J2a 
 
 REESE LIBRARY 
 
 . 
 
 UNIVERSITY OF CALIFORNIA. 
 
 -,FP 11. .1.893 , 8g . I 
 
 Class No. 
 
 
INQUIRY 
 
 TAXATION 
 
 AND 
 
 COMMERCIAL POLICY 
 
 GREAT BRITAIN; 
 
 WITH OBSERVATIONS ON THE PRINCIPLES OF CURRENCY, 
 AND OF EXCHANGEABLE VALUE. 
 
 BY DAVID BUCHANAN. 
 
 Of THf 
 
 UNIVERSITY } 
 
 EDINBURGH: 
 WILLIAM TAIT, 107, FRINGE'S STREET; 
 
 SIMPKIN, MARSHALL, & CO., LONDON; 
 AND JOHN GUMMING, DUBLIN. 
 
 MDCCCXLIV. 
 
EDINBURGH : 
 
 Printed by WILLIAM TAIT, Prince's Street. 
 
CONTENTS. 
 
 CHAPTER I. 
 
 OF TAXATION. 
 
 Page 
 
 Maxims of Dr Smith. Difficulty of reducing them to practice 
 as taxation is extended. Taxes on consumption. Produce 
 not always in proportion to the amount of the tax, 1 
 
 CHAPTER II. 
 
 OF THE TAXATION OF GREAT BRITAIN. 
 
 No other country so heavily taxed. Large annual produce of 
 the taxes. An indication of vast wealth. Increasing pro- 
 duce of the existing duties. Estimated amount of their 
 spontaneous increase if no addition had been made since 
 1793. Increase of taxes encroaches on the freedom of the 
 subject, 4 
 
 CHAPTER III. 
 
 OF TAXES ON CONSUMPTION. 
 
 Amount of taxation to be regulated by the amount of the article 
 taxed. Distinction between articles that may be heavily or 
 lightly taxed. Taxes on salt ; on pepper ; on tobacco ; on 
 sugar ; on tea ; on coffee ; on wine ; on cotton wool ; on 
 sheep's wool, 11 
 
 CHAPTER IV. 
 
 OF TAXES ON MANUFACTURED ARTICLES. 
 
 Effect of these taxes rf Injurious to the manufacturer ; to the 
 improvement of art and industry. Chief articles on which 
 imposed,.,, 31 
 
vi CONTENTS. 
 
 Pag* 
 
 Taxes on British Spirits. 
 
 Severity of the Excise survey. Frequent changes in the mode 
 of assessment. Injurious and expensive to the manufacturer. 
 History of the tax in England and Scotland. Frequent 
 changes. Assessment on the cubic contents of the still. Not 
 suited to the process of distillation. Its effects in deteriorating 
 the spirit. Division of the country into districts, with sepa- 
 rate duties. Its impolicy. The market chiefly supplied by 
 the smuggler. Entire change of the law in 1814. Illicit 
 trade still continues. Permission to use small stills. Duty 
 reduced to 2s. per gallon. Success of this measure. Decrease 
 ' of the illicit trade. Increase of the revenue. Increase of the 
 tax in 1825. Its effects. The Irish duties. Assessed on the 
 contents of the still. The effect the same as in Scotland. 
 Alarming increase of smuggling. Duty reduced as in Scotland. 
 Its success. Increase of the spirits brought to charge. De- 
 crease of smuggling. Tax again increased in 1830. Revival., 
 to a certain extent, of the illicit trade. Reduction of the 
 duty in 1834. Effects. Tax increased in 1842. Unproduc- 
 tive. Repealed in 1843. Account of the duties in England. 
 Consumption checked by the high duty. Tax reduced. 
 Revenue increased. One uniform duty proposed. Distinc- 
 tion of duties necessary from difference of circumstances, 36 
 
 On Malt. 
 
 Restraints on the manufacture. Objections of the maltsters. 
 Answer by the Board of Excise. Restraints the result of 
 heavy duties. Not a heavy tax on beer. Not the cause of 
 the non-increase in its consumption. Arising from high price 
 and other causes. Tax on beer. Moderate, and not oppres- 
 sive. No good reasons for its repeal, 51 
 
 On Soap. 
 
 Regulations of the Excise. Interfere injuriously with the 
 manufacture. Illicit trade. Causes of it. Duty reduced in 
 1833. Effects on consumption and revenue, 57 
 
 On Glass. 
 
 Different kinds of glass. Strictness of the Excise survey. Not 
 necessary to secure the revenue. Account of the duties and 
 
CONTENTS. Vll 
 
 Page 
 
 their gradual increase. Tax on Crown-glass falls on dwelling- 
 houses. Not exorbitant. Does not lessen the consumption of 
 crown-glass so much as the window-tax. Consumption of 
 glass. How affected by the tax. Tax on bottles ; its amount 
 dependent on the consumption of the liquors for which bottles 
 are required. Not an oppressive tax. Flint-glass. Impo- 
 litic increase of duty. Decrease of consumption. Decrease 
 of duty and of revenue. Illicit trade. Facilities to the smug- 
 gler from chemical improvements. Illicit trade checked by 
 the reduction of the duty. Plate-glass. Nature of the manu- 
 facture. Checked by the exorbitant rise of duty in 1813. 
 Decrease of duty. Increase of consumption occasioned by a 
 great fall of price as well as by reduction of duty. Injurious 
 restrictions on the manufacture. Examples. Regulations 
 respecting the drawback on exportation, 59 
 
 On Paper. 
 
 Different modes of assessing the duty. Regulations injurious. 
 Not enforced during the progress of the manufacture. 
 General outcry against the tax. Not on just grounds. Tax 
 moderate. Not injurious to literature. No good reasons for 
 reducing it, 81 
 
 Stamp Duties. 
 
 The transference of property a source of revenue in all countries, 
 Levied by means of a stamp. Extent of the stamp duties 
 in Britain. Not founded on any rule of equity. Taxes on 
 real property. On bills and receipts. On the succession to 
 property. Unjust distinction in favour of real property. 
 The legacy duties heavy and unequal. Amount of these 
 duties. Taxes on insurance. License duties. Auction du- 
 ties. Duties on newspapers and advertisements, 84 
 
 Newspapers. 
 CHAPTER V. 
 
 DIRECT TAXES. 
 
 Early resorted to in this country. Tax on houses on windows. 
 Progress and amount. Taxes on Carriages on Horses 
 on male Servants. Progress and amount. Reductions, 0.5 
 
X CONTENTS. 
 
 Page 
 be confined. Difficulty of carrying into effect this reform. 
 
 Timber duties. Their reduction and regulations a great prac- 
 tical improvement. Account of these duties. The inequality 
 of their operation. The protection which they give to Canada 
 timber. Those defects corrected or diminished by the new 
 tariff, 156 
 
 CHAPTER X. 
 
 OF PROTECTING DUTIES ON THE PRODUCE OF LAND. 
 
 Price of grain always subject to regulation in Great Britain. 
 Bounty on exportation granted in 1688. Quantity of grain 
 exported since 1773. Amount paid for bounty. Exportation 
 declined about the year 1770, and at last ceased. Progress 
 and prosperity of Britain. Increase of inhabitants. A supply 
 of foreign corn required for their support. Large supplies im- 
 ported into Great Britain for the last 70 years. Causes of this 
 change. Different laws enacted for regulating the foreign 
 trade in corn. Act of 1773, 1791, 1804. Prosperity of agri- 
 culture till about the year 1814. New law of 1815, of 1828, 
 of 1842. Principle of these laws. Practical effect. Com- 
 parative merits of a fixed duty and a sliding scale. Corn-law 
 associations. Landholders. Errors of both parties in over- 
 rating the importation of the foreign supply. Practical in- 
 efficiency of corn laws from 1773 to 1815. The trade nearly 
 free. The era of high prices and agricultural prosperity. 
 In 1821 the foreign supply only 34,275 quarters. Low 
 prices and depression of agriculture. Insignificance of the 
 foreign supply deduced from these facts. State of agriculture 
 for the last sixty or seventy years not dependent on the corn 
 laws. Price of corn, on which agriculture depends, fixed by 
 causes beyond human control. Corn laws not the cause of 
 commercial distress. Foreign corn never peremptorily ex- 
 cluded from this country. ^Quantities imported during the 
 operation of the corn laws. No great interval between the 
 present law and a free trade. No data for exactly estimating 
 the effect of a given addition to the supply on the price may 
 be calculated at 3s. per quarter. Effects of a free trade on 
 prices equally overrated by producers and by consumers. 
 High price in Britain would attract a foreign supply. Equili- 
 brium of price brought about more by a rise abroad than by a 
 

 CONTENTS. XI 
 
 Page 
 
 fall at home. Mr Meek's estimate of the probable import of 
 grain with a free trade. Countervailing duty of 5s. proposed 
 by Mr Ricardo on importation, and an equal bounty on ex- 
 portation. No ground for a countervailing duty. Ineffi- 
 ciency of these artificial expedients. A drain on the bank 
 for gold and commercial distress ascribed to the corn laws. 
 This theory considered. So great a quantity of gold not 
 wanted in those countries which supply corn. Foreign ex- 
 penditure not defrayed by gold alone. Its exportation not 
 coincident with the import of corn. -The great evil of the 
 corn law the principle on which it proceeds, 185 
 
 CHAPTER XI. 
 
 ON METALLIC CURRENCY. 
 
 The currency of a country consists of different metals, ac- 
 cording to the progress of wealth and improvement. The 
 functions of these different metals pointed out. Distinction 
 between the currency used in the main payments, and the in- 
 srioror subsidiary currencies used in the smaller payments. 
 In all the currencies of Europe, copper a subsidiary currency. 
 Silver a subsidiary currency in Britain, though not in any 
 other country. This great change effected in the reign of 
 William III. Account of the state of the currency at that 
 period. Proposed remedy of Sir Isaac Newton for the scarcity 
 of the silver coin. Inconvenience of using two metals in the 
 large transactions. Exclusive use of gold in the main pay- 
 ments. The perfection of the British currency. Former 
 deficient state of the silver coin in this country. New 
 copper coin issued, 230 
 
 CHAPTER XII. 
 
 PAPER CURRENCY. 
 
 The value of paper dependent on the promise to pay. Its value 
 regulated by its plenty or scarcity. Depreciation the conse- 
 quence of over-issue. Cannot take place when payable in 
 specie. Banks. Common all over Europe. Bank of Eng- 
 land the most wealthy. Its capital. Dividend. Profits. 
 From what sources derived. Increase during the war. 
 Decline of its business with the return of peace, and the 
 
Xll CONTENTS. 
 
 Page 
 
 resumption of cash payments. Increase of banks throughout, 
 the country. Their skilful management of cash transactions. 
 Increased facilities for the remittance of money, 250 
 
 CHAPTER XIII. 
 
 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 Substitution of paper for specie increases the hazards of com- 
 merce. Credit the cause of mercantile convulsions. Accu- 
 mulation of capital tends to extended credit to reckless 
 speculation to commercial distress. The nature of these 
 calamities. Examples which occured prior to the use of 
 paper in Scotland from the failure of the Darien scheme 
 in France from the Mississippi scheme in 1719 in England 
 from the South Sea scheme in 1720. Commercial convul- 
 sions in Britain in 1793 in 1825 in 1835. Causes and 
 consequences of these several calamities. Convulsion in the 
 United States in 1835. Over-issue of paper generally held 
 to be the cause of those calamities. This opinion considered. 
 Issues of the banks overstated by Lord Liverpool. No 
 data then existing for an accurate estimate. Excess not to 
 be inferred from the absolute amount of the circulation. 
 Facts stated in illustration. Over-issue raises the nominal 
 price of gold. No rise took place in 1825 or in 1835. A 
 proof that there was no over-issue. The state of the currency 
 not the cause of the unfavourable change. Occasioned by 
 large importations. An increase of currency not an increase 
 of capital. Commercial distress occasioned by over-trading. 
 Bank restriction followed by an excess of issue, and by 
 depreciation. Not by over- trading, nor by any commercial 
 crisis, as in 1825 and 1835. Circulation of a bank dependent 
 on the demands of trade. Not regulated by the discretion of 
 bankers The currency of Britain not under the control of 
 the bank directors. Money-dealers agents between the lender 
 and borrower. The nature and limits of their functions. 
 No power to control speculation. Not accountable for com- 
 mercial distress. Principles on which they conduct their 
 business. Confirmed by the evidence of practical men. 
 Theories laid down for regulating the circulation not adhered 
 to in practice. Rule of Mr H. Palmer considered. Not 
 followed. Contraction of the currency suggested as a remedy 
 

 CONTENTS. Xlll 
 
 Page 
 
 for an unfavourable change, and a check to speculation. 
 State of the exchanges considered. Means resorted to by the 
 bank for remedying an unfavourable exchange. Bills of credit 
 drawn on Paris in 1832 and 1836, and in 1839 ; also in 1839 
 on Amsterdam and Hamburg. Provided for by remittances 
 of specie. Circulation of the bank still regulated by the 
 necessities of commerce. A contraction of the currency 
 seldom resorted to as a check to the drain of gold. Illustrated 
 by an account of the bank's transactions. How the great 
 mass of specie is affected by the fluctuations of commerce,... 257 
 
 CHAPTER XIV. 
 
 TRANSACTIONS OF THE BANK CONSIDERED IN REFERENCE TO ITS 
 OWN SAFETY. 
 
 A drain of specie caused by an unfavourable exchange. Slow 
 and gradual.- Not dangerous to the bank. A drain caused 
 by panic. Sudden and violent. May endanger the credit 
 of the bank. Drain of specie in 1797. Suspension of pay- 
 ments. The bank released from its obligation to pay in 
 specie. Its consequences. Drain of specie in 1825. Danger 
 of the bank. Prohibition to issue one-pound notes. Drain 
 on the bank in 1835. Restriction withdrawn on joint-stock 
 banks in England. Established in different parts. Evils 
 ascribed by Mr H. Palmer to the competition of rival banks 
 imaginary. The inutility of restricting their transactions. 
 The system of money-dealing that has arisen in this country 
 not a proper subject of legislative interference. State of the 
 banks in the United States, 30G 
 
 CHAPTER XV. 
 
 OF EXCHANGEABLE VALUE. 
 
 Scarcity the source and measure of exchangeable value. No 
 article, of which the supply exceeds the demand, can have 
 any value in exchange. Water an example. Scarcity would 
 give value to water, as to corn. Price of articles high exactly 
 as they are scarce. This principle regulates wages, profits, 
 and rent. No article, the produce of labour and capital, can 
 rise above the common level of profit. The produce of land 
 not liable to this restriction. The price of corn may rise 
 
XIV CONTENTS. 
 
 Page 
 
 higher, though it cannot fall lower. Principle on which the 
 price of corn is determined. Doctrine of Mr Malthus, of 
 Ricardo, of M'Culloch, considered. Rent yielded by other 
 sorts of rude produce. Market price of such articles not 
 dependent on their original cost. Increase of expense not 
 followed by a rise of price. Conclusions of Mr Ricardo, from 
 his doctrine of rent, considered, 321 
 
THE 
 
 TAXATION AND COMMERCIAL POLICY 
 
 OF 
 
 GREAT BRITAIN. 
 
 CHAPTER I. 
 
 OF TAXATION. 
 
 Lms of Dr Smith. Difficulty of reducing them to practice as 
 Taxation is extended. Taxes on Consumption. Produce not 
 always in proportion to the amount of the Tax. 
 
 DR SMITH, in treating of Taxation, lays down 
 certain maxims, the evident justice and utility of 
 which, he observes, have recommended them, more 
 or less, to the attention of all nations. These are, 
 1st, That every tax should press equally on all ranks, 
 in proportion to their means. 2d, That the amount 
 of the tax which each individual is bound to pay, 
 should be certain, and not arbitrary. 3d, That the 
 tax ought to be paid at the time, and in the manner 
 most convenient to the contributor. 4th, That every 
 tax should take as little as possible out of the pockets 
 of the people over and above what it brings into the 
 public treasury. 
 
 In the early progress of taxation, it is easy to 
 comply with those just and reasonable rules. Where 
 the revenue required is not to a great amount, it 
 
 B 
 
2 OF TAXATION. 
 
 may be readily obtained from a few light and pro- 
 ductive taxes on consumable articles which occasion 
 no serious hardship, and being gradually con- 
 founded with the price are paid by the consumer 
 without any complaint. But when the increasing 
 demands of the State encroach, not only on the 
 luxuries, but on the comforts and conveniencies of 
 life, an adherence to the abstract rules of Dr Smith 
 is not so easy a task. The effect of taxes is to dimm- 
 ish consumption ; and hence they may be increased 
 without any proportional increase of revenue : thus 
 verifying the saying of Dr Swift, that two and two 
 do not always make four in the arithmetic of the 
 Customs. Taxes on consumption may be at length 
 carried to such an excess as to be wholly unproduc- 
 tive ; and in these circumstances, the financier has 
 recourse to direct taxation, by which economy is 
 compelled to surrender its hoards, and a revenue is 
 extorted where indirect taxation fails. But this 
 resource has its limits; the income of individuals 
 is only available to a certain amount for the service 
 of the State ; and when direct taxation is carried 
 to excess, and encroaches on capital, its produce 
 will gradually decline. Arrears will accumulate, 
 which threats and violence will be in vain em- 
 ployed to recover ; great distress will be occasioned 
 by those extortions : the produce of the taxes will 
 nevertheless fall off; and a public bankruptcy will 
 then ensue, when all the means are exhausted by 
 which a revenue can be extorted from the impo- 
 verished people. In the course of this continued 
 drain on the resources of industry, all the maxims 
 
NATION. 
 
 of Dr Smith will be set at nought ; and the only 
 rule will then be 
 
 " Rem, si possis, recte ; si non quo cumque modo 
 rem." 
 
 Expensive establishments for the collection of the 
 taxes, the increase of smuggling, a host of revenue- 
 officers for its suppression, and a vexatious inter- 
 ference with all the most important branches of indus- 
 try, are the great inconveniencies that follow the in- 
 crease of indirect taxation : and here the rules of Dr 
 Smith are again violated ; those heavy taxes always 
 taking a larger sum out of the pockets of the people 
 than they bring into the public treasury. It is, how- 
 ever, the peculiar advantage of indirect taxes, that 
 they are paid in small sums in a manner the most 
 easy and convenient to the contributor. Hence, 
 they do not grind down or oppress those who 
 pay them. No man's goods can be brought to the 
 street, and sold for their payment ; a decrease in the 
 consumption of the taxed article, and consequently 
 of the revenue, being the only effect in this case of 
 over-taxation. The heavy taxes imposed in this 
 country on many articles, such as tea and sugar for 
 example, to the amount of about 100 per cent., are 
 collected with little or no inconvenience ; and the 
 reason is, that they are paid piecemeal, as the arti- 
 cles are wanted, and are not accumulated into any 
 inconvenient sum. But direct and compulsory taxes, 
 while they cannot be evaded, however severe, are not 
 collected in small sums to suit the convenience of the 
 contributor, but are generally allowed to increase into 
 an annual demand. This was one among the many 
 
4 OF TAXATION. 
 
 evils of the Property tax imposed in this country in 
 1798, in aid of the prodigal expenditure of the first 
 French war ; and afterwards renewed in the war 
 which followed. It was a severe and compulsory 
 tax ; collected not like the taxes on consumable ar- 
 ticles, in detail, hut only once in the year, when it 
 amounted to a large sum, which pressed heavily on 
 the small trader, and frequently placed him at the 
 mercy of the tax-gatherer, who might proceed, for 
 the discharge of the debt, with the arrest and public 
 sale of his goods and chattels. In like manner, the 
 House and Window duties are more objectionable than 
 if they were laid on consumable articles. All direct 
 taxes, except where they are extremely moderate, oc- 
 casion greater anxiety and distress than can possibly 
 be occasioned by indirect duties on consumption. 
 
 CHAPTER II. 
 
 OF THE TAXATION OF GREAT BRITAIN. 
 
 No other country so heavily taxed. Large annual produce of the 
 taxes. An indication of vast wealth. Increasing produce of the 
 existing duties. Estimated amount of their spontaneous increase 
 if no addition had been made since 1793. Increase of taxes 
 encroaches on the freedom of the subject. 
 
 No other country, perhaps, was ever so heavily 
 taxed as Great Britain. Before the war which com- 
 menced with France in 1793, the public revenue 
 amounted to 14,284,000 : in the course of that long 
 
OF THE TAXATION OF GREAT BRITAIN. 
 
 war, the sum raised by taxation rose to between 
 60,000,000 and 70,000,000 a-year. In 1813, it 
 was 66,041,307 ; a prodigious sum to be raised in 
 one year from the land and labour of a single nation. 
 Europeans have often been amused with romantic 
 stories of Indian wealth, and of the vast sums car- 
 ried off from those countries by successful invaders. 
 But all the fairy tales of Eastern treasure are here 
 outdone by the reality. No conqueror revelling in 
 spoil, ever obtained half such an amount of wealth 
 from wasted cities, as has been raised in this country, 
 in a single year, by the legal process of equal contri- 
 bution. The plunder of Delhi by Nadir Shah, when 
 he ransacked the Mogul treasury, containing the ac- 
 cumulated spoil of ages, and carried off gold and 
 jewels to an immense amount, was never supposed 
 greatly to exceed 30,000,000 sterling, which is not 
 half of what has been raised in this country in a 
 single year ; and falls far short of its ordinary reve- 
 nue for the last thirty or forty years. And this 
 astonishing proof of the wealth and almost boundless 
 resources of an industrious and commercial country, 
 rests not on the fanciful tales of credulous travellers, 
 but on the plain, unadorned evidence of figures in 
 parliamentary tables ; while the marvel still is, that 
 the nation actually advanced in prosperity during 
 this expensive war, and under a load of taxes that 
 would have overwhelmed any other European State. 
 Such are the wonders of finance, of commerce, and 
 of capital ; and, still more, of science and intelligence 
 guiding the powers of productive industry. The 
 parliamentary accounts attest the increasing produce 
 
6 OF THE TAXATION OF GREAT BRITAIN. 
 
 of the existing taxes, while every year was adding 
 to the burdens of the country. The same tax, from 
 the increase of consumption, still yielded a greater 
 produce. Thus, a tax of one penny on the pound of 
 candles, yielded, in 1793, 213,000 ; and in 1831, the 
 year before it was repealed, 497,770 : in 1800 it 
 yielded 238,435 : in 1816, 305,694 ; though, dur- 
 ing the interval, additional duties had been laid on 
 almost all the great articles of consumption : on tea, 
 60 per cent. ; on sugar, 30 per cent. ; on malt, 40 per 
 cent. ; on wine 30 per cent. ; on beer, 25 per cent. : 
 and though the Stamp duties, and the duties on houses, 
 windows, carriages, horses, servants, &c., had been 
 greatly increased, and the produce of the most severe 
 impost ever laid on the country, namely, the Property 
 tax, had been raised to 15,000,000 a-year. The tax 
 of 2^d.onthepound of soap, yielded, in 1793, 384,808; 
 and in 1815, the year before it was raised to three- 
 pence, 676,095. The addition of three farthings to 
 the duty, which raised it to threepence, was about 33 
 per cent, on the price ; while the produce of the tax 
 had gradually increased in 1832, the year before it 
 was reduced to l^d., to 1,186,219; which was about 
 66 per cent. The same duty on paper, which pro- 
 duced, in 1804, 324,588, had increased, in 1816, to 
 415,017; and in 1835, the year before it was re- 
 duced from 3d. to l^d. per pound, to 796,146. 
 This remarkable increase in the produce of the exist- 
 ing taxes is an undoubted proof of an advancing 
 country. The revenue of the State is merely a branch 
 of the great revenue of the nation ; it is an offset 
 from this main stream : and hence an increase in the 
 
OF THE TAXATION OF GREAT BRITAIN. 7 
 
 produce, not of one, but of all the taxes, is an infal- 
 lible index to the national prosperity. 
 
 Of all the taxes which existed prior to the year 
 1793, that on candles is the only one which, during 
 the whole course of the war, was continued at the 
 same rate of Id. on the pound until it was abolished 
 in 1832. Hence its increasing produce may be taken 
 as a measure, however imperfect, of the spontaneous 
 increase and probable amount of the revenue of this 
 country, if no addition had been made to the taxa- 
 tion of 1793. The tax on candles produced, as al- 
 ready stated, 213,000 in 1793; and in 1831, the 
 year before it was repealed, 497,770 : and this 
 increase in its net produce took place while, as has 
 been already stated, great additions were made every 
 year to all the other taxes. If no additional burdens 
 had restrained the progress of the country, the duty 
 of Id. on this article would probably have increased 
 from 213,000, its produce in 1793, not to 497,000, 
 but to 600,000 or 700,000, i. e. to triple its ori- 
 ginal amount; and the other taxes improving at 
 the same rate, as may be naturally inferred, the 
 revenue of 1793 would, in the course of the succeed- 
 ing thirty years, have increased spontaneously to 
 42,752,000, or even to 50,000,000 ; and, if the war 
 with France had been avoided, would, without any 
 addition to the national burdens, have afforded ample 
 funds for the liquidation of the public debt, and for 
 every munificent scheme of domestic improvement. 
 But it was found wholly inadequate to the unprece- 
 dented expenses of the contest in which the country 
 was involved in 1793, to provide for which, not only 
 
8 OF THE TAXATION OF GREAT BRITAIN. 
 
 was it necessary to raise enormous sums, but to raise 
 them within a given time. There was no leisure to cast 
 about for the most eligible modes of obtaining money; 
 recourse was necessarily had to the most productive. 
 Every successive year new taxes were required to 
 meet the charge for interest on the vast sums that 
 were borrowed and spent. The financial fruit was, 
 in the meantime, slowly ripening ; but the pressing 
 exigencies of the State could brook no delay, and 
 artificial methods were consequently resorted to, in 
 order to force it prematurely forward. * 
 
 Owing to the enormous expenditure of Great 
 Britain, more especially during the latter years 
 of the French war, every expedient was devised by 
 which money could be raised, whether directly or in- 
 directly. The taxes on all consumable articles were 
 augmented to the utmost ; every transfer of property, 
 and all mercantile transactions, were heavily taxed ; 
 the direct contributions on houses and property were 
 largely increased, and levied with a rigour unknown in 
 former times ; and every place was laid open to the 
 
 1 The following is an account of the estimated charge created 
 by the war, and of the produce of the new taxes that were im- 
 posed from 1794 to 1802 inclusive : 
 
 Year. Charge. Produce of the Taxes imposed. 
 
 1794 773,324 1,207,349 
 
 1795 1,227,415 1,536,147 
 
 1796 1,850,373 1,456,254 
 
 1797 3,241,348 2,967,629 
 
 1798 585,941 1,677,945 
 
 1799 333,682 103,128 
 
 1800 317,532 805,062 
 
 1801 1,812,817 1,833,627 
 
 1802 3,163,161 4,677,237 
 
GREAT BRITAIN. 
 
 domiciliary visits of the Revenue officers, who forced 
 their obnoxious way, not only into manufactories and 
 warehouses, but into every corner and recess of the 
 very citadel of liberty an Englishman's dwelling- 
 house ; no longer his castle, as in bygone times he 
 could proudly declare it to be. Sir Robert Wai- 
 pole's well-known scheme of bonded warehouses, 
 brought forward in 1733, which imposed no addi- 
 tional burden, while it gave facilities to trade and 
 to the collection of the revenue, and was afterwards 
 carried with advantage far more extensively into effect, 
 was violently opposed as an inroad on the rights of 
 Englishmen for the sake of revenue ; and the indigna- 
 tion of the people being fairly aroused, it was assailed 
 by petitions and angry remonstrances from all quarters, 
 until it was finally withdrawn. But the expenses of the 
 nation being greatly increased by the French and Span- 
 ish wars, rashly begun (as the wars of Great Britain 
 have generally been) in 1 739 and 1 750, and by large ad- 
 vances to the continental powers, an increase of reve- 
 nue was urgently required ; and the Finance minister 
 watching his opportunity, forced at length, on the 
 patient people, a real and a far heavier yoke than 
 the imaginary grievance which they had so indig- 
 nantly spurned some thirty years before. In 1763 
 the Excise survey was extended to a variety of dif- 
 ferent articles, on which taxes were imposed or 
 increased in amount ; and during the succeeding 
 war with the American colonies, (still more rashly 
 begun than even the wars with France and Spain,) 
 the same system was enforced with additional rigour. 
 As the amount of the taxes, and the temptation to 
 
10 OF THE TAXATION OF GREAT BRITAIN. 
 
 evade them increased, other restraints were devised. 
 Every fresh impost gave rise to some new severity : 
 pains and penalties were multiplied ; and in the 
 course of the last French war, when, in order to pro- 
 vide for the increasing expenditure of the country, 
 heavy additional taxes were imposed, such as the Pro- 
 perty tax, which levied a proportion from all incomes 
 above 60, and a tenth on 150 a-year and up- 
 wards, the Revenue code was at length perfected in 
 all its harsh details ; and the British people, who so in- 
 dignantly repelled the imaginary inroad on their liber- 
 ties by Sir R. Walpole, now patiently submitted to 
 the fetters of the Excise in almost every branch of 
 industry ; to the domiciliary visits of the revenue 
 officers; and, finally, to the inquisitorial machinery of 
 the Property tax. 
 
 Heavy taxation seems, in this manner, to be the 
 portion of Great Britain: it is the necessary con- 
 sequence of the wars in which the country has 
 been involved. A moderate revenue may be raised 
 without transgressing the known rules of taxa- 
 tion ; but when the demands of the State rise to 
 forty, fifty, or sixty millions a-year, heavy taxes 
 must be resorted to ; and they must be levied by 
 means arbitrary and severe. There is no easy pro- 
 cess by which such vast sums can be raised; no 
 royal road to so large a revenue. With the progress 
 of taxation, financial difficulties increase. It is found 
 that taxes which are rejected in an early stage of 
 taxation, must afterwards be patiently submitted to, 
 as well as stricter modes of assessment ; and it is vain 
 to complain. These evils arise out of the growing 
 
OF TAXES ON CONSUMPTION. 
 
 necessities of the State. The expenses of the pre- 
 vious wars in which the country has been involved, 
 have been accumulated into its present heavy load of 
 debt ; the annual interest on which imposes the ne- 
 cessity of raising a large revenue for its payment ; 
 and while this necessity continues, it is vain to ex- 
 pect any relief from heavy taxation, or from any of 
 the evils which follow in its train. 
 
 CHAPTER III. 
 
 OF TAXES ON CONSUMPTION. 
 
 Amount of taxation to be regulated by the amount of the article 
 taxed. Distinction between articles that may be heavily or lightly 
 taxed. Taxes on Salt, on Pepper, on Tobacco, on Sugar, on Tea, 
 on Coffee, on Wine, on Cotton-wool, on Sheep's-wool. 
 
 IN imposing taxes on consumption, the great pro- 
 blem is to find out the precise amount of duty which, 
 on each article, will yield the largest revenue. This 
 will depend, in a good degree, on the nature of the 
 article on which the tax is imposed. There are cer- 
 tain commodities which are in use among all classes, 
 which are yet supplied at a very small cost ; and which 
 may, on this account, be heavily taxed without occa- 
 sioning any great falling off in the consumption, or any 
 great hardship to the consumer. Thus, if we suppose 
 one shilling a-year to be expended on the use of any 
 article, a tax of ten times its amount would only 
 
12 OF TAXES ON CONSUMPTION. 
 
 impose an additional expense of ten shillings on the 
 consumer ; while, on an article on which he expended 
 5 or 10 a-year, a tax of the same amount would 
 annually take out of his pocket 50 or 100. In 
 the one case it would be a productive tax ; in the 
 other, it would annihilate both consumption and re- 
 venue. To the first class belong such articles as salt, 
 pepper, spiceries, tobacco, drugs, and numerous others, 
 which it is unnecessary to specify. The expense 
 laid out on these is so inconsiderable, that the con- 
 sumption is comparatively little affected by a rise or 
 fall of price ; less than that of other articles on which 
 a greater expense is laid out. No one, for example, 
 would consume any greater quantity of salt than he 
 required, because of its cheapness, the consumption 
 being limited by the nature of the article ; and, on 
 the other hand, the necessary supply of salt costs so 
 little, that the tax to which it was subjected of 15s. 
 per bushel, equal to about thirty or forty times its origi- 
 nal cost, imposed on it during the last war, was riot op- 
 pressive, nor did it restrict the use of it except among 
 the poorest classes, or where it was used for the cure 
 of provisions as an article of trade. In place of the 
 whole, it was proposed to repeal only two-thirds of 
 this tax, on the notion that the low duty would, from 
 the increase of consumption, still yield the same re- 
 venue as before ; as if the greater cheapness of such 
 an article could cause any one to use three times the 
 quantity of it. In like manner the consumption of 
 pepper, of spices, or of drugs, is comparatively little 
 affected by the price. The inconsiderable expense 
 laid out on those articles renders their cost of so little 
 
OF TAXES ON CONSUMPTION. 13 
 
 consequence, that a heavy tax, though it raise the 
 price, has comparatively little effect in lessening the 
 consumption. The case is very different with such 
 articles as beer, wine, spirits, or tea, which add 
 largely to domestic expense, and of which the con- 
 sumption is sensibly affected by every rise of price. 
 A rise or fall of price that would have very little 
 effect on the consumption of salt or pepper, would se- 
 riously affect that of wine, of beer, of spirits, or of tea: 
 and hence they are not the proper subjects of heavy 
 taxation. These articles have, accordingly, in Great 
 Britain, been more lightly taxed ; the heaviest taxes 
 having been imposed on the former class of articles. 
 The tax on salt, of 15s. per bushel, exceeding so 
 greatly the cost of the article, was, however, still 
 productive, and yielded 1,500,000 a-year; though 
 a tax to anything like so large an amount on 
 any of the great articles of consumption, such as 
 tea, sugar, wine, or spirits, would at once have 
 put an end to both consumption and revenue. If 
 the duty on salt had only been one-half, it could not 
 have been reasonably objected to. It would still, 
 no doubt, have greatly exceeded the original cost ; 
 probably about twenty times. But a tax may not 
 be immoderate on this account, and may not, conse- 
 quently, restrict the consumption. It will depend 
 entirely on the nature of the article on which it is 
 imposed, whether a duty of 500 per cent., or of 100 
 per cent., be the most oppressive. The repeal of the 
 tax on salt was, however, beneficial to the fisheries; 
 for though a drawback was allowed of the duty on 
 all the salt used by the fish-curers, so many difficul- 
 
14 OF TAXES ON CONSUMPTION. 
 
 ties were encountered in obtaining it, as almost to 
 countervail the benefit. Its repeal has also favoured 
 the rise of important manufactures, of which it is 
 the basis : so that, however urgent the demand for 
 revenue may be, it appears to be acknowledged on 
 all hands, that its revival would be highly impolitic 
 and injurious. 
 
 The tax on pepper, which was raised, in 1819, to 
 2s. 6d., was equal to 500 per cent, on the original 
 cost. So heavy a tax would not have been produc- 
 tive, except on an article which could be freely used 
 at little expense. The consumption of pepper, how- 
 ever, increased under this heavy duty from 141,061, 
 its amount in 1820, the year after it was imposed, 
 to 166,706 in 1824 : a clear proof that the article 
 was not over-taxed; and that, owing to the small ex- 
 pense laid out upon it, the 500 per cent, duty was 
 less oppressive than a duty of 100 per cent, would 
 have been on any of the great articles of consumption 
 already enumerated. A tax cannot justly be repro- 
 bated as impolitic or enormous, merely because it 
 exceeds the price of the article on which it is im- 
 posed, as it may, nevertheless, be light and easy to 
 the consumer, as well as productive to the Treasury. 
 A tax of 100 per cent, on tea, would cost a family as 
 many pounds as a tax of 500 per cent, on pepper 
 would cost shillings. Of the two, therefore, it is 
 the lesser duty which is exorbitant, and which im- 
 poses the greatest hardship on the consumer. When 
 the tax on pepper was reduced to 6d., on the notion 
 that a lower duty, by increasing the consumption, 
 would still yield the same revenue, its produce de- 
 
OF TAXES ON CONSUMPTION. 15 
 
 clined to 59,963, and to 66,469 in 1842. The 
 duty on tobacco, of 3s. in the pound, at which it was 
 fixed in 1825, amounts to about 900 per cent, on the 
 prime cost ; and the consumption had increased in 
 1837 from 14,510,555 Ibs., its amount in 1825, to 
 17,480,930 Ibs. ; yielding a net revenue of 2,655,169; 
 and in 1842 of 2,724,997. So heavy a tax on 
 many other articles would be entirely unproductive ; 
 yet it yields a large revenue on tobacco : and the 
 reason is, that a taste for this luxury can be grati- 
 fied at a small expense ; and the duty, though exor- 
 bitant, imposes a trifling hardship on the consumer, 
 and has little effect in lessening the demand. The 
 chief objection to the tax is the encouragement 
 which it gives to smuggling. 
 
 Sugar, though it is used only as an accessary 
 along with other things, is, however, a more expen- 
 sive article of consumption ; and has never, therefore, 
 been so heavily taxed. The duty in 1826 was fixed 
 at 26s. per cwt., and in 1830 was reduced to 24s.; which 
 amounts to above 100 per cent, on the present aver- 
 age price. No article has, perhaps, been subject to 
 greater fluctuations of price than sugar. For nearly 
 twenty years prior to 1840, its average price did not 
 exceed 30s. per cwt., while, for twenty years before, 
 it was as high as 70s. and 80s., and sometimes, 
 though rarely, at 90s. The price has, however, 
 generally been on the decline ; and its continued fall 
 has always counteracted the tendency of the tax 
 to check the consumption. Sugar, when the duty 
 was 27s. and 24s. per cwt., was sold cheaper to the 
 consumer than in 1793 when the duty was only 15s. 
 
16 OF TAXES ON CONSUMPTION. 
 
 Yet its consumption has not kept pace with the 
 increasing wealth and population of the country. 
 In 1801, sugar was consumed to the amount of 
 2,773,795 cwts. by 10,942,646 inhabitants; in 1831 
 a greater number, namely, 16,537,398, consumed 
 3,421,597 cwts. ; and in 1840 a still greater number, 
 namely, 18,650,646, only consumed 3,594,832 cwts.; 
 and, in 1841, 4,057,628 cwts.; which shows a 
 decided falling off rather than an increase in the 
 consumption : and the cause must be sought for, not 
 in the heavy tax to which it has often been ascribed, 
 but rather in the circumstance of its consumption 
 depending on that of other articles, such as tea or 
 coffee, in the preparation of which sugar is required : 
 and the enormous duty which checks the demand for 
 tea must also check the demand for this, its proper 
 accessary, sugar. As it is not so much, there- 
 fore, on its own price that the consumption of sugar 
 depends as on that of other articles with which it is 
 used, no diminution of the tax would greatly in- 
 crease the consumption, so long as the tax on tea, 
 on the demand for which that of sugar so much 
 depends, is allowed to remain so high. Sugar is, 
 no doubt, used along with coffee as well as with tea ; 
 and the annual consumption of this article has in- 
 creased to 25,000,000 Ibs. But the annual con- 
 sumption of tea amounts to between 30,000,000 
 and 40,000,000 Ibs. In 1841, it amounted to 
 36,675,667 ; and as a much greater quantity of 
 sugar is used to the pound of tea than to the pound 
 of coffee probably five times the amount it is 
 still on its consumption that the demand for sugar 
 must chiefly depend. 
 
OF TAXES ON CONSUMPTION. 17 
 
 Of all the British taxes on consumption, that on 
 tea is perhaps the most objectionable: First, Because 
 it is a great article of family expense, costly in its 
 use, on which a light tax is more oppressive than a 
 heavier tax on other articles. Second, The exten- 
 sive use of tea conduces both to the health and 
 morals of the people : it is the peculiar distinction 
 of tea, that it refreshes without intoxicating. It is 
 not a filthy luxury like tobacco. On the contrary, 
 it is commended by the Roman historian, when he is 
 enumerating its importation into Europe among the 
 other advantages of the trade to the East, as affording 
 " an elegant repast." In supplanting the use of beer 
 and other beverages in the morning and afternoon 
 meal, its introduction has aided in the improvement 
 of domestic manners; and if its price were lower, 
 it would rival even more effectually the use of 
 ardent spirits, that fruitful source of moral debase- 
 ment. In every view, therefore, this article ought 
 to find especial favour with the rulers of the land, 
 and to be lightly taxed. It has, however, been very 
 heavily taxed in this country, at the rate of 100 per 
 cent. ; to which 20 per cent, has been added by the 
 tax on sugar, and formerly other 20 per cent, by 
 the monopoly of the East India Company. So 
 heavy a tax was calculated to check the demand for 
 so expensive an article; and accordingly its con- 
 sumption does not appear, any more than that of 
 sugar, to have kept pace with the wealth and popu- 
 lation of the country. In 1803, when the duty was 
 raised on the finer teas to 95 per cent., the con- 
 sumption remained stationary for seventeen years 
 
18 OF TAXES ON CONSUMPTION. 
 
 after, at between 20,000,000 and 21,000,000 Ibs. In 
 1817 it amounted to 20,619,455 Ibs. 
 
 When the monopoly of tea by the East India 
 Company was abolished in 1834, the tax of 100 per 
 cent, was repealed, and new duties were imposed : 
 on Bohea a duty of Is. 6d. per Ib. ; on Congo and 
 the finer teas, 2s. 2d. ; and on the finest, such as 
 Souchong, Gunpowder, &c., 3s. The difficulty of 
 classifying teas according to this new scale, gave 
 rise, as was alleged, to frauds on the revenue by 
 the importers of tea ; and the discriminating duty 
 was relinquished for a duty of 2s. Id. per Ib. on all 
 teas. The great objection to this tax, as to all 
 indiscriminate taxes, except they are extremely 
 moderate, is, that it presses heavily where it ought 
 to press lightly; and lightly where a heavier tax 
 might be imposed. On the low-priced teas, such as 
 bohea, it is equal to 150 or 200 per cent. ; while on 
 the finer teas it does not amount to above 50 or 75 
 per cent. The duty is regulated by the high-priced, 
 when it should be regulated by the lower-priced 
 teas. It is thus the reverse of being just and equal. 
 By raising the price of the coarser teas, it lays the 
 burden on the poorer or the middling classes, the 
 chief consumers of those teas ; while it presses more 
 lightly on the rich, who use the finer teas, and on 
 whom the burden ought chiefly to lie. Considering, 
 besides, the nature of the article, the exorbitant 
 duty is most objectionable ; and it encroaches deeply 
 on the comforts of the community. The tax on 
 salt, on pepper, or on tobacco, though greatly exceed- 
 ing the original cost, does not impose any great 
 additional expense on the consumers, and does not 
 
OF TAXES ON CONSUMPTION. 19 
 
 materially restrain the consumption. But a lighter 
 tax on so expensive a luxury as tea is more heavily 
 felt, and enforces economy in its use, though it con- 
 duces, more than any other article, to comfort as well 
 as to morality. In every view it is an impolitic 
 and an oppressive tax. The new duty of 2s. 1 d. on 
 the finer teas is, however, less in amount than the 
 former ad valorem duty of 100 per cent. : and the 
 price has been still farther reduced about 20 per 
 cent, by the large importations of the free-trader. 
 The consequence has been, a great increase in the 
 consumption of tea, which amounted in the year 
 1841 to 36,675,667 Ibs.; a clear proof that it 
 is by the high price that it has been all along re- 
 strained. 
 
 Coffee, like tea, is an expensive article of con- 
 sumption, which will not bear a heavy tax. Yet it 
 has been heavily and very unequally taxed in this 
 country. The duty has varied from 6d., its present 
 amount, to Is. 7d., and even 2s. per Ib. ; or from 
 about 60 to 150, or 200 percent. Though possess- 
 ing all the valuable qualities of tea, those high 
 imposts nearly interdicted its use in this country. 
 Nothing more clearly exemplifies the bad effects 
 of exorbitant duties. On an article in such great 
 demand, and so expensive, the duty should never 
 have exceeded 20 or 30 per cent. ; and it appears 
 from experience, that a higher duty will not yield 
 a larger revenue. The tax was raised from 6d. to 
 lO^d. ; in 1796, it was raised to Is. 5d. ; and in 
 1804, to Is. 7fd. Under the pressure of those 
 heavy duties, the consumption remained stationary, 
 
20 OF TAXES ON CONSUMPTION. 
 
 while the population was increasing. It amounted, 
 in 1789, to 930,141 Ibs. ; and in 1807, the year be- 
 fore the duty was reduced to 7d., it had only increased 
 to 1,176,164 Ibs. The moment this depressing load 
 was taken off, the consumption bounded up as with 
 an elastic spring, to 9,251,837 Ibs., its amount in 
 1808. The duty was again raised to Is. in 1819 ; 
 but was finally reduced to 6d. in 1825, when the 
 annual consumption rapidly increasing, amounted, in 
 1840, to 28,723,735 Ibs. ; and the duty of 6d. pro- 
 duced, in 1837, 675,120; and, in 1842, 740,053; 
 a clear proof of the impolicy of the former duty 
 of Is. 7d., which only produced, in 1807, 161,245. 
 The effect of the reduced duty on coffee, in increas- 
 ing the consumption, was aided by a falling price ; 
 especially for about fifteen years after it took place, 
 as well as by the prevailing taste of the community, 
 which gave immediate effect to the lower duty. Tea 
 and coffee possess nearly the same qualities, and ap- 
 pear equally acceptable to the public taste. The 
 heavy duty, however, on coffee, and its high price, 
 turned the scale in favour of tea, which accordingly 
 had the monopoly of the market. The consumers 
 would almost as soon have given different prices for 
 the same qualities of tea, as a higher price for coffee 
 By the reduction of the duty and the price, coffee 
 was, for the first time, placed on an equality with 
 tea in the British market ; and the consequence was 
 a sudden and extraordinary demand for this formerly 
 forbidden article. The consumption of tea was also 
 increasing at the same time ; so that the falling price 
 was diffusing a growing taste for both these luxuries : 
 
rSUMPTION. 21 
 
 which, with the lower duty on coffee, could be used 
 indifferently, the one at no greater expense than 
 the other. 
 
 Wine is another foreign luxury which, from its 
 rare and precious qualities, will always bring a high 
 price. It is not, therefore, a fit subject for a heavy 
 tax ; and in any justly graduated scale of taxation, 
 it would rank among the lowest class of taxed ar- 
 ticles. Yet on this already too expensive article, 
 taxes have been imposed which it would not bear, 
 and which have been generally followed by a decrease 
 both of consumption and of revenue. Wine has con- 
 sequently been in this country the luxury of the 
 rich : it has never been freely used by the middling 
 classes. Heavy taxation has been compared by Dr 
 Smith to the evil of a barren soil ; and how forcible 
 in this case is the comparison, where its effect has 
 been to debar the inhabitants of this northern island 
 from any fair participation in the finer produce of 
 more genial climes. Mr Warre, in his excellent 
 treatise on the wine trade, estimates the number of 
 bottles daily used in Great Britain, for three years 
 previous to July 1822, at only 61,275 ; a limited 
 consumption certainly by fourteen millions of people. 
 The consumption has, however, been restricted by 
 the high price as well as by the heavy duties. In 
 the case of tea, coffee, and sugar, the effect of the 
 duty has been counteracted by a falling price ; but 
 wine still rose in price as fresh taxes were heaped 
 upon it; and both the duty and the price have 
 equally tended to check the consumption. In the 
 year 1784, about 20 was the price of a pipe of 
 
22 OF TAXES ON CONSUMPTION. 
 
 port wine of a hundred and thirty-eight gallons. It 
 rose every subsequent year; and in 1794 its price 
 was 32; in 1804, 46; in 1813 and 1814, 77 
 and 66 ; or, making allowance for the depreciated 
 currency, 58 and 48, 10s. It was in 1820, when 
 the currency was restored to its standard, 55, 
 which was more than double its price in 1784. This 
 great rise of price has been ascribed, not to any in- 
 crease of demand, but to the monopoly of the Oporto 
 Company. But the same, or even a greater rise of 
 price, has taken place in the price of Spanish and 
 other wines, not subject to any monopoly. The 
 price of sherry rose from 25, its price in 1788, to 
 60 and 70 per butt of a hundred and thirty gallons 
 in 1836 ; and the price of French and German wines, 
 of which there has always been a free export, has 
 risen in a like proportion. The cause of this rise 
 must, therefore, have been the increased demand, 
 owing to the rapid advances of wealth and improve- 
 ment throughout the world since 1784. It is only 
 when mankind acquire the means of purchasing these 
 rare and expensive luxuries, that an effectual demand 
 for them can arise ; and when, as in the case of the 
 finer wines, the produce of particular soils, they can- 
 not be increased in proportion to the demand, the 
 price will necessarily rise with the progress of popu- 
 lation and of wealth. 
 
 A tax on wine was imposed at an early period in 
 this country ; more especially on French wines, 
 which was dictated more by national animosity than 
 by sound policy. The tax was increased in 1745 
 and 1763, and also during the American war, when 
 
OF TAXES ON CONSUMPTION. 23 
 
 additional duties were imposed ; of which, while the 
 estimated produce was 242,844, the actual produce 
 was only 6316. In 1784, the duty amounted, on 
 French wines, to 93, 8s. 9d. per tun, or to 7s. lOd. 
 per gallon ; and on Portugal wine, to 49, 14s. Id. ; 
 or about 4s. 6d. per gallon. The consumption was 
 checked by this heavy duty; and in 1786 it was, by 
 the wise advice of Mr Pitt, reduced to 50, 16s. 6d. 
 per tun of 250 gallons ; or to about 4s. ^d. per gal- 
 lon on French, and 32, 16s., or 2s. 6fd. on Portu- 
 gal and other wines. The effect of this judicious 
 measure was an increase in the import of wine from 
 15,953 tuns, its average amount from 1784 to 1786, 
 to 27,354 tuns, its average amount from 1788 to 
 1790 inclusive, and an increase of revenue also, from 
 the low duty, of 88,556 ; the average produce of 
 the duty for three years ending in 1786, being 
 625,454, and for the three years ending 1790, 
 714,010. In 1794, the consumption of wine had 
 increased to 30,290 tuns. For the support of the 
 French war in which the country was now engaged, 
 an additional duty was imposed, in 1794, of 20 on 
 Portugal wine, and 30 per tun on French wine. 
 This additional duty does not seem to have checked 
 the demand, since the consumption amounted, in 
 1795, to 33,297 tuns. A notion seems now to have 
 been entertained, that this favourite luxury would 
 bear almost any tax. An additional duty of 20 and 
 30 per tun was accordingly imposed on French 
 and Portugal wines, the peculiar impolicy of which, as 
 indeed, of almost every additional duty on wine, was, 
 that it was added to a rising price, to the amount, 
 
24 OF TAXES ON CONSUMPTION. 
 
 for the ten previous years, of about 50 per cent. 
 By the combined effect of an increased duty and a 
 rising price, the import of wine was reduced, on an 
 average of the three following years, to 20,961 tuns -, 1 
 that of French wine fell off from 870 to 215 tuns ; 
 and the consumption of all wines, from 6,927,121 
 gallons, its amount in 1794, to 3,970,961 in 1797. 
 The demand for wine, notwithstanding the continued 
 rise of price, began after a time to increase, and in 
 1803 amounted to 31,529 tuns, when the duty was 
 again raised to 11s. 5^d. per gallon on French, and 
 to 7s. 8d. on Portugal wines ; though the price had in 
 the meantime risen about 30 per cent, since the year 
 1796, when the last duty was imposed. This increase, 
 both of price and duty, had the usual effect of de- 
 creasing the consumption, in 1804 and 1805, to 
 4,840,719 and 4,565,551 gallons; which is more than 
 a million less than in 1789, notwithstanding the great 
 increase of population and wealth during the inter- 
 vening period. The consumption of wine began 
 again to increase from the year 1805 ; and was 
 again checked by the rise of price which took place 
 about the year 1810 ; though there was no subse- 
 quent addition to the tax. The duty was reduced 
 in 1828 to 7s. 3d. per imperial gallon on French, 
 and to 4s. lOd. on Portugal wine ; and was fixed, in 
 1831, at 5s. 6d. on all foreign wines, and at 2s. 8d. 
 on Cape wines. 
 
 The rash imposition of the heavy duties of 30 and 
 20 on French and Portugal wines in the two succes- 
 
 1 Warre's Account of the Wine Trade, p. 9. 
 
TAXES ON CONSUMPTION. 25 
 
 sive years of 1795 and 1796, appears to have given a 
 check to the consumption of wine in this country, 
 from which it never afterwards recovered. The rise of 
 price which followed, to the amount of between 30 
 and 40 per cent., continued still farther to check the 
 demand ; which never was to the same amount as 
 before the imposition of these heavy taxes. The fol- 
 lowing is an account of the average consumption for 
 periods of five years, from 1804, after the last duty 
 was imposed, to 1825, when the duties were reduced : 
 
 Gallons. 
 Average consumption of wine for five years, 
 
 from 1804 to 1808 inclusive, . * 5,534,675 
 From 1809 to 1813, .... 5,665,799 
 From 1814 to 1818, .... 5,417,001 
 From 1819 to 1825 inclusive, six years, 5,231,905 
 
 Average produce of five years, from 
 
 1790 to 1794 inclusive, . . 7,166,593 
 
 The consumption of wine was increased by the 
 reduction of the duties, and amounted, in 1841, to 
 6,184,960 imperial gallons, equal to about 7,477,000 
 gallons of the former measure ; which, by 18,650,646 
 inhabitants, scarcely exceeds the consumption from 
 1790 to 1794, when the inhabitants hardly amount- 
 ed to 10,000,000. The consumption of wine, there- 
 fore, appears to have decidedly decreased in this 
 country ; which can hardly be owing to the duties, 
 not now exceeding on Portugal wines 25 or 30 per 
 cent., and on French and German wines not being 
 above 16 per cent. It is not so much the duty 
 as the high price, which since the year 1794 
 has been more than doubled, which restricts the 
 
26 OF TAXES ON CONSUMPTION. 
 
 consumption. The use of the higher-priced wines 
 must always be confined to the richer classes, even 
 though the duty were repealed ; and Portugal 
 wines, though cheaper, are still too expensive an 
 article to be freely used by the middling classes, 
 who are the chief consumers of this, as of all other 
 articles, and whose demand it is that regulates 
 the consumption. Wine is a favourite luxury ; 
 and the competition of the many, raising its price, 
 confines it to the use of the few ; for whose enjoy- 
 ment it is, therefore, that, however lightly taxed, 
 the finer wines will always be chiefly reserved. 
 
 Great Britain draws a revenue from various other 
 foreign articles, imported either for the employment 
 of her industry, or for the luxurious consumption of 
 the rich. Fruits such as currants, raisins, almonds, 
 prunes, figs were formerly subjected to heavy duties, 
 which have been reduced, with an increase of con- 
 sumption ; but not to such an amount as to com- 
 pensate, in all cases, the reduction of the tax. The 
 duty on currants was formerly 44s. 6d. per cwt. 
 This fruit, though it is used in the favourite dish of 
 the English, is not an important article of family 
 expense ; and hence it will bear a duty which would 
 be oppressive and injurious on some other articles, 
 such as wine, or coifee, or spirits; and, accordingly, 
 the consumption appears to have increased under the 
 pressure of this heavy tax, of which the produce was, 
 in 1829, 251,842, and in 1832, 314,325 ; while 
 the revenue, from the reduced tax, was, in 1842, 
 only 227,765. It does not appear, therefore, to 
 belong to that class of articles on which, where a large 
 
OF TAXES ON CONSUMPTION. 27 
 
 revenue is required, a heavy duty is altogether inex- 
 pedient. The duty has, however, been reduced on other 
 fruits, as on raisins and figs, with a more favourable 
 result both to trade and revenue. On the former, a 
 reduction took place, in 1829, to 15s. and 7s. 6d. 
 In 1828, the higher duty yielded 168,271. The 
 produce of the lower duty was, in 1840, 138,202 ; 
 in 1841, 189,703 ; and in 1842, 143,853. The 
 duty on figs was reduced in 1 832. The produce of 
 the higher duty was 22,402 ; of the lower duty, 
 in 1841, 22,703 ; and in 1842, 17,724. The duty 
 on almonds was reduced in 1832, with a decrease 
 of revenue, from 17,135 in 1831, to 8641 in 1841; 
 on prunes, in 1834, with a decrease of revenue 
 from 10,677, its amount in 1833, to 4880 in 
 1841 ; and in 1842, 2259 : so that it is only in 
 particular cases that the expectation of the same, 
 or a greater duty can be expected from a lower tax. 
 It may be sometimes, however, highly expedient to 
 sacrifice a small amount of revenue for the benefit of 
 commerce. 
 
 Great Britain, from her great progress in wealth 
 and manufactures, requires continual supplies of rude 
 produce from other countries where the materials of 
 industry are not in such demand. The chief articles 
 of this nature on which an import duty is paid, 
 are cotton-wool, sheep's-wool, wood, iron, and the 
 other metals, besides numerous others of less impor- 
 tance. The duties on wood and iron will be more 
 properly considered along with the alterations made 
 in the tariif of 1842, as well as other duties, mostly in- 
 considerable, on numerous articles of foreign produce. 
 
28 OF TAXES ON CONSUMPTION. 
 
 The astonishing extent to which the cotton manu- 
 facture is carried, requires a vast supply of the raw 
 material, which amounted, in 1840, to 592,488,010 
 Ibs., and, in 1841, to 487,992,355 Ibs. ; on which the 
 trifling duty of 2s. lid. per cwt. yielded, in 1841, a 
 revenue of 528,488. This duty on the raw mate- 
 rial of so important a manufacture, has often been 
 objected to. But its insignificant amount prevents 
 it from being injurious ; and in the present state of 
 the finances, it is not likely that any minister will 
 surrender revenue to such an amount. This trifling 
 burden is more than counterbalanced by the use of 
 improved machinery, which still enables the British 
 manufacturer to command every market to which he 
 has access. 
 
 The woollen manufacture requires also large im- 
 portations of the raw material, which was obtained 
 formerly from Spain, more lately from Germany and 
 the British colonies in South Australia, as well as 
 from India and South America. In order to protect 
 the wool-growers in this country against foreign 
 competition, a heavy duty was laid on the importation 
 of foreign wool, which was deeply and justly com- 
 plained of by the home manufacturer ; and the re- 
 markable impolicy of which is so forcibly exposed 
 by Professor Low in his work on the Domestic Ani- 
 mals of the British Islands, that the whole passage 
 is subjoined. 
 
 " Soon after the peace of 1814, alarm was raised 
 amongst the British wool-growers lest the price of 
 the raw material should be reduced below what they 
 chose to term a remunerating price. The Govern- 
 
OF TAXES ON CONSUMPTION. 29 
 
 raent of the day, in an evil hour, yielded to the in- 
 fluence exerted ; and in the year 1819, heavy duties 
 were imposed on foreign wool, with the design of 
 keeping up the price of the native produce, under the 
 specious pretext of encouraging British agriculture. 
 In six years this monstrous law was repealed ; but 
 not until it had done all that the shortness of the 
 time allowed for establishing the manufactures x>f 
 foreign rivals, and giving them the ascendancy in the 
 markets in Europe. But the price of short wool 
 continuing to decline, renewed efforts were made by 
 the wool-growers to induce the Legislature to restore 
 the former restrictions. This, in 1828, led to a 
 Parliamentary inquiry ; when a mass of evidence was 
 produced, proving, beyond all cavil, the danger and 
 evil of interfering, through the medium of duties and 
 fiscal regulations, with the raw material of a manu- 
 facture which could only be sustained by freedom 
 of trade and production. It was proved, by the con- 
 current testimony of witnesses from all parts, that 
 the cloth made from British wool alone could no 
 longer find a market in Europe, and was even deemed 
 too coarse for the clothing of the labouring classes 
 at home ; and that, without a free command of the 
 wool of other countries, a great part of the woollen 
 export trade of Great Britain would be for ever lost. 
 " It may well excite surprise that any class of 
 men amongst us should have dared to demand that 
 the manufacturers of the country should be prevented 
 from procuring the materials of their manufacture 
 where these should be obtained cheapest and best ; 
 nay, should not only be prevented from exercising 
 
30 OF TAXES ON CONSUMPTION. 
 
 this natural and necessary right, but compelled to 
 take from the wool-growers at home, and at a price 
 enhanced by fiscal regulations, what was absolutely 
 unsuited for the purposes of commerce. The dis- 
 graceful law of 1819 had already shown, that by 
 refusing to take the wools of other countries, we de- 
 pressed the price of the raw material abroad, and 
 thus gave an indirect premium to the foreign manu- 
 facturer ; and that, by forcing our manufacturers to 
 employ wools of inferior quality and higher price, 
 we directly unfitted them for competition in the 
 general market of the world. It was of the repeal 
 of the law of 1819 that the wool-growers thought 
 fit to complain, as having produced the depreciation 
 which had taken place in the price of the clothing 
 wools ; not perceiving that, in admitting the deprecia- 
 tion from this cause, they admitted, at the same time, 
 the magnitude and injustice of a burden which had 
 been so heavily taxing the manufacturing industry 
 of our own country, and fostering that of others." 
 
 " It is known that, in these 
 
 times, the great danger to the manufacturing pros- 
 perity of the country is the progress of other nations 
 in those arts in which we have hitherto excelled, 
 and that our relative superiority in such arts can 
 only be maintained by our being enabled to supply 
 the productions of them on the cheapest terms : and 
 granting that the wool-growers could, by means of 
 an ill-judged monopoly, have forced up for a time 
 the price of the native wool, would they not thereby 
 have abandoned a yet more safe and permanent 
 means of effecting the end, namely, that which would 
 
OF TAXES ON MANUFACTURED ARTICLES. 
 
 31 
 
 have resulted from increasing the demand for the 
 manufactured commodity? The injurious measure 
 contended for was, however, happily resisted, never, 
 it is to be trusted, to be brought forward again ; 
 and the trade of wool, by being thrown open to the 
 world, has been placed on a far surer foundation 
 than if it had been made to rest on the narrow and 
 insecure basis of monopoly and restrictions." 1 
 
 CHAPTER IV. 
 
 OF TAXES ON MANUFACTURED ARTICLES. 
 
 Effect of these taxes. Injurious to the manufacturer ; to the 
 improvement of art and industry. Chief articles on which im- 
 posed. 
 
 TAXATION, however necessary and however well 
 regulated, still imposes many inconveniencies, and in 
 its excess, is injurious to revenue as well as to trade. 
 But it occasions greater evils when it is laid on the 
 manufactures of the country than on articles of 
 foreign growth. In the one case, it merely restrains 
 the consumption of such articles, and the intercourse 
 
 1 See Illustrations of the Breeds of the Domestic Animals in 
 the British Islands, by David Low, Esq., F.R.S.E ; Part IX. p. 
 54. A valuable work, in which eloquence and philosophy are 
 happily combined, in the illustration of this interesting branch 
 of rural economy, with learned research and accuracy of detail. 
 
32 OF TAXES ON MANUFACTURED ARTICLES. 
 
 with the countries in which they are produced, which 
 is no doubt an evil ; but internal taxes lay under 
 thraldom the industry of the country : they impose, 
 for the security of the revenue, complicated re- 
 straints, necessarily strict and arbitrary, and often 
 capricious; the least deviation from which, even 
 through inadvertence, exposes the offender to heavy 
 penalties ; while the Revenue officers, in enforcing 
 this code of petty tyranny, must have access at all 
 times, by night as well as by day, to every part of 
 the manufacturer's work. It may be easily con- 
 ceived how injuriously such restrictions must inter- 
 fere with those manufactures which depend on chemi- 
 cal agencies; how the spirit of invention must be 
 checked by acts of Parliament regulating the work 
 in all its most delicate processes, when they shall 
 begin, and when they shall end ; and, as in the case 
 of spirits, minutely prescribing the nature and strength 
 of the materials to be used. In all the higher and 
 more complicated modes of industry, this constant 
 and teasing superintendence is more especially in- 
 jurious; since it admits, in no case, of any devia- 
 tion from the beaten track. Under this blio-htino- 
 
 O o 
 
 influence, ingenuity necessarily languishes. No new 
 modes of working can be introduced ; no experiments 
 tried by which the chemical and other properties of 
 materials may be better known and more extensively 
 used. The application of science to the improvement 
 of industry is in this manner obstructed ; the manu- 
 facturer is forced on modes of working less efficient 
 and economical than he himself would desire ; and a 
 waste of materials is occasioned, and a useless ex- 
 
OF TAXES ON MANUFACTURED ARTICLES. 33 
 
 pense, which raises the price of goods, and narrows 
 the demand. 
 
 The survey of the Excise generally commences in 
 the earliest stage of the manufacture, with an exact 
 gage of the materials on hand, which is continued 
 throughout the subsequent processes, and ends with 
 a strict account of the goods that are finally produced. 
 If it is found, on a balance of these two accounts, 
 that the actual produce of goods exceeds, after cer- 
 tain allowances, the previous estimate, the excess is 
 charged with duty ; and in case of a deficiency, or 
 presumption of fraud, the manufacturer is threatened 
 with forfeitures and penalties. This double survey 
 is enforced in the manufacture of spirits, of malt, 
 of soap, as it was formerly in that of glass. The 
 manufacturer is debited with a presumptive charge, 
 founded on an estimate of the produce from a given 
 quantity of raw materials, which, though he fail to 
 realize, he is still liable for the whole amount of the 
 duty ; and hence he labours to make up the quantity 
 required, though frequently with a deterioration of 
 the quality. 
 
 It was to avoid the manifold incoriveniencies at- 
 tending this mode of assessment, that the duty on 
 window-glass, and on bottle-glass, was transferred 
 from the fluxed materials to the goods as they came 
 finished from the annealing furnace, which added to 
 the ease and comfort of the manufacturer, without at 
 all trenching on the security of the revenue; and 
 equal relief would be given, if the same mode of levy- 
 ing the duty could be extended to other branches of 
 industry. The perfection to which the paper manu- 
 
 D 
 
34 OF TAXES ON MANUFACTURED ARTICLES. 
 
 facture has been brought, is ascribed, and not with- 
 out reason, in the report of the Excise commissioners, 
 to this exemption, during the previous process, from 
 the survey of the Excise, and to the free application 
 of machinery to its improvement. The amount of the 
 raw material, however, seldom affords any sure data 
 for an estimate of the actual produce, nor, conse- 
 quently, any just rule of charge. In the manufac- 
 ture of soap, the calculation of the Excise is, that 
 thirteen hundred-weight of material will produce a 
 ton of soap : and though the calculation is at variance 
 with all experience, and cannot be realized, it is, 
 nevertheless, the rule of charge against the manufac- 
 turer, which he must pay, however short of this 
 quantity his produce may be. So vexatious and im- 
 practicable has this process of assessment been found, 
 that in England it has been dispensed with by the 
 mutual consent of all parties, as impeding business 
 without securing the revenue ; while in Scotland it 
 has been rigorously enforced, the officers, in many 
 cases, relieving each other with all " the exactness 
 and discipline " of sentinels. And thus it seems to 
 depend on the discretion of the Excise officer whether 
 the act of Parliament shall be enforced, or whether it 
 shall remain a dead letter. 1 
 
 It is now generally acknowledged that the Excise 
 regulations are far too complex, and that the pen- 
 
 1 See the shrewd and conclusive evidence on this subject, of 
 Mr Taylor of Edinburgh. Appendix to Seventeenth Report, p. 
 128. See, also, evidence of Mr Fripp, soap-maker, Bristol, 
 Seventeenth Report, p. 15; of Mr Soames, manufacturer in Lon- 
 don ; of Mr Undsworth ; of Mr Benjamin Hawes. Report, pp. 
 92, 93. 
 
OF TAXES ON MANUFACTURED ARTICLES. 35 
 
 alties by which they are enforced are out of all propor- 
 tion severe. This evil is the necessary consequence of 
 heavy taxation. The temptation to evade the tax in- 
 creases with its amount : and heavier penalties and 
 more minute regulations, are, in consequence, deemed 
 necessary for the protection of the revenue. It is 
 stated in the Seventh Report of the Select Com- 
 mittee, that if the Excise regulations were submit- 
 ted to the revision of persons scientifically as well 
 as practically acquainted with the subject, a great 
 reduction might be made in their number, and a 
 greater simplicity given to their form and language ; 
 and that a system of survey might be devised equally 
 efficient and less oppressive. "The full benefit of 
 such an improvement," it is added, " cannot, perhaps, 
 be fully appreciated except by those who have had 
 opportunities of witnessing the feelings of disgust and 
 dissatisfaction expressed by traders, from being sub- 
 jected, in the conduct of their business, to a code of 
 rules and regulations to which, from their multipli- 
 city and complexity, they state it to be next to im- 
 possible that they should in all respects conform." 1 
 Taxes which require such machinery for their col- 
 lection, on however fit objects they may be imposed, 
 are so deeply injurious to the manufacturer, that they 
 may be truly said to err against Dr Smith's fourth 
 maxim, in taking out of the pockets of the people 
 a much greater sum than they bring into the Trea- 
 sury. 
 
 The chief articles of internal manufacture on which 
 heavy duties have been imposed in this country, are 
 British spirits, malt, beer, soap, starch, candles, 
 
 1 See Tenth Report, p. 15. 
 
36 OF TAXES ON MANUFACTURED ARTICLES. 
 
 paper, leather, glass, and printed cottons. The duty 
 on printed cottons, which was extremely unequal and 
 oppressive, was abolished in 1830 ; those on starch, 
 on candles, and on leather, have also been repealed : 
 the duties on the other articles still remain among 
 the most productive in this country ; and their policy 
 and practical effects may therefore be briefly consi- 
 dered. 
 
 Taxes on British Spirits. 
 
 Severity of the Excise survey. Frequent changes in the mode of 
 assessment. Injurious and expensive to the manufacturer. 
 History of the tax in England and Scotland. Frequent changes. 
 Assessment on the cubic contents of the still. Not suited to 
 the process of distillation. Its effects in deteriorating the spirit. 
 Division of the country into districts, with separate duties. Its 
 impolicy. The market chiefly supplied by the smuggler En- 
 tire change of the law in 1814. Illicit trade still continues. 
 Permission to use small stills. Duty reduced to 2s. per gallon.r 
 Success of this measure. Decrease of the illicit trade. Increase 
 of the revenue. Increase of the tax in 1825. Its effects. The 
 Irish duties. Assessed on the contents of the still. The effect 
 the same as in Scotland. Alarming increase of smuggling. 
 Duty reduced as in Scotland. Its success. Increase of the spirits 
 brought to charge. Decrease of smuggling. Tax again increased 
 in 1830. Revival, to a certain extent, of the illicit trade. Re- 
 duction of the duty in 1834. Effects. Tax increased in 1842. 
 Unproductive. Repealed in 1843. Account of the duties in Eng- 
 land. Consumption checked by the high duty. Tax reduced. 
 Revenue increased. One uniform duty proposed, Distinction of 
 duties necessary from difference of circumstances. 
 
 In this country, British spirits have been subjected 
 to a heavy tax, and to a rigorous survey for its col- 
 lection. The act by which it is imposed is most 
 minute in its details, of which the substance is sub- 
 
ON BRITISH SPIRITS. 37 
 
 joined, as a sample of the severe code under which 
 the British revenue is collected. The law fixes, first, 
 the locality of the distilleries in England within a 
 quarter of a mile of a market town, containing, at 
 least, five hundred inhabited houses ; second, also the 
 size of the still, which, in England, must contain at 
 least four hundred, and in Ireland and Scotland, 
 forty gallons. It describes minutely all the different 
 vessels and stills which the distiller requires, and in 
 what manner they are to communicate with each 
 other. Before beginning to work, the premises and 
 all the utensils to be used, must be entered ; each 
 room or utensil distinguished by a particular letter ; 
 a drawing or description given of every fixed pipe or 
 communication, and of the place to which it leads, and 
 every pipe painted of a particular colour, according to 
 the use to which it is applied. The same vigilance is 
 maintained through every stage of the manufacture. 
 The extract from the grain is watched in all the suc- 
 cessive processes through which it passes in its pro- 
 gress to pure spirit. Every vessel in which it is con- 
 tained is placed under the lock and seal and other 
 fastenings of the Excise officer. No operation can 
 go on except in his presence. He must be present 
 when the brewing commences, six hours' previous 
 notice being given him of the exact time ; also of the 
 materials to be used, and their quantity ; and when 
 the operation is finished, of the vessel in which the 
 wort is collected ; of its specific gravity, which is the 
 measure of its strength, and which must agree with a 
 notice previously given ; and is restricted, in England, 
 to 90 and 50, and in Ireland and Scotland, to 80 
 
38 OF TAXES ON MANUFACTURED ARTICLES. 
 
 and 30 degrees. The wort being converted into 
 wash, is measured and remeasnred every eight hours 
 by the officer, both for its strength and quantity. 
 On a previous notice of eight hours, being again 
 measured, it is conveyed, still under his inspection, 
 to another vessel, he having removed the locks and 
 fastenings by which it is secured ; where, being again 
 measured, it is conveyed into the still, where it is 
 converted into low wines : the officer still attending 
 to measure both its strength and quantity, and to 
 place everything under his lock and seal. In like 
 manner, with four hours' previous notice, and its 
 quantity and strength ascertained as before, the offi- 
 cer making his surveys at least twice during his 
 course of eight hours, the process of distillation pro- 
 ceeds ; and, after another survey of the strength and 
 quantity, the spirits are allowed, on four hours' pre- 
 vious notice, to be removed into the distiller's stock. 
 The tax on spirits may be assessed in different 
 stages of the manufacture : either on the wort after it 
 undergoes the process of fermentation and is convert- 
 ed into wash ; or on the low wines, the first extract 
 by distillation from the wash ; or, finally, on the 
 second extract, namely, the spirit when it is fit for 
 use. As it is considered essential for the security of 
 the revenue to watch the process of distillation 
 through all its stages, it is probably of no great 
 moment whether the duty be imposed on the wash 
 or on the spirit. But the distillers justly complain 
 that, in addition to the minute and vexatious inspec- 
 tion of their concerns by the Excise, they have been 
 exposed to great loss and inconvenience from the fre- 
 

 ON BRITISH SPIRITS. 39 
 
 quent changes that have been introduced in the mode 
 of assessing the duty : sometimes on the wash, at 
 other times on the spirit, and, in Scotland and Ire- 
 land, on the cubic contents of the still. With each 
 successive change in the law, they incurred a heavy 
 charge in adapting their premises, on which they had 
 generally expended a large capital, to the new mode 
 of working ; and in the purchase, also, of new vessels 
 and other utensils, in place of those previously in 
 use. Changes of this nature, which deeply affect the 
 concerns and property of individuals, ought not to be 
 rashly hazarded. A wise legislator will study exist- 
 ing interests, and be slow to derange establishments 
 in which a large capital has been embarked. In the 
 different laws for the regulation of the distilleries in 
 this country, no such caution has been observed. 
 They appear to have been rather a series of rash ex- 
 periments, by which the property of the manufacturer 
 has been largely sacrificed, with little benefit to the 
 revenue. No branch of industry has ever, perhaps, 
 been so harassed by such varying and complex re- 
 gulations. In England, by the 4 Queen Anne, the 
 duty was imposed on the low wines and on the 
 spirits, as at present ; and this mode of assessment 
 continued until 1784, 1 when the duty was imposed 
 on the wash at the rate of 5d. per gallon. In 1825, 2 
 the duty was again transferred from the wash to the 
 low wines and spirits, by which the distillers incurred 
 a heavy charge in altering their works, in compliance 
 with the new law. One extensive dealer, in his evi- 
 
 1 24 Geo. III., c. 46. 2 6 Geo. IV. c. 40. 
 
40 OF TAXES ON MANUFACTURED ARTICLES. 
 
 dence before the Commissioners of Excise Inquiry, 1 
 states his expense, on this account, to have amounted 
 to the incredible sum of 60,000 ; and another esti- 
 mates his loss at 12,000. This alteration, expensive 
 as it was to the manufacturer, was considered by 
 many as affording no advantage whatever over the for- 
 mer mode of working ; and they, besides, complained 
 deeply that all these experiments for improving the 
 revenue, were made at the distiller's expense. 
 
 The distillery regulations of Scotland and Ireland, 
 and the changes which they have undergone, have 
 been still more faulty, and have produced even 
 greater evils than those of England. The act of 
 Union extended to Scotland, the English law of 
 Queen Anne, which, with some immaterial amend- 
 ments and additions to the tax, continued in force 
 eighty years; during which period both countries 
 enjoyed the advantage of equal duties, and a free 
 trade. The exportation of Scots spirits was in con- 
 sequence begun in 1777, and rapidly increased from 
 2034 gallons, its amount in that year, to 881,969 in 
 1786 ; a greater quantity than was at that time 
 brought to charge for the home consumption of the 
 country. 
 
 It was about this period that the illicit trade, 
 favoured by the increase of taxes, and the lax admin- 
 istration of the Excise, was carried to its height ; 
 and that all the great staples of consumption, such 
 as tea, wine, tobacco, spirits, East India goods, laces, 
 silks, &c., were known to be chiefly supplied by the 
 
 1 See Appendix to the Seventh Report of the Commissioners of 
 Excise Inquiry, No. 94. Evidence of Thomas Smith. 
 
ON BRITISH SPIRITS. 
 
 smugglers ; who were so numerous and powerful, 
 being frequently well armed, that they landed their 
 goods, and carried them into the interior in defiance 
 of the Excise. The decline of the revenue from this 
 cause occasioned serious alarm, and was the subject 
 of long and earnest inquiries by parliamentary com- 
 mittees. The simple expedient of lowering the duty 
 on tea adopted by Mr Pitt in 1786, when it was com- 
 muted for a tax on window-lights, gave a complete 
 check to the contraband trade in that article. But, 
 unfortunately, no substitute could be found for other 
 taxes which it would have been equally expedient to 
 have reduced or repealed. Spirits formed at this 
 time one of the great articles of the illicit trade, of 
 which the legal consumption, along, of course, with 
 the revenue, had greatly decreased. In order to 
 check this growing evil, a new scheme, recommended 
 by the Commissioners of Excise Inquiry in 1784, 
 was now tried in Scotland, in which the mode of 
 assessing the duty on spirits, and of working, was 
 entirely changed. The existing duties were all 
 abolished, and a license-duty was imposed on the 
 cubic contents of the still, at the rate of 1, 10s. for 
 every gallon which it contained ; when the distiller 
 was left at full liberty to manufacture his spirits 
 according to whatever process he might judge best, 
 and to produce any quantity of which his still was 
 capable. This new law for regulating the distil- 
 leries, which was considered to be an infallible 
 device for improving the revenue, was the least 
 successful of any that had been tried. It was 
 founded on a total ignorance of the business of dis- 
 
42 OF TAXES ON MANUFACTURED ARTICLES. 
 
 filiation, and was alike injurious to all the various 
 interests which it affected, to the revenue as well 
 as the manufacturer; while in debasing the quality of 
 the spirit, which was its acknowledged effect, it gave 
 to the illicit trader a decided superiority in the 
 market. The tax being proportioned to the capa- 
 city of the still, and being the same whatever quan- 
 tity was produced, the distiller, having paid the 
 annual duty, had an interest in producing the great- 
 est possible quantity of spirits within the year ; and 
 he contrived to run off the still an operation which 
 it was supposed would require twenty-four hours 
 in three minutes. By this quicker process of dis- 
 tillation, which the new law introduced, he so far 
 outstript all the calculations that had been made, 
 that the duty, though still following the increased 
 production at a tardy pace, was gradually raised 
 from 1, 10s., its amount in 1784, to 164 in 1806, 
 on each gallon of the still, besides an additional 
 duty on the wash and on the spirit. 
 
 It was about this period, namely in 1784, that 
 Scotland was divided into the Highland and the Low- 
 land districts, each with different regulations and 
 rates of duty ; and these unequal duties, with the 
 new modes of assessment, still favoured the progress 
 of illicit distillation. Against the competition of 
 the more lightly taxed Highland spirit, the Lowland 
 distiller was protected, not by a countervailing duty, 
 but by its exclusion as contraband from the Lowland 
 district. The reason and taste of the community 
 alike rebelled against this unnatural law, which in- 
 terdicted the produce of the country from the use of 
 
ON BRITISH SPIRITS. 
 
 its own inhabitants. The general sympathy was 
 with the smuggler. The Highland spirit which he 
 manufactured from malt in small stills, -was in uni- 
 versal demand, and was brought over the Border by 
 bands of organized smugglers, against whose inroads 
 no vigilance could guard the forbidden frontier. 
 The entire exclusion of this staple product of the 
 Highlands would indeed have been deeply injurious 
 both to the landlords and tenants of that district, 
 by lowering the value of their lands ; and hence the 
 zealous concurrence of both in evading the rigour 
 of this arbitrary law. It was the demand of the 
 illicit distilleries for barley that raised its price, 
 and greatly improved the value of all Highland 
 estates : in many cases doubling their rents. Need 
 we wonder, therefore, that no great zeal was evinced 
 in suppressing illicit distillation ; or that the land- 
 lords, sitting as judges in the Excise courts, awarded 
 such moderate fines as operated, and were, indeed, 
 viewed rather as a license-duty for the continuance 
 of the trade, than as a penalty on its suppression. 
 All the recesses and glens in the Highlands were 
 accordingly known to be the seats of illicit distilla- 
 tion ; and by many ingenious devices, and secret 
 channels, the spirit found its way in large quantities 
 into all the Low-country markets. l 
 
 In 1814, the assessment on the cubic contents of 
 the still was discontinued ; and the English system 
 of a duty on the wash, and on the spirit, was ex- 
 
 1 See Appendix to the Fifth Report of the Commissioners of 
 Excise Inquiry into the Revenue arising in Ireland, No. 59. 
 Evidence of Hugh Munro, Esq. 
 
44 OF TAXES ON MANUFACTURED ARTICLES. 
 
 tended to Scotland, amounting on the spirit to 8s. 
 per gallon. But this law, in restricting the Lowland 
 distiller to no less a still than of 2000 gallons, and 
 the Highland distiller to one not less than 500 gal- 
 lons, still left the contraband trader with advantages 
 which he was not slow to improve. The finer and 
 cheaper spirit that was made in his small still was 
 universally preferred to the coarser spirit of the 
 larger stills, to which distillation was now confined. 
 It was by the smuggler, therefore, that the market 
 was still supplied; and the years 1814 and 1815 
 were noted for the progress of illicit distillation over 
 the whole country. In 1816 the use of small stills 
 of 40 gallons was again permitted; the duty was 
 reduced to 6s. 2d. and 5s. 6d. But the illicit trade 
 had in the meantime received such an impulse, from 
 the unwise restraints and heavy duties imposed 
 on the legal distiller, that no vigilance could sup- 
 press it. 1 
 
 It was not till the year 1823, when the duty was 
 reduced from 5s. 6d. to 2s. per gallon, that the legal 
 distiller had any chance of a successful competition 
 with his contraband rival. This act was extended 
 to Ireland, and was in all respects a most successful 
 measure. The lower duty increased the quantity of 
 spirits brought to charge in Scotland, from 2,308,286 
 gallons, its amount in 1823, to 4,350,301 gallons in 
 1824, and in 1825 to 5,981,540 gallons; and the 
 revenue which it yielded was nearly equal to the 
 produce of the former high duty, amounting in 1825 
 
 1 See Appendix to the Seventh Report, p. 302, Nos. 100, 101, 
 102, 103. See, also, Fifth Report, 
 
ON BRITISH SPIRITS. 45 
 
 to 682,848, while the duty of 5s. 6d. only produced, 
 in 1822, 691,136. The efficiency of the measure 
 was further attested by the cessation of the illicit 
 trade, and the erection of legal stills all over the 
 Highlands. 1 
 
 In 1826, the duty was raised in Scotland and in 
 Ireland to 2s. lOd. the imperial gallon ; which, mak- 
 ing allowance for the difference of measure, was an 
 addition to the tax of 6d. per gallon ; and, in 1830, 
 it was raised to 3s. 4d., while the drawback on malt, 
 which had been increased to Is. 2d. per gallon on 
 spirits, in which it was exclusively used, was reduced, 
 in 1830, to 8d. The effect of those impolitic addi- 
 tions to the duty, was to revive, to a certain extent, 
 the illicit trade in the Highlands ; and, to suppress 
 it, new severities were resorted to, namely, penal- 
 ties and heavy fines ; and in default of payment, the 
 
 jail. 2 
 
 In Ireland similar errors were committed. In 
 
 1 The success of the measure is proved by the concurring 
 evidence of all the different collectors in the Highland districts ; 
 every one expressing himself in stronger terms than another 
 respecting the great benefits which it had produced. See Appen- 
 dix to the Seventh Report of the Commissioners of Excise Inquiry, 
 Nos. 102, 103. One collector stated in evidence, that at one time 
 he had 150 or 160 offenders to prosecute once a-quarter; and that 
 now (15th November, 1833) they did not exceed five or six. 
 Appendix, Seventh Report, Nos. 104, 305. 
 
 2 See Appendix to Report of Commissioners of Excise Inquiry. 
 Evidence of Collectors of Argyle ; who say, " In a part where 
 it [the illicit trade] had revived, and was carried to a considerable 
 extent last year, we have been so fortunate as to make discoveries, 
 and get the persons to jail; and from their not being allowed to 
 get out so soon, nor being allowed aliment, which will make 
 them an example to their neighbours, I hope it will be stopped." 
 21st November, 1833. 
 
46 OF TAXES ON MANUFACTURED ARTICLES. 
 
 1779, the duty was assessed, as it was afterwards 
 in Scotland, on the cubic contents of the still, and 
 with precisely the same effects. The quicker process 
 of distillation that was adopted entirely distanced 
 the erroneous computations of the Excise ; and the 
 tax, though it was continually increased till at length 
 it was, in proportion to its original amount, as 38 to 
 1, never kept pace with the still more rapid increase 
 of spirits which was produced by the improved process 
 of distillation. This mode of assessment was in conse- 
 quence superseded by a duty of 5s. 6 d. on the gallon, 
 at which rate it continued till the year 1823. 
 
 All the evils which necessarily arose from excess 
 of duty were, during this interval, experienced in 
 Ireland. Smuggling was carried on to an alarming 
 extent. The annual consumption of spirits was 
 estimated at 10,000,000 gallons ; while the duty in 
 1822 was only paid on 2,910,483 gallons. But the 
 loss of revenue was by no means the worst evil : 
 the prosecution of the illicit trade gave rise to the 
 most lamentable scenes of violence and disorder ; the 
 country, traversed by armed and hostile bands of 
 revenue-officers and smugglers, presented, in many 
 districts, the image of war. It was in vain that 
 increased severities were resorted to ; that the guilt 
 of an unlicensed still was visited by a heavy fine on 
 a whole parish ; and that the smuggler was punished 
 by transportation. The trade was still actively pur- 
 sued all over the country, until the year 1823, when 
 the duty was reduced in Ireland, as in Scotland, to 
 2s. the gallon, and was transferred from the cubic 
 contents of the still to the spirit. This measure 
 
ON BRITISH SPIRITS. 47 
 
 was entirely successful: the illicit trade was sup- 
 pressed; and the quantity of spirits brought to charge 
 was increased from 2,910,483 gallons in 1822, to 
 6,690,315 in 1824, and to 9,262,744 in 1825 ; while 
 the produce of the high duty of 5s. 6d., which was 
 in 1821 912,288, and in 1822 797,518, was 
 nearly equalled by that of the lower duty of 2s. in 
 1824, which was 776,690, and was exceeded by 
 it in 1825, when it amounted to 1,084,191. The 
 same effects have still followed every reduction of 
 duty on spirits ; a clear proof that it is not one of 
 those commodities on which a heavy tax can be 
 safely imposed. The amount brought to charge in 
 Scotland was, in 1839, 1840, and 1841, 6,188,582; 
 6,180,138; 5,989,995 gallons: the duty, 1,031,430; 
 1,088,049; 1,098,149. 
 
 The low duty of 2s. on the gallon, though it im- 
 proved the revenue and put an end to smuggling, 
 was not allowed to continue for more than two 
 years. The experiment of excessive duties was 
 again tried. The tax was raised, as in Scotland in 
 1826, from 2s. to 2s. lOd. the imperial gallon ; and 
 in 1830 to 3s. 4d. ; followed as usual by a revival 
 of the illicit trade, and by a loss of revenue. On 
 this point, the Seventh Report of the Select Com- 
 mittee in 1833 contains conclusive evidence from all 
 the most respectable distillers and revenue collectors 
 of Ireland; who state that the illicit trade com- 
 menced with the first increase of the duty in 1826, 
 and that in 1832, when it was raised to 3s. 4d., 
 smuggled spirits were openly offered for sale in all 
 the towns ; that the fair trader was undersold in 
 
48 OF TAXES ON MANUFACTURED ARTICLES. 
 
 every market; and that before 1833 the contraband 
 trade had overspread the whole country. The only 
 remedy was a reduction of the duty, which took 
 place in 1834, from 3s. 4d. to 2s. 4d., and was fol- 
 lowed by the best effects. The spirits which paid 
 duty in 1833 at 3s. 4d. amounted to 8,168,596 
 gallons, on which the revenue was 1,361,432. The 
 duty in 1834 at 2s. 4d., for the last half of the year, 
 amounted to 1,369,318 ; and the spirits that paid 
 duty for home consumption to 10,037,209 gallons. 
 In 1838, the quantity of spirits which paid the duty 
 of 2s. 4d. for home consumption, was 12,296,342 
 gallons ; and the revenue received, 1,434,573. Nor 
 was this increase of revenue obtained, as many sup- 
 pose, at the expense of sobriety ; seeing that nearly 
 the same quantity of spirits was consumed when the 
 duty was high. The only difference was, that the 
 low duty was paid on the spirits consumed, while 
 the higher duty was evaded to a great extent. 
 
 The last attempt to draw a revenue from Ireland 
 by an increased duty on spirits, was made in 1842, 
 and with precisely the same result as on all former 
 occasions ; namely, an increase of smuggling with no 
 proportional increase of revenue. The additional 
 duty imposed was Is. per gallon ; the estimated 
 revenue was 250,000 : not above one half of which 
 was realized. The tax was accordingly repealed the 
 year after it was imposed. The consumption of 
 spirits has decreased in Ireland owing to the influ- 
 ence of the temperance doctrines. The produce was, 
 in 1839, 1840, and 1841, 10,815,709 ; 7,401,051 ; 
 6,485,443 gallons ; the duty amounted, in those 
 several years, to 1,261,832; 936,126; 864,726. 
 
ON BRITISH SPIRITS. 49 
 
 In England, the increase and decrease of the 
 uuties on spirits have always been followed by the 
 same effects. The duty was gradually raised during 
 the war from 3s. 4|d. per gallon to 11s. 8jd. in 
 1820 ; and each successive addition was followed 
 by a decrease of the quantity of spirits brought to 
 charge, and in most cases by a loss of revenue. 
 The produce of the duty, on an average of three 
 years from 1820, at 11s. 8jd., was 2,559,825; 
 the duty was reduced, in 1826, to 7s. ; and the 
 following is an account of its produce in the follow- 
 ing years : 
 
 1826 2,592,521 
 
 1827 2,335,046 
 
 1828 2,715,890 
 
 1829 2,695,268 l 
 
 In 1830 the duty was raised to 7s. 6d. without 
 any decrease in the quantity of spirits brought to 
 charge. The following is the account of the revenue 
 for the next four years : 
 
 1830 2,857,147 
 
 1831 2,787,767 
 
 1832 2,730,712 
 
 1833 2,893,988 
 
 and in 
 1838 2,973,933 
 
 The last increase of duty was in 1840, when 4d. 
 was added to the gallon of spirits, without apparently 
 any corresponding increase of revenue ; the produce 
 of the duties in Britain being, in 
 
 1839 4,040,438 i 1841 4,214,083 
 
 1840 4,169,554 | 1842 4,035,914 
 
 The unequal duties, and different regulations and 
 
 modes of assessment which have been adopted in 
 
 England, Scotland, and Ireland, have been always 
 
 a subject of complaint, and a serious obstacle to 
 
 1 See Seventh Report, Appendix, No. 83. 
 
50 OF TAXES ON MANUFACTURED ARTICLES. 
 
 a free trade. But a uniform rate of duty could 
 only be established in the three kingdoms by lower- 
 ing the English and Scots to the Irish duty of 
 2s. 4d. This, however, would probably be attended 
 with a great loss of revenue ; for, though smug- 
 gling may prevail in the great towns of England, 
 where illicit stills are secretly worked on a small 
 scale, the revenue from spirits is punctually paid 
 by the few great capitalists, among whom the 
 manufacture is divided. In 1833 the number of 
 English distilleries did not exceed twelve, and they 
 paid duties to the amount of 1,420,525. In 1842 
 duties were paid by nearly the same number, to the 
 amount of 2,648,651. But this heavy duty, if it 
 were imposed on numerous lesser dealers, as in Ire- 
 land or Scotland, would be evaded on all hands : a 
 tax of much less than 7s. 10d., the present amount 
 of the English duty, would restore the illicit trade 
 in all the mountainous recesses of those countries, 
 where no vigilance of the Excise could ever reach it ; 
 and one uniform duty, therefore, however great its 
 advantages would be, could hardly be established 
 throughout the United Kingdom, without a greater 
 sacrifice of revenue than, in the present state of the 
 finances, could be afforded. The difference of duties, 
 besides, does not prevent the import both of Scots 
 and Irish spirits into England. After being inter- 
 rupted by the useless and expensive changes, and dif- 
 ferent modes of manufacture introduced into the two 
 countries, the exportation of spirits to England was 
 resumed from Scotland in 1795, when it amounted to 
 125.377 gallons. It was favoured by the alteration 
 

 ON MALT. 51 
 
 of the law in 1823 ; and in 1833 it had increased to 
 2,587,316, and in 1839, to 2,140,325 gallons from 
 Scotland, and from Ireland to 351,529 gallons; the 
 Scots and Irish spirits paying, of course, a counter- 
 vailing duty on their importation into England. 
 
 
 On Malt. 
 
 Restraints on the manufacture. Objections of the maltsters.- 
 Answer by the Board of Excise. Restraints the result of heavy 
 duties. Not a heavy tax on beer. Not the cause of the non- 
 increase in its consumption. Arising from high price and other 
 causes. Tax on beer. Moderate, and not oppressive. No good 
 reasons for its repeal. 
 
 All the other branches of industry on which taxes 
 are imposed, are placed under the same strict survey 
 as the manufacture of spirits. The details vary, of 
 course, and are more or less oppressive according to 
 the different processes to which they are applied. 
 But the object is still the same ; namely, to watch 
 the raw material in the various stages through which 
 it passes, until the manufacture is finished. The 
 making of malt is conducted under the strictest sur- 
 veillance of the Excise ; and the maltster complains 
 deeply of the restrictions on the jprocess of malting, 
 by which the time of steeping the grain and of 
 watering it when on the floor, is prescribed by the 
 law, and to which, under all the variations of the 
 temperature and the seasons, he is bound, under heavy 
 penalties, strictly to conform. Most of the wit- 
 nesses who were examined by the Commissioners 
 
52 OF TAXES ON MANUFACTURED ARTICLES. 
 
 of Excise Inquiry in 1835, complain of these and 
 other restraints, as cramping the fair trader in the 
 exercise of his skill. It was stated in reply, that 
 the regulations complained of were introduced not 
 rashly nor capriciously, but for the security of the 
 revenue, being suggested by cases of fraud which 
 actually occurred ; and it is certainly not an easy 
 task, more especially when the taxes are heavy, to 
 reconcile the ease and comfort of the manufacturer 
 with the strict collection of the duties. Heavy 
 taxes present an irresistible temptation to fraud, 
 from which the revenue can only be secured by re- 
 gulations strict and arbitrary, and that cannot be 
 relaxed, however adverse to the spirit of freedom or 
 to the progress of industry. 
 
 The tax on malt, after various alterations during 
 the last war, and since its termination, was finally 
 fixed at 2s. 7d. per bushel, or 20s. 8d. per quarter, 
 in 1822. If the quarter of malt be estimated to 
 produce 3^ or 3^ barrels of strong beer, the follow- 
 ing will then be the amount of duty : 
 
 On the malt, 20s. 8d. 
 
 On the beer, 32s. 
 
 Hops, 2s. 
 
 54s. 8d. : 
 
 about 17s. on the barrel of beer of 36 gallons ; or 
 about 6d. on the gallon ; being equal, if we estimate 
 the value of the gallon at 2s. 6d., to 20 per cent, 
 on the price. This tax is, consequently, among the 
 most moderate of the British imposts on consumable 
 articles. The consumption of beer has not, however, 
 
ON MALT. 53 
 
 increased with the progress of the country. From 
 the parliamentary accounts, it appears that the con- 
 sumption of malt, and consequently of beer, had been 
 almost stationary since about the beginning of the 
 last century. The average quantity of malt charged 
 with duty for ten years, from 1715 to 1725, was 
 27,716,252 bushels. The quantity of beer made in 
 1722 amounted to 6,092,553 barrels, when the popu- 
 lation of Great Britain did not amount to above six 
 millions. For ten years, from 1820 to 1829 inclu- 
 sive, the average amount of malt that paid duty was 
 26,512,242 bushels; and the average consumption of 
 beer, for seven years preceding the repeal of the beer 
 duty in 1830, is only 7,352,000 barrels ; while 
 the population of the country had increased to 
 14,000,000. l But as the tax on beer has never 
 exceeded, and seldom been so high as 20 or 24 per 
 cent, in the course of last century, it will scarcely 
 account for this stagnation in the demand, consider- 
 ing that it could not have materially raised the price. 
 A very great rise, however, has taken place in the 
 price within the last fifty or sixty years, which, along 
 with other causes, will fully account for the station- 
 ary demand in this country. The best London por- 
 ter, which was sold about fifty years back at 3s. or 
 3s. 6d. per dozen, and at 52s. 6d. per hogshead, has 
 now, from whatever cause, risen to double that price, 
 or to 104s. or 106s. The price of strong beer or 
 ale, has risen in a like proportion, namely, from 60s., 
 70s., and 80s. per hogshead, its price in 1790, to 
 
 1 See Appendix to the Fifteenth Report of the Commissioners 
 of Excise Inquiry, No. I., Reply of Board of Excise, p. 85. 
 
54 OF TAXES ON MANUFACTURED ARTICLES. 
 
 nearly double namely, from 3 to 7 per hogshead ; 
 and from a table of the contract-prices paid by Green- 
 wich Hospital for more than a century past, we find 
 a gradual rise in the price of beer from 4s. and 5s. 
 to 15s. and 20s. per barrel : not above one fifth part 
 of which can be placed to the account of the tax. 
 This high price may have checked the demand for 
 beer ; but it has been greatly aided by other causes, 
 namely, the growing taste for articles which come 
 into competition with beer, such as tea, coffee, and 
 spirits. Tea was introduced into this country about 
 the beginning of last century. Of all the foreign 
 luxuries, it has proved the most grateful to the public 
 taste ; and its consumption has accordingly increased 
 from 370,000 Ibs. in 1722 to ten, twenty, thirty, and 
 even forty millions of Ibs. in some years. It sup- 
 planted, in many cases, the rival commodity of beer, 
 and broke up the numerous ale-drinking clubs that 
 were common in the country about the beginning of 
 the last century. Those several beverages, tea, coffee, 
 beer, and spirits, have each their own class of con- 
 sumers. A tea-drinker is seldom given to spirits ; 
 while a tippler of spirits as seldom cares for tea. 
 Hence it is scarcely possible that the consumption of 
 tea could have increased to thirty or forty millions 
 of Ibs. without trenching on the consumption of 
 those other articles with which it comes directly into 
 competition. Tea and coffee are fully as expensive 
 in their use as beer, greatly as the duty on coffee has 
 been reduced ; and tea is much more heavily taxed. 
 But neither the expense of tea, nor the tax on it, have 
 prevented its increased consumption ; still less would 
 

 ON MALT. 55 
 
 any growing demand for beer have been prevented by 
 the more moderate tax to which it has been subject, 
 if it had suited the general taste. But this appears 
 not to have been the case ; and, accordingly, in the 
 competition between those rival articles, beer has 
 been thrown out, and tea and coffee, or spirits, have 
 been preferred. 
 
 The tax on beer was repealed in 1830. It was a 
 productive tax, yielding above 3,000,000 a-year; 
 and it was not oppressive; its amount being only 
 10 per cent, on the price. Along with the repeal of 
 this tax, the sale of beer was set free from the re- 
 strictions hitherto imposed upon it. Prior to 1830, 
 it could not be sold by retail without a license from 
 a magistrate, renewable annually. The payment of 
 an annual duty of 2, 2s., is all the license that is 
 now required. The repeal of the duty, along with 
 those restrictions on the sale of beer, was followed 
 by an increased consumption of malt ; but not, by 
 any means, to such an amount as to make up for the 
 loss of the tax. For ten years prior to the repeal of 
 this tax, the consumption of malt in Great Britain, 
 after a long stagnation, had begun to increase. From 
 1811 to 1820 inclusive, its average amount was 
 24,196,386 bushels : from 1820 to 1830, 29,630,195 
 bushels. During the succeeding period of ten years, 
 it was increased, by the repeal of the beer duty, to 
 38,614,910 bushels. The average produce of the 
 beer and malt duties in Britain, for seven years from 
 1823, during which malt was subject to the present 
 duty of 20s. 8d. per quarter, was 7,223,441 ; while 
 the malt duty, since the repeal of the tax on beer, 
 has produced, on an average for the last seven years, 
 
56 OF TAXES ON MANUFACTURED ARTICLES. 
 
 ending in 1842, 4,844,639 : so that, if we deduct 
 the produce of the malt duties from the former 
 amount of the malt and beer duties, the result will 
 show the annual loss by the repeal of the beer tax, 
 to have been 2,349,698. Nor does the consumption 
 of malt appear, notwithstanding the repeal of this 
 productive duty, to be progressively increasing: it 
 was raised, indeed, immediately on the repeal of the 
 duty in question, from 29,630,195 bushels, as already 
 stated, to 38,614,910 bushels; but it has not since 
 increased: the average consumpt for the last three 
 years ending in 1843, being only 36,982,709 bushels. 
 The duty repealed was too inconsiderable in amount 
 to lower the price of beer in any degree to benefit 
 the consumer, or to increase the consumption to the 
 amount anticipated : so that the repeal of the tax 
 appears to have produced no advantage adequate to 
 the loss of revenue which it occasioned. There were, 
 besides, other important financial reforms that, with 
 so large a surplus of revenue, might have been safely 
 carried into effect : such as the great reform of the 
 Post-office, which afterwards took place when there 
 was no surplus to make up for the defalcation of 
 revenue by which it was followed. The opportunity 
 might have been taken to regulate and reform the 
 Custom-house duties ; to reduce the tax on fire insur- 
 ance ; the grinding duties on legacies ; the house 
 and window duties ; or the exorbitant duty of 100 
 per cent, on tea. There was, unfortunately, too 
 great a choice of subjects on which to lay out the 
 surplus that had accrued ; and no necessity, conse- 
 quently, to select for repeal one of the most produc- 
 tive and least oppressive of all the British duties. 
 
ON SOAP. 57 
 
 On Soap. 
 
 Regulations of the Excise. Interfere injuriously with the manu- 
 facture. Illicit trade. Causes of it. Duty reduced in 1833. 
 Effects on consumption and revenue. 
 
 Soap, though it is essential to health and comfort, 
 and should therefore be brought within the reach of 
 all classes by a low price, is too important an article 
 of consumption to be neglected, where a large revenue 
 is required. It has, accordingly, been taxed in this 
 country from an early period, and the manufacture 
 placed under the strict survey of the Excise; by which 
 its improvement has been seriously retarded. 
 
 The regulations under which the revenue is col- 
 lected, restrict the maker in his mode of working and 
 in the choice of his materials. He cannot try experi- 
 ments for the purpose of finding out the articles best 
 suited to his purpose, nor can he adopt the improved 
 apparatus by which soap is made more cheaply, more 
 expeditiously, and of a better quality, in France and 
 other countries where there are no restrictions : and 
 hence the manufacture, which is a chemical process, 
 has not profited, as in other countries, by the modern 
 improvements which have been made in that science. 
 The same process which was in use when the tax was 
 imposed, is continued with little alteration ; and the 
 soap which is made in France and Spain, and even in 
 Barbary, is in consequence preferred to English soap. 
 
 It appears, also, that those regulations, however 
 they restrict the manufacturer, have failed in their 
 intended purpose of checking the illicit trade, which 
 has been peculiarly facilitated by modern chemical 
 
58 OF TAXES ON MANUFACTURED ARTICLES. 
 
 discoveries. The barilla from Spain and Portugal, for- 
 merly used, contained about 20 per cent, of alkali ; 
 the kelp from Scotland only about 6 per cent. ; and 
 the manufacturer, in prosecuting his clandestine oper- 
 ations, had great difficulty in safely disposing of the 
 refuse which these materials left, which, being easily 
 known by a peculiar blue appearance, was often the 
 cause of his detection. All these difficulties are ob- 
 viated by the concentrated alkalies now made, which 
 can be put into a copper without grinding or any 
 other operation, which leave no refuse, and by the 
 use of which soap can be made in as many hours as 
 it formerly required days. 
 
 The duty was reduced, in 1833, from 3d. to l^d., 
 with a view not only to extend the consumption, but 
 also to check the contraband trade. This reduction 
 of duty, which was about one-half, was followed by 
 an increase in the consumption, of about one-fourth ; 
 which afterwards increased to a half, or 50 per cent., 
 on its former amount. 
 
 The average amount of the soap retained for home 
 consumption, for ten years prior to the reduction 
 of the duty in 1833, and adding the ninth part, on 
 account of the allowance of one-tenth formerly 
 made to the manufacturer on the high duty, was 
 106,568,611 Ibs. 1 The average of two years after the 
 duty was reduced, 130,690,061 Ibs. ; being an in- 
 crease of about one-fourth. 
 
 1 An allowance of one-tenth on the quantity manufactured 
 was made before 1833 to the maker, which was withdrawn when 
 the duty was reduced ; and in order to make a fair comparison 
 between the amount of duty, or of soap charged with duty pre- 
 vious and subsequent to this period, one-ninth must be added to 
 the parliamentary accounts of duty or of produce prior to 1833. 
 
ON GLASS. 
 
 59 
 
 average produce of the duty of 3d., for ten 
 years previous to 1833, adding, as before, the ninth 
 part, was 1,392,158 ; average produce of the re- 
 duced duty, for seven years prior to 1843, 772,187. 
 From the following account, the produce of the duty 
 appears to be on the increase since it was reduced. 
 Net produce of the duty on soap since 1836 : 
 
 1836 754,547 
 
 1837....:.... 729,567 
 
 1838 869,630 
 
 1839 700,650 
 
 1840 728,700 
 
 1841 814,227 
 
 1842 828,003 
 
 On Glass. 
 
 Different kinds of glass. Strictness of the Excise survey. Not 
 necessary to secure the revenue. Account of the duties and their 
 gradual increase. Tax on crown-glass falls on dwelling-houses. 
 Not exorbitant. Does not lessen the consumption of crown- 
 glass so much as the window tax. Consumption of glass. How 
 affected by the tax. Tax on bottles its amount dependent on 
 the consumption of the liquors for which bottles are required. 
 Not an oppressive tax. Flint-glass. Impolitic increase of duty. 
 Decrease of consumption. Decrease of duty and of revenue. 
 Illicit trade. Facilities to the smuggler from chemical improve- 
 ments. Illicit trade checked by the reduction of the duty. 
 Plate-glass. Nature of the manufacture. Checked by the exor- 
 bitant rise of duty in 1813. Decrease of duty. Increase of con- 
 sumption occasioned by a great fall of price as well as by reduc- 
 tion of duty. Injurious restrictions on the manufacture. Ex- 
 amples. Regulations respecting the drawback on exportation. 
 
 In the act which imposes the taxes on glass it is 
 distinguished as follows : 1st, crown-glass, and Ger- 
 man sheet-glass, or window-glass ; 2d, broad-glass, 
 a coarser species of glass used for the same purpose; 
 
60 OF TAXES ON MANUFACTURED ARTICLES. 
 
 3d, flint-glass, namely, decanters, tumblers, wine- 
 glasses, and small phials ; 4th, plate-glass, which is 
 cast and manufactured chiefly into fine mirrors, and 
 blown plate-glass ; and 5th, bottle-glass. Each of 
 these descriptions of glass is liable to different regu- 
 lations and rates of duty. 
 
 Glass was first subjected to a tax in this country 
 in the reign of William III., which was soon after- 
 wards repealed; being, as is stated in the act of 
 repeal, " so vexatious and troublesome in the levy- 
 ing," and endangering the loss of so beneficial a 
 manufacture to this kingdom. 1 It was, however, 
 again imposed, accompanied by the strictest sur- 
 vey of the manufacture in every stage, and in its 
 most delicate processes, which restrained all ex- 
 periments for its improvement, and occasioned both 
 loss and vexation to the maker. The favourite 
 scheme of a check on the manufacturer by a double 
 survey, first of the materials used, and afterwards of 
 the goods produced, was strictly enforced. With 
 this view the materials were gaged while in a state 
 of fusion in the pots by the officer, and afterwards 
 by the supervisor. The maker was required to 
 make entry in writing of every place which con- 
 tained glass, or the materials for making it ; of 
 every furnace, melting-pot, or chamber ; to mark and 
 number them ; to give six hours' notice, before be- 
 ginning to work, of the weight of the materials, and 
 of the kind of glass that was to be made ; while 
 every glass-house was beset at all times, by night 
 as well as by day, by the officers of Excise. 
 
 So close an inspection, which aggrieved the manu- 
 1 See 13th Report. 
 
ON GLASS. 61 
 
 facturer, was not necessary for the security of the 
 revenue. The materials of which glass is made, 
 namely,fine sand and kelp, or other coarser substances, 
 being melted by exposure to intense heat, are then 
 moulded into the various forms and utensils required ; 
 after which they are placed in another furnace, at a 
 lower temperature, where the great heat they have 
 acquired is gradually allowed to cool ; as any sudden 
 change of temperature would cause the frail mate- 
 rials of which they are composed to fly in pieces. 
 All articles of glass, with the exception of the 
 smaller articles of flint-glass, must undergo this an- 
 nealing process ; they must all go through the an- 
 nealing furnace. Here, therefore, if vigilant officers 
 are constantly stationed, no article of glass-ware 
 could possibly escape the legal charge ; and hence 
 the thraldom under which the glass manufacture 
 was long placed in the early part of the process, by 
 the gaging and regaging of the fluxed materials in 
 the pots, and by the other inquisitorial proceedings 
 of the revenue officers, continually on the premises, 
 were not less troublesome and vexatious than they 
 appear to have been uncalled for. 
 
 In 1795, accordingly, by the 35 George III., the 
 unnecessary rigour of these regulations, was in some 
 degree relaxed. It was enacted that the makers of 
 glass bottles, who were desirous of paying the duty 
 on the weight of the manufactured goods as they 
 came from the annealing furnace, and not as formerly 
 on the fluxed materials, were required to make a 
 declaration to this effect ; when the officer was bound 
 to adopt this new rule of charge, ikough he was 
 
 UNIVEBSITT 
 
62 OF TAXES ON MANUFACTURED ARTICLES. 
 
 not prohibited, as he ought to have been, from still 
 gaging the materials in the pots. 
 
 In 1809 the same rule of charge was applied to 
 window-glass, and to broad-glass. An act was 
 passed in that year for repealing the duty on the 
 fluxed materials, and assessing it on the manufac- 
 tured goods as they were received from the anneal- 
 ing furnace ; which was a decided improvement, as it 
 relieved the manufacturer from the early survey, and 
 all the inquisitorial proceedings connected with it ; 
 for, though the 1 & 2 Victoria, which consoli- 
 dates the duties on glass, still continues to the officer 
 the power of gaging the materials, and though it has 
 been often vexatiously exercised, and with no profit 
 to the revenue, yet when the amount of the mate- 
 rials ceased to be the rule of charge, or any check 
 on the illicit dealer, the gaging of the pots became 
 little else than a useless form. In practice, accord- 
 ingly, the maker of window-glass, of German sheet- 
 glass, and of bottle-glass, was relieved from the early 
 survey : and the inspection of the Excise, now only 
 commencing when the manufacture is nearly com- 
 pleted, he is in a great measure left, in its first stage, 
 to pursue his own plans ; as it is only after the 
 wares are removed into the annealing furnace, that 
 the precautions for securing the revenue really com- 
 mence. 1 
 
 The tax on glass, which was reirnposed in 1746, 
 amounted to 9s. 4d. per cwt. on the materials of 
 crown, plate, and flint glass, and all white glass, 
 
 1 Appendix to the 13th Report, No. 33, p. 132. Evidence of 
 Mr R. L. Chance, glass manufacturer, Birmingham ; also, evi- 
 dence of Mr Cookson, No. 2.5, p. 100. 
 
ON GLASS. 63 
 
 which was equal to about 30 or 40 per cent, on the 
 price. In 1777, the duty on the materials of flint 
 and plate glass was raised to 18s. 8d. per cwt. ; on 
 those of common bottle-glass to 3s. 6d. ; and two 
 other distinctions of glass were introduced, namely, 
 crown-glass and broad-glass, or German sheet-glass 
 on the materials of which a duty was imposed, on 
 the former of 14s., and on the latter of 7s. per cwt. 
 Several additions were from time to time made to 
 the duties in the course of the next ten years. They 
 were raised on the materials of bottle-glass in 1787 
 to 4s. ^d. per cwt. ; and in 1794, on the materials 
 of plate-glass, to l, 12s. 2^d. ; and on those of 
 crown-glass to 1, 4s. 2d., which was equal to about 
 100 per cent. In 1805, several trifling additions 
 having been made during the interval, the duties 
 were raised to 2, 9s. per cwt. on plate and flint 
 glass ; to 1, 16s. 9d. on crown and German sheet 
 glass ; and to 12s. 3d. on broad-glass ; on which latter 
 they were raised in 1810 to 15s. ; and in 1813 the 
 duty was doubled on all denominations of glass. 
 On flint and phial glass, as also on plate-glass, it 
 was raised to 4, 18s. ; on crown-glass, and German 
 sheet-glass, to 3, 13s. 6d. ; on broad-glass, to 
 1, 10s. ; and on common bottles, to 8s. 2d. per 
 cwt. In 1819 the duty on plate-glass was reduced 
 to 3 per cwt. ; and in 1825 that on flint-glass was 
 transferred to the fluxed materials at the rate of 3d. 
 per pound, which on the manufactured glass was 
 equal to 6d. per lb., or 2, 16s. per cwt. This 
 duty was, in 1838, reduced to 2d. per lb. on the 
 manufactured glass. In 1830 the duty on bottles 
 was reduced from 8s. 2d. to 7s. per cwt. 
 
64 OF TAXES ON MANUFACTURED ARTICLES. 
 
 These duties have been censured as extravagant 
 in their amount, and as having prevented the demand 
 for glass, however well adapted either for use or 
 ornament, from increasing with the wealth and im- 
 provement of the country. The description of glass 
 which is most heavily taxed is crown-glass or win- 
 dow-glass, on which the tax of 3, 13s. 6d. per cwt. 
 amounts to about 200 per cent, on the price. But, 
 as formerly observed, a tax is not necessarily immo- 
 derate because it exceeds the price of the article on 
 which it is imposed. A tax of 500 per cent, on cer- 
 tain commodities may not impose so heavy a burden 
 as a tax of 100 per cent, on others. A tax of 700 
 or 800 per cent, on tobacco, does not probably add 
 20s. or 30s. a-year to the expense of the consumer. 
 A tax of the same amount on salt or on pepper would 
 add still less ; while the present tax of about 100 per 
 cent, on tea, levies as many pounds on the consumer 
 as the 500 per cent, tax on pepper formerly levied 
 shillings. A tax of 200 per cent, on window-glass 
 appears at first view inordinate. But, if we con- 
 sider the uses to which window-glass is chiefly 
 applied, it will be seen that it is a tax on dwelling- 
 houses as much as the window-tax, or the direct 
 tax on houses ; and the degree in which it raises 
 the price of the article on which it really falls, must 
 decide whether it be exorbitant or otherwise. 
 
 In a house with twenty windows, the expense for 
 glass will not exceed 30 or 35, while the pro- 
 perty is probably worth from 1000 to 2000 ; and 
 if the tax were reduced one-half, it would save the 
 proprietor 10 on a sum of 1000, or 1 per cent. 
 
ON GLASS. 65 
 
 on his first outlay ; while his annual expense for 
 glass must be still more trifling, and can scarcely 
 amount to above twenty shillings in the year. On 
 smaller houses the tax will be less in proportion ; so 
 that, if the consumption of crown-glass fall off, it can 
 hardly be owing to this tax, whether of 100 or of 
 200 per cent, on the price. There are, however, 
 other taxes which affect the consumption of window- 
 glass, though indirectly, yet more heavily than this 
 direct tax. Such is the duty on windows, which 
 was first imposed in the reign of William III., and 
 was gradually increased, till, in 1776, the progressive 
 duty amounted to 1, 14s. 6d. annually on twenty 
 windows. The commutation-tax of Mr Pitt, in 1784, 
 nearly tripled this duty, raising it to 3, 19s. 8d. 
 on twenty windows ; about 5 per cent, on the rental ; 
 which by successive additions in 1797, 1798, 1802, 
 1803, and 1808, was enormously increased. The 
 duty was progressive, from 6s. on a house with six 
 lights to 93, 2s. 6d. on 179 windows; and the in- 
 termediate duties were after the same exorbitant 
 scale. On twenty windows the duty was 13, 15s. ; 
 on forty windows, 28, 17s. 6d. When the number 
 of windows was between thirty and forty, the tax 
 increased at the rate of 17s. for each additional 
 window ; and of 1, 2, and 3, as the number in- 
 creased. The number of houses liable to the win- 
 dow duty is estimated at 280,000. Those which 
 are exempted, in not having six or seven windows, at 
 4,000,000. If we reckon these houses to have on 
 an average four windows, the number of windows 
 that are not taxed will be 16,000,000 ; and reckon- 
 
66 OF TAXES ON MANUFACTURED ARTICLES. 
 
 ing the other class of houses to have on an average 
 twenty windows in each, the whole number will 
 amount to 5,600,000, or about one-third. This is 
 a far heavier duty on glass than the direct tax, though 
 it is not so easy to estimate accurately its effects. 
 Taking, however, the amount of the duty on crown- 
 glass to be 200 per cent., and the expense of glass 
 for twenty windows at 30, the amount of the duty 
 will be 20. But the window tax amounts to more 
 than two-thirds of this sum ; and being an annual 
 burden, can hardly be estimated at less than ten 
 times the amount of the direct duty : so that, if the 
 one had the effect of checking the consumption, it 
 must have been still more severely checked by this 
 heavier tax, or penalty, as it may be called, on the 
 use of glass. 
 
 But the demand for window-glass is affected, 
 though indirectly, more by the circumstances and 
 general condition of the country than even by its 
 own price. Where a country is rapidly advancing 
 in wealth and population, it is certain that the num- 
 ber of dwelling-houses will continually increase, as 
 will of course the demand for everything which 
 dwelling-houses require ; and, among other articles, 
 for crown-glass. If the increase of inhabitants re- 
 quire a greater number of dwelling-houses, the price of 
 window-glass, or the tax, heavy as it is on its use, 
 will hardly hinder them from being built. We can- 
 not imagine that the great moral machinery by 
 which a country is borne forward in its course, 
 could be suddenly stopt by the window duty, and 
 still less by so trifling a clog as a tax on glass, 
 
ON GLASS. 67 
 
 which would add about 1 or 2 per cent, to the ex- 
 pense of house-building. In those intervals of de- 
 pression, however, to which every country is liable, 
 population will advance at times at a slower rate ; 
 the number of dwelling-houses will also more slowly 
 increase, and there will not be the same demand for 
 those articles, for crown-glass among the number, 
 which dwelling-houses require; and to these indi- 
 rect causes, perhaps, rather than to the effect of the 
 taxes, whether direct or indirect, may be traced the 
 increasing or stationary demand for crown-glass. 
 An increased economy in the use of the article must, 
 no doubt, be the consequence of its high price, and 
 of the other imposts with which it is burdened. 
 But the petty expedients of economy to decrease 
 must be far less powerful than the tendencies of an 
 improving country to increase the consumption of 
 this article. 
 
 The yearly consumption of crown-glass in Eng- 
 land varied between 1778 and 1823, a' period 
 of forty-five years, from 63,000 to 93,000 cwts. ; 
 and its non-increase from the year 1789, when it 
 amounted to 90,746 cwts., to 1823, when it was 
 90,640 cwts., has been ascribed to the immoderate 
 duty. But this annual supply of 90,000 cwts. may 
 have been equal, not only to the annual waste, but 
 to all that was wanted in addition for the new 
 dwelling-houses required by the increasing inhabi- 
 tants. Though stationary, it may, nevertheless, in- 
 dicate the increase that was taking place in the 
 number of inhabitants, and in the number of houses 
 required for their accommodation: in which case 
 
68 OF TAXES ON MANUFACTURED ARTICLES. 
 
 no progressive increase would take place in each 
 succeeding year, whatever might have been the price ; 
 and the non-increase of consumption is a proof, 
 therefore, not of the over-severity of the tax, but 
 only of the slower rate at which the country may 
 have been advancing. 
 
 In 1794, the duty was raised from 16s. to 
 1, 4s. 2d. per cwt. ; when the average consumption 
 declined, for the following eight years, from 1795 to 
 1802 inclusive, to 74,614 cwts. The decrease of 
 consumption thus closely following the increase of 
 duty, might appear to be its necessary consequence, 
 were it not that the addition of 8s. could hardly be 
 deemed adequate to produce such an effect, consider- 
 ing the uses to which the article is applied ; and 
 besides, it appears that when, in 1805, the duty was 
 farther raised to 1, 16s. 9d., the consumption, in 
 place of falling off, immediately increased, and 
 amounted, on an average of five years, from 1805 to 
 1809, to 92,616 cwts., and again fell off in the three 
 following years, from 1810, though the duty con- 
 tinued the same, to 83,955 cwts. From those facts, 
 then, it would clearly appear that, as already stated, 
 the consumption of this article is less affected by 
 the amount of the tax imposed upon it than by 
 other causes. 
 
 After the duty was raised from 1, 16s. 9d. to 
 3, 13s. 6d., the quantity brought to charge fell 
 off, which, in the report of the Commissioners 
 of Excise Inquiry, is ascribed to the increase of 
 duty. But the consumption, as already stated, had 
 begun to fall off before the duty was raised ; and to 
 
ON GLASS. 69 
 
 the depressed state of trade, and of the country at 
 large, at the conclusion of the French war, and for 
 several years after, rather than to the increase of 
 duty, may be ascribed this languishing demand for 
 window-glass. With the general improvement of 
 trade and of the country the demand quickly re- 
 vived, notwithstanding the heavy duty, to nearly 
 double its former amount, as will appear from the 
 following account : 
 
 Average yearly amount of crown-glass charged with 
 
 duty in England from the year 1813 to 1823 in- Cwts. 
 
 elusive: 74,172 
 
 From 1823 to 1832 inclusive, .... 102,771 
 
 From 1833 to 1838 inclusive, .... 137,381 
 
 In 1839, . .... 131,333 
 
 In 1840, 141,864 
 
 In 1841, 111,920 
 
 In 1842, 93,055 
 
 From the above account, it will be observed that the 
 consumption of crown-glass, which had revived with 
 the progress of the country about the year 1823, 
 has again decreased, for the last two years, with the 
 depression of trade, though there has been no in- 
 crease of duty ; which sufficiently proves that the 
 demand for this article does not, as has been already 
 stated, depend so much on the amount of the duty as 
 on the general condition of the country, which in its 
 advances in population and in wealth, must require 
 an additional supply of crown-glass at whatever 
 cost ; while, in those alternate intervals of depres- 
 sion which occur, the demand will fall off. The crown- 
 glass brought to charge in Scotland amounts to about 
 4000 cwts. in a year. 
 
70 OF TAXES ON MANUFACTURED ARTICLES. 
 
 Produce of the duty in England. 
 
 1814 269,004 
 
 1836 557,305 
 
 1837 533,405 
 
 1838 485,946 
 
 1839 482,648 
 
 1840 588,100 
 
 1841 431,871 
 
 The tax on bottles, in like manner as the tax on 
 window-glass, does not fall so much on the glass as 
 on the liquor which the glass is made to contain ; 
 and though it amount to 100 per cent, on its price, 
 it scarcely affects the article by which it is really paid. 
 The duty of 7s. per cwt. amounts to about Is. 2d. 
 on the dozen of bottles ; which, when they contain 
 wine or spirits, is far too inconsiderable to affect the 
 consumption, even though a bottle should never be 
 used more than once ; and in the case of beer, when 
 the same bottle is repeatedly used, the tax must be 
 too trifling to affect even the lower price of this 
 article. The number of bottles that will be re- 
 quired will, therefore, depend on the demand for 
 the liquors which they contain ; and an increased 
 consumption of wine, spirits, or beer, will necessarily 
 increase the demand for bottles, whatever be the 
 amount of the tax. And, accordingly, when it was 
 reduced in 1828 from 8s. 2d. to 7s., it is remarked 
 by the Committee of Excise Inquiry, that this 
 reduction does not appear to have been attended 
 with any corresponding increase of consumption ;* 
 nor would such an effect have been expected by the 
 Commissioners if they had considered that, unless 
 an increase take place in the consumption of the 
 liquors which bottles contain, no greater quantity 
 1 Commissioners of Excise Inquiry, p. 21. 
 
ON GLASS. 71 
 
 can ever be wanted at any price. So far from in- 
 creasing, indeed, the consumption fell off with the 
 decrease of duty in 1828 ; the average quantity 
 manufactured for the five years before being 345,814 
 cwts., and for the five subsequent years only 269,225 
 cwts. The amount of the duty on bottle-glass can- 
 not, therefore, be objected to as in any respect inju- 
 rious to the trade. The manufacturer, however, 
 still complains of restrictions on the process, which 
 were imposed at first when the duty was assessed 
 on the materials, and are still continued, though the 
 mode of assessment is changed, and though they 
 are now only vexatious to the maker, without adding 
 in any degree to the security of the revenue. 1 
 
 Flint-glass comprises all descriptions of the finer 
 and ornamental wares ; and being more an article of 
 luxury than bottle-glass, a heavy duty has a greater 
 tendency to restrict its consumption, as it may be 
 superseded, if it be overtaxed, by inferior articles ; 
 while bottle-glass is indispensable in all cases where 
 liquor is used. In the earlier accounts of the glass 
 duties, those on plate and flint glass are not distin- 
 guished. In 1778 these articles were manufactured 
 to the amount of 43,000 cwts., on which a duty of 
 18s. 8d. per cwt. yielded a revenue of 40,176 : in 
 1788, ten years after, it does not appear that the 
 manufacture had made any greater progress ; as the 
 higher duty of l, Is. 5^d. per cwt. only yielded 
 54,870. By the increase of the duty in 1795 to 
 
 1 See Thirteenth Report, Commissioners of Excise Inquiry; Evi- 
 dence of Mr Cookson. 
 
72 OF TAXES ON MANUFACTURED ARTICLES. 
 
 1, 12s. 8d. per cwt., the revenue was raised in 
 the following years to 115,000, 130,000, and 
 120,000 ; and the average produce of the manufac- 
 ture was 76,000 cwts., or about 22,000 cwts. more 
 than the produce of 1788. A duty of 2, 9s., which 
 was imposed in 1806, produced about 200,000 
 a-year ; which indicates scarcely any farther increase 
 in the manufacture since 1795. The great and im- 
 politic increase of the duties in 1813 to 4, 19s. per 
 cwt. brought down the annual produce of plate and 
 flint glass to about 63,000 cwts. The consumption 
 was again increased by the reduction, in 1825, of this 
 heavy duty to 6d., and in 1835 to 2d. per Ib. ; or to 
 2, 16s., and 18s. 8d. per cwt., as will appear from 
 the following account : 
 
 Average amount of the quantity of flint-glass charged with 
 a duty, in England, of 4, 18s. per cwt., for ten years, 
 viz. : Cwts. 
 
 From 1815 to 1824 inclusive, .... 54,113 
 For nine years, from 1826 to 1834 inclusive, duty 
 
 2, 16s. per cwt., 64,027 
 
 For three years, 1836, 1837, 1838, at 18s, 8d. duty, 82,296 
 For three years, ended in January 1843 : 
 
 1840, 89,767 
 
 1841, 83,093 
 
 1842, 72,916 
 
 The Commissioners of Excise Inquiry, and several 
 respectable manufacturers who were examined on 
 the subject, were so impressed with the exorbitance 
 of the glass duties, as to suggest that a larger revenue 
 would be derived from a lower tax. But the experi- 
 ment has been tried, and the fallacy of this expecta- 
 tion has been abundantly proved. There is scarcely, 
 
ON GLASS. 73 
 
 indeed, any article on which a decrease of tax would 
 be followed by an increase of revenue ; and on flint- 
 glass a serious defalcation has been the consequence 
 of a lower duty, which will appear from the follow- 
 ing account : 
 
 Average produce of the duties on flint-glass, from 1815 
 
 to 1824 inclusive, at 4, 18s. per cwt., . . 262,199 
 
 For nine years, from 1826 to 1834 inclusive, at 2, 16s. 
 
 per cwt., 178,497 
 
 Average produce for 1836, 1837, 1838, at 18s. 8d., 77,898 
 
 Do. of 1839, 1840, and 1841, .... 83,703 
 
 The reduction of these duties was nevertheless 
 highly expedient, as they hindered the improvement 
 of other branches of the glass manufacture, and en- 
 couraged the illicit trade. Many articles of flint- 
 glass, such as small phial or crystal bottles, do not 
 require to be annealed ; and before the duties were 
 reduced in 1835 to 18s. 8d., it is certain that, in 
 London, Birmingham, and other towns, they were 
 evaded to a great extent by unlicensed houses. From 
 the great progress which has been made in chemistry, 
 the materials for making flint-glass are easily ob- 
 tained, and of a better quality ; and a pure alkali, 
 such as is now made, can be converted into flint- 
 glass, without any difficulty, in a cellar or garret. 
 Owing to these facilities for the illicit trade, joined 
 to the temptation of higher duties, the manufacture 
 of the smaller articles of flint-glass gradually in- 
 creased to an extent formerly unknown ; so that the 
 fair-trader was undersold in every market, by compe- 
 titors who offered their wares under prime cost. The 
 trade was in consequence in a depressed state ; 
 
74 OF TAXES ON MANUFACTURED ARTICLES. 
 
 remunerating prices could no longer be obtained ; and 
 no vigilance could detect the contraband dealer in 
 the obscure haunts to which he resorted. It was 
 only by the wise and seasonable reduction of duty 
 which took place, that a check was at length given 
 to this great evil. 1 
 
 Plate-glass is another variety of this beautiful 
 manufacture. It is prepared either by being blown 
 and expanded, or cast at once on flat tables. The 
 value of a plate of glass increases with the size, but 
 in an accelerated ratio ; so that in doubling the size 
 we greatly more than double the value. In the 
 manufacture, the great object is to obtain plates of 
 the largest size, which are by far the most valuable. 
 But this is extremely difficult, as the risk of accidents 
 increases with the size and weight of the plate : so 
 that, by a manufacturer in his evidence before the 
 Excise Commissioners, the large plates are compared 
 to prizes in the lottery ; and few in proportion to the 
 blanks or the smaller plates, which are much less 
 valuable, though they pay the same rate of duty, 
 
 1 See Appendix to the Thirteenth Report of Commissioners of 
 Excise Inquiry, No. 29, Evidence of Frederick Fincham, Esq. 
 Mr Powell, glass manufacturer at Bristol, gives similar evidence 
 respecting the extent of the illicit trade. " There are," he observes, 
 " thirty manufacturers in the city (London) at this moment, un- 
 known to the Government, employed in melting up what we call 
 cullet, or broken glass, such as the stems of goblets, bottoms of 
 tumblers, the thick parts of decanters, and so on. They can be 
 made up into salt-cellars, cruets, and castors, bird-boxes, smelling- 
 bottles, &c., and it is done to a very large extent ; and my belief 
 is, that there is no legislative precaution can prevent it." See 
 Appendix, No. 27. 
 
ON GLASS. 75 
 
 and are only made when the glass, from flaws or 
 accidents, cannot be cut into larger sizes. 1 On a 
 plate 144 inches long, by 80 broad, the duty of 
 4, 18s., according to an estimate by a manufacturer, 
 would amount to 50 per cent. ; while the same rate 
 of duty, on a plate of 14 inches by 10, would be 100 
 per cent. The present reduced duty of 3 per cwt. 
 does not amount to more than 30 per cent, on the 
 larger sizes, and 60 or 70 per cent, on the smaller. 2 
 In a country so heavily taxed as Great Britain, the 
 amount of this tax can hardly be objected to ; more 
 especially on an article so costly as plate-glass, the 
 luxury of the rich, and the appropriate ornament of 
 their splendid saloons. The great addition made to 
 the duty on plate-glass in 1813, gave a decided check 
 to the manufacture ; which declined to 10,000 and to 
 6000 cwts. while the high duty continued. After 
 it was reduced in 1820 to 3, the consumption in- 
 creased, in 1821, to 9718 ; in 1825, to 15,082; and 
 in 1828, to 28,722 cwts. The produce of the duty 
 of 1820 has increased at the same time from 27,162 
 to 77,444 in 1838. The Excise Commissioners 
 ascribe the decrease of production after 1813 to the 
 rise of the duty ; and its subsequent increase to its 
 diminution from 4, 18s. to 3 per cwt. But it 
 appears that a remarkable fall has taken place in 
 the price of plate-glass to a much greater amount 
 than the increase of the duty. It is stated by Mr 
 
 1 Appendix to Thirteenth Report. Evidence of Thomas Cock- 
 burn, Esq., Governor of the British Plate-glass Company, p. 131. 
 
 2 Appendix to Thirteenth Report. Evidence of Mr Cookson 
 and Mr Cuthbert, No. 21, p. 107. 
 
76 OF TAXES ON MANUFACTURED ARTICLES. 
 
 Cockburn, Governor of the British Plate-glass Com- 
 pany, that a plate of 96 inches by 60 can now be 
 bought for 50, for which he formerly paid 214 ; 
 to which fall of price, more than the increase of the 
 duty, must be ascribed the increased consumption of 
 plate-glass. 
 
 It is not so much the amount of the glass duties, 
 more especially since they have been reduced on plate, 
 flint, and bottle glass, that can be justly complained 
 of, as the complicated restraints which they impose, 
 and which are always found to stand in the way of 
 improvement. The inequality of duties on the sev- 
 eral branches of the glass manufacture, is a standing 
 inconvenience ; as it renders it necessary to protect 
 one branch of the manufacture against the compe- 
 tition of the other. Flint-glass, for example, has 
 always been subjected to a higher duty than green 
 or bottle glass, being of a finer quality. It was 
 provided that all articles of green glass should weigh 
 at least six ounces, in order to prevent any interfer- 
 ence with the smaller articles of the flint-glass. This 
 restriction was injurious to the manufacturer of bottle- 
 glass. But the inequality of duty produced still 
 greater inconveniencies. It was found that, by the 
 application of chemical skill, green glass could be so 
 far improved as to rival the finer articles of flint- 
 glass. Under the existing law, however, no experi- 
 ments for this purpose could be made. To improve 
 the manufacture of this inferior glass, and to bring it 
 into a competition with flint-glass, so long as the great 
 inequality of duty continued, would have been unjust 
 to the manufacturer of the latter, who would have 
 
ON GLASS. 77 
 
 complained, with reason, that he was rivalled in the 
 market by articles equal in fineness to his own, and 
 yet paying a lower duty. But green glass could never 
 have been improved if it would thereby have become 
 liable to a duty of 4, 18s., or even of 2, 18s. per 
 cwt. It could not have borne the burden of so heavy 
 a tax ; the reduction of which was therefore essential 
 to the progress of the manufacture. The restrictions 
 of the Excise, which prescribed the size of the melt- 
 ing-pots, which subjected to duty all the materials 
 that were spoiled in the process, and still visited with 
 heavy penalties every petty deviation from the Excise 
 rules, were extremely unfavourable to any improve- 
 ment in glass -making. Their injurious effect was 
 fully exemplified in the case of a respectable manu- 
 facturer, which he himself stated in evidence to the 
 Commissioners of Excise Inquiry. He had, it appears, 
 succeeded by the application of chemical knowledge 
 in so far improving the quality of green glass that it 
 was nearly equal to flint-glass. Being seen by an 
 officer of Excise, he denounced it as contraband; 
 and having reported this contravention of the Excise 
 laws to the Board, it was only through their lenity, 
 and on giving up the obnoxious articles to be broken 
 in pieces, that he escaped a prosecution: so that 
 pains and penalties were the only fruits that this 
 ingenious person was likely to reap from this exercise 
 of his skill. 1 The present low duty no longer opposes 
 the progress of the manufacture. But its repeal 
 
 1 See Appendix to the Thirteenth Report of Commissioners of 
 Excise Inquiry. Evidence of Frederick Fincham, Esq., No. 29, 
 p. 112. 
 
78 OF TAXES ON MANUFACTURED ARTICLES. 
 
 would nevertheless be an important benefit ; and 
 considering the restraints which it imposes on the 
 makers, and on the exportation of glass, as well as 
 its trifling produce, it seems scarcely worth while to 
 retain this miserable remnant of an obnoxious tax. 
 
 Glass, which is applied to so many useful purposes, 
 lends its aid also to the researches of science. But 
 here, as in most other cases, the restraints of the 
 Excise interfere with those great interests. It is re- 
 quired that glass which is used for optical purposes, 
 should be of the same specific gravity throughout. 
 Where this is not the case, the rays of light are re- 
 fracted as they pass from one medium to another, of 
 different degrees of density ; and the same accuracy 
 of observation cannot be attained. By pouring the 
 melted glass into cold water, then grinding it into pow- 
 der, and afterwards rapidly melting it, a more perfect 
 mechanical mixture is obtained ; and a repetition of 
 this process two or three times, gives the glass that 
 uniform density which is required for purposes of 
 science. But this process is prohibited by the Excise 
 regulations, which exact a duty on every new recasting 
 of the glass ; and the consequence is, that in the manu- 
 facture of optical glasses for lenses and telescopes, 
 England has been rivalled in Italy, Germany, France, 
 and Switzerland, where there are no restrictions, and 
 where they can be equally well made and at less cost. 
 
 The following circumstance still further illustrates 
 the injurious effect of the restrictions imposed : 
 Among the other optical improvements that had been 
 made in France, a species of lens was contrived for 
 the use of lighthouses, of so great a refracting power 
 
ON GLASS. 79 
 
 that it would penetrate several miles through a dense 
 fog. But though this improvement was of such im- 
 portance in a maritime country, the Commissioners 
 of the Northern Lights, who applied to the plate- 
 glass manufacturers of Newcastle for specimens of 
 this glass, found that it would be an infringement of 
 the Excise laws to make it of the thickness required. 
 The heavy duty on flint-glass was 4, 18s., while 
 that on plate-glass was only 3 ; and to protect the 
 one against the other, the thickness of plate-glass 
 was restricted to seven-eighths of an inch ; otherwise 
 to pay the same duty as flint-glass. The polyzonal 
 lens, which was now to be introduced, was to consist 
 of forty pieces of glass, and would weigh 200 
 cwts. : so that it could not have been made of plate- 
 glass of the proper thickness without being subjected 
 to a ruinous duty; and it seemed to be doubtful 
 whether it could be made on any terms. It was 
 therefore resolved to transmit the order to be exe- 
 cuted by a house in France ; and it was only in con- 
 sequence of directions from the Treasury, specially 
 dispensing with the Excise rules, that this discredit- 
 able course was prevented. 1 
 
 The exportation of glass, which is an important 
 branch of trade that might be still farther extended, 
 is impeded by the regulations consequent on the in- 
 
 1 See Seventh Report of Commissioners of Excise Inquiry, p. 
 11, Appendix, No. 26, pp. 103, 104. Evidence of Mr Cookson and 
 Mr Cuthbert. 
 
 For farther information respecting the glass duties, and other 
 restrictions of which the manufacturer complains, the reader is 
 referred to the Thirteenth Report, which contains full details 
 on the subject. 
 
80 OF TAXES ON MANUFACTURED ARTICLES. 
 
 ternal duties, and by the mode of settling the draw- 
 back. On plate-glass the duty is levied on the weight, 
 while the drawback is allowed on the square foot, at 
 the rate of 6s. 6d. ; and it was found that, under 
 this law, sheet or crown glass obtained the draw- 
 back of 6s. 6d., which exceeded the amount of the 
 duty paid. To prevent this fraud, a more marked 
 distinction was given to those different descriptions 
 of glass, plate-glass being prohibited from being 
 made of a less thickness than one-eighth of an inch, 
 and crown-glass of a greater thickness than one-ninth 
 of an inch ; and the internal manufacture was thus 
 injured for the foreign trade. The exporters of crown- 
 glass complain that no allowance is made for the 
 breakage which takes place in the course of ship- 
 ment ; that they are subjected to stamp duties pay- 
 able on the bond and debenture, and are cut out of 
 other allowances ; and that, consequently, the duty 
 which they pay is not fully returned. The allowance 
 on crown-glass, exported in small squares of not less 
 than six inches by four, is 4, 18s. per cwt., and is 
 stated to be a full compensation for every charge. 
 The flint-glass manufacturers complained that when 
 the duty was 6d. on the pound, the drawback of 7d. 
 was not a sufficient compensation for the loss by 
 breakage in exportation. 
 

 ON PAPER. 81 
 
 On Paper. 
 
 Different modes of assessing the duty. Regulations injurious. 
 Not enforced during the progress of the manufacture. General 
 outcry against the tax. Not on just grounds. Tax moderate. 
 Not injurious to literature. No good reasons for reducing it. 
 
 Paper is chiefly used in the manufacture of books : 
 a comparatively small quantity is required for the 
 purpose of writing ; and it is not consumed to any 
 extent by the poorer classes. It may, however, be 
 considered as the raw material of an important 
 manufacture, and a fit subject only for a moderate 
 tax. It was first subjected to an ad valorem duty 
 in 1711, by the 10th of Queen Anne; and it was 
 then classed into as many denominations as were to 
 be found in the stationer's shop ; to each of which 
 different rates of duty were attached. In 1794, a 
 more simple mode of assessment was introduced, 
 according to the weight ; five denominations only were 
 retained ; and the duty on the first class was raised 
 to 2^d. per Ib. In 1802, in consequence of the dis- 
 putes which this classification occasioned, these de- 
 nominations were reduced to two, namely, the first 
 and the second class ; the distinctions between the 
 two being, that the second-class paper should be 
 made of old ropes and cordage only, the tar or the 
 pitch not to be extracted or separated, and to pay a 
 duty of l^d per Ib. ; and all other paper to be 
 reckoned in the first class, on which the duty im- 
 posed was 3d. on the Ib. This distinction between 
 
82 OF TAXES ON MANUFACTURED ARTICLES, 
 
 those two classes was soon rendered nugatory by the 
 improvements that were introduced, by which the 
 act which imposed the duty, and fixed the materials 
 to be used in the second class, was no longer appli- 
 cable, and was, in consequence, generally evaded. 
 All the irregularities which took place in conse- 
 quence, were corrected in 1836, when one uniform 
 duty of l^d. was laid on all paper, without reference 
 to the quality of the materials employed. 
 
 It was an objection to the late tax of 3d. per 
 pound on paper, that it pressed unequally on papers 
 of inferior quality, amounting on some of them to 
 200 per cent. The tax on printing paper, from which 
 the revenue was chiefly derived, was, however, far 
 from oppressive. When it was imposed, it did not 
 amount to above 15 or 20 per cent, on the price ; 
 and it could not, as it did not in point of fact, 
 materially hinder the manufacture of books. Yet no 
 tax was ever more vehemently decried ; not only by 
 the dealers in paper and in books, but by theorists, 
 philosophers, and politicians. From the outcry which 
 they raised, it might have been supposed that this 
 baneful tax had nipt in the bud all the opening 
 flowers of British genius, and converted the fields of 
 literature into a barren waste. Yet there never was 
 a time when such a flood of literary works, old as 
 well as new, by the best authors, issued from the 
 press, as when this tax was in force ; or were ever 
 before so widely, because so cheaply, circulated. It 
 was by lowering the price of books that the reduc- 
 tion of the tax was expected to give such a prodi- 
 gious impulse to the progress of knowledge. But it 
 
83 
 
 had no such effect. The price of books did not 
 materially fall : all the most popular periodical works 
 and magazines were sold at precisely the same price 
 as before. The difference made in the original cost 
 by the lower duty was so trifling, that it was not 
 thought worth while to allow it in the price. 
 
 Since the conclusion of peace in 1815, the price of 
 paper had fallen to the amount of about 50 per cent.; 
 which would have counterbalanced any injurious 
 effect of the tax, even though it had been to a 
 greater amount : those who dwelt on the evil of 
 the paper duties, amounting to 15 or 20 per cent., 
 did not advert to the countervailing effect of this 
 great fall of price, which, aided, no doubt, by the 
 improving taste and increasing demand of the com- 
 munity for books, fully accounts for the rapid increase 
 of the supply, and for the annually augmenting pro- 
 duce also of the paper duties since 1803, when the 
 tax of 3d. on the pound was first imposed. An 
 account is subjoined, for different periods, of the 
 revenue yielded by the tax on paper, both before and 
 after the reduction of the duty. 
 
 Net average produce of the duties on paper in Great Britain. 
 
 From 1803 to 1812 inclusive, . . . 418,739 
 
 From 1812 to 1822, .... 512,513 
 
 From 1822 to 1832, .... 682,992 
 
 For three years, from 1833 to 1835, . 788,626 
 
 From 1837 to 1842 inclusive, six years, . 555,333 
 
 The increasing amount of the paper duties, if they 
 had not been reduced, would probably have amounted 
 to between 000,000 and 1,000,000. The annual 
 
84 STAMP DUTIES. 
 
 loss, therefore, by the reduction of this nowise op- 
 pressive tax, may be estimated at 450,000. 
 
 Stamp Duties. 
 
 The transference of property a source of revenue in all countries.- 
 Levied by means of a stamp. Extent of the stamp duties in 
 Britain. Not founded on any rule of equity. Taxes on real 
 property. On bills and receipts. On the succession to property. 
 Unjust distinction in favour of real property. The legacy 
 duties heavy and unequal. Amount of these duties. Taxes on 
 insurance. License duties. Auction duties. Duties on news- 
 papers and advertisements. 
 
 The complicated concerns of a rich and commer- 
 cial nation present many sources from which a 
 revenue may be drawn ; and these are quickly 
 sought out by those who have the charge of pro- 
 viding for the public service. In most countries the 
 transference of property by sale or by succession 
 has yielded a revenue to the State. Such transac- 
 tions afford peculiar facilities for taxation. They 
 cannot be concealed ; they furnish ample evidence 
 of ability to pay ; while the means of preventing 
 evasion by voiding the transaction, where deceit is 
 practised, are simple and effective. Those duties are 
 generally levied by means of a stamp on the paper 
 on which the transaction is recorded. 
 
 The same process, so efficient in its application to 
 real property, has been extended, with equal success, 
 to the transactions of commerce ; and every descrip- 
 tion of pecuniary contract or bond, of which there 
 
STAMP DUTIES. 
 
 85 
 
 is a written record ; every obligatory instrument in 
 short ; all bills or promissory notes, whether payable 
 by demand or otherwise ; all receipts, protests, 
 indentures of apprenticeship ; all inventories, or 
 appraisements of property ; every charter-party ; all 
 policies of insurance on lives, or from fire or sea 
 risk ; bills of lading ; debentures for the drawing back 
 of duties ; letters of attorney ; licenses to carry on 
 certain professions ; law proceedings ; every grant 
 from the crown of any dignity, of any lands or 
 heritable subjects, or of any pension, privilege, or 
 lucrative office ; all newspapers, cards, dice ; besides 
 other matters which it is unnecessary to detail, have 
 been subjected to taxation in this country, under 
 the effectual penalty, in most cases, of invalidity, 
 provided the tax is not paid. So easy a process for 
 raising money was not likely to be neglected, where 
 money was so much wanted ; and, accordingly, the 
 stamp duties have, in Great Britain, been extended 
 to every description of mercantile business. They 
 were resorted to at an early period ; and, after being 
 relinquished, they were revived in 1694. They have 
 been since increased during every successive war in 
 which the country has been engaged, more especially 
 during the last protracted contest with France ; and 
 they have now reached that extreme point when 
 they could not be farther increased, with any hope of 
 additional revenue. 
 
 The duties on the conveyance of property consist 
 of an ad valorem duty, and a duty on the deed in 
 proportion to its length ; which are found, from the 
 frequency and extent of such transactions, to be 
 
86 STAMP DUTIES. 
 
 sufficiently burdensome. They are, besides, founded 
 on no rule of equity. Property may remain for cen- 
 turies with one proprietor ; or it may change hands 
 repeatedly in the course of a few years. This, how- 
 ever, is no reason for subjecting it to a tax. The 
 necessities of the proprietor may compel him to sell ; 
 and thus a tax is imposed on him, which his richer 
 neighbour escapes by retaining his land. There is, 
 therefore, no equality in those duties. Chance seems 
 to decide where they are to light. Hence, however 
 ready a resource they afford, they must always be 
 partial and unequal ; and it is only in an advanced 
 stage of taxation that they are generally resorted to, 
 amid a choice of evils. 
 
 The letting of land, and the raising of money on 
 land, or any other description of real property, by 
 mortgage, are also subject to ad valorem duties, 
 and to a duty besides on the length of the deed: 
 and the first of these transactions being for the 
 mutual benefit of both parties, affords a fair sub- 
 ject of taxation; but a tax on the borrowing of 
 money, which is often a mark of distressed circum- 
 stances, is far from being equally eligible, and can be 
 justified only by necessity. This tax extends to per- 
 sonal, as well as to heritable bonds, and to bonds of 
 caution, and is heavily felt in those important tran- 
 sactions. 
 
 From the general severity of these duties, we may 
 easily observe, as taxation progresses, how narrowly 
 property is watched ; and how, at length, it cannot 
 shift its position without being immediately laid hold 
 
STAMP DUTIES. 87 
 
 of and brought under contribution. The net duty on 
 deeds and other instruments amounted in 
 
 1836, to 1,497,796 
 
 1837, 1,450,815 
 
 1838, 1,542,388 
 
 1840, to 1,586,496 
 
 1841, 1,546,715 
 
 1842, 1,471,816 
 
 1839, 1,577,232 
 
 The taxes on bills, drafts, promissory notes, and 
 receipts, chiefly affect commerce. In 1833, the duty 
 on receipts, for all sums under 5, which was found 
 to be extremely vexatious, and was mostly evaded, 
 was repealed. The net produce of the tax on bills of 
 exchange amounted, in 1841, to 545,637 ; in 1842 
 to 487,689 ; that on receipts, in 1842, to 158,559. 
 The taxes on the succession of the living to the pro- 
 perty of the dead, are far more oppressive than any 
 of the other stamp duties, heavy as they are. It is 
 only on personal property that this tax is levied ; and 
 the injustice of exempting land, the most valuable of 
 all inheritances, from a burden to which other pro- 
 perty is liable, has been long and justly complained 
 of. No plea that is even specious, has ever been 
 suggested for this partiality; and one of its worst 
 effects is, that it gives a colour to the outcry that 
 has been raised, however unjustly, against the general 
 fairness and equality of British taxation. 
 
 The taxes on the succession to personal property, 
 consist, first, of an ad valorem duty on the whole 
 amount of the deceased's estate, of which an account, 
 verified on oath, must be exhibited in the ecclesiasti- 
 cal courts ; and of a farther duty, namely the legacy 
 duty, from which only bequests from the husband to 
 the wife are exempted. Bequests to children pay 1, 
 
88 STAMP DUTIES, 
 
 to brothers and sisters 3, to nephews 5, to grand- 
 nephews 6, and to strangers 10 per cent. Those 
 duties are remarkably heavy. They take effect, not 
 on the income, but on the capital ; and they give rise 
 to frequent cases of severe oppression. The condition 
 of a family, as is well known, is generally changed 
 for the worse by the decease of the parent ; and the 
 peculiar objection to this tax is, that it is taken out 
 of the inadequate means of the widow and her father- 
 less children. The parent may have saved out of his 
 income of 500 or 600 a-year, 1500 or 2000 ; 
 which, if he die intestate, is liable to a tax of 60 ; 
 to a farther duty of 1 per cent., or 20, in descend- 
 ing to his children ; and of 60 if left to nephews : 
 by which it will be diminished 80 in the one case, 
 and 120 in the other, which amounts to 6 per cent, 
 on the whole capital. And if it should be necessary, 
 in the division of the estate, to convert any part of 
 it into cash, to the amount, we may suppose, of 500, 
 it will then be met by the auction duty of 5 per cent., 
 which will raise the expense to 145, about 7 per 
 cent., to which the property is liable in its descent to 
 its natural heirs, and to still heavier duties if they 
 are more distant. 
 
 Those taxes are, therefore, exorbitant and oppres- 
 sive : they are founded on no just or rational prin- 
 ciple. So far from being imposed where there is 
 ability to pay, it is on families left destitute by the 
 death of the parent that they take effect ; while 
 landed property, to the amount of 10,000 or 15,000 
 a-year, descends to the lawful heir without paying 
 any duty. The tax-gatherer is surely not the most 
 
STAMP DUTIES. 89 
 
 appropriate visiter to the abode of the widow ; and 
 it is a strange perversion of every principle to select 
 such a season of affliction, and often of poverty, for 
 the imposition of taxes. In every view, this tax must 
 be condemned as contrary not only to every known 
 rule of taxation, but to the common principles of 
 humanity and justice. 
 
 The following is the net amount of the duty on 
 legacies, and on probates and testamentary inven- 
 tories in Great Britain, for nine years : 
 
 Probates and Testamentary 
 Year. Legacies. Inventories. 
 
 1834 1,209,739 864,393 
 
 1835 1,178,883 848,066 
 
 1836 1,171,452 861,046 
 
 1837 1,179,965 965,768 
 
 1838 1,282,001 872,190 
 
 1839 1,158,670 792,983 
 
 1840 1,174,360 860,844 
 
 1841 1,175,471 890,564 
 
 1842 1,223,562 828,462 
 
 Insurance transactions of every description have 
 been subjected to heavy taxation in this country. In 
 principle the tax on fire insurance is extremely ob- 
 jectionable, and being, besides, exorbitant in its 
 amount, it impedes, and in many cases prevents, 
 those transactions, however eminently beneficial to 
 all concerned. In crowded cities, a sudden conflag- 
 ration frequently consumes property to so great an 
 amount as to involve the most wealthy in ruin, and 
 still more those in the humbler walks of life. The 
 mutual association of individuals for the mitigation 
 of this evil, by dividing the burden, is one of those 
 
90 STAMP DUTIES. 
 
 social improvements of which the eminent benefit 
 ought to receive the countenance of a wise and pa- 
 ternal government. But the exorbitant duty of 200 
 per cent., which is imposed on ordinary risks, tends 
 to discourage all such transactions ; and there is 
 reason to fear that the expense of insurance fre- 
 quently induces the humbler tradesman rather to en- 
 counter the hazard of fire. The injurious nature of 
 the tax cannot, therefore, be doubted ; but the doubt 
 is, whether the British government, in its urgent de- 
 mands for revenue, will ever dispense with, or even 
 lessen, a tax which yields, with the other taxes on 
 insurance, nearly a million yearly. 
 
 In 1833 the duty on the insurance of farming- 
 stock was repealed, though no good reason was 
 assigned for its exemption from a burden which 
 attaches to every other description of property. 
 
 The following is an account of the produce of the 
 fire insurance duties in Great Britain for the last five 
 years : 
 
 1836 796,199 
 
 ]837 822,871 
 
 1838 852,372 
 
 1839 881,664 
 
 1840 991,181 
 
 1841 920,661 
 
 1842 940,226 
 
 The tax on marine insurances, especially on the 
 coasting trade, is not oppressive ; nor does it seem 
 to offer any material obstacle to trade. The greatest 
 objection to the taxes on foreign insurance is, that 
 they are merely nominal in other European countries, 
 which induces the transfer of the business to for- 
 eigners, by whom it can be equally well managed, and 
 at a cheaper rate. 
 
STAMP DUTIES. 
 
 Amount of duty on Marine insurances. 
 
 1836 251,430 
 
 1837 222,377 
 
 1838 250,590 
 
 1839 291,515 
 
 1840 298,137 
 
 1841 283,088 
 
 1842 249,918 
 
 Among other expedients resorted to in this coun- 
 try for raising a revenue, taxes have been imposed 
 not only on consumable articles, but also on a license 
 to deal in them, or to manufacture them. Such a 
 duty is peculiar to this country, and marks too clearly 
 the public necessities, for the supply of which it is 
 imposed. This tax is partial and unequal in its 
 operation ; but so numerous and varied are the bur- 
 dens which press on this country, that a minister can 
 no longer pick and choose among the articles which 
 he shall tax. He must often take not exactly what 
 is eligible, but what is productive. A license duty 
 was imposed in 1784 on the manufacturers of certain 
 articles, and the dealers in them, which has been 
 gradually extended till the produce of these duties 
 now amounts to nearly a million sterling. In 1841, 
 it was 940,612 ; and in 1842, 923,190. 
 
 The sale by auction of landed property, annuities, 
 
 I ships, farming-stock, &c., was subjected, in 1777, to 
 a duty of 3d.; and that of furniture, plate, jewels, 
 horses, carriages, and other goods and chattels, to a 
 duty of 6d. in the pound. Plate and jewels were 
 afterwards rated at the lower duty. In 1797, those 
 duties were raised respectively to 6d. and 10d., and 
 in 1805, to 7d. and Is. in the pound. From this 
 duty there were numerous exemptions, namely, all 
 property sold by the warrant of any public court ; 
 
92 STAMP DUTIES. 
 
 almost all foreign produce subject to a duty on impor- 
 tation; agricultural produce, in many cases; property 
 damaged by fire, and sold for the behoof of tbe insurers; 
 besides other exemptions of less importance. The 
 whole amount of the auction duty was, in 1807, 
 265,987; in 1811, 1812, and 1813, it rose to 
 383,894, 337,847, and 344,572 ; from which it 
 declined, in 1834, to 234,051." In 1842, its amount 
 was 277,873, nearly about the same as in 1807. 
 Its produce, therefore, does not appear to have in- 
 creased with the business of the country ; which 
 affords a conclusive argument against the amount, if 
 not against the principle of the tax. 
 
 Newspapers. 
 
 There is no branch of business which has improved 
 more remarkably with the progress of the country 
 than that of the periodical press. Newspapers, when 
 they were first published, were not above a tenth of 
 their present size, and meagre in their details. As 
 their business increased with the wealth and com- 
 merce of the country, they were improved in size, 
 and still more in the talent and intelligence with 
 which they were conducted ; and the practice of re- 
 porting the debates in parliament, which was begun 
 during the American war, added prodigiously to their 
 interest, and to their circulation. The important 
 
 1 Appendix to the Twelfth Report of the Commissioners of 
 Excise Inquiry, pp. 22, 23. 
 
NEWSPAPERS. 93 
 
 events which followed the opening of the great revo- 
 lutionary drama in France, of which they were neces- 
 sarily the chroniclers, gave them a still further 
 impulse, notwithstanding the additional taxes to 
 which they were then subjected ; while they rose, 
 also, into importance as vehicles of mercantile intel- 
 ligence, from the number of advertisements which, 
 with the increasing transactions of the country, began 
 to crowd their columns. A modern newspaper, ac- 
 cordingly, presents quite a different aspect from the 
 diminutive publications of former days. With the 
 necessary funds for the reward of talent, it contains a 
 well selected store of intelligence from every quarter. 
 In its broad page is concentrated the whole multifari- 
 ous business of society. It is a chronicle of domestic 
 life, and of existing manners ; a true picture of the 
 " world's debate," with all the varying colours which 
 the passions, prejudices, and controversies of the pass- 
 ing day cast upon the troubled scene ; and whether 
 for business, or the amusement of a vacant hour, is 
 in universal request. On such an article a moderate 
 duty may be imposed ; but it is not a fit subject for 
 a, heavy tax. 
 
 I A stamp duty on newspapers was first imposed 
 during the reign of Queen Anne, which was gradually 
 increased in the course of the different wars in which 
 the country was engaged. In 1797, it was raised 
 from 2d. to 3^d., and afterwards to 4d., with a dis- 
 count of 20 per cent., reducing the duty to about 
 3^d., while the price was restricted to 7d. This 
 was an exorbitant tax on an article necessarily 
 expensive, and in such general demand; amounting to 
 
94 
 
 NEWSPAPERS. 
 
 about 100 per cent, on the original cost, which con- 
 siderably narrowed the circulation of newspapers. 
 The produce of the low duty of 2d. amounted, in 
 1797, to 154,422. The exorbitant duty gave rise 
 to a contraband trade, which no vigilance could sup- 
 press. Newspapers began to be circulated in all 
 quarters without a stamp ; and -the only remedy for 
 this evil was found in the reduction of the duty 
 from 3^d. to Id., which took place in 1836. The 
 circulation of newspapers has since greatly in- 
 creased; but not to such an extent, though daily 
 progressing, as to make up for the reduction of the 
 duty, as will appear from the subjoined account of 
 its produce before and after the reduction of the tax: 
 
 1826 371,497 
 
 1836 335,264 
 
 1837 201,621 
 
 1838 204,590 
 
 1839 220,446 
 
 1840 225,686 
 
 1841 225,086 
 
 1842 235,780 
 
 The duty on advertisements in newspapers was 
 reduced, in 1833, from 3s. 6d. to Is. 6d. The fol- 
 lowing is the net amount of the duty for three years 
 before and after the reduction, and of its produce for 
 the last five years, from which it appears to be gra- 
 dually increasing ; so that it may be, in time, ex- 
 pected to equal its former produce : 
 
 1831 157,481 
 
 1832 156,898 
 
 1833 155,400 
 
 1834 84,422 
 
 1835 88,440 
 
 1836..., 98,336 
 
 1838 111,899 
 
 1839 115,284 
 
 1840 121,422 
 
 1841 121,744 
 
 1842 117,056 
 

 DIRECT TAXES. 95 
 
 CHAPTER V. 
 
 DIRECT TAXES. 
 
 irly resorted to in this country. Tax on houses on windows.- 
 Progress and amount. Taxes on Carriages on Horses on male 
 Servants. Progress and amount. Reductions. 
 
 DIRECT taxes, which raise a revenue without the 
 intervention of any consumable article, were intro- 
 duced into this country in 1696, when a duty was 
 laid on houses and windows, which was gradually 
 increased in the course of the last century. In 1779, 
 it was raised to 6d. in the pound on all rents between 
 5 and 40 ; to 9d. on rents above 40 and under 
 60 ; and to Is. on all rents of 60 and upwards ; 
 which was increased, in 1798, to 8d., Is., and Is. 3d.; 
 and finally, in 1802, to Is. 4d., 2s., and 2s. 6d. in the 
 pound, on these several rents. The duty on win- 
 dows was, in like manner, progressively increased; 
 and, after successive additions, was raised, in 1808, 
 from 6s. in England, and 4s. in Scotland, on a house 
 with six lights, to 93 on 180 windows, and in a 
 like proportion where the number was smaller ; and 
 was increased 2s. 6d. on every additional light. 
 
 The heavy pressure of these taxes on the middling 
 classes was frequently complained of; and the inqui- 
 sitorial visits of the surveyor for the assessment of 
 the window duty, occasioned, at diiferent times, no 
 small annoyance. They were substantially taxes on 
 the proprietor's income, of which his house was 
 supposed to afford a sufficiently fair criterion. The 
 
96 DIRECT TAXES. 
 
 house tax amounted from 6^ to 10 and 12^ per cent, 
 on the rent, and the duty on windows from 8 to 10 
 and 12 per cent. The amount of both, on the lower 
 rents, was about 15, and on the higher rents about 
 20 and 25 per cent. These taxes were neither un- 
 just nor unequal ; but they were oppressive from 
 their amount, and should have been selected for 
 repeal or reduction with the first surplus of re- 
 venue that appeared after the restoration of peace. 
 They imposed a much heavier burden than the tax 
 on beer, on leather, on pepper, or on any of the nume- 
 rous imposts which were reduced or repealed after 
 the termination of the war. They were, however, 
 retained, somewhat pertinaciously, until the popular 
 outcry which they excited, compelled the reduction 
 of the one and the repeal of the other. 
 
 The duty on windows was reduced one-half from 
 the 5th April, 1823. Amount in the three pre- 
 vious years, and in the four years ending in 1842 : 
 
 1820 2,564,308 
 
 1821 2,560,721 
 
 1822 2,554,413 
 
 1839 1,298,622 
 
 1840 1,404,642 
 
 1841 1,664,052 
 
 1842 1,569,344 
 
 The house duty was repealed in 1833. Amount 
 in the three previous years : 
 
 1830 1,435,431 
 
 1832 1,491,472 
 
 1831 1,460,170 
 
 The taxes on carriages, horses, male servants, 
 dogs, armorial bearings, licenses to wear hair-powder, 
 and to kill game, comprise chiefly the luxurious 
 expenses of the rich. The tax on carriages, which 
 was first imposed in 1747, of 4 on every four- 
 
)IRECT TAXES. 
 
 97 
 
 wheeled, and 2 on every two-wheeled carriage, was 
 gradually increased in proportion to the number of 
 carriages; and in 1802, after the scheme for tripling 
 the assessed taxes was superseded by an income tax, 
 it was raised to 12 ; in 1812, from 10 on a single 
 carriage to 15, and to 18 each, on nine carriages. 
 This tax, with the duty also on horses and carriages 
 and male servants, was reduced one-half from 5th 
 April, 1823. The following is the amount of its pro- 
 duce in the three years preceding its reduction, and 
 in 1842 : 
 
 1820 534,551 
 
 1821 545,387 
 
 1822. 
 1842. 
 
 558,187 
 
 442,880 
 
 A yearly duty was imposed, in 1784, of 10s. on 
 each horse, and on each dealer in London of 10, 
 and of 5 in the country. In 1798, the duty was 
 raised from 1, 4s. on a single horse, to 2, 15s. 
 each, where they amounted to twenty ; and the scale 
 was increased, in 1801, 1802, 1805, 1806, 1808, and 
 finally, in 1812, to 2, 17s. 6d. on a single horse, 
 and to 6, 12s. on each, where they amounted to 
 twenty. The produce of the duty is subjoined for three 
 ears before its reduction, and its amount in 1842 : 
 
 1820 685,250 
 
 1821 679,830 
 
 1822 664,768 
 
 1842 319,570 
 
 The duty on horses employed in husbandry amount- 
 ed, in 1820, to 191,914. It was reduced, in 1821 
 and 1822, and amounted, in 1842, to 68,610. 
 
 A duty on male servants was first imposed in 
 1777, of 15s. on each : in 1782, 5 per cent, was 
 added. This duty was, at different times, progres- 
 
 H 
 
98 DIRECT TAXES. 
 
 sively increased. In 1798 it was raised from 1, 10s. 
 on a single servant, to 4, 16s. each on eleven ser- 
 vants ; in 1802, to 2 on one, and to 6, 6s. on 
 eleven; in 1805, 10 per cent, was added; in 1808 
 the scale was raised to 2, 4s., and in 1812 to 
 2, 8s. on one servant, and to 7, 11s. each on 
 eleven servants. Produce before and after it was 
 reduced a half in 1823 : 
 
 1820 576,146 
 
 1821 580,349 
 
 1822 580,732 
 
 1842 205,727 
 
 Income or Property Tax. 
 
 First imposed in 1798. Rate on income. Provisions for levying it. 
 On commercial and professional income. On income from 
 land. Progress and amount. Tax specious in theory. Difficult 
 in practice. 'Inquisition into the private affairs of individuals 
 unavoidable. Inconsistent with the spirit of freedom. Property 
 tax of 1806 abolished in 1815. New tax on property in 1842. 
 
 In 1798 when, in order to check the farther aug- 
 mentation of the public debt, it was resolved to 
 raise part of the supplies within the year, the house 
 and window duties, with the assessed taxes, were 
 tripled ; and where they amounted to 30, 40, and 
 50, they were increased four and five fold. This 
 was a bold experiment in finance, which paved the 
 way for the direct tax on property, by which it was 
 superseded in the following year. This tax on 
 income, or property, imposed on every income of 
 60 a contribution of 10s., or the one hundred and 
 
INCOME OR PROPERTY TAX. 
 
 twentieth part, which was gradually increased to a 
 tenth part on all incomes of 200 and upwards. This 
 tax was repealed in 1802, after the peace of Amiens. 
 It produced annually about 5,500,000. 
 
 A new tax on income was imposed in 1803, when 
 the war was renewed with France, which rose from 
 3d. in the pound on an income of 60, at the rate 
 of Id. in the pound for every 10, to its maximum 
 of 5 per cent, on 150 a-year. The estimate of the 
 farmer's profit was now raised in England, in all 
 cases, to three-fourths, and in Scotland it was fixed 
 at one-half of his rent. In 1805, one-fourth was 
 added to the rate of contribution ; and in 1806, it 
 was raised to 10 per cent, by a new act ; and all 
 income arising from property, whether in land or in 
 money, however small, was subjected to a contribu- 
 tion of one-tenth. 
 
 An equal tax on income is liable to no objections, 
 if it could be fairly assessed. But it is here where 
 the difficulty lies ; 1st, in adjusting an equitable 
 scale of contribution for the larger and the smaller 
 incomes, and for those, also, which arise from the rent 
 of land, or from the more uncertain profits of a trade 
 or profession ; and, 2dly, it is scarcely possible to 
 check the evasion of the tax, without such a strict 
 inquisition into the affairs of individuals as must 
 always be repugnant to the habits of a free people. 
 
 I. A tax which takes the same rate from all 
 incomes, high and low, imposes, with a show of 
 equality, an unfair burden on the smaller incomes. 
 A rich landlord, or merchant, with 10,000 a-year, 
 could spare, with little comparative hardship, a pro- 
 
100 DIRECT TAXES. 
 
 portion of his ample income, which, if taken from 
 300 a-year, occasions a sacrifice of comforts, and 
 even of necessaries; and finally reduces its proprietor 
 to an inferior mode of living, and a lower rank in 
 society ; and on a smaller income of 60 a-year, the 
 hardship is still greater. The rate of contribution 
 ought, therefore, to vary with the means of the con- 
 tributor, and to rise to its maximum among the 
 highest incomes. In the urgent necessities of the 
 State, however, when revenue must be obtained by 
 whatever means, the taxes which are efficient will 
 always be preferred to those which are nicely just. 
 The distinction between the income arising from 
 property, and the more precarious profits of a trade 
 or profession, was recognised in the property tax of 
 1806 : for the purpose, however, of levying an in- 
 creased rate, not on the higher, but on the lower 
 incomes, the smallest of which was now subjected to 
 an equal rate of contribution with those of the richest 
 landlord; by which a heavy and unequal burden was 
 imposed on limited incomes that were derived from 
 property. 
 
 The property tax fell heavily on the rent of land, 
 which could not be so well concealed as the profits 
 of trade. All the inquisitorial machinery with which 
 the tax was provided, often failed to drag out mer- 
 cantile profit from its hiding-place. But a simple in- 
 spection of the tenant's lease was all that was necessary 
 to ascertain the landlord's income ; which was accord- 
 ingly assessed to the last farthing. The profit of the 
 tenant, which was estimated at three-fourths, in 
 England, or half of his rent, in Scotland, and could be 
 

 INCOME OR PROPERTY TAX. 101 
 
 ascertained with equal accuracy, was, in many cases, 
 greatly overrated. A tenant may be prospering on 
 his farm, or his circumstances may be declining of 
 which, towards the conclusion of the French war in 
 1814, there were too many examples; and the same 
 peremptory rule indiscriminately applied, while it 
 favours the wealthy and the prosperous, must be 
 deeply injurious to those who are already struggling 
 with high rents and fluctuating prices. At the 
 renewal of the lease, the property tax of the tenant 
 necessarily forms a deduction from the rent. It is 
 clear that this tax will be estimated among his other 
 expenses by the farmer, who will, in consequence, 
 bargain for a lower rent. The landlord's share of the 
 produce is the surplus which remains after paying all 
 the expenses of cultivation. An increase in those 
 expenses diminishes this surplus ; and hence, no 
 tenant, in entering on a new lease, could offer so 
 large a surplus as before he was burdened with this 
 new expense. Under the operation of this tax, 
 therefore, the proprietor is doubly assessed : he has 
 to pay not only his own, but also his tenant's pro- 
 perty tax in the deduction of rent, which the latter 
 will ultimately claim, and will be allowed on this 
 account. 
 
 The inquisitorial nature of this tax has been heavily 
 complained of. Without, however, a strict inquisition 
 into the affairs of individuals, no income tax could 
 ever be fairly assessed. Even where it is moderate, 
 and still more where it amounts to a tenth of the 
 income, it holds out an irresistible temptation to 
 concealment and fraud ; and it is well known that, 
 
102 DIRECT TAXES. 
 
 in this country, both in 1798 and 1806, it was evaded 
 to a great extent by mercantile income ; while it fell 
 with unsparing severity on the rent of land, on funded 
 property, and on other incomes, the amount of which 
 could not be concealed. It was to guard against 
 this inequality that the rules for ascertaining mer- 
 cantile or professional income were so severe and 
 arbitrary ; and that to enforce them, an irresponsible 
 tribunal of commissioners was appointed, with power 
 to summon before them mercantile men or others, for 
 the purpose of extorting, by cross-examinations, by 
 an appeal to their oaths, or by threats of surcharges 
 and penalties, an unreserved disclosure of theiraffairs. 
 These inquisitorial proceedings, arbitrary as they 
 are, a practical inroad on the rights of freemen, to 
 which there is no parallel, even under the most abso- 
 lute governments in Europe, and truly an anomaly 
 in a country long famed for its love of liberty, 
 were, nevertheless, essential to the just and equal 
 assessment of the tax ; though they still form the 
 great objection to all such imposts, especially in a 
 free country. It is not in mere forms that liberty 
 consists ; and if the people suffer under arbitrary 
 taxation, of what moment is it that they owe 
 the obligation to representatives chosen by them- 
 selves? Necessity, an over-ruling necessity, is the 
 only plea on which an income tax can ever be justi- 
 fied ; and it was entirely on this principle that it 
 was submitted to in 1798 and 1806. The people 
 were persuaded, in consequence of the ill success of 
 the war, that their independence was threatened by 
 the over-grown power of France ; and they preferred 
 
rCOME OR PROPERTY TAX. 
 
 .03 
 
 any alterative, however grievous, to the risk of a 
 foreign yoke. But these fears vanishing with the 
 successful conclusion of the contest, they rebelled 
 against the obnoxious tax. Ministers would fain 
 have persuaded them, that its produce was necessary 
 to wind up the accounts of a long and an expensive 
 war. They were most unwilling to part with so 
 convenient an instrument of revenue. But it was 
 wrested out of their reluctant grasp by the unani- 
 mous and impatient voice of the aggrieved people. It 
 was abolished in 1816. Its produce amounted, in 
 the year ending April 1815, to 15,298,982. 
 
 During the long interval of peace which succeeded 
 the wars of the French Revolution, Great Britain, 
 along with other European States, reduced her ex- 
 penditure ; and her revenue still improving, began to 
 yield annually a surplus, which was laid out in the 
 repeal or the reduction of taxes. This prosperous 
 state of the finances continued till about the year 
 1835, when, owing to the diminished produce of the 
 existing taxes from various causes, and to the in- 
 creased expenditure at the same time, occasioned by 
 the necessity, real or supposed, of augmenting the 
 warlike establishments of the country, by the insur- 
 rection in Canada, and the wars undertaken in the 
 East, for the chimerical purpose of propping up the 
 decaying empire of Turkey, an annual deficit appeared 
 in the annual accounts in place of a surplus. To sup- 
 ply this deficiency, new taxes were imposed, which 
 being unproductive, recourse was had, in 1842, to a 
 tax on income, to be continued for three years. This 
 tax levied 7d. in the pound, or nearly 3 per cent, on 
 all incomes of 150, and upwards. 
 
104 DIRECT TAXES. 
 
 When the income tax was first imposed in 1798, 
 the country was involved in a war which was 'waste- 
 ful beyond all former example. The annual expen- 
 diture often exceeded the income by about twenty or 
 thirty millions ; an alarming increase of debt was 
 the consequence, which it was necessary to check for 
 the maintenance of the national credit ; and the bold 
 measure was accordingly devised, of raising part of 
 the supplies within the year, in place of borrowing 
 the whole, and imposing taxes for the payment of 
 the interest only. It was in this necessity that the 
 first income tax had its origin. In 1842, the same 
 necessity did not certainly exist ; the excess of ex- 
 penditure, in place of twenty or thirty, did not amount 
 to more than three or four millions a-year. Still it 
 was necessary to check this growing deficit ; and with 
 this view, an income tax was resorted to, at the 
 lower rate of 3 in place of 10 per cent. ; while all 
 incomes under 150 were exempted, which was an 
 important and a humane improvement. The pro- 
 visions for assessing the tax were necessarily strict 
 and severe ; and hence, it has been suggested, whe- 
 ther an adequate fund for the supply of the public 
 necessities might not have been obtained from other 
 sources, namely, from the reimposition of the most 
 productive of those taxes, to the amount of about 
 sixteen millions a-year, which had been reduced, 
 or repealed, since the termination of the war. An 
 estimate of the probable amount of these is sub- 
 joined : 
 
INCOME OR PROPERTY TAX. 
 
 Of the tax on Beer, 3,000,000 
 
 Leather, 600,000 
 
 Houses, 1,200,000 
 
 Windows, 1,200,000 
 
 One half on Servants and Carriages,... 500,000 
 Horses, 200,000 
 
 105 
 
 6,700,000 
 
 Of these, the taxes on beer and leather were ex- 
 tremely light and productive. The duty on houses 
 and windows was more heavy ; but it was still pre- 
 ferable to a tax on income : being, indeed, a species 
 of income tax without its inquisitorial powers. If 
 an adequate revenue could have been drawn from 
 those duties, they would probably have been less 
 unpopular than the tax on income. But the minister 
 who was responsible for the maintenance of the pub- 
 lic credit, preferred the tax that could be more surely 
 depended on, to those which would have been more 
 uncertain in their produce, though more popular, be- 
 cause more easy. 
 
 The produce of this tax amounted, in the year 
 ended 5th January, 1844, to 5,249,260. 
 
 Post-office. 
 
 Its importance to society. Established for the convenience of com- 
 merce. The rates exorbitant. Original cost inconsiderable. 
 Hardship of the tax on the poor. Increase of the revenue checked 
 by the extravagant rates. Contraband intercourse. Mr Hill's 
 plan adopted. Its popularity. Loss of revenue. 
 
 The business of the Post-office is, in all countries, 
 a public charge, and is a source of revenue to the 
 government ; nor is there any just objection to a 
 
106 DIRECT TAXES. 
 
 moderate and equal rate of postage. But, on the 
 other hand, no tax can be more truly oppressive 
 where it is exorbitant, as was formerly the case in 
 this country. A cheap and easy intercourse, by 
 letters, is one of the greatest advantages that can be 
 conferred on society. It is essential to all its great 
 interests : to trade, to science, and to literature ; 
 while it tends to promote and enlarge all social ties. 
 There is no branch of the public management which 
 affects so deeply the whole business of life, and 
 which it is essential should be judicious, and well 
 considered. 
 
 The Post-office in Britain was originally estab- 
 lished in the reign of Charles II., for the convenience 
 of commerce. But, in the course of the wars in 
 which the country was involved, its revenue was soon 
 diverted to the public service, and the rates were gra- 
 dually raised to the amount of about 700 or 1000 per 
 cent, on the original charge : an exorbitant tax in 
 any case ; but, where it affected so deeply all the 
 various interests of society, entirely without excuse. 
 The error of those extravagant rates of postage is 
 now generally admitted. The cost of transmitting 
 letters is trifling ; not amounting, between London 
 and Edinburgh, a distance of about 400 miles, to a 
 penny per letter. The number of chargeable letters 
 that passed through the post-offices in Britain was, 
 in 1836, 54,634,920 ; in 1837, 58,224,840 ; the 
 average rate of postage was 10d., including the two- 
 penny post letters, 1 of which the greater part, being 
 a tax, ought to fall equally on all letters. 
 
 See Appendix to Report of Select Committee on Postage, p. 434. 
 

 POST-OFFICE. 107 
 
 Every letter must, of course, be charged with the 
 expense of carriage, which increases with the dis- 
 tance. But there is no reason why a letter that 
 cornes from a distance, after paying this necessary 
 charge, should also be heavily taxed. On the con- 
 trary, the distance is rather a reason for diminishing 
 all the other obstacles to the correspondence. It is, 
 however, by this erroneous standard that the rates 
 of postage were formerly regulated in this country, 
 and that they were raised at last so high as to re- 
 strict all correspondence, except on urgent business, 
 even between the nearest friends. These high rates 
 imposed almost an entire embargo on the correspon- 
 dence of the poor, who were frequently unable to 
 pay the expense of letters from distant friends, as 
 was fully proved before the Select Committee ap- 
 pointed, in 1839, to inquire into the Post-office rates. 
 Postmasters were often induced, from motives of 
 compassion, to give out the letters on trust ; but 
 they were, in most cases, retained or returned to 
 London, for non-payment of the postage ; and the 
 misery of near relations, when they could not re- 
 deem from the Post-office, letters containing the 
 long-expected effusions of absent affection tidings, 
 perhaps, of the battle, and of the soldier's fate, mors 
 aut victoria Iceta was calculated deeply to impress on 
 those who witnessed such painful scenes, the peculiar 
 hardship of this tax. 1 
 
 1 In the course of the last war this evil was redressed. Let- 
 ters from soldiers and sailors, in the public service, only paid the 
 moderate postage of one penny. But, in former times, the scenes 
 alluded to were frequently witnessed. 
 
108 DIRECT TAXES. 
 
 The revenue of the Post-office, owing to these ex- 
 travagant rates, has not advanced with the progress 
 of the country. The net produce, on the average 
 of six years, from 1815 to 1820 inclusive, was 
 1,386,536 ; from 1832 to 1837, 1,364,912. The 
 net produce, in 1838, was 1,525,000, and in 1839, 
 1,519,000; which was only an increase of about 
 130,000, or one-tenth on the income of nineteen or 
 twenty years, though the population had, in the mean- 
 time, increased from twelve or thirteen to about 
 eighteen millions ; and the intercourse in a still greater 
 proportion. An illicit trade is the sure consequence 
 of excessive taxation ; and it was now commenced 
 in this country, and could neither be checked by the 
 vigilance of the Post-office, nor by the heavy penal- 
 ties to which it was liable. The legal channel being 
 narrowed by the high rates of postage, the corre- 
 spondence of the country overflowed into other chan- 
 nels, by which letters were despatched to all parts 
 of the kingdom. They were sent by stage-coaches, 
 vans, steam-boats, by railroads, in parcels, in boxes ; 
 and, in some parts of the country, regular carriers 
 were known, in some degree, to supersede the inter- 
 course by post. It was in vain that the offenders 
 were threatened with pains and penalties. They 
 still pursued their profitable trade ; and the only 
 sure remedy for those abuses appeared to be a lower 
 duty, and, of course, less temptation to violate the 
 law. The uniform rate of one penny on all postages, 
 without regard to distance, was, accordingly, sug- 
 gested by Mr Hill ; a scheme, startling from its 
 boldness, yet original and ingenious, and, when ex- 
 
POST-OFFICE. 109 
 
 plained in detail by its author, found to be the 
 only practicable remedy of this serious grievance; 
 and it was so warmly supported by the mercantile 
 classes, that it was finally adopted in 1839, the 
 postage being reduced first to 4d., and afterwards to 
 Id., on all letters. The reduction of this heavy and 
 ill-regulated impost was of the greatest benefit to 
 the community. Other taxes, that were light and 
 yet productive, were sometimes repealed, with 
 little benefit to the community ; but the increased 
 facility of correspondence, the result of this measure, 
 was an unspeakable advantage to all classes, and gave 
 an impulse to the whole business of life. The defalca- 
 tion of revenue which it occasioned, to the amount of 
 about a million, which could be but ill spared, and 
 which was greater than was anticipated in the over- 
 sanguine calculations of its promoters, was the only 
 drawback by which it was followed. It was expected 
 that the produce of the lower duty, from the increased 
 number of letters, would not fall far short of its for- 
 mer amount. But this proved to be an error. The 
 letters no doubt did greatly increase from fifty-four and 
 fifty-eight millions, their amount prior to the reduction 
 of the postage, to three hundred and fifty millions in 
 1842 ; which, however, at a penny per letter, gives a 
 much smaller revenue. The following is the account 
 of the net receipts of the Post-office from the reduced 
 rates : 
 
 Net revenue in 1840 441,000 
 
 1841 455,000 
 
 1842 605,000 
 
 The reduction of postage, however, and the increase 
 
110 ADVANTAGES OF COMMERCE. 
 
 of letters, was followed by an increase in the charge 
 of management from 647,527 in 1839, to 838,902 
 in 1842. 1 The number of letters, and the revenue, 
 of course, from the lower duty, will, no doubt, con- 
 tinue to increase, though it cannot be expected to 
 rise to its former amount. But the advantages of 
 the reduced postage are so great, that they are 
 cheaply purchased by this sacrifice, while the defi- 
 cient revenue may be supplied from less exception- 
 able sources. 
 
 CHAPTER VI. 
 
 The nature and peculiar advantages of commerce. The division of 
 labour its foundation, and the great source of national wealth. 
 The free exchange of produce its necessary consequence. Essen- 
 tial also from the diversity of soil and climate. Effects of com- 
 merce in increasing the luxuries of a nation. Bounties and pro- 
 tecting duties. Their impolicy. Commercial code of Britain. 
 Restrictions which it imposed on manufacturing industry at home. 
 On foreign produce and goods. The colonial trade founded on 
 monopoly. The domestic industry of the colony held in the same 
 thraldom as that of the mother-country. 
 
 THE taxation of Great Britain has been hitherto 
 considered with a view merely to revenue, its proper 
 and legitimate object. But it has been used also as 
 an instrument of monopoly ; protecting duties, or pro- 
 hibitions, having been imposed on the importation 
 into this country of foreign produce, whether of land 
 or labour, for the encouragement of domestic in- 
 1 See Finance Accounts for the different years, pp. 51 and 59. 
 
[VISION OF LABOUR. 
 
 dustry; while the exportation of British produce 
 has, on the same principle, been encouraged by boun- 
 ties. The taxes which have been imposed, for this 
 purpose, present an extensive subject of investigation, 
 which it is now proposed to pursue, and which will 
 comprehend, 1st, A general inquiry into the nature 
 and peculiar advantages of trade, and how far it can 
 be promoted by bounties, or protecting duties ; 2d, 
 An account of the different measures that have been 
 introduced by modern statesmen for improving the 
 commercial policy of Great Britain ; and 3d, The 
 duties imposed for the protection of agriculture, will 
 next claim to be fully considered. 
 
 The maxims by which commerce was formerly 
 regulated, have been rejected in modern times as the 
 errors of a rude age. It is no longer considered to 
 be a proper object of legislative interference ; it is 
 found to flourish most where it is least meddled w T ith ; 
 and a general view of its nature and peculiar ad- 
 vantages, which will best illustrate the nature and 
 effect of bounties and protecting duties, appears 
 strongly to bear out the same conclusion. 
 
 The foundation of commerce is laid in the division 
 of labour, and in that diversity of soil and climate 
 which prevails in different countries. The division 
 of labour, which confines each individual to his respec- 
 tive calling, is one of the main sources of national opu- 
 lence ; as he acquires in that particular line a much 
 greater degree of dexterity than if his attention were 
 distracted among a variety of different employments ; 
 and the joint labour of the whole country, thus skil- 
 fully managed, yields, in consequence, a more valuable 
 return. But it is evident that a free exchange of pro- 
 
112 EXCHANGE OF PRODUCE. 
 
 duce is a necessary sequel to this judicious direction of 
 the national industry. The different classes of la- 
 bourers, the tailor, the butcher, the baker, pursuing each 
 his own trade, have necessarily on hand more of their 
 own particular commodity than they can use. This 
 inequality can only be rectified by a free exchange, by 
 which they are all severally supplied with what they 
 want, in exchange for that of which they have a surplus; 
 and the exchange that thus takes place between the dif- 
 ferent dealers, is an epitome of the general commerce 
 that prevails in the world. In the progress of in- 
 dustry, parishes, counties, and nations, attach them- 
 selves to particular employments. As capital in- 
 creases, and the market extends, the division of la- 
 bour is carried to a greater extent ; mechanical art 
 is improved in all its branches ; the productive powers 
 of industry are enlarged by the aid of machinery ; 
 extensive manufactories thus arise, of which the pro- 
 duce, exceeding the demand at home, seeks an outlet 
 in the extended market of other countries. The 
 great advantage of this extension of trade is, that it 
 gives to industry a wider range for its productions ; 
 it allows a greater division of labour than is consis- 
 tent with a narrower market, and enables a nation, by 
 more skilful management, to draw from its land and 
 labour a more valuable return ; not only to diversify, 
 but greatly to increase its stock of those conveniencies 
 and luxuries which constitute wealth. The growing 
 abundance, and reduced price of all goods which is 
 thus brought about, is precisely the process by which 
 national wealth is augmented, and the condition of 
 all classes improved; and the same free exchange 
 which takes place between individuals in consequence 
 
EXCHANGE OF PRODUCE. 113 
 
 of the division of labour, is also rendered necessary 
 between nations, by that diversity of soil and climate 
 which leaves with each a surplus of its own pecu- 
 liar produce, and a deficiency of the produce of 
 other climates. It is by a free exchange that these 
 inequalities are corrected ; that the bounties of 
 Providence are distributed in a fair proportion among 
 all nations ; and that in one spot is concentrated, by 
 means of trade, the diversified produce of the earth. 
 It is trade which brings to northern countries all the 
 varied luxuries of more favoured climates ; which 
 spreads the festive board with wine, the most pre- 
 cious cordial and restorative which the earth pro- 
 duces ; . with tea or coffee, the favourite luxuries of 
 every class, brought from the remotest parts of the 
 earth; with spiceries of all kinds ; and with numerous 
 other articles of luxury or use. It is by means of 
 trade that the national stock of northern countries 
 is enriched with all the rare and delicate produc- 
 tions which are matured under a tropical sky ; with 
 the vegetable oils, in all their variety ; with balsams, 
 perfumes ; many rare herbs, precious in the healing 
 art ; with fragrant essences, which recruit the shat- 
 tered nerves ; and with all that is ornamental either 
 in dress or furniture. 
 
 Trade being in this manner a free exchange among 
 nations, or among individuals, of their respective pro- 
 duce, it is clear that all devices for its encouragement 
 which impede this free exchange, whether they be 
 bounties bribing foreigners to buy, or protecting 
 duties hindering them to sell, must be prejudicial to 
 its true interests. The only encouragement which 
 
 I 
 
114 PROTECTING DUTIES. 
 
 trade requires, is a free market for its produce, in 
 which the best articles will always command a ready 
 sale. This is the true incentive to industry and 
 skill ; and it is to thwart this natural arrangement, 
 and to discourage the sale of such articles, that boun- 
 ties are given, or protecting duties imposed. It is to 
 countervail the superiority of the skilful workman, 
 or the natural advantages of climate, that his goods, 
 or the produce of particular countries which is cheaper 
 and better than any other, are loaded .with duties, 
 that their sale may be impeded by an artificial rise 
 of price, and that the consumer may be compelled to 
 buy the produce of domestic industry, though dearer 
 and inferior in quality ; and bounties are founded on 
 precisely the same principle. Their object is, in like 
 manner, to force the sale of inferior articles, and, 
 with this view, to make up out of the public purse to 
 the seller that remunerating price which he could not 
 obtain from their sale in a free market. This, then, 
 is the nature of bounties and of protecting duties. It 
 is not against violence and injustice that protection 
 is sought, but against ingenuity and skill. Protect- 
 ing duties, as well as bounties, are imposed for the 
 benefit of the ignorant and incapable ; and it is be- 
 cause they are ignorant and incapable that they re- 
 quire either bounties to encourage them, or duties to 
 protect them. Where the workman at home, or the 
 climate, furnishes a better article than can be got 
 from abroad, no protection is required. It is only 
 where the home are inferior to the foreign articles, 
 and, therefore, do not sell, that it becomes necessary, 
 by means of protecting duties, or by bounties, to force 
 
COMMERCIAL CODE OF BRITAIN. 115 
 
 a sale ; by which we tax the many for the benefit of 
 the few, depress ingenious industry, and actually hold 
 out a bounty on indolence and rapacity. To buy 
 cheapest, arid to sell dearest, is the inalienable pri- 
 vilege the Magna Charta of commerce, which repu- 
 diates all interference between the buyer and the 
 seller. Such manufactures as cannot stand their 
 ground without protection, should be left to their 
 fate ; and, if they should decay, the capital and in- 
 dustry which they employed will flow naturally into 
 other and more profitable channels. 
 
 The commercial code of Great Britain presents a 
 continued violation of those clear, and now undis- 
 puted maxims. Her ancient policy, like that of 
 the other European States, was founded on monopoly. 
 Her import duties were framed on this narrow notion, 
 that it is profitable to sell and not to buy, though 
 wholly inapplicable to the concerns of a great nation, 
 and entirely at variance with the principles of trade, 
 which is promoted by competition, and by the freest 
 exchange between nations as between individuals. 
 The produce of labour, as well as the produce of 
 land, was accordingly protected against foreign com- 
 petition, either by prohibitions or by heavy duties. 
 The minute restraints that were imposed on the free 
 exercise of industry by the legislators of those days, 
 are absurd, vexatious, and impracticable. No satirist, 
 indulging his genius for caricature, could have ima- 
 gined anything more ridiculous than many of these 
 officious interferences, not only with the freedom of 
 trade, but with the concerns of private life. Nume- 
 rous and complicated statutes regulated all the staple 
 
116 RESTRICTIONS ON HOME MANUFACTURES. 
 
 manufactures of the country : such as linen, woollen, 
 and silk; the exact lengths and breadths of the 
 cloths ; the mode of sorting the yarn, and of weaving 
 it ; the weaver to give security for weaving accord- 
 ing to law. The bleaching of linen was placed under 
 the charge of the magistrate, who might summon the 
 servants employed to give information, if any breach 
 of the law occurred in carrying on the business ; and 
 the restrictions by which the silk trade was regulated, 
 were numerous, absurd, and truly mischievous. The 
 manufacture of stockings was regulated in the mi- 
 nutest points of shape and size ; also the making of 
 hats. Not merely the importation, but the wearing 
 of any article, which could interfere with the sale 
 either of silk or woollen goods, was forbidden by 
 numerous laws. There are no less than four severe 
 and solemn acts proscribing, for the benefit of the 
 silk manufacture, under heavy penalties, the weav- 
 ing, or the making " of any button, or button-holes 
 of cloth, serge, drugget, or other cloth ; " and as 
 this act had been evaded by the unforeseen prac- 
 tice of making and binding button-holes with cloth, 
 serge, &c., a subsequent act extends the penalty 
 to the wearer of those dangerous buttons. The 
 wearing of any printed, stained, or dyed calico, 
 was prohibited under a penalty of 5, to be given 
 to the informer ; cambrics and French lawns under 
 a like penalty of 5, to the informer; to which 
 penalty, any milliner making up the prohibited 
 articles was liable. Examples without number might 
 be multiplied of the same mistaken interference by 
 law in matters that can only be regulated by the 
 discretion of individuals. 
 
COLONIAL TRADE. 117 
 
 The trade of the colonies has always been strictly 
 monopolized for the benefit of the mother country, 
 and their domestic industry was held in the same 
 thraldom. The length to which this commercial 
 tyranny was carried is hardly credible in the pre- 
 sent day. The exercise of mechanical industry 
 was rigidly proscribed in all her dependencies by 
 Great Britain ; acts, innocent, and even praise- 
 worthy, as conducing to the general prosperity, 
 were treated as crimes, and branded with disgrace, 
 in the suicidal code of monopoly. The same spirit 
 which at home classed the exporters of wool with 
 felons, ruled the commercial concerns of the colony. 
 The settlers were hardly allowed to fashion their 
 own produce for use after the rudest methods. They 
 were encouraged to till the ground, but prohibited 
 from manufacturing its produce, on which British 
 industry was to be employed at home. The exercise 
 of mechanical skill was prohibited by fines and pen- 
 alties the rewards, under this perverted system, of 
 ingenious industry. Manufactures seldom flourish 
 in a new colony ; being retarded by the want of 
 capital, and the high price of labour. Yet, when 
 they first began to make their appearance among the 
 active and enterprising colonists of North America, 
 the rich merchants of Britain took the alarm, and, 
 with a malignant jealousy, they used all their influ- 
 ence to blight those early fruits of successful indus- 
 try; they demanded, and obtained, from the legis- 
 lature, penal laws for the purpose of crushing the 
 rising trade of their own colonies ; and acts were 
 passed, proscribing such manufactures, under heavv 
 
118 COMMERCIAL REFORM. 
 
 penalties, as in any degree interfered with the in- 
 dustry of the mother country. The making of hats 
 was prohibited ; every forge or furnace for smelting 
 iron was declared to be a " common nuisance" ; to 
 be abated on complaint to the governor, who, on 
 refusing to act, incurred a penalty of 500. Many 
 other examples might be given of the same narrow 
 spirit. The remnants of this barbarous injustice yet 
 linger in the modern code of Britain ; which still 
 prohibits, by heavy duties, the West India planter 
 from refining his own sugar, which is accordingly 
 brought to this country in British ships for behoof 
 of the refiners at home. 
 
 CHAPTER VII. 
 
 Progress of commercial reform. Early prejudices on the subject of 
 commerce. First dispelled by the work of Dr Smith. Change 
 which it effected in the policy of States. Commercial treaty 
 between Great Britain and France. Other restrictions still main- 
 tained. Exclusion of America from the colonial trade. Retalia- 
 tion of America. A treaty of reciprocity concluded. 
 
 THE narrow and fallacious maxims on which was 
 founded the early legislation of Great Britain, and 
 which proceeded on the notion of promoting trade by 
 restraint and regulation, were faithfully transmitted 
 to succeeding times ; and, until a late period, they 
 regulated the commercial policy of this, as of most 
 other European countries. 
 
EARLY PREJUDICES. DR SMITH. 119 
 
 The prevailing ignorance was first dispelled by the 
 great work of Dr Smith ; whose genius, ranging 
 from a higher elevation, comprehended at one view 
 the true relations of the subject ; and boldly entering 
 on this new field of speculation, propounded those 
 great and original doctrines, which cast an entirely 
 new light on the subject. To him belongs the rare 
 merit of founding a school of practical philosophy, 
 in which are taught important truths that deeply 
 affect the great concerns of society. He has refuted 
 errors and prejudices, firmly rooted and of long 
 standing the source of many bad laws ; and with a 
 force and clearness of reason that approaches to 
 scientific demonstration : so that it seems often 
 doubtful whether most to admire the weighty truth, 
 or the simplicity of the process by which it has been 
 brought to light. 
 
 The work of Dr Smith produced a gradual change 
 in the opinions of mankind, and in the policy of 
 States. His enlightened views were adopted by 
 several distinguished statesmen in his own country ; 
 among others, by Mr Pitt, who reduced them to prac- 
 tice in the commercial treaty which he concluded 
 with France in 1786. The object of this great mea- 
 sure was to promote the prosperity and peace of 
 two nations, by whose wars Europe had been so 
 often disturbed. Great Britain and France had been 
 for centuries before, rivals and enemies ; and their 
 commercial policy was tainted by the same spirit 
 which prompted their unhappy wars. They were 
 never thoroughly at peace with each other ; the in- 
 tervals of peace which occurred were never improved 
 
120 TREATY BETWEEN BRITAIN AND FRANCE, 
 
 in the spirit of peace : the war of arms was invariably 
 succeeded by that of commercial restrictions; insomuch, 
 that though they possessed the materials of extensive 
 commerce, the one abounding in all that art and in- 
 dustry can supply, and the other in the finer produc- 
 tions of a more favoured climate, their trade was 
 almost entirely obstructed by the prohibitory duties 
 which their mutual jealousies imposed. The new 
 treaty was diametrically opposed in principle to the 
 whole previous policy of the country. Its object was 
 to remove restrictions, and to unite the two countries 
 in the bonds of amity and peace ; and its illustrious 
 author, accordingly, reprobated with indignation the 
 odious doctrine, that the two nations were or could 
 be the natural enemies of each other, and expatiated 
 in all the pride of lofty eloquence, on the opposite 
 tendency of the measure which he proposed, which 
 was to calm those mutual animosities that had so 
 often broken forth in cruel wars, to the disgrace and 
 injury of both countries, 1 
 
 1 The name of Mr Fox, the friend of freedom and of peace, is 
 conspicuous among the opponents of this great and wise measure ; 
 for which no better ground is assigned than general hostility to 
 France, on account of the ambition, tyranny, and Punica fides, 
 which it was long the fashion for British politicians, in their anti- 
 national zeal, to urge against thatpower. Such is thebaneful influence 
 of party spirit on the greatest minds. It is gratifying to observe 
 that, in the present day, though the jealousies of merchants still 
 obstruct the conclusion of a commercial treaty, those hostile dis- 
 positions are no longer cherished ; but, on the contrary, the greatest 
 anxiety is evinced by the rulers of both countries to unite them to- 
 gether in the most friendly ties. Every friend of humanity and 
 peace must be rejoiced at the prevalence of this moderate and 
 pacific spirit in the national councils. 
 
 

 PROVISIONS OF THE TREATY. 121 
 
 The freedom of trade and navigation was the basis 
 of this treaty. The vessels of both countries were 
 allowed equal privileges in each other's ports ; and 
 the heavy duties which obstructed the mutual ex- 
 change of produce, were abated. The wines of 
 France were admitted at the same duties as those of 
 Portugal. The duty on brandies, vinegars, and oils, 
 was reduced to the lowest rate paid by any nation. 
 Those on woollen and cotton manufactures ; on por- 
 celain, pottery, and glass, were reduced from 50 and 
 75 per cent., which were prohibitory, to 12 per cent, 
 in both countries. Linens were admitted on the 
 same duty as from Holland. The duty on saddlery 
 was reduced to 10 per cent. ; on millinery made up 
 of muslin, lawn, cambric, to 12 per cent., in both 
 countries. This treaty is by far the most liberal 
 measure ever introduced into the country : it placed 
 the commerce of France and England on a footing of 
 equality ; and in lowering the duties on the staple 
 manufactures of Britain to 12 per cent., deprived 
 them of their boasted protection. A great impulse 
 was given to trade by its emancipation from the 
 trammels of monopoly ; and the export of British 
 manufactures to France was rapidly increasing, when 
 all intercourse between the two countries was checked, 
 for nearly a quarter of a century, by the war which 
 was begun in 1793. 
 
 But this wise and friendly treaty with France was 
 an exception to the general policy of Britain, which 
 was still founded on restriction and monopoly. The 
 tardy progress of commercial reform is the more re- 
 markable, as its necessity was now fully admitted. 
 
122 EXCLUSION OF AMERICA 
 
 It was no longer doubted that restrictions were 
 hurtful to trade ; that the colonial monopoly was 
 disadvantageous to all parties, even to the mother 
 country, for whose behoof it was intended ; and that 
 the navigation laws, rigidly enforced, would prove in- 
 jurious to trade, and ultimately to navigation itself. 
 Yet no movement was made ; no step was taken to 
 soften these restrictions ; and thus, among a people 
 eminently commercial, and with the boasted advan- 
 tage, besides, of a free constitution, abuses were allow- 
 ed to take root, and to grow up, of which no other 
 country in Europe presented any example. Such 
 was the monopoly of the East India trade by an ex- 
 clusive company ; which, though not less contrary to 
 the interests of commerce than of navigation, and 
 though universally condemned, still maintained its 
 ground, and finally lingered behind its time till the 
 year 1834. 
 
 When America achieved her independence, a fair 
 occasion was presented for the exercise of British 
 liberality, by the admission of the new State to her 
 former free intercourse with the West India colonies ; 
 and Mr Pitt, the steady advocate of liberal policy, 
 introduced a measure into Parliament for this pur- 
 pose, during his first and short-lived administration. 
 But the cry of monopoly prevailed; and the new 
 State was, with violence and clamour, cast out as an 
 alien from all her former privileges. Her vessels 
 were excluded, under pain of forfeiting both ship and 
 cargo, from entering any British port in the West 
 Indies ; though these colonies were almost entirely 
 dependent on America for supplies of provisions, 
 

 FROM THE COLONIAL TRADE. 123 
 
 lumber, and live-stock, in return for sugar, rum, and 
 other tropical produce, which met with a ready sale 
 in the American markets. This prohibition, though 
 it was occasionally relaxed, yet inflicted severe dis- 
 tress on the West India islands. From 1780 to 
 1786, these islands experienced a series of violent 
 hurricanes, the peculiar scourge of the climate, by 
 which the country was laid waste, and scarcity en- 
 sued; and in 1786, thousands of negroes perished 
 from famine, though from the neighbouring ports of 
 America ample supplies might have been obtained, 
 but for the cruel prohibition by the mother country 
 of any intercourse with her former colony, except in 
 British ships. 
 
 A treaty, on the principle of reciprocal freedom in 
 trade and navigation, was proposed by the Ameri- 
 can minister in London, in 1785, and was declined by 
 the British government, as was also all negotiation 
 respecting the colonial trade. This rigid adherence 
 of Great Britain to her navigation laws, and other re- 
 strictions, gave rise, as was to be expected, to similar 
 restrictions on the part of the United States, now an 
 independent power, fully resolved to maintain her 
 rights. The first American congress, accordingly, 
 which met in 1789, passed an act excluding foreign 
 vessels from her coasting trade ; also from the trade 
 between America and China, by discriminating duties 
 on tea, and imposing licenses and other duties on all 
 foreign vessels that entered an American port. A 
 negotiation was the result of this retaliation, which 
 terminated in a treaty, concluded in 1794, by which 
 it was agreed that the vessels and goods of both coun- 
 
124 PROGRESS OF COMMERCIAL REFORM. 
 
 tries should be entitled to the same privileges, and 
 liable to the same duties, in each other's ports. Ame- 
 rican vessels were also, at the same time, admitted 
 into certain ports of the British dependencies in the 
 East Indies. 
 
 Further progress of commercial reform. Navigation laws of Bri- 
 tain. Not indebted to them for naval power. Tendency to pro- 
 voke the retaliation. Cause of monopoly weakened by political 
 changes. Relaxation of the navigation laws. Necessary to avert 
 the threatened retaliation of foreign powers. Reciprocity treaties. 
 
 The philosophy of Dr Smith, however closely con- 
 nected with the great interests of society, was little 
 attended to during the revolutionary war with France, 
 so deeply did the great events of those times engross 
 the attention of all Europe. With the return of a 
 more tranquil era, the interest in those important 
 inquiries gradually revived ; and the statesmen of 
 the country found it necessary, as a tribute to the 
 increasing knowledge of the age, to revise the com- 
 mercial policy of the country that had been long 
 pursued, and to remove some, at least, of the more 
 obnoxious restrictions by which, though universally 
 condemned, the commerce of Great Britain was still 
 embarrassed. 
 
 The Navigation act of Charles II., was long the 
 idol of British statesmen ; and though dictated, ac- 
 cording to Dr Smith, by national animosity, was still 
 declared by him to be as well adapted to its purpose 
 
NAVIGATION ACT. 125 
 
 as if it had been contrived by deliberate wisdom. 
 It was, however, with this celebrated act that modern 
 statesmen commenced the work of reform, by modi- 
 fying its rigour, and adapting it to the altered circum- 
 stances of the times. 
 
 The great purpose of the Navigation act was to 
 exclude foreign shipping from the carrying trade of 
 Britain. With this view, it gave to British-built 
 shipping, of which the master and three-fourths of 
 the crew were British, the monopoly, 1st, of the 
 coasting trade ; 2d, of the direct trade with the 
 colonies ; 3d, of the fisheries ; 4th, of the carrying 
 trade with Asia, Africa, and America, from which 
 no goods could be imported into Britain except in 
 British vessels, directly from the country where they 
 were produced ; 5th, numerous bulky articles, to the 
 number of twenty-eight, are specified in the act, 
 which can only be imported directly from Europe 
 into Britain in British ships, or in ships of the 
 country of which they are the produce, subject to 
 alien duties. Such were the provisions of this 
 well-known act, the deliberate wisdom of which, 
 although commended by Dr Smith, may, neverthe- 
 less, be questioned. Even though all nations had 
 acceded to the restrictions which it imposed, it 
 seems doubtful how far it ever would have produced, 
 or ever did actually produce, the boasted advantages 
 which have been ascribed to it. Its object is to rear 
 up a formidable navy ; and, for this purpose, it relies 
 rather on the artifices of monopoly, than on the spon- 
 taneous development of the national resources from 
 which alone a navy can be either formed or perma- 
 
126 SOURCES OF NAVAL POWER. 
 
 nently supported. Commerce is the parent, as it is 
 also the measure of naval power. A navy cannot 
 be created by the arbitrary decrees of legislation. 
 It is the slow growth of maritime trade ; and where 
 trade flourishes, and is extended, the means of fitting 
 out a navy cannot be wanting. Great Britain, there- 
 fore, with her trade extending over the whole world ; 
 with her extensive sea-coast, and numerous ports, 
 could hardly fail, in any case, to have attained to 
 maritime greatness. It was not necessary for ensur- 
 ing the growth of a commercial marine, to bind her 
 trade to her navigation by the chains of monopoly, 
 since the one cannot exist without the other. Navi- 
 gation is the necessary accompaniment of trade ; and 
 no commercial country ever yet carried on any pro- 
 portion of its trade with foreign shipping. 
 
 Many circumstances concur to give to every coun- 
 try the monopoly of its own navigation. Without 
 the aid of laws it will necessarily fall to those who, 
 from local knowledge, connexions, and other advan- 
 tages, are best qualified to carry it on. To those 
 advantages, therefore, natural, as well as acquired, 
 Great Britain appears to be indebted for her mari- 
 time superiority, rather than to those boasted laws 
 which confine her commerce to native ships ; and, 
 accordingly, it appears from Dr Smith's own state- 
 ment, that she had become a great naval power, for- 
 midable in war, before these laws were enacted, or 
 could possibly have taken effect. 
 
 It is still more certain that the restrictions which 
 Great Britain imposed on commerce would have 
 been injurious to herself, even though they had been 
 

 POLITICAL CHANGES. 127 
 
 acquiesced in by all the other nations. Commerce, 
 being an exchange of what is superfluous for what is 
 scarce, must, in the nature of things, confer a mutual 
 benefit on those who make the exchange. It is a 
 voluntary transaction, and would not be engaged in, 
 unless it yielded this common advantage ; and hence, 
 not only the selfishness and the injustice, but the 
 folly of those commercial restrictions. In excluding, 
 by heavy duties, the importation of French produce, 
 Great Britain in effect restricted her own trade. 
 Importation implies exportation. The produce of 
 France would not be imported into Britain without 
 a return ; and that return would be in British goods. 
 Each nation receiving a supply of what is wanted 
 for that of which it has too much, industry thus mu- 
 tually profits by this necessary exchange of its sur- 
 plus produce. 
 
 But other nations would not tamely submit to the 
 monopolies of Great Britain, however cunningly de- 
 vised for her own benefit. During the revolutionary 
 war, which commenced in 1793, and terminated in 
 1814, domestic improvement was mostly at a stand. 
 War engrossed the attention of all Europe. But 
 no sooner was it brought to a close, than the dif- 
 ferent nations began to turn their attention to the 
 arts of peace ; when the commercial system of Bri- 
 tain was found to be the great stumbling-block in 
 the way of navigation and trade. All complained 
 of her navigation laws, and other restrictions ; and 
 threatened to retaliate. Their measures were, how- 
 ever, at first, strictly defensive. Their object was 
 not intended to favour restrictions, but to put them 
 
128 RETALIATION OF FOREIGN POWERS. 
 
 down ; and to establish among all trading nations 
 an equality of charges, whether on shipping or goods. 
 Such was the policy of the United States. They 
 retaliated on Great Britain the full measure of her 
 own restrictions ; but they did not object to a different 
 arrangement, by which equal charges should be im- 
 posed on the goods and shipping of either country 
 in the ports of the other ; and, accordingly, Great 
 Britain, though long holding by her exclusive privi- 
 leges, was forced at last to give way, and, in 1815, to 
 conclude a treaty with America, on those equal prin- 
 ciples. In 1822, Prussia issued an edict, imposing 
 discriminating duties on the vessels or goods of every 
 nation in which similar duties were levied on her 
 own goods and shipping; and, on a remonstrance 
 from this country, it was replied that we need not 
 expect the repeal of these duties so long as we per- 
 severed in our own. 1 All the other States of Europe 
 were, in like manner, prepared for retaliation ; and, 
 in case Great Britain persevered in her exclusive 
 laws, to form a league for defence against her as the 
 common enemy of free trade. They were resolved 
 no longer to allow her to cut and carve upon the 
 commerce of the world ; to pick and choose what to 
 concede and what to withhold ; to send her goods 
 to their markets in any quantity, and to reject their 
 produce in return. They resolved to oppose her by 
 her own arts ; to retaliate upon her with interest ; and, 
 if she rejected other arguments, to impress upon her 
 just views of policy, by a sense of her own advantage. 
 
 1 See Huskisson's Speeches, vol. iii., p. 1 29. 
 

 
 POLITICAL CHANGES. 129 
 
 But their measures were still defensive. It was from 
 Great Britain that the system proceeded. It was 
 this greatest of all commercial States that mingled 
 up for her neighbours the potion of monopoly, which 
 they, refusing to partake, commended the poisoned 
 chalice to her own lips. 
 
 Many circumstances had concurred to weaken the 
 cause of restriction throughout Europe. The indepen- 
 dence of the United States was the first serious blow 
 which it received. This event laid open the commerce 
 of a great continent to all nations. Monopoly thtfs 
 lost its vantage-ground; and though still strongly in- 
 trenched, was now commanded from new and more 
 advantageous positions. Experience, equally with 
 reason, laid open the benefits of free trade. The 
 ancient bond between the mother country and the 
 colony was suddenly rent asunder ; the thraldom of 
 monopoly was broken ; and, so far from evil following 
 to either, both were benefited ; the trade flourished 
 and increased more than ever. After the monopoly 
 had ceased, the two countries were still bound to- 
 gether by their mutual wants : America, a compara- 
 tively new settled country, being deficient in capital 
 and industry, and abounding in the rude produce of 
 the soil ; Great Britain, on the other hand, rich in 
 capital, and still more in art and in ingenious indus- 
 try, being a storehouse of goods out of which the 
 wants of America could be at once supplied. It was 
 on this foundation that the trade was originally 
 raised ; and from the same cause it revived with the 
 termination of the war. 
 
 Other important political changes occurred in dif- 
 
 K 
 
1 30 POLITICAL CHANGES. 
 
 ferent parts of the world, which imposed on Great 
 Britain the necessity of modifying her exclusive laws. 
 In 1808, Brazil became the seat of the Portuguese 
 empire, and was thus laid open to the intercourse of 
 other nations. The independence of South America 
 was acknowledged about 1810. St Domingo was 
 also independent ; and Cuba acted on the principles 
 of free trade. Every port on the Atlantic and Pacific 
 shores, from Cape Horn as far as the borders of 
 Canada, was thus open to the vessels of all nations. 
 The flag of commercial freedom thus floated over alarge 
 portion of the globe. The empire of monopoly was 
 contracted to a comparatively narrow span ; and its 
 influence was diminished in proportion. The inde- 
 pendent communities of America were anxious to 
 acquire shipping and trade ; and they had resolved 
 strictly to retaliate on those European countries from 
 which either their vessels or goods were excluded. 
 For this purpose they had already devised prohibi- 
 tory laws, by which Great Britain, in rigidly adher- 
 ing to her Navigation act, would have been met in 
 all the ports of America by similar restrictions. In 
 these circumstances, it was wisely determined by the 
 British ministers somewhat to relax this monopoly, 
 rather than encounter exclusion on so large a scale. 
 The prohibition which the Navigation act imposed 
 on the importation into Britain of the produce of 
 Asia, Africa, and America, except in British-built 
 ships, and from the place of their production, was 
 repealed as regarded the United States, by the differ- 
 ent treaties concluded, the last in 1815, with that 
 power ; and with the South American States, as they 
 
RESTRICTIONS ON FOREIGN IMPORTS. 131 
 
 severally attained to independence, and entered into 
 commercial treaties with Great Britain. The pro- 
 hibition, however, to import the produce of these 
 parts, or any of the enumerated commodities from 
 Europe, except directly from the places of their 
 growth, was still retained, and was found to em- 
 barrass, without in any degree promoting the interests 
 of commerce. The restrictions on the trade out of 
 Europe were chiefly injurious to the British mer- 
 chant. The condition to which he was subjected, of 
 only importing commodities from the place of their 
 growth, embarrassed him in the assortment of his 
 cargo in the distant ports of Asia, Africa, or America, 
 and must have frequently diminished his chances of 
 profit. The attempt, by legislators at home, to ex- 
 ercise such a control over him in those remote ports, 
 was certainly an unusual stretch of presumption and 
 folly ; which, in place of promoting, could only tend 
 to retard the progress both of navigation and trade. 
 The same restriction which was imposed on the com- 
 merce with Europe, of importing foreign commodi- 
 ties directly from the place of their growth, was 
 equally embarrassing, without any benefit. In 1822, 
 these restrictions were accordingly repealed. The 
 goods, the produce of Asia, and the other divisions 
 of the globe, were allowed to be imported in British- 
 built ships, from any place whatever, unless specially 
 prohibited ; and the importation of the enumerated 
 goods into Britain was allowed, not only in the 
 vessels of the country of which they were the pro- 
 duce, but in the vessels of the country from which 
 they were imported into Britain. 
 
132 RELAXATION OF THE NAVIGATION LAWS. 
 
 Those acts, therefore, released British as well as 
 foreign shipping from useless restrictions. The for- 
 mer were now permitted to bring from any foreign 
 country, not only goods the produce of that country, 
 but goods imported into it from any other foreign 
 place ; and thus the British ship-owner had the ad- 
 vantage of choosing his cargo from a greater variety 
 of articles ; while the foreigner, by this new law, could 
 not only bring into Britain enumerated commodities, 
 the produce of his own country, but those, also, which 
 were imported into it. The distinction of the enu- 
 merated goods is still retained: they cannot be brought 
 into Great Britain in any foreign vessel except under 
 certain limitations namely, in the vessel of the country 
 where they were produced, or of the country from which 
 they are imported. No American vessel, for example, 
 can import the wines of France into this country ; and, 
 in return, no British vessel can carry any other than 
 British produce directly to the United States. This 
 restriction, therefore, like all others of the same 
 nature, recoils on its contrivers. It is indeed more 
 injurious to Great Britain than to America ; for, as 
 Mr Huskisson explains in one of his masterly speeches 
 on this subject, the American merchant, or ship- 
 owner, suffers no hardship in being restricted to the 
 direct importation of American produce into Great 
 Britain, having nothing else to bring over ; while, 
 for his return cargo, which he may find it for his 
 interest to assort more variously, he may choose from 
 the whole produce of Europe. The British mer- 
 chant has not the same advantage ; seeing that, in 
 return for the restrictions imposed by Britain, he is 
 
RECIPROCITY TREATIES. 
 
 13J 
 
 confined in his export-cargo from Europe, of which 
 alone he may wish to vary the assortment, to British 
 goods, under pain of forfeiting both ship and cargo. 
 Those restrictions which Great Britain imposes on 
 foreign shipping, are thus retaliated on her own ; and 
 wherein, then, it may be asked, consists the advan- 
 tage of those much-boasted laws? Is it not evi- 
 dent, from experience as well as from reason, that 
 monopoly is not the true interest of a great commer- 
 cial State, whose navigation and trade will be more 
 effectually promoted by free competition than by all 
 the devices of monopoly, however cunningly devised ? 
 In addition to those restrictions, foreign commerce 
 and navigation were both discouraged in Great Bri- 
 tain by heavier duties on goods imported, and by 
 smaller drawbacks on goods exported, in the vessels 
 of aliens than of natives. This distinction in favour 
 of British vessels tended to divert both trade and 
 navigation from their natural course. But the scheme, 
 however ingeniously contrived, was frustrated by the 
 retaliation of other nations ; and Great Britain was 
 reduced to the alternative of either retracing her steps, 
 or of following out her system to its final and legi- 
 timate conclusion, namely, the entire proscription, 
 like the Chinese, of all foreign trade. A different policy 
 was adopted. Treaties had been already concluded 
 with Brazil in 1811, and with the United States in 
 1815, on what was called the principle of reciprocity ; 
 by which it was agreed, that the ships and goods of 
 both nations should be charged with equal duties, 
 and entitled to equal immunities and drawbacks in 
 each other's ports. The adoption by Great Britain 
 
134 RECIPROCITY TREATIES. 
 
 of this principle, as the basis of her foreign trade, 
 was a new era in her policy. These terms, however, 
 being granted to one State, could not, with any rea- 
 son, be denied to others ; and in this new bond of 
 commercial intercourse were accordingly included, 
 in 1824, 1825, and 1826, the American States of 
 Mexico, Colombia, Buenos Ayres, Peru, and others ; 
 and in Europe France, Prussia, the Netherlands, 
 Sweden, Denmark, with other minor States. 
 
 An outcry was raised against this wise and neces- 
 sary relaxation of the navigation laws, by the ship- 
 owners and others ; who ascribed to it the decrease 
 in British, and the increase that they asserted had 
 taken place in foreign shipping. Mr Huskisson, the 
 author of the measures, however, proved, from the 
 unerring evidence of parliamentary returns, that the 
 number of British vessels built in 1825, when the 
 effects of the recent changes must have been fully felt, 
 was greater than in any former year on record, amount- 
 ing to 1312 : the number built in 1814, the last year 
 of the war, when, from various causes, the demand 
 for shipping was great, being only 818. The num- 
 ber of ships which, in 1824, entered inwards, was, 
 according to the same return, 19,164 ; their tonnage, 
 2,364,249 : the number of foreign ships was 5280 ; 
 their tonnage, 694,880. In 1825, the relative num- 
 ber of British and foreign ships was as follows : 
 
 No. Tons. 
 
 British vessels entered inwards, '21,786 2,786,844 
 Foreign do. do., 6561 892,601 
 
 The increase in the number of British ships was 
 2622, and in the foreign, only 1281. The year 
 

 ON THE COLONIAL TRADE. 135 
 
 1825 was, however, noted for overtrading ; and there 
 was, in consequence, a greater demand for shipping 
 than in any former year. In 1826, owing to the 
 unexampled depression of trade, the amount of 
 British shipping decreased. Mr Huskisson proved, 
 however, from the same accounts, that the decrease 
 in foreign was still greater than the decrease in 
 British shipping; 1 and that the falling off in the 
 latter was altogether independent of the late relax- 
 ation in the navigation laws. 
 
 CHAPTER VIII. 
 
 ON THE COLONIAL TRADE. 
 
 Colonies of no real advantage to the mother country. Partial relax- 
 ation of the monopoly in 1822 and in 1825. Disadvantage of the 
 remaining restrictions. Complained of by the Americans, who 
 retaliate. A compromise at last agreed on. Narrow policy of 
 Britain. Restrictions still imposed on the colonial trade. 
 Taxes imposed by Great Britain on the colonies. Unproductive. 
 Operation of the colonial monopoly. Varies according to cir- 
 cumstances. Its effect on the price of sugar and coffee. 
 
 IT is now generally acknowledged, that colonies 
 are of no real advantage to the mother country. 
 The monopoly of the trade is a positive injury to 
 both parties ; to the dependent as well as to the 
 
 1 See Huskisson's Speeches, vol. iii. p. 95. 
 
136 ON THE COLONIAL TRADE. 
 
 parent State ; and the sovereignty, however it may 
 flatter the national vanity, brings with it no solid 
 benefit. The undue importance attached by Great 
 Britain to her American colonies, was fully proved 
 by the event. The wisest statesmen were impressed 
 with the notion that the loss of this great empire, 
 the brightest ornament, as it was styled, of the 
 British crown, would be a serious blow to the 
 national prosperity. How entirely has the subse- 
 quent prosperity of the country belied those vain 
 fears. The loss of America has, in no degree, 
 affected the commercial greatness of Britain ; it has 
 rather redounded to her advantage ; and the only 
 regret now is, that the Canadas were not united in 
 the same successful revolt, which would have freed 
 the mother country from all farther care or expense 
 concerning them ; and from the injurious monopolies 
 established, as well as from the danger of being 
 involved in wars with other powers, on their account. 
 Colonies are frequently acquired by conquest, and 
 hence are valued as the honourable trophies of suc- 
 cessful war. In the prosperous reign of Queen Eliza- 
 beth, no act was more unpopular, though none was 
 probably more wise, than the giving up of Calais, the 
 last memorial of English conquest in France ; and, 
 at present, the cession of any of the numerous and 
 expensive colonies of Britain, even for an equivalent, 
 would probably draw on its adviser an equal share 
 of popular odium, though no real injury might thence 
 accrue to the country. It was for the preservation 
 of her American empire that Great Britain embarked 
 in a long, and finally an unsuccessful war ; and any 
 
RELAXATION OF MONOPOLY. 137 
 
 minister would probably have been denounced as an 
 enemy of his country, who would, at that time, have 
 proposed to terminate the threatened strife, by acceding 
 to American independence ; though all the blood and 
 treasure would thereby have been saved, which was 
 afterwards squandered in that fatal war. 
 
 Although, by the navigation laws of Great Britain, 
 foreign States were always excluded from her colonial 
 trade, yet, owing to the gradual progress of juster 
 notions, and still more, to the force of circumstances, 
 the whole American continent having been emanci- 
 pated from commercial bondage, it was no longer 
 found possible strictly to adhere to this narrow 
 policy. It was, however, departed from slowly and 
 reluctantly ; minor details were given up, while the 
 principle was retained; and it was only from the 
 well-founded dread of retaliation, that this country at 
 length consented to a partial relaxation of those 
 restrictive laws. 
 
 In 1822, the 3 George IV. opened the trade with 
 the British colonies to any friendly State in America, 
 either in their own, or in British vessels. But this 
 privilege was clogged by several restrictions ; the 
 foreign vessel being confined to a direct voyage from 
 her own country to the colony, and to certain enu- 
 merated articles, chiefly lumber and provisions, on 
 which also discriminating duties were imposed ; 
 while the same articles were allowed to be exported, 
 either from Great Britain to the colonies, or from 
 colony to colony, as from the Canadas to the West 
 Indies, duty free. 
 
 The colonies were permitted, by the same act, to 
 
138 ON THE COLONIAL TRADE. 
 
 send their produce directly to Europe ; only, how- 
 ever, in British ships, and to bring back also, in a 
 direct voyage, certain enumerated commodities of 
 foreign growth or manufacture. In 1825, the 6 
 George IV., c. 73, conferred the same privilege of a 
 direct trade to the British colonies, on the European 
 and all other friendly States. They were permitted 
 to import directly into those colonies, in their own 
 or in British ships, all articles the produce or manu- 
 facture of the countries to which they belonged, ex- 
 cept such as were specially prohibited-; and, in return, 
 to export the produce of the colonies to any part 
 of the world, except to Great Britain or her depen- 
 dencies. The duties imposed by the former act, on 
 lumber, provisions, and live-stock, and other minor 
 articles imported from foreign States, were con- 
 tinued ; and discriminating duties were laid on wine 
 and spirits. On wine, a duty of 7, 7s. per tun of 
 252 gallons, when imported from Britain ; and for 
 the encouragement of British navigation, a further 
 duty of 7, 10s. per cent, when imported from other 
 countries; and on spirits 6d. per gallon. The im- 
 portation of certain articles of provision, such as 
 salted beef or pork; also of coffee, cocoa, sugar, 
 molasses, rum, &c., unless for re-exportation, was 
 prohibited, except from the mother country, or her 
 colonies. The same prohibition was also extended 
 to fish, dried or salted, to oil, blubber, &c. On 
 foreign goods, wares, and merchandise, discriminat- 
 ing duties were imposed, amounting, on manufactures 
 of linen, leather, silk, on clocks and watches, musical 
 instruments, &c., to 30 per cent. ; on glass manufac- 
 
CLAIMS OF THE AMERICANS. 139 
 
 tures, soap, manufactured tobacco, cotton manufac- 
 tures, 20 per cent. ; and, on other articles not 
 enumerated, 15 per cent. 
 
 The Americans rejected the offer of a trade with 
 the colonies, thus clogged with discriminating duties ; 
 and they passed an act imposing alien duties on all 
 British vessels entering American ports from the 
 colonies, to be levied until the productions of the 
 United States should be admitted on the same terms 
 and duties as the like productions of any other coun- 
 try : thereby claiming to be placed on an equal footing 
 in this trade with the North American colonies, or 
 any other portion of the British empire. 
 
 Mr Huskisson censures this claim as the most ex- 
 travagant ever proposed by one independent State to 
 another ; and he suggests various schemes of retalia- 
 tion that might have been adopted for bringing the 
 Americans to more reasonable views. But the dis- 
 agreement originated in the narrow policy of this 
 country ; by which, in order to favour the trade of 
 Canada, discriminating duties were imposed on lum- 
 ber and provisions imported directly from America 
 to the West Indies. It was against these duties that 
 the Americans remonstrated ; and they retaliated by 
 counter-restrictions, of which Mr Huskisson com- 
 plained ; though they were the natural and proper 
 fruits of the British monopoly. If the American 
 trade with the West Indies was restrained, it was of 
 no moment whether it was by direct prohibitions or 
 by protecting duties. It was not for the mere name 
 of freedom that they contended, but the reality. They 
 saw plainly, that by the new scheme of protecting 
 
140 ON THE COLONIAL TRADE. 
 
 duties, their trade with the West Indian colonies of 
 Great Britain would still be obstructed as before ; 
 and they retorted on the British their own restric- 
 tions. 
 
 This last measure was introduced by Mr Huskis- 
 son, with an eloquent eulogium on the advantages of 
 free trade ; of which, however, it was by no means a 
 happy specimen : the discriminating duties which 
 were substituted for prohibitions, obstructed the trade 
 as effectually as before ; and since the foreign manu- 
 facturer was undersold in his own markets, on equal 
 terms by his British rival, it was little else than 
 mockery to admit him to a hopeless competition in 
 the colonial market with heavy duties against him. 
 The duties on such articles as lumber, live-stock, and 
 provisions, were not prohibitory ; and they were still 
 imported from the United States for the supply of 
 the West Indies. But the rise in their price occa- 
 sioned by the duties, increased the expenses of the 
 planter, and the price of his produce ; and thus limit- 
 ing the demand for it, tended to check the progress 
 of cultivation and industry in these islands. On the 
 other hand, the exclusion of foreign sugar, coffee, and 
 other products, from the Canadas and other British 
 colonies, gave the West India planter the monopoly 
 of these articles ; and by raising their price to the 
 North American colonies, had the same effect of re- 
 tarding their progress and embarrassing their trade, 
 by preventing them from freely disposing of their 
 produce in certain markets, such as the Brazils and 
 Cuba, from which they could not bring back, in 
 return, any of the great staples of those colonies, as 
 sugar, coffee, or rum. 
 
AMERICANS RETALIATE. 141 
 
 Mr Huskisson's complaint was, that the just limit 
 of retaliation was exceeded. But by what standard 
 can this limit be fixed ? The example of monopoly 
 once given, will be improved upon ; one restriction 
 will lead to another ; the system is progressive ; and 
 has no necessary limit but in the entire proscription 
 of trade. If the duties complained of had been 
 imposed with a view to revenue, the retaliation of 
 America would have deserved the unqualified cen- 
 sure of Mr Huskisson. But they were protecting 
 duties, intended to favour the Canadian at the ex- 
 pense of the American trade ; and hence the retaliation 
 which they provoked. An unreserved concession of 
 the West India and of the Canada trade to America, 
 as was formerly proposed by Mr Pitt, would not only 
 have obtained a different return, but would have 
 proved a passport to confidence, and a sure guarantee 
 against future jealousies and all the anti-commercial 
 tariffs which have been since threatened, and been 
 partly carried into effect. It would have been fol- 
 lowed by equal freedom to the British trade in the 
 American ports ; and thus all difficulties would have 
 terminated, and all those tedious and perplexed 
 negotiations entered into for the vain purpose of 
 negotiating a commercial treaty on the unsatisfactory 
 basis of mutual restriction. 
 
 After some farther vexatious differences respecting 
 the terms of reciprocity, in the course of which Great 
 Britain proceeded to retaliate on America by impos- 
 ing alien and other duties on her vessels and cargoes 
 entering British ports, the negotiations were at length 
 amicably terminated. It was agreed, on the part of 
 
142 ON THE COLONIAL TRADE. 
 
 this country, to modify the discriminating duties 
 which obstructed the trade of America with the West 
 Indies. Two acts were passed, in 1831 and 1833, 
 containing a list of articles ; among others, live-stock, 
 rice, corn and grain unground ; biscuit or bread ; meal 
 or flour, except wheat-flour, which were allowed to be 
 imported into the West Indies duty free ; and salted 
 meat, pork, and hams, at a duty of 12s. per cwt. 
 from any foreign country. America accepted of these 
 terms, on which the trade between the two countries 
 has since been carried on. 
 
 But notwithstanding those concessions, the dis- 
 criminating duties which are still left, interfere most 
 injuriously with the trade. Wheat-flour and lumber 
 are admitted into Canada duty free, and lumber 
 into New Brunswick and Nova Scotia ; and as those 
 articles are exempted, when exported by Canada 
 to the West Indies, from the duty to which they 
 are liable when brought directly from America, the 
 tendency of those regulations is to force the trade 
 out of its direct and natural course, into this round- 
 about channel through the British colonies ; to secure 
 to the Canadas the monopoly of supplying the West 
 Indies with lumber and provisions ; to raise the price 
 of those necessary articles to the West India planter 
 by all the additional expense of the round-about 
 voyage ; thus imposing a tax on the industry of the 
 West Indies, for the profit of the British or Cana- 
 dian ship-owners ; oppressing one colony for the 
 benefit of another ; and, finally, incurring the hazard 
 of irritating America, and provoking retaliation by a 
 pretended offer of a free trade to the West Indies ; 
 
RESTRICTIONS ON THE COLONIAL TRADE. 143 
 
 while, by the device of discriminating duties, it is 
 nearly as effectually obstructed as before. 
 
 The misunderstanding, and the tedious negotiations 
 which took place with the United States, respecting 
 the trade with the West Indies, have proceeded 
 chiefly from the reluctance of this country to part 
 with the monopoly. The trade of Great Britain 
 with her West India colonies was greatly facilitated 
 by the intervention of American produce. It was 
 a new equivalent in the circle of commercial ex- 
 change, which being obtained for British goods in 
 the American ports, was advantageously exchanged 
 for the colonial produce that was to be carried 
 home to Europe. Great Britain derived from this 
 free intercourse with the colonies, and the United 
 States, great advantages for the trade with both; 
 from any share in which it was her anxious care 
 to exclude her American rival ; and hence the 
 retaliation which was provoked, and of which Mr 
 Huskisson so heavily complained. By forcing the 
 lumber and the flour of the United States destined 
 for the West Indies, to go round by Canada, the 
 American trade, though not directly prohibited, was 
 nearly as effectually obstructed. In the exportation 
 of lumber to the Canadas, her shipping had no great 
 chance of being employed. Being prohibited by the 
 British Navigation act from completing the voyage to 
 the West Indies, it would hardly be worth while to 
 commence it to the Canadas. The diversity of produce 
 in the West Indies and the United States affords the 
 sure foundation of an extensive trade ; but there is 
 not the same scope for trade between the Canadas 
 
144 ON THE COLONIAL TRADE. 
 
 and the United States, their productions being 
 similar : and hence, to stop the American shipping 
 in their progress to the West Indies at Canada, and 
 to compel them to return with such cargoes as they 
 can obtain, is equivalent to an almost entire prohi- 
 bition of the trade. By this device, unworthy 
 of a great nation, this country aims at monopoly 
 under the guise of freedom ; by endeavouring to force 
 the colony trade into a channel where it can only be 
 profitably carried on by British shipping. 
 
 The provisions for regulating the general trade of 
 the colonies were dictated by the same spirit. The 
 actual prohibition on the import of foreign manufac- 
 tures was, no doubt, withdrawn. But, by the heavy 
 import duties which were proposed, of 7^, 15, 20, 
 and 30 per cent., they were still as effectually ex- 
 cluded as before ; and, accordingly, while the value 
 of British manufactures imported was, in the year 
 1839, 2,957,093, the foreign manufactures that paid 
 the duties of 20 and 30 per cent., only amounted in 
 value, in the same year, to 70,024 ; and, if we take 
 away two articles, namely, manufactured tobacco 
 and glass, the whole yearly value of these foreign 
 imports will be reduced to 34,191. If the object 
 of this act therefore, was, as was professed, to open 
 the trade of the colonies to other nations, it was 
 entirely defeated by the heavy import duties imposed, 
 which still effectually closed the colonial ports against 
 the importation of foreign goods. 
 
 The other restraints that were laid on the colonial 
 trade were equally injurious. The extra duty of 1\ 
 per cent, on wine, except when imported from Great 
 
RESTRICTIONS ON THE COLONIAL TRADE. 
 
 Britain, which was imposed for the encouragement 
 of British shipping, obstructed the trade of the 
 colonies with the countries that border the Medi- 
 terranean, and with Madeira. The produce of the 
 Nova Scotia or Newfoundland fisheries finds a ready 
 market in those countries in exchange for their wines. 
 But in bringing back those wines to the colonies, the 
 merchant was met by the discriminating duty of 7^ 
 per cent., in addition to the British duty of 7, 7s. 
 per tun ; which was found to be a material draw- 
 back on the trade. The exclusion of foreign fish, 
 and also the duty on salted meat, pork, and hams, 
 was deeply complained of : the colonies being thereby 
 prevented from obtaining such a choice of provisions, 
 as a free competition with other fishing countries 
 would alone secure j 1 and being also compelled, not- 
 withstanding the duty of 12s. per cwt., to import 
 supplies from Europe, where they can be obtained 
 for half the price they cost in Britain. It is esti- 
 mated that above eighty or ninety vessels sail annually 
 from the port of Hamburgh alone, with supplies. 
 
 In 1842, the heavy duties on the import of 
 manufactures and merchandise into the North Ameri- 
 can colonies, were reduced according to the following 
 rates : 
 
 Spirits, Rum, per gallon, .... 6 
 
 Other Spirits, 010 
 
 Glass manufactures, Silk manufactures, 1 5 per cent, ad valorem. 
 Wine, whether bottled or not, . . . \ 
 Cotton, Linen, Woollen, Leather, Paper, Hardware ( 
 Manufactures, Clocks and Watches, Manufac- j 7 pei 
 tured Tobacco, Soap, Candles, Cordage, Oakum, / 
 1 Evidence of J. Macgregor, Esq., p. 77 ; and of J. D. Hume, 
 Esq., p. 121. 
 
146 ON THE COLONIAL TRADE. 
 
 Oil, blubber, fins, and skins, . . . 15 per cent. 
 Articles not enumerated, .... 4 per cent. 
 
 Those duties of 15 per cent, on glass maufactures, 
 and on cotton, linen, and woollen, &c., of 7 per cent., 
 could hardly fail to turn the scale against foreign 
 goods in the colonial market. The measure was, 
 however, a movement in the right course, and was of 
 importance, as it sanctioned principles which, in due 
 time, may be expected to bring about the total aboli- 
 tion of all those vexatious imposts, and place the 
 commerce of the colonies on its true basis. 
 
 But, along with this reform of the colonial tariff, 
 new duties were imposed of 2s. the barrel on the 
 importation from the United States of wheat-flour 
 into Canada, and 4s. per cwt. on cured meat, besides 
 various duties on other articles. The object of these 
 new duties it is not easy to understand ; and it was 
 never clearly explained by those who proposed the 
 measure. The reason for allowing flour and salted 
 meat to come into Canada, from the United States, 
 duty free, was to secure for the shipping of that 
 colony the farther carriage of these articles to the 
 West Indies. In this view the measure, as has been 
 already stated, was far from being liberal in its princi- 
 ple. And it was certainly not mended by the new 
 duties that were imposed on the trade from the United 
 States to Canada, which were chiefly to be depre- 
 cated as forming a new obstacle to the emancipation 
 of the colonial trade from the complicated restric- 
 tions by which it has always been encumbered. The 
 greatest boon that Great Britain could confer on those 
 dependencies would be, not to meddle in their internal 
 
EFFECTS OF MONOPOLY. 147 
 
 concerns ; nor in the regulation of their trade, which, 
 it is certain, legislative restraints may injure, but 
 cannot promote. 1 
 
 The monopoly of the colony trade will be, accord- 
 ing to circumstances, either nugatory or injurious. 
 Where it confines the merchant to the markets 
 which abound in all that he requires, in which he 
 can buy cheapest and sell dearest, it will then only 
 be nugatory. It will really impose no restraint. 
 The law will only prescribe the channel into which 
 trade would of itself naturally flow. The injury 
 which the West India islands suffered from the 
 restrictions on their trade w r ith America has already 
 been fully explained. But the law which restricted 
 them to the market of the mother country for a 
 supply of manufactures was not equally injurious, as 
 there was no other from which they could be obtained 
 at a cheaper rate ; and, accordingly, the North Ameri- 
 can colonies still resorted to that market for such manu- 
 factures as they required, after other markets were open 
 to them. On the other hand, Great Britain suffered no 
 injury in being confined to the colonies for their pecu- 
 liar staples, so long as they could be abundantly sup- 
 plied. The yearly consumption of tobacco, one of 
 the great staples of North America, is stated by Dr 
 Smith to have amounted in Great Britain to only 
 14,000 hhds., while the supply from the colonies 
 amounted to 96,000 hhds. In this case, the mono- 
 poly did not raise the price by stinting the supply. 
 Great Britain could not have been more abundantly 
 
 1 Report of Select Committee on the Import Duties ; Evidence 
 of Mr Macgregor, p. 77. See, also, Evidence of Mr Hume, p. 122. 
 
148 ON THE COLONIAL TRADE. 
 
 supplied from any other quarter : and hence no injury 
 accrued to her in being confined to so abundant 
 a market, however the colonies might suffer in being 
 compelled to send their superabundant produce to the 
 narrow market of the mother country, whence it had to 
 be re-exported, with delay and expense, to its final desti- 
 nation in the markets of Europe. In like manner, the 
 supply of sugar and coffee, the great staples of the West 
 Indies, has been generally greater than the mother 
 country could consume : and hence Great Britain 
 suffered no injury in being restricted to this market. 
 The produce of sugar, for the last sixty or seventy 
 years, has been rapidly increasing throughout the 
 world ; and during the long war with France, which 
 began in 1793, the conquest of the French and 
 Dutch colonies by Britain, and their extended culti- 
 vation by British capital, poured into this country a 
 supply far beyond the demand, and reduced the price 
 from 69s. and 63s., in 1799 and 1800, to 50s. and 
 36s. in 1801 and 1802. With such a superabundant 
 supply, and a large surplus for exportation, the 
 monopoly was not injurious. It could not affect 
 the price, which depended on the demand, not of 
 the home, but of the European market. From the 
 increasing produce of sugar throughout the world, 
 the price continued, with occasional fluctuations, 
 still to decline ; and though, in 1814, 1815, and 
 1816, it rose to 62s. and 73s., it fell, in 1830 and 
 1831, to 25s. and 24s. ; and, during all this period, 
 the supply from the British colonies so far exceeded 
 the consumption, that the monopoly had no effect in 
 raising the price. 
 
IMPORTATION OF SUGAR. 
 
 149 
 
 The following is an account for different periods 
 of the average excess of the supply over the con- 
 sumption in Great Britain, from the year 1815 to 
 1834: 
 
 Imported from 1815 to 1819 inclusive: 
 British plantation, East India, and Mauritius, 1 
 Retained for home consumption, 
 
 Excess of supply, 
 
 From 1820 to 1824 inclusive: 
 
 Import, 
 
 Retained for home consumption, 
 
 
 Excess of supply, 
 
 From 1825 to 1828 inclusive: 
 Import, . 
 
 Retained for home consumption, 
 
 Excess of supply, 
 
 
 From 1829 to 1833: 
 Import, 
 
 Home consumption, 
 
 Excess of supply, 
 
 From 1834 to 1838 : 
 Import, 
 
 Home consumption, . 
 
 Excess of supply, 
 
 Cwts. 
 
 3,862.302 
 2,517,593 
 
 1,344,809 
 
 4,016,850 
 3,108,843 
 
 908,007 
 
 4,053,553 
 3,999,021 
 
 654,532 
 
 4,546,265 
 3,670,042 
 
 876,223 
 
 4,321,020 
 3,790,202 
 
 530,818 
 
 While the supply of sugar from the British colonies 
 so greatly exceeded the demand, the price in Great 
 Britain and in the foreign market was nearly the 
 same. But after the act of 1834 was passed for 
 
 1 Foreign sugar is not included in the above account. Being 
 liable to a duty of 3, 3s. per cwt., it was only imported with a 
 view to its re-exportation after being refined. 
 
150 ON THE COLONIAL TRADE. 
 
 the emancipation of the West India slaves, the pro- 
 duce from these islands began to decline, and the 
 price in Britain rose in proportion, to 39s., 49s., and 
 56s., per cwt. in 1839 and 1840 ; while, in the 
 European market, from the increasing supply, the 
 cultivation of sugar having been greatly extended in 
 Cuba, Brazil, in the Southern States of America, 
 and in the Asiatic islands, it was only 21s. 6d. or 
 22s. per cwt. The exclusion of this cheap article 
 from the home market, by the differential duty of 
 63s. per cwt., inflicted, therefore, a deep injury on 
 the country. The monopoly was no longer a dead 
 letter. It was in full activity, and imposed a heavy 
 tax, equal in amount to the excess of the home above 
 the foreign price, on the whole annual consumption. 
 The loss thus sustained will appear from the follow- 
 ing estimate : 
 
 Annual Difference between A ,. 
 
 Consumption. the home and the t ? t 
 
 Year. Cwts. forei S n P rice 
 
 1835 3,586,562 6s 1,025,968 
 
 1836 3,488,399 13s 2,267,454 
 
 183? 3,954,810 13s 2,545,626 
 
 1838 3,909,665 12s 2,345,799 
 
 1839 3,825,599 17s 3,251,759 
 
 1840 3,594,834 28s 5,031,267 
 
 1841 4,057,628 28s 5,680,679 
 
 Such has been, for some years past, the annual 
 expense to Great Britain of the West India mono- 
 poly of sugar. It is one of the heaviest taxes which 
 this narrow policy imposes on the country. It is, 
 besides, a clog on its trade and industry ; as it neces- 
 sarily restricts the intercourse of Great Britain with 
 
MONOPOLY IN COFFEE. 151 
 
 the countries of which sugar is the staple ; and by 
 raising its price, it discourages its use, or rather the 
 use of tea, in the preparation of which sugar is essen- 
 tial. It thus abridges the comforts of the people ; 
 or, what is worse, tempts them, by depriving them 
 of this cordial, to the use of others, ruinous alike to 
 their health and morals. It is a real grievance on 
 the country, only to be paralleled by the monopolies 
 of salt and other articles, which excited so general 
 a clamour in the reign of Queen Elizabeth, before 
 they were finally abolished. 
 
 The price of coffee, another great article of con- 
 sumption, was not, until of late years, materially 
 affected by the monopoly ; the demand at home being 
 fully supplied by the produce of the British colonies. 
 The reduction of the duty in 1824, from Is. to 6d. 
 per lb., gave an impulse to the consumption, which 
 was farther aided by an increasing supply and a 
 lower price. Till the year 1832, prices continued at 
 from 50s. to 86s. per cwt. for Jamaica coffee, which 
 was not much above the price in the European mar- 
 ket. The supply from the British West Indies, 
 which amounted in 1832 to 24,642,857 cwts., began 
 about this period, and more especially after the year 
 1834, to fall off; and foreign coffee being excluded 
 by a duty of Is. 3d. per lb., the monopoly, as in the 
 case of sugar, began to take effect, and to raise the 
 prices at home above those abroad. 
 
 The following is an account of the annual supplies 
 of coffee from the British West Indies for the last 
 ten years : 
 
152 ON THE COLONIAL TRADE. 
 
 Year. Cwts. Year. Cwts. 
 
 1832 24,642,857 
 
 1833 18,852,423 
 
 1834 22,069,201 
 
 1835 14,617,046 
 
 1836 18,877,471 
 
 1837 15,182,967 
 
 1838 17,430,475 
 
 1839 11,469,600 
 
 1840 12,730,080 
 
 1841 17,060,992 
 
 This deficiency in the supply of coffee from the 
 British colonies, though it was fully made up from 
 other sources in this country, raised the price, in 
 
 1834 and the three following years, to 80s. and 112s., 
 and in 1838 to 83s., 96s., and to 112s. and 138s. 
 per cwt., for the best qualities ; while the coffee that 
 was excluded from the British market was not above 
 half the price of the privileged article. The price of 
 St Domingo coffee was 51s. and 53s. per cwt. ; that 
 of Ceylon coffee, before its admission into Britain in 
 
 1835 at the duty of 6d., was from 48s. to 51s. ; after 
 which, however, it rose to the level of the scarcer 
 market, namely, to 80s. and 85s. The duties were 
 6d. per Ib. on British West India coffee ; 9d. per Ib. 
 from British possessions within the limits of the 
 East India Company's charter ; on coffee from foreign 
 countries within this limit, Is. ; and from other foreign 
 countries, Is. 3d. per Ib. Those two latter duties 
 acted as a prohibition on the importation of foreign 
 coffee into Britain. But from the great rise of price, 
 it was found that it could be sent from St Domingo 
 and from Java, to the Cape of Good Hope ; and could 
 thence, after paying all charges, be imported with a 
 profit at the lower duty of 9d. : and this device was 
 actually adopted, and afforded an apt commentary on 
 the absurdity of those restrictions which forced the 
 merchant to travel out of his way several thousand 
 
IMPORTATION OF COFFEE. 153 
 
 miles, in order to evade the operation of this absurd 
 and injurious law. 
 
 The deficient supply of coffee from the West 
 Indies was in this manner made up by the increasing 
 supply from British possessions, chiefly Ceylon, in 
 the East Indies, which gradually increased from 
 1,969,769 cwts., its amount in 1832, to 7,420,041 in 
 1836. In 1838 the quantity reserved for home con- 
 sumption amounted to 25,818,613 ; of which the 
 supply from the Cape, at the duty of 9d., amounted to 
 3,222,406 Ibs. ; and from the possessions in the East 
 Indies, at 6d. of duty, 7,061,058. A statement is 
 subjoined of the quantity reserved for home con- 
 sumption in 1839 and 1840, and of the several coun- 
 tries from which it was received : 
 
 Reserved for home consumption : 
 
 1839. 1840. 
 
 Of the produce of British possessions 
 
 in America, West Indies, and 
 
 Africa, 15,526,569 9,955,159 
 
 Imported from Cape of Good Hope, 
 
 and British possessions in East 
 
 Indies, ..... 4,461,534 4,540,172 
 
 Foreign coffee, East Indies, . . 8,675,197 14,150,924 
 
 Foreign coffee, otherwise imported, 81,125 77,480 
 
 28,744,425 28,723,735 
 
 If we estimate the annual consumption of coffee 
 in this country at 25,000,000 of pounds, or 250,000 
 cwts., and the artificial rise of price at 30s. per cwt., 
 the annual tax which the monopoly imposes will 
 amount to about 375,000 a-year. But this useless 
 addition to the heavy burdens of the country, how- 
 
154 ON THE COLONIAL TRADE. 
 
 ever oppressive, is far from being the greatest evil of 
 the monopoly. Sugar and coffee are the two great 
 staples of the Brazils, of Cuba, St Domingo, Java, 
 and the other islands in the Asiatic archipelago. 
 The rejection of those articles in return for manu- 
 factures, narrows the circle of commercial exchange 
 with all those countries. The refusal of payment 
 in the only equivalent which they have to give, raises 
 up an obstacle to the purchase of British goods ; it 
 thus embarrasses the general trade of the country, 
 to favour a particular branch of it ; and we pro- 
 voke the enmity and retaliation of those nations 
 whose produce we in this manner proscribe from our 
 markets. The present treaty with the Brazils, which 
 ceases in 1844, admits British goods at a duty of 
 15 per cent. ; and they are imported to the annual 
 amount of five millions sterling. 1 According to the 
 testimony of different merchants, those import duties 
 will be greatly raised when the treaty expires, 
 provided Great Britain continues the present pro- 
 hibitory duties on the produce of Brazil ; while, on 
 the other hand, a relaxation of the discriminating- 
 duties on coffee and sugar would lead to an increased 
 demand for British goods. These are at present in 
 danger of being superseded by the manufactures of 
 Germany, Austria, Switzerland, and other countries, 
 which receive in return the produce of the Brazils at 
 moderate duties. 
 
 A still greater evil of the monopoly is, that in rais- 
 ing the price of coffee, and indirectly that of tea, by 
 raising the price of sugar, it discourages the consump- 
 
 1 Select Committee on the Import Duties, p. 141 ; Evidence of 
 Mr Moore. 
 
EVIL EFFECTS OF MONOPOLY. 155 
 
 tion of those articles, a taste for which is highly 
 favourable both to health and morals, superseding, 
 as they do, the use of ardent spirits, that never-fail- 
 ing source of vice and misery. Numerous houses 
 have been, of late years, established in London 
 and other places, which are open from about four 
 in the morning till ten at night, where the labourer, 
 before entering on his daily toil, can have a cup 
 of coffee, with a slice of bread and butter, for Id. ; 
 his breakfast at a later hour, for 3d. ; and if he bring 
 his dinner, he may sit down to it in a comfortable 
 room, and have coffee and bread on the same terms. 
 About 1500 or 1600 persons frequent some of these 
 places of entertainment in a day ; where, along with 
 refreshments, they are furnished with newspapers, 
 and all the other publications of the day. Such 
 establishments are extremely favourable to regular 
 and sober habits. They are schools of temperance, 
 where the doctrine is not preached, but practised ; 
 and are infinitely better fitted for their laudable pur- 
 poses than the costly projects which are daily set on 
 foot for the instruction of the poor, with their salaried 
 teachers, both lay and clerical. Thousands of pounds 
 may be laid out by authority in education schemes, 
 without half the usefulness of this simple establish- 
 ment, which is a real blessing to the poor, well 
 meriting the favour of a wise and paternal govern- 
 ment ; but which the monopoly tends to discourage, 
 by raising the price of those articles on the sale of 
 which its prosperity depends. 
 
 The duties were reduced by the tariff of 1842 to 4d. 
 per Ib. on coffee from the British possessions, and to 
 8d. on all foreign coffee. 
 
156 TARIFF OF GREAT BRITAIN. 
 
 CHAPTER IX. 
 
 TARIFF OF GREAT BRITAIN. 
 
 Not founded on any consistent principles. Favourable to monopoly. 
 Inconsistent in its details. Comprises almost every article of 
 consumption. Duties numerous. Revenue chiefly arises from a 
 few articles. Revision by Mr Huskisson in 1825. 30 per cent, 
 fixed as the maximum of duty. Protecting duties reduced on 
 manufactures. The impolicy of these duties. Reduction of the 
 duties on metals. Reduction of duties on manufactures of little 
 effect in practice. Revision of the British tariff in 1842. Highest 
 protecting duty fixed at 20 per cent. Principle on which founded. 
 Protecting duties on agricultural produce. Repealed or re- 
 duced. Duty on spices, foreign fruits ; on oils, dye-stuffs, drags, 
 &c. ; on skins, furs, and peltry ; on boots, shoes, gloves, and 
 other articles ; on metals. Admission of live-stock. Just in 
 principle. Of no great practical benefit. Differential duties in 
 favour of the colonies. Wrong in principle. Great defect of the 
 British tariff. Its multifarious details. Almost the whole re- 
 venue yielded by a few articles, to which taxation should be 
 confined. Difficulty of carrying into effect this reform. Timber 
 duties. Their reduction and regulations a great practical improve- 
 ment. Account of these duties. The inequality of their opera- 
 tion. The protection which they give to Canada timber. Those 
 defects corrected or diminished by the new tariff. 
 
 THE chief sources from which Great Britain derives 
 her vast revenues have been treated of in the preced- 
 ing chapters. Her list of import duties, compre- 
 hending a variety of minor articles, which, though 
 numerous, yield an inconsiderable revenue, still re- 
 mains to be considered. In this complicated scheme, 
 taxes have been imposed at different times, and often 
 increased rather with a view to the existing emer- 
 gency, than on any due consideration of their expe- 
 
FAVOURABLE TO MONOPOLY. 157 
 
 diency. The system bears evident marks of incon- 
 gruity in its details ; and it is, besides, founded on 
 the principle of monopoly, from which it is by no 
 means yet freed ; though it has been amended by the 
 reform of Mr Huskisson in 1825, and still more by 
 that of Sir R. Peel in 1842. 
 
 In this tariff is included almost every foreign article 
 of consumption, however trifling : foreign fruits, and 
 luxuries of every description ; numerous articles of 
 food or medicine ; the raw materials of industry, or 
 such as are useful in manufactures, the most impor- 
 tant of which have been already considered. On all 
 of these, heavy taxes have been imposed for the sake 
 of revenue, or for the protection of domestic industry, 
 and often of colonial produce. Though it is true, as 
 remarked by the Select Committee on the Import 
 Duties, that the British tariff, as it was originally 
 devised, presented neither congruity nor unity of 
 purpose ; yet in its leading principle of monopoly, 
 in the exclusion of foreign produce from the British 
 market, whether of land or labour, it was marvellously 
 consistent. This object is never lost sight of; namely, 
 to give the monopoly of the home market to the 
 manufacturer, or to the landowner. Every article 
 in which they were dealers ; everything which bears 
 any touch of foreign industry ; provisions of every 
 description, were interdicted from this country, either 
 directly, or by heavy duties. Live cattle, fresh or 
 salted meat, were prohibited ; bacon, butter, cheese, 
 eggs, and finally corn, were all liable to import 
 duties more or less heavy ; while the home manufac- 
 turer was in like manner protected by exorbitant 
 
158 TARIFF OF GREAT BRITAIN. 
 
 duties on the importation of foreign goods. There 
 were, indeed, several exceptions, as of articles which 
 were deemed useful in manufactures. But even these, 
 in the course of the last war with France, were mostly 
 brought under the general rule of heavy taxation, 
 though frequently to the injury of domestic industry. 
 The want of congruity or unity of purpose, re- 
 marked in the Report of the Select Committee, is 
 also manifest in the numerous trifling duties scattered, 
 apparently at random, over the multitude of articles 
 which swell the tariff list. The schedule which is 
 attached to the act, for the consolidation of the Cus- 
 toms, enumerates 1150 articles on which specific 
 duties were charged ; besides others not enumerated, 
 and which paid some a duty of 5 per cent., though 
 the more common rate was 20 per cent. In 1840, the 
 revenue of the Customs amounted to 22,962,610, 
 of which ten articles yielded 20,871,136 ; six other 
 articles, 1,147,148 ; making together, 22,018,284, 
 and leaving the remaining sum of 944,326 to be 
 made up by 1136 minor articles. 1 The Report of 
 the Select Committee contains an abstract of those 
 duties, under eight separate heads, according to their 
 amount, which is subjoined ; and from which it will 
 be observed, from how small a number of articles 
 almost the whole revenue was, and still is, derived. 
 
 Schedule 1, containing 349 articles, producing less 
 
 than 100 each of customs, . . . 8050 
 
 Schedule 2, containing 132 articles, producing from 
 
 100 to 500 each, . 31,029 
 
 1 Report on Import Duties, p. 6 ; Evidence of J. Macgregor, 
 Esq. 
 
TARIFF OF 1840. 159 
 
 Schedule 3, containing 45, 500 to 1000 each, . 32,056 
 Schedule 4, containing 107, 1000 to 5000 each, . 244,733 
 Schedule 5, containing 63, 5000 to 100,000 each, 1,397,324 
 Schedule 6, containing 10, 100,000 to 500,000 each, ], 838,630 
 Schedule 7, containing 9, 500,000 each, and up- 
 wards, 18,575,071 
 
 Schedule 8, containing 147, on which no duty has been received, 
 but on which there has been an excess of drawback. 
 
 There are in the tariff of 1840, 147 articles on 
 which the drawback and allowances exceed the re- 
 ceipt ; 340 on which the revenue is not equal to the 
 expense of the collection, or the trouble which it 
 occasions to the merchant, and of which the whole 
 produce only amounted to 8050.* A tax of 50 or 
 even 100 per cent., is often found to produce less 
 than 20, and in several cases not 1 in a year ; 
 the smallness of the revenue, in proportion to the 
 duty, arising either from the limited demand for the 
 article, or from its importation, and, consequently, 
 the revenue that would have been received from it, 
 having been prevented by the great amount of the 
 tax. 
 
 The Committee on the Import Duties, after stat- 
 ing that there are 1150 different rates of duty 
 chargeable on imported articles, all other commo- 
 dities paying duties as unenumerated, adds the fol- 
 lowing just and conclusive remarks : " Very few of 
 such rates appear to have been determined by any 
 recognised standard ; and it would be difficult for 
 any person unacquainted with the details of the 
 tariff, to estimate the probable amount of duty to 
 
 1 Report on the Import Duties, p. 4. 
 
160 TARIFF OF GREAT BRITAIN. 
 
 which any given commodity would be found sub- 
 jected. There are cases where the duties levied are 
 simple and comprehensive ; others where they fall 
 into details both vexatious and embarrassing. The 
 tariff often aims at incompatible ends ; the duties 
 are sometimes meant to be both productive of reve- 
 nue and for protective objects, which are frequently 
 inconsistent with each other : hence they sometimes 
 operate to the complete exclusion of foreign produce, 
 and, in so far, no revenue can of course be received ; 
 and sometimes, when the duty is inordinately high, 
 the amount of revenue becomes, in consequence, 
 trifling." 
 
 During the vast expenditure of the French war, 
 the taxation of the country was continually increas- 
 ing ; every succeeding year still brought with it some 
 new burden ; and ministers, wholly absorbed in the 
 difficult task of providing the necessary supplies, had 
 no leisure for the consideration of matters that 
 appeared less urgent. But when those demands 
 ceased with the return of peace, it was found expe- 
 dient to repeal or reduce several of the most oppres- 
 sive taxes that had been imposed during the war. 
 Other beneficial reforms were carried into effect ; 
 and in 1825, a general revision of the tariff was 
 undertaken by Mr Huskisson, on the principle of 
 repealing or reducing the high duties that had been 
 imposed on the importation of foreign goods. A 
 new tariff was accordingly adopted, in which it was 
 proposed that no protecting duty should exceed 30 
 per cent. The following are among the chief articles 
 on which the duties were reduced : 
 
RESTRICTIONS INJURIOUS TO TRADE. 161 
 
 On cotton goods, formerly prohibited, from 75 and 
 
 50 to 10 per cent. 
 
 On woollen goods, formerly prohibited, from 
 
 67, 10s. and 50 to 15 per cent. 
 
 On linen, from 180 and 40 to . . . 25 per cent. 
 
 On paper, for prohibitory duties, per lb., 3d. ; on 
 other descriptions of paper, duties still prohi- 
 bitory. 
 
 On crown-glass, per cwt., . . . . 868 
 
 Other descriptions, duties equally prohibitory. 
 
 On articles of glass not enumerated, from 80 per 
 
 cent, to 20 per cent. 
 
 On iron, from 6, 10s. per ton, to . . . l 10 
 
 Articles of iron not enumerated, ... 20 per cent. 
 
 Copper, from 54 per ton, to . . . . 12 
 
 Spelter, from 28 per ton, to . . . 14 and 10 
 
 Tin, from 5, 9s. 3d. per cwt., or about 110 per 
 
 ton, to 30 per cent. 
 
 Lead, from 20 to 1 5 per cent. 
 
 On a variety of other minor articles also, the ex- 
 orbitant duties that had been imposed during the 
 war were lowered. 
 
 Prohibitions and restrictions are injurious to the 
 trade of all countries ; but in the case of Britain 
 they are peculiarly impolitic : because, from her su- 
 periority over other nations in art and industry, her 
 manufactures need no protection. They are cheaper 
 and better than those that are brought from abroad : 
 and hence obtain a preference in the market without 
 the aid of protecting duties. Of all nations Great 
 Britain had the least reason to follow this perverted 
 policy. Her manufactures have flourished in conse- 
 quence of her vast capital and superior skill ; and 
 seeing that they have always made their way in 
 other countries, and that the foreign manufacturer 
 
 M 
 
162 
 
 TARIFF OF GREAT BRITAIN. 
 
 is undersold in his own market, how unnecessary is 
 it to protect them by discriminating duties against 
 foreign competition at home. That other countries 
 should protect their inferior artisans in their unequal 
 rivalry with British skill, is a natural, though mis- 
 taken policy. But all that Britain ought to desire, 
 is a fair field and no favour ; and, in place of impos- 
 ing restrictions on trade, her interest is rather to 
 impress on other nations the opposite policy, both by 
 precept and example. 
 
 The decided superiority of British manufactures 
 is also attested by the extent of their sale abroad, 
 compared with the trifling demand for foreign manu- 
 factures in return ; and this disproportion has been 
 in no degree affected by the amended tariff of 1825. 
 Nor was this to be expected : for if the foreign manu- 
 facturer was undersold in his own market by his 
 British rival, on equal terms, or with the advantage 
 of a protecting duty, how could he look for better 
 success in the British market with a protecting duty 
 against him of from 10 to 30 per cent. This reduc- 
 tion of duty did not, therefore, materially alter the 
 course of trade. It did not lead to the introduction of 
 foreign manufactures into the British market. Silk 
 goods, indeed, on which a duty of 30 per cent, had been 
 previously substituted for a prohibition, were imported 
 to some extent ; or rather, they were legally imported, 
 in place of being smuggled, as before. But the vast 
 exportation of British manufactures still presented a 
 remarkable contrast to the quantity imported. In 
 1841, cotton goods were exported to the estimated 
 value of 23,499,478 ; while the duty of 10 per cent. 
 
RESTRICTIONS IMPOSED BY FOREIGNERS. 163 
 
 on those imported, only amounted to 8363. The 
 value of the woollen manufactures exported is esti- 
 mated at 8,876,653, while the duty of 15 per cent, 
 on those imported, amounted to 17,613. In other 
 manufactures, the excess was as before, wholly on 
 the side of exportation. 
 
 Among the other evils of those restrictions, it was 
 found that other nations readily imbibed the lessons 
 which we taught, and even bettered our instructions. 
 The restraints which Great Britain imposed on others 
 still recoiled on herself; and it was evident, that an 
 obstinate perseverance in this false course, would 
 entail on her commerce counter-restrictions in other 
 markets : and that thus proscribed and hemmed in 
 on every side, and gradually driven from its former 
 channels, it would be forced at last within its own 
 narrow territory, not by the superior skill against 
 which the rulers of the country were so anxious to 
 provide, but by the hostility of jealous rivals, justly 
 incensed at the previous unfair proscription of their 
 own trade by the British laws. 
 
 Heavy duties had been imposed, partly for protec- 
 tion and partly for revenue, on various sorts of rude 
 produce, as on metals. On iron, the duty was raised 
 from 2, Is. 6d. in British, and 2, 10s. in foreign 
 ships, to 6, 10s. and 6, 18s. lOd. in the course of 
 the last French war. Still heavier duties restrained 
 the importation of the other metals. On copper, the 
 import duty was 54 per ton; on tin, 5, 9s. 3d. 
 per cwt., or above 100 per ton; on lead, 20 per 
 cent. ; and on zinc, or spelter, 28 per ton, or above 
 100 per cent. ; and while the importation of those 
 
164 TARIFF OF GREAT BRITAIN. 
 
 metals, the foundation of important manufactures, 
 was thus restrained by heavy duties, other articles of 
 less importance were, on the ground of their utility 
 to commerce, either not at all, or very lightly taxed. 
 The import duties on cochineal, indigo, and generally 
 on all dyeing drugs, were repealed ; and in contra- 
 vention of the much-boasted Navigation laws, they 
 were at times admitted directly from any country in 
 Europe, though not the produce of that country. 
 
 Though in practice the reduced tariff of Mr Hus- 
 kisson, on manufactures, was of little avail, owing to 
 the high protecting duties of 15, 25, and 30 per cent, 
 that were still in force; the reduction of the import 
 duties on iron, copper, lead, &c., was still found to 
 be a practical advantage. The protecting duties 
 of Great Britain were generally directed to the ex- 
 clusion of foreign produce. But in some cases they 
 favoured one branch of internal trade by injuring 
 another. Such was the effect of those that were 
 imposed on metals, which form the basis of impor- 
 tant manufactures ; and of which the foreign supply 
 being obstructed by heavy duties, the price was 
 raised, and a bounty was thus given on their produc- 
 tion at home. But by this rise in the price of the 
 raw material, the manufacturer of this country was 
 placed under a disadvantage in the foreign market, 
 where he was met by cheaper goods made from the 
 untaxed materials that were obtained abroad. The 
 British manufactures in iron, brass, and copper, 
 which depended on a foreign supply of the raw ma- 
 terial, were injured by those heavy import duties. 
 The duty of 6, 10s. per ton on iron, of which the 
 
IMPROVEMENTS IN BRITISH IRON. 
 
 uses are so various and important which is indis- 
 pensable in the construction of machinery, as also in 
 many important manufactures, and more or less used 
 in all amounted, when the price fell from 18 and 
 20 to 7, to nearly 100 per cent. ; and giving the 
 monopoly of the home market to the iron-masters, 
 would have certainly proved injurious to the hard- 
 ware manufactures of Sheffield and Birmingham, if 
 they had continued to depend wholly on the foreign 
 supply. No superior skill of the British workman 
 could have counterbalanced so heavy a duty. But 
 the quantity of iron produced at home began, about 
 the year 1788, so greatly to increase, owing to the 
 improved process that had been adopted of making 
 iron with pit-coal in place of charcoal, and of using 
 the steam-engine for blowing the furnace, as to ex- 
 ceed the demand, and for the first time to leave a 
 surplus for exportation. At a later period, the intro- 
 duction of hot air in the blast-furnace gave such 
 increased facilities for the smelting of iron, that the 
 quantity produced was greatly increased; and Great 
 Britain, in place of importing, now largely supplies 
 other countries with this necessary article. In the 
 new tariff of 1825, the duty on bar-iron was reduced 
 to 1, 10s. per ton, whether imported in British or 
 in foreign ships. The increased produce, however, 
 at home, superseded the necessity of any foreign 
 supply, excepting of Swedish or of Russian iron for 
 the manufacture of steel, to which it is peculiarly 
 adapted ; and the quantity imported, has accordingly 
 rather fallen off. From 1786 to 1706 it varied from 
 44,000 to 54,000 tons. Its yearly amount, for past 
 
166 TARIFF OF GREAT BRITAIN. 
 
 years, has been from 10,000 to 20,000 tons ; and the 
 produce of the duty has varied from 28,110, its 
 amount in 1836, to 20,589, its amount in 1840. The 
 export in 1806, was 28,000 tons ; in 1835, 178,000 ; 
 and in 1838, 225,317 tons. The quantity produced 
 annually at home, is estimated at 1,500,000 tons ; 
 so that, greatly as the consumption has increased, it 
 is still exceeded by the supply. The produce of other 
 metals, such as copper, on which the duties are now 
 reduced, had been increasing at home. But the ex- 
 clusion, by heavy duties, of this metal, the material of 
 important manufactures, was still attended with seri- 
 ous disadvantages : the British manufacturer, though 
 its price was reduced abroad by the discovery of 
 richer mines, being confined, by the heavy duty, to the 
 use of the dearer article at home. Copper is, besides, 
 of various qualities, adapted to particular uses ; and 
 it is of advantage that the manufacturer should have 
 the power of selecting, from all the varieties of the 
 metal, that which he finds best adapted to his purpose. 
 Other metals, such as tin and lead, on which Mr 
 Huskisson now reduced the import duties, are also 
 produced in sufficient abundance to supply the home 
 demand. The produce of zinc, or spelter, used along 
 with copper in the manufacture of brass, from the 
 few indifferent mines in this country, is not abundant ; 
 and the reduction of the duty, by admitting more 
 freely the foreign supply and reducing the price, 
 gave rise to new manufactures, in which that article 
 was chiefly used ; and also promoted the prosperity 
 of the manufactures in brass. The reduction of the 
 import duty on the raw material, is a necessary step 
 
TARIFF OF 1842. 167 
 
 to the repeal of the protecting duty of 30 per cent, on 
 the foreign manufactures ; which, in this case, most 
 of those acquainted with the trade declare, would be 
 no longer necessary. 1 
 
 The revision of the British tariff in 1842, was 
 followed by important amendments, which proceeded 
 generally on the principle of substituting duties for 
 prohibitions ; of reducing duties on the materials of 
 industry to a merely nominal amount ; and on half 
 manufactured articles to the moderate rate of 10 per 
 cent. ; while the maximum of protecting duties was 
 fixed at 20 per cent. 
 
 By this new measure, the importation of agricul- 
 tural produce, hitherto impeded, either by prohibi- 
 tions, or by heavy duties, which had the same effect, 
 was materially facilitated. Cattle, formerly prohi- 
 bited, were admitted at a duty of 1 per head ; 
 calves, sheep, hogs, and other animals, at propor- 
 tionally lower duties, and at half these duties from the 
 British colonies ; and fresh meat, or slightly salted, 
 at a duty of 8s. per cwt. On salmon and soles, 
 a duty was substituted for a prohibition ; and on 
 herrings, potatoes, onions, the heavy prohibitory 
 duties were greatly lowered. On bacon, hams, and 
 tongues, the duty was decreased ; on the two former 
 articles, 14s. per cwt. being substituted for 28s. ; 
 while on the same articles from the colonies, the 
 duties were lowered by more than one half. No 
 abatement was made in the import duties on butter, 
 cheese, or eggs ; which produced above 400,000 
 
 1 See Minutes of Evidence taken before the Select Committee 
 on the Import Duties, pp. 96, 97, Questions 1185, 1186, &c. 
 
168 TARIFF OF GREAT BRITAIN. 
 
 a-year. They were, however, reduced in favour of 
 the colonies. The import duties were also reduced 
 on various other articles, such as clover-seed, linseed, 
 rape-seed, &c., of which, for the encouragement of 
 agriculture, a lower price was thought expedient. 
 
 On spices, the existing duties were mostly retained. 
 They were generally of small amount, and they had 
 been previously reduced ; that on pepper from 2s. 6d. 
 to 6d., with some injury to the revenue, and with 
 little benefit to the consumer. 
 
 Foreign fruits, with the exception of almonds, cur- 
 rants, oranges, prunes, raisins, &c., on most of which 
 articles the duties had been previously reduced, yield 
 so trifling a revenue, that it is of no great moment how 
 the duties are arranged. Where they were altered, 
 however, they were generally diminished. 
 
 On woods for cabinet-work, the heavy duties were 
 lowered ; on mahogany, the most important of all, 
 from 5 to 1 ; on rosewood, from 6 to l per 
 ton ; and on other articles less important, in pro- 
 portion. 
 
 Though the internal supply of copper had been for 
 some years equal to the consumption, yet the prohi- 
 bition to smelt foreign copper, except to be re-ex- 
 ported, was injurious to British industry ; as it not 
 only prevented the workers in copper from obtaining 
 the abundant produce of South America, and thus 
 from using an equally cheap material with the manu- 
 facturer abroad ; but in smelting the copper of the 
 foreign mines for re-exportation, they were furnishing 
 their rivals abroad with an article which would enable 
 them to work cheaper than themselves ; while they 
 
TARIFF OF 1842. 169 
 
 were debarred from its use in the same manufacture, 
 though the produce of their superior skill, by their 
 >wn mistaken policy. The repeal of these injurious 
 restrictions on the importation of copper, and the 
 substitution of a duty for a prohibition, was benefi- 
 cial both to trade and revenue ; the duty yielding, in 
 1842, a revenue of I5,688. 1 The exclusion of the 
 foreign article, though it favours the production at 
 home, discourages other branches of industry and 
 trade in general, as well by raising the price of 
 goods, as by the rejection, in exchange for our own 
 goods, of the staples of other countries. The abun- 
 dant mines of Chili and of Cuba furnish a supply of 
 copper for exportation, which if we reject, we neces- 
 sarily limit our trade with those countries ; besides 
 refusing an article, the refinement of which, from its 
 rough state, affords employment for capital and 
 industry. 
 
 The reduction of those high duties by Mr Hus- 
 kisson was not injurious to the business of mining, 
 or of smelting the ores, for which the aoundance of 
 coal in this country affords peculiar advantages ; 
 while the reduction of the duty on zinc, or spelter, 
 which was now still farther reduced, gave rise to 
 different manufactures, of which that article was 
 the basis: and the proposed tariff of Sir R. Peel 
 was calculated to increase, and farther to extend 
 these advantages; while the loss of the trifling- 
 revenue which the repealed or reduced duties pro- 
 duced, that from zinc being, in 1840, only 9053, was 
 of little moment. 
 
 1 See Sir R. Peel'a Speech on the Tariff. 
 
170 TARIFF OF GREAT BRITAIN. 
 
 Under the head of oils, extracts, perfumery, dye- 
 stuffs, drugs, resins, &c., are included several articles 
 useful in manufactures ; such as olive and palm oil, 
 spermaceti and train oil, on which the duty was 
 reduced from 26, 12s., which was prohibitory, and 
 consequently yielded nothing, to 6 per ton, which 
 produced a revenue, in 1842, of 11,042 ; also bark, 
 indigo, madder, gum : on most of these the duties 
 are reduced for the benefit of those branches of in- 
 dustry in which they are employed. But on the 
 other numerous articles on the list, the trifling duty 
 received not amounting, on any one out of 140 
 articles, to 1000 a-year, marks their limited use, 
 and their little importance, with any view either to 
 trade or revenue. The only improvement that could 
 be adopted in this case, was their entire repeal. 
 
 Of the articles included under the title of skins, 
 furs, and peltry, there are only two, namely, hides 
 dry and wet, which yield a revenue of any conse- 
 quence. On these the duty was reduced : on foreign 
 skins, and numerous articles of peltry, it was in some 
 cases raised, in others diminished. On a due consider- 
 ation, however, of the peculiar circumstances, in every 
 case on raw and undressed skins, the duty was re- 
 duced from 20 to 5 per cent. ; on tanned and curried 
 skins, from 30 to 10; and on manufactured articles of 
 skins and furs, from 75 to 20 per cent. ; the remaining 
 articles of peltry, though numerous, only yielded a 
 trifling revenue. 
 
 On all manufactures the protecting duties were 
 reduced. It was justly stated, and is indeed well 
 known, that heavy duties afford no protection to the 
 
TARIFF OF 1842. 171 
 
 home manufactures ; their only effect is to substitute 
 an illicit for a legal trade, by which, for a given pre- 
 mium, contraband articles are introduced into the 
 market to any amount. No prohibitory duties have 
 ever yet been able to suppress the influx into this 
 country of light and fancy goods from France. The 
 expediency of moderate duties is therefore apparent ; 
 and the principle acted upon by Mr Huskisson in 
 1825, was still followed out by Sir R. Peel in the 
 tariff of 1842. The protecting duties on the cotton 
 and woollen manufactures had been already reduced 
 to 10 and 15 per cent. ; on those of brass and copper, 
 china and porcelain, they were reduced from 30 ; on 
 those of tin, from 25 ; on certain sorts of linen, from 
 40 to 15 per cent. On manufactures of leather^such 
 as boots, shoes, the duty was reduced from 1, 10s. 
 on a dozen pairs, to 12s. ; on shoes of satin, silk, or 
 other stuffs, from 18s. to 9s. ; on all descriptions of 
 gloves, nearly one half. The regulation of the silk 
 trade in 1825, and the reduction of the duties, super- 
 seded the necessity of any further interference with 
 that important branch of industry ; and the duties, with 
 the exception of those on thrown silks and organ- 
 zines, which were reduced, were allowed to remain, 
 on the protecting duties of manufactured articles, at 
 30 per cent. 
 
 Such appear to be the chief details of this impor- 
 tant reform, which sufficiently attest its liberal pur- 
 pose of removing impolitic restrictions, and of bringing 
 back taxation to its true principles, as an instrument 
 of revenue and not of restraint. It is in this view, 
 as a standing precedent of just and enlightened policy, 
 
172 TARIFF OF GREAT BRITAIN. 
 
 that it was more valued by many, than for its prac- 
 tical results. It was stated, and no doubt truly, 
 that the prohibition to import cattle into this coun- 
 try, however wrong in principle, never occasioned 
 any real injury ; and that the substitution of a duty 
 for a prohibition, only gave permission to a trade 
 which circumstances did not encourage, and which 
 it was clear could not be effectually prosecuted for 
 years to come. In support of those views, the con- 
 dition of the breeding countries on the continent was 
 pointed out ; hardly any of which reared cattle for 
 exportation. In the pastoral districts of Germany, 
 sheep are reared for the fleece and the wool ; and as 
 the mode of treatment by which these are improved 
 deteriorates the flesh of the animal, the worthless- 
 ness of the carcass, the expense of the voyage to 
 Britain, and finally, the tax, must, it was stated, 
 present insuperable obstacles to the prosecution of 
 this trade. It was added, that the impossibility of 
 bringing from the continent such a supply of cattle 
 as would lower the price of meat in Britain, was 
 further proved by all the statistical information that 
 was collected respecting those countries. The truth 
 of these statements cannot be questioned ; and, ac- 
 cordingly, not more than 3155 living animals were 
 imported during the first six months of the year 
 1843 ; and the profit gained was not such as to en- 
 courage a fresh importation. Still, the repeal of the 
 prohibition was an important reform. Commerce, 
 when it is chained down by restrictions, must remain 
 inactive. Its native vigour cannot be displayed. It 
 is only when the weight which depresses the elastic 
 
ADVANTAGES OF THE NEW TARIFF. 173 
 
 springs of industry is withdrawn, that its energies 
 can be fully discerned : and hence, though no imme- 
 diate results have yet followed the opening of this 
 trade, yet the obstacles to a free intercourse being- 
 removed, the large demands and high prices in this coun- 
 try will in time afford an inducement to those pastoral 
 countries to improve their natural resources, and to 
 raise supplies for the British market, where they can 
 be profitably exchanged for the products of industry. 
 And thus both parties will mutually profit : Great 
 Britain by a reduction of her prices, always high ; 
 and the exporting countries by an increase in their 
 low prices, and the stimulus that will thus be given 
 to their languishing industry. Accordingly, it is now 
 found, that though other articles, such as meat, bacon, 
 &c., on which the duties were reduced, were not at 
 first brought into the country to any great amount, 
 the trade has already begun to increase ; and vessels 
 arrive from the United States with those articles 
 for their sole cargo, much improved in their quality. 
 Such is the stimulus, therefore, that this just and 
 wise measure for the repeal of prohibitions and pro- 
 tecting duties, resolutely carried through in the face 
 of violent opposition and prejudice, has already given 
 to a trade, almost new ; and which will, no doubt, be 
 gradually extended, with a further experience of its 
 benefits. 
 
 The long list of differential duties imposed by this 
 amended tariff on numerous foreign articles, for the 
 protection of colonial produce, is inconsistent with 
 the general character of the measure ; and though it 
 cannot seriously affect the course of trade, it is still 
 
174 TARIFF OF GREAT BRITAIN. 
 
 a movement in the wrong course an error in prin- 
 ciple, which gives a sanction to the maxims of mono- 
 poly : and the danger is, that, under its fostering in- 
 fluence, a trade may gradually arise depending on 
 protection ; and a numerous class, profiting by the 
 abuse, whose willing and often effectual aid can 
 always be depended on to oppose a return to a wiser 
 policy. Circumstances concurring with the spirit of 
 the times, had deeply encroached on the colonial 
 monopoly ; this antiquated fabric of impolicy and 
 injustice, undermined by the progressing knowledge 
 of the age, was tottering to its fall ; and to put 
 together and repair its decaying fragments, was 
 indeed a retrograde step, at variance with the spirit 
 of this generally enlightened measure, that can only 
 be ascribed to the influence of adverse and powerful 
 interests, which too often, in this country, fetter the 
 policy of the State. Great Britain has frequently 
 experienced the injury, as well as the reproach of 
 colonial monopoly, in her intercourse with foreign 
 States. It was this monopoly which so long per- 
 plexed her negotiations with the United States, after 
 the restoration of peace in 1816 ; and which ended, 
 at last, after the proscription of each other's com- 
 merce was threatened on both sides, in a compromise, 
 which is still a source of heart-burning in America, 
 owing to the restrictions laid on her intercourse 
 with the British colonies. Nor were these restric- 
 tions less forcibly dissuaded by the adverse aspect 
 of other commercial States, namely, the Germanic 
 Union, Portugal, Spain, France, the Brazils, and 
 others of less importance, whose hostile tariffs had 
 
THE GERMANIC UNION. 175 
 
 already narrowed the sphere of British commerce. 
 It is of great moment, at present, to secure the con- 
 fidence of the Germanic Union, instituted for the 
 freedom of domestic trade, and ready to retaliate the 
 restrictions of other nations. In 1842, an increase 
 of the import duties on the iron wares, cotton twist, 
 linen yarns, and mixed woollen goods of Great Bri- 
 tain, was proposed by the Union ; and the alarm 
 excited by the threatened loss of those foreign mar- 
 kets sufficiently attests their importance. The Bri- 
 tish envoys at the German courts were severally in- 
 structed to join in immediate remonstrances on the 
 subject ; to set forth, to the best advantage, the late 
 reforms in the British tariff; the reduction of the 
 import duties on corn and on wood ; and to sound 
 forth the praises of this country as the patron of free 
 trade. The total abolition of protecting duties on 
 manufactures, or their reduction on important ar- 
 ticles, such as sugar or corn, would, at this time, 
 have proved an irresistible argument in favour of 
 British commerce. But in dealing only with the 
 minor monopolies, and not with those that are of 
 still greater importance, and in appending the badge 
 of monopoly to a measure generally fair and liberal, 
 Great Britain placed herself in a false position with 
 foreign nations, who take her commercial creed 
 from her actions rather than from her words ; and 
 though there is much to commend in her recent 
 policy, yet it cannot be denied that its exceptions 
 and inconsistencies somewhat detract from its value 
 as an example to other countries. 
 
 In this revision of the British tariff, no retrench- 
 
176 TARIFF OF GREAT BRITAIN. 
 
 ment was made of the multifarious details by which 
 it was encumbered. Of the whole revenue of the 
 Customs, amount ing, in the year 1842, to 20,158,504, 
 the chief proportion, namely 19,178,977, was de- 
 rived from nineteen different imports, of which a list 
 is subjoined ; x the remaining 979,527 being made up 
 of numerous duties imposed on trifling articles, such 
 as arrow-root, tapioca, vermicelli ; foreign fruits of 
 limited consumption ; spiceries, such as cinnamon, 
 cloves, ginger, mace, &c. ; seeds of different kinds, 
 on which the produce of the duties, with the excep- 
 
 1 Revenue yielded in 1842 by nineteen different articles : 
 
 Butter, 187,921 
 
 Corn, 1,294,669 
 
 Currants, .... 227,765 
 
 Molasses, .... 254,165 
 
 Raisins, . . . . 143,853 
 
 Silk, 210,725 
 
 Rum, 973,608 
 
 Brandy, .... 1,216,783 
 
 Sugar, 4,425,760 
 
 Tallow, .... 163,266 
 
 Lemons and Oranges, . . 68,098 
 
 Cheese, 98,092 
 
 Pepper, .... 66,469 
 Seeds of all sorts, including Tares, 182,600 
 
 Wood and Timber, . . 903,348 
 
 Tea, 3,532,934 
 
 Tobacco, .... 2,724,997 
 
 Wine, 1,201,198 
 
 Wool, 661,773 
 
 19,178,977 
 Amount of Revenue for 1842, 20,158,504 
 
 979,527 
 
 
PROPOSED REFORM OF THE TARIFF. 177 
 
 tion of clover and linseed, is trifling ; foreign woods, 
 of which, with the exception of mahogany, and one 
 or two other woods, no one article yielded in 
 1840, 1000, some not 100 a-year; oils, extracts, 
 and perfumery, from which, with the exception of 
 olive and palm oil, the revenue is scarcely worth 
 the collection from many articles not being 100 ; 
 from others not 1 in the year ; and from not 
 a few, nil was the return ; dyers' stuffs, drugs, 
 &c., of which, from about 140 articles, not above 
 six or seven yielded, in 1840, 1000 ; many not 
 100 a-year. 1 The repeal of the taxes on these 
 trifling articles would be extremely beneficial ; it 
 would relieve commerce from the delay and vexation 
 incident to petty details, while, in simplifying the busi- 
 ness, it would reduce also the expense, of the Customs. 
 If the tariff were extended to twenty-eight additional 
 articles, of which a list is subjoined, 2 the deficit 
 
 1 See Tables of the New Duties of Customs, officially compiled 
 from authentic documents. 
 
 2 Twenty-eight articles, the addition of which to other nineteen, 
 would raise the revenue of the Customs to 1 9,713,693, less only 
 by 444,811 than at present : 
 
 Produce in 1842. 
 
 Almonds, 6,505 
 
 Bark, reduced from 8d. and Id. to 3d., . 10,838 
 
 Brimstone, same duty, .... 8,269 
 
 Bristles, 24,082 
 
 Cocoa, Cocoa-nut husks and shells, and 
 
 Chocolate, 6d. and 4d., to 4d., . . 14,055 
 Chicory, and other vegetable matter appli- 
 cable to its uses, do., .... 21,211 
 
 Clocks, 6,373 
 
 Copper Ore, 15,688 
 
 Carried over, 
 
178 
 
 TARIFF OF GREAT BRITAIN. 
 
 would be reduced to 438,691, which could be made 
 up with little difficulty. In place, therefore, of the 
 laborious regulation of minute details, the important 
 reform of the British tariff would be, by one stroke 
 of the pen to clear away this rubbish of petty duties, 
 which scarcely repay the cost of collection, and to 
 confine taxation to the great leading articles of con- 
 sumption. The deficiency of revenue occasioned by 
 this reform would only be 979,527, or 438,691, 
 if we add the twenty-eight articles enumerated, 
 which might partly be made up by the regulation of 
 other taxes. No existing interest could be injured 
 
 Brought forward, . . . 107,021 
 
 Cork, unmanufactured .... 15,974 
 
 Mahogany, 13,513 
 
 Eggs, 32,642 
 
 Figs, 17,724 
 
 Bottles, green, or covered with wicker, . 14,951 
 
 Hides, 25,898 
 
 Indigo, . 15,821 
 
 Iron, in bars, 16,800 
 
 Leather gloves, 27,464 
 
 Linens, 10,827 
 
 Liquorice juice and paste, . . . 15,419 
 
 Nutmegs, 21,866 
 
 Nuts, 40,927 
 
 Olive oil, 27,518 
 
 Palm, 13,575 
 
 Train, spermaceti, and blubber, . . 11,042 
 
 Rice, 10,206 
 
 Silk, raw, thrown silk, manufactures of the 
 
 East Indies, . . ... 62,388 
 
 Skins and furs, 19,533 
 
 Turpentine, 19,727 
 
 540,836 
 
TIMBER DUTIES. 179 
 
 by the repeal of those minor duties, while trade 
 would be released from the shackles which they im- 
 pose ; to the great relief of the merchant, whose goods, 
 no longer placed in bond for the payment of trifling 
 imports, would be at once carried from the ship to 
 his own warehouse. But, considering the alarm that 
 was raised among all the dealers whose craft was 
 but slightly touched by the proposed reform how 
 the agriculturists and graziers saw absolute ruin in 
 the proposed admission into the country of foreign 
 cattle ; and every petty dealer the loss of his busi- 
 ness, from the slightest reduction of the duties which 
 protected his craft, the influence of the minister, great 
 as it was, would hardly have carried, against hostile 
 and powerful interests, the bolder measure of repeal- 
 ing, in place of modifying, obnoxious duties and pro- 
 hibitions. 
 
 The reduction of the Timber duties, and the change 
 in the mode of assessing them, was a practical im- 
 provement calculated to benefit both the merchant 
 and the consumer. Those duties amounted originally 
 to 6s. 8d. on the load of timber containing 50 cubic 
 feet, and to 2, 13s. on the 120 deals from 8 to 20 feet 
 in length, and 3^ inches in thickness. On other de- 
 scriptions of timber, such as battens, boards, spars, 
 staves, &c., duties were levied in proportion ; and so 
 long as they continued at this moderate rate, they 
 occasioned no inconvenience. But they were gradu- 
 ally increased from 6s. 8d. to 10s., 14s., 16s , 1, and 
 1, 7s. 4d.; and in 1811, they were doubled, amount- 
 ing to 2, 14s. 8d. per load. They were afterwards 
 raised to 3, 5s.; and in 1821, fixed at 2, 15s., 
 
180 TARIFF OF GREAT BRITAIN. 
 
 when a duty of 10s. per load was first laid on Canada 
 timber. The duty on deals, and on all wood sawn 
 or split, was at the same time raised from 2, 13s. 
 on 120 deals from 8 to 20 feet long and 3^ inches 
 thick, to above 20. In 1821, it was fixed at 19 
 on 120 deals from 6 to 16 feet long; and at 22 
 where the length was from 16 to 21 feet. On Canada 
 deals of equal size, a duty was imposed, at the same 
 time, of 2 and 2, 10s. on the 120 deals. 
 
 The chief objections to those duties were 1st, 
 Their amount, by which the price of timber was 
 unduly augmented, and the trade placed under inju- 
 rious restraints ; 2d, The mode in which they were 
 assessed, which caused them to fall unequally on 
 different descriptions of timber ; and, 3d, The en- 
 couragement given to import the inferior timber of 
 Canada in preference to the superior timber from the 
 northern countries of Europe. 
 
 I. In every country the demand for such articles 
 as timber, iron, flax, hemp, wool, coal, &c., the rude 
 produce of the soil, increases with the progress of 
 wealth and industry ; and the supply, generally defi- 
 cient, must be drawn from those countries where the 
 materials of industry are not in the same demand. 
 No article is in such universal use as timber. It is 
 the chief material in house-building, in ship-building ; 
 in household furniture ; in carriages of every descrip- 
 tion, from the chariot to the humble cart; in ma- 
 chinery for the aid of industry, the most complicated 
 as well as the simplest; and it is used for other 
 articles, more or less important, such as packing 
 boxes, musical instruments, and various other imple- 
 
TIMBER DUTIES. 181 
 
 ments of trade or manufacture. On such an article 
 one of the primary materials of industry a heavy 
 tax must be a clog on the whole business of a com- 
 mercial country. 
 
 The annual deficiency in the home supply of tim- 
 ber, has been estimated in Britain at above one 
 million of loads of 50 cubic feet ; and it has been 
 supplied partly from Europe, though, in later times, 
 chiefly from the Canadas. The cost of Dantzic, 
 Memel, and Riga timber, has been computed at 46s. 
 or 52s. per load ; the freight, which is more than the 
 first cost, and the other charges, constituting a mate- 
 rial element in the price. 1 A tax of 2, 15s. on the 
 load of timber amounts, consequently, to more than 
 1 00 per cent, on the price, and the tax on deals is 
 about the same rate : an oppressive duty on an 
 article in such general use, which, by raising its price, 
 tends to check improvement, and, by its unequal 
 operation, to divert the trade out of its natural 
 course. 
 
 II. The inequality of the duty, from its being im- 
 posed without distinction on deals of different lengths 
 and thicknesses, did not affect the manufacture while it 
 continued at the moderate rate of 5^, or Is. on the 
 deal; 12 feet being still adopted as its convenient 
 length, notwithstanding the increase of duty thereby 
 incurred. This inequality became of more importance 
 as the duty was increased ; and deals were sought for 
 of greater lengths, which, for the same duty, con- 
 tained a greater quantity of wood. Until the year 
 
 1 Report of Select Committee on the Timber Duties, 1835; 
 Evidence of H. Warburton, Esq., par. 5109, pp. 345, 346, 347. 
 
182 TARIFF OF GREAT BRITAIN. 
 
 1821, the duty was the same on all deals from 8 
 to 20 feet in length, and there was no limitation 
 of the breadth. Hence, on 120 deals of the small 
 size, the duty amounted to 5, 3s. lid. per load; 
 and on the same number of a larger size to only 
 1, 16s. 7f d. 1 In 1821, a new regulation took place, 
 by which a duty of 19 was imposed on 120 deals from 
 6 to 16 feet in length ; and of 22 where the length 
 was from 16 to 21 feet. This new scale of duties 
 still produced serious inequalities between the longer 
 and the shorter deals ; and also between timber in 
 deals and in the log, measured according to its cubic 
 contents. Archangel logs, for example, 21 feet long, 
 and 11 inches wide, and 3 inches thick, would pro- 
 duce 11 loads of timber and 27 feet, on which the duty, 
 at 2, 15s. per load, would amount to 31, 14s. 8d., 
 while they only paid 22, which is at the rate of 
 1, 18s. Id. per load. The long hundred of Norway 
 deals, again, or 120, 14^ feet long, 9 inches broad, 
 and 3 inches thick, which produces only 6 loads and 
 15 feet of timber, paid 19 of duty; which amounts 
 to 3 per load, or 5s. more than the duty on the 
 log. 
 
 The heavy duty falling more lightly on the long 
 than on the short deals, created a demand in this 
 country for the latter, and limited, consequently, the 
 import of wood to those countries from which a 
 supply of long deals could be obtained. From Nor- 
 way, accordingly, the import of deals has greatly 
 fallen off. The timber grown in that country is not 
 
 1 See Report of the Lords' Committee on Foreign Trade, 3d 
 July, 1820. Evidence of Jas. Borthwick, Leith, p. 69. 
 
TIMBER DUTIES. 183 
 
 of the lengths that are required ; nor are the rivers 
 of sufficient depth to float down this large timber to 
 the sea. The trade in wood has accordingly fallen off 
 with this country, in consequence of the unequal duty 
 imposed by the operation of the British tariff. 1 The 
 former, and the most convenient, lengths of Nor- 
 way deals, was 12 feet. The duty on this short 
 length being, in this country, the same as on the 
 longest, they ceased to be brought to the British 
 market, and have been generally sent to France and 
 Holland. By the restraint thus imposed on the trade, 
 the price of the timber was generally raised, owing 
 to the great expense incurred in obtaining it of this 
 large size. 2 The cubical contents of the deal the only 
 just standard of the duty was as little attended to 
 in the thickness as in the length. Whether the deal 
 was 1^, 2, or 3 inches in thickness, it was liable to 
 the same duty, which operated as a prohibition on 
 the importation of all deals of a less thickness than 
 3 inches ; though smaller deals are often required 
 for many purposes ; and the 3-inch deal, after being 
 imported, had to be further divided, often with a 
 waste of the wood : the regulation as to the thick- 
 ness occasioning also the same waste in the original 
 manufacture of the deal. 3 
 
 III. The inequality in the relative duties imposed 
 on Baltic and on Canada timber, entirely diverted 
 
 1 Select Committee on Timber Duties ; Minutes of Evidence, 
 pp. 45, 46, 47; Evidence of Richard Norman, Esq., par. 557 et seq. 
 
 2 Evidence of Richard Norman, Esq., par. 559. 
 
 3 Ibid., pars. 572, 573. Of Mr Smirke, par. 3382 et seq. 
 
184 TARIFF OF GREAT BRITAIN. 
 
 the trade from its natural course, by artificially raising 
 the price of the superior timber of Europe, and dis- 
 couraging its consumption, and by introducing in its 
 room the inferior timber of the British colonies. 
 While the duty on European timber was gradually 
 increased from 6s. 8d. to 3, 5s., and to 2, 15s. per 
 load, Canada timber was only subjected to a duty of 
 10s. per load. The excess of duty on the European 
 timber thus amounted to 45s. per load, which turned 
 the balance entirely in favour of Canada timber ; the 
 importation of which increased from 5680 loads, in 
 1788, out of 209,162 loads, the whole amount of the 
 timber imported at that time, to 416,830 loads out 
 of 521,524 loads, the amount imported in 1833. 
 This inequality of duty is in direct violation of that 
 great maxim of trade, which is to buy cheapest and 
 to sell dearest ; since it sends the British ships across 
 the Atlantic for a supply of timber, which might be 
 obtained nearer home, of a better quality and at a 
 cheaper rate. The freight of timber from Canada 
 has been, for some years past, from 37s. to 41s. per 
 load, which is more than half the price ; while from 
 Memel, Riga, Dantzic, and other European ports, it 
 is not more than from 17s. to 21s. The impolicy of 
 those heavy and unequal duties, and their injurious 
 effects, are therefore obvious. 
 
 In the tariff now proposed, this heavy duty on 
 timber was reduced from 2, 15s. per load, to 1, 12s., 
 and after the 10th October, 1843, to 1, 5s.; on 
 deals to 1, 18s., and to 1, 12s. also in 1843 ; and 
 proportionally on other descriptions of timber, into 
 
PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 185 
 
 whatever form it was fashioned. The inequalities in 
 the mode of assessment were also corrected. In lieu 
 of the duties on the load of fifty cubic feet, the im- 
 porter was allowed to enter deals, boards, battens, 
 &c., by the tale ; and a new scale was prepared, 
 according to which the duty, increasing for every 
 3 feet in length from 6 to 21 feet; in like man- 
 ner, from 14 to 3 J inches in thickness ; and from 9^ 
 to 1 1^ feet in breadth, was more accurately levied, 
 as nearly as possible, according to the cubic contents 
 of the wood. 
 
 CHAPTER X. 
 
 OF PROTECTING DUTIES ON THE PRODUCE OF LAND. 
 
 Price of grain always subject to regulation in Great Britain. 
 Bounty on exportation granted in 1688. Quantity of grain ex- 
 ported since 1773. Amount paid for bounty. Exportation 
 declined about the year 1770, and at last ceased. Progress and 
 prosperity of Britain. Increase of inhabitants. A supply of 
 foreign corn required for their support. Large supplies imported 
 into Great Britain for the last seventy years. Causes of this 
 change. Different laws enacted for regulating the foreign trade 
 in corn. Act of 1773, 1791, 1804. Prosperity of agriculture till 
 about the year 1814. New law of 1815, of 1828, of 1842. 
 Principle of these laws. Practical effect. Comparative merits of 
 a fixed duty and a sliding scale. Corn -law associations. Land- 
 holders. Errors of both parties in overrating the importation of 
 the foreign supply. Practical inefficiency of corn laws from 1773 
 to 1815. The trade nearly free. The era of high prices and 
 agricultural prosperity. In 1821 the foreign supply only 34,275 
 
186 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 quarters. Low prices and depression of agriculture. Insignifi- 
 cance of the foreign supply deduced from these facts. State of 
 agriculture for the last sixty or seventy years not dependent on 
 the corn laws. Price of corn, on which agriculture depends, 
 fixed hy causes beyond human control. Corn laws not the 
 cause of commercial distress. Foreign corn never peremptorily 
 excluded from this country. Quantities imported during the 
 operation of the corn laws. No great interval between the pre- 
 sent law and a free trade. No data for exactly estimating the 
 effect of a given addition to the supply on the price may be cal- 
 culated at 3s. per quarter. Effects of a free trade on prices equally 
 overrated by producers and by consumers. High price in Britain 
 would attract a foreign supply. Equilibrium of price brought 
 about more by a rise abroad than by a fall at home. Mr Meek's 
 estimate of the probable import of grain with a free trade. 
 Countervailing duty of 5s. proposed by Mr Ricardo on importa- 
 tion, and an equal bounty on exportation. No ground for a coun- 
 tervailing duty. Inefficiency of these artificial expedients. A drain 
 on the bank for gold and commercial distress ascribed to the corn 
 laws. This theory considered. So great a quantity of gold not 
 wanted in those countries which supply corn. Foreign expendi- 
 ture not defrayed by gold alone. Its exportation not coincident 
 with the import of corn. The great evil of the corn law the prin- 
 ciple on which it proceeds. 
 
 IN Great Britain, the produce of the land has 
 shared equally the protection of the Legislature with 
 the produce of labour. The home manufacturer has 
 been favoured by heavy duties on the importation of 
 foreign goods, and the cultivator of the soil by 
 bounties on the exportation of corn, or by duties on 
 its importation, for the purpose either of enabling 
 him, by selling his produce at a cheaper rate, to 
 command the foreign market, or of securing to him, 
 by an exclusion of foreign produce, the monopoly of 
 his own. The price of grain has seldom or never 
 been allowed, in this country, to find its level in the 
 
GRAIN ALWAYS SUBJECT TO REGULATION. 187 
 
 market. The law has always interfered, either for 
 the purpose of lowering it, or raising it. In the 
 times of the Henries and the Edwards, it was for 
 the purpose of reducing prices that laws were passed. 
 It was with this view that exportation was re- 
 strained, and that severe penalties were also imposed, 
 according to the fallacious maxims of that age, on 
 the forastallers of the market. About the time of 
 the Revolution this system was changed, through the 
 prevailing influence, as is generally understood, of 
 the landed proprietors ; and in place of laws to make 
 bread cheap, which was the policy of a former age, 
 the great object was now to maintain a remunerating 
 price ; and this object has been pursued, with little in- 
 terruption, to the present time. As the manufacturers 
 had, by their importunate clamour, extorted from the 
 Legislature ample securities against the importation of 
 foreign goods, the landlords were not behind-hand in 
 looking after their own interest, and in endeavouring 
 to obtain an equally sure guarantee against the im- 
 portation of foreign grain. 
 
 It was in 1688 that a bounty was first granted 
 on the exportation of grain, of 15s. per quarter on 
 wheat, while the price continued under 48s., at that 
 time a high price ; of 2s. 6d. on barley, under 24s. ; 
 and 3s. 6d. on rye, under 32s. The act of Charles 
 II., which still continued in force, imposed prohibi- 
 tory duties on importation, until the price rose to 
 50s. 4d., at that time an unusually high price ; and a 
 duty of 8s. while it was under 80s. a-quarter. The 
 bounty, along, however, with other powerful causes, 
 had the effect of sending abroad large supplies of 
 
188 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 corn, during the greater part of the last century. 
 From the year 1688 to 1773, the excess of corn 
 exported amounted to 30,968,366 quarters, and the 
 bounties paid to 6,237,176. In this country, as at 
 present in Poland, Prussia, and Germany, as also in 
 Ireland, agriculture had outstript the tardy progress 
 of commerce ; its produce abounded more in the 
 country than the produce of industry ; it was either 
 more than sufficient for the wants of the manufac- 
 turing classes, or its price was higher than, in the 
 state of wages, they could afford to pay ; and it was, 
 therefore, sent abroad to the better market of Hol- 
 land and the Low Countries ; which, it would appear, 
 had, at that time, made greater advances in industry 
 and wealth, and were able to buy it at a higher 
 price. With the encouragement of the bounty, grain 
 was often exported when it was wanted at home, 
 to the injury of the poor, who were suffering from 
 scarcity and high prices. On this account the law 
 was occasionally suspended, and foreign grain im- 
 ported, the high duties imposed by the 22 Charles 
 II., being for the time remitted. About the year 
 1770, the exportation of corn from this country 
 began to fall off, and the stream to set in slowly in 
 an opposite direction. The progress of the country, 
 which, from the beginning of the last century, had 
 rather been languid, was now accelerated by many 
 concurring causes. The general advance of science, 
 the various inventions, and improved machinery, em- 
 ployed in every branch of productive industry, gave 
 a prodigious impulse to manufactures ; and more 
 especially after the close of the American war, the 
 
RISE IN THE PRICE OF GRAIN. 189 
 
 increase and more equal distribution of wealth ap- 
 peared in the improved condition of all classes. The 
 greater demand for labour and the rise of wages was 
 followed by an increase of inhabitants ; and for their 
 maintenance, the surplus produce, which was for- 
 merly sent abroad, was now retained at home, where 
 prices began to rise with the progressive prosperity 
 of the country. It is necessary, as has been else- 
 where explained, 1 that the annual supply of corn 
 should last until the supply of the following year be 
 obtained ; and where scarcity prevails, that the price 
 should rise until it is so far placed out of the reach 
 of the great body of the consumers, who are put on 
 short allowance. But where the consumers are rich, 
 a higher price will be necessary, to place corn out 
 of their reach, than when they are poor ; and hence 
 the gradual rise which has taken place in this coun- 
 try, with the progress of industry and the more free 
 circulation of wealth. It is a commonly-received 
 notion, sanctioned by the authority of Dr Smith, 
 that the price of corn regulates the wages of labour. 
 The reverse of the proposition will rather be found 
 to be nearer the truth ; namely, that the rate of 
 wages, as it is high or low, tends to raise or to de- 
 press the price of corn ; and to the low wages and 
 poverty of the working-classes, may be partly as- 
 cribed the extremely low prices of corn in 1822, and 
 at other times also within the last twenty years. 
 An account of the average price of wheat, in this 
 
 1 See Chapter on Exchangeable Value. 
 
190 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 country, for periods of ten years, from 1751 to 1840, 
 is subjoined : 
 
 Average price of grain for ten years ; quarter of eight Winchester 
 bushels : 
 
 From 1751 to 1760, inclusive, . . l 17 8 
 1761 1770, . ..236 
 
 Average price per Receiver of corn : 
 1771 to 1780, 1 . . . 245 
 1781 1790, . . . 276 
 
 1791 1800, . . . 3 1 74 
 
 1801 1810, 2 . . . 3 15 2 
 
 1811 1820, 2 . . . 3 12 
 
 1821 1830, 3 . . . 2 17 4 
 
 1831 1840, . . . 2 15 3 
 
 The preceding account of prices exhibits a gradual 
 rise, from about the year 1760 to 1780 ; a still greater 
 increase from 1790 to 1820 ; and a decline for the 
 next twenty years to 1840, which may be partly 
 ascribed to more favourable seasons. The progres- 
 sive rise in the price of corn, may also be ascertained 
 from a comparison of the lowest prices of cheap and 
 abundant years, with the prices of scarcity in former 
 times. Thus, in 1740, a year of scarcity, the price 
 was 45s. Id. for the Winchester quarter of eight 
 
 1 This is the price as given by the Receiver of corn returns, and 
 is lower than the price of the quarter of eight Winchester bushels, 
 as it is the average price of different descriptions of grain. An 
 addition of 5s. per quarter would be required to equalize the prices 
 after 1770, with those before. 
 
 2< The price in these years, when the currency was depreciated, 
 is estimated in bullion, an allowance being made for the depre- 
 ciation. 
 
 3 From 1820, when the imperial quarter was used, a deduction 
 is made equal to the difference between it and the former quarter. 
 
IMPORTATION OF FOREIGN CORN. 191 
 
 bushels ; and the price in 1822, a year of extraordi- 
 nary cheapness, was, for the imperial quarter, 44s. 7d. i 1 
 the price of scarcity in the former being the price of 
 extraordinary plenty in the latter year ; which marks 
 the great increase that had, in the meantime, taken 
 place in the value of corn ; the true cause of which 
 is to be found in the great flood of prosperity which 
 set in upon the country after the peace of 1763, and 
 has ever since continued, though with severe intervals 
 of depression and distress, more especially towards 
 the conclusion of the war with France, as also in 
 later times. The price of corn has accordingly risen 
 above the level of the European market. It is gener- 
 ally about 40 per cent, above the price in Dantzic 
 and other shipping ports on the Continent, and often 
 50 per cent, higher than in France; and this high 
 price, the consequence of the great progress of manu- 
 factures and of population, has entirely changed the 
 course of trade : having for the last seventy years 
 drawn large supplies of corn from other countries. 
 This will appear from the following account of the 
 average export, and subsequent import of grain for 
 periods of ten years, from 1700 to 1720, and the an- 
 nual amount of importations since that period : 
 Average import of grain from 1700 to 18 20, for periods often years. 
 
 Years, Total. Excess of Exports. 
 
 1700 to 1709 inclusive, 3094 2,804,641 
 
 1710 1719 1667 3,647,113 
 
 1720 1729 640,114 1,691,340 
 
 1 The difference between the imperial quarter, and the quarter 
 of eight Winchester bushels, is not material, and is, perhaps, more 
 than compensated by the superior quality of the grain in the Win- 
 chester quarter. 
 
192 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 Year. Total. 
 
 1730 to 1739 133,934... 
 
 1740 
 1750 
 1760 
 
 1749 126,934... 
 
 1759 298,793... 
 
 1769 1,517,318.., 
 
 1770 1779 4,721,157. 
 
 1780 1789 5,044,661. 
 
 1790 1799 12,677,528. 
 
 1800 1809 13,534,126., 
 
 1810 1819 17,000,234., 
 
 Annual amount of the wheat imported till the 
 year 1828, when a new act was passed : 
 
 Qrs. 
 
 Excess of Exports. 
 ... 5,200,312 
 ... 6,730,723 
 ... 6,588,844 
 ... 3,360,158 
 Excess of Imports. 
 ... 2,586,310 
 ... 1,822,738 
 ...11,378,900 
 ...12,453,344 
 ... 17,044,52s 1 
 
 Years. 
 
 1821 9 
 
 1822 2 
 
 1823 13,137 
 
 1824 15,778 
 
 Years. Qrs. 
 
 1825 525,231 
 
 1826 315,892 
 
 1827 572,705 
 
 1828 841,828 
 
 The following is an account of the quantity of 
 grain of all sorts imported under the Act of 1828, 
 9 Geo. IV. : 
 
 Years. Qrs. 
 
 1829 2,025,156 
 
 1830 2,753,262 
 
 1831 2,508,700 
 
 1832 481,619 
 
 1833 112,465 
 
 1834 233,555 
 
 1835 470,147 
 
 Years. Qrs. 
 
 1836 320,305 
 
 1837 904,584 
 
 1838 2,522,223 
 
 1839 4,615,262 
 
 1840 3,829,120 
 
 1841 3,365,061 
 
 1842to29thApril 27,640 
 
 When Great Britain, in place of exporting corn as 
 formerly, began to require a supply of foreign corn for 
 the support of her increasing inhabitants, it was deemed 
 necessary to alter the system of duties which regu- 
 lated the trade. An act was accordingly passed in 
 1773, by which the bounty of 5s. on the exportation 
 1 See Tooke's High and Low Prices, Appendix, p. 32. 
 
LAWS REGULATING FOREIGN TRADE IN CORN. 193 
 
 of wheat, which was continued till the price reached 
 48s., now ceased at 44s., when exportation was pro- 
 hibited ; and the duty on importation, which by the 
 act. of Charles II. was 16s. on wheat, till the price 
 rose to 58s. 4d., and 8s. till it rose to 80s., was now 
 reduced to 6d., at or above 48s. This act, which 
 mitigated the restrictive policy hitherto adopted, 
 by reducing the duties, and limiting their operation, 
 both on the exportation and importation of corn, 
 forms a remarkable exception to the whole course of 
 British legislation on this subject ; and is understood 
 to have been suggested by Mr Burke, and other dis- 
 tinguished statesmen of that day. It was continued, 
 without any material alteration, till the year 1791> 
 when a new act was passed, which increased the 
 facilities of exportation and the restraints on impor- 
 tation. The former, which was prohibited at 44s., 
 was now permitted at 46s. ; and importation, which 
 was formerly permitted when the price was 48s., at 
 the low duty of 6d., was now prohibited until the 
 price rose to 50s , when a duty of 2s. 6d. was pay- 
 able until the price rose to 55s., with the low duty 
 of 6d. In 1804, these restrictions were still farther 
 increased. The prohibitory duty on importation was 
 continued till the price reached 63s., after which the 
 duty was lowered to 6d. No other alteration of any 
 importance took place until the act of 1815, which 
 will be afterwards fully considered. 
 
 From the year 1804, the price of grain continued 
 unusually high ; the average for the next nine years 
 being 4, 14s. per quarter ; or, making allowance 
 for the depreciation of the currency, 4. A great 
 
 o 
 
194 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 rise took place, in consequence, in the profits of farm- 
 ing and in the rent of land ; and in all quarters tillage 
 was rapidly extended. The decline of prices about 
 the year 1813, renewed the alarm of the landlords 
 and farmers. Many of the latter, having engaged for 
 larger rents than they could afford to pay, claimed 
 the protection of higher duties. Parliamentary com- 
 mittees were appointed in 1813 and 1814, to inquire 
 into the causes of the depressed state of agriculture ; 
 and, after examining numerous witnesses, they re- 
 commended a great increase in the import duties: 
 70s. or 80s. per quarter being the lowest price at 
 which they deemed it safe to admit foreign corn. In 
 1815 an act was accordingly passed, which raised 
 the importation price of wheat to 80s. ; of rye, peas, 
 and beans, to 53s. ; of barley, to 40s. ; of oats, to 
 26s. ; and of wheat from the British colonies in 
 America, to 67s. 
 
 This law, which was intended to give to the grower 
 of corn the entire monopoly of the market, was 
 superseded, in 1828, by a new act, which imposed 
 prohibitory duties of 24s. when the price was at 
 63s., and of 10s. when it was at 70s. a quarter ; 
 after which the following rates were established 
 on wheat : at 71s., and under 72s., 6s. 8d. ; at 
 72s., and under 73s., 2s. 8d. ; above 73s., Is. On 
 barley, the duty on importation was 12s. when the 
 price was 33s., to decrease Is. for every shilling 
 of rise above that price : so that the duty of Is. 
 would commence at 41s. ; on oats, the Is. duty was 
 to commence at 31s. ; on rye, peas, and beans, at 
 46s. On colonial grain, a duty of 5s. was imposed 
 
NEW LAW OF 1842. 195 
 
 on wheat until the price rose to 67s. ; above, a duty 
 of 6d. ; on barley, oats, and rye, corresponding duties 
 were imposed. 
 
 This act continued in force till the year 1842, 
 when those heavy duties on the importation of 
 grain began to excite general discontent among 
 the mercantile classes ; who were further inflamed 
 by the statements, widely circulated, in which the 
 depression of trade and the unparalleled distress of the 
 working classes, were traced, without, however, any 
 scrupulous accuracy of argument, entirely to the 
 operation of the corn laws. A general conviction was 
 at the same time spreading, of the impolicy of all 
 restraints on the importation, whether of the produce 
 of land or of labour ; and the popular voice thus 
 weighing in the scale against the ascendancy of the 
 landed interest, impressed on the legislature the 
 policy of concession, and of somewhat lowering, at 
 least, the almost insuperable barrier that had been 
 raised up against the influx of foreign grain. 
 
 The law of 1842, accordingly, brought forward by 
 Sir Robert Peel, on his accession to office, imposed 
 prohibitory duties on importation, declining from 19s., 
 when the price was at 51s., to 10s. when it rose to 
 63s.; after which the following rates were imposed : 
 
 At 64s., 65s., and 66s., a duty of 8s., 7s., and 6s., 
 which latter continued to 69s. Duties were im- 
 posed 
 
 Above 69s. of 5s. 
 
 70s. 4s. 
 
 71s. 3s. 
 
 Above 72s. of 2s. 
 73s. Is. 
 74s. no duty. 
 
 A lower scale was applied to the inferior grains, 
 
196 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 the duty of Is., to commence when oats, barley, and 
 peas' and beans, rose to the respective prices of 27s., 
 37s., and 42s. 
 
 Such is a brief summary of the laws by which 
 Great Britain has, for the last 150 years, regulated 
 the foreign trade in corn. With the single excep- 
 tion of the act of 1773, the object has been, to en- 
 courage agriculture by a rise of price ; for which 
 purpose, bounties have been granted to encourage the 
 exportation of the home supply, or the foreign supply 
 has been excluded by protecting duties. And two dis- 
 tinct questions here arise for consideration : the first in 
 reference to the principle of these law r s, namely, how 
 far it is consistent with sound policy to encourage 
 agriculture by an artificial rise of price? secondly, as all 
 the commercial depression and misery, and even the 
 pecuniary embarrassments of the country, have been 
 ascribed, by the opponents of the corn law, to its 
 sole operation ; and as this controversy has been the 
 source of violent dissension between the mercantile 
 and agricultural classes, it will be proper calmly to 
 inquire, without vindicating the principle of those 
 restrictions, how far they can be considered as the 
 cause of all this complicated distress ; what, in short, 
 is their practical effect ; to what extent have they 
 raised the price of grain, by the limitation of the 
 supply ; and how far have they thus fulfilled the in- 
 tention of their authors ? 
 
 In this country, the produce, whether of land or 
 of labour, has been always favoured by protecting 
 duties : and, however these may be considered by 
 many as contrary to sound policy, yet, if they be 
 
PRINCIPLE OF THE CORN LAWS. 197 
 
 extended to one branch of industry, they cannot be 
 fairly withheld from another. The question, how- 
 ever, now to be considered, is, not whether trade or 
 agriculture have been chiefly favoured in this country; 
 but whether these restraints are in either case politic 
 or just. 
 
 I. The nature of protecting duties has already 
 been fully considered. It is evident that, whether 
 laid on the produce of land, or on the produce 
 of industry, they impose a tax on the many for the 
 benefit of the few. The price of the protected com- 
 modities is artificially raised for the profit of the 
 dealers, at the expense of all others. This is the 
 effect of the laws which formerly excluded from this 
 country foreign goods by heavy duties, as well as 
 foreign cattle, or fresh or salted meat ; and which 
 still check, to a certain extent, the importation of 
 corn. They tend to raise the price of those articles 
 to the British consumer. They lay under contribu- 
 tion the consumers of manufactures or provisions, for 
 the profit of those who sell those articles, and who 
 gain by the high price what the others lose. This is 
 the obvious tendency of the law for regulating the 
 importation of corn : its intended object, as its cer- 
 t^in effect, is to raise the price, and consequently the 
 rent of land, though not by any means to the extent 
 that is generally supposed ; and accordingly no other 
 intelligible reason has ever been assigned for the 
 measure : for though no subject has been more tho- 
 roughly canvassed, no fact or argument, in all that 
 has been said or written on the subject, has ever been 
 brought forward to prove that it is for the interest of 
 
198 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 the community at large to raise artificially the price 
 of corn. No rational explanation has ever been 
 given why the price of this, as of all other commodi- 
 ties, should not be allowed to find its level in the 
 market. Fears, indeed, have been expressed, bold 
 predictions have been hazarded, that the free admis- 
 sion of the foreign supply would ruin the agriculture 
 of this country, and that corn lands would be thrown 
 out of cultivation : as if the demand for human food 
 could ever cease ; as if the continued and pressing 
 necessities of an increasing population were not a 
 sufficient stimulus to agriculture, and the surest of 
 all guarantees for the progressive cultivation of the 
 soil. The lands that produce sugar, coffee, and other 
 luxuries, that may be dispensed with, are not thrown 
 out of cultivation ; though those articles are allowed 
 to find their level, with the exception of this country, 
 in the general market of the world. There is no law 
 for artificially raising their price in order to ensure 
 their cultivation. How chimerical, therefore, the 
 alarm that the demand, the effectual demand, for 
 human food, the staff of life, should fall off in place of 
 increasing, in a commercial society, too, rapidly ad- 
 vancing in wealth and population ; and that, without 
 an artificial rise of price, the land should ever cease 
 to produce corn ! Of all articles, corn stands the 
 least in need of any protecting duty : its price, from 
 the great demand, being already so high, as not only 
 to repay the profits of the stock and the wages of 
 the labour employed in its cultivation, but to afford 
 a large surplus to the landlord under the name of 
 rent. This surplus, which remains after paying the 
 
INCREASED VALUE OF LAND. 199 
 
 expenses of cultivation, is the great encouragement 
 to agriculture : it is the bounty held out by nature 
 on extended cultivation ; and this surplus, namely, 
 the rent, and, of course, the value of land, has within 
 the last forty or fifty years increased four-fold in this 
 country. Lands which have been bought towards 
 the end of the last century, between 1780 and 1790, 
 for 20,000 or 30,000, have been resold in the 
 present day for above 100,000. Examples of this 
 prodigious increase in the value of land are to be 
 found in all parts of the country ; and it has been 
 brought about by two causes 1st, By the great rise 
 which has taken place in the price of grain, with the 
 progress of manufactures and the increase of wealth ; 
 and, 2d, By the greater quantity that has been ob- 
 tained from the land by improved cultivation. The 
 use of tile-draining in the moist climate of Britain ; 
 the new manures, such as lime, bone-dust, guano, and 
 chemical substances, which science has employed to 
 fertilize the soil, have so greatly added to its pro- 
 duce, that, as already stated, its value has increased 
 four-fold. Now, the great incentive to cultivate the 
 land is the value of this produce : the greater its 
 value, the greater, of course, will be the inducement 
 to obtain it. It is on this principle that protecting 
 duties are imposed : they are intended to encourage 
 agriculture by limiting the supply of grain, and rais- 
 ing its price ; thus increasing the value of the surplus 
 which remains to the landlord. Yet how insignifi- 
 cant is their effect when compared with those other 
 more powerful causes, which, being interwoven with 
 the frame of society, are constantly at work to pro- 
 
200 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 duce the same end, namely, to augment the landlord's 
 rent ; and which, by increasing, not merely in price 
 but in quantity, the produce of the land, have already 
 raised it in Britain to four times its former value. 
 It is this improved value of the surplus produce 
 which is brought about by the progress of manufac- 
 tures, and by other causes, over which legislators 
 have no control, that has extended cultivation over 
 the whole country, and everywhere converted un- 
 productive land into corn fields. It is the only 
 fair or effectual encouragement that agriculture can 
 receive, or that is worth receiving; the only true 
 basis of its prosperity ; compared with which, all the 
 boasted expedients of human skill, which by means 
 of an unpopular tax endeavour to regulate the price 
 of corn, are feeble and inefficient. 
 
 II. With regard to the practical effect of those 
 laws, it is even of more importance than the prin- 
 ciple, which is of little moment, provided it remain, 
 as it has often done, a dead letter in the statute book : 
 for there is no doubt that, for a period of about forty 
 years, from 1773 to 1815, those laws for regulating 
 the importation of corn were inefficient, and really 
 imposed no restraint on importation ; the market 
 price of corn being almost always above the price at 
 which the duty was payable. 48s., 54s., and 66s., 
 were about the several prices at which, according to 
 the acts successively passed in 1773, 1791, and 
 1804, the high duties were payable on the impor- 
 tation of wheat, and at comparatively lower prices 
 on other grains ; and the market price being all the 
 
PRACTICAL EFFECT OF THE CORN LAWS. 201 
 
 while above this price, the law was inoperative : 
 and, accordingly, with one or two short intervals, 
 importation was free from about the year 1773 to 
 1815. The act of 1815, which raised the price at 
 which importation was permitted to 80s., had the 
 effect, except in rare instances of high price, of 
 excluding the foreign supply. The rigour of this 
 law was mitigated by the act of 1828, which ad- 
 mitted of importation when the price reached 70s., 
 at 6s. 8d., and at lower duties as it rose higher ; 
 and during its operation, the ports were frequently 
 opened to foreign grain. From the 5th July, 1828, 
 when the act was passed, to the 5th January, 1839, 
 the whole quantity of grain imported, exceeded 
 12,000,000 of quarters. The measure of Sir R. 
 Peel, in 1842, was a farther step in the same course: 
 it lowered the barrier that opposed the influx of 
 foreign grain. It appears, from Parliamentary ac- 
 counts, that no great quantity of corn was ever 
 brought into the country at a much higher import 
 duty than 10s. per quarter, which may, therefore, 
 be considered as the limit of importation ; and, in 
 this case, 80s., 71 s., and 64s., may be stated as the 
 respective prices at which the several acts of 1815, 
 1828, and 1842, permitted the importation of wheat ; 
 and the other grains at a comparatively lower scale. 
 These prices afford a simple test of the comparative 
 effects of those different measures, of which the last 
 is certainly the most favourable to the consumer. 
 The price of 64s., when wheat may be imported 
 at a duty of 8s., is not unusually high ; and at 
 higher prices the duty decreases ; so that, unless in 
 
202 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 cheap years, the law of 1842 is fully as favourable 
 to importation as a fixed duty, which was proposed, 
 would have been, of 8s. a quarter. The advantage 
 of a fixed duty is stated to be the greater certainty 
 which it gives to the speculations of the merchant, 
 who, in sending his corn to the British market, can 
 no longer be met by an increase of duty, in addition 
 to a falling price. But no duty can be fixed, unless 
 it be of small amount. The duty of 8s. a quarter is 
 too high to be maintained with a deficient produce 
 and a high price. So serious an obstruction could not 
 be thrown in the way of importation ; and the duty 
 would require either to be altogether remitted, or 
 reduced with a rise of price, so that it would still be 
 a varying duty, which, though no doubt an inconve- 
 nience, is the least of two evils ; the greater being 
 certainly an oppressive duty on the food of the 
 people, along with a high price. But between these 
 extremes of a fixed duty, and one constantly varying, 
 as at present, a middle course might probably be 
 adopted with advantage. If we suppose only three 
 gradations of duty : 1st, a prohibitory duty ; 2d, a 
 duty which would permit importation ; and 3d, a nomi- 
 nal duty, or no duty ; the evil of a fixed duty, with a 
 constantly varying price, would be avoided, as well 
 as the complicated scale of duties which encumber 
 the present scheme. A fixed duty could hardly be 
 adopted of more than 4s. a quarter, otherwise it 
 must be regularly abated with a rise of price. And 
 if some such moderate duty be not proposed, the 
 only other alternative seems to be, a free trade in 
 corn ; which would at once terminate this really riot 
 
FIXED DUTY AND SLIDING-SCALE. 203 
 
 important controversy, however keenly debated by 
 political parties, between a fixed duty and a sliding- 
 scale. 
 
 Numerous other evils are, however* stated to arise 
 from a varying duty. The sudden influx of corn 
 which takes place when it falls to Is., occasions, it 
 is said, an over-supply in the market, and a ruinous 
 fall of prices. Yet the whole annual stock of grain 
 at home is produced at once ; and, at the time of 
 harvest, added to the existing supply, diminished by 
 nearly a year's consumption. But the price is not 
 depressed by this sudden addition to the supply. It 
 is not lower after the harvest, when the country is 
 full of grain, than when the supply is nearly ex- 
 hausted ; and the reason is, that though the whole 
 supply of the year be on hand, it is slowly and gra- 
 dually dispensed to the consumers as it is wanted ; 
 and the corn taken out of bond, and added to the 
 general supply, being served out according to the 
 same rule, can have no more effect on the price, be- 
 cause of its being at once added to the supply, than 
 the annual produce, which is added at once to the 
 remaining stock of the previous year. The price 
 will no more be affected by a million of quarters 
 added to the stock of grain from the bonded ware- 
 house, than if they had originally made part of the 
 yearly produce. But the influx of the foreign sup- 
 plies does not appear so sudden as has been stated. 
 In the several years 1829, 1830, and 1831, wheat 
 was imported to the amount of 1,364,340, 1,702,437, 
 and 1,494,206 quarters ; the greater proportion of 
 which appears to have been taken out of bond, not 
 
204 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 at once, but in the course of the year, as will be seen 
 from the subjoined account. 1 It is only in 1830, 
 that the quantity entered for home consumption, in 
 any one month, amounted to above one million of 
 quarters. In the four years, from 1838 to 1841, 
 the high prices occasioned large importations ; and 
 in some years, certainly, almost the whole supply 
 was imported at once; as in 1838, when, out of 
 1,822,991 quarters, the importation during the year, 
 1,514,647 quarters were entered for consumption in 
 September. In 1839, however, the greatest quan- 
 tity entered for home consumption, in any one month, 
 was 775,617 quarters in October, out of 2,702,848 
 entered during the other eleven months ; in 1840, 
 1,035,546 quarters were entered in October, out of 
 2,329,991 ; and in 1841 and 1842, no greater pro- 
 
 1 Quantities of wheat and wheat-flour entered for home con- 
 sumption. 
 
 Return to House of Commons, 6th March, 1839 : 
 
 
 1829. 
 
 1830. 
 
 1831. 
 
 January 
 
 332 800 
 
 1 711 
 
 36,141 
 
 
 
 
 
 February 
 
 141,730... 
 
 400 . 
 
 3,684 
 
 
 
 
 
 IMarch 
 
 133,354... 
 
 263 
 
 487,151 
 
 
 
 
 
 April, 
 
 12,580... 
 
 7,768 
 
 316,773 
 
 May, 
 
 25,260... 
 
 245,121 
 
 456,167 
 
 June, 
 
 81,478... 
 
 24,689 
 
 106,602 
 
 July, 
 
 476,261... 
 
 29,339 
 
 32,330 
 
 August, 
 
 25,391... 
 
 364,077 
 
 13,906 
 
 September, . 
 
 179,408... 
 
 1,042,340 
 
 12,627 
 
 October, 
 
 32,311... 
 
 8,291 
 
 19,769 
 
 November, . 
 
 733... 
 
 3,223 
 
 11,520 
 
 December,.. 
 
 1,389... 
 
 619 
 
 9,209 
 
 1,442,695 1,727,841 1,505,879 
 
OPPOSITION TO PROTECTING DUTIES. 205 
 
 portion of the yearly supply was taken out of bond 
 in any single month ; nor does it appear that the 
 price was materially affected by those additions to 
 the home produce. 
 
 The mercantile classes, the consumers of corn, 
 have always protested against the laws in this 
 country for the protection of agriculture ; and their 
 representations have, of late years, been powerfully 
 enforced by the depressed condition of trade. The 
 commercial shock which the country experienced 
 about the year 1836, was followed by an entire 
 prostration of industry, in all its branches from 
 which it is only now (1844) slowly reviving by a 
 want of employment, and by distress and misery 
 among the working-classes, to an extent hitherto 
 unknown. Those calamities being ascribed by many 
 to the sole operation of the corn laws, a violent ex- 
 citement was produced ; and especially among the 
 working-classes, which was the source of those 
 lawless combinations, by which the country was 
 distracted towards the close of 1842, and of which 
 the professed object was to extort, by violence, a 
 fair reward for labour, at that time but poorly paid. 
 Those disorders, no doubt, had their origin in real 
 distress and poverty ; but they were also farther 
 inflamed by the fallacious hope held out, from a free 
 trade in corn, of flourishing commerce and of cheap 
 bread. 
 
 The two opposing parties, in this controversy, 
 appear to have both fallen into the same error, of 
 overrating the importance of the foreign supply ; to 
 the want of which, on the one hand, is ascribed the 
 
206 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 stagnation of trade, and the general distress of the 
 people ; and from its free importation, on the other 
 hand, the landlords dread a fall of prices to the level 
 of the Continental markets, a reduction of rents, 
 and the decline of cultivation : and hence the tenacity 
 with which they hold their now impaired monopoly, 
 amid the murmurs of the people. 
 
 In opposition to those theories, hastily assumed 
 by both parties, the whole history of the corn trade 
 proves the little importance of the foreign, compared 
 with the home supply, and its trifling influence on 
 the price ; and that it is to the unequal produce at 
 home, from variable seasons, that all the fluctuations 
 in the price of corn, and in the state of agriculture, 
 may be clearly traced. A country such as Hol- 
 land, of great commercial wealth, and of limited ex- 
 tent, may, no doubt, depend on foreign supplies for 
 its subsistence. But Great Britain, with her nume- 
 rous population, her improved agriculture, and her 
 extended commerce, the latter keeping pace with, 
 and aiding the former, must depend, for subsistence, 
 almost wholly on her own soil. The foreign supply, 
 whether admitted or excluded, can be but a small 
 make-weight in the scale of price ; and in all cases, 
 where its fluctuations are to any extent, they can 
 be clearly traced to the home, and not to the foreign 
 supply. This conclusion appears to be borne out by 
 the following, among many other important facts. 
 
 It has been already stated that, from about the 
 year 1773 to 1815, the laws for regulating the im- 
 portation of corn were inefficient in practice, and 
 that importation was really free. During all this 
 
 
PRICES OF GRAIN FROM 1792 TO 1821. 207 
 
 period, however, and more especially from the year 
 1790, when the foreign supply, the want of which is 
 supposed so greatly to raise the price, and to pro- 
 duce so many other evils ; and its free admission, on 
 the other hand, to occasion a fall of prices ruinous to 
 agriculture ; when this supply was freely flowing into 
 the country, grain continued to rise until it reached 
 an unusually high price, as will appear from the ac- 
 count of prices which is subjoined. 1 
 
 1 Account of the price of grain, from the year 1792 to 1821 ; 
 with the average price for periods of five years : 
 
 Year. Price. Average of five years. 
 
 1792 42s. lid. 
 
 1793 48s. lid. 
 
 1794 51s. 8d. 
 
 1795 74s. 2d. 
 
 1796 77s. 2d 58s. lid. 
 
 1797 53s. Id. 
 
 1798 50s. 3d. 
 
 1799 67s. 6d. 
 
 1800 113s. 7d. 
 
 1801 118s. 3d. 80s. 6d. 
 
 1802 67s. 5d. 
 
 1803 56s. 6d. 
 
 1804 60s. Id. 
 
 1805 87s. lOd. 
 
 1806 79s. Od 70s. 2d. 
 
 1807 73s. 3d. 
 
 1808 79s. Od. 
 
 1809 95s. Od. 
 
 In Bullion. 
 
 1810 93s. Od. 
 
 1811.. . 87e. Od... ...85s. 5d. 
 
208 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 In 1819, and the following years, the foreign 
 supply began to fall off, and finally ceased. In that 
 year, the amount of wheat that was entered for 
 home consumption was 1,606,280 quarters ; in 
 1820, 124,858 quarters; in 1821, 34,275 quarters; 
 and in the four following years, the whole foreign 
 supply only amounted to 28,891 quarters. Yet 
 during this period, when scarcely any foreign corn 
 was imported, the price continued to fall, till in 
 1822, it was lower than it had been for thirty years 
 before. According, however, to the commonly-re- 
 ceived notion of the importance of this foreign sup- 
 ply, its free influx into the country should have been 
 the era of low prices, and its exclusion one of high 
 prices. The fact appears to have been precisely the 
 
 Year. Price. Average of five years. 
 
 1812 104s. Od. 
 
 1813 87s. Od. 
 
 1814 53s. Od. 
 
 1815 54s. Od. 
 
 1816 62s. Od 72s. Od. 
 
 1817 91s. Od. 
 
 1818 81s. Od. 
 
 1819 69s. Od. 
 
 1820 62s. Od. 
 
 1821 54s. 5d. 1 ?ls. 4d. 
 
 1822 43s. 6d. 
 
 1823 51s. Od. 
 
 1824 62s. Od. 
 
 1825 66s. 6d. 
 
 1826 57s. Od 55s. 9d. 
 
 1 Bank notes at par. 
 
EFFECT OF FOREIGN SUPPLY ON PRICES. 209 
 
 reverse. Prices were generally high when importa- 
 tion was free, and agriculture prosperous ; and they 
 fell unusually low after the ports were closed, in 
 1819 and 1820, against the foreign supply, and agri- 
 culture was depressed. The whole history of the 
 corn trade is indeed one continued illustration of the 
 insignificance of the foreign supply, compared with 
 the supply at home ; the abundance or scarcity of 
 which it is that produces those extremes of price 
 which derange the business of agriculture, and all 
 speculations in land. It is well known that the 
 produce of the years 1799 and 1800 was remarkably 
 deficient, the crops being injured in the first by in- 
 cessant rains, and in the latter by drought and other 
 causes. The prices rose, in consequence, to 118s. 
 and 120s. a quarter. In aid of this alarming defi- 
 ciency, supplies were sought from every country in 
 Europe ; importation was not only permitted, but 
 was encouraged by a bounty ; for which the sum 
 paid in the two years amounted to 2,135,678, and 
 foreign corn was imported to the amount of 4,545,276 
 quarters. By the united effect of enormous prices 
 and large bounties, supplies of grain were drawn 
 from the most distant parts of Europe, without any 
 relief of the scarcity, or any decline of the high price, 
 which continued at 120s. a quarter, even after the 
 harvest was begun in 1801. The real value of the 
 foreign supply was thus brought to the test ; it was 
 brought into the country without restraint, and it 
 had no perceptible effect on the price. But no 
 sooner was the abundant supply of 1801 poured into 
 the deficient market, than the void was filled up ; 
 
 p 
 
210 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 the scarcity was succeeded by plenty ; and the price, 
 which was in August 110s. and 120s. a quarter, fell 
 suddenly in September to 70s., and in October to 
 60s. Can we possibly desire a more clear illustra- 
 tion and contrast of the effect of the foreign and 
 the home supply. They both come in, the one after 
 the other, in aid of a deficient supply ; and a better 
 experiment could not be desired for the illustration 
 of science : and what is the result ? The scanty ad- 
 dition of the foreign supply does not even palliate 
 the existing deficiency ; it does nothing to fill up the 
 void left in the home produce ; while the home sup- 
 ply, flooding the deficient markets, changes scarcity 
 into plenty, and causes the prices to tumble down at 
 once from their extravagant level, to the moderate 
 rate of 60s. a quarter. It is to the variable produce 
 at home, therefore, and not to the effect of any foreign 
 supply, that all these fluctuations which occur in the 
 price of grain, from year to year, must be traced, and 
 which no legislation can either prevent or control. 
 
 The state of agriculture for the last 60 or 70 
 years, its gradual improvement in this country, and 
 the vicissitudes which it has experienced, appear to 
 have been in no degree connected with the laws for 
 regulating the importation of corn. From about the 
 year 1770, to 1815, its prosperity was scarcely ever 
 interrupted ; prices were continually on the increase; 
 and land purchased or taken on lease, however extra- 
 vagant the terms were considered at the time, was 
 sure in the end to yield a large return. The conse- 
 quence was, that the occupation or possession of this 
 property was sought after almost at any price ; and 
 
PROGRESS OF AGRICULTURE IN BRITAIN. 211 
 
 the rent of every farm offered on lease was raised by 
 the competition of rival bidders far beyond its real 
 value. This progressive prosperity of agriculture 
 was the consequence of the continued though gradual 
 rise of prices, which took place towards the end of the 
 last century ; of the rise of price beyond all former 
 example in 1799 and 1800 ; and of the equally high 
 prices which continued for ten successive years, from 
 1804 to 1814. Now, during this period, importation 
 was free, with the exception of several years of the 
 French war, when it was partially obstructed, though 
 not wholly stopped, considerable quantities being still 
 imported under the authority of licenses for carrying- 
 on the trade; and in 1817 and 1818, the foreign 
 supply, owing to the high price, was freely admitted, 
 notwithstanding the heavy import duty, and was 
 greater during the latter than on any former year. 
 The sudden and unexpected decline of prices in 
 1814 and 181 5, had produced serious embarrassments, 
 both among tenants and landlords, and renewed their 
 fears for the decline of agriculture. These were 
 again quelled by the high prices of 1817 and 1818 ; 
 when the farther decline of prices which occurred 
 about April 1819, and continued during the four 
 following years, though the foreign supply was at 
 the time excluded and the home grower had the 
 monopoly of the market, completed the depression 
 of agriculture. The high rents that had been con- 
 tracted for could no longer be paid, and many indus- 
 trious farmers were ruined. A general fall of rents 
 was the consequence ; and on this footing the busi- 
 ness of farming has been since prosecuted with all its 
 
212 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 former activity, and cultivation extended over large 
 tracts of waste land. 
 
 From this brief sketch of the progress of agricul- 
 ture in Britain, for the last fifty or sixty years, its 
 prosperity during the first, and its depression during 
 the latter period, appears to have been the effect of 
 fluctuating prices, from variable seasons ; and would 
 have equally taken place, though no restraint had 
 been laid on the importation of corn. The whole 
 course of experience, indeed, appears to run most 
 perversely counter to those theories, which ascribe 
 either the prosperity or the subsequent depression of 
 agriculture to the operation of the corn laws ; for, 
 when the foreign supply was freely admitted into 
 the country, and when agriculture, according to the 
 hypothesis, should have been ruined, or greatly de- 
 pressed, it prospered more than at any former period ; 
 and when the foreign supply was excluded, as it was 
 in 1819, and for several years after, and when the 
 home-growers had the monopoly of the market, and 
 should have prospered accordingly, they were in- 
 volved in greater distress than ever they had before 
 experienced. Every view of the subject, indeed, 
 points out the inefficacy of the petty devices of 
 legislation, even for their own limited ends. The 
 foreign supply is a poor instrument to work with ; it 
 bears so small a proportion to the home supply, that 
 whether we have it or want it, appears not to be 
 of the consequence supposed. It can neither coun- 
 teract, nor can it much assist, those great natural 
 causes which carry forward of themselves all the 
 necessary arrangements of society, in a manner so 
 
PRICE OF CORN BEYOND HUMAN CONTROL. 213 
 
 orderly and magnificent. The price of corn, on which 
 depends the subsistence of man, is placed, by a wise 
 and beneficent providence, beyond the control of 
 legislation. It is fixed by the state of the home 
 supply, which no human power can materially change, 
 and by causes connected with the internal condition 
 of the country ; and the petty attempts which are 
 made to regulate it by means feeble and inadequate, 
 appear to be in the highest degree presumptuous and 
 vain. It is as if we were attempting to control, by 
 our artificial contrivances, the great machinery of the 
 natural world; to aid the force of the wind with a pair 
 of bellows, or to drain the ocean by means of a steam-- 
 engine. There is certainly no denying the power of 
 these agencies, the last of which is the great triumph 
 of science and of art ; but how insignificant do they 
 appear beside the stupendous energies of nature ! 
 
 From the preceding facts, therefore, it seems to 
 follow, that the commercial distress and misery which 
 this country has suffered since the year 1836, can- 
 not justly be placed to the account of the corn 
 laws, however justly objected to on principle ; nor, 
 consequently, would their total repeal give relief 
 to the trade of the country, or employment and 
 bread to its famished labourers. Foreign corn has 
 never at any time been excluded from Great Bri- 
 tain. Even under the act of 1815, which imposed 
 the greatest restraint, a large supply found its 
 way into the country in 1818 ; the subsequent 
 acts of 1828 and 1842, admitted the foreign supply 
 on still easier terms; and the question is, to how 
 much greater an amount would importation take 
 
214 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 place under a free trade. From the year 1790 to 
 1804, when there was practically no restraint on 
 importation, and little or no interruption to the 
 intercourse with Europe, the greatest quantity of 
 grain imported was 2,135,597 quarters in 1800-1, 
 and in 1801-2, 2,405,544 quarters, when the price 
 of wheat was raised, by the scarcity, to 120s. per 
 quarter. In 1818, when the law of 1815 was in 
 force, 3,522,729 quarters were imported ; the ports 
 being opened by the high price, which was between 
 80s. and 90s. The quantity imported, under the law 
 of 1828, amounted from 15th July, 1828, to the 5th 
 January, 1841, a period of 12-| years, to above 
 13,000,000 quarters, including the meal and flour 
 imported; and during the years 1838, 1839, and 
 1840, to 10,276,901 quarters, including also the 
 flour imported, or to above 3,000,000 quarters in 
 each year ; and, besides that a regular and increasing 
 supply is now brought from Ireland, amounting to 
 about 3,000,000 quarters yearly, all restraints on 
 the import of grain from that country having been 
 withdrawn in 1806, the present law gives consider- 
 ably greater facilities to importation; and if we 
 estimate that this will add 500,000 quarters to the 
 yearly supply at home, it will be seen that, except in 
 cheap and abundant years, Great Britain must con- 
 stantly, under the existing law, import large supplies 
 of grain from other countries. There is between the 
 present system, therefore, and a free trade, np very 
 wide interval. Its practical effect is to prevent the 
 importation of corn when the price is under 63s,, i. e. 
 when its price is reasonable, and when the foreign 
 
EQUILIBRIUM OF PRICES, HOW CAUSED. 215 
 
 supply is less needed ; and when, probably, the im- 
 portation would be limited by the price, though the 
 trade were free. It is not likely, therefore, that by 
 the total repeal of this law we should add above one 
 or two millions of quarters to what we already im- 
 port. This addition to the supply would no doubt 
 affect the price; but to what amount cannot be 
 accurately ascertained. We cannot estimate the 
 precise effect of any given addition to the supply on 
 the price. This is a problem in political economy 
 which we have no data to solve. There is no com- 
 mon measure between the increase or decrease of 
 quantity, and the rise and fall of price ; and hence 
 we cannot calculate with precision the actual effect 
 of the corn laws on the price of grain ; we cannot 
 tell to what amount the addition of a tenth or a 
 twentieth to the stock of grain, or a deficiency to the 
 same amount, will either raise or reduce the price. 
 But, from the facts already stated, the effect of the 
 foreign supply on the price at home appears to be 
 hardly perceptible, amid other more powerful causes ; 
 and we should probably, therefore, not underrate its 
 influence, in estimating the reduction that it would 
 effect in the price at from 2s. to 3s. a quarter, or 
 nearly about a farthing on the price of the quartern 
 loaf. At the same time, the steady demand of Britain 
 for foreign corn must no doubt direct a greater quan- 
 tity of European capital to the improvement of land ; 
 and might, in time, bring a larger supply into this 
 country. The amount of grain that, with a free 
 trade, might be obtained annually from Europe, is 
 estimated by Mr Meek, the envoy of the British 
 
216 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 government, in 1841, to the grain countries in the 
 north, at 4,000,000 quarters. The progressive im- 
 provement of agriculture in Europe might, no doubt, 
 in time, yield such a surplus. But it would be a 
 slow process ; and the trade and population of Bri- 
 tain advancing in the meantime, the whole might be 
 readily absorbed in the increasing demand, without 
 any injury to agriculture from reduced prices. The 
 importation of grain from Ireland into this coun- 
 try, which began in 1806, has increased to nearly 
 3,000,000 quarters yearly, and has not been injurious 
 to British agriculture ; and the reason is in this, as 
 in all other cases, that an increase of inhabitants 
 surely follows an increased supply of corn, whose 
 greater demand counterbalances the tendency of this 
 increased supply to reduce the price. Corn differs 
 from all other commodities in this, that it thus 
 creates consumers for itself; and the demand still 
 keeping pace with the supply, the price, though it 
 may fluctuate from year to year, cannot fall per- 
 manently below its general level. The principles 
 which regulate the price of corn are considered at 
 length in the chapter on Exchangeable Value ; and, 
 according to the views there stated, there can be no 
 great danger that the foreign supply, increasing in 
 this country as it will do slowly, will ever so far 
 depress the price as to discourage the cultivation of 
 the British soil. It is not those changes for which 
 time prepares the way slowly and gradually, but 
 violent and artificial revolutions, that disturb the 
 relations of commerce and the even tenor of human 
 affairs. 
 
IMPORT OF GRAIN WITH A FREE TRADE. 217 
 
 But if the consumers of corn are deluded with 
 false hopes of reviving commerce, and of cheap bread, 
 from the repeal of the corn laws, equally vain are 
 the fears of the landholders that the country would 
 overflow with foreign corn, and that the price would 
 be reduced to the level of the European market, or 
 about 50 or 60 per cent., and that agriculture would, 
 in consequence, be neglected. There is no doubt, 
 while the price of corn is so much higher in Great 
 Britain than on the Continent, that the foreign sup- 
 ply, if more freely admitted, would flow into this 
 country until the equilibrium of price were restored. 
 If, for example, corn could be brought into Leith or 
 London from Dantzic, Liebau, Riga, Rostock, Odessa, 
 &c., for 30s. per quarter, after paying all charges, 
 and if the price in this country were 54s., we may be 
 assured that such a sure and profitable trade would 
 not be neglected ; and that corn would be sent into 
 the markets of Britain, until, by the fall of prices in 
 the importing country, and their rise in the other, 
 they were brought near one common level. But at 
 what intervening point they would meet whether 
 the common level would be attained chiefly by the 
 rise of price in the exporting country as the supply 
 
 'as diminished, or by its fall in the importing coun- 
 as it was increased, would entirely depend on 
 relative supply which they respectively possessed. 
 
 [f they were in exactly the same circumstances, and 
 had the same supply, and if in the one country 
 corn was at 50s. a quarter, and could be imported for 
 30s., the price would fall in the importing country 
 exactly as it rose in the other, and would attain its 
 
218 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 level at the medium price of 40s. But if the supplies 
 of the importing country were drawn from a much 
 smaller store of grain than it possessed at home if 
 1,000,000 quarters of grain only added one fiftieth 
 part to its stock, while it diminished the annual 
 supply of the exporting country by one tenth, it is 
 clear that the fall of prices in the one country would 
 not correspond to the rise in the other ; and the com- 
 mon level, in place of 40s., might be 45s., or even 
 48s. If we suppose two reservoirs of water, of equal 
 superficial capacity, in which the fluid is standing at 
 two different levels of 54 and 30, and a communica- 
 tion suddenly opened between them, we know that 
 they will both stand at the common level of 42 feet ; 
 but if we suppose the one at the higher level to be 
 triple the superficial capacity of the other, every foot 
 which it is brought down will produce a correspond- 
 ing rise of three feet in the other; and hence the 
 fluid will rest permanently a,t the higher level of 48, 
 being raised in the smaller reservoir 18 feet, and 
 depressed only 6 feet in the larger. This is the law 
 of the material world ; but not one whit more certain 
 in its operation than the great laws which we have 
 been expounding, by which human society is com- 
 pacted and held together, and which it is the object 
 of political economy to explain and enforce, with a 
 view to the great principles of legislation and go- 
 vernment. 
 
 Great Britain, excelling in arts, in commerce, and 
 manufactures, is also a great agricultural country. 
 An immense capital has been applied to the cultiva- 
 
PRINCIPAL PORTS WHENCE GRAIN EXPORTED. 219 
 
 tion of the soil, which, aided by skill, industry, and 
 enterprise, has improved to the utmost the productive 
 capacity of the land ; and hence, no country, in pro- 
 portion to its extent, yields so large an annual 
 produce of grain. It has been estimated, though of 
 course on rather uncertain data, that its average pro- 
 duce of all sorts amounts to 48,000,000 or 50,000,000 
 quarters. This is a very large supply of grain, and 
 must very greatly exceed the stock of grain in the 
 Continental countries from which we draw our sup- 
 plies. The principal ports of Europe which export 
 grain are Hamburg, Rostock, Dantzic, Liebau, Riga, 
 and Odessa on the Black Sea. The first five towns 
 draw their supplies from the countries which lie con- 
 tiguous to the Baltic, or the rivers which flow into 
 that sea ; namely, the Elbe, the Oder, the Vistula, 
 the Memel, the Duna, &c. ; the more distant pro- 
 vinces of the interior, which are far from the sea- 
 coast, or from any navigable river, being prevented 
 from sending their produce to a foreign market by 
 the badness of the roads and the expense of carriage. 
 Hence, it is only a comparatively limited tract of 
 country that furnishes the foreign supplies ; nor is it 
 on account of its great wealth and flourishing agri- 
 culture, that it has a surplus to send abroad to other 
 lations. It is rather from its poverty, from the want 
 )f capital and manufactures, owing to which those 
 rho are not engaged in agriculture have no equiva- 
 lent with which they can purchase its products : and 
 hence, though agriculture is in a very backward state, 
 the landlord cannot find a market at home for his 
 scanty produce ; which is cheap, not so much from the 
 
220 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 abundance of the supply as from the want of demand; 
 and which, therefore, naturally resorts to the market 
 of a richer country, on which, however, from its small 
 quantity, it makes but a very slight impression. 
 There is no doubt, that if the present restraints on 
 importation were withdrawn, supplies of grain would 
 come into the country from the ports on the Baltic ; 
 and that they would be continued so long as the re- 
 spective prices here and on the Continent left the 
 merchant-importer a profit on the transaction. At 
 Dantzic, Koningsberg, Liebau, &c., wheat is gener- 
 ally much lower than in this country ; and after pay- 
 ing all charges, amounting to about 12s. a quarter, 
 it could often be brought into London for 30s. per 
 quarter, and sold for 35s. with a profit. It is this 
 fact which so alarms the landholders and tenants 
 with the idea of an inundation of cheap corn, and 
 with the ruinous depression of prices to the same 
 rate as on the Continent ; and it is the same delusion 
 which inflames the consumers of corn against the 
 present corn laws, which they imagine raises prodi- 
 giously the price of corn in this country, and thus 
 entails on them the burden of a heavy tax, in order to 
 increase the landlord's rents. Neither of the parties 
 seem to be aware, that the moment the heavy demand 
 of the British market was brought to bear on the 
 European supply, the price would rapidly rise ; and 
 that the quantity withdrawn from the more limited 
 stock of the Continental market, would have the 
 effect of raising the price in a much greater propor- 
 tion than its addition would depress the price in 
 Great Britain. When we consider the situation of 
 
FOREIGN SUPPLY OF GRAIN INSIGNIFICANT. 221 
 
 the two countries, the one overflowing with capital, 
 with a vast commerce and a flourishing agriculture ; 
 the other with comparatively little commerce, with- 
 out manufactures, and its agriculture in a rude and 
 backward state, it would be no strained inference 
 to suppose, that, for every shilling the price fell in 
 Great Britain, it would rise in the Continental mar- 
 kets at least 7s. or 10s. With the exception of the 
 year 1818, we never were able, even when there was 
 no restraining duty on the importation of corn, to 
 draw, any one year, a larger supply from the Conti- 
 nent, or from any other quarter, than 2,600,000, or 
 2,700,000 quarters; which, compared with the annual 
 produce at home, is quite insignificant, and which, 
 accordingly, had never any perceptible effect, as we 
 have already stated, on the markets in this country ; 
 though it was sufficient, by raising prices on the Con- 
 tinent, to bring them to a balance with those in Bri- 
 tain. The present difference of prices between Great 
 Britain and Europe, allowing for the import charges, 
 may be estimated at 24s. per quarter ; and this differ- 
 ence would no doubt be brought to an equality by 
 a free trade. 
 
 But the proportion in which prices would fall in 
 Britain and on the Continent would be extremely dif- 
 jrent ; and, considering the great inequality in the 
 jpective stores of grain between which the free 
 >mmunication would take place, it is certain that 
 ie balance would be adjusted more by a rise of 
 price on the Continent, than by a fall in Britain ; and 
 this affords a sure guarantee to agriculture against 
 any undue fall of price. In all those scattered, and, 
 
222 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 in comparison of Britain, scantily-supplied markets, 
 the price must be regulated by the demand in the 
 great central market to which everything is flowing. 
 However cheaply corn may be purchased in Europe, 
 its price will necessarily be raised by the competi- 
 tion of British capital, till the profit on its impor- 
 tation be reduced to the ordinary rate. The holder 
 of foreign corn will take care to sell it at such a price 
 as will only leave him this profit, and no more. The 
 prices of grain in Europe will, accordingly, be found 
 still to keep pace with those in Britain. For twenty- 
 four years prior to the year 1794, the price of wheat 
 in Dantzic, with the exception of only two years, 
 did not rise to 40s. a quarter. The deficient crop of 
 1794, and the high prices in Britain, raised it to 
 58s. in 1795 ; and from the same cause it rose, in 
 1800 and 1801, to 72s. and 73s. ; and in 1817 and 
 1818, to 92s. and 70s. ; and it is, indeed, obvious, 
 that where the trade is free, corn cannot be mate- 
 rially higher in one country than in another. 
 
 Several writers of distinction, among others Mr 
 Ricardo and Mr Maculloch, propose to lay a duty 
 of 5s. a quarter on the importation of wheat, in order 
 to countervail the unequal duties with which they 
 state that the land in Great Britain is burdened, 
 and to grant a bounty to the same amount on expor- 
 tation ; or a drawback, as they term it, for the pur- 
 pose of guarding against a superabundant produce, 
 and an undue fall of prices. It is by restraints on 
 importation, and bounties on exportation, that the 
 corn trade has "always been held in bondage ; and 
 in admitting the expediency of those restrictions, we, 
 
MR RICARDO'S PROPOSED DUTY. 223 
 
 in a manner, give up the cause of free tracie ; we quit 
 the vantage-ground of principle, to commence an in- 
 conclusive dispute about mere details. If the land 
 is burdened with unequal taxes, they ought to be 
 pointed out, that they may be repealed. There is 
 no other mode of redressing the grievance. Unjust 
 taxes on land cannot be countervailed by unjust 
 taxes on commerce. Equal taxation is not to be 
 attained by such a process. A direct indemnity to 
 the land, if any claim for indemnity could be made 
 out, would be the better policy, in place of indirect 
 attempts at compensation, by sending its produce 
 abroad and raising its price, as if plenty were an evil to 
 be guarded against ; as if it ever could be necessary to 
 protect the land against the consequences of its own 
 fertility, by paying for exporting part of the home 
 supplies. This was the narrow policy of the Dutch, 
 who, when their spice islands produced too largely, 
 burnt part of the crops to enhance the price of the 
 remainder. No legislative skill can guard agriculture 
 against the effect of varying prices ; nor does it re- 
 quire this protection more than any other branch of 
 industry. The abundance and cheapness of corn, 
 though it may occasion a fall of rents, is a great 
 >lessing to the community at large ; and the pro- 
 ved bounty on the exportation of its produce is as 
 mnecessary, as it would, like every other contrivance 
 >r the encouragement of trade, be entirely inefficient. 
 Whether a country shall export or import grain, de- 
 pends on the price ; which, again, depends on many 
 concurring causes, deeply connected with the general 
 state of industry and wealth. A bounty of 5s. on 
 
224 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 the quarter of wheat would have no effect in convert- 
 ing Great Britain from an importing into an export- 
 ing country. It would not nearly countervail the 
 difference of price in the respective markets of this 
 country, and of Europe. In 1822, a noted year of 
 cheapness, when the average price of wheat in 
 Britain was only 43s., the price in Dantzic was 
 29s., Id. ; in Odessa, 19s., 8d. ; in Rotterdam, 34s. 
 lid. ; add for freight and other expences, 10s.; which 
 would bring the price of British wheat to 53s. 3d. 
 before it could reach the market in Dantzic, to enter 
 into competition with corn about half its own price. 
 There is nearly the same disparity of price between 
 the British and every other market ; so that without 
 a bounty, not of 5s., but of 20s. or 30s., the produce 
 of Britain would have no chance of a sale in the 
 cheaper markets of the Continent. 
 
 It is by no means clear, however, that the land 
 has any claim for compensation on account of un- 
 equal burdens ; nor is it likely that, holding the rod 
 of taxation in their own hands, the landlords would 
 lay it too heavily on themselves ; and accordingly, in 
 the distribution of the public burdens, those con- 
 nected with land have been exempted from several 
 taxes to which others are liable ; such as, insurance 
 duties on farm stock, duties on horses employed in 
 husbandry, the legacy duties, and others. The bur- 
 dens chiefly complained of as pressing unequally on 
 the land, are the land tax, the tithes, the church 
 rates, the poor rates, and county rates. Of these, 
 the land tax, from the improved value of the land, 
 bears too small a proportion to the rent to afford 
 
LAND NOT UNEQUALLY BURDENED. 225 
 
 any subject of complaint ; and the tithes were ori- 
 ginally the property of the Church, they never be- 
 longed to the landlord, and their payment to the 
 rightful owner can hardly be counted among his un- 
 equal burdens. The poor rates affect not merely the 
 land, but houses, and manufacturing establishments, 
 such as mills and factories ; and it has been estimated 
 that these pay their fair quota of this tax. At any 
 rate, there is certainly no such inequality as to call 
 for a compensation to the land by an artificial rise in 
 the price of its produce. Good roads, the expense 
 of which is partly defrayed by highway rates, chiefly 
 benefit the land, by affording to its produce an easier 
 access to markets. On the whole, therefore, this 
 plea of compensation in favour of the land appears 
 to rest on no clear or intelligible ground ; and even 
 if land were unequally taxed, the error is not to be 
 corrected by another unequal tax on the whole com- 
 munity. 
 
 An exportation of gold, in payment of corn ex- 
 ported, a drain on the Bank for specie, and commer- 
 cial distress in consequence, are enumerated among 
 the other evils of the corn laws ; and the importa- 
 tion of corn, as of any other commodity, no doubt 
 increases the foreign debt of the country, for which 
 an equivalent must be given. Corn, when imported, 
 however, no more requires to be paid in gold than 
 any other article, such as cotton, or wool, which 
 swells the list of imports ; an excess of which above 
 the exports, occasions an unfavourable exchange, 
 and an exportation of the precious, metals. It is 
 from the general course of commerce, and not 
 
 Q 
 
226 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 from the importation of any particular commo- 
 dity, that the mass of specie which floats in the 
 great market of the world, receives its impulse 
 and direction. The imports of Great Britain, for 
 several years, have amounted in value to above 
 60,000,000. Their official value, in 1842, was 
 64,377,962. An additional import of corn, to the 
 amount of 2,000,000 or 3,000,000 of quarters, could 
 hardly make such an addition to the debt as to 
 require to be paid wholly in gold. Great Britain is 
 a vast storehouse of goods, assorted for all the various 
 uses of life, in which the importers of corn could 
 not fail to find articles of use or luxury, to suit 
 the foreign market. It could not be necessary to 
 send gold alone in exchange for corn, from the want 
 of other suitable equivalents. So great a quantity 
 of gold besides, to the amount, we must suppose, of 
 4,000,000 or 5,000,000 sterling, could not be 
 taken into the circulation of those countries from 
 which corn is received. It would overflow in all the 
 channels of trade, and would, in consequence, be 
 immediately sent abroad in exchange for goods. 
 But, in this case, would not the first exchange be for 
 goods rather than for gold? Would gold be de- 
 manded in those countries where it was not required 
 in the circulation, and where it could not be used, 
 and where it would be immediately exported in 
 exchange for goods ? If the purchase of corn, or any 
 other expense abroad, subjected the Bank to a drain 
 of specie, this effect would invariably follow, in every 
 case when corn was purchased abroad, or any other 
 foreign expense was incurred. This, however, is far 
 
FOREIGN CORN NOT PAYABLE WHOLLY IN GOLD. 227 
 
 from being the case. We find the stock of specie 
 in the Bank declining, sometimes when there is 
 no importation of corn, or any other expenditure 
 abroad ; at other times increasing when corn is 
 flowing into the country. The expenditure of Great 
 Britain, in the West Indies and in Europe, during 
 the first four years of the war which commenced in 
 1793, amounted to 33,510,779 ; besides the grain 
 imported in the four years ending in 1796, estimated 
 in value at 8,944,012. 1 All this foreign expendi- 
 ture was defrayed without any great demand for 
 gold, or any serious pressure on the Bank, until near 
 the end of the year 1795. In August of that year, 
 the stock of bullion amounted to 5,136,350. In 
 1796, the foreign expenditure continued, along with 
 another cause, more powerful than any, to drain the 
 Bank of its specie ; namely, distrust and domestic 
 alarm, by which, in 1797, the well-known suspension 
 of payments was occasioned. Nor in the subsequent 
 history of the Bank, will the drain of specie be found 
 to correspond with the importations of corn. From 
 28th February, 1824, to the same date in 1826, 
 the specie in the Bank of England declined from 
 13,810,060 to 2,459,510 ; 2 being to the amount 
 >f 11,350,550. In 1824, the importation of corn 
 was trifling ; and in 1825, it did riot amount, of all 
 >rts, to more than 1,057,078 quarters ; for the pay- 
 Lent of which, even if gold had been demanded, so 
 
 1 Report of Lords' Committee of Secrecy, p. 144. 
 
 2 Appendix to Report from Committee on Bank of England, 
 p. 23. See, also, Report of the Secret Committee on the Bank 
 Charter, and the Reports of the several Committees on Banks of 
 Issue, for 1840 and 1841. 
 
228 PROTECTING DUTIES ON AGRICULTURAL PRODUCE. 
 
 large a sum as was drawn out of the Bank would not 
 nearly have been required. In the several years of 
 1828,1829,1830, and 1831, the importations of wheat 
 amounted to 841,828, 1,363,487, 1,700,548, and 
 1,487,807 quarters. The bullion in the Bank of Eng- 
 land amounted, in February 1828, to 10,347,290 ; 
 from which it declined to 6,795,530 in August 
 1829 : in February 1830, it had increased to 
 9,171,000 ; and in August of the same year, though 
 large importations of corn had in the meantime 
 taken place, to 11,150,480. In 1838, wheat was 
 imported to the amount of 1,241,460 quarters. The 
 bullion in the Bank amounted, in January, to 
 9,892,000, at which it continued throughout the 
 year 1838, notwithstanding the influx of foreign 
 grain ; and on the 24th December, it still remained 
 at 9,594,000. In 1839, the import of wheat was 
 2,534,556 quarters, and the specie in the Bank 
 declined to 2,471,000 in the beginning of August. 
 There were, however, other causes for this decline 
 in that year ; .namely, the commercial distress and 
 distrust which generally prevailed abroad, as well as 
 at home, and which contributed materially to the 
 drain which the Ba,nk then experienced. That it 
 was not the importation of grain which cleared the 
 Bank of its specie, appears from this, that after the 
 stock was reduced, in August 1839, to its lowest 
 point, namely, to 2,471,000, foreign grain continued 
 to flow into the country throughout the remainder of 
 the year, as well as in 1840, which could not have 
 been paid with specie drawn out of the Bank ; seeing 
 that its stock continued all the while to increase, 
 
FOREIGN CORN NOT PAYABLE WHOLLY IN GOLD. 229 
 
 and in December, 1839, had risen from 2,471,000 
 to 4,532,000. During the years 1840 and 1841, 
 wheat and flour were imported to the amount of 
 between 2,000,000 and 3,000,000 quarters; by which, 
 however, the stock of bullion in the Bank does not 
 appear to have been affected, having continued dur- 
 ing the year at about 4,000,000. In 1842, grain 
 was imported in large quantities, and was brought 
 out of bond, under Sir Robert Peel's act, to the 
 amount of 2,457,931 quarters. Specie, in the mean- 
 time, continued to flow copiously into the Bank, 
 having gradually increased to between 9,000,000 
 and 10,000,000. From all these facts we may 
 infer, that an importation of foreign corn does not 
 necessarily, any more than other articles, require 
 to be paid for by an exportation of gold ; and that 
 the drain of its cash, to which the Bank has been 
 frequently exposed, has its origin chiefly in other 
 causes. America does not import, but regularly 
 exports corn for the supply of other countries ; yet 
 its banks are frequently assailed with demands for 
 specie which they cannot answer, and are compelled, 
 in consequence, to suspend their cash payments. 
 
 The chief objection to those laws for regulating 
 the importation of corn is, the example of mono- 
 poly which they hold out to other nations, and 
 which they are nowise unwilling to follow ; and 
 they are peculiarly inexpedient on the part of Great 
 Britain, excelling in every mode of ingenious in- 
 dustry, and commanding every market, by the su- 
 periority of her produce. Her industry already 
 
 languishes under the baneful influence of rival 
 
230 ON METALLIC CURRENCY. 
 
 monopolies, and is still farther threatened. Other 
 nations require, or think they require, protection 
 against her too powerful competition. America has, 
 accordingly, increased the import duties on British 
 goods, as has also France on British linens; the 
 Germanic Association are proceeding in the same 
 course ; and her own narrow policy silences all 
 complaints against those restrictions, however false 
 in principle, and however prejudicial to the interests 
 of all commercial states. The real evil, therefore, of 
 those restrictions, is not so much any limitation in 
 the supply of corn, or any material rise which they 
 occasion in the price, as the retaliation to which 
 they give rise from other nations, by which Britain 
 is excluded from foreign markets ; and the monopoly 
 directed against the commerce of others thus, in the 
 end, recoils on our own. 
 
 CHAPTER XI. 
 
 ON METALLIC CURRENCY. 
 
 The currency of a country consists of different metals, according to 
 the progress of wealth and improvement. The functions of these 
 different metals pointed out. Distinction between the currency 
 used in the main payments, and the inferior or subsidiary cur- 
 rencies used in the smaller payments. In all the currencies of 
 Europe, copper a subsidiary currency. Silver a subsidiary cur- 
 rency in Britain, though not in any other country. This great 
 change effected in the reign of William III. Account of the 
 state of the currency at that period. Proposed remedy of Sir 
 
COINS SUITED TO THE AMOUNT OF PAYMENTS. 
 
 Isaac Newton for the scarcity of the silver coin. Inconvenience 
 of using two metals in the large transactions. Exclusive use of 
 gold in the main payments. The perfection of the British cur- 
 rency. Former deficient state of the silver coin in this country. 
 New copper coin issued. 
 
 THE reasons that have induced mankind to con- 
 vert metals into coin have been already explained 
 by Dr Smith ; and it is, indeed, sufficiently obvious, 
 from a consideration of their qualities, that no other 
 substance would answer the purpose equally well. 
 In different periods of improvement, different metals 
 have been fixed upon for this purpose ; and the same 
 metals have also, at different times, prevailed more 
 or less in the currency of every country. The use 
 of money being to facilitate exchanges, it will natur- 
 ally consist of the metal most suited to the value of 
 the exchanges, and of course to the value of the pay- 
 ments which it is designed to effect. When the 
 payments are large, it will be most convenient to 
 use a metal containing a great value in little bulk ; 
 as in that case the same sum can be counted and 
 weighed in much less time. But for trifling pay- 
 ments, a coarser metal will answer better ; as a 
 precious metal could not be conveniently divided 
 into sufficiently small portions for the purpose re- 
 quired. The smallest payments occur in the retail 
 trade ; and it is for this trade, accordingly, that 
 coins of a very low denomination are found neces- 
 sary. By giving the retail dealer a measure of 
 value for the smallest portion of his goods, he can 
 suit his trade to the demands of his customers, how- 
 ever trifling. Farthings, accordingly, which have 
 
232 ON METALLIC CURRENCY. 
 
 been long disused in the general payments of the 
 country, have been sometimes required in London 
 for the retail trade in beer, which being sold in small 
 quantities, a coin proportionably small is wanted to 
 measure the exact value of what is thus purchased. 
 With a large coin there could be no accurate 
 measurement of value ; and no business could be 
 done, unless under some different and less convenient 
 arrangement. Grocers, also, and other retail dealers, 
 occasionally require farthings in their minute dealings. 
 In an early stage of society, when nations 
 are poor, and their payments trifling, copper has 
 frequently been known to answer all the purposes 
 of currency; 1 and it is coined into pieces of very 
 low denominations, in order to facilitate the incon- 
 siderable exchanges which then take place. In the 
 early ages of the Roman republic, a copper coinage 
 effected all the necessary payments ; and it was not 
 till conquest had introduced luxury and wealth, that 
 the Romans found it necessary to employ silver 
 coins. Their copper coins were also of very low 
 denominations. Copper was formerly used in Scot- 
 land for the main payments ; and, within the last 
 fifty years, aged persons were alive, who, in the 
 beginning of the last century, had seen the tenant 
 carrying a sack of copper to the landlord, in pay- 
 ment of his rent. There were, also, no less than 
 four denominations of copper below a halfpenny. 
 
 The general wealth of a country is very accu- 
 rately measured by the nature of its payments, 
 
 1 Lord Liverpool on the Coin, p. 146. 
 
FUNCTIONS OF THE DIFFERENT METALS. 233 
 
 and the state of its coin ; and the decided preva- 
 lence of a coarse metal in its currency, joined 
 to the use of coins of very low denominations, 
 marks a rude state of society. In the progress of 
 improvement those coins fall into disuse. Being 
 chiefly used for the retail of consumable articles, 
 they are gradually thrown out of employment, as 
 the retail transactions grow more considerable, in 
 consequence of the increasing wealth of the country. 
 Silver is also, at the same time, introduced into the 
 more important transactions of commerce, in place 
 of copper ; and as wealth continues to increase, and 
 to be more equally diffused, gold is, at last, the only 
 metal in which the larger payments can be effected. 
 The business of the currency thus naturally divides 
 itself into two distinct departments: the duty of 
 effecting the main payments being reserved for the 
 more precious metal ; while the inferior metals are 
 still retained for more trivial exchanges, and are thus 
 merely subservient to the main currency. 
 
 Between the first introduction, however, of a more 
 precious metal into the currency of a country, and its 
 exclusive use in the main payments, there is a wide 
 interval ; and the payments of the retail trade must, 
 in the meantime, have grown so considerable, in con- 
 sequence of the increase of wealth, that they can, in 
 part at least, be conveniently managed by the new 
 and more valuable coin ; since no coin can be used 
 for the main payments which is not suited, at the 
 same time, to the transactions of the retail trade. It 
 is from the consumer that every trade, whether it be 
 a trade of production or manufacture, derives the 
 
234 ON METALLIC CURRENCY. 
 
 ultimate return of its capital. The capital of the 
 retail dealer is immediately replaced by the money 
 of the consumer ; the retail dealer transmits what he 
 receives for the sale of his goods to the wholesale 
 merchant, who, in like manner, pays it away to the 
 manufacturer or to the farmer : so that though the 
 most precious metal might be most conveniently used 
 in the main payments, the currency which carries 
 on the retail business must still mix in all the 
 great transactions of trade. It will be collected 
 by the retail dealer in sufficient quantities for his 
 wholesale payments, by whom it will accordingly 
 be paid away in large sums for his goods; and 
 thus it will circulate and perform the functions of 
 the main currency. Though all the larger payments 
 might be more conveniently effected in gold, yet a 
 country must still have a currency suited to the small 
 scale of its retail transactions ; since its consumable 
 commodities could not otherwise be divided into 
 sufficiently small portions for the wants of the com- 
 munity. That metal, therefore, whether silver or 
 copper, which will both answer this purpose, and will 
 also effect, though with less convenience, the main 
 payments, must still assist in the more important 
 transactions of the country. 
 
 In all the metallic currencies of Europe, copper is 
 a subsidiary currency ; no payment being ever made 
 in that metal, unless it be too inconsiderable for any 
 of the silver coins. But although gold has been long 
 introduced into all the continental currencies, it has 
 not supplanted silver in the main payments. The 
 nature of payments on the Continent does not, it 
 
CHANGE EFFECTED IN THE BRITISH CURRENCY. 235 
 
 seems, permit the use of silver as a subordinate cur- 
 rency. Although gold would clearly answer better 
 for the greater payments, yet silver must still be 
 collected in large sums by the retail dealers. The 
 disposal of their goods must still bring them a con- 
 siderable portion of silver currency, which they can 
 employ in no other way than in paying the demands 
 of the wholesale merchant. In Britain, it is evident 
 that the quantity of silver in circulation does not 
 exceed what is wanted for the smaller payments, as 
 it has been often difficult to procure change for the 
 gold coins ; and silver coin has at times been sold 
 for a premium. Silver is hardly ever seen in a larger 
 sum than twenty shillings ; and, in point of fact, few 
 payments of that amount are ever made in silver. 
 
 Before the reign of William III., silver, we are 
 told, 1 was brought in large bags to the Treasury in 
 payment of the national revenue. But at this period 
 the great change took place, which for ever excluded 
 it from the main payments ; and the facts then dis- 
 closed deserve the more attention, as we have no 
 exact knowledge of any such crisis in the currency 
 of other countries. It would be interesting to trace, 
 if we had materials for so curious an inquiry, the rise 
 and decline of a particular metal in the currency of 
 a country ; but the want of facts is a bar to such an 
 investigation. The period when silver was substi- 
 tuted for copper in the currencies of Europe is buried 
 in obscurity: for such matters, unfortunately, sel- 
 dom engage the notice of historians. It is to war 
 and politics that their attention is chiefly directed ; 
 
 1 Lord Liverpool on the Coin. 
 
236 ON METALLIC CURRENCY. 
 
 while, for those favourite topics, the precious details 
 of domestic history are thrown into the shade. In 
 most parts of Europe, in America, and throughout 
 India, silver still continues to he used in the main 
 payments ; and we have no data to calculate when 
 gold may take the lead in the currencies of those 
 countries. Such an era may not occur in the revo- 
 lution of centuries ; and in every view, therefore, it 
 is worth while to attend to the state of the British 
 currency at the period alluded to. The exclusive 
 introduction of gold into the main payments of Eng- 
 land, was a clear proof that the returns of the retail 
 trade were by this time chiefly made in that metal ; 
 which might have been the case though no single 
 payment had ever exceeded, or even equalled, any of 
 the gold coins ; because, in the general abundance of 
 gold, and scarcity of silver, gold coins would natur- 
 ally be offered for small sums, and a balance of silver 
 demanded in return ; by which means gold, by thus 
 assisting in the retail trade, and economizing the use 
 of silver, even for the smaller payments, would pre- 
 vent its accumulation by the retail dealer ; and as it 
 was formerly found necessary, when silver was used 
 for the retail trade, to employ it also in the great 
 payments, in like manner gold cannot now be exclu- 
 sively employed in the main payments, without 
 occasionally doing the duty of silver in the retail 
 trade. If gold were not used for this purpose, more 
 silver would be required ; which would, in that case, 
 be collected by the retail dealer in sufficient quanti- 
 ties for his wholesale payments, and would thus 
 encroach on the functions of the higher currency. 
 
DIMINISHED VALUE OF THE SILVER CURRENCY. 237 
 
 The substitution of gold for silver in the larger 
 transactions must immediately occasion an excess of 
 the latter currency, and consequently a fall in its 
 value, which affords the necessary temptation to melt 
 it down. At the time the great change took place 
 in the currency of Britain, the silver coin had been 
 so much debased by clipping, and by the wear and 
 tear of circulation, that a guinea passed for 30s. To 
 remedy this defect, a new silver coinage had been just 
 issued, to the amount, in tale, of 6,882,908, 19s. 7d. 
 But silver being now excluded from the main pay- 
 ments, the quantity issued was far more than could 
 be employed in the smaller payments. The excess, 
 accordingly, encumbered the circulation, and the 
 silver coin fell 4| per cent, under its intrinsic 
 value; and being worth more in bullion than in 
 coin, the greater part of the excellent currency re- 
 cently issued, was, in consequence, converted into 
 bullion, and exported. Though government had 
 spent about 2,700,000 on this coinage of silver, 
 yet, in seventeen years, it had almost wholly disap- 
 peared. 
 
 Alarmed by this unaccountable diminution of the 
 silver coin, the matter was referred to Sir Isaac 
 Newton, who, in his report to the Lords of the 
 Treasury, showed, from the relative value of gold 
 and silver all over Europe, that silver was under- 
 rated, in the British currency, in proportion to gold ; 
 and on this account, being more valuable in bullion 
 than in coin, it was melted down, and exported. He 
 mentions, besides, an important fact in regard to the 
 currency of Sweden, which, being duly considered, 
 
238 ON METALLIC CURRENCY. 
 
 affords the true explanation of the change then going 
 on in England. In Sweden, the value of silver was 
 higher in proportion to gold than in any other part 
 of Europe ; and Sweden, it appears, which had 
 formerly been content with a copper currency, began 
 now to abound in silver. The same change was 
 going on both in England and Sweden. Their in- 
 creasing wealth required a more valuable currency for 
 their cash transactions ; and the high price of silver 
 coin in Sweden, and its low price in England, were 
 necessary to perfect the desired improvement. 
 
 To the accident of silver being underrated in pro- 
 portion to gold, Lord Liverpool, in his valuable work 
 on the British coin, ascribes in part its exclusion 
 from the main payments. The same cause, however, 
 had frequently before excluded silver from the circu- 
 lation ; but it was soon found that it could not be 
 wanted ; and it was, therefore, more accurately 
 valued, for the purpose of being again introduced 
 into the currency, and used as formerly in the main 
 transactions. 
 
 It is evident that the coin used for the larger pay- 
 ments can only pass current at its intrinsic worth ; 
 and all attempts, accordingly, to alter its value, either 
 by debasement, or by raising its denomination, have 
 uniformly produced a corresponding rise of prices. 
 Men are alarmed when they see the fundamental 
 principles of value thus shaken ; and they plainly 
 perceive, that the ruin and injustice of such arbitrary 
 innovations must finally bring back the coin to the 
 sure standard of intrinsic worth. They refuse to 
 transfer their property on the faith of this artificial 
 
INFERIOR CURRENCIES. 239 
 
 and uncertain value stamped upon it ; and, in all 
 their transactions, they are guided, not by its no- 
 minal, but by its real value. They do not choose 
 to give up the security of substantial property 
 for the guarantee of tyranny and fraud. But in- 
 trinsic worth does not appear necessary to a sub- 
 sidiary currency, because its depreciation cannot 
 be attended with such injurious effects. If we 
 suppose copper, which, throughout the whole of 
 Europe, is used solely for the smaller payments, to 
 be depreciated 50 per cent., so that twenty-four half- 
 pence really contained copper to the value of six- 
 pence, how trifling is the risk of taking such a cur- 
 rency in payment, so long as it is confined to small 
 sums ? Though it should be even found necessary to 
 make it pass for its intrinsic value, the loss of an in- 
 dividual must still be trifling. He might possibly 
 have in his possession twenty-four of these halfpence, 
 and in that case he would lose exactly the half of 
 that sum ; but the apprehension of such a loss would 
 never induce him to compare the value of copper in 
 coin and its value in the market ; still less would he 
 refuse it in case he found any deficiency. When 
 payments amount to 1000 or 2000, the case is dif- 
 ferent : it then becomes of importance to examine 
 the currency in which the payment is made, both as 
 to its weight and fineness, and to exact strict com- 
 pensation for every deficiency. Without this neces- 
 sary caution, trade would be a continual fraud, to 
 which no man could submit without being speedily 
 ruined. The coin, therefore, in which the greater 
 payments are made, must in all cases be brought to 
 
240 ON METALLIC CURRENCY. 
 
 the test of its intrinsic worth ; while it is the pecu- 
 liar distinction of a currency confined to the smaller 
 payments, that it will circulate for an arbitrary 
 value. 
 
 In Rome, while copper was the prevailing coin, it 
 was current only for its intrinsic worth ; and in the 
 first Punic war, it was, accordingly, by diminishing 
 its weight, that the public, and all other creditors, 
 were defrauded. Silver had been introduced about 
 five years before the commencement of that war j 1 
 and it gradually superseded copper in the main pay- 
 ments, though we cannot fix the precise period of 
 this change. The fact seems certain, however ; and 
 it is on this ground that the historian Gibbon defends 
 Justinian 2 for taking one-seventh from the weight of 
 the copper coin. Copper was, at this latter period, 
 confined to the smaller payments ; and on this ac- 
 count, what was formerly a mischievous fraud, was 
 now an improvement. Gold was introduced into 
 the Roman currency sixty-two years after silver ; 3 but 
 it never seems to have excluded silver from the main 
 payments ; for the same historian, in his account of 
 the Roman taxation, 4 states, that it required a par- 
 ticular law to enforce the payment of the public 
 revenue in gold. Pliny mentions, that the tribute 
 of the conquered provinces was formerly exacted in 
 silver ; and he expresses his wonder that gold was 
 
 1 Metrologie ; ou Traite des Mesures, Poids, et Monnoies des 
 auciens peuples et moderne ; Par M. Paucton, p. 385. 
 3 Decline and Fall of the Roman Empire, vol. iii., p. 86. 
 3 Metrologie, &c., p. 412. 
 3 Vol. iii., p. 106. 
 
INFERIOR CURRENCIES. 
 
 241 
 
 not preferred. Gold, however, it appears, had after- 
 wards become the more desirable currency, though sil- 
 ver had been still collected in sufficient quantities for 
 the main payments, otherwise the order to receive gold 
 alone, in payment of taxes, would have been useless. 
 
 In the currencies of Europe, where copper is con- 
 fined to the smaller payments, it passes for whatever 
 value is fixed on it, without any examination either 
 of its weight or fineness. Before the year 1798, the 
 copper coin of Great Britain was in a very debased 
 state ; even the mint coins of England, when newly 
 issued, were rated a good deal higher than their value 
 in copper ; a great proportion of them was, besides, 
 much worn. The copper coin of Scotland was in a 
 worse state ; and the copper currencies of both coun- 
 tries were composed, in a great measure, of counter- 
 feits. Although these counterfeits were occasionally 
 refused, yet the mint halfpence, whether English or 
 Scots, were always taken in payment, although their 
 current value was probably double their real value ; 
 and even the counterfeits, after some little clamour, 
 were current equally with the mint coins. Private cop- 
 per coins also passedfor the same value, and with equal 
 facility, as other coins, until their circulation was finally 
 stopped by the new issue of copper coins in 1798. 
 
 In the currency of Britain, intrinsic worth is not 
 essential to the circulation of the silver coin ; and 
 it has accordingly long been current at an arbitrary 
 value. Lord Liverpool estimates that the silver coins 
 which were in circulation in his time had lost 29 
 per cent, of their weight ; yet, twenty-one of these 
 worn and debased shillings still exchanged for a 
 guinea, which was perfect in its weight. During 
 
 R 
 
242 ON METALLIC CURRENCY. 
 
 the reign of King William, when the silver coin was 
 in the same debased state, and when the gold coin 
 was perfect in its weight, the case was different ; 
 thirty worn and debased shillings being at that time 
 given for a guinea. Silver was then used in the 
 main payments ; and it would not circulate but for 
 its intrinsic worth. Since the great reformation of 
 the currency in the reign of King William, it has 
 been confined to the smaller payments ; and its cur- 
 rent value has, in consequence, lost all connexion 
 with its intrinsic value. At present, also, the silver 
 currency has lost about 10 per cent, of its intrinsic 
 worth ; yet twenty shillings exchange, without any 
 difficulty, for a sovereign of its full weight. On the 
 other hand, when it was lately found that the sove- 
 reigns, from the wear and tear of circulation, had 
 lost part of their weight, though not to the amount 
 of above 1 or 2 per cent., their currency was imme- 
 diately checked, their exact weight ascertained, and a 
 strict allowance exacted for the smallest deficiency; by 
 which the peculiar position which each of these metals 
 occupied in the system was clearly marked out. 
 
 Dr Smith has entirely overlooked this peculiar 
 property of a subsidiary currency, and he falls, in 
 consequence, into several mistakes. In describing the 
 state of the British currency, at the time he wrote, 
 he observes, " Twelve copper pence contain half-a- 
 pound avoirdupois of copper of not the best quality ; 
 which, before it is coined, is seldom worth seven- 
 pence in silver. But as by the regulation, twelve 
 such pence are allowed to exchange for a shilling, 
 they are in the market considered as worth a shilling. 
 Even before the late reformation of the gold coin of 
 
INFERIOR CURRENCIES. 243 
 
 Great Britain, the gold that part of it at least which 
 circulated in London and its neighbourhood was 
 in general less degraded below its standard weight 
 than the greater part of the silver. One and twenty 
 worn and defaced shillings, however, were considered 
 as equivalent to a guinea, which, perhaps, was worn 
 and defaced too, but seldom so much so. The late 
 regulations have brought the gold coin as near, per- 
 haps, to its standard weight as it is possible to bring 
 
 the current coin of any nation The silver 
 
 coin still continues in the same worn and degraded 
 state as before the reformation of the gold coin. In 
 the market, however, one and twenty shillings of this 
 degraded silver coin are still considered as worth a 
 guinea of this excellent gold coin." The singular 
 fact of twenty-one of these debased shillings exchang- 
 ing for a guinea of its full weight and fineness, is here 
 clearly stated by Dr Smith ; but his explanation of 
 it, namely, that the " most precious metal regulates 
 the value of the whole coin," is far from satisfactory. 
 Why should one sort of coin regulate the value of 
 another, because it is more precious? i. e. because 
 it contains a greater value in a smaller bulk. There 
 is no reason in this, and it is besides contrary to 
 experience ; for we find the guinea exchanging in the 
 reign of King William for thirty shillings, because 
 they were worn and degraded, and had lost part of 
 their value ; and the same guinea only exchanging 
 afterwards for twenty-one of the same still more worn 
 and debased shillings. 
 
 Lord Liverpool has described, with more accuracy 
 than any former writer, the state of the British coin, 
 and the relations of its various currencies. But his 
 
244 ON METALLIC CURRENCY. 
 
 views are occasionally perplexed and inconsistent ; 
 and though he points out very clearly the change 
 which took place in the currency during the reign of 
 William III., and the subsequent limitation of silver 
 to the smaller payments, together with its high value 
 in circulation, he fails to explain the principle, and 
 frequently overlooks all the necessary conclusions of 
 his own statements. He had himself a principal 
 superintendence of the copper currency issued in 
 1798 ; and it is remarkable, that though he observed 
 the silver coin current without any inconvenience, 
 for more than its real value, he directed the intrinsic 
 value of the new copper currency to be made equal 
 to its current value ; thus causing its destruction, 
 which, in point of fact, soon took place from a rise 
 in the value of the metal of which it was made. The 
 true explanation of the facts stated is to be found 
 in the limitation of silver and copper to the smaller 
 payments ; in consequence of which it is no longer 
 worth while to make any nice estimate of their 
 intrinsic worth. 
 
 Money being the foundation of all mercantile con- 
 tracts, it is of great consequence that it should remain 
 steady in its value. The value of coin is, however, 
 exposed to vary : 1st, From the varying value of the 
 metals of which it is made ; and, 2dly, From the 
 wear and tear of circulation ; light and worn coins 
 being inferior in value to those that remain perfect 
 in their weight. When two metals are used in the 
 main payments, this inconvenience is the more felt, 
 as the coins of the respective metals are liable to 
 vary, not only in relation to commodities, but in 
 relation also to each other ; a rise in the value of 
 
ONE METAL BEST SUITED TO MAIN PAYMENTS. 245 
 
 cither metal destroying the established proportions 
 of the currency, and rendering it profitable to convert 
 coin into bullion. When silver coin, for example, is 
 ordered by the regulations of the mint to be ex- 
 changed for gold coin at less than its intrinsic value, 
 there is an obvious advantage in converting it into 
 bullion, and selling it for what it may bring in the 
 market. If either of the two metals, therefore, is 
 undervalued in coin, it is generally melted down and 
 restored to its true value in bullion. These incon- 
 veniences are inseparable from a metallic currency ; 
 as, however accurately gold and silver may be esti- 
 mated in the currency, there is no guarding against 
 the varying value of those metals in relation to each 
 other; and, in that case, it becomes profitable to con- 
 vert into bullion the coin that is current at an under- 
 value. 
 
 Both gold and silver have been alternately ban- 
 ished from the currency of England by an erroneous 
 estimation of their value. They have occasionally, 
 also, passed current at a value diiferent from that 
 set upon them by the regulations of the mint. After 
 the discovery of the American mines, silver fell in its 
 value when compared with gold ; the gold coins were 
 in consequence either melted down or exported ; and 
 James I. was under the necessity of raising their 
 value nearly 11 per cent, when compared with the 
 silver coins. It appeared, however, that this rise in 
 the value of the gold coin was too great ; as the silver 
 coin, after this alteration, was almost wholly ban- 
 ished from circulation. The value of silver, however, 
 when compared with gold, continued very rapidly to 
 fall ; so tha-t a new valuation of gold became very soon 
 
246 
 
 ON METALLIC CURRENCY. 
 
 necessary, and the currency was exposed to continual 
 disorder from the constantly declining value of silver, 
 until at length it reached its lowest depression. 
 
 The exclusive use of the more precious metal in 
 the main payments, constitutes the perfection of the 
 British currency. It gives a unity to the whole 
 system, in which is assigned to each of the different 
 metals the distinct and appropriate duty of measur- 
 ing, the precious metal the larger, and the inferior 
 metals the lesser values. The shilling is now merely 
 a division of the pound as the halfpenny is of the 
 shilling ; and from the limited amount of value which 
 they severally measure, intrinsic worth not being 
 necessary to their circulation, the currency is freed 
 from the confusion incident to the varying value of 
 the different metals in relation to each other, or to 
 a wrong estimate of their value, in consequence of 
 which one or other of them has often been melted 
 down and disappeared. This simplicity in the plan 
 of the currency, which obviates the risk of all internal 
 disorder, has been often mistaken for a defect ; and 
 it has been suggested, that silver should be again 
 introduced, as a measure of value in the higher trans- 
 actions of trade, along with gold ; though it cannot 
 be doubted, that where the value is above a pound, 
 gold is the preferable measure ; and if the value be 
 measured and ascertained in gold, to what pur- 
 pose should it be re-measured in silver. In all mea- 
 sures, whether of space, of size, or of weight, we 
 use suitable denominations for what is large and 
 what is small. If we ascertain the distance from 
 London to Edinburgh in miles, we scarcely think 
 it necessary to compute it in furlongs, and in feet : 
 
IN UTILITY OF TWO MEASURES OF VALUE. 247 
 
 on the same principle, having measured the largest 
 value with the most precious metal, which best an- 
 swers the purpose, why seek to measure it by a more 
 tedious process in silver ? No authority, besides, 
 could again force this inferior metal into the main 
 circulation of Britain. The coins of which a metallic 
 currency must chiefly consist, and their several uses, 
 depend on the amount of the cash transactions in 
 which they are employed. The limitation of silver 
 to the smaller payments, was brought about by the 
 progress of the country, and the increasing extent of 
 its cash transactions; arid while they continue at 
 their present amount, silver is not of the value neces- 
 sary to transact the main payments. It is not the 
 currency which the retail dealer collects in the sale 
 of his goods ; and is not, therefore, in sufficient 
 quantity for doing the duty of the main currency. 
 If it were even forced into circulation for a time, it 
 would soon be melted down, and disappear ; as when 
 it was formerly issued in so large a quantity in the 
 reign of William III. ; and gold, from its greater 
 convenience, would be introduced in its stead. 
 
 Those who have had the charge of the British 
 coin never seem to have thought of any suitable plan 
 for the regulation of the inferior currencies ; and the 
 silver coin was, for nearly a century, totally neglected ; 
 and consisted accordingly of old and worn coins with- 
 out any remains of their former appearance ; twenty- 
 one of which, though deficient about one-third in their 
 weight, still exchanged for a guinea of its full weight. 
 The copper coinage was regulated on equally mis- 
 taken views. In 1798, 1815 tons of copper were 
 coined into penny pieces, halfpence, and farthings ; of 
 
248 ON METALLIC CURRENCY. 
 
 which, as we are informed by Lord Liverpool, intrinsic 
 worth was adopted as the basis ; by which they were 
 only rendered more heavy and cumbersome, without 
 being more useful ; and by a rise at last in the price of 
 copper, as has been already stated, were all melted 
 down, and disappeared; and in the more populous parts 
 of the country, a base currency was substituted in their 
 place. By this plan, therefore, the community were put, 
 1st, to the useless expense for metal incurred by the 
 great weight of these copper coins ; and, 2d, to the 
 loss of this excellent currency, in consequence of the 
 quantity of metal which it contained. A new silver 
 coinage has long been substituted for the old and de- 
 based silver currency ; and both the silver and the 
 copper coins that are now circulating in Britain are 
 sufficiently heavy, and might, perhaps, be somewhat 
 diminished with advantage, and certainly without 
 any loss. 
 
 With respect to the particular sum for which the 
 inferior currencies should be made a legal tender, it 
 is clear that, as the use of copper is to aid, not to 
 supersede, silver, its station in the currency is thus 
 fixed ; and it should not, therefore, be made a legal 
 tender for any sum above sixpence, the lowest silver 
 coin ; while silver, for a like reason, should not be made 
 a legal tender for more than a sovereign. In mat- 
 ters of this sort, however, laws are in general of little 
 avail. In this country, for example, when silver was 
 a legal tender for 25, it was often so scarce that it 
 was difficult to procure change for a guinea; and 
 hence no payments to that amount could ever be 
 made in silver. If silver never exceed what is wanted 
 for the smaller payments, it cannot be collected in suf- 
 
EXCESS OF THE INFERIOR CURRENCIES. 
 
 249 
 
 ficient quantities for the larger payments ; and though 
 there were no law limiting its legal tender, it could not, 
 in these circumstances, be generally offered in payment 
 of large sums. If, on the other hand, it exceed what 
 is wanted for the smaller payments, no law restrict- 
 ing its legal tender will prevent its accumulation by the 
 retail dealer, as he may soon collect a large quantity of 
 silver or of copper, though none of his payments should 
 ever exceed 20s. or even 6d. ; for which respective 
 sums the silver and the copper coins ought always to 
 be a legal tender. It has already been shown, that the 
 use of gold in the main payments necessarily implies 
 also its use in the retail trade : those who have gold 
 coins offering them for small purchases, and receiv- 
 ing with the commodity purchased a balance of sil- 
 ver in return ; by which means the surplus of silver 
 that would otherwise encumber the retail dealer, is 
 drawn off and dispersed into general circulation. 
 But if there is as much silver as will transact the 
 small payments, independent of gold, the retail dealer 
 must then receive silver for small purchases ; and it 
 must of necessity accumulate in his hands. In this 
 country, an excess of copper coin was issued during 
 the year 1798, by private traders ; and, though cop- 
 per was not a legal payment for more than sixpence, 
 the surplus soon found its way into the coffers of re- 
 tail dealers, who naturally tried, by various expe- 
 dients, to force it back into circulation, from which, 
 however, it was sure to return, and finally to settle in 
 their hands. It was accordingly found, that when 
 its circulation was stopped, copper had accumulated 
 with the retail dealers in sums of 20, 30, and even 
 50, which they were obliged finally to dispose of 
 
 
250 ON METALLIC CURRENCY. 
 
 as old copper. The evil arose from the excessive 
 issue of those coins by private traders, on whom all 
 recourse was gradually lost ; and the currency thus 
 imposed on the public was a sure source of loss 
 wherever it was accumulated. It was against an 
 evil of this sort that Swift, without seeing its precise 
 nature, wrote so powerfully in the Draper's Letters. 
 The halfpence were to be issued in Ireland for more 
 than their intrinsic worth, for the benefit of an indi- 
 vidual of the name of Wood, who had an interest in 
 their excessive issue. This, and not the overvalua- 
 tion of the coin, was the real evil ; as the obnoxious 
 currency with which the community would have been 
 overflowed, would have gradually accumulated in the 
 hands of the retail dealers, on whom it would have 
 brought certain loss. 
 
 Though no law respecting the legal tender of the 
 inferior currencies can prevent their accumulation by 
 the retail dealers, in the event of their excessive 
 issue, some such regulation seems, nevertheless, neces- 
 sary ; as a degraded currency might otherwise be 
 generally offered in payment of large sums, by which 
 means all, creditors mioiit be defrauded. 
 
 CHAPTER XII. 
 
 PAPER CURRENCY. 
 
 The value of paper dependent on the promise to pay. Its value 
 regulated by its plenty or scarcity. Depreciation the consequence 
 of over-issue. Cannot take place when payable in specie. 
 
PAPER CURRENCY FOUNDED ON CREDIT. 251 
 
 Banks. Common all over Europe. Bank of England the most 
 wealthy. Its capital. Dividend. Profits. From what sources 
 derived. Increase during the war. Decline of its business with 
 the return of peace, and the resumption of cash payments. 
 Increase of banks throughout the country. Their skilful manage- 
 ment of cash transactions. Increased facilities for the remittance 
 of money. 
 
 A CURRENCY of paper which has no intrinsic 
 worth, must depend for its circulation on credit. It 
 is merely a promise to pay on demand ; and it is only 
 on the faith of that promise that it circulates, with- 
 out which it would be of no more value than so much 
 waste paper. When this promise is punctually ful- 
 filled ; when the paper is exchanged for gold, the 
 moment it is presented for payment, its value will 
 never vary from the standard. The promise, for 
 whatever amount of gold or silver it may be, will 
 always be of the same value with the thing pro- 
 mised ; and a currency of paper solidly fixed on this 
 foundation, safely moored, as it were, to the sure 
 anchor of the precious metals, will always remain 
 steady in its value, and will answer every purpose 
 of specie, whether as an instrument of exchange, or 
 a measure of value. 
 
 The value of money, consisting either of paper or 
 of coin, is determined, like that of every other article, 
 by its plenty or scarcity. The discovery of the 
 American mines, which increased the supply of the 
 precious metals, lowered their value in proportion ; 
 and a supply of paper beyond the demands of trade 
 will, in like manner, lower its value. But a cur- 
 rency of paper convertible into specie at the will of 
 the holder, cannot be thus unduly increased; because 
 the surplus will be immediately returned on the 
 
 xS^TfoRfifev 
 
 ff^T ,mf '> 
 R UNIVERSITY } 
 
252 PAPER CURRENCY. 
 
 bank which issues it, in exchange for specie. If the 
 bank persist in re-issuing its returned notes, it will 
 be quickly admonished of its error by a continual 
 drain of cash, until the excess which encumbers the 
 circulation be in this manner thrown off. Where a 
 bank is no longer bound to pay in specie, the discre- 
 tion of its managers is the only security against 
 excessive issue ; and where this takes place, it will 
 be followed by depreciation without any remedy : 
 because a bank thus released from its engagements, 
 is closed against any return of its superfluous and 
 depreciated notes. 
 
 Of all the banks of circulation that have been 
 established in the great cities of Europe, as in Lon- 
 don, Paris, Vienna, Berlin, Petersburg, &c., the most 
 important is the Bank of England, whether we con- 
 sider its great wealth, exceeding that of any other 
 trading company, or the vast extent of its transac- 
 tions. Its capital, on which dividends are paid, 
 amounts to 10,914,750 ; and the sum lent to 
 government, to 11,015,100. The business of the 
 bank consists in the discount of mercantile bills, or in 
 advances on other securities for the accommodation 
 of trade. It acts, besides, as a great engine of State; 
 receiving and paying the interest due to the public 
 creditor ; circulating Exchequer bills ; accommodat- 
 ing government with advances on the credit of funds 
 not yet realized ; and assisting generally in all the 
 great operations of finance. The management of the 
 public debt, which increased in the course of the two 
 last wars from 249,851,628, its amount in 1792, 
 to between 700,000,000 and 800,000,000, has 
 yielded a large profit. The allowance to the bank 
 
BANK OF ENGLAND. 253 
 
 per million was in 1726, under the administration of 
 Sir R. Walpole, 360 ; it was afterwards increased 
 to 562. In 1786, it was reduced to 450, when 
 the public debt amounted to 224,000,000 ; and in 
 1807, it was still further reduced to 340 on the 
 first 600,000,000 of debt, and to 360 per million 
 on all above that sum ; at which rate it continued 
 till the year 1832, when it was provided in the act 
 renewing the charter, that an annual deduction should 
 be made from it of 120,000, leaving for the profit 
 of the bank 130,000 a-year. In 1792, the sum 
 paid by the public on this account was 99,803 ; 
 and in 1815, when the debt was swelled to its high- 
 est amount, 281,568. The public deposits with 
 the bank increased, during the two last wars, in a 
 like proportion, and yielded a large profit. There 
 is no separate account of these prior to 1807. In 
 1792, they could hardly have exceeded 4,000,000. 
 They had increased in 1806 to between 11,000,000 
 and 12,000,000 ; at which amount they continued 
 for the ten following years. From the use of this 
 money a large profit accrued to the bank, even after 
 making a deduction for the sum of three millions 
 lent in return to the government without interest. 
 The circulation of the bank increased with this in- 
 crease of business from 10,729,520 in 1796, to 
 27,261,650 in 1815 ; arid the securities, from 
 10,000,000 and17,000,000, to 44,558,500. From 
 this vast accumulation of business, both public and 
 private, the profits of the bank appear to have been 
 prodigiously augmented during the late wars. The 
 dividend was increased in proportion. From 1797 
 to 1806, it amounted, including the bonus paid 
 
 
254 PAPER CURRENCY. 
 
 from time to time, to above 10 per cent., and was 
 continued regularly at that rate on a capital of 
 11,642,400, amounting annually to 1,164,240 
 till the year 1816, when the capital was increased 
 to 14,553,000, being an addition of 25 per cent. ; 
 on which the dividend of 10 per cent, was still paid, 
 amounting to 1,455,300. A sum of undivided 
 profit was besides accumulated, which had increased 
 in 1816 to 8,639,680. The effect of this addition 
 of 2,910,600 to the capital of the bank was to 
 raise the value of each 100, producing an income of 
 10 a-year to 125, and to increase the income of 
 each proprietor proportionally, i. e., to 12, 10s. per 
 annum. With the great profit thus realized since 
 the suspension of cash payments in 1797, the value 
 of bank stock rose from 125 per cent., its price in 
 1797, to 262 per cent, in 1816. The original capi- 
 tal of the bank thus acquired, since it was released 
 from its obligations to pay in specie, an additional 
 value equal to 16,000,000 ; which, added to the 
 increase of its undivided profit, amounting to above 
 5,000,000, makes a sum of 21,000,000, the actual 
 inproved value of the bank capital in the course of 
 nineteen years, besides the bonuses paid in 1799, 
 1801,1802,1804,andl816,amounting to 5,530,140.* 
 Those great profits declined with the resumption 
 of cash payments. In preparing for that necessary 
 measure, the bank was forced to contract its busi- 
 ness. The circulation was reduced from 29,543,780 
 
 1 See Appendix to the Report of the Committee on the Bank 
 of England Charter, No. 5, and No. 34. The undivided capital of 
 the bank was, in 1797, 3,471,320, and in 1816, 8,639,680. 
 Appendix to Report for the Bank of England Charter, No. 5, 
 No. 34. 
 
ADVANTAGES OF A NATIONAL BANK. 255 
 
 in August 1817, to 20,295,300 in August 1821 ; the 
 securities from 44,558,500 in 1815, to 18,475,540 
 in August 1821. The commercial bills under discount 
 fell off from 11,416,400 in 1816, to 3,960,600 
 in 1817 ; and they were afterwards still farther 
 decreased to 1,533,600 in 1831. Notwithstanding 
 this decline of business, the high dividend of 1.0 per 
 cent, was still paid, even on the increased capital of 
 14,553,000, amounting to 1,455,300. It was 
 taken, however, not out of profit realized, but from 
 the sum of undivided profit previously accumulated, 
 which was, accordingly, reduced from 8,639,680 in 
 1816, to 3,067,020 in 1823. In that year, the 
 dividend was lowered to 8 per cent., and amounted 
 to 1,164,240 ; and in 1832 the capital was reduced 
 to 11,642,000, its former amount, or 25 per cent. ; 
 this sum being repaid by the government to the bank, 
 and divided among the proprietors. But this divi- 
 dend on the reduced capital, though now only amount- 
 ing to 931,382, could no longer be afforded out of the 
 annual profits; and in 1839 it was still farther reduced 
 to 7 per cent., its amount prior to 1797, and amounting 
 to 814,968. The price of bank stock declined with 
 the fall of profits from 262 to 200, and was, in 
 1842, at 162. It has now risen, in 1844, to 193. 
 The establishment in the metropolis of a national 
 bank, with a large capital, facilitates the introduc- 
 tion of banks in other parts. Every bank of issue 
 requires a supply of specie ; and a national bank 
 provides this necessary supply, which, in the general 
 course of circulation and commerce, is distributed 
 among the lesser banks. A portion of their capital 
 is generally invested in negotiable securities, by the 
 
250 PAPER CURRENCY. 
 
 aid of which they can always obtain a supply of Bank 
 of England notes. Banks of issue are now established 
 in all the provincial towns of Great Britain. They 
 multiplied rapidly in that short interval of prosperity 
 which followed the American war. They were estimat- 
 ed by Mr Thornton 1 to amount, in 1797, to 353 ; in 
 1799, to 366 ; and they amounted, in 1814, to 994. 
 The law which restricted banks in England to the 
 number of six partners, impaired their means, and 
 consequently their stability; and the commercial 
 distress which prevailed in 1814, 1815, and 1816, 
 was aggravated by the frequent insolvencies and 
 ruin of the English banks. Their number, accordingly, 
 has rather diminished ; the licences taken out in 
 1832 being only 636 ; and they do not appear to 
 have since increased ; though between eighty and 
 ninety joint-stock banks are now established in Eng- 
 land. There are also about thirty banks in Scot- 
 land, with branches in almost every town. 
 
 Those various money-dealers, dispersed through- 
 out the kingdom, take charge of its cash transac- 
 tions, which they manage with equal economy and 
 despatch. In Great Britain, the progress of capital 
 and of trade ; the known wealth of banking estab- 
 lishments ; and the high state of mercantile confi- 
 dence, together with the facilities of communication, 
 and other advantages peculiar to an advanced state 
 of society, have brought the system to perfection ; 
 and remittances to London from the country, which 
 were formerly tedious and difficult, and for which a 
 premium was given, varying from 2s. 6d. to 20s. per 
 
 1 Inquiry into the Nature and Effects of the Paper Credit of 
 Great Britain, p. 154. 
 
EFFECTS OF PAPER ON COMMERCE AND CREDIT. 257 
 
 cent., are now made both safely and readily from the 
 most distant parts. The necessary effect of this 
 highly artificial and curious system is, to concentrate 
 in the wealthy and populous towns the cash transac- 
 tions of the neighbourhood; when the several balances 
 arising out of these transactions being formed into 
 new accounts by the money-dealers, are, by a simple 
 transfer of debt and credit in their books, brought to 
 a general balance. This balance being afterwards 
 carried to a still more general account, all the scat- 
 tered debts of the country are at length collected 
 into one common account by the bankers of the me- 
 tropolis, which is then brought to a final balance. 
 The metropolis, the centre of intercourse and trade, 
 is the centre, also, of this vast system of money- 
 dealing. Here, as to a point, all the cash transac- 
 tions of the country naturally converge; and here the 
 account is finally closed by payments in cash, of which, 
 in comparison with the vast extent of the transac- 
 tions, an inconceivably small quantity is required. 
 
 CHAPTER XIII. 
 
 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 Substitution of paper for specie increases the hazards of commerce. 
 Credit the cause of mercantile convulsions. Accumulation of 
 capital tends to extended credit to reckless speculation to 
 commercial distress. The nature of these calamities. Examples 
 which occurred prior to the use of paper : in Scotland from the 
 
 S 
 
258 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 failure of the Darien scheme in France from the Mississippi 
 scheme in 1719 in England from the South Sea scheme in 1720. 
 Commercial convulsions in Britain in 1793 in 1825 in 
 1835. Causes and consequences of these several calamities. 
 Convulsion in the United States in 1835. Over-issue of paper 
 generally held to be the cause of those calamities. This opinion 
 considered. Issues of the banks overstated by Lord Liverpool. 
 No data then existing for an accurate estimate. Excess not to be 
 inferred from the absolute amount of the circulation. Facts 
 stated in illustration. Over-issue raises the nominal price of gold. 
 No rise took place in 1825 or in 1835. A proof that there was 
 no over-issue. The state of the currency not the cause of the 
 unfavourable change. Occasioned by large importations. An 
 increase of currency not an increase of capital. Commercial 
 distress occasioned by over-trading, Bank restriction followed 
 by an excess of issue, and by depreciation. Not by over-trading, 
 nor by any commercial crisis, as in 1825 and 1835. Circulation 
 of a bank dependent on the demands of trade. Not regulated by 
 the discretion of bankers The currency of Britain not under the 
 control of the bank directors. Money-dealers agents between the 
 lender and borrower. The nature and limits of their functions. 
 No power to control speculation. Not accountable for commercial 
 distress. Principles on which they conduct their business. 
 Confirmed by the evidence of practical men. Theories laid down 
 for regulating the circulation not adhered to in practice. Rule of 
 Mr H. Palmer considered. Not followed. Contraction of the 
 currency suggested as a remedy for an unfavourable change, and 
 a check to speculation. State of the exchanges considered. 
 Means resorted to by the bank for remedying an unfavourable 
 exchange. Bills of credit drawn on Paris in 1832 and 183G, and 
 in 1839 ; also in 1839 on Amsterdam and Hamburg. Provided for 
 by remittances of specie. Circulation of the bank still regulated 
 by the necessities of commerce. A contraction of the currency 
 seldom resorted to as a check to the drain of gold. Illustrated 
 by an account of the bank's transactions. How the great mass 
 of specie is affected by the fluctuations of commerce. 
 
 IT is observed by Dr Smith, who has explained 
 with his usual clearness the advantages of paper 
 money, that the commerce and industry of a country 
 
CAUSES OF MERCANTILE DISTRESS. 259 
 
 where it is used, will not rest on so secure a founda- 
 tion as when the circulation consists of the precious 
 metals. " Over and above the accidents," he observes, 
 " to which they are exposed, from the unskilfulness 
 of the conductors of this paper money, they are 
 liable to several others from which no prudence or 
 skill of those conductors can guard them." 
 
 The substitution of paper for specie, with all the 
 refinements of money-dealing to which it leads, has 
 the effect of binding the mercantile community more 
 closely in the ties of confidence and credit ; and 
 hence, there is no doubt that this delicate machinery 
 is not only more easily disordered, but suffers more 
 severely when any such disorder occurs. Accord- 
 ingly, we find that commerce, in this as in other 
 countries, has been from time to time subject to 
 sudden convulsions, which occasion extensive dis- 
 tress and ruin. These calamities have been ascribed 
 to various causes ; generally to the over-issue of paper 
 by the banks, and to its subsequent and too sudden 
 contraction. This theory, however, appears to have 
 been rather hastily assumed, and neither to rest on 
 any clear facts, nor conclusive argument ; and there 
 are other causes more deeply seated, and that are 
 interwoven in the frame and structure of every mer- 
 cantile community, to which, as some think, they 
 have been more justly ascribed, and of which it will 
 now be proper briefly to consider the nature and 
 effects. 
 
 It is evident that, if there were no credit if all 
 articles as they were bought or sold, were immedi- 
 ately paid for in cash there could be no bankruptcy, 
 
2GO EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 nor any derangement of commerce. Every transac- 
 tion would be immediately brought to a close, and 
 would leave no risk behind. But if the capitalist A 
 accommodate B with a loan of 20,000, and if B 
 engage in ruinous speculations in which it is lost, A 
 will be distressed, panic-struck, and finally plunged 
 in despair, when he discovers that he has lost his 
 whole fortnne. If thousands are in the same situa- 
 tion; if, like A, they have lent, or invested their 
 capital where there is no likelihood of any return, 
 the distress will be still more widely extended in 
 proportion to the greater amount of capital that is 
 involved ; and if a great proportion of the national 
 stock be thus lent out on bad security, or unprofit- 
 ably invested, the materials of a commercial convul- 
 sion are here to a certainty prepared, which sooner 
 or later will burst forth with all the miseries that 
 follow in its train. The cause is obviously the undue 
 extension of credit; and the effect will always follow, 
 wherever, from the superabundance of capital, credit 
 is carried to excess. These calamities originate in 
 misplaced confidence, in this, as in all other cases, 
 the great cause of commercial ruin ; and which may 
 take place, as in point of fact it has often taken 
 place, when the currency consisted entirely, or nearly 
 so, of the precious metals. In every industrious 
 community capital naturally increases.- It is the 
 accumulated produce of land and labour ; the surplus 
 which remains over the annual consumption. It has 
 been accumulating in this country, and throughout 
 Europe, for centuries. The labour of the industrious 
 classes has annually produced a greater quantity of 
 
CAUSES OF MERCANTILE DISTRESS. 261 
 
 goods of every description than has been consumed ; 
 and by this constant addition, the national stock has 
 increased to its present vast amount. 1 Peace con- 
 duces to the increase of capital, as war to its dissipa- 
 tion. Capital being the produce of industry, the 
 greater the proportion of those who produce to those 
 who consume, the more rapidly will it increase ; as, 
 on the other hand, it will be more quickly wasted, 
 according to the proportion which the consumers 
 bear to the producers. War, accordingly, which 
 converts a large portion of productive labourers into 
 soldiers and sailors, who consume without reproduc- 
 ing, impairs the national capital, and renders it 
 scarce ; while peace, on the other hand, disbanding 
 this crowd of unproductive labourers, and setting 
 them to work, the effect of their industry is soon 
 visible in the increase of the national stock, and in 
 the reduced rate of interest, which is invariably high 
 during war, as it is always sure to fall with the 
 return and continuance of peace. It is, accordingly, 
 in a season of prosperity and peace that capital 
 accumulates more rapidly, and that overflowing in 
 the remotest extremities of the kingdom ; and in all 
 
 1 Many circumstances concur to point out to tlie most careless 
 observer the gradual accumulation of stock in this country : such 
 as the great improvement of the land in all quarters ; the progress 
 of manufactures ; and the constant establishment of new branches 
 of industry, and their extension into the remoter districts of the 
 kingdom. The disappearance of the annual fairs for the sale of 
 goods, which were frequently held in former times, is another con- 
 sequence of increasing capital; the goods which, in order i<> 
 economize a limited capital, were carried for sale from place to 
 place, being now permanently stored up in every part. 
 
262 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 the channels of trade it is daily found more difficult 
 to lay it out with any chance of profit. With this 
 increasing difficulty of investment, the capitalist not 
 only lowers the rate of interest, but makes fewer 
 scruples about the security. Commercial confidence 
 thus necessarily keeps pace with the progress of 
 wealth. Money is more easily obtained, and more 
 readily invested ; and it is this facility of credit 
 which gives a dangerous impulse to mercantile 
 enterprise; which sets afloat daring schemes and 
 doubtful undertakings ; and brings forward, in every 
 branch of trade, a host of projectors, who, with bor- 
 rowed funds, plunge into bold and reckless specula- 
 tions, overlooking, in their eagerness for the prize, 
 all the fatal hazards that beset the unwary adven- 
 turer in the lottery of trade. In this ferment of 
 speculation, all schemes of domestic improvement, 
 the construction of bridges, roads, canals, railroads, 
 which absorb the superabundant capital of the coun- 
 try, as well as foreign loans, with numerous other 
 rash projects, find ample support from the overflow- 
 ing funds, and the ardent projecting spirit of the 
 times. Commerce, in the meantime, presents the 
 show of outward prosperity ; everywhere is heard 
 the din and bustle of business and speculation ; in- 
 dustry flourishes in all its branches ; and all things 
 appear to go on smoothly. But deep and extensive 
 ruin lies hid under this deceitful cairn. The vast super- 
 structure of commercial dealing, which shows so fair 
 outwardly, does not rest on any solid foundation of 
 real capital : it is chiefly reared up on speculation. 
 The proper business of commerce is to convey, by the 
 
CAUSES OF MERCANTILE DISTRESS. 263 
 
 speediest process, the rude produce of the soil, through 
 all its various and necessary stages, from the cultiva- 
 tor to the consumer. This is the quiet and orderly 
 channel in which trade regularly flows. The pro- 
 duce of the land is sold to the wholesale merchant ; 
 by him to the manufacturer ; by him to the merchant, 
 who keeps a large store of goods ; by him to the re- 
 tail dealer, who finally sells to the consumer. This 
 is the regular beaten track of trade, from which, in 
 proportion as it deviates, it becomes insecure. But 
 in a season of high confidence and active speculation, 
 large quantities of goods are intercepted in their way 
 to the consumer ; are bought at high prices, and 
 stored up in the vain hope that prices will still be 
 higher. The speculators thus not only increase their 
 stock, but raise the price ; and the consequence of 
 this extra demand for goods is, that a large stock is 
 accumulated, not for immediate use, but on specula- 
 tion and at a high price, beyond the wants of the con- 
 sumer. This artificial rise in the amount and value of 
 the national stock, which occasions ultimately a vast 
 loss when prices fall to their former level or below 
 it, is the consequence of extravagant speculations ; 
 and it gives rise to a complicated mass of transac- 
 tions resting on credit, and kept afloat by a floating 
 mass of fictitious bills, drawn and redrawn in a con- 
 tinual circle. So long as a high state of confidence 
 remains ; so long as the speculators are supplied with 
 ample fu^ds on easy terms, and on long-dated bills, 
 the system may be supported ; the external show of 
 prosperity may be maintained ; the mercantile com- 
 munity may still slumber on in a false security ; and 
 
264 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 ruined traders may continue still farther to spin out 
 the long thread of their ruinous speculations : but, 
 sooner or later, the day of reckoning will come ; 
 the flimsy fahric will at last totter to its fall ; and 
 when this occurs, when the mine at last explodes, 
 then will be seen, from the wide-wasting ruin which 
 takes place, to what an extent commerce has been 
 previously undermined. Numerous and fatal bank- 
 ruptcies, shaking the commercial world to its centre, 
 will at once dispel the dream of blind confidence in 
 which the most wary have been lulled ; and sus- 
 picion, starting as from a trance, will cause every 
 man to doubt his neighbour ; the banks will contract 
 their credit ; and panic, scarcity of money, distrust 
 spreading far and wide, will level with the ground 
 every establishment that does not rest on a basis of 
 real wealth. In the general wreck, capital will be 
 lost to a vast amount ; and in many cases even the 
 wealthiest merchants will share in the common ruin. 
 Such, then, is the nature of those calamities ; those 
 storms which burst forth in a season of apparent 
 prosperity, and in a moment blight the fairest hopes 
 of commerce ; and the immediate cause is the sud- 
 den and extensive shifting of property from one hand 
 to another, occasioned either by misplaced confidence 
 or by the alternate rise and depreciation of the nation- 
 al stock to a vast amount. Now, this may overtake 
 any country where credit prevails, and where it is 
 carried to excess, or where doubtful speculations are 
 undertaken. An over-issue of paper is no way essen- 
 tial to the fatal result ; it is not a necessary element 
 in the scene of ruin. Money may be lent where it 
 
DARIEN SCHEME. 265 
 
 may be lost, 'to any amount, without the intervention 
 of paper ; and where this takes place, commercial 
 distress will necessarily follow, whether the currency 
 consist of paper or the precious metals. 
 
 These views are confirmed by frequent examples of 
 nations given over, for a time, to the spirit of mer- 
 cantile gambling, and to its unhappy consequences, 
 misery and ruin. It is in the desire of sudden wealth 
 that all those schemes originate. It was this temp- 
 tation which seduced the wary Scots into the unhappy 
 scheme of a settlement at the isthmus of Darien, in 
 which, deluded by golden dreams, they embarked 
 about 400,000 ; a large proportion of the national 
 stock which had accumulated during the ten years of 
 peace and prosperity that followed the revolution of 
 1688. "Almost every one," says Sir Walter Scott 
 in his admirable sketches of Scottish history, " who 
 had or who could command any sum of ready money, 
 embarked it in the Indian and African Company, and 
 subscribed their all ; maidens threw in their portions, 
 and widows whatever sums they could raise upon 
 their dower, to be repaid a hundred-fold by the gold- 
 en shower that was to descend upon the subscribers. 
 Some sold estates to vest the money in the Com- 
 pany's funds ; and so eager was the spirit of specu- 
 lation, that when 800,000 formed the circulating 
 capital, half of that sum was vested in Darien stock." 
 The loss of capital to so great an amount by the 
 failure of this adventure, convulsed the country, 
 which was filled from one end to the other with the 
 wailings and misery of those who were thus suddenly 
 reduced from affluence to poverty. Now, this cala- 
 
266 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 mity was produced without the intervention of paper 
 currency ; and it very clearly exemplifies the principle 
 that we have endeavoured to explain ; as it is of no 
 moment, if the national stock be invested where there 
 is no hope of a return, whether it be in cotton, or in 
 sugar, or in Darien stock. 
 
 The Mississippi scheme in France, and the South 
 Sea scheme in England, which occurred in 1719 and 
 1720, presented an exact counterpart to the Darien 
 scheme, both in their origin and consequences. They 
 took their rise in the superabundance of capital ac- 
 cumulated in both countries during the seven years 
 of prosperity and peace which succeeded the treaty 
 of Utrecht, and by which credit was fostered and 
 the spirit of commercial enterprise. The Mississippi 
 scheme, of which Law was the author, combined an 
 unlimited issue of paper, the infallible specific pre- 
 scribed by this political quack for the malady of de- 
 pressed trade, under which France was then labour- 
 ing, with a vast project of finance and foreign trade, 
 out of which stock-jobbing speculations arose to an 
 unheard-of extent. It was proposed to vest in one 
 great company, to be called the Company of the West, 
 the whole privileges and effects of the other foreign 
 trading companies ; the great farms and the general 
 receipt of the public revenues and taxes ; the man- 
 agement of the mint and of the bank ; and also to 
 grant to the company the whole province of Louisiana, 
 with the monopoly of its trade. By this complicated 
 project, a compound, as it proved to be, of knavery 
 and folly, the national creditors were defrauded ; the 
 country inundated with a depreciated currency ;" and 
 
MISSISSIPPI SCHEME. 267 
 
 thousands cajoled to their ruin by extravagant pro- 
 mises of gain, which the projector knew full well he 
 could never fulfil. The French fell blindly into the 
 snare : they were the dupes of their avarice. Count- 
 less millions, they appear to have imagined, were to be 
 conjured out of the deserts of Louisiana by the fairy 
 wand of the great state-magician, on whose promises 
 they reposed with boundless faith : for there was no 
 other process by which their golden dreams could be 
 realized. Absurd as was the prevailing frenzy, it infect- 
 ed all classes. The Stock-exchange, where the traffic in 
 shares was carried on, and where the fortune of thou- 
 sands was set upon a cast, presented a frightful scene 
 of agitation ; every avenue to the street where it was 
 held was beset by a dense throng, among whom the 
 anxiety to gain an entrance was so great, that several 
 were crushed to death in the struggle. The price of 
 shares was rapidly raised by this eager competition, 
 from 500 livres, their original amount, or 25, if we 
 estimate 40 livres to the mark, which was the value 
 fixed on it in 1716, though it was afterwards changed, 
 to 10,000 livres, equal to 500 ; the aggregate value 
 of the whole stock, amounting to 600,000 shares, being 
 thus raised to the enormous sum of 300 millions ster- 
 ling ; though the real worth, the sure level to which, 
 however propped up for a time by fraud and falsehood, 
 they must ultimately fall, was probably not more 
 than one-fourth or one-fifth of that sum. To esti- 
 mate the net amount of property that was lost and 
 won in the course of these gambling transactions, in 
 which the government, the company, the bank, the 
 
268 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 speculators in stock, were alternately the agents and 
 the victims, would be altogether vain. But when 
 we consider the prodigious fall which afterwards took 
 place in the value of the stock, to the amount of proba- 
 bly not less than from 150 or 200 millions sterling, 
 and how often this stock must have been bought and 
 sold among the gamblers of the Stock-exchange, we 
 may form some conception of the vast extent of the 
 sudden revolution in property, and the fearful convul- 
 sion which now took place; the greatest, perhaps, that 
 ever occurred in any age or country, and which ter- 
 minated in the ruin of thousands, and in the utter 
 prostration, for a time, of all commercial credit in 
 France. The evil was farther aggravated by the 
 failure of the bank, and the annihilation of the whole 
 mass of its paper. This paper was first made ex- 
 changeable for its value in bullion ; afterwards, for a 
 certain number of livres, which were repeatedly re- 
 duced by debasement, the unworthy device of a des- 
 potic government : it was, besides, greatly depreciated 
 by excess ; and it was finally destroyed by the arbi- 
 trary decree of the regent lowering its value one-half. 
 The notes that had been issued amounted, at this 
 time, to 2,696,400,000 livres, equal in value to above 
 100 millions sterling; and the shock which society 
 must have sustained from the previous fall of the 
 stock, and from the subsequent extinction, by a stroke 
 of the pen, of so vast an amount of paper, may be 
 easily imagined. The day after the decree was is- 
 sued, namely, 23d May, 1720, " A man," says Sir J. 
 
SOUTH SEA SCHEME. 
 
 269 
 
 Stewart, "might have starved with 1,000,000 of 
 paper in his pocket. 1 
 
 This scheme was on a much more extensive scale 
 than that of the Scots to the isthmus of Darien ; and, 
 to stock-jobbing speculations, it superadded the 
 shameful fraud of a depreciated currency. In prin- 
 ciple, however, the one was the exact counterpart 
 of the other, as of all those ruinous investments by 
 which commerce has suffered so deeply in modern 
 times : for if capital be lost, it is of no moment how 
 it has been invested ; whether in stock that has lost 
 its value, or in goods; or whether it has been lent out 
 where there is no hope of any return. The South 
 Sea scheme, which was equally fatal to credit and 
 commerce in England, originated also in the increase 
 of capital and of commercial confidence, and in deep 
 speculation, its never-failing consequence. The pe- 
 culiarly prosperous state of the country at this time, 
 is proved by all concurring accounts. The drain on 
 the national capital being closed by the peace of 
 Utrecht in 1713, it began rapidly to accumulate; so 
 that, in 1717, Sir R. Walpole, taking advantage of 
 the " high state of credit and the low price of money," 
 brought forward his plan for reducing the interest 
 on the national debt from 6 to 5 per cent. The 
 country continued to prosper, and capital to accumu- 
 late, until it was with difficulty that it could be 
 employed with profit. This high state of credit, 
 and abundance of money, gave a prodigious impulse 
 to speculation ; and there was no scheme, however 
 
 1 Stewart's Principles of Political Economy, chap, xxxi., vol. ii., 
 p. 269. See, also, Wood's Life of Law. 
 
270 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 wild and impracticable, that did not find supporters. 
 " The whole nation," says Tindal, in his continuation 
 of Rapin's History, "was become stock-jobbers. The 
 South Sea was like an infectious distemper, which 
 spread itself in an astonishing manner. Every even- 
 ing produced new projects, which were justly called 
 bubbles; and new companies appeared every day. 
 These were countenanced by the greatest of the 
 nobility. The Prince of Wales was governor of the 
 Welsh copper; the Duke of Chandos, of York build- 
 ings; the Duke of Bridgewater formed a company 
 for building houses in London and Westminster. 
 There were nearly a hundred different kinds of pro- 
 jects, or bubbles ; and it was computed, that above 
 a million and a half was won and lost by these 
 unwarrantable practices, by which many unwary 
 persons were defrauded and impoverished, and a few 
 crafty men enriched, to the great detriment of domes- 
 tic trade." Macpherson, in his Annals of Com- 
 merce, gives a similar description of the prevailing 
 frenzy. 1 He enumerates above one hundred joint- 
 stock companies embracing mercantile speculations 
 of every description, and many schemes to which the 
 mere name would affix ridicule. It was estimated 
 that, in following out those projects, a capital of 
 500,000,000 would have been absorbed. To the 
 avidity for commercial enterprise, arising from the 
 increasing plenty of money, this great stock-jobbing 
 speculation, the greatest ever known in this country, 
 and the next to the Mississippi scheme in France, 
 owed its origin, and successful progress. 
 
 1 Annals of Commerce, vol. in. pp. 89, 90. 
 
SOUTH SEA COMPANY. 271 
 
 The South Sea Company was established in 1711, 
 with a capital of 10,000,000, which was invested 
 in the public funds at an interest of 6, and in 1717 
 of 5 per cent., amounting to 500,000 annually. 
 The company had the privilege of an exclusive trade 
 to the east coast of America, with the exception of 
 Brazil and the Dutch colonies ; and with the west 
 coast from Terra del Fuego northward ; which, as 
 Spain rigidly interdicted all intercourse with her 
 colonies, the only civilized portion of Western 
 America, was little else than a trade with savages. 
 With a view of lessening the public burdens, greatly 
 increased by the late French war, it was now pro- 
 posed that the irredeemable annuities payable to the 
 national creditors should be subscribed into the South 
 Sea Company's stock, and converted into redeemable 
 annuities : that these last should, in like manner, be 
 commuted into the same stock, and a bill for this 
 purpose passed through parliament. The precise 
 advantage of this transaction does not very clearly 
 appear. The public debts would still be the same, 
 whether held by their original owners, or converted 
 into South Sea stock. There is only one process by 
 which debt can be either extinguished or diminished. 
 There is no royal road to its payment ; and Mac- 
 pherson, 1 alluding to the Mississippi scheme, justly 
 blames the British parliament for copying after such 
 an example ; " for approaching too near, though not 
 intentionally, to such unjust and visionary schemes 
 for lessening the British national debt, by listening 
 to the proposals of crafty projectors, calculated for 
 
 1 Annals of Commerce, vol. iii. p. 76. 
 
272 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 deceiving and hoodwinking the proprietors of those 
 debts, by altering or changing the names, shape, 
 and position of them, too much resembling what is 
 vulgarly called sleight-of-hand, rather than for any 
 solid lessening of those encumbrances: as if any other 
 method whatever, consistently with national justice 
 and honour, could lessen our encumbrances, but a 
 clear and inviolable sinking fund, the consequence of 
 frugal savings from the reduction of interest." 1 No 
 sooner were the Company's books opened for subscrip- 
 tions, either in the government annuities or in money, 
 than all the passages to the Stock-exchange were 
 choked up by deluded multitudes eager to purchase. 
 South Sea stock rose, in consequence, from 100 to 
 300, 400, 800, and 1000 per cent. The 
 frenzy that prevailed can hardly be understood in 
 succeeding times ; all classes indulged in dreams of 
 imaginary wealth, from which many only wakened 
 to the reality of utter ruin. They were the dupes of 
 their avarice ; though we can hardly conceive from 
 what sources they anticipated their enormous gains ; 
 unless, indeed, they gave the directors credit for the 
 discovery of some fairy treasure. The shameful 
 fraud of declaring a dividend on the company's stock 
 at Christmas 1720, of 30 per cent., and a subsequent 
 dividend for twelve years of 50 per cent., deceived 
 many. They swallowed the bait artfully thrown 
 out, and were ensnared to their ruin. 
 
 When parliament interfered to distribute equally 
 among the subscribers the capital really possessed by 
 the Company, amounting, in 1720, to 37,800,000; 
 
 1 Annals of Commerce, vol. iii. p. 76. 
 
SOUTH SEA SCHEME. 273 
 
 and if 13,300,000 be deducted, which belonged to 
 the original proprietors in their corporate capacity, 
 to 25,500,000, it afforded to each 33, 6s. 8d., 
 afterwards increased, by an additional two millions, 
 to 39, Is. 8d. When it is considered that a portion 
 of this stock was purchased at from ten to five times, 
 and the remainder at more than double its original 
 value ; that, in the ardour of speculation, it was sold 
 and resold, how often cannot be known ; the vast 
 extent of property which must have shifted hands in 
 the course of these transactions, can hardly be esti- 
 mated. If we suppose, however, the whole stock of 
 25,500,000 to have been only once bought, at 500 
 per cent., it must have been raised beyond its real 
 worth above 100 millions sterling ; and the property 
 lost and won in other joint-stock schemes for which 
 money was subscribed, may be computed at about 
 half that sum. If this estimate be anything near the 
 truth, we may easily conceive what a devastation must 
 have been occasioned by the overflowing and subse- 
 quent ebbing of so vast a flood of capital in all the 
 channels of trade ; and accordingly the wide-spread 
 misery which followed ; the general shock to credit ; 
 the universal panic that succeeded to the former high 
 state of commercial confidence, presented a scene 
 of distress without a parallel in any former era of 
 English commerce. The causes here are obviously 
 the same as in the former cases of the Darien and 
 Mississippi schemes. The limited circulation of 
 paper by the Bank of England, which had not been 
 long established, could not possibly have occasioned 
 so fearful a convulsion ; and the demand for specie 
 
 T 
 
274 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 which took place, was on the most eminent gold- 
 smiths, the chief bankers in those days of metallic 
 currency ; many of whom, not having sufficient funds, 
 were forced to shut their shops and abscond. The 
 fact of the goldsmiths acting as bankers, and holding- 
 deposits of money, sufficiently indicates the limited 
 circulation of the paper. 
 
 The commercial crisis experienced in 1793, arose, 
 like all the others which preceded it, in a season of 
 prosperity and peace, when capital was abundant 
 and the rate of interest low ; 3 per cent, stock hav- 
 ing risen to 97f ; and it was marked by panic, com- 
 mercial distress, an extreme scarcity of money, and 
 by frequent bankruptcies even among the wealthi- 
 est merchants. In the country, the banks, from the 
 discredit of their paper, were exposed to alarming 
 demands for specie ; and several opulent establish- 
 ments, applying in their distress to the Bank of 
 England, were refused the accommodation which 
 they required. Important failures ensued to the 
 number, in five months, from March to July 1793, 
 of between seven and eight hundred, including about 
 a hundred banks. In the distress which prevailed, 
 a judicious and healing measure was resorted to. A 
 loan of exchequer bills, to the amount of 5,000,000 
 if required, was, by the authority of Parliament, di- 
 rected to be offered to as many merchants giving pro- 
 per security as should apply. This seasonable ac- 
 commodation was attended with the best effects. It 
 supplied the want of money, which was one great 
 cause of embarrassment, and was followed by the 
 speedy restoration of commercial confidence, and by 
 
COMMERCIAL CRISIS OF 1793, OF 1825. 275 
 
 an increased abundance of cash in the metropolis, and 
 in the country at large. 
 
 In the course of the long war which was begun in 
 1793, the commerce of the country was exposed to 
 many rude shocks, under which it suffered severely. 
 But the fatal effects were here produced not by the 
 abuse of capital, but by external violence. The 
 commerce of Britain was excluded, during the latter 
 years of the war, from its accustomed markets, by the 
 hostile decrees of France. It had expanded over the 
 wide extent of the habitable globe, and it was sudden- 
 ly pent up by unnatural violence within the narrow 
 precincts of its own territory. The manufacturers, 
 having no outlet for their goods, were in many cases 
 ruined, and their workmen consigned to idleness and 
 misery. To this cause may be traced the commercial 
 distresses which were experienced towards the con- 
 clusion of the war ; and several years elapsed before 
 the trade of Britain recovered from the severe dis- 
 tress which it suffered from the hostility of her power- 
 ful enemy. 
 
 In 1825, commerce was again overtaken by one 
 of those signal disasters which occur in a season of 
 prosperity and peace, and which, in their destruc- 
 tive effects, rival the calamities of war. At this 
 time, as in 1720, ten years of successful industry had 
 fully repaired the waste of the national stock which 
 the French war had occasioned. Money had become 
 abundant ; the banks overflowed with deposits ; the 
 rate of interest fell from 5, to 4 and 3 per cent. ; 
 the ardour of speculation was fostered, and every 
 encouragement was given to hazardous adventures 
 
276 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 in trade. Every day brought forth some new scheme 
 for the employment of capital. In foreign mining and 
 in foreign loans, the sums invested amounted to be- 
 tween 30,000,000 and 40,000,000. In domestic 
 improvement, such as canals, railroads, &c., capital 
 was flowing away unperceived, and through various 
 other channels. No wholesale scheme of delusion 
 such as the Darien, the Mississippi, or the South Sea 
 scheme was held out to ensnare the unwary ; but 
 the result was precisely the same. From the diffi- 
 culty of investment, capital was employed in a variety 
 of visionary and fatal projects. A scarcity of money 
 began to be experienced in consequence, and the rate 
 of interest to rise ; a premonitory symptom of the 
 approaching catastrophe : the banks caught the 
 alarm, and contracted their discounts ; bankruptcies 
 ensued from this cause, and from the loss of capital 
 in rash speculations ; and the usual effects followed 
 of panic a general distrust among mercantile men ; 
 a run upon the banks for specie ; and a stagnation 
 and deadness in all branches of industry, of late so 
 flourishing. The misery and starvation of disbanded 
 workmen throughout the manufacturing districts, 
 completed the gloomy picture. 
 
 Such were the fatal consequences of this catastro- 
 phe, originating evidently in the same spirit of rash 
 speculation which was the cause of all the previous 
 disasters. The unprecedented excess of goods im- 
 ported in the year 1825, which will appear from the 
 subjoined account, plainly points out this as the cause 
 of this memorable calamity : 
 
COMMERCIAL CRISIS OF 1835. 277 
 
 Average import in the three years preceding 1825, of 
 
 In 1825. 
 
 Wool, 24,341,076 Ibs 38,703,682 
 
 Cottonwool, 161,206,711 222,457,616 
 
 Indigo, 5,077,878 7,530,534 
 
 Square timber, 551,496 loads 664,186 
 
 Thrown silk, 404,423 Ibs 800,501 
 
 Raw silk, 2,608,527 3,431,172 
 
 In wine and tallow, and other articles, the imports 
 were increased at a similar rate. Such prodigal sup- 
 plies of goods were not required to supply the con- 
 sumption of the country ; they were purchased on 
 speculation, at high prices ; and it was the great 
 losses incurred on this vast stock of imported as 
 well as manufactured goods, by the fall of prices 
 from the height to which they had been buoyed up, 
 that occasioned the shock, and all the embarrass- 
 ments which followed. The evil was not an excess 
 of paper, but of capital, as in 1720, when there was 
 hardly any paper in circulation, and which, seeking 
 a safe haven wherein to enter, and not finding it, was 
 wrecked on the rocks and shoals of desperate adven- 
 ture ; and if capital be lost, it matters little, as has 
 been already stated, whether it be in the purchase of 
 South Sea stock, or of cotton, sugar, or other goods. 
 
 It might have been expected that mercantile men 
 would have avoided, for some time to come, the fatal 
 snare into which they had so lately fallen. But they 
 failed to profit by dear-bought experience ; and in 1835 
 they embarked in their former course of ruinous adven- 
 ture, and were again involved in the same calamities 
 as in 1825, arising also from the same causes. In 
 1829 and 1830, trade began to recover from the 
 
278 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 severe reverses under which it had lately suffered, 
 and capital to accumulate; advertisements which daily 
 appeared of absurd projects by joint-stock companies, 
 denoted that the spirit of speculation, which was the 
 cause of the former calamity, was again at work. 
 In due time the evil broke out, with all the usual 
 consequences of bankruptcy, panic, distrust, and stag- 
 nation of industry ; and America and Britain being 
 now more closely connected by the improved facili- 
 ties of communication that had been established 
 between them, were at once involved in this new 
 calamity. The mercantile body in both countries 
 was agitated by one simultaneous shock. In the 
 United States, the spirit of mercantile adventure 
 had been carried to an unheard-of excess. British 
 goods had been imported far beyond the wants of 
 the consumers. The imports had increased rapidly 
 in value for several years past, from 70,876,920 dol- 
 lars in 1830, to 149,895,742 and 189,980,035 dol- 
 lars in 1835 and 1836 ; and in the home trade specu- 
 lation had still farther outstript all the rules of 
 prudence. The sales of the public lands were in- 
 creased from 5,000,000 of dollars, the amount in 
 1833, to 25,000,000 in 1836. Vast sums, estimated 
 to amount to 95,000,000 of dollars, mostly borrowed 
 or in paper, were laid out by cities, corporations, and 
 merchants, on canals, railroads, on savings, insurance, 
 and other companies, or on banks : also on wild lands, 
 as well as on lands around the different cities and 
 villages ; and on town-buildings, and on other rash im- 
 provements. 1 An immense structure was thus raised 
 
 1 Report to the Missouri General Assembly. Documents laid 
 before Congress, No. 227, p. 605. 
 
COMMERCIAL CRISIS OF 1835. 279 
 
 up, as usual, on a slender basis : there was a fail- 
 show of outward prosperity, though all within being 
 false and hollow, the foundation was too surely laid 
 of future and extensive ruin ; and when the system 
 broke down at last, a scene of commercial distress 
 ensued which is without a parallel in any former 
 time. It was in Great Britain that the alarm com- 
 menced, where credit had also been carried to a 
 great excess. The Bank of England rejected the 
 bills of those merchants in London who had em- 
 barked in American speculations ; and they, in con- 
 sequence, called for the payment of their debts in 
 the United States. The Treasury order, in the mean- 
 time, issued by the President on the llth July, 1836, 
 ordering that specie only should be received in pay- 
 ment of the public lands, hastened on the crisis of 
 which the foundation was already laid. 1 Those who 
 had run riot in speculation were now called upon 
 to pay the reckoning, and they had no funds. "The 
 failure of the debtors to meet their engagements," it 
 is observed in the Report already referred to, " was 
 followed by the refusal of the banks to pay their 
 obligations ; and a general depreciation of the cur- 
 rency was the result, bearing in its train universal 
 distrust, heavy sacrifices of property, and general 
 embarrassment." By this frightful convulsion, which, 
 like the great Mississippi scheme, combined with 
 ruinous speculations the shameful fraud of a depreci- 
 ated currency, the whole frame of American commerce 
 was at once paralyzed ; all commercial confidence 
 was extinguished; and embarrassment, panic, and a 
 1 Report to the Missouri General Assembly, No. 227, p. 604. 
 
280 EFFECTS OF PAPER ON COMMERCE AND CREDIT . 
 
 frightful scarcity of money pervaded the wide extent 
 of the Union. 
 
 The American merchants were largely indebted to 
 this country for the goods which they had imported; 
 and their inability to pay increased the commercial dis- 
 tress in Britain. It was chiefly occasioned, however, 
 by the ruinous speculations in which her own traders, 
 in the high state of confidence which prevailed, had 
 invested their own overflowing capital. The subse- 
 quent stagnation of trade, and of every description of 
 industry, gave rise to unheard-of scenes of distress and 
 misery among the working classes in this country; and 
 however obvious the causes of the original disaster, 
 the long-continued deadness of trade, without any 
 symptoms of revival until about the year 1843, does 
 not admit of so clear an explanation ; and it may be, 
 therefore, suggested, 1st, Whether from the ties of 
 confidence and credit being more widely extended 
 with the improved communications between distant 
 parts, the fabric of speculation reared up to a greater 
 height, may not occasion, in its fall, more extensive 
 ruin, and a longer period of distress ; 2d, Whether 
 the manufactures of Britain, conducted on a larger 
 scale, and traversing the habitable globe in search of 
 a market, a greater surplus may not be, in this man- 
 ner, accumulated on speculation, and a longer time 
 required to clear off this vast amount of unsaleable 
 goods, and to reunite, as before, the broken relations 
 of commerce ; 3d, Whether, from the wonderfully 
 ingenious machinery now adopted, the produce of 
 industry may not exceed the consumption ; and whe- 
 ther the intervals of depression may not in con- 
 
CAUSES OF COMMERCIAL DISASTERS. 281 
 
 sequence be of longer duration than those periods of 
 prosperity which they appear periodically to succeed; 
 and, finally, whether the impolitic restrictions on 
 trade persisted in by this country, in opposition to 
 her plain interest, and retaliated on her own trade, 
 may not have at last contracted the foreign market, 
 and reduced the demand for her manufactures. These 
 points, which are at present doubtful, may be more 
 clearly resolved by time and experience ; and to 
 those unerring results it is safer perhaps to trust, 
 than to theories which events so frequently disprove. 
 Such appear to be the chief causes of those disasters 
 which commerce has of late years experienced in this 
 and in other countries. The other causes to which, 
 as already stated, they have been ascribed, are, 1st, the 
 sudden expansion of the paper circulation by the Bank 
 of England and the country banks ; the rise of prices 
 thereby occasioned either from depreciation in con- 
 sequence of over-issue, or from the supposed stimulus 
 given by large issues of paper to commerce and to 
 speculation ; and, 2d, the subsequent contraction of 
 its currency by the bank, which produced effects 
 entirely the reverse ; namely, a deadness and stagna- 
 tion of industry in all its branches, and that great 
 fall of prices which, in 1825 and 1835, occasioned 
 such heavy losses to those merchants who had specu- 
 lated largely in the purchase of goods. 1 This is the 
 theory that is chiefly current among mercantile men, 
 which, also, the Select Committee of 1832, and of 
 
 1 See Report of the Committee of Secrecy on the Bank of Eng- 
 land's Charter, Appendix, p. 485. Evidence of John Easthope, 
 Esq., pars. 5968, 5969. 
 
282 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 1840 and 1841, from the general tenor of their 
 questions to the witnesses whose evidence they 
 received, appear to have adopted. How far these 
 views are just, it will now be proper briefly to con- 
 sider. 
 
 I. An alternate rise and fall of prices is an evil in- 
 cident to all mercantile convulsions, which have their 
 origin in over-trading; and it has been already 
 pointed out in what manner large purchases of goods, 
 at a high price, and on speculation, to be stored up 
 in the expectation of a still higher price, must in- 
 evitably lead to a subsequent fall, and to wide-spread 
 commercial ruin. The loss on this account to the 
 holders of goods, in 1836 and 1837, is estimated, 
 rather vaguely no doubt, in a Report by the Cham- 
 ber of Commerce in Manchester, at 40,000,000. 1 
 Property to so great an amount, or nearly so, could 
 not have changed hands, without giving a serious 
 shock to trade. But with whatever evils this alter- 
 nate rise and fall of prices was followed, there was 
 evidently no inordinate issue of paper, and no fall 
 consequently in its value, to bring it about. Paper 
 never appears to have varied from its standard during 
 the commercial disasters of 1825 and 1835. The 
 price of gold, when purchased with paper, is an in- 
 fallible test of its value ; and its price never rose 
 above the standard of 3, 17s. 6d., or 3, 17s. lOd. 
 an ounce. Paper, therefore, maintaining its value, 
 could not have been issued in excess, by which its 
 
 1 See Minutes of Evidence before the Select Committee on Banks 
 of Issue, p. 3. par. 16. 
 
NO OVER-ISSUE OF PAPER IN 1825 AND 1835. 283 
 
 value would have been lowered. The steadiness of 
 its value proves that there was no over-issue. 
 
 II. No impulse can be given to commerce by large 
 issues of paper, of which the excess will always cause 
 a proportional loss of value. Neither the Bank of 
 England, nor any other bank, can, by increasing the 
 circulation, impress that movement on commerce 
 which can only be derived from an accession of 
 real capital. This was the error of the projector 
 Law, who proposed to enrich a nation by an un- 
 limited issue of paper ; of which he did not con- 
 sider, that he diminished the value exactly as he 
 increased the quantity. Money, no doubt, forms a 
 part of the national stock ; but as it loses its value 
 in proportion as it is increased without a correspond- 
 ing increase of business, we can never in this manner 
 augment the real capital of the country. If we 
 suppose the currency to amount to 50,000,000 of 
 sovereigns, and to be suddenly doubled, the extent of 
 commerce still continuing the same, two sovereigns 
 having then to do the duty of one sovereign, would 
 fall one half in value, and the aggregate value of the 
 whole would still remain the same. It was no in- 
 crease in the issue of paper it was an increase of 
 capital, a real accumulation of the produce of land 
 and labour which gave rise to the over-trading and 
 subsequent disasters of 1825 and 1835. A bank 
 which does not pay in specie may inundate a country 
 with its paper ; but it will not thereby increase the 
 value of the currency, whatever other evils it may 
 produce ; nor will it give any impulse to commercial 
 enterprise. No over-trading can possibly be the 
 
284 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 consequence of this nominal increase in the currency, 
 no more than if ten millions of sovereigns were 
 divided into two, and the half being called equal to 
 the whole, the currency was then said to be increased 
 to double its former amount. After the bank was 
 released, in 1797, from its obligation to pay in specie, 
 its circulation was increased from twelve millions, its 
 amount in 1708, to twenty-five, twenty-six, and 
 twenty-eight millions in 1817, without giving any 
 undue stimulus to commerce, or occasioning any such 
 panics or sudden shocks as occurred afterwards in 
 1825 and 1835. Commerce was not, indeed, flour- 
 ishing. There was little demand for the produce of 
 industry: the warehouses of the merchants overflowed 
 with goods, for which there was no outlet ; and the 
 South American markets, when they were open to 
 the trade of Europe, were accordingly inundated 
 with an over-supply of British manufactures, which 
 was followed by a ruinous fall of prices, and by nu- 
 merous bankruptcies. About the year 1810 and 
 1811, this was the chief cause of the commercial 
 embarrassments which prevailed. The violent pro- 
 scription of the British trade on the Continent, the 
 desolations of war, and the subsequent transition to 
 a state of peace, occasioned the commercial dis- 
 tress and stagnation of industry which followed, and 
 which continued for several years after the termina- 
 tion of the French war. In 1814, 1815, and 1816, 
 numerous failures took place among the English 
 banks, occasioned by their limitation to six partners, 
 and their proportionally small capital, which gave 
 rise to local alarms and to great derangement and 
 
PAPER CIRCULATION NOT REGULATED BY BANKS. 285 
 
 distress. But there was no such general panic, or 
 subversion of credit and confidence, as afterwards 
 occurred in 1825 and 1835 during a season of pros- 
 perity and profound peace ; though the same causes 
 had been in operation to which those disasters were 
 afterwards ascribed, namely, a decided over-issue, and 
 a subsequent contraction of paper by the banks. 
 
 It would be a serious objection to the introduction 
 of paper, as a substitute for specie, if there existed no 
 more certain standard of its value than the discretion^ 
 of bankers ; and if they would thereby obtain a con- 
 trol over all prices, and over the whole commerce of 
 the country. But if we consider, with any attention, 
 the nature of their business, it will be seen that their 
 power is confined within much safer limits. It is 
 through their agency that the growing capital of a 
 prosperous community finds its way from the lender 
 to the borrower, and finally overflows into all the 
 channels of trade. The bankers are the agents be- 
 tween the two parties ; it is through the medium of 
 their paper that the transaction is effected ; which, 
 if they were to refuse, some other mode would be 
 devised for carrying on the business of the country, 
 for conveying capital from the lender, to whom it 
 is superfluous, to the borrower, who is in want of it. 
 In this transaction, the banker has no direct con- 
 cern ; he only facilitates the business which he can- 
 not stop. He is merely the carrier who conveys the 
 capital from the one party to the other ; he does not 
 create the capital ; it is already accumulated ; and 
 through his agency, finds its way from those who have 
 
286 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 to those who want it. To this extent, and no further, 
 are the banks concerned in these transactions ; and 
 the abuse which has been cast upon them, and es- 
 pecially on the Bank of England, as having occa- 
 sioned, by their rash issues of paper, those calamities 
 under which commerce has suffered so deeply, is 
 neither borne out by sound reason, nor by any con- 
 clusive facts. When commerce prospers and when 
 capital overflows, the banks lend it out more freely 
 and readily than when it is scarce ; and this seems to 
 be the amount of their delinquency, the head and 
 front of their offending. But it is not the issue of 
 their paper which causes this abundance ; nor, when 
 capital accumulates, as it does in every prosperous 
 community, have they the power of checking the 
 spirit of rash speculation which it produces, or the 
 extensive ruin which finally ensues : the convulsions 
 which occasionally lay waste credit and commerce, 
 are as little under the control of the banks as the 
 rage of the elements. They themselves are swept 
 away in the overflowing tide of capital which sets 
 in ; and, when the mischief breaks out, are tossed 
 about on the agitated sea of domestic alarm, with 
 scarcely the power of saving themselves, far less of 
 directing the storm. Those who so heavily blame 
 them, and ascribe the mercantile distress which takes 
 place, to their greater readiness to lend, and their 
 profuse issues of paper, fall into the common error of 
 mistaking the effect for the cause. 
 
 The circulation of the Bank of England, as of all 
 the other banks, will necessarily vary with the ne- 
 cessities of commerce ; with every increase or de- 
 
PAPER CIRCULATION NOT REGULATED BY BANKS. 287 
 
 crease in the cash transactions of the country ; as 
 also, with a quicker or a slower rate of circulation. In 
 a season of mercantile distrust, money does not cir- 
 culate so quickly as when confidence prevails ; it is 
 not so readily parted with, being retained for unfore- 
 seen emergencies ; and, in this case, a larger supply 
 will be required to carry on the same extent of com- 
 merce. The amount of currency, therefore, whether 
 consisting of paper or of the precious metals, that 
 will circulate in any country, and which, by what- 
 ever means, must be obtained, will be determined 
 by the extent and general course of trade, and not 
 by the discretion of any banker. Of all the spe- 
 cious theories which have been laid down for regu- 
 lating the paper circulation of the country, it is 
 remarkable how few have ever been reduced to 
 practice. Commerce, and all the other great concerns 
 of society, are far too irregular and eccentric in their 
 movements to admit the application of theoretic 
 rules ; and the banks are compelled, whatever 
 maxims they may previously lay down, to conform, 
 in regulating their circulation, to the emergencies of 
 trade as they arise. Neither the Bank of England 
 nor any other bank possess an arbitrary control 
 over the currency. They can neither, by diminishing 
 or increasing it according to their discretion, raise or 
 depress its value, and thus affect the general price of 
 commodities. From the evidence of practical men, 
 given before the parliamentary committees, it ap- 
 pears, that the bankers are controlled in their manage- 
 ment more by the force of circumstances than by 
 fixed rules. As men of business and sound discretion, 
 
288 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 they seldom refuse to commerce the necessary supply 
 of currency which is required. It is not the practice 
 of any banker to reject good bills, or any other trans- 
 action which is safe and profitable : and hence it 
 will be found, that the directors of the Bank of 
 England, in regulating their issues, never exercised 
 that control over the currency, and still less over the 
 commerce of the country and the price of commo- 
 dities, which has been ascribed to them ; that it is 
 not by their discretion that the amount of the circu- 
 lation is determined, but by the demands of com- 
 merce. 1 No greater quantity can at any time be 
 circulated than commerce requires. When it is 
 convertible into specie, the excess will in this case 
 
 See the Evidence of Mr J. B. Richards, Deputy-governor of 
 the Bank of England in 1825 ; more particularly his reply to 
 question 4973, as follows : 
 
 " It has been stated to the committee that the principle on which 
 the Bank now conducts its affairs, is to keep the amount of its 
 securities as even as possible; was that the principle upon which the 
 bank acted previously to 1825 ? Answer. As far as I know, that 
 steadiness and evenness of conduct has always been one of the first 
 principles of the Bank; but it has, and ever will be controlled, I fear, 
 by circumstances which neither the Bank, the government, nor any 
 set of individuals, can strictly control. I know the power is great, 
 and it can be exercised, but it may endanger the country ; and if 
 I may take the liberty of saying, were we to have two or three 
 years of bad harvests, and the food of the people depended on the 
 importation of corn, and we were obliged to get the corn, cost 
 what it would, I do not quite see the way in which that principle 
 could be effectually maintained, without placing the country upon 
 the verge of the greatest possible difficulties." See, also, the con- 
 clusive evidence of Mr Gilbart, manager of the London and West- 
 minster Bank, on this point. Second Report of the Committee 
 on Banks of Issue, (1841,) question 1043 to 1056. 
 

 CIRCULATION REGULATED BY THE STATE OP TRADE. 289 
 
 be immediately returned on the bank which issues it ; 
 and where it is not so convertible, it will fall pro- 
 portionally in value, as has been already explained. 
 Abstract rules may be laid down for the regulation 
 of the currency ; but these will be over-ruled by cir- 
 cumstances to which the directors of the bank, in 
 the exercise of a sound discretion, will in practice be 
 compelled to conform. 
 
 Those views are strengthened by the evidence of 
 the different bankers and money-dealers which was 
 given before the Select Committee, and which throws 
 great light on the principles that regulate the cur- 
 rency. From the facts stated by those dealers, it 
 appears that the circulation of the country ebbs and 
 flows with the state of business in its different dis- 
 tricts. In London this alternate increase and decrease 
 in the currency takes place four times in the year : 
 it increases with the payment of the quarterly divi- 
 dends on stock, and gradually declines till the ensuing 
 quarter comes round, when a larger issue necessarily 
 takes place. 1 The circulation of the country at large 
 is regulated by the same rule, namely, the extent of 
 the business which it has to perform ; and accord- 
 ingly, it is found that in Scotland it uniformly 
 increases at the two terms of Whitsunday and Mar- 
 tinmas, when large sums are required for the payment . 
 of rents, interest on loans, and other cash transactions, 
 which are settled at that time. The evidence of the 
 English bankers confirms and illustrates more fully 
 the same principle, namely, that the circulation 
 necessarily expands and contracts with the demands 
 
 1 See Minutes of Evidence before Select Committee on Banks 
 of Issue, 1841 ; Evidence of J. TV. Gilbart, Esq., p. 81. 
 
 U 
 
290 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 of commerce ; that it increases and decreases periodi- 
 cally with the varying transactions of the district. 1 
 Those bankers uniformly replied to questions, Whether 
 they regulated their issues by the state of the foreign 
 exchanges or the amount of bullion in the Bank of 
 England, that those causes did not affect their circu- 
 lation; and steadily adhered, notwithstanding the 
 cross-questioning of the Committee, to their original 
 views, namely, that they had no power either to con- 
 tract or increase the circulation : its amount being 
 determined by the local transactions of the district. 
 Mr Hobhouse, the banker at Bath, whose evidence 
 is remarkably clear and conclusive, replied, that as 
 he could not manage to pay 100 with 90, no 
 more could he reduce the circulation under the just 
 level of commerce and its necessary demands. 2 
 
 1 See, particularly on this point, the evidence of Mr Hobhouse, 
 banker at Bath. The circulation in the agricultural districts 
 (he states) " decreases half a million regularly every year from 
 the spring to the summer quarter, and it expands again by degrees 
 towards autumn and Christmas; but universally the period of 
 decrease is always in those two quarters, from the spring to the 
 summer quarter ; and the average is, as near as possible, half a 
 million every year, as shown by those returns. That fact abun- 
 dantly proves my position, namely, that the circulation depends 
 entirely upon the amount of local traffic going on ; for, in the 
 spring quarter, the payments are much heavier than they are in 
 the summer quarter. I think the rents are principally paid be- 
 tween Lady-day and the summer quarter; taxes are paid at that 
 time, and all the farmers are laying in their stock at that time. 
 The consequence is, as a matter of course, that more money is 
 required to carry on those dealings ; at least, I should submit, 
 that a person would be very clever who could carry them on with 
 the same amount of money." 
 
 2 See Second Report on Banks of Issue, 1841 ; Evidence of H. 
 W. II. Hobhouse, Vincent Stuckey, W. Rodwell, Esqs. The Com- 
 
EVIDENCE OP BANKERS. 291 
 
 The opinions of those bankers appear to be sound 
 and practical ; the result of experience, and not of 
 vague theories reared up on rash inferences from 
 doubtful facts. It will accordingly be found that, 
 
 mittee sometimes cross-questioned the witnesses in a manner not 
 particularly calculated to elicit useful information, but rather to 
 perplex their evidence. When a difference of opinion occurred on 
 some speculative matter, as in this case, they entered into a species 
 of disputation with the witnesses, as if they had met for the 
 debate of doubtful paints, rather than for the collection of useful 
 facts, the materials of science. The witnesses no doubt frequently 
 brought forward rash and ill-considered theories. But it was not 
 the business of the Committee to convict them of error, and thus 
 to lengthen out an inquiry into facts by speculative discussions, 
 which were here out of place. Mr Hobhouse, however, main- 
 tained his opinions, which by every successive question were only 
 drawn out more clearly than before. "I should define (he observed) 
 the circulation indicated in these county returns to be the amount 
 of money demanded and used by the people for their ordinary 
 local dealings, as far as they are conducted in such currency ; 
 and hence I should affirm, that the amount of the ordinary local 
 dealing and expenditure is the principle that at any and at all 
 times limits and determines the amount of those various circula- 
 tions. Whatever increases the expenditure increases the circu- 
 lation, and vice versa. Therefore the country bankers are perfectly 
 passive in the matter ; no competition on their part can increase 
 the circulation beyond this amount; no artificial management can 
 reduce it under this amount. You may vary the quality of the 
 circulation in any district as much as you like, but not the quan- 
 tity of it : that is my position. You might suppress our notes ; 
 but the vacuum so occasioned would be filled up by Bank of Eng- 
 land notes, or by coin, or in some other way. It is laid down by 
 Mr M'Culloch, who is a very great authority upon these matters, 
 at least, he has quoted it from a great writer, Sir Dudley North, 
 upon the subject, ' A people will not want money to serve their 
 ordinary dealing, and more than enough they will not have ;' or, 
 in other words, the natural demand of the people for money to 
 serve their ordinary dealings, is the controlling principle of those 
 country local circulations, as these returns abundantly prove." 
 
292 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 regardless of speculative maxims, the bank has always 
 been compelled to follow, in its transactions, the 
 varying course of trade. 
 
 Mr Horsley Palmer, in his evidence before the 
 Select Committee, lays down the following rule for 
 regulating the circulation; namely, that when the 
 exchange is at par, the Bank should, excepting under 
 special circumstances, so regulate its issues as " to 
 retain an investment in securities bearing interest to 
 the extent of two-thirds of its liabilities, the re- 
 maining one-third being held in bullion or in coin." 1 
 The principle, however, here laid down by Mr 
 Palmer is lost in the exceptions by which it is quali- 
 fied. It is only, he states, when the exchange is at 
 par that it can be carried into effect. There are, 
 besides, other " special circumstances" which prevent 
 its observance; and by those, and not by the rule laid 
 down, it appears that the currency has been regu- 
 lated since 1832 : for out of eight years, from that 
 time to 1840, there are not above three, namely, the 
 last half of 1832, the year 1833, and 1838, in which 
 
 1 The following is Mr Palmer's explanation of this principle in 
 his evidence before the Committee of 1832 : 
 
 " The principle, with reference to the period of a full currency, 
 and consequently a par of exchange, by which the Bank is guided 
 in the regulation of their issues, (excepting under special circum- 
 stances,) is to invest and retain in securities bearing interest, a 
 given proportion of the deposits and the value received for the 
 notes in circulation, the remainder being held in coin and bullion ; 
 the proportions which seem to be desirable, under existing cir- 
 cumstances, may be stated at about two-thirds in securities, and 
 one-third in bullion ; the circulation of the country, so far as the 
 same may depend on the Bank, being subsequently regulated by 
 the foreign exchanges." 
 
RESTRICTION OF CURRENCY NOT EXPEDIENT. 203 
 
 the rule of Mr Palmer has been observed. In gen- 
 eral, the securities and the bullion varied widely in 
 reference to the liabilities from this, or from any other 
 rule ; the former being sometimes equal to, sometimes 
 exceeding the liabilities, and almost always more than 
 two-thirds; while the latter, in place of being one-third, 
 generally varied between a fourth and an eleventh 
 part : and thus we find all those abstract maxims, 
 as already observed, giving way before the practical 
 emergencies of business. The Bank has been blamed 
 for not restricting its circulation the moment the 
 drain of specie was observed, which precededthe panics 
 of 1825 and of 1835. But no restriction of its cur- 
 rency by the Bank, whatever embarrassments it might 
 have occasioned, nor any rise in the rate of interest, 
 which was also suggested as a necessary precaution, 
 would have averted the disasters that were impend- 
 ing. The overflowing capital in which they origi- 
 nated, if its holders did not want it, must have been 
 lent out to others. No efforts of the Bank could have 
 prevented it from finding its way from the lender to 
 the borrower, and setting afloat all the rash specula- 
 tions of that disastrous period. If one channel had 
 been choked up, another would have been opened ; 
 if the bank had refused to lend, it would have been 
 obtained from others ; capital once accumulated, 
 would, by some means or other, have found its way 
 into the money market. No power of the Bank could 
 have arrested the swelling stream. As the contrac- 
 tion of the currency, however, is the usual specific 
 of theorists for the evil of undue speculation, of an 
 unfavourable exchange, or of a drain of bullion on 
 
294 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 the Bank, it may not be out of place here to consider 
 shortly how far this is the proper course for the 
 Bank to pursue. 
 
 It has already been explained, that as commercial 
 embarrassments are riot caused by the undue expan- 
 sion of the currency, no more would they be pre- 
 vented by its forced contraction ; and with regard to 
 an adverse exchange from an unfavourable balance 
 of trade, it will gradually be corrected without the 
 interference of the Bank by the exportation of goods 
 or specie. Great Britain is a vast emporium of com- 
 merce and of industry, to which, as to a common 
 centre, the cash transactions of the commercial world 
 naturally converge. 1 Its great capital and improved 
 industry, draw from every region the rude produce of 
 the soil. Cotton-wool, sheep's-wool, hemp, flax, and 
 numerous other products, the materials of industry, 
 flow into the country from different quarters ; and being 
 re-exported in a manufactured state, not only repay 
 the original cost, but constitute a debt against those 
 states to which they are sent, and turn the exchange 
 in favour of Britain. But this ordinary course of 
 trade is occasionally reversed, and the balance of 
 debt turned against Britain, by large importations of 
 corn, or goods as in 1824 and 1825, by foreign loans 
 and other transactions, which run counter to the 
 
 1 See Minutes of Evidence, &c. Question 4799 ; Evidence of 
 N. M. Rothschild, Esq. : " This country is in general the bank for 
 the whole world ; I mean, that all transactions in India, in China, 
 in Germany, in Russia, and in the whole world, are all guided 
 here, and settled through this country : so that it is not possible 
 for any power to guide the exchanges for so long as two or three 
 months." 
 
INTERFERENCE OF THE BANK WITH THE EXCHANGE. 295 
 
 general course of commerce, and require to be settled 
 by remittances either of specie or of goods. 1 The 
 Bank of England has occasionally interfered to rec- 
 tify the exchanges by supplying the money market 
 of London with foreign bills, when they were defi- 
 cient, and sending abroad specie for their discharge. 
 In 1832, it is stated by Mr Palmer, 2 that silver 
 coin, to the amount of one million sterling, was 
 converted into bullion, and exported to Paris, on which 
 bills were drawn for the amount. In 1830, bills of 
 credit were, in like manner, drawn on Paris, to the 
 amount of between 400,000 and 500,000, gener- 
 ally at three months, and were provided for by the 
 Bank of England, when they became due ; and in 
 1839, between May and June, and between July 
 and October, bills to the still larger amount of 
 2,900,000 were drawn on Paris, also on Amsterdam 
 and Hamburg ; they were negotiated through the 
 Bank of Paris, and were finally provided for by re- 
 mittances of gold or silver, and by bills of exchange 
 purchased by the Bank of England. In this man- 
 ner, rather than by a forced contraction of the cur- 
 rency, has the Bank given an impulse to the ex- 
 changes ; though, in the end, the transactions of 1839 
 appear to have limited the circulation : the bills 
 drawn from Paris on London being paid, when they 
 became due, in Bank of England notes, which were 
 
 1 See Minutes of Evidence before the Committee on the Bank 
 of England Charter ; Evidence of M. N. Rothschild, Esq. Ques- 
 tion 4750, &c., 4858, 4851, 4866. 
 
 9 Sec Minutes of Evidence before the Select Committee w: 
 Banks of Issue, Question 1443, 1446. 
 
296 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 consequently withdrawn from the circle. Mr Pal- 
 mer seems to be of opinion that there was no other 
 mode of reducing the issues of the Bank, and check- 
 ing the drain of bullion which took place in 1839, 
 than by the expedient of those foreign bills, though he 
 does not clearly explain why the sale of securities would 
 not have produced the same effect, in limiting the out- 
 standing notes. The reason which he gives, namely, 
 that the effect of selling securities to diminish these 
 notes, would have been counteracted by the demand 
 for discounts, which continued unabated, though the 
 rate of interest had been raised in May to 5, and in the 
 following June and September to 5^ and 6 per cent, 
 applies equally to the falling in of the foreign bills. 
 The circulation must have been equally diminished 
 by the paying in of the notes, whether in return for 
 securities sold, or for those bills. But the notes once 
 returned, might, in either case, have been re-issued 
 in discounts, and the circulation maintained at its 
 former amount. The reason here given by Mr Pal- 
 mer is equally conclusive against either of those ex- 
 pedients for reducing the circulation. His explana- 
 tion, however, seems to confirm the views previously 
 given on this subject ; namely, that the Bank do not 
 possess that control over the circulation which is 
 supposed. He states, in substance, and his authority 
 will not readily be disputed, that the Bank having 
 raised the rate of interest to 5, 5-J-, and 6 per cent., 
 had no farther power over its issues ; and that, 
 though they might have been reduced by the sale of 
 securities, the currency thus withdrawn, must have 
 been immediately re-issued in mercantile discounts : 
 
CIRCULATION AND BULLION NOT IN PROPORTION. 297 
 
 so that in this, as in all former cases, the transac- 
 tions of the Bank are still controlled by the neces- 
 sities of trade. 1 
 
 From the history and transactions of the Bank 
 since the resumption of cash payments, it does not 
 appear that the circulation has been often restricted, 
 in order to check the drain of gold. Its currency has 
 riot fluctuated with the alternate increase or decrease 
 of its treasure, as will appear from the subjoined 
 sketch of its transactions. 2 In 1822, the amount of 
 bullion in the Bank in February, was 11,057,150, 
 and in August 10,097,960; and the circulation 
 18,665,350, and 17,464,790. On the 31st August 
 1825, the treasure had declined to 3,364,320, and the 
 circulation had increased to 19,398,840. In 1829, 
 the Bank experienced a drain of its cash, which, on the 
 
 1 From the following question put to the witness, the same 
 impression seems to have been made on Mr Wood, the Chairman 
 of the Select Committee on Banks of Issue : " If, in your opin- 
 ion, the sale of other securities would have produced no effect 
 whatever in reducing the amount of circulation, and raising the 
 rate of interest were inexpedient, were not the Bank, in the early 
 part of 1839, left without any principle for limiting the amount 
 of their issues, except the demand of the public for discounts T 
 Minutes of Evidence, Question 1427. The conclusion seems di- 
 rectly to follow from Mr Palmer's statement; and in his answer, 
 which is not quite clear, he admits that the latter measure, namely, 
 the drawing of bills from Paris, " was virtually the same as the 
 temporary sale of securities to the extent of the credit used." 
 This sale of securities he considers, however, would have been 
 rendered nugatory in decreasing the circulation from the contin- 
 ued demand for discounts, which he does not seem to be of opin- 
 ion that it would have been safe for the Bank to have refused. 
 
 2 See Appendix to the different Reports of the Parliamentary 
 Committees on the subject. 
 
298 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 30th August 1828, amounted to 10,498,000, with 
 a circulation of 21,357,510; and was reduced in 
 February and August 1829 to 6,795,530, with a 
 circulation of 19,870,850 ; and in the following 
 February 1830, the gold had increased to 9,171,000, 
 with a circulation of 20,050,730. In 1831 and 
 1832, gold flowed into the Bank, and the circula- 
 tion rather appears to have fallen off with this influx 
 of treasure. The following is the relative amount 
 of the bullion and the circulation at different pe- 
 riods : 
 
 Bullion. Circulation. 
 
 1832, 29th February, 5,293,000 18,051,000 
 
 25th September, 8,134,000 17,202,000 
 
 24th December, 9,853,000 16,708,000 
 
 1833, 25th June, 11,454,000 18,531,000 
 
 23d July, 11,044,000 20,687,000 
 
 31st December, 11,200,000 17,469,000 
 
 In 1834, the Bank was exposed to a drain of specie. 
 The bullion amounted in January, to 10,142,000, 
 with a circulation of 17,422,000 ; and was gradually 
 reduced in May of that year to 8,485,000, with a 
 circulation of 18,326,000; on 18th May 1835, to 
 5,951,000, with a circulation of 18,775,000; in 
 1836 the drain still continued ; and the following is 
 the relative state of the bullion and the circulation 
 during the latter part of this and the beginning of the 
 following year : 
 
 Bullion. Circulation. 
 
 1836, 10th October, 4,729,000 18,247,000 
 
 22d November, 3,937,000 17,401,000 
 
 27th December, 4,229,000 16,770,000 
 
 1837, 31st January, 3,833,000 19,037,000 
 
CIRCULATION AND BULLION NOT IN PROPORTION. 299 
 
 During the year 1838 bullion flowed into the 
 Bank ; and the following is an account of its circula- 
 tion and its treasure : 
 
 Bullion. Circulation. 
 
 27th February, 10,471,000 18,975,000 
 
 31st July, 9,517,000 20,417,000 
 
 24th December, 9,794,000 17,449,000 
 
 The year 1839 was one of severe commercial pres- 
 sure ; and the Bank was exposed to a heavy drain of 
 specie, so that its stock was reduced on 27th August 
 to 2,420,000. This drain is ascribed by Mr H. 
 Palmer a great authority on this subject to three 
 causes : 1st, To the very large amount of American 
 securities that were sold, and for which credit was 
 given in the year 1838 and to February 1839, which 
 increased considerably the amount of bills on London 
 in the foreign market; 2d, To the unprecedented 
 purchases of corn in the continental ports towards 
 the end of 1838 and 1839 ; and, 3d, To the doubts 
 that prevailed on the Continent, after May and June 
 1839, of the ability of the Bank to continue payments 
 in specie, and the transmission in consequence of all 
 long-dated bills for discount in this country, and the 
 return of their value in gold, besides the withdrawing 
 of money that had been deposited in Britain. 1 The 
 causes here assigned by Mr Palmer are quite suffi- 
 cient to account for the drain of specie to which the 
 Bank was exposed ; and it appears that discredit 
 abroad, the most dangerous of all, was combined with 
 
 1 See Appendix to Report of Committee; Evidence of II. 
 I?aliner. Question 1362. 
 
300 EFFECTS OF PAPER ON COMMERCE AND CREDIT, 
 
 an unfavourable exchange. The treasure in the Bank 
 declined from 9,794,000, its amount in December 
 1838, to 2,420,000 in August 1839 ; the large sum 
 of 7,374,000 having been lost in the course of eight 
 months. So rapid a drain could scarcely have taken 
 place unless discredit had been added to an unfavour- 
 able exchange. The circulation of the Bank, which 
 amounted, when its cash was at the lowest, in August 
 to 17,982,000, was reduced, by means of the foreign 
 bills already mentioned, to between 16,000,000 and 
 17,000,000, and occasionally between 15,000,000 
 and 16,000,000. The exchanges turning in favour 
 of this country, treasure began to flow slowly into 
 the Bank in the year 1840, and still more freely 
 in 1841 and 1842, until it increased to between 
 10,000,000 and 11,000,000 ; and has since risen 
 to the enormous amount of 14,993,000. It may be 
 doubted, however, whether it is not the safer policy, 
 in place of contracting the circulation in order to 
 correct an unfavourable exchange, to allow this irre- 
 gularity to correct itself, either by an exportation of 
 specie or of goods, to which it gives encouragement. 1 
 The cause of an adverse exchange is the debt which 
 one country owes to another, and the true mode of 
 correcting it is by its discharge. It does not seem 
 necessary for this purpose to contract the currency 
 in the indebted country, which may be hazardous to 
 commercial credit ; more especially when, with an 
 unfavourable exchange, may be combined, as in 1839, 
 
 1 See Report on Banks of Issue ; Evidence of J. W. Gilbart, 
 Esq. Question 957 et scq. 
 
INCREASE OF DISCOUNTS WITH THE PANIC OF 1825. 301 
 
 any degree of alarm. Mr Thornton, who was a 
 director of the Bank in 1797, gives his opinion, in his 
 well-known work on currency, that the Bank should 
 be liberal in its accommodation in cases of commer- 
 cial distress; and that its issues should rather be 
 increased than diminished. A certain amount of 
 currency is essential to the punctuality of commercial 
 payments; and if, when money is scarce and trade 
 stagnates, it is farther embarrassed by a diminished 
 circulation, a panic may break out, and the drain 
 from an adverse exchange which, ebbing away with 
 a gentle current is not dangerous may be converted 
 into the rapid drain from domestic alarm ; which, 
 with however small a number of outstanding notes, 
 may draw from the Bank its last sovereign. No 
 stricter rule has ever been laid down, than that the 
 Bank should contract its circulation with a drain of 
 gold ; yet we find that, in 1824, though the Bank, 
 alarmed at first by the immense influx of foreign bills 
 that poured in from every quarter, in consequence of 
 the rising flood of speculation that was setting in 
 upon the country, contracted its discounts ;* yet when 
 the directors, from a deep sense of the prevailing- 
 distress, adopted, in the face of an alarming drain of 
 specie, which diminished their stock, from Feb- 
 ruary 1825 to February 1826, from 8,779,100 to 
 2,459,510, the opposite and the more generous 
 policy of increasing their circulation, within the same 
 period, from 20,753,760 to 25,467,910, it was 
 
 1 See Evidence taken before the Committee on the Bank of 
 England Charter ; examination of N. M. Rothschild, Esq. Ques- 
 tion 4846, &c., 4897 to 4903. 
 
302 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 followed by no injury to the Bank, while it materially 
 contributed to the relief of commerce and to the 
 restoration of credit. And this is another of those 
 many examples in which men of prudence and saga- 
 city, whatever abstract rules they may lay down, 
 are forced to conform in practice to the existing 
 emergency as it occurs. 
 
 There is no accounting for the fluctuations of com- 
 merce, from which the mass of specie that floats in 
 the general market of the world receives its impulse 
 and direction. Great Britain, however, has long been 
 an entrepot of the precious metals, which flowing in 
 from the mining countries in exchange for manufac- 
 tures, of which there is here a greater assortment 
 than in any other country, are dispersed in smaller 
 quantities over all the world. Before the commence- 
 ment of the French war in 1793, gold and silver 
 were exported from this country to Europe, and to 
 other parts ; and of late years still larger exporta- 
 tions have taken place. For ten years inclusive, 
 from 1815 to 1825, gold was exported, according 
 to the Custom-house accounts, to the amount of 
 2,809,594 ounces, equal in value to 10,948,417, and 
 silver to the amount of 94,704,997 ounces, amounting 
 in value to 27,352,498, arid this exportation appears 
 to be still continued. From 1837 to 1843 inclusive, gold 
 was exported to the amount of 2,032,247 ounces, equal 
 in value to 6,858,833 ; and silver to the amount of 
 87,555,117ounces, equal in value to 24,077,656. The 
 Custom-house takes no account of the import of the pre- 
 cious metals, being, according to the prejudices of that 
 day, exempt from duty as a privileged article. It is only 
 
TRANSACTIONS OF THE BANK. 303 
 
 from the exportation that we can collect any account of 
 the importation. Until of late years, the trade of Great 
 Britain with India required a constant exportation 
 of specie, which appears to have occasioned no incon- 
 venience, though in the present day an unfavourable 
 exchange, and an export of specie, seems to be re- 
 garded as a great evil; and if the banks should 
 happen to increase the circulation at the same time, 
 they are on this account censured in the most unmea- 
 sured terms, however they may be all the while acting 
 for the best interests of trade and the community at 
 large. 
 
 Since the resumption of cash payments, the Bank 
 has been engaged in several transactions with the 
 government, as well as with other parties, which have 
 been censured as deviations from its proper course of 
 business, and as rather tending to encourage the 
 spirit of commercial speculation. 
 
 I. In 1824, government were enabled, owing to the 
 abundance of money and the low rate at which it 
 could be obtained, to reduce the rate of interest on 
 the 4 per cent, stock to 3^ per cent. ; the holders 
 being offered the payment of the principal in the event 
 of their not consenting to the reduction of interest. 
 The amount paid on this account was 5,000,000, 
 which was advanced by the Bank between October 
 and January 1835 ; and this transaction was sup- 
 posed by some to have encouraged the spirit of specu- 
 lation which was then begun, and which ended so 
 fatally in 1825. An advance, however, was made to 
 government for a similar purpose, when the 5 per 
 cents, were reduced in 1823, without any inconve- 
 
304 EFFECTS OF PAPER ON COMMERCE AND CREDIT. 
 
 nience to trade ; and how a different effect should 
 have been produced by the same cause in 1824, or 
 how an advance of 5,000,000 to the government, 
 or to any other party, should have any tendency to 
 derange the general commerce of the country, does 
 not seem quite obvious, and has never been satisfac- 
 torily explained. 
 
 II. In 1833 the surplus funds which had accrued 
 to the East India Company, on the winding up of 
 their commercial concerns and the sale of their stock, 
 was lent to the Bank at an interest of between 2 and 
 3 per cent., and lent out again by the Bank to brokers 
 at a small profit. This sum, which appears to have 
 amounted to between 10,000,000 and 11,000,000, 
 was paid into the Bank as it was received, and repaid 
 to the Company as it was required from 1834 to 
 1838, when these transactions were closed. This 
 transaction of the Bank has also been called into 
 question, as if it was of the smallest moment, since 
 the money was to be lent, whether the Bank or the 
 East India Company were the lenders. 
 
 III. The Bank has also been censured for the manner 
 in which it aided the subscribers to the West India 
 loan of 15,000,000, which was contracted for in 
 August 1835, and on which the Bank declined to 
 make the advances in the usual manner, namely, after 
 the first and second instalments were paid by the 
 subscribers, to advance the subsequent instalments. 
 The directors on the 5th August, two days after the 
 loan was contracted for, issued a notice that they 
 would make advances at 3 per cent, on Exchequer 
 bills, India bonds, six months' bills of Exchange, or 
 
TRANSACTIONS OF THE BANK. 305 
 
 other approved securities ; and to this facility of 
 accommodation offered by the Bank, and the reduced 
 rate of interest, has been ascribed the speculations 
 and the panic which followed in 1835. Thus effects 
 are mistaken for their causes. The reduction of the 
 rate of interest was the consequence of the overflow- 
 ing capital; which, as has already been explained, 
 and not the intimation by the Bank, was the cause 
 of the commercial speculations in 1835. The Bank, 
 in reducing the rate of interest, only conformed to 
 the market rate, which will still find its level inde- 
 pendent of all control ; and whether the Bank accom- 
 modated the subscribers to the West India loan, by 
 making advances in the usual manner, or on the 
 securities proposed, appears neither of importance to 
 the general interests of trade, nor in any degree con- 
 nected with or aiding the spirit of speculation that 
 then prevailed. 1 
 
 1 Minutes of Evidence before Committee on Banks of Issue ; 
 Evidence of Mr Norman, Mr Page, Mr Horsley Palmer, and 
 others. 
 
306 TRANSACTIONS OF THE BANK CONSIDERED 
 
 CHAPTER XIV. 
 
 TRANSACTIONS OF THE BANK CONSIDERED IN 
 REFERENCE TO ITS OWN SAFETY. 
 
 A drain of specie caused by an unfavourable exchange. Slow and 
 gradual. Not dangerous to the bank. A drain caused by panic. 
 Sudden and violent. May endanger the credit of the bank. 
 Drain of specie in 1797. Suspension of payments. The bank 
 released from its obligation to pay in specie. Its consequences. 
 Drain of specie in 1825. Danger of the bank. Prohibition to 
 issue one-pound notes. Drain on the bank in 1835. Restriction 
 withdrawn on joint-stock banks in England. Established in 
 different parts. Evils ascribed by Mr H. Palmer to the compe- 
 tition of rival banks imaginary. The inutility of restricting their 
 transactions. The system of money-dealing that has arisen in 
 this country not a proper subject of legislative interference. 
 State of the banks in the United States. 
 
 THE transactions of the Bank, which have hitherto 
 been considered in reference to the general interests 
 of commerce, claim a farther consideration as they 
 affect its own safety and the interest of the share- 
 holders. 
 
 The chief danger to which a national bank, such 
 as the Bank of England, is exposed, is a drain of 
 specie and a suspension of its cash payments ; and 
 this, owing to the great disproportion between its 
 liabilities, consisting of its circulation and deposits, 
 and its stock of bullion, the one being often four- 
 teen or fifteen, in general not less than six or seven, 
 and never less than three times the amount of the 
 other. In February 1826 its liabilities amounted to 
 32,403,850, and the bullion only to 2,459,520 ; in 
 
IN REFERENCE TO ITS OWN SAFETY. 307 
 
 May 1832 they amounted respectively to 28,683,000 
 and to 5,809,000 ; in January 1833 to 34,363,000 
 and 10,065,000 ; in August 1839 to 26,316,000 
 and 2,471,000. A national bank, of which the 
 notes are payable at sight, will always be exposed 
 to a drain of its cash from a great foreign expendi- 
 ture and an unfavourable exchange. But the drain 
 from this cause is slow and gradual ; and cannot 
 endanger its credit where it has ample funds where- 
 with to purchase specie, and to recruit its decreasing 
 stock. The exchange, as already stated, tends to 
 correct itself; the profit on foreign bills encouraging 
 the exportation either of goods or specie, by which 
 the debt which depresses the exchange is discharged. 
 It was this profit which indemnified the Bank for the 
 large remittances of silver to Paris, in 1832, to the 
 amount of 1,000,000 ; of specie to the amount of 
 500,000 in 1836; and of 2,900,000 in 1839. 
 Gold is often in demand for many purposes. It is 
 required, on the breaking out of a war, for the mili- 
 tary chest of the armies which take the field ; and it 
 must be obtained at whatever cost. " Gold (says 
 Mr Rothschild, in his instructive evidence before the 
 Select Committee,) is wanted if there is a war ; and 
 in that case foreign governments will give 2 or 3 per 
 cent, more or less for the gold, because they must 
 have it. When the Emperor of Russia made war in 
 Poland lately, gold, which went from Hamburg to 
 Petersburg and Warsaw, was paying from 3 to 4 
 and 5 per cent. If 5 per cent, will not pay it, 10 
 per cent, will be given." 1 Specie to any amount 
 
 1 See Report of the Select Committee on the Charter of the 
 Bank of England ; Minutes of Evidence, p. 283. Question 4808. 
 
BUS TRANSACTIONS OF THE BANK CONSIDERED 
 
 may always be obtained at the market price. The 
 Bank of England being, however, a mercantile body, 
 cannot squander its funds with the same profusion as 
 a despotic sovereign in the prosecution of his ambi- 
 tious projects. Its managers must, by watching 
 the exchange, obtain specie at the cheapest rate ; 
 though, to avert a suspension of cash payments, it 
 must no doubt be purchased at any price. 
 
 The drain of specie from domestic alarm is in all 
 
 respects diiferent from that which proceeds from an 
 
 unfavourable exchange. Panic is in its own nature 
 
 sudden ; it does not allow the Bank a moment's respite 
 
 to recruit its ebbing treasure; and it must, therefore, if 
 
 it continue for any time, terminate in a suspension of 
 
 cash payments. Such was the catastrophe which 
 
 befell the Bank of England in 1797. To the slow 
 
 and gradual demand arising from an unfavourable 
 
 exchange, it had been exposed for more than a 
 
 twelvemonth before ; and though the directors were 
 
 greatly alarmed by the loss of their treasure, and 
 
 even intimated their fears that a farther advance to 
 
 the Emperor of Germany would be fatal to the 
 
 Bank, they appear to have expressed themselves thus 
 
 strongly for the purpose of checking the minister in 
 
 his lavish advances to foreign powers; since they 
 
 stated afterwards, before the Lords' Committee, that 
 
 they apprehended no serious danger before the 21st 
 
 February, 1797 i 1 for since, in the course of the three 
 
 several years of 1794, 1795, and 1796, the foreign 
 
 expenditure of the country amounted to rather more 
 
 than 8,000,000, 11,000,000, and 10,000,000, 
 
 without injuring the Bank beyond an inconvenient 
 
 1 See Lords' Committee of Secrecy; Minutes of Evidence, p. 1 1. 
 
IN REFERENCE TO ITS OWN SAFETY. 309 
 
 and somewhat expensive drain of specie, the farther 
 advance of 2,000,000 or even 3,000,000 could 
 not have endangered its credit. The foreign drain 
 on the Bank for the two previous years was gra- 
 dual, and had been provided for, with some ex- 
 pense no doubt for specie, but with no farther evil ; 
 and it was not till the panic commenced at home 
 that any serious danger arose : and then it was the 
 sudden, extraordinary, and still increasing demand 
 for specie, that brought on the fatal crisis. On 
 Tuesday the 21st February, the directors of the Bank, 
 alarmed by the increasing demands for gold, com- 
 municated to the Chancellor of the Exchequer the 
 precise amount of their cash. In the course of the 
 preceding week the drain had been greater than was 
 ever before known ; but from Tuesday the 21st it 
 continued increasing with such alarming rapidity, 
 that on the two last days of the week, namely, 
 Friday and Saturday, it exceeded that of the four 
 preceding days. This is the great and conclusive 
 fact which points to the true cause of the fatal 
 catastrophe. It was this vast and increasing demand 
 this tempest that was raging without that finally 
 swallowed up the resources of the Bank, which had 
 reduced its treasure to 1,272,000, and which in its 
 rapid increase would have quickly drained it of its 
 last guinea. The suspension of cash payments, by 
 an order in council, was, therefore, not a matter of 
 choice, but of over-ruling necessity. No other alter- 
 native remained. All sudden and violent alarms are, 
 however, in their nature of short duration ; and the 
 disclosure of a balance of above 15,000,000 in 
 favour of this great company, the result of a parlia- 
 
310 TRANSACTIONS OF THE BANK CONSIDERED 
 
 nientary inquiry into its affairs, quelled at once all 
 suspicion and all farther alarm. This was the proper 
 time for the resumption of cash payments ; and its 
 adjournment till six months after a definitive treaty 
 of peace was a fatal error. The act, fixing the 
 time for recommencing payments in specie, passed in 
 1819 ; and the period was anticipated by the Bank, 
 which, with this view, had previously collected a 
 large amount of treasure. 
 
 The release from the obligation of paying in specie 
 was at first used with discretion. But in a short 
 time this dangerous privilege was abused : the paper 
 was issued in excess, and suffered a corresponding 
 loss of value to the amount, in the course of eight or 
 ten years, of between 20 and 30 per cent. This 
 degradation of the currency was a dishonourable 
 expedient, an exception to the fair tenor of British 
 policy, and the source of extensive disorder and 
 injustice ; its effect being to subvert all pecuniary 
 contracts, first in favour of debtors by the deprecia- 
 tion of the currency, and afterwards in favour of 
 creditors by its restoration to its former standard. 
 
 The commercial panic of 1825 was accompanied 
 by a heavy drain on the Bank for specie, which had 
 nearly caused a suspension of its payments. This 
 drain commenced in February and April 1825, and 
 kept pace with the alarming progress of the panic, 
 until, in November and December, the credit of the 
 Bank was seriously endangered. Mr Richards, one 
 of the directors, speaking of the last week of its 
 continuance, adds, " On Monday morning the storm 
 began, and till Saturday night it raged with an inten- 
 sity which it is impossible for me to describe ;" when 
 
IN REFERENCE TO ITS OWN SAFETY. oil 
 
 on that evening, as Mr Richards states, "the tide 
 receded," and turned from that moment. 1 In the 
 meantime, this great money-dealing company never 
 made the slightest pause. Gold was collected from 
 all quarters to supply the growing demand ; and the 
 readiness with which it was met appears to have 
 slaked the raging thirst for specie, and to have sud- 
 denly quieted the alarm. The paroxysm was too 
 violent to last ; it was a passing tornado succeeded 
 by a dead calm. But the danger in these cases is, 
 that the Bank may be taken at unawares, and over- 
 whelmed by a demand for specie, before there is 
 time to prepare for the crisis ; and great fears were 
 entertained by the directors of such a catastrophe, 
 which they freely expressed to his Majesty's minis- 
 ters. But they declined absolutely to sanction any 
 
 1 See Minutes of Evidence taken before the Committee on the 
 Bank of England Charter, Question 5005 to 5012. The account 
 by Mr Richards, which is subjoined, describes fully the nature of 
 this fearful panic. 
 
 " The Bank had taken a firm and deliberate resolution to make 
 common cause with the country ; and on Saturday night, it 
 was my happiness, when I went up to the Cabinet, reeling 
 with fatigue, to be able just to call out to my Lord Liverpool, 
 and the members of his Majesty's government then present, that 
 all was well. Then, in the following week, things began to get a 
 little more steady ; and on the 24th, what with the one pound 
 notes that had gone out, and other things, people began to be satis- 
 fied ; and then it was for the first time in a fortnight that those 
 who had been busied in this terrible scene could recollect that 
 they had families, who had some claim on their attention. It 
 happened to me not to see my children that week." In answer 
 to a question, whether he was apprehensive of the Bank not 
 being able to continue its payments, he replied, " It looked ex- 
 ceedingly suspicious. Another such week, and the country could 
 not have stood it ; in my humble judgment, the Bank could not 
 have stood it although we had gold coining." 
 
312 TRANSACTIONS OF THE BANK CONSIDERED 
 
 discontinuance of cash payments : the} 7 advised rather 
 to pay to the last sovereign ; and their firmness saved 
 the Bank from this fresh dishonour, and the country 
 from the agitation that would have too surely fol- 
 lowed. The drain at this time arose entirely from 
 the alarm that prevailed both in London and in the 
 country, and which was first excited by extensive 
 insolvencies among the English banks. Those in 
 the country resorted, in their distress, for aid to the 
 Bank of England, the common repository of specie 
 for the whole kingdom ; where the demands, in what- 
 ever quarter they at first arise, are sure ultimately 
 to centre ; and it was by the concentration of this 
 drain in the metropolis, that the credit of the Bank 
 was now endangered, its specie having been reduced 
 to little more than a million of sovereigns. 
 
 As a security to the Bank, against the recurrence 
 of similar drains, the issue of one pound notes was 
 at this time prohibited ; and this prohibition would 
 have been extended to Scotland, but for the firm and 
 united remonstrances of the whole country against 
 it. It was supposed that the panic and the drain of 
 gold was chiefly confined to the holders of one pound 
 notes, though it was stated in evidence, that gold 
 was paid to individuals in sums varying from 100 to 
 1000 sovereigns, and to bankers in large sums 
 weighed and put up in bags, in order to save time ; 
 and though it is certain, as it was stated by the 
 ministers of that day, in a letter to the Governor of 
 the Bank of England, that no former drain could 
 have been caused by the one pound notes, since they 
 were not issued during the crisis of 1793, nor on 
 the still more alarming crisis of 1 797 ; and, far- 
 
IN REFERENCE TO ITS OWN SAFETY. 313 
 
 ther, the abolition of these notes did not, as was 
 expected, prevent the panic and the drain of 1832 
 and 1835, and the subsequent drain of 1839 : so 
 that it appears to have been an inefficient measure 
 in England, and would have produced still more 
 serious inconvenience if it had been rashly extended 
 to the Scottish currency. 
 
 The demand on the Bank for specie was not 
 nearly so great in 1835 as in 1825. It commenced 
 early in 1834, when the bullion, which amounted to 
 10,142,000, was, in the end of 1836, reduced to 
 3,840,000. In 1837, bullion again flowed into 
 the Bank. A drain commenced in 1838, by which, 
 towards the end of 1839, the stock was reduced 
 to 2,544,000. To those demands for specie the 
 Bank will be always exposed from the fluctuations 
 of trade. They proceed from no mismanagement of 
 the currency ; but from causes, as has already been 
 fully stated, over which the Bank has no control. An 
 artificial contraction of the circulation, for the purpose 
 of checking the drain, while it would be hazardous 
 to credit, would not add to the security of the Bank. 
 
 The commercial distress of 1825 was aggravated by 
 insolvencies among the English banks, which, by their 
 limitation to six partners, were restricted in their capi- 
 tal, and not so able, consequently, to answer the de- 
 mands to which, during a commercial alarm, they will 
 always be exposed. " The effect of this law," as is 
 justly observed by Lord Liverpool, in his masterly let- 
 ter to the Governor of the Bank of England, " is to 
 permit every description of banking except that which 
 is solid and secure." This restriction was accordingly 
 withdrawn, and joint-stock banks, with large capitals 
 
314 TRANSACTIONS OF THE BANK CONSIDERED 
 
 and a numerous proprietary, were permitted to be 
 established sixty-five miles from London, and to is- 
 sue their own notes. Against those establishments, 
 which now arose in most of the commercial towns 
 of England, an outcry was raised ; as if the commer- 
 cial embarrassments of the country were solely oc- 
 casioned by the reckless issue of their paper, Mr 
 H. Palmer, in his pamphlet on the currency, declaims 
 against the competition of seventy-two banks, which, 
 in the short space of two years, he mentions, had 
 been established in England and Wales, " with in- 
 numerable branches in almost every town throughout 
 the kingdom ;" and the competition in the issue of 
 paper " that grew out of this excessive multiplica- 
 tion of banks," he seems to regard with deep alarm. 
 This competition, however fraught with so much 
 supposed evil in England, has existed for more than 
 a century in Scotland, where there are about thirty 
 banks, with branches all over the country; and where, 
 so far from retarding, they are universally acknow- 
 ledged to have eminently assisted, by their judicious 
 distribution of capital, the progress of agriculture 
 and commerce. It is a great error to suppose that 
 competition in the issue of paper tends to excess. 
 The check of immediate convertibility into specie is 
 equally effectual on banks whether they be many or 
 few. The exchange of notes which takes place be- 
 tween those rival establishments in the same district, 
 once or twice in the week, secures the payment of 
 whatever balance may be then due, in gold, Bank of 
 England notes, or Exchequer bills ; and thus affords 
 a complete guarantee against any excess of issue. 
 The English joint-stock banks have, some of them, 
 
IN REFERENCE TO ITS OWN SAFETY. 315 
 
 mismanaged their affairs, while others have been 
 charged with fraud. This has increased the outcry 
 against them, as if the whole could be justly reproached 
 for the misconduct of a few ; and the necessity has 
 been strongly urged of exacting security for their 
 issues, and of subjecting them to a certain surveil- 
 lance in the conduct of their affairs, and to other 
 restraints. It has even been suggested, that the ex- 
 clusive privilege of circulating notes should be vested 
 in one central bank in the metropolis ; of which im- 
 practicable scheme it seems, however, useless to discuss 
 the merits, since it is next to certain it never will 
 exist except on paper. Nor would it, besides, afford 
 the expected security against commercial panics, which 
 would occur again, as they have occurred before, even 
 though the currency consisted of the precious metals. 
 The object of these precautions is to guard against 
 the risks to which paper currency is liable. But if 
 paper has its risks, it has also its advantages ; and 
 exactly as the restraints add to the security, they 
 curtail those advantages : so that the only alternative 
 seems to be, either to take the one with the other, or, 
 recurring at once to the use of the precious metals, to 
 renounce the benefit of paper, and be free at the same 
 time from the risk. But as the insolvency of a bank 
 causes great local distress, and an alarm which, in a 
 commercial country, may be contagious, its safety 
 might be farther guaranteed, without its utility being 
 impaired, if every joint-stock bank were bound to 
 exhibit a certain amount of paid-up capital, a 
 million, we may suppose, or half a million, and if a 
 public assurance, founded on an official inquiry into 
 its affairs, were given, that this capital still remained 
 
316 TRANSACTIONS OF THE BANK CONSIDERED 
 
 entire after the payment of each successive dividend. 
 If this fact were duly ascertained, which it might be, 
 without interfering with the business of the bank, all 
 risk of insolvency would be at end. A large paid- 
 up capital, therefore, without the farther security of 
 unlimited responsibility, is all that is wanted as a 
 guarantee to the public, by which neither the trans- 
 actions of the bank would be restricted, nor its utility 
 impaired. It is on this solid foundation that the 
 Scots banks have been raised, which no storms nor 
 panics have ever shaken, and which at such times 
 have proved the safeguards of public credit, not more 
 by their known stability than by their prudent man- 
 agement ; and there is no possible reason why bank- 
 ing may not in England, by the same prudence, be 
 guarded against abuse. The inquiry of the different 
 parliamentary committees into the principles of paper 
 currency, and the transactions of the banks, which has 
 brought before the public much valuable information, 
 has also set afloat several theories which, if acted upon, 
 would lead to injurious restraints on the business of 
 banking. It is seldom that the great concerns of society 
 can be forwarded by legislative interference ; and when 
 we consider what a complicated and factitious system 
 of money-dealing has arisen in this country, which, 
 spreading from London the centre over the whole 
 kingdom, has been brought to its present perfection 
 by long practice and increasing skill, aided by, and 
 aiding a vast and an extending trade, we may well 
 be startled at the boldness of the projector who would 
 thrust his meddling hand into such delicate machin- 
 ery; and who would not rather pause, and surveying 
 in silent admiration so curious a creation, the spoil- 
 
IN REFERENCE TO ITS OWN SAFETY. 317 
 
 taneous product of individual prudence, would not be 
 startled with the fear, lest he might be meddling with 
 what he might mar, and certainly could never mend. 
 It is vain to imagine that any artificial restraints on 
 the issue of paper, or on the business of banking, will 
 afford a guarantee against commercial panics. These 
 will occasionally arise, so long as a desire to make 
 rich and to speculate actuates mankind, and so long 
 as capital is accumulated to give wings to mercantile 
 indiscretion. 
 
 It is no way surprising that several of the joint- 
 stock banks, before they succeeded in tracing out 
 the true path, should have stumbled in their way, and 
 fallen. Experience will, however, in this as in other 
 cases, teach its own lessons. The sagacious trader 
 will not be repeatedly caught in the same snare. 
 Practice will instruct him in the mysteries of bank- 
 ing, and the faults of inexperience will be avoided by 
 matured skill. Let matters be left to the sagacity 
 of dealers, and with the Bank of England the centre 
 of the system, a great reservoir of specie, a sure 
 haven in time of alarm to which minor establishments 
 will fly and find shelter a sound system of banking 
 will arise, which will supply the country with a cur- 
 rency of which the standard will be gold, and which, 
 being guarded from abuse by practical skill and sound 
 discretion, will prove an effectual substitute for coin, 
 whether as a medium of exchange j^t.as^a measure 
 of value. 
 
 ' UHIVEBSIT* 
 
 ^CgUFOflgJ^ 
 
 The commercial embarrassments of America have, of 
 late years, been greatly aggravated by the unsound 
 
318 BANKS OF THE UNITED STATES. 
 
 state and general insolvency of the banks. In no 
 country has the use of paper extended more rapidly, 
 or been issued in greater excess. In 1838, the num- 
 ber of banks throughout the Union amounted to 
 between six and seven hundred ; many of them estab- 
 lished on a slender foundation of capital, or on funds 
 altogether fictitious. Of these, the most important 
 was the Bank of the United States, in Philadelphia, 
 which possessed a capital of 35,000,000 dollars. It 
 was incorporated in 1816 for twenty years. When 
 its charter expired, the question of its renewal di- 
 vided the American community into two great parties. 
 At the head of one hostile to the bank, was General 
 Jackson, the President, who proposed to dispense 
 with paper currency altogether, and to collect the 
 public revenue entirely in specie, to be laid up in 
 vaults under the charge of public officers. This notion 
 was, no doubt, quite consistent with his opposition 
 to the renewal of the bank charter, or to the exis- 
 tence of a national bank. But it was not the less 
 irrational and extravagant. It is certain that no 
 change, even for the better, is without some atten- 
 dant evil ; and that paper currency, as well as every 
 other improvement, has its inconveniences and haz- 
 ards, as well as its advantages. But to part, on this 
 account, with this cheap substitute for coin, would 
 be as unwise as to renounce the benefits of naviga- 
 tion from the dread of shipwrecks, or of steam from 
 the inevitable perils with which it is attended. 
 
 The bill for renewing the charter of the United 
 States Bank, which was passed by Congress, was 
 rejected by the President, in virtue of the veto which 
 he possesses on all measures not sanctioned by two- 
 
BANKS OF THE UNITED STATES. 319 
 
 thirds of the legislative bodies ; arid in the same hostile 
 spirit he gave direction, in 1833, for the removal of the 
 government deposits to certain other banks. In thus 
 discountenancing the great national bank of the 
 United States with a large capital, and in giving en- 
 couragement to banks with a smaller capital, General 
 Jackson acted on the principles of the English act, 
 which limited the number of partners in a bank to 
 six ; which, as described by Lord Liverpool, was to 
 disallow all that was sound and secure in banking, 
 and to bring forward all that was unsound and dan- 
 gerous. During the panic of 1836, all the American 
 banks accordingly suspended their cash payments ; 
 and the country, as is remarked in a report on the 
 State of New York laid before Congress, was flooded 
 with every species of depreciated currency, to the 
 general annoyance and loss of the people at large. 
 
 A national bank, such as the Bank of England, 
 situated in the metropolis, the great emporium of 
 the national commerce, and the centre of all cash 
 transactions, and resting on the solid foundation of 
 its large capital, is calculated to give coherence and 
 unity to the whole system. It is the general repo- 
 sitory of specie to which the minor banks fly for sup- 
 port in time of need : it assists mercantile distress 
 that arises not from a want of property, but from a 
 want of cash, and by this seasonable aid quells an 
 incipient alarm. Numerous banks, on the other hand, 
 scattered over the country without any connecting 
 link or a commanding capital, have no power to 
 assuage a rising panic or scarcity of cash. Property 
 may abound, but there may be no stock of gold into 
 which it can be converted ; and all the banks may. 
 
320 BANKS OF THE UNITED STATES. 
 
 therefore, be involved in one common calamity, as 
 was the case in the United States in 1837, and since 
 in 1839, when the great American Bank, with its 
 capital of 35,000,000 of dollars, was, by its ruinous 
 speculations and general mismanagement, compelled 
 to suspend its payments, and was followed by almost 
 all the other lesser banks in the country. Great con- 
 fusion followed this insolvency, which, setting afloat 
 the currency from the sure anchorage of gold and sil- 
 ver, left no fixed standard of value. The respective 
 currencies of the different States were in consequence 
 depreciated more or less, and coin exchanged for 
 paper at a premium varying downwards from 20 
 per cent., by which the commerce and cash transac- 
 tions between different parts were seriously impeded. 
 What a contrast does the steady value of the British 
 currency present to this continually-recurring evil of 
 suspended payments and a depreciated standard ! 
 The bankers in Great Britain carry high the point 
 of mercantile honour; and the slightest delay in 
 paying, far less the actual dishonour of any draft or 
 bill by a bank, would seal its ruin. In America, the 
 case is different. The reckless issue of paper ac- 
 commodates the merchants in their rash specula- 
 tions, while they, depending on the indulgence of 
 the banks, are indulgent in their turn. This mu- 
 tual dependence seems to relax the strictness of 
 mercantile engagements ; and the banks, taking the 
 advantage, too easily resort, in their difficulties, 
 to a suspension of cash payments, and thus inflict 
 an incurable wound on credit. Yet Congress, 
 and the legislatures of the different States, have 
 passed the most stringent acts for the regulation 
 
OF EXCHANGEABLE VALUE. 321 
 
 and control of the banks, which have all been either 
 evaded or disregarded; thus proving the impolicy, 
 as well as the futility, of those legislative restraints 
 on the business of banking. 
 
 CHAPTER XV, 
 
 OF EXCHANGEABLE VALUE. 
 
 Scarcity the source and measure of exchangeable value. No article, 
 of which the supply exceeds the demand, can have any value in 
 exchange. Water an example. Scarcity would give value to 
 water, as to corn. Price of articles high exactly as they are scarce. 
 This principle regulates wages, profits, and rent. No article, 
 the produce of labour and capital, can rise above the common level 
 of profit. The produce of land not liable to this restriction. The 
 price of corn may rise higher, though it cannot fall lower. Prin- 
 ciple on which the price of corn is determined. Doctrine of Mr 
 Malthus, of Ricardo, of M'Culloch, considered. Rent yielded by 
 other sorts of rude produce. Market price of such articles not de- 
 pendent on their original cost. Increase of expense not followed 
 by a rise of price. Conclusions of Mr Ricardo, from his doctrine 
 of rent, considered, 
 
 IT is obvious, that the quantity of any commodity 
 consumed cannot for any length of time exceed the 
 quantity produced, as it is equally certain that the 
 supply will not long exceed the consumption ; and if, 
 for short periods, accidental causes should derange 
 this just equilibrium, it is quickly restored by a higher 
 or a lower price. An excess of the supply is followed 
 
322 OF EXCHANGEABLE VALUE. 
 
 by a lower price, which increases the consumption ; 
 and an excess of the consumption occasions a rise of 
 price, by which consumption is checked. When the 
 demand or the consumption, and the supply, are 
 exactly equal, the price is then at rest ; but it cannot 
 rest anywhere else. It cannot rest either when the 
 consumption is greater than the supply, or the supply 
 than the consumption ; as it must in the one case be 
 raised by the competition of the buyers, and lowered 
 in the other by the competition of the sellers. The 
 demand and the supply are like equal weights in 
 opposite scales, which are never at rest until they 
 come to an even balance. That price, therefore, by 
 which they are brought to an equality, is the natural 
 price the point to which the price continually tends 
 amid all its variations ; to which, as is well expressed 
 by Dr Smith, it perpetually gravitates, as to a centre 
 of continuance and repose. 
 
 No commodity, of which the supply exceeds the 
 demand, can have any value in exchange. However 
 useful or necessary it may be, and in however great 
 demand, it will never bear any price unless it be scarce, 
 i. ., unless the demand for it exceed the supply. 
 Water is equally necessary with corn for the support 
 of man ; yet it bears no price : it has, owing to the 
 superabundance in which nature supplies it, no value 
 in exchange. But if the supply of water had been 
 equally scarce with that of corn, there is no reason 
 why it should not have been sold at the same price. 
 There is no reason why the competition of the buyers, 
 which fixes a price on other articles, should not have 
 also fixed a price on water. Even though it might 
 
OF EXCHANGEABLE VALUE. 323 
 
 cost no labour to obtain the water, yet if it were 
 scarce, if there were a greater demand for water 
 than could be supplied, a price would immediately 
 follow; since there is no other mode of bringing about 
 the necessary equality between the demand and the 
 supply. Scarcity, therefore, or the excess of the 
 demand above the supply, is the true origin, as well 
 as the true measure of all exchangeable value. No 
 article which is not scarce can have any value in ex- 
 change ; and exactly in proportion to its scarcity, or 
 to the excess of the demand above the supply, will 
 its value be. If we suppose the demand to be 100 
 and the supply 200, there will be no price. The 
 article, however necessary, will possess no value in 
 exchange. If we suppose the demand to be 105 and 
 the supply 100, a price will then be necessary, in 
 order to confine the consumption within the limits of 
 the supply; and if the demand rise to 110, a still 
 higher price will be necessary. If the demand for 
 different articles be 120, 130, or 140, while the supply 
 is only 100, their prices will vary proportionably, and 
 will stand at different levels, exactly according to the 
 scarcity of each. 
 
 It is the principle here laid down which determines 
 the price of all articles, which fixes the rate of wages, 
 the rate of profit, the rent of land, of mines, of fish- 
 eries, and of every other species of produce. The 
 price of labour, like that of every other article, de- 
 pends on its plenty or scarcity in the market ; and 
 the rate of profit on the plenty or scarcity of capital. 
 The rate of wages, however, and of profit being once 
 fixed, the price of all articles which are produced by 
 
324 OF EXCHANGEABLE VALUE. 
 
 labour and capital, must sooner or later conform to 
 the general standard. No article can permanently 
 rise above the common level. If any branch of 
 industry yielded a greater profit than another, it 
 would draw capital from those other employments 
 until the inequality were reduced. In exchanging or 
 selling such articles, we, in fact, exchange or sell 
 labour and capital ; and equal portions of these must 
 always exchange for each other, or be of the same 
 value. The labour and capital employed in their pro- 
 duction must be the measure of their exchangeable 
 value. An article which is produced by ten days' 
 labour and a capital of 100, will always exchange 
 or be of the same value as another article which is 
 produced by the same quantity of labour and capital ; 
 or, if it be produced by five days' labour and a capital 
 of 200, its value must still depend on the same 
 principle we still exchange the same things for each 
 other, namely, labour and capital, though in different 
 quantities and variously combined : and this proposi- 
 tion, which is the foundation of Mr Ricardo's theories, 
 is as clear, and an equally barren truth generating no 
 conclusion, as that one quarter of corn must be of 
 the same value as another quarter of corn, or one 
 sovereign of the same value as another of the same 
 weight and fineness. 
 
 But though all articles containing equal portions 
 of labour and capital must be of the same value, 
 though their price can never be more than is sufficient 
 to repay the wages of the labour and the profits of 
 the stock necessary to produce them, it does not 
 follow that every other sort of produce, of land for 
 
OF EXCHANGEABLE VALUE. 
 
 325 
 
 example, should be liable to the same restriction in 
 its price. Here, if we may so speak, we enter upon 
 a new territory, and come under the jurisdiction of a 
 different principle. The price of every article must 
 indeed be sufficient to pay the expenses of its pro- 
 duction, otherwise it will not be produced. The 
 produce of land must always rise to such a price as 
 will repay the wages of the labour and the profits of 
 the stock employed in raising it. This is the lower 
 limit of price, below which neither corn, nor any 
 article the produce of labour and capital, can per- 
 manently fall. But it may rise above it for any 
 time, and to any amount ; the scarcity of the article 
 being the only measure of its price. In no case, as 
 has been already remarked, can the consumption 
 of any commodity permanently exceed the supply ; 
 and it is only by means of the price that the con- 
 sumption and the supply can be brought to an 
 equality. Now, the price necessary to bring about 
 this equality between the consumption and the supply 
 of certain articles, the produce of land, is always so 
 high as to yield a surplus above wages and profit. 
 Corn always rises to this high price ; out of which, 
 after paying wages and profit, a surplus remains, 
 which goes to the landlord under the name of rent. 
 This high price is not the cost of its production; 
 it is the measure of its scarcity; the exact index 
 to the excess of the demand above the supply. As 
 land only yields its produce once in the year, it is 
 necessary, for the support of mankind, that the supply 
 of one year should last until a new supply be pro- 
 cured ; and, accordingly, the supply, however defi- 
 
326 OF EXCHANGEABLE VALUE. 
 
 cient, always lasts until the produce of the next 
 harvest is in the market : a striking proof of the 
 complete control of the price over the consumption. 
 If we suppose one sixth part of the produce of the 
 year to be wanting, it would be consumed, at the 
 ordinary rate, in ten in place of twelve months, 
 and famine would depopulate the land. But no 
 scarcity ever produces this effect. There is no 
 greater want at the end than at the beginning of 
 the season. The deficient supply is never con- 
 sumed until a new supply be ready for use ; and 
 this effect is produced by the operation of a higher 
 price, which forces the great body of the con- 
 sumers to use corn more sparingly, and thus averts 
 the calamity of absolute want. The ship is vic- 
 tualled for ten months, and it has a twelvemonth's 
 voyage to perform ; and the crew are put on short 
 allowance, not, however, by the foresight of man, 
 but by the operation of causes over which he has no 
 control. The price rises until it enforce the neces- 
 sary economy in the use of the supply, and it cannot 
 rise higher. Corn would be placed, by a higher 
 price, beyond the reach of the great body of the 
 consumers, and the supply, deficient though it might 
 be, could not be consumed ; while, at a lower price, 
 it would be consumed before a new supply could be 
 procured. The dominion of the price over the sup- 
 ply is entire and absolute. It is, if we may so speak, 
 the outlet through which the supply flows for the 
 daily use of the community ; and we enlarge or con- 
 tract this outlet, exactly as we lower or raise the 
 price. Thus it is that, by means of the price, the 
 
PRICE OF CORN. 
 
 327 
 
 supply is regulated ; and that price which duly pro- 
 portions the daily or weekly consumption to the sup- 
 ply of the year, is the natural or necessary price. 
 The expense of production cannot here weigh a feather 
 in the balance of price. It affords no principle by 
 which it can be regulated. Whatever may have been 
 the original cost of corn ; though all the lands from 
 which it is produced were equally fertile ; though it 
 were even the spontaneous produce of the fruitful 
 earth, and cost nothing, the consumption must still be 
 brought, and in point of fact is always brought, within 
 the limits of the supply ; and this is accomplished, 
 and can only be accomplished, by a rise of price. 
 But the price which it costs to raise corn, might 
 not, by any means, be the price which would effect 
 this object : it might be too high, when the supply 
 would be placed out of the reach of the great body 
 of the consumers ; or it might be too low, when 
 the consumption would go on too quickly, and the 
 supply might be consumed before the next supply 
 could be obtained. It is by a higher or lower 
 price only, that these evils can be averted; for there 
 exists no other agency by which the consumption 
 can be controlled. It is entirely to this principle 
 that all the fluctuations of the market are to be 
 traced; it is the master-spring that sets in motion 
 all the machinery of price : and the great and neces- 
 sary object of regulating the consumption being once 
 attained, the profit or the rent of the landed proprie- 
 tor, and the extent to which cultivation is carried, 
 follow as incidental consequences of the high price, 
 
328 OF EXCHANGEABLE VALUE. 
 
 though they have no share in producing it. And 
 this law, which regulates the price of corn, is constant 
 and uniform in its operation; it lies deep in the 
 very frame of society. If it settle the price one year, 
 it must settle it every year : for it applies to every 
 possible case that can occur, whether of plenty or of 
 scarcity. The moment the supply is brought into 
 the market, no matter whether from rich or poor 
 lands, it begins to operate ; and its operation never 
 ceases until it be wholly consumed. A high price 
 of corn is no doubt a standing encouragement to an 
 increased supply. But corn being the food of man- 
 kind, the demand for it always increases faster than 
 it can be supplied. Mr Malthus has explained, with 
 equal clearness and originality, that great law by 
 which mankind increase faster than food can be pro- 
 vided for them : and hence the continual and increas- 
 ing demand for corn. The supply may increase ; but 
 if, from the rapid increase of inhabitants, the demand 
 increase still faster, the price cannot fall : it must still 
 remain at the point necessary to restrict this increas- 
 ing and keen demand within the limits of the supply. 
 On this subject, Mr Malthus, by whom indeed 
 the doctrine was first stated, 1 Mr Ricardo and Mr 
 M'Culloch have adopted a different theory. They 
 maintain that the price of corn is regulated by the 
 expense of its production on the poorest lands. In 
 every unoccupied country there are large tracts of 
 fertile and unappropriated land, for which no rent is 
 paid ; on the same principle, according to this doc- 
 trine, that we do not pay for air and water because 
 1 See "An Inquiry into the Nature and Progress of Rent," p. 36. 
 
MR RICARDO'S THEORY. 329 
 
 of its plenty. But when, from the progress of popu- 
 lation, this fruitful land can no longer supply the in- 
 creasing demand for food, recourse is had to inferior 
 soils, on which it costs more labour and expense to 
 raise corn ; and it is maintained that the price must 
 rise in order to pay this increased expense. But 
 the corn which is raised on the fruitful and first cul- 
 tivated soils, though at less expense, will, neverthe- 
 less, be sold at the same price : as there cannot be 
 two prices for corn of the same quality. If corn be pro- 
 duced at an expense of 20s. on the better, and 50s. on 
 the inferior soils, a surplus or rent of 30s. will re- 
 main to the proprietor of the best lands after paying- 
 wages and profits. The high price of corn, therefore, 
 which leaves a surplus after paying wages and profit, 
 arises, according to this theory, from the expense of 
 cultivating the inferior lands ; this is the measure of 
 its price, and it is the difference of producing it on 
 the fruitful and on the inferior lands that constitutes 
 rent. 
 
 In a country which overflows with capital, there 
 is no doubt that cultivation will be extended to lands 
 which afford no return beyond that of wages and 
 profit. It may be even carried farther, and a scanty 
 produce extorted from the most barren spots. But 
 the price will not necessarily rise to the level of this 
 expensive cultivation. As the daily, weekly, and 
 monthly consumption of corn must be proportioned 
 to the supply of the year ; and as it is only by a 
 higher or a lower price that this can be effected ; it is 
 clear that corn must rise to this price, and that it 
 cannot rise higher, whatever be the cost of its pro- 
 
330 OF EXCHANGEABLE VALUE. 
 
 duction. It is not, therefore, the expense of culti- 
 vating inferior lands that is the cause of this high 
 price ; but, on the contrary, it is the high price that 
 is the cause of this extended cultivation. It is the 
 price which fixes the boundary of cultivation ; but it 
 is not the extent of cultivation or the expense of 
 production which fixes or limits the price. It is to 
 the current prices that the farmer looks for his profit 
 in cultivating new lands ; for he will not enter on 
 such schemes on the notion, that because it costs him 
 more to produce corn, he will, therefore, be able to sell 
 it for more. He must be assured of his profit by a 
 prior rise of price ; and it is this price which, ac- 
 cording to Mr Ricardo's theory, extends cultivation 
 downward to the inferior lands : for, without such a 
 price, they would be allowed to lie waste. But this 
 extension of cultivation to inferior lands cannot be 
 both the effect and the cause of high price. If it 
 be a prior rise of price that extends cultivation to 
 those lands, this rise of price is clearly the cause, 
 and extended cultivation the effect. Philosophers 
 have defined cause and effect to be an invariable 
 sequence. But Mr Ricardo's theory reverses this 
 natural order of things, and places the effect before 
 the cause. That which takes place first, namely, the 
 rise of price, he calls the effect ; and that which 
 takes place last, namely extended cultivation, the 
 cause. Farther, the price rises, according to his 
 hypothesis, and extends cultivation to the poorer 
 lands. Now, the same principle which fixes the 
 price before, must also fix it after the supply is 
 obtained from those lands. It must still be regulated 
 
MR RICARDO'S THEORY. 331 
 
 by the plenty or scarcity of corn in the market, 
 which is the supreme arbiter of the price, and not by 
 the expense of cultivation on poor lands. If we 
 trace the price to this simple principle, namely, to 
 the plenty or scarcity in the market, and consider 
 the cultivation of poor lands to be the effect and not 
 the cause of the high price, we have a very easy and 
 simple explanation of the subject, and avoid all that 
 perplexity which we fall into by inverting this natu- 
 ral order of things. 
 
 According to the theory of Mr Ricardo, the price 
 of corn must continually rise with the progress of 
 cultivation. But we have no account of this con- 
 tinued rise of price in any country. On the contrary, 
 as Dr Smith states, the price was lower during the 
 first sixty-four years of the last than during the first 
 sixty-four years of the preceding century. " This fact," 
 he observes, " is attested, not only by the accounts 
 of the Windsor market, but by the public fiars of 
 all the different counties in Scotland ; and by the ac- 
 counts of several different markets in France, which 
 have been collected with great diligence by M. 
 Messance, and by M. Dupre de St Maur. The evi- 
 dence is more complete than could have been ex- 
 pected in a matter that is naturally so difficult to be 
 ascertained." From this time, and especially from 
 the year 1794" to about the year 1820, the price of 
 corn was extremely high. It was in 1800 and 1801 
 at 120s. per quarter, often at 70s., 80s., and 90s. 
 Agriculture made great progress, and new tracts of 
 land were everywhere improved. This extensive 
 cultivation would, according to Mr Ricardo, cause 
 
332 OF EXCHANGEABLE VALUE. 
 
 the price to rise as the cost of production increased ; 
 and thus he would connect high price with an in- 
 creasing supply, and a low price with a diminishing 
 supply: for by throwing the inferior lands out of 
 cultivation, we diminish the supply, and diminish 
 also the expense of production, and consequently the 
 price. Since 1820, the former high prices of corn 
 have been succeeded by low prices ; and in the mean- 
 time cultivation has still extended. But if the price 
 of corn were regulated by the expense of its produc- 
 tion, this extended cultivation ought to have occa- 
 sioned a rise and not a fall of price ; so that this 
 theory, the more it is considered, appears the more 
 inconsistent with principle and the plainest facts. 
 It is not by a continual rise of prices that cultivation 
 is extended in any country. The price of corn, as 
 has already been explained, can never be measured 
 by the barrenness or fertility of the lands from which 
 it is raised. It may not be possible to cultivate 
 certain lands at the existing prices ; but the price 
 will not, therefore, rise to the level of those barren 
 lands. The price that would be necessary to pay 
 for this expensive cultivation would check the pro- 
 gress of population ; at so high a price the produce 
 could not be consumed. It would be placed without 
 the reach of the great body of the consumers ; to 
 w r hose level, at whatever expense it may have been 
 produced, it must of necessity be brought by a lower 
 price. It is by other causes, therefore, that cultiva- 
 tion is gradually extended in every country ; namely, 
 by more skilful modes of husbandry, an increasing 
 capital, and growing habits of industry, by which 
 
OF PRODUCE WHICH YIELDS A RENT. 333 
 
 the most fertile tracts that in a ruder age were al- 
 lowed to lie waste, are improved ; and so far from 
 prices rising in consequence, they always decline as 
 cultivation is extended. 
 
 There are many other sorts of rude produce which 
 yield a surplus above wages and profits ; and in all 
 these cases, it is still the same principle, namely, the 
 degree of scarcity in which they are produced, and 
 not the cost of production, which determines the 
 price. The fine vineyards of France yield many of 
 them even a higher rent than corn lands. The price 
 of their produce stands at a higher level. After 
 paying wages and profits, it leaves a larger surplus 
 for the landlord's rent ; and this high price is not the 
 cost of production ; it is, as in all other cases, the 
 price necessary to proportion the consumption to the 
 supply. At a lower price the demand would be 
 greater than could be supplied; and the price rises 
 until it is checked, and brought within the limits of 
 the supply. Mines of metals or of other mineral 
 substances generally afford a rent. Mr Ricardo, 
 true to his theory, holds, that the price or the value 
 of gold and silver is determined by the expense of 
 extracting them from the poorest mine ; and hence, 
 as mining speculations are carried to a greater extent, 
 as poorer mines are worked, and as a greater quan- 
 tity of produce is of course extracted, the higher will 
 be the price ; and thus, according to this doctrine, 
 the price, as in the case of corn, would rise as the 
 supply increased, and would fall as it was diminished: 
 it would decrease as the poorer mines were aban- 
 doned, and it would increase as they were again 
 
334 OF EXCHANGEABLE VALUE. 
 
 worked. Hence, a large supply and a high price, 
 and a small supply and a low price, are conclusions 
 fairly deducible from Mr Ricardo's theory. On the 
 principle, too, that the price of gold is regulated by 
 the expense of procuring it from the poorest mine, 
 it should rise still higher, if still poorer mines were 
 resorted to : and not the plenty or scarcity of the 
 article, therefore, but the length to which rash pro- 
 jectors carried their mining speculations would be 
 the measure of its price, It is certain that the con- 
 sumption of the precious metals cannot, for any length 
 of time, exceed the supply ; and it is only by means 
 of the price that they are brought to an equality. 
 At a certain price a given quantity only can be con- 
 sumed. If the price of gold and silver were too high, 
 they would accumulate in the markets until it fell to 
 its just level. If it were too low, the consumption 
 would exceed the supply, until it was restricted 
 within its just limits by a higher price ; and thus 
 we still find the necessity of proportioning the con- 
 sumption to the supply to be the great principle 
 which regulates the price. A higher price would no 
 doubt prompt a more active search after gold, and 
 a resort perhaps to poorer mines, of which the pro- 
 duce would hardly pay the expense of producing it. 
 But the expense of extracting gold from those poorer 
 mines could not be the cause of this high price, 
 which, by the hypothesis, rises first ; and is not, 
 therefore, the effect, but the cause of the opening of 
 those poorer mines ; just as, in the case of corn, a 
 prior rise of price is ever, according to the hypothesis, 
 the cause of extended cultivation. A salmon fishery 
 
OF PRODUCE WHICH YIELDS A RENT. 
 
 335 
 
 delds a large rent ; and this rent greatly increased, 
 after it was found that salmon packed in ice might be 
 sent fresh to London. This improvement extended 
 the market, and increased the demand ; there was no 
 increase in the expense of production ; it was the 
 increased competition of the buyers which raised the 
 price. At a lower price, a greater quantity of the 
 article would have been consumed than could have 
 been supplied ; and a higher price was necessary to 
 bring the consumption within the limits of the supply. 
 A large surplus profit is frequently derived from 
 secrets in manufactures, far exceeding the ordinary 
 profits of stock ; and the reason is not, as Dr Smith 
 supposes, that a high price is paid for the private 
 labour of the manufacturer, but because the demand 
 is great and the supply small ; and a high price is 
 necessary to reduce the one within the limits of the 
 other. There are other branches of industry in which 
 the labour and capital employed afford a large surplus 
 above wages and profit. A well-employed newspaper 
 affords this surplus. The capital employed bears no 
 proportion to the profit gained. A newspaper is an 
 established channel through which mercantile com- 
 munications are made to the public. It is a species 
 of toll-bar, through which certain sorts of goods pass 
 in their progress to the market, and on which the 
 keeper levies a tax, not the lowest which he can 
 afford to take, but the highest which the public can 
 afford to pay. At a higher price the commodity 
 would not be in demand : so that it is still the same 
 principle which regulates the price. 
 
 In all cases where an article yields a rent or'a sur- 
 
336 OF EXCHANGEABLE VALUE. 
 
 plus above wages and profit, its price is independent 
 of the original cost : consequently, an increase or a 
 decrease in the expense of production will occasion 
 not a rise or a fall of price, but a fall or a rise of 
 rent. Rent, or the surplus above wages and profit, 
 is the fund out of which the increased expense of 
 production is defrayed ; it is not the price which is 
 raised, but it is this surplus which is diminished. It 
 is this surplus which is affected by every variation in 
 the expense of production ; and until it be exhausted, 
 no increase in the original cost can add anything to 
 the market price. Though the expense of producing 
 it be increased, its price will not rise ; nor, though 
 it be produced cheaper, will it therefore fall. Hence 
 the effect of all improvements in agriculture which 
 lessen the cost of production : the application of new 
 manures to the soil, such as lime or bone manure, or 
 cheaper modes of reaping or preparing the corn by 
 the thrashing-machine, do not diminish the price, 
 but increase the rent. A lower price would not ac- 
 curately adjust the consumption to the supply ; and 
 the produce of one year might be consumed before 
 that of another could be procured. The price, there- 
 fore, cannot vary with the expense of production ; 
 and it is the rent only which rises or falls with this 
 expense. The tithes and the poor-rates in England, 
 both so justly complained of, and now in some de- 
 gree corrected, are paid out of the rent. They 
 diminish the surplus belonging to the landlord ; but 
 they do not increase the price, no more than taxes 
 or any of the peculiar burdens imposed on the land, 
 all of which are paid out of the rent. The property 
 
MR RICARDO'S THEORY. 
 
 337 
 
 tax which was imposed in this country during the 
 last war with France, and a small proportion of which 
 was re-imposed in 1842, pressed with peculiar seve- 
 rity on the land. It amounted to a tenth of the 
 landlord's rent, and a tenth also of the tenant's in- 
 line, which was estimated by a rigid rule at half, 
 >r two-thirds of the rent ; and hence was often far 
 beyond the real profit. This heavy tax fell on the 
 tenant without redress during the currency of his 
 lease ; but at its renewal, it was added by the tenant 
 the other burdens on the land, and deducted from 
 the rent. Both taxes, therefore, his own as well as 
 the tenant's tax, fell ultimately on the proprietor, who 
 could not obtain redress by raising the price, that 
 being already fixed by another cause beyond his con- 
 trol, namely, by the relation between the demand and 
 the supply. 
 
 Mr Ricardo deduces from the principle which he 
 lays down, namely, that labour is the only true mea- 
 sure of exchangeable value, doctrines that are new 
 certainly, but not on this account either original or 
 sound. In explaining this proposition, as it is modi- 
 fied in the progress of society, and by the accumula- 
 tion of capital, he enters into details of figures, which 
 are sufficiently laborious and intricate, without, how- 
 ever, being conclusive. He supposes numerous cases 
 in which labour and capital, and fixed and circulating 
 capital, are differently combined ; which, as they are 
 essentially the same in principle, though somewhat 
 varied in the terms, lead to no conclusion that is of 
 any importance. He brings forward, among other 
 cases, that of a hunter and a fisherman employing, 
 
338 ON EXCHANGEABLE VALUE. 
 
 the former, a circulating capital of 50, and a fixed 
 capital, lasting for ten years, of 150; the latter, a cir- 
 culating capital of 150, and a fixed capital of 50. 
 He supposes the rate of wages to rise 6 per cent., 
 which would increase the sum required by the hunter 
 to pay the labour which he employs 3, and the sum 
 required by the fisherman 9. He farther supposes 
 that profits would fall 4 per cent, in consequence of 
 the rise of wages ; and he proceeds to calculate how 
 this rise in the rate of wages and fall of profits would 
 affect the different articles produced by the hunter 
 and the fisherman. But why, it may be asked, should 
 profits fall when wages rise ? and why should not 
 both the hunter and the fisherman be indemnified for 
 the rise of wages which they pay, by a rise in the 
 price of the articles which they produce ? There is 
 no reason why the profits of either party should fall 
 when they can be both indemnified by a suitable rise 
 of prices. The original cost of all articles which are 
 produced by labour and capital, is made up of wages 
 and profit ; and a rise in the rate of either, must 
 occasion a suitable rise of price. No reason can 
 possibly be given, if an increase of original cost from 
 any other cause occasion a higher price, why the same 
 effect should not also follow from a rise of wages. 
 A rise in the price of the raw material, the imposi- 
 tion of a tax which increases the original cost, raises 
 the price ; and can there be any reason why the same 
 cause, proceeding from a rise of wages, should not 
 produce the same effect ? Nor has the rate of profit 
 any necessary connexion with the rise or fall of 
 wages. It depends on the supply of capital in the 
 
MR RICARDO'S THEORY. 339 
 
 money market. It will fall as the supply increases, 
 and will rise as it diminishes. But it cannot rise or 
 fall from any other cause. There are, besides, many 
 articles, the value of which is made up chiefly of 
 labour, and of which the price must rise with every 
 rise of wages ; otherwise, the maker must sell them 
 at less than they cost him, as the whole profit on the 
 capital employed in producing them would be ab- 
 sorbed by a very inconsiderable increase of wages : 
 it would not afford a sufficient fund wherewith to 
 compensate him for his increased outlay. 
 
 Of the numerous other cases which Mr Ricardo 
 has brought forward in illustration of his doctrines, 
 it may be remarked, that the price of all the different 
 articles which are produced by labour and capital, 
 must depend on the amount employed in their pro- 
 duction. However variously combined, it is still the 
 labour and the capital which are exchanged against 
 each other, in however different quantities, that must 
 be the measure of their exchangeable value; and 
 Mr Ricardo's different cases, when divested of the 
 complication of figures in which they are wrapt up, 
 supply no other data from which any conclusion can 
 be drawn important to science. After laying down 
 his proposition, that a rise of wages occasions a fall 
 of profits, and a fall in the price of certain articles, 
 Mr Ricardo proceeds, without more ado, as if this 
 were a self-evident axiom, to trace its effects on the 
 prices of different articles, the produce of labour and 
 capital, and of fixed and circulating capital. But 
 his calculations appear to proceed generally on a 
 petitio prindpii, and to prove nothing farther than 
 
340 OF EXCHANGEABLE VALUE. 
 
 that the prices of articles are differently affected by 
 a rise in the rate of wages, according as they are 
 either the produce of labour or the produce of capi- 
 tal : a proposition which few will probably be dispose 
 to controvert. 
 
 It is unnecessary, however, to enter farther into 
 that labyrinth of obscure reasoning by which Mr 
 Ricardo follows out his doctrines to their remote con- 
 sequences. If we disprove the principle on which he 
 has founded his system, his conclusions, however logi- 
 cally drawn, must fall to the ground with the original 
 error. His work evinces a mind acute, subtle, and ar- 
 gumentative; less inclined, however, to the perspicuous 
 conclusions of comprehensive reason than to wire- 
 drawn theories, in the demonstration of which his 
 perseverance is unwearied. But his argument gen- 
 erally fails to convince. It is rather an ingenious 
 puzzle ; a task for the understanding to unravel ; 
 often a skilfully disguised fallacy, on which the 
 acute and intelligent author raises a laborious super- 
 structure of reasoning, which, however correctly de- 
 duced, cannot, if it be founded on a wrong principle, 
 as it has been our endeavour to show, lead to any 
 sound conclusion. 
 
 THE END. 
 
 EDINBURGH : 
 
 Printed by WILLIAM TAIT, Prince's Street. 
 
UNIVERSITY OF CALIFORNIA LIBRARY 
 BERKELEY 
 
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