'vw^j^r-'" OUTLINES POLITICAL ECONOMY: A REI'UKLICATION OF THE ARTICLE UPON THAT SUBJECT CONTALNKD IN THE EDINBURGH SUPPLEMENT TO THE ENCYCLOPEDL\ BRITANNIC A. TOGETHER WITH MottH 3Bj:plumtov]» sutr (Krittcal, A SUMMARY OF THE SCIENCE. BY REV. JOHN M'VICKAR, A. M. \ PROFESSOR OE MORAL PHILOSOPHY AND POLITICAL ECONOMV IN COLUMBIA COLLEGE, NEW-YORK. WILDER & CAMPBELL, BROADWAY 1825. Southern Distn^t of JVew- York, ss. BE IT REMEMBERED, That on tlie 21st day of July, A. D. 1825, in the SOiii year ot' the Independence of iho United States of America, Wilder and Campbell, of the said District, have deposited in this office the title of a book, the right whereof they claim as proprietors, in the words following, to wit : " Outlines of Political Economy: being a republication of the article upon t]:at subject coii- tain-^d in the Edinburgh Supplement to the Encyclopedia Britannica. Together with Notes Explanatory and Critical, and a Summary of the Science. By Rev. John M'Vickar, A. M. Professor of Moral Philosophy an 3 Political Economy in Columbia College, New- York." In conformity to the Act of Congress of the United States, entitled " An Act for the en- couragement of Learning, by securing the copies of Maps, Charts, and Books, to the authors and proprietors of such copies, during the time therein mentioned." And also to an Act, entitled " An Act, supplemenlary to an Act, entitled an Act for the encouragement of Learn- ing, by securing the copies of Maps, Charts, and Books, to the authors and proprietors of such copies, during the times therein mentioned, and extending the benefits thereof to the arts of designing, engraving, and etching historical and other prints." JAMES DILL, ricrk of the Southern District of J^ew-York. ^'andcrpoo'J &; Cole, Printer TO JAMES WADSWORTH, ESQ. OF GENESEO, N. Y. Col CollJuhf 19. 1825. Dear Sir, I know not to whom the following repubh- cation can with greater propriety be addressed, than to the friend at whose solicitation it was undertaken : nor by whom it will be more favour- ably received, whether regarded as an attempt to facilitate in our country the study of Political Economy, or in consideration of the sentiments by which the present is dictated. I am. Respectfully and sincerely yours, .T. M'VICKAR. iVil6S540 CONTENTS OF THE ESSAY I'ART I. — Definition- and History. Page Definition of the Science 7 Distinction between Value in Exchange and Utility - - H Definition of the term Wealth ... - - 9 Importance of the Science ...--- 11 Causes of neglect of the Science ■...-- 12 Principles of the Science — Nature of its Evidence - - ^ 15 Rise of the Science in Modern Europe - - - - 18 Mercantile System -- Balance of Trade _.._-.- 19 Manufacturing System ------- 20 Progress of Commercial Science in England - - - 23 Sentiments of Mr. Mun 25 " Sir Josiah Child . . - - - 26 " Sir William Petty " " Sir Dudley North 28 " Mr. Locke - 30 " Mr. Barbon ------ " " Dr. Davenant - 31 " Jacob Vanderlint . . . - . " " Sir Matthew Decker - . . - 32 " Mr. Hume - 33 " Mr. Harris ------ 34 Early Italian Writers on Commerce . - - - " " French " " - - _ - " System of French Economists . - . _ . 35 " Quesnay ------- " System of Adam Smith - - - - - -- 41 Distinction between Politics and Political Economy - - 48 " Statistics " - - 49 PART II. — Production op Wealth. =5ect. 1. Definition of Production 50 Labour the only Source of Wealth - - - 51 The Earth not a Source of Wealth - - - 52 Opinion of Hobbes ------ " " Locke ------ 53 Sect. 2. Means by which the Productive Powers of Labour may be increased ._-..-- 56 1 . Security of Property . - . - 57 Effects of Insecurity - - . - 60 Case of the Jews ----- 61 Objections of Rousseau and Beccaria - - 62 2. Division of Labour ----- 64 1. Individual, increases skill and dexterity - 65 Saves time ------ " Facilitates the invention of Machinery - 66 Limited by the extent of Market - - 67 2. Territorial division of Labour - - 68 Effect in augmenting National Wealth - 70 Sophism of French Economists in relation to Commerce ----- '• 3. Money ------ 75 3. Accumulation and Employment of Capital - 76 Modes in which Employment of Capital facilitates Labour ------ 79 1. It enables us to produce Commodities that could not be produced without it - - '• COiNTENTS.- .2. It saves Labour in the production of Commo- dities ----.. 3. It enables us to execute work better as well as quicker ---_._ The power to employ Labour depends on the amount of Capital Accumulation of Capital - - - . . Advantage of High Profits - - . . Parsimony necessary to Accumulation Expenditure of Government not a cause of Accumu- lation ---.... Sect. 3. Different Employments of Capital and Industry Employment of Capital in Agriculture " " Manufactures Necessity of Manufactures to Agriculture No real difference between them - . . Opinion of Adam Smith - - . . . Nature co-operates with Man in Manufactures and Commerce ---._. Employment of Capital in Commerce Advantage of Retail Dealers - . . . Agriculture, Manufactures, and Commerce, equally ad- vantageous --.__. Manufactures not a cause of increased mortality Division of Labour does not degrade the Labourer Eulogium of Mr. Malthus on Manufactures • Rate of Profit the test of the advantage of different em- ployments ...... PART in. — Distribution of Wealth. Sect. L Preliminary division of the Produce of Industrv - Quantity of Labour the regulating principle of 'S'alue Sect. 2. Primary Observations, Equality of Wages ----.. of Profits ----._ Variations of demand and supply exert no permanent influence on Price - - - _ . The will and the power to purchase, necessary to con- stitute demand ------ Cost of Production the regulating principle of Price Reason why Gold is more valuable than Silver " Cottons have declined in Price ' Competition of Producers sinks Prices Influence of Monopolies - - . - , Average Price coincident with cost of production Opinion of Marquis Garnier - . . . Sect. 3. Nature, Origin, and Progress of Rent Definition of Rent ------ No Rent paid on the first settlement of a Country Origin of Rent - - - . . Progress of do. - - - . . Objections to this theory - . - . Land which yields no Rent . ^ - , Payment of Rent on all soils not inconsistent It does not support Landlords without Rent " account for a rise and fall of Price the same way 125 Distinction between Agriculture, Manufactures, and Commerce - - -. - - - jog Tendency of Manufacturing products to rise, and of Agricultural to fall in Price - - - <• Earth compared to a scries of Machines -rKor. 4. Eflect of Capital and Wages on Exchangeable Value, Value of Commodities regulated by the Labour and Capital expended in their production Employment of Workmen by Capitalists does not raise Die price of Commodities - - - 131 Page 80 Ol S4 94 95 96 90 99 100 101 103 105 107 108 110 111 112 113 114 115 116 118 119 120 1 22 123 124 1'; 129 CONTENTS). HI Page Etfect ol' the fluctuations of Wages on Exchangeable Value 132 1 . When the Capitals are of the same degree of du- rability -._... " 2. When the Capitals are of different degree^ of du- rability 134 Goods cliiefly aflected by a rise of Wages - - 135 Profits vary inversely as Wages . . - 136 Method of estimating the effects of fluctuation - 137 General rule on the subject of all fluctuations - 138 Confined within narrow limits . . - - 139 Cause of the popular opinion .... 140 Excliangeable Value does not depend on Capital em- ployed ---..-- 141 SJECT. 0. Profits and Wages, Opinion of Adam Smith erroneous . - - 145 Decreasing fertility of tlie soil the principal cause of a fall of profits - - - - - - " Profits depend on Proportional Wages - - 149 Low Profits in Holland — Error of Sir J. Child and Adam Smitli ------ 151 Low Profits cause the transfer of Capital to other countries ------- 152 PART IV. — CoNSTrMPTioN of Wealth. Definition of Consumption - - - - - - 155 Consumption the end of Pioduction . _ - - « Test of advantageous Consumption - . . . 157 Luxury not disadvantageous . - - . . 158 Adam Smitli's criterion of productive and unproductive Con- siunption __-_--.- iQQ " Distinction between the different classes of Society illfounded - 162 Case of the Physician ------- 165 Public Functionaries productive labourers - . - " Consumption not to be encouraged as a stimulus - - 167 Unproductive Consumption not necessary to prevent gluts - 168 Error of Montesquieu - - - - - - . 171 Consumption of Government . _ - _ - 172 Opinion of M. Say ------- 175 Conclusion --------- " Reference to the Pritvcipal Editorial Notes. Prefatory observations - . . - 5 Wealtli and Value - - - - - 11 Science applied to Individual Wealth . - - 12 Errors of the Ancients - - - - 14 Connexion between Public and Private Wealth - 17 Balance of Trade ----- 20 Writers on Political Economy - - - . 42 Economical Science in America - - - 44 Labour not the sole Source of Wealth - - 51 Interest ---... 59 Power of subdivision of Labour . _ . 66 Stock — Adam Smith's originality - _ . 67 Union of Science and Morals - - . - 69 Territorial division of Labour - . - 70 Great Britain and the American Colonies - - 72 Articles on Political Economy contained in the Supplement to the Encyclopedia Eritannica - . - 75 .Money -,-..- 76 Immaterial Capital - - . . . 7g Canals ---.-. 80 Machinery ----_. go Impolicy of War - - _ . . g4 Which most operative. Industry or Economy - •■ COiNTENTS. PaG£ Government Expenditure - - - - 87 The liberal views of Political Economists - - 88 Advancement of Wealth - - - - 89 Exceptions to the liberal system - - - 90 fn Agriculture, in what sense Nature is a co-worker with Man 94 Balance of Trade ----- 95 Restriction of Auction Sales - - - - 97 Manufactures _ _ . _ . 102 Equality of Profits ... - - 104 All Value not resolvable into Labour - - 105 Men of Science ill paid .... 108 Profits equal not of individuals but of the business - 109 Natural and Market price - - - - 112 Influence of demand cind supply on price - - 115 Rent ....... 119 Returns from Land ...--" High Profits not necessarily the result of no Rent - 121 English Husbandry, why unsuitable to our new Country 123 Price of Agricultural produce regulated by demand and supply .._..- 125 Error of French Economists .... 127 Merits of Ricardo ----- 129 Capital not to be confounded with Labour - - 131 Ricardo's subsequent acknowledgment - - 135 Real and Nominal Wages .._.«• Real Wages - . - - - - 140 Wages and Profits not to be confounded - - 142 High Profits of the early Colonies ... 145 Population _...-."• Ricardo's principle limited .... 149 Confined to comparative Profits as well as comparative Wages .--... 150 Taxation, why to be limited .... 151 Corn Laws of England . . . _ 152 Change of English Policy - . - . 154 Capital indefinite in form - - - - 155 Commerce productive _-.."• Sumptuary Laws - - • - - - 159 Division of the Classes of Society ... I6I Defence of Smith . - - - . 164 Good management equally necessary with Economy - " Labour dtrec^fy and tnrfired/y productive - - 166 True Economy of Government expenditure - - 167 Progress of Population in the United States - - 168 Cause of general gluts .... 169 Means of supplying Government expenditures - 172 Additional References .... 176 Summary ...... 177 Conclusion .-..-. 186 PREFATORY OBSERVATIONS.. The following article is from the pen of J. R. M'Culloch, Esq. formerly of Edinburgh, now of London, in which latter city he has had the honour of being selected as the first Ricardo Lectu- rer upon Political Economy. The object proposed by its republication is the diffusion, in a more popular form, of a valuable Essay on a most important subject ; and it has been undertaken at the solicitation of men zealous in every good work. It is republished entire and with- out alteration, the original extracts from ancient and foreign authors being retained, and a translation added, an addition obviously required by the nature of the xmdertaking. For the tidelity of these translations, for the original notes, being those marked by the signature E, and for the syllabus at the close, the Editor is responsible. Where he has the misfor^ tune to differ from his Author, which he is occasionally com- pelled to do, the reasons by which he has been led to it, as well as the authorities which support him in it, shall be stated, in order that the reader may be enabled to form an independent decision ; the object of the Editor being rather to excite in- quiry, and create a popular taste for these studies, than to dog- matize upon them. For readers not unpractised in the science, it maybe well, in entering on the ensuing essay, to have before them some general view of the distinctive principles which have gradually separated from the Economical School of Adam Smith, the more modern one to which our Author is attached, and which generally passes under the name of that distinguished writer, to whose memory the London Institution has been raised. Among the fundamental positions of Adam Smith, which have since been controverted or set aside, the following are the principal. 1. That wealth is confined to material products — consequently all those classes of society who are not engaged in such pro- duction, are to be regarded as mere consumers of the public wealth. 2. That the price of every commodity is made up of three dis- tinguishable portions, viz. rent of land, wages of labour, and profits of capital. 3. That exchangeable value is regulated by the opposing prin- ciples of demand and supply — being directly as the former, and inversely as the latter. 4. That the decrease of profits which usually accompanies the progress of society, arises from the accumulation of capital bcr ing more rapid than the means of its profitable investment. 1 VI PREFATORY OBSERVATIONS. To each of these positions the superior acuteness of modern analysis, has been able to raise objections ; these, however, are not all of equal strength, and while the admirers of Adam Smith are willing to acknowledge the inexpediency of the limitation contained in the first position, and the error of the second, they still contend for the practical truth of the third and fourth. The principles of the modern school, as contradistinguished from those of Smith, may be thus stated. 1. That productive labour is not restricted to that engaged in material products, but that all paid labour is productive labour. 2. That rent forms no component part of price — that of the raw material being governed by the labour of production on land that pays no rent. 3. That exchangeable value is regulated solely by the quantity of labour worked up in the commodity. 4. That the decrease of profits in the progress of society arises, not from accumulation of capital, but from the increased diffi- culty of production on the land, or in other words, from the necessity of resorting to inferior soils, as population presses on the means of support. In his additional notes, the general aim of the Editor has been, to supply what he considered requisite to render this es- say a popular compendium of the science to which it relates. This he has endeavoured to do, — 1. By explaining and illustra- ting whatever to the unpractised reader might appear obscure. 2. By a fuller statement of opposing opinions, and an ampler re- ference to authorities, thus enlarging to the student the mate- rials for a candid and liberal judgment : — and 3. By the addition of some important questions which have been either altogether omitted by our Author, or but slightly touched upon. The syllabus with which it closes, is intended to give a synop- tical view of the science, to show the relation and harmonious connexion which subsists between its various parts, to render its principles familiar to the understanding, and thus give to the mind that acuteness and promptitude in their practical applica- tions, which is necessary to the correction of error and the de- tection of sophistry. Col. Coll, JV. F. ^Oth April, 1825. POJLITICAL. ECONOMY. PART I. DEFINITION AND HISTORY Dejinition of the Science — Catises of its being neglected in Greece and Rome, and in the Middle Ages — Species of Evidence on which its Conclusions are founded — Rise of the Science in Mo- dern Europe Mercantile System Progress of Commercial Philosophy in England in the Seventeenth and Eighteenth Cen- turies — System of M. Quesnay and the French Economists — ■ Publication of the " Wealth of JVations'''' — Distinction between Politics and Statistics and Political Economy. Political Economy* is the science of the laws which regidatc Definition ihe production, distribution, and consumption of those material %cL^^^._ products which have exchangeable value, and which are either ne- cessary, useful, or agreeable to man.^ This definition has been framed so as to exclude all reference to such articles as exist independently of man, and of which un- limited quantities can be obtained without any degree oi labo- rious exertion. Had such been the case with all the articles required to satisfy our wants, and to gratify our desires, this science would either have had no existence at all, or would have been cultivated only as a source of amusement, without any view to utility. Political Economy is exclusively conversant with objects which come within the observation of every man, and which are continually modified by human interference. It is, in fact, the science of values ; and nothing which is not pos- sessed of exchangeable value, or which will not be accepted as an equivalent for something else, can come within the scope of its inquiries. It is obvious, however, that an article may be possessed of the highest degree of utility, or, as it is sometimes termed, of intrinsic worth, and yet be wholly destitute of ex- changeable value. Without utility of some species or another. * Economy, from oIko;, a house, or family, and vofxo;, a law — the govern- ment of a family. Hence Political Economy may be said to be to the state what domestic economy is to a single family. t The definition of a science, as it limits its inquiries, is consequently all important. Thus tlie definition of our author confines it to material pro- ductions ; thereby excluding all consideration of the influence exercised upon national prosperity, by science and professional labours. The impor- tance of these considerations will be afterward shown ; at present it is suf- ficient to point it out, as a defect in the definition. The latter clause is also superfluous, since the exchangeable value possessed by a product, is both the test a:nd the measure of its necessity, utility, or agreeableness. A better definition is that given in the title of A. Smith's work — The science which relates to the " nature and causes of the wealth of nations." — E. f-OLlTlCAL ECONOMV. Ijistinction between Value in Kxchange and Utility. Ek&i^iiin;, • Jio iii'iicle !tviil-ever be an oljject of demand ; but how necessary ' ' ' soever any particulnr article may be to our comfort, or even existence, and however great the demand for it, still, if it be a spontaneous production of nature — if it exists independently of liuman agency, and if every individual has an indefinite com- mand over it, it can never become the subject of an exchange, or afford a basis for the reasonings of the economist. It cannot justly be said, that the food with which we appease the cravings of hunger, or the clothes by which we defend ourselves from the inclemency of the weather, are more useful than atmos- pheric air ; and yet they are possessed of that exchangeable value of which it is totally destitute. The reason is, that food and clothes are not, like air, gratuitous products : they cannot be had at all times, and without any exertion ; they are obtain- able only by labour ; and as no one will voluntarily sacrifice the fruits of his industry, without receiving an equivalent in return, they are truly said to possess exchangeable value. The word value has, we are aware, been very generally em- ployed to express, not only the exchangeable worth of a com- modity, or its capacity of exchanging for other commodities, but also to express its utility, or its capacity of satisfying our wants, and of contributing to our comforts and enjoyments. But it is obvious, chat the utility of commodities — that the capacity of bread, for example, to appease hunger, or of water to quench thirst — is a totally different and distinct quality from their capa- city of exchanging for other commodities. Dr. Smith perceived this difference, and showed the importance of carefully distin- guishing between the utility, or, as he expressed it, the " value in use," of commodities, and their value in exchange. But he did no't always keep this distinction in view, and it has been very generally lost sight of by M. Say, Mr. Malthus,* and other late writers. We have no doubt, indeed, that the confounding to- gether of these opposite qualities has been one of the principal causes of the confusion and obscurity in which many branches of the science, not in themselves difficult, are still involved. When, for example, we say that water is highly valuable, we unquestionably attach a very different meaning to the phrase from what we attach to it when we say that gold is valuable. AVater is indispensable to existence, and has, therefore, a high degree of utility, or of " value in use ;" but as it can be gene- rally obtained in large quantities, without much labour or exer- tion, it has, in most places, but a very low value in exchange. Gold, on the other hand, is of comparatively little utility ; but as it exists only in limited quantities, and as a great deal of la- bour is necessary to procure a small supply of it, it has a high exchangeable value, and may be exchanged or bartered for a large quantity of most other commodities. To confound these * This charge against Malthus appears to be unfounded : on the con- trary, he carefully maintains the distinction, "The term value" says he. •• is so rarely understood as meaning the mere utility of an object, that if this interpretation of it be retained it should never be applied witli- oiit the addition, in use." — Malthus^ Principlts, Szc. chap. 2. Summari/. M. Say, it is true, so uses it, but it is not in its ordinary sense, but as a technical term, the meaning of which he had already fixed by definition. — Say, Book I. chap. i. These arbitrary definitions, however, are a source y>i error, and therefore to be avoided. — E. POLITICAL ECONOJIV. J clilierent sorts of value would evidently lead to the most errone- Definition. ous conclusions. And hence, to avoid all chance of error from mistaking the sense of so important a word as value, we shall never use it except to signify exchangeable worth, or value in exchange ; and shall always use the word utility to express the power or capacity of an article to satisfy our wants, or gratify our desires. A few words will suffice to show the necessity and importance of always distinguishing between the utility of a commodity and its value. If utility and value in exchange were identical, or if they were regulated by the same laws, it would necessarily fol- low, that the same circumstances which were calculated to in- crease the utility of any article would also increase its value, and vice versa. But the fact is distinctly and completely the reverse. The utility of a commodity is never increased by simply raising, but it is, in the great majority of instances, in- creased by lowering its value. A deficient harvest increases the exchangeable value of corn, but most certainly it does not increase its utility. If such an improvement were to take place in the manufacture of hats as would enable them to be produced for a half of the expense it now takes to bring them to market, their value, and consequently their price, would very soon be reduced a half also. Each individual would thus be able to buy two hats for the same sum it had formerly required to buy one ; and while the utility of no single hat would be impaired by this fall of value, it is plain that the sphere of their utihty would be greatly extended, and that they would be brought within the reach of a large proportion of those whose poverty might previously have rendered them unable to obtain them. In fact, the grand object of the science of Political Economy is to discover the means by which the value of commodities may be reduced to the lowest possible limits. For, the more their value is reduced, the more obtainable they become, and the greater, consequently, is the amount of the necessaries, conve- niences, and luxuries at the disposal of every individual. Political Economy has been frequently defined to be " the DcfinitioTi science which treats of the production, distribution, and con- "wealth.^"' sumption of wealth;''^ and if by wealth be meant those material products which possess exchangeable value, and which are ne- cessary, useful, or agreeable to man, the defininition is quite unexceptionable. But the economists who have adopted this definition have attached a different, and a much too extensive meaning to the term wealth. They have sometimes, for exam- ple, considered wealth as synonymous with " all that man de- sires as useful and agreeable to him,'''* But if Political Economy * This definition is that ^ven by the Earl of Lauderdale. Though inde- fensible as the subject of the science, it is yet true as a definition of wealth, in the sense in which Lauderdale employs it. He distinguishes between the opulence of the state and that of individuals ; to the former he applies the term " wealth,"' to the latter " riches" — " All is wealth that man desires as useful or delightful to him." To convert it into riches it must exist in such a degree of scarcity as to become capable of appropriation. Thus we may say of a country abounding in all the products of a fertile soil and healthful climate, that it has wealth ; but whether its inhabitants be rich depends on their comparative numbers and power of exchange. Italy is a wealthy country, Scotland a poor one ; but the inhabitants of the former JO i'OLITICAL ECONOMY. Definition, vrere to embrace a discussion of the production and distribuiion of all that is useful and agreeable, it would include within itself every other science ; and the best Encyclopaedia would really be the best treatise on Political Economy. Good health is useful and delightful, and, therefore, on this hypothesis, the science of wealth ought to comprehend the science of medicine ; civil and religious liberty are highly useful, and, therefore, the science of wealth must comprehend the science of politics ; good acting is agreeable, and, therefore, to be complete, the science of wealth must embrace a discussion of the principles of the histrionic art, and so on. Such definitions are obviously worse than useless. They can have no effect but to generate confused and perplexed notions respecting the objects and limits of the science, and to prevent the student ever acquiring a clear and distinct idea of the nature of the inquiries in which he is engaged. Mr. Malthus has defined wealth to consist of " those material objects which are necessary, useful, and agreeable to man." (^Principles of Political Economy, p. 28.) But this definition, though infinitely less objectionable than the preceding, is much too comprehensive to be used in Political Economy. Atmos- pheric air, and the heat of the sun, are both material pro- ducts, and are highly useful and agreeable.* But their inde- pendent existence, and their incapacity of appropriation, ex- cludes them, as we have already shown, from the investigations of this science. . . Dr. Smith has not explicitly stated what was the precise meaning attached by him to the term wealth ; but he most com- monly describes it to be " the annual produce of land and la- bour." Mr. Malthus, however, has justly objected to this de- finition, that it refers to the sources of wealth, before we know Avhat wealth is, and that it includes all the useless products of the earth, as well as those which are appropriated and enjoyed by man. The definition we have given is not liable to any of these ob- jections. By confining the science to a discussion of the laws regulating " the production, distribution, and Consumption of those material products which have exchangeable value, and which are either necessary, useful, or agreeable," we give to it a distinct and definite object. When thus properly restricted, the researches of the economist occupy a field which is exclu- sively his own. He runs no risk of wasting his time in inqui- ries which belong to other sciences, or in unprofitable investi- gations respecting the production and consumption of articles which cannot be appropriated, and which exist independently of human industry. Capacity of appropriation is indispensably necessary to con- stitute wealth. And we shall invariably employ this term to distinguish those products only which are obtained by the inter- are poor, of the latter comparatively rich. — Inquiry into the J^ature and Origin of Public Wealth, ch. ii. — For au able criticism upon it, see Edin- burgh Review, Vol. iv. — E. * The author here carelessly uses the term product as synonymous with object, whereas product in the language of this science, is properly confined to the results of human labour, something produced by voluntary not by natural agency. Had Malthus used the term product instead of object, the iriticism passed upon him by our author would have been inapplicable.— f^. POLITICAL ECONOMV. 11 vention of human labour, and which, consequently, can be ap- Definition. propriated by one individual, and consumed exclusively by him. A man is not said to be wealthy, because he has an indefinite command over atmospheric air, for this is a privilege which he enjoys in common with every other man, and which can form no ground of distinction ; but he is said to be wealthy, accord- . ing to the degree in which he can afford to command those ne- cessaries, conveniences, and luxuries which are not the gifts of nature, but the products of human industry. It must, however, be carefully observed, that, although the possession of value be thus necessary to the existence of wealth, they cannot be con- founded together without leading to the most erroneous conclu- sions. Wealth and value are as widely different as utility and value. It is plain that every man will be able to command a much greater quantity of these necessaries and gratifications, of which wealth consists when their value declines, or when they become more easily obtainable, than when their value increases. IVealth and value vary in an inverse ratio. The one increases as the other diminishes, and diminishes as the other increases. — Wealth is greatest where the facility of production is great- est, and value is greatest where the difficulty of production is greatest.* m The science of Political Economy is exclusively conversant importance with that class of phenomena, which the exertion of human in- scilifce. dustry exhibits. Its object is to ascertain the means by which this industry may be rendered most productive of necessaries, comforts, luxuries, and enjoyments, or of wealth in the proper sense of the word ; by which this wealth may be most advan- tageously distributed among the different classes of the society ; and by which it may be most profitably consumed. To enter into a lengthened argument to prove the importance of a science having such objects in view, would be worse than useless. The consumption of wealth is indispensable to existence ; but the eternal law of Providence has decreed that wealth can only be procured by the intervention of industry — that man must earn his bread by the sweat of his brow. This twofold necessity renders the production of wealth a constant and principal object of the exertions of the vast majority of the human race. It has subdued the natural aversion of man to labour, giveii acti- * In this passage there may appear to be some obscurity ; its princi- ples, however, are just : — Wealth and value are both relative terms — wealth relates to persons, value to things ; wealth refers to the power individuals possess of commanding the comforts and luxuries of life ; va- lue to tlie rate of exchange existing among the products of industry : — wealth is based upon plenty of commodities; value upon their scarce- ness. We may suppqse a state of society, in which nature producing gra- tuitously all that can be desired, wealth would abound, but value would have no place : as labour was required for their production, wealth would decrease and value increase, until we arrived at the opposite extreme, where constant labour would suffice for the support of the labourer only ; in which case, wealth would cease, but value would be at its height. The actual state of society, may be taken as a variable medium between these two extremes, and partaking of the character of both. Commodities having value in proportion to their scarceness, and adding to wealth in pro- portion to their plenty and cheapness. — See MaMns^ Principles of Politi- cal Economy^ ch. 6. — E. 12 POLITICAL ECONOMY. Objects and Importance of the Causes of the Neglect of this Sci- piice in the Ancient and jNliddleAgeB, vity to indolence, and armed the patient hand of industry willi zeal to undertake, and perseverance to overcome, the most dif- ficult and disagreeable tasks. But when wealth is thus neces- sary, when the desire to acquire it is sufficient to induce us to submit to the greatest privations, it is plainly impossible to doubt the utili y and paramount importance of the science which teaches the modes by which its acquisition may be facilitated, and by which we may be enabled to obtain the greatest amount of wealth with the least possible difficulty. There is no class of people to whom a knowledge of this science can be consi- dered as either extrinsic or superfluous. There are some, doubtless, to whom it may be of more advantage than to others ; but it is of the utmost consequence to all.* The prosperity of individuals, and consequently of nations, does not depend nearly so much on salubrity of climate, or on the fertility and conve- nient situation of the soils they inhabit, as on the power pos- sessed by them, of applying their labour with perseverance, skill, and judgment. Industry can balance almost every other deficiency. It can render regions naturally inhospitable, bar- ren, and unproductive, the comfortable abodes of an intelligent and refined, a crowded and wealthy population ; but where it is wanting, the most precious gifts of nature are of no value, and countries possessed of the greatest capabilities of improvement, with difficulty furnish a miserable subsistence to the scanty popu- lation of hordes distinguished only by their ignorance, barba- rism, and wretchedness. But when the possession of wealth is thus necessary to indi- vidual existence and comfort, and to the advancement of nations in the career of civilization, it may justly excite our astonish- ment that so few efforts should have been made to discover its sources, and facilitate its acquisition, and that the study of Po- litical Economy, should not have been early considered as form- ing a principal part in a comprehensive system of education. Two circumstances, to which we shall now briefly advert, seem to us to have been the principal causes of the neglect of this science. The first is the institution of domestic slavery in the ancient world ; and the second the darkness of the period w-hen the plan of education in the universities of modern Europe was first organized. The citizens of Greece and Rome considered it degrading to employ themselves in those occupations which form the princi- * The applicability of the principles of this science to the advancement of individual wealth, is but hinted at by our author ; it deserves to have been more strongly enforced. It is the great merit of Say's system, that it not only identifies individual wealth with that of the nation, but also the means by which they are respectively to be advanced. Wealth cannot be produced from nothing, but then every man derives from nature, in some proportion or other, its primitive elements, — mental ability and phy- sical strength ; to direct them to its production, is the only object of tliis science. So that to use the illustration of Say, " As men may be taught to make a clock, they may be taught to make what is called riches." Nor is it without a capital that any healthy young man sets out in life. The ex- penses of his education and support from his infancy, are to him an accumu- lated capital — his mental acquirements and bodily strength are their result ; and by means of them he is enabled to derive an interest from the money that has been thus appropriated in his favour, and laid out in what, whilo health continues, is its most permanent and profitable investment. — E. POLITICAL ECONOMV, 1'3 pal business of the inhabitants of modern Europe. In some of Causes of the Grecian states the citizens were prohil)ited from engaging in llrVomi^ai any species of manufacturing or commercial industry ; and in Economy. Athens and Rome, where such a prohibition did not exist, these employments were universally regarded as mean, mercenary, and unworthy of freemen, and were in consequence carried on exclusively by slaves, or the very dregs of the people.* Agri- culture was treated with more respect. Some of the most dis- tinguished characters in the earlier ages of Roman history, had been actively engaged in rural afiairs ; but, notwithstanding their example, in the llourishing period of the Republic, and under the Imperial Regime, the cultivation of the soil was almost en- tirely carried on by slaves, belonging to the landlord, and em- ployed on his account. The mass of Roman citizens were either engaged in the military service,t or derived a precarious and de- pendant subsistence from the supplies of corn furnished by the conquered provinces. In such a state of society the relations subsisting in modern Europe between landlords and tenants, and masters and servants, were unknown ; and the ancients were iu consequence entire strangers to all those interesting and import- ant questions arising out of the rise and fall of rents and wages, which form so important a branch of economical science. The spirit of the philosophy of the ancient world was also extremely unfavourable to the cultivation of Political Economy. The lux- urious or more refined mode of living of the rich, was regarded * The force of the prejudices on this head may be learned from the fol- lowing quotations : " Illiberales autem et sordidi," Cicero says, " questus mercenariorum, omniumque quorum opera, non quorum artes emuntur. Est enim illis ipsa merces auctoramentum servitutis. Sordidi etiam pu- tandi, qui mercantur a mercatoribus quod statim vendant, nihil enim pro- Jiciunt, nisi admodum maitiantur I Opificesque omnes in sordida arte ver- santur, ncc enim quidquam ingenuum potest habere officina * * * Merca- tura autem, si tenuis est, sordida putanda est ; sin autem magna et copiosa, multa undique apportans, multisque sine vanitate impertiens, non est ad- modum vituperanda." (De Officiis, Lib. I. sect. 42.) " The gains of mer- chants, as well as of all who live by labour, and not skill, are mean and illi- beral. Their very mercliandize is the badge of their slavery. Those persons also are to be esteemed sordid who buy from merchants that they may im- mediately sell again, for their projils can be made only by falsehood. All workmen are servilely engaged, nor can the workshop have any thi7ig tvorthy of a freeman. The business of a merchant, if contracted, is base, yet if great and extensive, bringing many things from far, and without vanity distribu- ting them to many, is not to be altogether despised." — {Cicero on Morals.') " Vulgaris opificum, quaj manu constant, et ad instruendam vitam occu- patsEsunt; in quibus nulla decoris, nulla honesti simulatio est." (^Senecce EpistolcE, Ep. 89.) " The business of workmen, which is manual, and re- lates merely to the conveniencies of life, without any connexion with taste or sentiment, is to be reputed base." — (^Seneca'S Letters.) A hundred similar qv^otations might be produced ; but the one we have given from Cicero is sufficient to establish the accuracy of what we have advanced. The strength of the prejudice against commerce and the arts is proved by its exerting so powerful an influence over so cultivated a mind. For a further discussion of the opinions of the Romans on this subject, we refer our readers to the Dissertazione del Commercio de Romani qJ' Mengotti, which received a prize from the Academy of Paris in 1787, and to the Memoria Apologetica del Commercio de Romani of Torres, published at Venice in 1788. t " Rei militaris virtus prffistat cteteris omnibus ; haec populo Romano., hsec huic urbi aeternam gloriam peperit." — (Cicero pro Murena.) " Mili- tary science excels all other, — it is this which has gained eternal glory f*^'" ihiscity. and for the Roman people." — (Cicero for Murena. ^ 14 I'OLITICAL ECONOMY, Causes of the neglect of Political Economy. by the ancient moralists as an evil of the first magnitude. They considered it as subversive of those warlike virtues, which were the principal objects of their admiration, and, in consequence, they denounced the passion for accumulating wealth as fraught with the most injurious and destructive consequences. It was ijnpossible that Political Economy could become an object of at- tention, to men imbued with such prejudices ; or that it could be studied by those who held the objects about which it is con- versant in contempt, and who spurned that labour by which wealth is produced.''^ At the establishment of our universities, the clergy were al- most the exclusive possessors of the little knowledge then in existence. It was natural, therefore, that their peculiar feel- ings and pursuits should have a marked influence on the plans of educf-'tion they were employed to frame. Grammar, rhetoric, logic, school divinity, and civil law, comprised the whole course of study. To have appointed professors to explain the princi- ples of commerce, and the means by which labour might be rendered most effective, would have been considered as equally superfluous and degrading to the dignity of science. The pre- judices against commerce, manufactures, and luxury, generated in antiquity, had a powerful influence in the middle ages. None were possessed of any clear ideas concerning the true sources of wealth, happiness, and prosperity. The intercourse between the different countries was extremely limited, and was rather confined to marauding excursions, and a piratical scramble for the precious metals, than to a commerce founded on the gratifi- cation of real or reciprocal wants. These circumstances sufficiently account for the slow pro- gress of, and the little attention paid to, this science up to a very recent period. And since it became an object of more general attention and liberal inquiry, the opposition between the theories and opinions that have been espoused by the most eminent of its professors, — a necessary and inevitable result, as we shall im- mediately show, of its recent cultivation — has proved exceed- ingly unfavourable to its progress, and has generated a disposi- tion to distrust its best established conclusions. This prejudice is, however, extremely ill-founded ; and notwithstanding the di- versity of the theories that have been formed to explain its va- ='' From the ancients although we have but little written on this science, yet of that little much is wrong. Their philosophers taught them contempt of wealth, not the means of attaining it. Gold and virtue, according to Plato, were weights in opposite scales ; of which, as one roc's the other necessarily declined. In commerce, he taught that fundamental and prevalent error, which lies at the basis of the restrictive policy of nations, viz. That in an exchange both parties cannot be gainers : consequently, that the gain of the <^ne but counterbalances the loss ol the othei- : — hence, in his liction of a })erfcft commonwealth, tlie capital was to be seated inland, and commerce ])rohibited. Xeuophon, Aristotle, Sec. hold a similar language ; degrading, if not utterly rejecting, commerce : and by imposing forced limitations upon population, showing an utter ignorance of the productive powers of indus- try to increase, or rather to create, tliat wealth by which it is supported. Rome, which had grown great by plunder, naturally despised the slow earnings of industry ; and the sentunents of her writers, as well as tlic polit:y of her government, show the erroneous views tlien entertained of natiomd wealth. They regarded it as existing in a certain definite quantity in the ■world at large, fluctuating, but not progressive, and of it every uation pa~- scssed it=elf of a share in proportion to its strengtli in war. — J^. POLITICAL ECONOiMV. 15 lious phenomena, Political Economy admits of as much cer- Ciiusps cf tainty in its conclusions, as any science not exclusively depend- of Voift^ai ant on mere relation. A brief exposition of the nature of the Economy. principles on which it is founded, and of the mode in which its investigations ought to be conducted, will evince the correctness of this statement. Political Economy is not a science of speculation, but of fact Principles or and experiment. The principles on which the production and Mature or' accumulation of wealth and the progress of civilization depend, *j,','\f,^'g,','"tT' are not the offspring of legislative enactments. Man must ex- Conclusions ert himself to produce wealth, because he cannot exist without arciounii.ii; it ; and the desire implanted in the breast of every individual of rising in the world and improving his condition, impels hinx to save and accumulate. The principles which form the basis of this science make, therefore, a part of the original constitu- tion of man and of the physical world, and their operations, like those of the mechanical principles, are to be traced bj'- the aid of observation and analysis. Thvre is, however, a material distinction between the physical and the moral and political sciences. The conclusions of the former apply in every case, while those of the latter only apply in the majority of cases. The principles on which the production and accumulation of wealth depend are inherent in our nature, but they do not ex- ercise precisely the same influence over the conduct of every individual ; and the theorist must satisfy himself with framing his general rules so as to explain their operation in the majorit}-^ of instances, leaving it to the sagacity of the observer to modify them so as to suit individual cases. Thus it is an admitted prin- ciple in the science of Morals, as well as of Political Economy, that by far the largest proportion of the human race have a much clearer view of what is conducive to their own interests, than it is possible for any other man, or select number of men, to have ; and consequently that it is sound policy to allow every individual to follow the bent of his inclination, and to engage in any branch of industry he thinks proper. This is the general theorem ; and it is one which is established on the most com- prehensive experience. It is not, however, like the laws which regulate the motions of the planetary system, — it will hold good in nineteen out of twenty instances, but the twentieth may be an exception. But it is not required of the economist, that hi? theories should quadrate with the peculiar bias of the mind of a particular person. His conclusions are drawn from contem- plating the pi'inciples which are found to determine the condi- tion of mankind, as presented on the large scale of nations and empires. His business is with man in the aggregate — with states, and not with families — with the passions and propensities which actuate the great bulk of the human race, and not with those which are occasionally found to influence the conduct of a solitary individual. This distinction should be kept constantly in view. Nothing is more common than to hear it objected to some of the best established truths in political and economical science, that they are at variance with certain facts, and that, therefore, they must be rejected. But these objections very often originate in an entire misapprehension of the nature of the science. U 16 POLITICAL El OAOMY. Evidence on vvould be casy to produce a thousand instances oi' individuai.T coi'iclu'ai^n» who have been enriched by monopoHes and restrictions, and of Political even by robbery and plunder ; though it would certainly be a are Founded, little too much to conclude from thence that society could be enriched by such means ! This, however, is the single consi- deration to which the political economist has to attend ; — and, until it can be shown that monopolies and restrictions are not destructive of national wealth, and that what is gained by the monopolist is not lost by the public, he is justified in consider- ing them injurious. To arrive at a well-founded conclusion in economical science, it is not enough to observe results in parti- cular cases, or as they affect particular individuals ; we must further inquire whether these results are co7rstant and univer- sally applicable — whether the same circumstances which have given rise to them in one instance, would in every instance, and in every state of society, be productive of the same or similar results — A theory which is inconsistent with an uniform and constant fact, must be erroneous ; but the observance of a par- ticular result at variance with our customary experience, and when we may not have had the means of discriminating the cir- cumstances attending it, ought not to induce us hastily to modif}- or reject a principle which accounts satisfactorily for the greater number of appearances. The example of the few arbitrary princes who have been equitable, humane, and generous, is not enough to overthrow the principle which teaches that it is the nature of irresponsi- ble power to debauch and vitiate its possessors — to render them haughty, cruel, and suspicious ; nor is the example of those who, attentive only to present enjoyment, and careless of the future, lavish their fortunes in boisterous dissipation or vain ex- pense, sufficient to invalidate the general conclusion, that the passion for accumulation is stronger and more powerful than the passion for expense. Had this not been the case, mankind could never have emerged from the condition of savages. The mul- tiplied and stupendous improvements which have been made in different ages ami nations — the forests that have been cut down — the marshes and lakes that have been drained and cultivated — fhe harbours, roads, and bridges, that have been constructed — the cities and edifices that have been raised — are all the fruit of a saving of income, and establish, in despite of a thousand individual instances of prodigality, the ascendancy and superior force of the accumulating principle. It is from the want of attention to these considerations that much of the error and misapprehension with which the science of Political Economy has been, and still is, infected has arisen. Almost all the absurd theories and.opinions which have succes- sively appeared have been supporlec^ by an appeal to facts. But a knowledge of facts, without a knowlecjge of their mutual rela- tion — without being able to show why the one is a cause and the other an effect — is, to use the illustration of ]\I. Say, really no lietter than the indigested enjdition of an almanack maker, and can afford no means of judging of the truth or falsehood of a general principljc. , , ,. • But, although we are -not to reject a received principle be* f afmp Oft' the appareutopposition nt.' a few results, with the pav- I'OLITICAL ECONOM\. 17 ticular circumstances of which we are unacquainted, we can Evidence on have no confidence in its solidity if it be not deduced from a cmfciu^lJons very comprehensive and careful induction. To arrive at a ^fJ^"^jJ'C!i'' true knowledge of the laws regulating the production, distribu- are'roundrd. tion, and consumption of wealth, the economist must draw his materials from a very wide surface ; he should study man in every different situation— he should have recourse to the his- tory of society, of arts, of commerce, and of civilization — to the works of philosophers and travellers — to every thing, in short, that can throw light on the causes which accelerate or retard the progress of civilization. He should observe the changes which have taken place in the fortunes and condition of the human race in different regions and ages of the world. He should trace the rise, progress, and decHne of industry, and he should carefully discriminate the effect of different pohtical measures, and the various circumstances wherein an advancing and declining society differ from each other. Such investiga- tions, by disclosing the real causes of national opulence and re- finement, and of poverty and degradation, furnish the econo- mist with the means of giving a satisfactory solution of almost^ all the important problems in the science of wealth, and of devising a scheme of public administration calculated to ensure the continued advancement of the society in the career of im- provement. It must always be kept in mind that it is no part of the busi- ness of the economist to inquire into the means by which indi- vidual fortunes may have been increased or diminished, except to ascertain their general operation and effect.''^ The public interests ought always to form the exclusive objects of his at- tention. He is not to frame systems, and devise schemes, for increasing the wealth and enjoyments of particular classes ; but to apply himself to discover the sources of national -wealth, and universal prosperitij, and the means by which they may be ren- dered most productive. * Though public and not private wealth, as our author justly observes, be the object of inquiry, yet from the analogy that subsists between them, an elucidation of the principles of the one must tlirow light upoH the other, and men thereby become not only sounder legislators, but also better mer- chants and men of business, of whatever nature their employments maybe. A few words may serve to explain this connexion. Individual wealth is ac- quired, either by the ordinary profits of regular busmess, or by the accidental profits of speculation, — in so far as it arises from tlie former, it rests upon the natural price of commodities ; so that national and individual wealth become the same, governed by the same laws, and advancing with equal steps — here then the knowledge of this science must be practically important. In the profits of speculation the case is different : national and individual wealth here, are not the same : but neither are they, as many suppose, at variance, — wealth on such occasions, where the exchange is internal, simply changes hands — individuals gain or lose, but the mass of national wealth continues without alteration. Still, here also, this science may serve as a guide to the enterprise of the capitalist. Though his profits depend upon the fluc- tuations of a market price, yet these fluctuations have a law by which they are limited and governed : that law arises out of the necessary costs of production, which in the case of each commodity forms the central point of variation. A knowledge of this governing principle, together with tliose which regulate its demand and supply, must obviously afford some- thing like a guide, in deterrainin? the nature and extent of a safe specu- 'a1ion. — E. POLITICAL ECONOMY. Rise of the tJcience in Modern Europe. Mercantile System. When we reflect on the variety and extent of the previous knowledge requisite for the construction of a sound theory of PoHtical Economy, we cease to feel any surprise at the errors into which economists have been betrayed, or at the discrepancy of the opinions which are still entertained on some important points. Political Economy is of very recent origin. Though various treatises of considerable merit had previously appeared on some of its separate parts, it was not treated as a whole, or in a scientific manner, until about the middle of last century. This circumstance is of itself enough to account for the number of erroneous systems that have since appeared. Instead of de- ducing their general conclusions from a comparison of particu- lar facts, and a careful examination of the phenomena attending the operation of difierent principles, and of the same principles in different circumstances, the first cultivators of almost every branch of science have begun by framing their theories on a very narrow and insecure basis. Nor is it really in their power to go to work differently. Observations are scarcely ever made or particulars noted for their own sakes. It is not until they begin to be in request as furnishing the only test by which to ascertain the truth or falsehood of some popular theory, that they are made in sufficient numbers, and with sufficient accu- racy. It is, in the pecuhar phraseology of this science, the effectual demand of the theorist that regulates the production of the facts or raw materials, which he is afterward to work into a system. The history of Political Economy strikingly exem- plifies the truth of this remark. Being, as we have already observed, entirely unknown to the ancients, and but little at- tended to by our ancestors up to a comparatively late period, those circumstances which would have enabled us to judge with the greatest precision of the wealth and civilization of the in- habitants of the most celebrated states of antiquity, and of Europe during the middle ages, have either been thought un- worthy of the notice of the historian, or have been only very imperfectly and carelessly detailed. Those, therefore, who first began to trace the general principles of the science had but a comparatively limited and scanty experience on which to build their conclusions. Nor did they even avail themselves of the ^e\v historical facts with which they might have easily be- come acquainted, but almost exclusively confined their attention to those which happened to fall within the sphere of their own observation. Agreeably to what we have now stated, we find that th(< theories advanced by the early economical writers were formed on the most contracted basis, and were only fitted to explain a few of the most obvioias and striking phenomena. The Mer- cantile Theory, for example, was entirely bottomed on the popu- lar and prevalent opinions respecting money. The precious metals having been long used, both as a standard whereby to ascertain the comparative value of difierent commodities, and as the equivalents for which they were most frequently exchan- ged, acquired a fictitious importance, not merely in the estima- tion of the vulgar, but in that of persons of the greatest dis- cernment. The simple consideration that all buying and selling i" r<»ally nothing more than the bartering of one commodity foV I'OLITICAL ECONOMV. li) another — of a certain quantity of corn or wool, for example, i^icrcanuio for a certain quantity of gold or silver, and vice versa, was en- ^y^^^"^- tirely overlooked. The attention was gradually transferred from the mo7iey^s worth to the money itself; and the wealth of individuals and of states came to be measured, not by the abun- dance of their disposable products — by the quantity or value ol" the commodities with which they could afford to purchase the precious metals — but by the quantity of these tnetals actually in their possession. It is on this flimsy and fallacious hypothesis that the theories of almost every writer on economical subjects antecedent to the appearance of the works of Child, North, and Locke, in England, and of Gournay and Quesnay, in France, are founded ; and, what is of intinitely greater moment, it is on this same hypothesis that the difi'erent civilized countries have pro- ceeded to regulate their intercourse with each other. Their grand object has not been to facilitate the production of the ne- cessaries, comforts, and luxuries of life, but to monopolise the largest possible supply of gold and silver. And, as in countries destitute of. mines, these could not be obtained except in ex- change for exported commodities, various schemes were re- sorted to for encouraging exportation, and for preventing the importation of almost all products other than the precious me- tals. In consequence of this opinion, the excess of the value of the exports over the value of the imports was long consi- dered as the most infallible test of the progress of a country in the career of wealth. This excess, it was believed, could not be balanced otherwise than Vy an equivalent importation of gold or silver, or of the only real wealth which it was then supposed a country covdd possess. These principles and conclusions, though absolutely false and erroneous, afford a tolerable explanation of a few very obvious phenomena ; and, what did more to recommend them, they are in perfect unison with the popular prejudices on the subject. It was natural, therefore, that they should be espoused by the merchants or practical men, who were the earliest writers on this science. They did not consider it necessary to subject the principles they assumed to any refined analysis or examination. But, reckoning them as sufficiently established by the common consent and agreemen't of mankind, they directed themselves exclusively to the discussion of the practical measures calcula- ted to give them the greatest efficacy. " Although a kingdom," says one of the earliest and ablest Balance of writers in defence of the mercantile system, "maybe enriched '^""ade. by gifts received, or by purchase taken, from some other na- tions, yet these are things uncertain, and of small consideration, Avhen they happen. The ordinary means, therefore, to increase our wealth and treasure, is by foreign trade, whei'ein we must ever observe this rule — to sell more to strangers yearly than tec consume of theirs in value. For, suppose, that when this king- dom is plentifully served with cloth, lead, tin, iron, fish, and other native commodities, we do yearly export the overplus to foreign countries to the value of L. 2,200,000, by v/hich m"eans we are enabled, beyond the seas, to buy and bring in foreign wares for our use and consumption to the value of L. 2,000,000 ; Ijy this order duly kept in our trading, we may rest assured that the kin2;dom shall be enriched yearly L. 200,000, which mu?i 20 POLITICAL ECOXOiMY. -vstem. Mercantile be brought to US as SO much treasure ; because that part of our stock which is not returned to us in wares, must necessarily be brought home in treasure." — (Mun's Treasure by Foreign Trade, orig. edit. p. 11.) The gain on our foreign commerce is here supposed to con- sist exclusively of the gold and silver which, it is taken for granted, must necessarily be brought home in payment of the excess of exported commodities. Mr. Mun lays no stress what- ever on the circumstance of Ibreign commerce enabling us to obtain an infinite variety of useful and agreeable products, which it would either have been impossible for us to produce at all, or to produce so cheaply, at home. We are desired to consider all this accession of wealth — all the vast addition made by commerce to the motives which stimulate, and to the com- forts and enjoyments which reward the labour of the industrious, as nothing, and to fix our attention exclusively on the balance of L. 200,000 of gold and silver ! This is much the same as if we were desired to estimate the comfort and advantage derived from a suit of clothes, by the number and glare of the metal buttons by which they are fastened ! And yet the rule for esti- mating the advantageousness of foreign commerce, which Mr. Mun has here given, was long regarded by the generality of merchants and practical statesmen as infallible ; and such is the inveteracy of ancient prejudices, that even now we are annually congratulated on the excess of our exports over our imports !* * The reverse of this fact, viz. an apparent surplus of imports over ex- ports, which marked the commerce of these United States while in tlie con- dition of colonies, afforded a problem of very difficult solution to the main- tainers of this theory. According to their reasoning, the colonies must an- nually be growing poorer, the custom-house books showing a regular ba- lance against them, but as in truth they were rapidly increasing in wealtli, this striking inconsistency of principles with facts, brought such discredit on their system, that from the tune of Adam Smith, no scientific writer has ventured to press the Balance of Trade as a conclusive test of pros- jierity or decline, although popular prejudice still continues so to regard it. On this subject the following principles may be considered settled. 1. The exports and imports of a nation must, on a general account, ba- lance each other. The reasoning by which this principle is arrived at, is both simple and conclusive. A nation pays for its imports by means of its exports, and as it imports nothing without being paid for, its exports must consequently balance its imports : — from this it follows, 2. That an unfavourable balance of trade with one nation, is made up by a favourable balance with others ; — the liquidation being effected by bills of exchange, transferring these funds to the creditor country. 3. That the custom-house books do not show this equal balance, because Ihe estimates of both exports and imports, are taken in the same country, whereas they sliould be taken in the countries to which they respcctivelv belong — the value of the produce of this country on its arrival in England, balancing, in the long run, the value of her manufactures, purchased witli the proceeds, on their arrival here, supposing the profits of capital in botli countries to be equal. 4. From this it further follows, that between two countries carrying on on equal exchange with each other, the custom-house books will always sliow a surplus in each, of imports over exports, and tliat the respective profits of each will be represented by the amount of such surplus. The case of the colonies is thus then to be explained : — In their direct intercourse with England, a large balance annually appears against them in the custom-house books ; this ajjparent balance is first to be reduced by tlieir ciicuitous trade, and tlie final balance placed to their credit, and not to their charge ; it being both tlio. prnof and the measiuT oi a profitaHf> • ommprcft.,— /?. POLITICAL ECONOMY. 21 But there were other circumstances, besides ilic erroneous Mercaniiio notions respecting the precious metals, which led to the forma- ^i"]^ tion of the mercantile system, and to the enacting of regulations f^"g^^'';[.';,; restrictive of the freedom of industry. The feudal government established in the countries that hail formed the western division of the Roman Empire, degenerated into a system of anarchy and lawless oppression. The princes, who were of themselves totally unable to restrain the usurpations of the greater barons, or to control their violence, endeavoured to strengthen their in- fluence and consolidate their power, by attaching the inhabit- ants of cities and towns to their interests. For this purpose, they granted them charters, enfranchising the inhabitants, abo- lishing every existing mark of servitude, and forming them into corporations, or bodies politic, to be governed by a council and magistrates of their own selection. The order and good govern- ment that was thus established in the cities, and the security of property enjoyed by their inhabitants, when the rest of the country was a prey to rapine and disorder, stimulated their in- dustry, and gave them a vast ascendancy over the cultivators of the soil. It was from the cities that the princes derived the greater part of their supplies of money ; and it was by their assistance and co-operation that they were enabled to control and subdue the pride and independence of the barons. But the citizens did not render this assistance to their sovereigns merely by way of compensation for the original gift of their charters^ They were continually soliciting and obtaining new privileges. And it was not to be expected that princes, so very deeply in- debted to them, and by whom they must have been regarded as forming by far the most industrious and deserving portion of their subjects, should be at all disinclined to gratify their wishes. To enable them to obtain their provisions cheap, and to carry on their industry to the hpst advantage, the exportation of corn, and of the raw materials of their manufactures, was strictly pro- hibited ; at the same time that heavy duties and absolute prohi- bitions were interposed to prevent the importation of manufac- tured articles from abroad, and to secure the complete monopoly of the home market to the home manufacturers. These, toge- ther with the privilege granted to the citizens of corporate towns of preventing any individual from exercising any branch of business until he had obtained leave from them ; and the va- riety of subordinate regulations intended to force the importa- tion o£ the raw materials required in manufactures, and the ex- portation of the manufactured goods, form the principal features of the system of public economy adopted,, with the view of en- couraging manufacturing industry, in evejy country in Europe, in the fourteenth, fifteenth, sixteenth, and seventeenth centuries. The freedom of industry recognised by their ancient laws was almost totally destroyed. It would be easy to mention a thou- sand instances of the excess to which this artificial system was carried in England and other countries ; but as many of these instances must be familiar to our readers, we shall only observe, as illustrative of its spirit, that by an act passed in 1678, for the encouragement of the English woollen manufacture, it was order- ed that all dead bodies should be wrapped in a woollen shroud 1 But the exclusion of foreign competition, and the monopoly 3 22 . POLITICAL ECONOMY. iMcrcantiic of the hoDie market, did not satisfy the manufacturers and mer- K..\stem. chants. Having obtained all the advantage they could from the pubhc, they attempted to prey on each other. Such of them as possessed most influence, procured the privilege of carrying on particular branches of industry to the exclusion of every other individual. This abuse was carried to a most oppressive height in the reign of Elizabeth, who granted an infinite num- ber of new patents. At length, the grievance became so in- tolerable, as to induce all classes to join in petitioning for its abolition, which, after much opposition on the part of the Crown, by whom the power of erecting monopolies was considered a very valuable branch of the prerogative, was effected by an act passed in the 21st of James I. But this act did not touch any of the fundamental principles of the mercantile or manufactu- ring system ; and the exclusive privileges of all bodies corpo- vate were exempted from its operation. In France the interests of the manufacturers were warmly espoused by the justly celebrated M. Colbert, minister of finan- ces during the most splendid period of the reign of Louis XIV ; and the year 1664, when the famous tariff, compiled under Col- bert's direction, was first promulgated, has been sometimes con- sidered, though improperly, as the real era of the manufactu- ring system. These restrictions were zealously supported by the writers in defence of the mercantile system, and the balance of trade. The facilities given to the exportation of home manufactured goods, and the obstacles thrown in the way of their importation from abroad, seemed to them to be particularly well fitted for making the exports exceed the imports, and procuring a favour- able balance. Instead, therefore, of regarding these regulations as the offspring of a selfish monopolizing spirit, they looked on fhem as having been dictated by the soundest policy. The ma- nufacturing and mercantile systems were thus naturally blended together. The acquisition of a favourable balance of payments was the grand object to be accomplished ; and heavy duties and restrictions on importations from abroad, and bounties and pre- miums on exportation from home, were the means by which this object was to be attained ! It cannot excite our surprise that a system having so many popular prejudices in its favour, and which afforded a plausible and convenient apology for the ex- clusive privileges enjoyed by the manufacturing and commercial classes, should have early attained, or that it should still pre- serve, notwithstanding the overthrow of its principles, a power- ful practical influence. Melon and Forbonnais in France, — Genovesi in Italy, — ij^un. Sir Josiah Child, Dr. Davenant, the authors of the British Merchant, and Sir James Stuart, in Eng- land, — are the ablest writers who have espoused, some with more and some with fewer exceptions, the leading principles of ' the mercantile system. "It is no exaggeration to affirm, that there are very few po- litical errors wliich have produced more mischief than the mer- cantile system. Armed with power, it has commanded and for- bid where it should only hciVG protected. The regulating mania which it has inspired has tormented industry in a thousand ways, 5o force it from its natural channels. It has made each particu • POLITICAL ECONOMY. 23 iar nation regard the welfare of its neighbours as inconipatible Mercantile with its own ; hence the reciprocal desire of injuring and im- '^i^'*"'- poverishing each other ; and hence that spirit of commercial rivalry which has been the immediate or remote cause of the greater number of modern wars. It is this system which has stimulated nations to employ force or cunning to extort commer- cial treaties, productive of no real advantage to themselves, from the weakness or ignorance of others. It has formed colonies that the mother country might enjoy the monopoly of their trade, and force them to resort exclusively to her markets. In short, where this system has been productive of the least injury, it has retarded the progress of national prosperity; every where else it has deluged the earth with blood, and has depopulated and ruined some of those countries whose power and opulence it was supposed it would carry to the highest pitch." — (Storch, Traite rf' Economic Politique, Tom. I. p. 122.) The greater attention which began to be paid, in the seven- ivo^voss or teenth, and in the earlier part of the last century, to subjects con- ^.?"f;,"' nected with finance, commerce, and agriculture, gradually pre- En^ianfi. pared the way for the downfall of the mercantile system. The Enghsh writers preceded those of every other country, in point- ing out its defects, and in discovering the real nature and func- tions of money, and the true principles of commerce. The es- tablishment of a direct intercourse with India did much to ac- celerate the progress of sound opinions. The precious metals have always been one of the most advantageous ai'ticles of ex- port to the East.* And when the East India Company was es- tablished in 1600, power was given them annually to export foreign gold coins or bulhon, of the value of L. 30,000. The Company were, however, bound to import, within six months after the return of every voyage, except the first, as much goki and silver as should together be equal to the value of the silver exported by them. But the enemies of the Company contended, that these regulations were not complied with, and that it was contrary to all principle, and highly injurious to the public inte- rests, to permit the exportation of any quantity of bullion. The merchants and others interested in the India trade, among whom we have to reckon Sir Dudley Digges, whose defence of the Company was published in 1615, Mr. Mun, who published a very able pamphlet in defence of the Company in 1621,t Mr. * Pliny, when enumerating the spices, silks, ami other Eastevn products imported into Italy, says, " Minimaque computatione millies centena mil- lia sestertium annis omnibus, India et Seres, peninsulaque ilia (Arabia) im- perio nostro demunt." — (Hist. JVat. Lib. XII. cap. IS.) " At the lowest computation, India, China, and the Arabian Peninsula, annually take out of the Empire, an hundred million of sesterces." — (JVatural Hist.) A sum, according to the received calculations, of 807,291/. 13s. 4rf. sterling. — E. The Emperor Charles V. used to say that the Portuguese, who then en- grossed almost the whole commerce of the East, were the common ene- mies of Christendom, inasmuch as they drained it of its treasure to export it to infidels ! — (Misselden On Free Trade, p. 24.) t This pamphlet, which is now become extremely rare, is printed in Purchas's Pilgrims, Vol. I. p. 732. It is entitled, " A Discourse of Trade from England to the East Indies, answering to divers objections which are usually made against the same ; particularly as to the exporting of gold and silver for unnecessary wares." Mr. Misselden's tract, which is enti- tled, " The Circle of Commerce, or the Balance of Trade," was answeied the same year, by Gerard Malyne, a London merchiint. Tlie tract of Sir 24 POLITICAL ECONOMY. Progressof Misscltlen, and more recently, Sir Josiah Child, could not con- PcicnecTi^' trovcrt the reasoning of Ihcir opponents, without openly im- Kngian;!. pugning ?ome of the commonly received opinions regarding money. In such circumstances, it is easy to see, that prejudice would be forced to give way to interest. At first, however, the advocates of the Company diti not contend, nor is there, indeed, any good reason for thinking that they were of opinion that the exportation of gold or silver to the East Indies was beneficial, on the single ground that the commodities brought back wt-re of greater value. They contended, that the Company did not ex- port a greater quantity of bullion than their charter authorized them to do ; and they further contended, that this exportation was advantageous, because the commodities imported from India were chiefly re-exported to other countries, from whence a greater quantity of bullion was obtained in exchange for them.* But even this was an immense advance in the progress to a sounder theory. Cest toujours le premier pas qui coute.^ Tho advocates of the Company began gradually to assume a higher tone ; and at length boldly contended that bullion was nothing hut a commodity, and that its exportation ought to be rendered as free as the exportation of any other commodity. Nor were these opinions confined to the partners of the East India Com- pany. They were gradually communicated to others ; and many eminent merchants were taught to look with suspicion on several of the received maxims, and were in consequence led to acquire more correct and comprehensive views regarding commercial intercourse. The new ideas ultimately made their Avay into the House of Commons ; and in 1663, the statutes prohibiting the exportation of foreign coin and bullion were re- pealed, and full liberty given to the East India Company, and to private traders, to export the same in unlimited quantities. | In addition to the controversies respecting the East India trade, the discussions to which the foundation of the colonies in America and the West Indies, the establishment of a compul- sory provision for the support of the poor, and the acts prohi- biting the exportation of wool, and the non-importation of Irish cattle, &c. gave rise, attracted an extraordinary portion of the public attention to questions connected with the domestic policy of the country. In the course of the seventeenth century, a more than usual number of tracts were published on commer- cial and economical subjects. And although the doctrines of Dudley Dig;ges is entitled, " The Defence of Trade," being a letter to Sir T. Smith, President of the East India Company. — E. * Those who have not the original pamphlets may consult Macpherson'? Historic of Commerce, Vol. II. pp. 297, 315, 511, — Macpherson's ,i1ccoiint of the European Commerce with India, pp. 94, 104, — and Mr. Robert Grant's tikefch of the History of the Company, p. 44, where they will find an ample confirmation of what we have staled. t In the first step lies all the dilficulty. — E. if The prejudice against the exportation of specie, is one of the most popular and deep rooted errors in relation to money. It is one which re- tains its hold upon the minds of the people after governments have aban- doned it. Yet all experience proves it to be unfounded, and tliat money, like water, when left free will find its natural level. All restrictions to withhold it are injurious or nugatory. Spain has retained it to its own im- poverishment ; and France has within a few years withdrawn its former prohibitions without suffering any inconvenience. For money, as for every other commodity, there is a certain effective demand, which demand will Hlways be supplied where commerce is unshackled, — E, POLITICAL ECONOMY. 25 the greater number of the writers are strongly tinctured with Progress of the prevailing spirit of the age, it cannot be denied, that several scienceTn^ of them have risen above the prejudices of their contempora- England. ries, and have an unquestionable right to be regarded as the founders of the modern theory of commerce ; as the earliest teachers of those sound and liberal doctrines, by which it has been shown, that the prosperity of states can never be promo- ted by restrictive regulations, or by the depression of their neighbours — that the genuine spirit of commerce is inconsistent with the dark and shallow policy of monopoly — and that the self-interest of mankind, not less than their duty, requires them to live in peace, and to cultivate friend.ship with each other. We have already referred to Mr. Mun's treatise, entitled Eng- Mr. Tsim-. lancfs Treasure by Foreign Trade. This treatise was first pub- lished in 1664 ; but there is good reason to suppose that it had been written many years previously. Mr. Mun's son, in the dedication to Lord Southampton, prefixed by him to the work, says, that his father " was, in his time, famous among mer- chants," a mode of expression which he would hardly have used, had not a considerable period elapsed since his father's death : and Mr. Edward Misselden, in his Circle of ComnLerce, published in 1623, (p. 36,) refers to Mr. Mun's tract on the East India trade, and speaks of its author as being an accom- plished and experienced merchant. Perhaps, therefore, we shall not be far wrong if we assume, that this treatise was written so early as 1635 or 1640. At all events, it is cei'tain, that the doctrines which it contains do not difi'er much from those which he had previously maintained in his pamphlet in defence of the East India Company, and some of the expressions are literally the same with those in the petition presented by that body to Parliament in 1628, which is known to have been written by Mr. Mun.* The extract we have previously given, shows that Mr. Mun's opinions, in so far as regards the question respecting the balance of trade, were exactly the same with those of his contemporaries. But, we believe, he was the first who endea- voured to show, and who has, in point of fact, successful!}'' shown, that a favourable balance could never be produced by re- strictive regulations : — that the exportation and importation of bullion, coin, and every other commodity, should be freely per- mitted ; — and that violent measures will never- bring gold or silver into a kmgdom, or retain them in it, (pp. 27, 92, &,c. ori- ginal edit.) Mr. Mun also distinctly lays it down, " that those who have wares cannot want money," and that " it is not the keeping of our money in the kingdom, but the necessity and use of our wares in foreign countries, and our want of other com- modities, that causeth the vent and consumption on all sides which causeth a quick and ample trade," (p. 43. )t Nor are these de- tached and incidental passages thrown out at random. They breathe the same spirit which pervades the rest of Mr. Mun's book, and constitute and form a part of his system. His obser- vations in answer to Malyne's, on some rather difficult questions connected with exchange, are both accurate and ingenious. * This petition, and the reasons on which it is founded, were so well es- teemed, as to occasion its being reprinted in 1641. t These expressions are in the petition of the Company, presented to Parliament in 1628. 2fi POLITICAL ECONOMY. Progress of The first edition of Sir Josiah Child's celebrated work on sdenceTn* trade, {A JVew Discourse of Trade, <^-c.) was published in 1668 ; England but it was very greatly enlarged in the next edition, published SirJosiaii in 16.90. There are many sound and liberal doctrines advan- Ciijid. ^gfj j„ ^\^[^ book. The argument to show that colonies do not and cannot depopulate the mother country is as conclusive as if it had proceeded from the pen of Mr. Malthus ; and the just and forcible reasoning in defence of the n:!turalization of the Jews is highly creditable to the liberality and good sense of the writer, and discovers a mind greatly superior to the prejudices of the age. Sir Josiah has also mauy good and judicious obser- vations on the bad effects of the laws against forestalling and regrating ; on those limiting the number of apprentices ; and on corporation privileges. When treating of the laws relating to the exportation of wool. Sir Josiah lays it down as an axiom, " That they that can give the best price for a commodity shall never fail to have it by one means or other, notwithstanding the opposition of any laws, or interposition of any power by sea or land ; of such force, subtilty, and violence, is the general course of trade.'''' The radical defect of Sir Josiah Child's Treatise consists in the circumstance of its being chiefly written to illustrate the ad- vantages, which he labours to show, would result from forcibly reducing the rate of interest io fotir per cent.; an error into which he had been led by mistaking the low interest of Holland for the principal cause of her wealth, when this low interest was in truth the effect of her comparatively heavy taxation. It is, however, worthy of remark, that this error was very soon detected. In the same year (1668) that Sir Josiah's Trea- tise first appeared, a tract was published, entitled. Interest of Money^mistaken, or a Treatise, proving that the Abatement of In- terest is the Effect and not the Cause of the Riches of a Nation, The author of this tract maintains the same opinions that were afterward held by Locke and Montesquieu, that the interest of money does not depend on statutory regulations, but that it va- ries according to the comparative opulence of a country ; or rather according to the comparative scarcity and abundance of money — increasing when the supply of money diminishes, and diminishing when it increases.* Having endeavoured to esta- blish this principle, the author of the tract successfully contends that Sir Josiah Child had totally mistaken the cause of the wealth of the Dutch, of which he shows the lowness of their interest was merely a consequence, flir William In 1672, Sir William Petty puldished his celebrated tract, htlcal Ana- entitled, the Political Anatomy of Ireland. In this work, the lomy. absurdity of the act passed in 1664, prohibiting the importation of cattle, beef, &c. from Ireland into Britain, is ably exposed, and the advantage of an unconstrained internal commerce clearly '■" It has been generally supposed that Mr. Hume was the first %vho showed (in his Essay on Interest') the fallacy of this opinion, and who proved that the rate of interest did not depend on the abundance or scar- city of money, but on the abundance or scarcity of disposable capital com- pared with the demands of the borrowers, and the rate of profit. This, however, is a mistake, the doctrine in question having been fully demon- strated in a pamphlet written by Mr. Massie, entitled. Essay on ike Go- verning Causes of the JValural Rale of Interest, published two years before Mr. Hume's Essay appeared. POLITICAL ECONOMV. 27 set forth. " If it be good for England," says Sir William, "to Progress of keep Ireland a distinct kingdom, why do not the predominant sdTil!2e'ia^ party in Parliament, suppose the western members, make Eng- England. land beyond Trent another kingdom, and take tolls and customs upon the borders ? Or why was there ever any union between England and Wales ? And why may not the entire kingdom of England be further cantonised for the advantage of all parties ?" (p. 34. edit. 1719.) The great defect in the writings of Mun, Misselden, Child, and others, did not really consist so much in their notions about the superior importance of the precious metals, or even the ba- lance of trade, as in their notions respecting the superior ad- vantages derived from the importation of durable, rather than of rapidly perishable commodities, and luxuries. This, however, was an extremely natural opinion ; and we cannot be surprised that the earlier writers on commerce should not have avoided falling into an error, from which neither the profound sagacity of Locke, nor the strong sense of Mr. Harris, have been able to preserve them. But even so early as 1677, the fallacy of this opinion had been perceived. In that year, there appeared a small tract, entitled, England's Great Happiness ; or, a Dia- logue between Content and Complaint ; in which the author con- tends, that the importation of wine, and other consumable com- modities, for which there is a demand, in exchange for money, is advantageous ; and, on this ground j^defends the French trade, which was as loudly declaimed against by the practical men of that day as it is by those of the present. We shall make a short extract from this remarkable tract : — " Complaint. — You speak plain ; but what think you of the. French trade ? which draws away our money by wholesale. Mr. Fortrey,! whom I have heard you speak well of, gives an account that they get L. 1,600,000 a-year from us. " Content. — 'Tis a great sum ; but, perhaps, were it put to a vote in a wise Council, whether for that reason the trade should be left off, 'twould go in the negative. For pa()er, wine, linen y Castile soap, brandy, olives, capers, prunes, kidskins, taffaties, and such like, we cannot be without ; and for the rest, which you are pleased to style .j^pes and Peacocks (although wise Solo- men ranked them with gold and ivory) they set us all agog, and have increased among us many considerable trades. * * I must confess, I had rather they'd use our goods than money ; but if not, I WOULD NOT LOSE THE GETTING OF TEN POUND BECAUSE I can't GET AN HUNDRED ; and I don't question but when the French get more foreign trade, they'll give more liberty to the bringing in foreign goods. I'll suppose John-a-Nokes to be a butcher, Dick-a-Styles to be an exchange man, yourself a law- yer, will you buy no meat or ribbands, or your wife a fine Indian gown or fan, because they will not truck zvith you for indentures which they have need of? I suppose no ; but if you get money enough of others, you care not though you give it away in spe- cie for these things ; I think 'tis the same case." * Mr. Fortrey's pamphlet has been much referred to. It was published in 1663, and reprinted in 1673. It contains a very good argument in favour of inclosures. The reference in the text sufficiently explains the opinions (^ the writei- in regard to commerce 28 POLITICAL ECONOMY. Pro^esaof The general spirit of this tract may perhaps be better infer- Sde'n'ceTn''' ^etl from the titles of some of the dialogues. Among othors, we Ehgland. have, " To export money our great advantage ;" — " The French trade a profitable trade ;" — " Variety of wares for all markets, a great advantage ;" — " High living a great improvement to the arts ;" — " Invitation of foreigii arts, a great advantage ;" — ^'■Multitudes of traders, a great advantage," &c. &c. But its influence was far too feeble to arrest the current of popular prejudice. In the year after its publication (1678) the impor- tation of French commodities was prohibited for three years. This prohibition was made perpetual in the reign of William III. when tht^ French trade whs declared a ?iM^sartce .' — a prin- . ciple, if we may so call it, which has been acted upon to this very hour. In 1681, a pamphlet was pubhshed in defence of the East India Company, under the signature of " Philopatris," but evidently the production of Sir Josiah Child. In the introduc- tion to this pamphlet, the following general principles are laid down : — " That all close monopolies (Sir Josiah contends that the East India Company does not come under this description,) of what nature or kind soever, are destructive to trade, and consequently obstructive to the increase of the value of our lands. " That silver or gold, coined or uncoined, though they are used for a measure of all other things, are no less a commodity than wine, oil, tobacco, cloth, or stuff's ; and may, in many cases, be exported as much to the national advantage as any other com- modity. " That no nation ever was, or will be, considerable in trade, that prohibits the exportation of bullion." (p. 3.) Sir William In S'lT WiWium Fetty's, Cluantulumcunque, published in 1682, Quantuium- the subject of money is treated with great ability, and the idea cunque. of draining England of her cash, by an unfavourable balance, successfully combated. " If some English merchants," it is said, " should be so improvident as to carry out money only, then the foreign merchants would buy up such English com- modities as they wanted with money brought into England from their respective countries, or with such commodities as England likes better than money ; for the vending of English commodities doth not depend on any thing else but the use and need which fo- reigners have of them.'''' Sir W. denies that "a country is the poorer for having less money;'''' and concludes by strongly con- demning the laws regulating the rate of interest ; observing, that there may as well be laws to regulate the rate of exchange and of insurance (See pp. 3, 6, 8, original edition.)* Sir Dudley But a tract, entitled. Discourses on Trade, principally directed to the Cases of Interest, Coinage, Clipping, and Increase of Money, * Thirteen years earlier had appeared, " A defence of Usury at 6 per cent." by T. Manley, against the attack? of Sir T. Culpepper, who had charged it with " many crimes and oppressions whereof it is al- together innocent." About the same time appealed an interesting Re- port from a joint Committee of the House of Conunons and the Common Council of London, entitled " England's Interest, or the great benefit to Trade by Banks or Olikcs of Credit in London." — By this it appears, that Offices of this kind had been already established in that city, and may be cpn?idei-ed as the first attempt at Bankiuj. — E. -Vorth. POLITICAL ECONOMY. 29 written by Sir Dudley North, and published in 1691, unques- Progress of lionably contains a far more able statement of the true princi- sci^^l'in pies of commerce than any that had then appeared. England. We regret that our limits will not permit our giving so full an account as we could have wished of this extraordin-.uy tract. The author is a most intelligent and consistent advocate of the great principles of commercial freedom. He is not, like the most eminent of his predecessors, well informed on one subject, and erroneous on another. He is throughout sound and liberal. His system is consentaneous in its parts, and complete. He shows, that in commercial matters, nations have the same inte- rests as individuals ; and exposes the absurdity of supposing, that any trade which is advantageous to the merchant can be in- jurious to the public. His opinions respecting the imposition of a seignorage on the coinage of money, and the expediency of sumptuary laws, then in great favour, are equally enlightened. We subjoin from the preface to this tract an abstract of th€ general propositions maintained in it : " That the whole world as to trade is but as oke na- tion OR PEOPLE, AND THEREIN NATIONS ARE AS PERSONS. " That the loss of a trade with one nation is not that only, separately considered, but so much of the trade of the world rescinded and lost, for all is combined together. " That there can be no trade unprofitable to the pub- lic ; FOR IF any prove so, men leave it off ; AND wherever the traders thrive, the public, of which they are part, thrive also. " That to force men to deal in any prescribed manner may profit such as happen to serve them ; but the public gains not, because it is taking from one subject to give to another. " That no laws can set prices in trade, the rates of which must and will make themselves. But when such laws do hap- pen to lay any hold, it is so much impediment to trade, and therefore prejudicial. " That money is a merchandise, whereof there may be a glut, as well as a scarcity, and that even to an inconvenience. " That a people cannot want money to serve the ordi- nary DEALING, AND MORE THAN ENOUGH THEY WILL NOT HAVE. " That no man will be the richer for the making much mo- ney, nor have any part of it, but as he buys it for an equiva- lent price. " That the free coynage is a perpettial motion found out, ivhere- hy to melt and coyn without ceasing, and so to feed goldsmiths and coyners at the public charge. " That debasing the coyn is defrauding one another, and to the public there is no sort of advantage from it ; for that admits no character, or value, but intrinsick. " That the sinking by alloy or weight is all one. " That exchange and ready money are the same, nothing but carriage and re-carriage being saved. " That money exported in trade is an increase to the wealth of the nation ; but spent in war, and payments abroad, is so much impoverishment. " In short, that all favour to one trade, or interest, is AN ABUSE, and CUTS SO MUCH OF PROFIT FROM THE PUPITC." 4 30' POLITICAL ECONOMY. Progress of Unluckily this admirable tract never obtained any consider-* sc^iKeTn"' ^^'^ circulation. There is good reason, indeed, to suppose that England. it uas designedly suppressed.* At all events, it speedily be- came excessively scarce ; and we are not aware that it has ever been referred to by any subsequent writer on commerce, ifr. Locke. The disordered state of the coin, and the proceedings rela- tive to the great recoinage in the reign of William III., led to a great deal of discussion both in and out of Parliament, and con- tributed, in no ordinary degree, to diffuse juster notions respect- ing money and commerce. It was then that Mr. Locke pub- lished his well known tracts on Money. t These tracts immedi- ately obtained a very extensive circulation ; and though infected with some very grave errors, they had a powerful influence in preventing Mr. Lowndes's proposal for degrading the standard of the coin from being carried into effect, and in contributing to establish the true theory of money. The restoration of the currency was not, however, effected without great opposition. A large minority in Parliament supported Mr. Lowndes's views ; and they were also supported by a number of writers. Of Mr. Barbon. these, Mr. Nicholas Barbon seems to have been one of the ablest. In his tract, entitled, A Discourse concerning Coining the JVctu Money Lighter, published in 1696, he detected several of the errors into which Mr. Locke had fallen ; and he has the further merit of having ably demonstrated the fallacy of the popular opinions respecting the balance of trade ; and of hav- ing shown, that no bullion could ever be sent abroad in payment of an unfavourable balance, unless it was at the time the cheap- est and most profitable article of export. The inferences deduced by Mr. Barbon from his investiga- tions into the balance of trade and foreign exchange are : " That a trading nation is made rich by traffic and the indus- try of the inhabitants — and that the native stock of a nation can never be wasted. " That no sort of commodities ought to be totally prohibited —and that the freer trade is, the better the nation "will thrive. " That the poverty and riches of a nation does not depend on a lesser or greater consumption of foreign trade, nor on the dif- ference of the value of those goods that are consumed. " That the balance of trade is a notion that serves rather to puzzle all debates of trade, than to discover any particular ad- vantages a nation may get by regulating of trade. " That the balance of trade (if there be o/je) is not the cause of sending away the money out of a nation : But that proceeds from the difference of the value of bidlion in several countHes, and from the profit that the merchant makes by sending it away more than by bills of exchange. " That there is no occasion to send away money or bullion to pay bills of exchange, or balance accounts. " That all sorts of goods, of the value of the bill of exchange, or the balance of the account, will answer the bill, and balance the account as well as money." — (p. 59.) * See the Honourable Roger North's Life of his brother, the Honour- able Sir Dudley North, p. 179. t Considerations on the Lowering of Interest and raising the Vahie of Money, 1691. Further Considerations concerning Raising the Value of Money, 1695. POLITICAL ECONOMY. 31 It is singular, that a writer possessed of such sound and en- Progress of larged opinions respecting the principles of commercial inter- sdTn^rrn' course, and who had shown that bullion differed in no respect England. from other commodities, should have maintained, that the value of coined money chiefly depended on the stamp affixed to it by goveryiment. I'his gross and unaccountable error destroyed the effect of Mr. Barbon's tract ; and was, most probably, the cause of the oblivion into which it very soon fell, and of its never hav- ing attracted that attention to which it was on other accounts justly entitled. The commercial writings of Dr. Davenant, Inspector-Gene- ^l^J^^'''' ral of Imports and Exports in the reign of Queen Anne, were published in the interval between 1695 and 1711. Though a partizan of the mercantile system. Dr. Davenant had emancipa- ted himself from many of the prejudices of its more indiscrimi- nate and zealous supporters. He considers a watchful attention to the balance of trade, and its " right government,*' as of the highest importance ; but he does not consider wealth as consist- ing exclusively of gold or silver ; or that prohibitions and re- strictions should be rashly imposed, even on the intercourse with those countries with which the balance is supposed to be unfavourable. But we are far from thinking, that the commer- cial writings of Dr. Davenant deserve the eulogies that have been bestowed on them ; or that they had any material effect in accelerating the progress of sound commercial science. They do not, in fact, contain a single principle that is not to be found in the work of Sir Josiah Child. Some of Dr. Davenant's pa- ragraphs are exceedingly good ; but the treatises of which they form a part are remarkably inconclusive, and are for the most part founded on narrow and contracted principles. There is no evidence to show that Dr. Davenant was at all aware of the ef- fect of commerce in facilitating the production of wealth, by enabling the inhabitants of each particular country to devote themselves, in preference, to those employments for the success- ful prosecution of which they have some natural advantage.* In 1734, Jacob Vanderlint, who describes himself as a trades- Jacob Van-- man, published his tract, entitled, Money answers all Things. '^^'''"' Mr. Stewart has referred to this tract in the Appendix to his valuable Life of Dr. Sjuith, and has quoted some passages illus- trative of the advantages of commercial freedom, which, he truly says, " will bear a comparison, both in point of good sense and of liberality, with what was so ably urged by Mr. Hume twenty years aflerward, in his Essay on the Jealousy of Trade.'' Vanderlint closes his pamphlet with an argument in favour of the substitution of a territorial tax in place of every * The progress of enlarged and liberal opinions with regard to com- merce seems to have been in no small degree counteracted by the publica- tion of the British Merchant. This work was written by some of the first merchants of their time, and was chiefly intendetl to expose the alleged defects in the commercial treaty with France negotiated by Queen Anne's Tory administration in 1713. It consists of a series of papers published weekly, and afterward collected in three volumes. Public opinion being very much against the treaty, the British Merchant enjoyed a large share of popularity. Its authors appear to have been thoroughly imbued with all the prejudices of the mercantile sect ; and the work is now only deserving^ of notice as containing the fullest exposition of their peculiar dactrines 32 POLITICAL ECONOMY. Progrc63 of Other — an idea borrowed from Locke, and subsequently adopted 9c~r' by the French economists. England. In 1744,* Sir 3Iatthevv Decker, an extensive merchant, pub- S^r Matthew hshed his Essaij on the Causes of the Decline of Foreign Trade. Diicker. ^his cssay has been frequently referred to by Dr. Smith, and it deserved his notice. Sir Matthew is a most intelligent and de- cided enemy of all restrictions, monopolies, and prohibitions -what- ever. To give full freedom to industry — he proposes that all corporation privileges should be abohshed ; and that all the ex- isting taxes should be repealed, and replaced by a single tax laid on the consumers of luxuries, proportionally to their incomes. The following short extracts will give an idea of the spirit and ability which pervades Sir Matthew's work : — " In the Memoirs of De Witt, it is said, ' that restraint is al- ways Imrtful to trade ;' the reason whereof is plain ; for nature ftas given various products to various countries, and thereby knit mankind in an intercourse to supply each other''s wants. To at- tempt to sell our products, but to buy little or none from fo- reigners, is attempting an impossibility, acting contrary to the intent of nature, cynically, and absurdly ; and, as ours is a populous manufacturing country, might be prejudicial to our interests ; for, could we raise all necessaries and vanities with- in ourselves, this intercourse designed by nature would be de- stroyed ; and then, how is our navy, our only bulwark, to be maintained?" (p. 147.) " Trade cannot, will not, be forced ; let other nations prohi- bit, by what severity they please, interest will prevail ; they Tnay embarrass their own trade, but cannot hurt a nation, whose trade is free, so much as themselves. Spain has prohibited our woollens ; but had a reduction of our taxes brought them to their natural value only, they would be the cheapest in Europe of their goodness, consequently must be more demanded by the Spaniards, be smuggled into their country in spite of their go- vernment, and sold at better prices ; their people would be dearer clothed, with duties and prohibitions, than without, con- sequently must sell their oil, wine, and other commodities, dearei" ; whereby other nations, raising the like growths, would gnio ground upon them, and their balance of trade grow less and less. But should we, for that reason, prohibit their com- modities ? By no means ; for the dearer they grow, no more than what are just necessary will be used ; their prohibition does their 07Vn business : some may be necessary for us ; what are so, we should not make dearer to our own people ; some may be pro- per to assort cargoes for other countries, and why should we prohibit our people that advantage ? Why hurt ourselves to HURT THE Spaniards ? If we would retaliate eifectually upon them for their ill-intent, handsome premiums given to our plan- fations, to raise the same growths as Spain, might enable them to supply us cheaper than the Spaniards could do, and establish a trade they could never recover. Premiums may gain trade, hot prohibitions will destroy jV." (p. 163.) * We quote from the edition of the Essay published at Edinl'urgli in 1756. It appears from the work itself, (p. 4.^ th:it it had been written . 3 74l> : the first edition was in 4to. POLITICAL ECONOMY, J3 Sir Matthew applies the same argument to expose the ab- Progress of surdity and injurious effect of our restraints on the trade with scZTc"uT France. " I allow," he says, " that Britain should be always England. vigilant over the designs of France, but need not be afraid of her power ; her wise regulations in trade should be the objects we should keep our eyes upon, and out-do her if possible ; or else, as she rises, we must sink. But it is our comfort, that our remedy is always in our own hands ; nor can there be any solid reason for the nation's paying dearer to other countries for goods we could buy cheaper in France. Would any wise dealer in London buy goods of a Dutch shopkeeper for 15d. or 18d. when he could have the same from a French shopkeeper for Is. ? Would he not consider, that, by so doing, he would empty his own pockets the sooner, and that, in the end, he would greatly injure his own family by such whims ? And shall this nation commit an absurdity that stares every private man in the face ? The certain way to be secure is to be more powerful, that is, to extend our trade as far as it is capable of; and as re- straints have proved its ruin, to reject them, and depend on free- dom for our security; bidding defiance to the French, or an}' nation in Europe, that took umbrage at our exerting our natural advantages." (p. 184.) We do not know that the impolicy of restrictions on the im- portation oi foreign corn has ever been more ably and triumph- antly exposed than in the following passage : " Every home commodity, in a free trade, will find its natural value ; for, though that fluctuates, as of necessity it must, according to the plentifulness or scarcity of seasons, yet for the home consump- tion, every home commodity must have great advantage over the foreign, as being upon the spot, and free from freight, insu- rance, commission, and charges, which on the produce of lands, being all bulky commodities, must in general be about \b per cent., and a greater advantage cannot be given without preju- dice ; for 15 per cent, makes a great difference in the price of necessaries between the nation seUing and the nation buying, and is a great difficulty on the latter, but, arising from the natu- ral course of things, cannot be helped ; though it is a sufficicjit security to the landholder, that foreigners can never import more necessaries than are absolutely required ; and, 1 presume, in such cases, they have more charity than to starve the people merely for an imaginary profit, which yet would prove their ruin in the end ; for it is a fallacy and an absurdity to think to raise the va- lue of lands by oppressions on the people that cramp their trade ; for if trade declines, the common people must either come upon the parish, or fly for business to our neighbours : in the first case, they become a heavy tax on the rich, and instead of buy- ing the produce of their lands, must have it given them ; and in the second case, when the consumers are gone, what price will the produce of land bear ?" (p. 56.) Of a work so well known as Mr. Hume's Political Essays, air. ilumfe, (published in 1752,) it is almost superfluous to speak. The ability with which he has combated the prejudice against the French trade, and exposed the absurdity of the dread of being deprived of a sufficient supply of bullion ; the liberality and ex- pansion of his views respecting commerce in general ; and the 34 POLITICAL ECONOMY. Progress of beauty of his illustrations Cannot be too highly praised. It did pdrn"?eTn*' "ot, however, enter into Mr. Hume's plan to give a systematic Kngiaud. view of the effects of commerce, nor has he instituted any Mr. Hunis. analysis of the sources of wealth. Mr. Harris has endeavoured to supply the latter deficiency ; and his Essay upon Money and Coins, published in 1757, is, perhaps on the whole, the best economical treatise that had appeared previously to the publi- cation of the Wealth of JVations. We have already noticed Mr. Harris's mistake of supposing that it was more profitable to im- port durable rather than rapidly consumable commodities ; and, as a writer on commerce, he is undoubtedly very inferior to Sir Dudley North and Sir Matthew Decker. But the comprehen- sive and able manner in which he has treated the subject of money ; the skill with which he has illustrated the effects of the division of labour in facilitating production and increasing wealth ; and the near approach he has made to some of the fundamental doctrines of Dr. Smith, if they do not give him a pre-eminence, certainly place him in the first rank among his precursors. r^uiy Italian We havc been induced to treat of the progress of commer- Commerc". cial scicuce in England at considerable length, partly on account of the interest and importance of the subject, and partly be- cause we are not acquainted with any work in which it has been investigated. M. Say and some other continental writers con- tend, that the Italians and French were the first who discovered and established the just principles of commercial intercourse. But the details we have now given prove the indisputable pri- ority of the English. The economical works of Davanzati, Serra, Turbolo, and Scaruffi, are almost wholly occupied with a discussion of the effects of a forced reduction of the standard of money. They deserve credit for having opposed all tam- pering with the currency ; but the arguments they employ to show its injustice and impolicy, are stated with much greater brevity and force in Sir Robert Cotton's speech in the Privy Council in 1626. The Discurso Economico of Bandini, the ear- liest writer on commerce whose works have been thought wor- thy of a place in the voluminous collection of Italian works on Political Economy,* was published so late as 1737. Belloni and Algarotti's Essays on Commerce, both very inferior to the works of Sir Josiah Child or Sir Dudley North, were published, the former in 1750, and the latter in 1763. i;ariy French The French have still less claim than the Italians to be con- «^'Immerce" ^idcrcd the discovcrcrs of the true principles of commerce. There is much accurate observation, and many just, patriotic, and striking observations on the injury France sustained from the want of a free internal traffic, and from the oppressiveness of taxation, in the Dixme Royale of the famous Marshal V^auban, written in 1698. But Vincent de Gournay, whom the French state to be one of the earliest of their authors who entertained comprehensive and liberal notions regarding commerce in gene- ral, was born so late as 171 2.1 M. Gournay published transla- * Scrittori Classic i Italiani di Economicc Politica. The publication of this collection of the works of her economical writers does honour to Italy. U was begun in 1803 and finished in 1805, in 50 volumes, 8vo. + Rpe Diipont's edition Des (Ewrcs de M. Tvrgot. Tom. III. p. HH POLITICAL ECONOMY. 36 tions of the treatise of Sir Josiah Child, and of a tract of Sir Early French Thomas Culpepper's, at Paris, in 1752. So slow was the pro- cJ^^rZ gress of economical science in France, that even Montesquieu has a chapter entitled, " A quelles nations il est desavantageux de fair c le commerce.''''^ But neither the efforts of the English nor French writers in System of favour of the freedom of commerce ;ind industry had any con- Economrsts. siderahle influence on the mercantile system. Their opinions respecting the nature of wealth, and of the causes 'of national opulence, being confused and contradictory, their arguments in favour of a liberal system of commerce had somewhat of an empirical appearance, and failed of making that impression which is always made by arguments founded on well established principles, and shown to be consistent with experience. Mr. Locke, as we shall hereafter show, unquestionably entertained very correct opinions respecting the paramount influence of la- bour in the production of wealth ; but he did not prosecute his investigations with the view of elucidating the principles of this science, and made no reference to them in his subsequent wri- tings. Mr. Harris adopted Mr. Locke's views, and deduced from them some practical inferences of great importance ; but his general reasonings are merely introductory to his Treatise on Money, and are not illustrated with that fulness of detail, or in that comprehensive and systematic mariner that is necessary in scientific works. The celebrated M. Q,uesnay, a physician, M. Ou-^iu.v attached to the court of Louis XV., has the unquestionable merit of being the first who attempted to investigate and ana- lyze the sources of wealth, with the intention of ascertaining the fundamental -principles of Political Economy^ and who gave it a systematic form, and raised it to the rank of a science. Quesnay's father was a small proprietor, and having been edu- cated in the country, he was naturally inclined to regard agri- culture with more than ordinary partiality. At an early period * " With what nations it is disadvantageous to carry on commerce." — E. Maupertuis, in his Eloge of Montesquieu, candidly admits that France is indebted for the science of commerce, finance, and population, or of Politi- cal Economy, to England. The passage is curious : " Comrae le plan de Montesquieu," he observes, '• renfermoit tout ce qui peut etre utile an genre humain, il n'a pas oublie cette partie esscntielle qui regarde le com- merce, les finances, la population : Science si nourclle parnii nous, qu'elle n'y a encore point de nom. — C est ches nos voisins qu elle est nie ; et elk y demuera jusque a ce que M. Melon lui Jit passer le mery " As the plan of Montesquieu included all subjects that could be useful to man, he has not forgotten that necessary one which relates to commerce; finance, and popu- lation : — a science so nev/ among us that it has not yet acquired a distinc- tive name. It is with our neighbours that it arose, and there continued vmtil M. Melon brought it across the channel"^ — E. Melon's work, Essui Politique sur le Commerce, was published in 1734. — It is entirely founded on the principles of the mercantile system. Mr. Bin- don translated it into English, and published it, along with some rather va- luable annotations and remarks, at Dublin, in 1739. Melon had advocated the ruinous policy of raising the denomination of the coin. This gave occasion to the publication of a very acute work by Dutot, entitled, Reflexions Politiques sur les Finances et le Commerce, 2 Tomes, 12mo. 1738. Dutot's work was in its turn very ably criticised by Duverney, in his Examen des Reflexions Politiques sur le Finances, &c. 2 Tomes, 12mo. 1740. These works contain a great deal of very curious and interesting information respecting the French finances. Duverney"? account of the famous Mississippi Scheme is particularly gooil. 36 ' POLITICAL ECONOMY. Systmof of his life he had been struck with its depressed state in France, iEconomrsfs. ^"d had set himself to discover the causes which had prevented its making that progress which the industry of the inhabitants, the fertility of the soil, and the excellence of the climate, seemed to insure. In the coarse of this inquiry, he speedily discovered that the prohibition of exporting corn to foreign countries, and the preference given by the regulations of Col- bert to the manufacturing and commercial classes over the agri- culturists, had been one of the most powerful obstacles to the progress and improvement of agriculture. But Quesnay did not satisfy himself with exposing the injustice of this prefer- ence, and its pernicious consequences. His zeal for the inte- rests of agriculture led him, not merely to place it on the same level with manufactures and commerce, but to raise it above them, by endeavouring to show that it was the only species of industry which contributed to increase the riches of a nation. Founding on the indisputable fact, that every thing which either ministers to our wants, or gratifies our desires, must be origi- nally derived from the earth,. Quesnay assumed as a self-evident truth, that the earth was the only sctirce of wealth ; and held that industry was altogether incapable of producing any new value, except when employed in agriculture, including therein fisheries and mines.* His observation of the striking effects of the vegetative ponders of nature, and his inability to explain the real origin and causes of rent, confirmed him in this opinion. The circumstance, that of all who are engaged in laborious un- dertakings, none but the cultivators of the soil paid rent for the use of natural agents, appeared to him an incontrovertible proof, that agriculture was the only species of industry which yielded a net surplus [produit net) over and above the expenses of pro- duction. Quesnay allowed that manufacturers and merchants were highly useful ; but, as they realised no net surplus in the shape of rent, he contended they did not add any greater value to the raw material of the commodities they manufactured or carried from place to place, than what was just equivalent to the value of the capital or stock consumed by them. These principles once established, it followed that landlords, farmers, and labourers employed in agriculture, were the only produc- tive classes in a state ; and that the labour of manufacturers and traders being unproductive, their means of subsistence, and their wealth, could only be derived from the agriculturists. It further followed, that the expenses of government, and the va- rious public burdens, however imposed, must be defrayed out of ihe. produit net, or rent of the landlords : and, consistently with '-'" " Cherchant d'ou vient les richesses des nations, Quesnay trouva qu'ellcs ne naissent que des travaux dans lequels la JS'ature ct la Puissance Divine, concourent avec les efforts pour produire ou faire recueillir des productions nouvelles : de sorte qu'on ne peut attendre Taugmentation Ac- ces richesses que de la cultivation, de la peche, et de rexploitation des mines et des carrieres." (See the Kotice sur les JEconomistes, by one of tlie most zealous of the sect, Dupont de Nemours, in the (Euvrcs de Turgot, Tome III. p. 312.) " In searching for the source of national wealth, Ques- nay found that it arises from those labours only, in which Nattire and the power of God concur with human efforts, in the production or the collec- tion of new products : so that wc cannot look for an augmentation of gr- n. t The manorial or land tax. — E. 40 POLITICAL, ECONOMY. systfim of dered as the greatest practical achievement of the labours oi i>onomf^'s. t^6 economists ; and there is but too much reason to fear it will long continue to afford a palpable demonstration of the fallacy of their doctrines."'* But notwithstanding the defects of their theory, there can be no question that the labours of the French economists contri- l)uted powerfully to accelerate the progress of economical sci- ence. In reasoning on subjects connected with national wealth, it was now found to be necessary to subject its sources, and the laws which regulate its production and distribution, to a more accurate and searching analysis. In the course of this exami- nation, it was speedily ascertained that both the mercantile and economical theories were erroneous and defective ; and that to establish the science of Political Economy on a firm foundation,, it was necessary to take a much more extensive surve}^ and. to «eek for its principles, not in a few partial and distorted facts, or in metaphysical abstractions, but in the connexion and rela- tion subsisting among the various phenomena manifested in the progress of civilization. The Count di Verri, whose Medita- tions on Political Economy were published in 1771, demonstra- ted the fallacy of the opinions entertained by the French eco- nomists respecting the superior productiveness of the labour Employed in agriculture ; and showed that all the operations of industry really consist of modifications of matter already in ex- istence.] But Verri did not trace the consequences of this im- * Exclusive of the Reflexions of T argot, the following are the principal w^orks published by the French Economists : — Tableau Economiqrie, ei Maximes Generates du Gouvernemenl Econo- laique, par Francois Quesnay, 4to. Versailles, 1758. Theorie de Plmpot, par M. de Mirabeau, 4to. 1760. UAmi des Hommes, par M. de Mirabeau, 7 Tomes, 1760, &c. Elements de la Philosophie Rurale, par M. de Mirabeau, 3 Tomes. 12mo. 1763. L^Ordre J^alnrcl cl Esscntiel des Societes Politiqnes, par Mercier de la Riviere, 4to. and 2 Tomes 12mo. 1767. Siir VOrigine ef Progres d''une Nouvelle Science, par Dupont de j\'e- mours, 1767. La Physiocratie, ou Constitution JN'aturelle du Gouvernemenl le ph(i> avantageux aux genre humain, par Quesnay, 2 Tomes, 1767. Letlrcs rfVn Citoyen a un Magistral, sur les vingliemes el les autres im- pots, par I'Abbe Baudeau, 1768. In addition to these works may be mentioned, Mcmoire sur les EJfets de rimpol Indirect, a Prize Essay written for the Royal Agricultural Society of Limoges, by Saint Perav)', 12mo. 1768 ; and the occasional articles sup- plied by Quesnay and his philosophical fraternity, for the Journal d'j^gri- cMliure, and the Ephcmerides du Ciloyen, a paper, sustained by them with varied ability, from 1767 to 1775, and containing occasionally, some origi- nal communications from Dr. Franklin, during his residence in Pari?. See Franklin's Works, Vol. IV. p. 206.— i:. t Alcuni benemeriti scrittori, rattristati dai gravi disordini, che sofTrono i popoli per le gabellc, sono passati all'estremo de considerare ingiusto p mal collocate il tribute se non ripartito sui fondi di terra, e colla creazionc di un linguaggio ascctico, hanno eretta la setta degli economisti, presso la quale ogni uomo che non adoperi I'aratro, e un essere sterile, e i mamifat- tori si chiamano una classe sterile. Rispettando il molto di vero e di utils che da essi e stato scritto, io non saprei associarmi alia loro opinione ne sul tribute, ne su di questa pretesa classe sterile. La riproduzione e attribui- bile alia manifattura ugualmente, quanto al lavoro de campi. Tutti i A- nomini dell' universo, sieno essi prodotti dalla mano dell'uonio o vcro dalle iraiversali leggi delta fisica, nou ci danno idea di attuale creazionc, ma m\\- camenfe di Una mcdificapione della materia, .^ccostare e srprrare «^ono s:li POLITICAL ECONOMY. 41 portant principle ; and, possessing no clear and definite notions ^^f'^™ °^j^ of what constituted wealth, did not attempt to discover the B?onomisi'i= means hy which labour might be facilitated. He made several valuable additions to particular branches of the science, and had sufficient acuteness to detect the errors in the systems of others ; but the task of constructing a better system in their stead required talents of a far higher order. At length in 1776, our illustrious countryman Adam Smith Wealth of published the Wealth of JVations — a work wliich has done lor Political Economy what the Principia of Newton did for Physics, and the Esprit des Loix of Montesquieu for Politics. In this work the science was, for the first time, treated in its fullest ex- tent, and many of its fundamental principles placed beyond the reach of cavil and dispute. In opposition to the French econo- mists, Dr. Smith showed, that labour is the only source of wealth, and that the desire inherent in the breast of every indi- vidual to improve his fortune and rise in the world is the cause of its accumulation. He next traced the means by which the powers of labour may be rendered most effective, and showed that it is productive of wealth when employed in manufactures and commerce, as well as when employed in the cultivation of the land. Having established these principles. Dr. Smith show- ed, in opposition to the commonl}' received opinions of the mer- chants, politicians, and statesmen of his time, that wealth did not consist in the abundance of gold and silver, but in the abun- dance of the various necessaries, conveniences, and enjoyments of human life ; he showed that individuals are always the best judges of what is for their own interest, and that, in prosecuting branches of industry advantageous to themselves, they necessa- imici element! che ringegpio umano ritrova analizando Tidea della riprodu- zLone ; e tanto e riproduzione di valore e di richezza se la terra, I'aria, e Vaqua ne'campi si trasmutino in grano, come se colla mano dello uomo il glutine di un insetto si trasmiiti in velluto, o vero alcuni pezzetti de me- tallo si organizzino a formftre una ripetizione. Degli intieri citta, e degli stati intieri campano non d'altro che sul prodotto di questa fecondissima classe sterile, la di cui riproduzione comprende il valore della materia pri- ma, la consumazione proporzionata delle mani impiegatevi, e di piu quella porzione che fa arrichire chi ha intrapresa la fabbrica e chi vi s'impiega con felice talento. — Medilazioni sulla Economia Politica, J 3. " Some deserving writers, grieved by the disorders which the people suf- fer by means of taxes, have gone to the extreme of considering every tax Tmjust and ill-placed, which does not rest upon land ; and adopting an as- cetic language, have given birth to the sect of Economists : in whose judg- ment, every man who holds not the plough is a useless being, and manu- facturers are an improduciivc class. In spite of the truth and utility of much of what they have written, I cannot unite with them in opinion, either in relation to taxes or to this pretended unproductive class. Repro- duction is attributable equally to manufactures as to the labour of the fields. The phenomena of the universe, whether produced by the hand of man or by the laws of nature, give us no idea of actual creation, but only of a modification of matter. To unite and to separate, are the only elements we find in the idea of reproduction; and the reproduction of wealth and value is equal, whether it be the earth, air, and water, in the fields, iiniting into grain, or the hand of man converting the gluten of an insect into velvet, or bits of metal into a watch. Upon tlie labours of this class of men, falsely named unproductive, whole cities and states are supported ; since their reproduction contains within itself the value of the raw material, the labour employed upon it, and the additional portion which goes to enrich tlie undertaker of industry, whoso skill i? devptx'd to it."—/:. 42- POLITICAL ECO.XOjMV. Wciitii of lily prosecute such as are advantageous to the public* From thence Dr. Smith drew his grand inference, that every regula- tion intended to force industry into particular channels, or to determine the species of commercial intercourse to be carried on between different parts of the same country, or between dis- tant and independent countries, is impolitic and pernicious — injurious to the rights of individuals — and adverse to the pro- gress of real opulence and lasting prosperity. The fact that traces of most of these principles, and even that the distinct statement of many of those that are most important, may be found in the works of previous writers, does not in the least detract from the real merits of Dr. Smith. In adopting the discoveries of others, he has made them his own ; he has de- monstrated the truth of principles on which his predecessors had, in most cases, stumbled bj'^ chance ; has disentangled and separated them from the errors by which they were incumber- ed ; has traced their remote consequences, and pointed out their limitations ; has shown their practical importance and real value — their mutual dependance and relation ; and has reduced them into a consistent, harmonious, and magnificent S3fstem. We do not mean to say that Dr. Smith has produced a perfect work. Undoubtedly there are errors, and those, too, of no slight importance, in the Wealth of A'ations. The principles to which we have just referred, and which form the basis of the work, are unimpeachable ; but Dr. Smith has not always reasoned cor- rectly from them, and he has occasionally introduced others, which a more careful observation and analysis has shown to be ill-founded. But after every allowance has been made for these defects, enough still remains to justify us in considering Dr. Smith as the real founder of the science.! If he has not left us * It is of importance to observe, that Dr. Smith does not say, that, in pro- secuting such branches of industry as are most advantageous to themselves, individuals necessarily prosecute such as are at the same time most advan- tageous to the public. His leaning to the system of the Economists — a lean- ing perceptible in every part of his work — made him so far swerve from tlie principles of his own system, as to admit, that individual advantage was not always a true test of the public advantageousness of different employments. He considered agriculture, though not the only productive employment, the most productive of any. He also considered the home trade as more productive than a direct foreign trade, and the latter than the carrying trade. We shall hereafter show, Chat there is no foundation for these dis- tinctions. t For the convenience of the student may be here mentioned some of the principal works since the time of A. Smith, and which partake more or less of the principles he has so conclusively settled. They are chieflj- confined to the present century ; the talents which adorned the close of the last ha- ving been from the political convulsions of Europe, devoted to questions of still higher bearing on the interests of society, viz. on religion, morals, and tlie foundation of government. In 1783, Lord Sheffield published his " Observations on the Commerce, of the United States," a work ably reviewed by Mr. Tench Coxe's "Brief Examination, &c." Philadelphia, 1791. These works, however, are rather statistical than scientific. Canard, on the prize question proposed by the National Institute '' In an agricultural country do taxes fall ultimately on the proprietors of land .'" Paris, 1800. This author opposes the economists — maintains the balance of trade — and adds a needless obscurity to his subject by the u«e of the ann- lytiral formula of pure science. DiiTf'?)^. '"Analvse Raisonnee.'" Paris, 1f>00. POLITICAL ex:gnomv. 4J a perlect work, he has, at all events, left us one which coniaius Wuaith or a greater mass of useful and universally interesting truths than N'^^'""^- has ever been given to the world by any other individual ; and he has pointed out and smoothed the route, by following which, subsequent philosophers have been enabled to perfect much Lauderdale. " Inquiry into the Nature and Origin of Public Wealth." 1804. This author is marked lor maintaining the distinction between public: and private wealth — making the former to consist in plenty, the latter tr» arise from scarcity. This inconsistency is to be avoided by drawing just distinctions between wealth and value. Ganihl. " Inquiry into the various Systems of Political Economy," a work worth referring to for its iacts, rather than its reasonings ; he appears as the patron of commerce. J. B. Say. " Treatise on Political Economy." Paris, 1802. The first edition of this Avork was suppressed by the order of Bonaparte. A later and enlarged edition is familiar to the American public, by the reprint of Prin- sep's Translation with notes, by C. C. Biddle. Boston, 1821. For the ge- neral scholar, no work, after the " Wealth of Nations," so well deserves to be studied. To the continent of Europe it may be said to have introduced the work and principles of Smith ; and to all it presented them In a new and more scientific form, freed from those statistical details with which, howe- ver necessary at the time, that great work now appears to be needlessly load- ed. Of this treatise Ricai-do says, " it is enriched with several acute, original, and profound discussions ;" and Mr. M'C. in his introductory discourse, speaks of its " clear and logical arrangements, and the felicity of many of its illustrations." '■'■Coiiversations on Political Economy," by Madame Marcet, London. This little work, though puerile in its form, and from a female pen, is not want-< ing in manly excellence. It has the high merit of being familiar without departing from scientific truth. Mallhus'' "Principles of Political Economy." London,1817. This author's reputation was established by his Essay on Population as early as 1798 ; a work which lies at the foundation of all subsequent inquiries into that sub- ject. The principles so ably maintained in this work may, however, be Ibund clearly and distinctly stated in Townshend's " Dissertation on the Poor Laws," in 1786, and still earlier, in a tract of Dr. Franklin's on Popu- lation, written in 1751. The opinions of Malthus in Political Economy, may be said to hold the medium between those of Adam Smith and Ricardo. Sismondi. " New Principles of Political Economy." This author ap- pears as an opponent of Malthus on the subject of population, of Ricardo in relation to Rent, and in general of the liberal system of Trade ; though on other points, he is both sound and acute. Gamier. The translator of Adam Smith into French, may be ranked next to Say, among his enlightened followers on the continent. Blavct had previously translated Smith in 1801, but without notes. Ricardo''s " Principles of Political Economy and Taxation," appeared in 1817, and may be considered as constituting an era in the science of which it treats, and the one with which its history closes. In the powers of acute analysis he goes beyond all his predecessors, and has given to the writin°-s of his school a corresponding character. On the subject of Rent, and the rela- tive influence of Wages and Profits upon each other, and on the price of commodities, he is universally acknowledged to have thrown much new light. In the former of these discoveries, however, he had been anticipated by earlier writers, by Malthus and more especially by Mr. West, a London Barrister, who two years earlier, viz. in 1815, had developed the true origin of Rent in a tract, subscribed " A Fellow of University College, Oxford." A still earlier developement of its nature, has recently been detected by Mr. M'C. in a French work, entitled " Principes de tout Gouvernement," pub- lished as early as 17G6. For the maintenance of the peculiar principles of Ricardo in addition to the present article of Mr. M'CuUoch, the student may refer to the valua- ble little -work of Mills, entitled " Elements of Political Economy." London, 1821. For an attack upon them, to an able Review of the present article in the Quarterly, No. 60, of Aug. 1824, written by a liberal adh(?rent of (h«^ older school rif Adam Smith.—/'.'' 44 POLITICAL ECOXOMY, "Woaltli of >(;ition3. that he h;ul left incomplete, to rectify the mistakes into which he liad fallen, and to make many new and important discoveries. Whetlier, indeed, we refer to the soundness of its leading doc- trines, to the liberality and universal applicability of its practi- cal conclusions, or to the powerful and beneficial influence it has had on the progress and perfection of economical science, and still more on the policy and destiny of nations, Dr. Smith's work must be placed in the foremost rank of those that have done most to liberalise, enlighten, and enrich mankind. lOi^oiioimi-iil SL-ience in America. KCOXOMICAL SCIENCE IN AMERICA. In traeinof the history of Political Economy, some reference is due to the claims of our own country ; though it must be acknowledged we have un- derstood the subject much better in practice than in theory. Of scientific writers indeed, we have few or none in the early history of the colonies; their Political Economy lay in their Politics. But still in their frequent addresses to the throne, petitions for the removal of grievances, defences of their cliar- ters, speeches in their colonial legislatures, and occasional public pamphlets upon questions thus discussed, we find maintained by them in firm and • tear terms, the great doctrines which lie at the foundation not only of civil liberty, but of national prosperity. This is more strikingly true, as we approach the period of their separation from the mother country, whei\ claims arbitrarily pursued on the one part, led to free investigation on the otlier of the foundations on which they rested, both of policy and right. This investigation terminated, as might be expected from the spirit which excited it in the principles of free trade and unshackled industry — princi- ples which were afterward embodied into the Constitutions of the various States, as well as into that of the General Government, and which in the advancement of our national prosperity, have so fully justified by their re- sult, the wisdom of those who established them. The reader desirous of referring to original documents in support of these views, may consult among others, " The Body of Liberties of Massachusetts," 1641. " The Simple Cobler of Agawam, 1647." The work of a clergyman, one Nathan Ward, and so popular that it ran through four editions in two years. "A defence of the New England Charters," by J. Dummer, Boston, 1721. " The Trial of Zenger," the editor of the Weekly Journal, N. Y. 1735. '• The Sentiments of a British American," Thacher, Boston. " The Farmer's Letters," DicKinson, Baltimore. '• Pteport of Boston Committee," S. Adams, Boston, 1772. " Massachusetts State Papers," &;c. fcc. Among the subjects of internal policy which early excited the attention of the colonies, was the necessity of a paper currency. The channels of free trade being closed against them, the precious metals did not flow into the <>.ountry in proportion to its needs, and the colonists were left to gather them, to use the words of Gov. Pownai in his able Tract on this subject, "from the scrambling profits of an undescribed traffic." hi addition to this, were the peculiar necessities of a new and encreasing country which will always be found comparatively bare of metallic mo«ey, from the great demands whicli exist within it for productive improvements, and the absorption that con- sequently takes place of coin, which as such is a dead capital, into the mass of productive investments. From these causes, a paper currency was universally adopted, resting necessarily on imperfect funds, and the evils which result from such ar- rangements, very generally experienced. These errors led to examination, ;md examination to a knowledge of principles, wliich were however more generally advocated than acted upon. Iji Pennsylvania alone of all the colonies, was this dangerous substitute for money established and main- tained without depreciation ; an honourable distinction gi-eatly due to the influence of Franklin, who, so early as the year 1729, wrote a Tract " On tlie nature and necessity of a Paper Currency." Its redemption rested upon a landed security, the best the situation of the countrv coidfl oflci-. POLITICAL- ECONOMY. 45 and it is a high compliment both to the soundness of the principles on which Economical the loan offic* was established and the integrity with which they were ap- Science in plied, that its paper, though not at pleasure redeemable, maintained its ■'^""^f"^*- fair value for more than fifty years, an evidence of skill which has drawn forth the eulogium even of British writers. At a later period on the same subject, we have a short tract of James Otis of Boston, though rather in a political than scientific tone, opposing a proposal of Gov. Hutchinson's to make gold a legal tender at a diminished value. As the acutest, however, of the writers on colonial currency, may be mentioned, Mr. Tench Francis of Philadelphia, an intelligent merchant and eminent lawyer, whose tract on paper money, was printed after his death by Gov. Pownal.and bound up in his "Administration of the Colo- nies." The date of publication is 1765, though written, as Gov. P. states, several years before. The sagacious views of this writer in relation to prices, go beyond those of his contemporaries on either side of the Atlan- tic, and the scientific precision of many of his deflhitions, reminds us of the school of Ricardo. . "All value" says he, "is given to things for their fitness or pcgror to answer or procure the necessary conveniencies or pleasures of human life. This value may be considered absolute or relative. Absolute value termi- nates in our esteem of any thing without referring to any other ; relative', is that which it has compared with another. The latter only, (exchange- able value,) I shall have occasion to treat of." " From the natural state and order of things, I think it may be affirmed that the worth or price of any thing, will always be as the quantity and uses among mankind ; as the uses directly, and as the quantity reciprocally or inversely. Use is the sole cause of value, and value the necessary effect of use. Price depends on quantity, and they are to each other inversely, or the more the one, the less the other. Water is as necessary as any thing, and a diamond perhaps as little, yet the superfluous plenty of one has rendered it of no worth in most places, and the scarcity of the other has carried it to an extravagant price." The effect of a superfluous paper money he thus states : " If a nation has a quantity of money equal to its commerce, the lands, commodities, and labour of the people shall bear a middle price. This state is the best, and tends most to enrich the people and make their happiness lasting. If they should mint paper to pass for money, the in- crease of quantity in the former will lessen the value of the latter, will raise the price of lands and rents, and make the labour of such a people and the commodities, be rated higher than in other places. Men's for- tunes will rise in nominal, not real value, from whence idleness, expense, and poverty shall follow. Where it is found necessary to add paper money to the coin of any country, to support its value ought to be the main and principal view. The paper derives its intrinsic worth from the fund wliicli is stable and fixed. If we in Pennsylvania, upon a sufficient fund answera- ble in silver at a future period, mint a quantity of paper equal to the uses of the people for money, why should it not at all times have value equal to the nominal value, or to the sum chargeable on the fund at the day to come :" From this " very judicious and able tract" as it is styled by Gov. Pownal, and one which contained, as he acknowledged, " the most exact and deci- sive sentiments on this subject, he had any where met with," — the Editor has thus largely quoted both from its intrinsic merit and from the circum- stance of its being locked up in a work comparatively but little known, and not very easy of access. The writings of Franklin on these subjects, are of a higher character. They partake less of the warmth of politics, and more of the dignity of science. The most of them were written and made public many years previous to the Revolutionary war, and consequently before the ap- pearance of that great work of Adam Smith which, by a notable co- incidence, taught to England the theory of national wealth, at the very moment almost, in which the colonies were entering on its practical de- velopement, being published in the beginning of 1776, the year of Uie de- claration of our independence. The acuteness of the mind of Franklin, however, was rather practical than theoretical — a kind of worldly tact that carried its owner right with- out much reference to principle. Though his short and scattered pieces 40 I'OLITICAL ECONOMY. Kconomical 0" Political Economy, therefore, cannot enter into any competition witli Science in the "Wealth of Nations," they are yet deserving of notice in the history of America. ^j^^, science, from the sound and sagacious views they entertain of the true principles of internal national policy, from their preceding by several years the appearance of that work, which first made these principles fa- miliar, and from the fact but little known, of Adam Smith's communica- tions with him, while preparing his celebrated " Inquiry," consulting him upon parts of the work as it proceeded, and frequently deferring to his opinion. The tone of Franklin's philosophy on these subjects, may be judged «f by the following extracts. In a note endorsed on a letter of Gov. Pownal's without date, but pre- vious to 1760, the year of his removal," Franklin says, " This objec- tion goes upon the supposition, that whatever the colonies gain, Bri- tain must lose, and that if the colonies can be kept from gaining an ad- vantage, Britain will gain it. If the colonies are fitter for a particular trade than Britain is, they should have it, and Britain apply to what it is more fit for ; for other countries will get it if the colonies do not. Advan- tagedhs circumstances and situations will always secure and fix manufac- tures ;*Sheffiield against Europe for three hundred years past." His examination before the British House of Commons in 1760, abounds with strong and just views of the true policy of Trade, and produced for a time, a sensible effect on the measures of the administration. The Essay on the principles of trade, which was the joint production of Dr. Franklin and Mr. G. Whately, deserves to rank in the history of Po- litical Economy with the Essays of Hume, which were published about the same period. " In transactions of trade, it is not to be supposed that like gaming what one party gains, the other must necessarily lose — an exchange is gain to each — hereby the common stock of comforts is increased.'' "■ Freedom and protection are most indisputable principles, whereon the success of trade must depend, as clearly as an open good road tends towards a safe and speedy intercourse : nor is there a greater enemy to trade than con- straint." " No laws which the art of man can devise, will or can hinder or entirely stop the current of a profitable trade, any more than the severest laws could prevent the satisfying of hunger when any opportiuiity offered to gratify it.'' ■' The precious metals, gold and silver, are no other than merchandise acquired from countries where there are mines, by those countries whieh have none, in exchange for the produce of their land or manufactures. " Speaking of the Spanish laws for retaining coin at home he says, " We see the folly of these edicts, but are not our own prohibitory and restric- tive laws, that are professedly made with intention to bring a balance from «ur trade with foreign nations, to be paid in money — are not such laws akin to these Spanish edicts — follies of the same family .'" " Most of. the statutes of Parliaments, Princes, and States, for regulating, directing, or restraining of trade, have, we think, been either xjolitical blunders or jobs obtained by artful men for private advantage, under pretence of public good." " It were therefore to be wished that commerce was as free be- tween all the nations of the world, as it is between the several counties of England ; so would all by mutual communication obtain more enjoy- ment. These counties do not ruin tlicmselves by trade, neitlier would the nations. No nation was ever ruined by trade, even seemingly the most disadvantageous." " As every individual makes a part of the whole public — whatever benefits the individual must benefit the public.'" On the subject of the corn laws, his language anticipates tliat of A. Smith. " Those who fear that exportation may so far drain the country of corn as to starve ourselves, fear what never did, nor ever can happen. They may as well when they view the tide ebbing towards the sea, fear that all the water will leave Uie river. The price of corn like water, will find its level. The more we export, the dearer it becomes at home. The more is received abroad, the cheaper it becomes there, ajid as soon as Uiese prices are equal, the exportation stops of course." The demoralizing effect of the poor laws, he exposes in his address en- titled " On the Price of Corn and Management of the Poor." " The day," says he, " you passed that act, you took away from before their eyes the 2>eiitest of all inducements to industry, frugality, and sobriety, by giving rOLITICAL ECONOMV. 47 them a dependaiice oa somewhat else than a careful accumulaiiou during Kconomioal youth and health, for support in age and sickness : in short, you offered a Science in premium for the encouragement of idlene^." Amcnca. See also. On paper m(jney, in answer to the Report of the Board of Trade, 1764. Canada Pamphlets, 1760. Positions to be examined, &c. 1769. Observations on War, on Luxury, Idleness, and Industry. And for a practical application of principles to individual success, see his " Way to Wealth," '^ Poor Richard's Almanac," &c. Not his country only, but the world at large, is indebted to him for his labours towards the abolition of slavery and the slave trade, and the miti- gation of the needless miseries of war, by putting a stop to all privateering, and injury of individual property. On this subject, he published a tract entitled, " Reasons against Privateering, &c." He was a peace maker upon principles, not only of humanity, but of political calculation — upon tlie ground tliat peace was the natural and true policy of all governments. " What vast additions,'' says he in a letter to Hartley, " to the convenience and comfort of living might we acquire, if the money spent in war had been employed in works of public utility, what an extension of agriculture even to the tops of the mountains." The only writer we shall notice subsequent to our Revolution, is one who gave tone and direction, by his official productions, to the vacillating policy and jarring interests of the new confederation. This is Alexander Hamilton, whose various official reports while Secretary of the Treasury, give evidence of the acuteness and versatile powers of his mind. They consist in, A Report on Public Credit, in 1790. " A National Bank. " The Constitutionality of a National Bank, 1791. " The subject of Manufactures, 1790. " The establishment of a Mint. And to these may properly be annexed, the Report on the coinage in tlie same year, by Thomas Jefferson, Secretary of State. Of these, the most interesting as it has been the most influential, in oui national policy, is that on manufactures. As the principles of this Report have sometimes been so far misunderstood as to be placed in direct opposi- tion to the school of Adam Smith, a short analysis of it may not be without its popular use. " The expediency of encouraging domestic manufactures," which is the object of the Report, he rests not upon reasoning but upon facts — upon cir- cumstances which create an exception to general rules. In the case of this country they were, as stated by him, " the embarrassments which obstruct- ed the progress of our external trade," and " the restrictive regulations which in foreign markets abridged the vent of the increasing surplus of our agricultural produce.'' The general reasoning with which the Report commences, is sound and conclusive, being either in accordance with Adam Smith, or possessing the still higher merit of pointing out the error of that agricultural bias which marks his work, and which is now universally admitted to be erro- neous. His argument lies against, 1. The French economists, or those whft maintained agriculture to be the only productive labour, and 2. Against. Adam Smith, who held it to be, though not the only, yet certainly its most productive form. On tliis latter point, Hamilton may be said, in some measure to antedate the discovery of the school of Ricardo ; viz. that, rent is the result not of the superior but of the limited productiveness of the soil, and that if any distinction is to be drawn between manufactures • and agriculture, it is that "the labour employed in manufactures being at once more constant, (as to time) more uniform, (as to power) and more ingenious, (as to the applicability of machinery) will be found at the same time more productive.'' But of their productiveness, he rather maintains the equality. " Each furnishes a certain portion of the produce of his labour, and each destroys a correspondent portion of the produce of the labour of the other. In the mean-time the maintenance of two citizens in- stead of one is going on : the state has two members instead of one ; and they together consume twice the value of what is produced from the land." " Hence the produce of the labour of the two farmers would not be greater than the produce of the labour of the farmer and artificer, and hence it results, that the labour of the artificer is as positively produf- 48 POLITICAL ECONOMf* -America. Economical tive as tliat of the farmer, and as positively augments the revenue of £0- Scieiioe in ciety." In passing to the consideration of the main object of the Report, he fully acknowledges the advantages that would flow from the general adop- tion among nations, of " the system of perfect liberty and free trade." " In such a state of things," says he, " each country would have the full benefit of its peculiar advantages to compensate for its deficiencies or disadvan- lages. If one nation were in a condition to supply manufactured articles on better terms than another, that other might find an abundant indemnifi- cation in a superior capacity to furnish the produce of the soil. And a free exchange mutually beneficial of the commodities which each was able to supply on the best terms, might be carried on between them, sup^jorting in full vigour the industry of each." The reasons of expediency, which, in the opinion of the Secretary, jus- tified a departure fiom this wise and liberal policy, it is not within the prO' vince of these notes to examine. It is sufficient that he placed it upon reasons that were peculiar in their nature and temporary in their influence ; "dictated to the country," as he observes, " by the imperious force of a very peculiar situation." The United States being at that time, as he justly states, " to a certain extent, in the situation of a country precluded from foreign commerce." If it may be permitted liowever to the writer to express an opinion, it would be, in concurrence with the Report, that the peculiar circumstances of a government recently established amid jarring interests with the re- sources of the country paralyzed by the exhaustion of a civil war — without capital at home, and without credit abroad — rendered it the soundest policy of the rulers to arouse, by whatever means were found most efficient, the slumbering energies of the nation, and to fortify and extend, for a time, that internal commerce over which they had the fullest control. But the essential policy and permanent usefulness of bounties and restric- tions, which are equivalent to them, is another question. And should manufactures continue to need them under more favourable circumstances, to use the language of the Report, " a presumption would arise in every such case, that there were natural and inherent impediments to success." For the length of this note, if any apology is due from an American Edi- tor to an American public, it must be found in his anxiety to set forth the just claims of his countrymen, however small, to the merit of advancing a science which bids fair to regenerate the world by uniting the nations of the earth in the bonds of common peace and mutual benefit. — £. uistinction The practical part of the science of Political Economy was Pomfcs'and long confounded with that of Politics ; and it is undoubtedly true i-oiiticai that thev are very intimately connected, and that it is frequently .ICcononiv . . i •/ impossible to treat those questions which strictly belong to the one without referring more or less to the principles and conclu- sions of the other. But, in their leading features, they are suf- ficiently distinct. The laws which regulate the production and distribution of wealth are the same in every country and stage of society. Those circumstances which are favourable or unfavourable to the increase of riches and population in a republic may equally exist, and will have exactly the same ef- fects, in a monarchy. That security of property, without which there can be no steady and continued exertion — that freedom of engaging in every different branch of industry, so necessary to call the various powers and resources of human talent and ingenuity into action — and that economy in the public expendi- ture, so conducive to the accumulation of national wealth — are not the exclusive attributes of any particular species of govern- ment. If free states generally make the most rapid advances in wealth and population, it is an indirect rather than a direct con- sequence of their political constitution. It results more from POLITICAL ECONOMY. 49 the greater certainty which a popular government presents that Distinction the right of property will be held sacrcil — that the freedom of ,.'J,,7t*es''and industry will be less fettered and restricted,— and that the pub- |°'^;;^^y lie income will be more judiciously levied and expended, than from the circumstance of a greater proportion of the people be- ing permitted to exercise political rights and privileges. Give the same securities to the subjects of an absolute monarch, and they will make the same advances. Industry does not require to be stimulated by extrinsic advantages. The additional com- forts and enjoyments which it procures have always been found sufficient to ensure the more persevering and successful exer- tions. And whatever rhay have been the form of government, those countries have always advanced in the career of improve- ment, in which the public burthens have been moderate, the freedom of industry permitted, and every individual enabled peaceably to enjoy the fruits of his labour. It is not, therefore, so much on its political organization, as on the talents and spirit of its rulers, that the wealth of a country is principally depen- dant. Economy, moderation, and intelligence on the part of those in power, have frequently elevated absolttte monarchies to a very high degree of opulence and of prosperity ; while, on the other hand, all the advantages derived from a more liberal system of government have not been able to preserve free states from being impoverished and exhausted by the extravagance, intolerance, and shortsighted policy of their rulers. The sciences of Politics and of Political Economy are, there- fore, sufficiently distinct. The politician examines the princi- ples on which all government is founded, he endeavours to de- termine in whose hands the supreme authority may be most ad- vantageously placed, — and unfolds the reciprocal duties and obligations of the governing and governed portions of society. The political economist does not take so high a flight. It is not of the constitution of the government, but of its acts only, that he presumes to judge. Whatever measures affect the produc- tion or distribution of wealth, necessarily come within the scope of his observation, and are canvassed by him. He examines whether they are in unison with the just principles of economi- cal science. If they are, he pronounces them to be advanta- geous, and shows the nature and extent of the benefits of which they will be productive ; if they are not, he s'hows in what re- spect they are defective, and to what extent their operation will be injurious. But he does this without inquiring into the constitution of the government by which these measures have been adopted. The circumstance of their having emanated from the privy council of an arbitrary monarch, or the repre- sentative assembly of a free state, though in other respects of supreme importance, cannot affect the immutable principles by which the economist is to form his opinion upon them. Besides being confounded with politics, the practical part of D^ncik.!^^ Political Economy has frequently been confounded with Statis- ti>tics and tics ; but they are still more easily separated and distinguished. Economv. The object of the statistician is to describe the condition of a particular country at a particular period ; while the object of the political economist is to discover the causes which have brought it into that condition, and the means by which its wealth Economy. SO POLITICAL ECONOMY. Distinction and riches may be indefinitely increased. He is to the statisti- f^isti^rand'* cian what the physical astronomer is to the mere observer. He Poiiticai takes the facts furnished by the researches of the statistician, and after companng them with those furnished by historians and travellers, he applies iiimself to discover their relation. By a patient induction — by carefully observing the circumstances attending the operation of particular principles, he discovers the effects of which they are really productive, and how far they are liable to be modified by the operation of other princi- ples. It is thus that the relation between rent and profit — be- tween profit and wages, and the various general laws which re- gulate and connect the apparently clashing, but really harmoni- ous interests of every different order in society, have been dis- covered and established with all the certainty of demonstrative evidence. PART II. PRODUCTION OF WEALTH. Sect. I. — Definition of Production — Labour the only source of Wealth. Definition of All the Operations of nature and of art are reducible to, and froduction. j.ga)]y consist of transmutations, — of changes of form and of place. By production, in the science of Political Economy, we are not to understand the production of matter, for that is ex- clusively the attribute of Omnipotence, but the production of utility, and consequently of exchangeable value, by appropria- ting and modifying matter already in existence, so as to fit it to Labour the satisfy our v/ants, and to contribute to our enjoyments. The of'wedth!' labour which is thus employed is the only source of wealth.* * This point has been strongly and ably stated by M. Destutt Tracy — "Non seulement,"" says he, "nous ne creons jamais rien, mais il nous est meme impossible de eoncevoir ce que c'est que creer ou anneantir, si nous entendons rigoureusement par ces mots, faire quelque chose de rien, ou re- duire quelque chose a rien; car nous n'avons jamais vu un etre quelconque sortir du neant ni y rentrer. De la cet axiome admis par toute I'antiquite : rien ne vient de rien, et ne peut redevenir 7ie7i. Que faisons-nous done par notre travail, par noire action sur tous les etres qui nous entourent? Jamais rien, qu'operer dans ces etres des changements de forme on de lieu qui les approprient a notre usage, qui les rendent utiles a la satisfaction de nos besoins. Voila ce que nous devons entendre par produire ; c'est don- ner au.v choses une uli/iii- quellcs navoient pas. Quel que soit notre U-a- vail, sM u"en resulte point d utilile, il est infrticteux ; s'il en resulte, il est product if.'''' — {Elemens d'Ideologie, Tome III. p. 162.) " Not only do we create nothing, but it is even impossible for us to con- (;eive the meaning ol the terms create and destroy, if we use them in their strict sense ; for we have never seen any thnig existing, either to proceed out of nothing or to return to it again. Hence tlie received axiom of an- tiquity, "Nothinj, can proceed from nothing." What do we then by our labour and operations on things around us ^ Simply nothing but to effect in them certain changes of form or place, which appropriates them to our use, or which renders them suitable to the supply of our wants. This is ■what we are to understand by the teim production ; it is to give to things a utility wliich before tliey did not possess. Whatever be our labour, if utility do not result from it, it is unfruitful ; if it do restilt from it, it is produc- tive." — (Elements of Metaphysics.) — E. POLITICAL ECONOMY. 51 Nature spontaneously furnishes the matter of which commodi- Labour the ties itre made : but, independently of Inbour, matter is rarely ""'maUh!* of any use whatever, and is never of any value. Place us on the banks of a river, or in an orchard, and we shall infallibly pe- rish, either of thirst or hunger, if we do not, by an effort of indus- try,* raise the water to our lips, or pluck the fruit from its pa- rent tree. It is stjldom, however, that the mere appropriation of matter is sufficient. In the infinite majority of cases, labour is required not only to appropriate it, but also to convey it from place to place, and to give it that peculiar figure and shape, without which it may be totally useless, .and incapable of either ministering to our necessities or our comforts. The coal used in our fires is buried deep in the bowels of the earth, and is ab- solutely worthless until the labour of the miner has extracted it from the mine, and brought it into a situation where it can be made use of. The stones and mortar of which our houses are built, and the rugged and shapeless materials from which the various articles of convenience and ornament with which they are fur- nished have been prepared, were, in their original state, alike destitute of value and utility. And of the innumerable variety of animal, vegetable, and mineral products which form the ma- terials of our food and clothes, none were originally service- able, and many were extremely noxious to man. It is his la- bour that has given them utility, that has subdued their bad qua- lities, and made them satisfy his wants, and minister to his com- forts and enjoyments. " Labour was the first price, the origi- nal purchase money that was paid for all things. It was not by o-old or by silver, but by labour, that all the wealth of the world was originally purchased." — (^Wealth of Nations, Vol. I. p. 44. 8vo. edit.) If we observe the progress, and trace the history of the hu- man race in different countries and states of society, we shall find their comfort and happiness to have been always nearly proportioned to the power which they possessed of rendering their labour effective in appropriating the raw products of na- ture, and in fitting and adapting matter to their use. The savage, whose labour is confined to the gathering of wild fruits, or to the picking up of the shell fish on the sea coast, is placed at the very bottom of the scale of civilization, and is, in point of comfort, decidedly inferior to many of the lower animals. The first step in the progress of society is made when man learns to * To term these oi-dinary acts, efforts of industry^ seems an overstrained application of language ; they are essential to all consumption, which ne- cessarily involves some bodily effort, great or small, and should not, there- fore, be regarded in the examination of that labour which is necessary to production. This fallacy arises from our author insisting upon labour, as the sole source of wealth, — which may be regarded as one of the peculiar doctrines of this school. It is a position rather morally than scientifically true ; without labour there can be no production of wealth ; but then, without the raw materials which the earth supplies, labour would neces- sarily I e unproductive. It seems, therefore, more natural and just to re- gard wealth, or products which constitute it, as the combined result of the energies of labour and the productive powers of the soil, — labour being- further aided in its powers, as society advances, by the natural agents which science calls into operation, and by those surplus products which, under the name of capital, introduces machinery and subdivision of la-^ bour. — E. 52 POLITICAL ECONOMY, Labour the hunt wild animals, to feed himself with their flesh, and to clothe of Wealtir himself with their skins. -But labour, when confined to the chase, is extremely barren and unproductive. Tribes of hun- ters, like beasts of prey, whom they are justly said to resemble closely in their habits and modes of subsistence, are but thinly scattered over the surface of the country which they occupy ; and notwithstanding the fewness of their numbers, any unusual deficiency in the supply of game never fails to reduce them to the extremity of want. The second step in the progress of society is made when the tribes of hunters and fishers apply their labour, like the ancient Scythians and modern Tartars, to the domestication of wild animals and the rearing of flocks. Their subsistence is much less precarious than that of hunters, but they are almost entirely destitute of all those comforts and elegancies which give to civilized life its chief value. The third and most decisive step in the progress of civilization — in the great art of producing the necessaries and conveniencies of life — is made when the wandering tribes of hunters and shep- herds renounce their migratory habits, and become agricultu- ralists and manufacturers. It is then, properly speaking, that man, shaking off" that indolence which is natural to him, begins fully to avail himself of the productive powers of industry. He then becomes laborious, and, by a necessary consequence, his wants are then, for the first time, fully supplied, and he ac- quires an extensive command over the articles necessary to his comfort as well as his subsistence. The Earth However paradoxical the assertion may at first sight appear. of Wealth?^ it is, notwithstanfUng, unquestionably true that the earth does not gratuitously supply us with a single atom of wealth. It is a powerful machine given by Providence to man ; but without labour this machine would be altogether useless, and would for ever stand idle and unemployed. It is to labour that the pro- ducts of the earth owe their value, and it is by its intervention that they become useful. The surface of the earth is, in its na- tural state, covered with fruits and game ; its bowels contain an infinite variety of mineral products ; its seas and rivers are sto- red with fish, and it is endowed with inexhaustible vegetative and productive powers ; but all these powers and products are plainly of no use whatever, and have no value, until the labour of man has called the former into action, and appropriated the latter, and given them that pecuhar form which is required to fit them to support his existence, or to increase his enjoyments. Opinion of The importance of labour in the production of wealth was jiobbes. very clearly perceived both by Hobbes and Locke. At the com- mencement of the 24th chapts^r (entited, " Of the JVittritio7i and Procreation of a Commonwealth^'') of the Leviathan, published in 1651, Hobbes says, " The nutrition of a commonwealth con- sisteth in the plenty and distribution of materials conducing to life. " As for the plenty of matter, it is a thing limited by nature to those commodities which, from (the two breasts of our com- mon mother) land and sea, God usually either freely giveth, or for labour selleth to mankind. " For the matter of this nutriment, consisting in animals, ve- getables, minerals. God hath freely laid them before u?, in or POLITICAL ECONOftrt . OO near to tlie lUce of the earth ; so as there needeih no more but Labour ti.R the labour and industry of receiving them. Insomuch that plen- "f'w^oaUh." ty dependeth (next to God's favour) 07i the labour and industry of man. ^^ But Mr. Locke had a much clearer apprehension of this doc- Opinion oV trine. In his Essa^ on Civil Government, published in 1689, he has entered into a lengthened, discriminating, and able analy- sis to show that it is from labour that the products of the earth derive almost all their value. " Let any one consider," says lie, " what the difference is between an acre of land planted with tobacco or sugar, sown with wheat or barley, and an acre of the same land lying in common, without any husbandry upon it, and he will find that the improvement of labour makes the far greater part of the value. I think it will be but a very modest computation to say, that of the products of the earth useful to the life of man, nine-tenths are the effects of labour ; nay, if we will rightly consider things as they come to our use, and cast up the several expenses about them, what in them is purely owing to nature, and what to labour, we shall find, that in most of them ninety-nine hundredths are wholly to be put on the account of labour. " There cannot be a clearer demonstration of any thing, than several nations of the Americans are of this, who are rich iu land, and poor in all the comforts of life ; whom nature having furnished as liberally as any other people with the materials of plenty ; i. e. a fruitful soil apt to produce in abundance what might serve for food, raiment, and delight ; yet for want of im- proving it by labour, have not one hundredth part of the con- veniencies we enjoy ; and the king of a large and fruitful terri- tory there feeds, lodges, and is worse clad than a day-labourer in England. " To make this a little clear, let us but trace some of the or- dinary provisions of life through their several progresses, before they come to our use, and see how much of their value they re- ceive from human industry. Bread, wine, and cloth, are things of daily use, and great plenty ; yet, notwithstanding, acorns, water, and leaves, or skins, must be our bread, drink, and cloth- ing, did not labour furnish us with these more useful commodi- ties ; for whatever bread is more worth than acorns, wine than water, and cloth or silk than leaves, skins, or moss, that is solely owing to labour and industry ; the one of these being the food and raiment which unassisted nature furnishes us with ; the other provisions which our industry and pains prepare for us : which how much they exceed the other in value, when any one hath computed, he will then see how much labour makes the far greatest part of the value of things we enjoy in this world ; and the ground which produces the materials is scarcely to be reck- oned on as any, or, at most, but a very small part of it. "An aci-e of land that bears here twenty bushels of wheat, and another in America, which with the same husbandry, would do the Uke, are, without doubt, of the same natural intrinsic value. But yet, the benefit mankind receives from the one in a year is worth L. 5, and from the other possibly not worth one penny : if all the profit an Indian received from it were to be valued and sold here, at least, I may truly say, not j^Vo- — "Tis labour, then 54 rOLITICAL E<*,ONOMV". Labour the wliich puts the gFcatcst part of value upon land, without "which of Wealth'!^ r^ wo^ild scarcely be roorth any thing : 'Tis to that we owe the greatest part of its useful products ; for all that the straw, bran, bread, of that acre of wheat, is more worth than the pro- duct of an acre of good land which lies waste, is all the effect of labour. For "'tis not merely the ploughman's pains, the rea- per's, and thrasher's toil, and the baker's sweat, is to be count- ed into the bread we eat, the labour of those who broke the oxen, who digged and wrought the iron and stones, who fitted and framed the timber employed about the plough, mill, oven, or any other utensils, which are a vast number, requisite to this corn, from its being seed to be sown, to its being made bread, must all be charged on the account of labour, and received as ;in efiect of that. Nature and the earth furnishing only the al- most worthless materials as in themselves. — 'Twould be a strange catalogue of things that industry provided and made use of about every loaf of bread, before it came to our use, if we could trace them. Iron, wood, leather, barks, timber, stone, i)rick, coals, lime, cloth, dyeing-drugs, pitch, tar, masts, ropes, and all the materials made use of in the ship that brought away the commodities made use of by any of the workmen, to any part of the work ; all which it would be almost impossible, at least too long to reckon up." {Of Civil Government, Book II. 40, 41, 42, and 43.)* Had Mr. Locke carried his analysis a little lurther, he could not have failed to perceive that neither water, leaves, skins, nor any of the spontaneous productions of nature, have any value, except what they owe to the labour required to appropriate them. The value of water to a man placed on the bank of a river depends on the labour necessary to raise it from the river to his lips ; and its value, when carried ten or twenty miles off, is equally dependant on the labour necessary to convey it there. All the rude products, and all the productive powers and capa- cities of nature, are gratuitously offered to man. Nature is not niggardly or parsimonious. She neither demands nor receives an equivalent for her favours. An object which it does not re- ([uire any portion of labour to appropriate or to adapt to our use, may be of the very highest utility ; but, as it is the free gift of nature, it is utterly impossible it can be possessed of the smallest value. t * This is a very remarkable passage. It contains a far more distinct and 1 omprehensive statement of the fundamental doctrine, that labour is the loustituent principle of value, than is to be found in any other writer pre- vious to Dr. Smith, or than is to be found even in the Wealth of Mifmis. But Mr. Locke docs not seem to have been sufficiently aware of the real value of the principle he had elucidated, and has not deduced from it any important practical conclusion. On the contrary, in his tract on the Rais- i/ig of the Value of Money, published in 1691, he lays it down broadly that :\\\ taxes, howsoever imposed, must ultimately /«// on the land : whereas, it is plain he ouglit, consistently with the above principle, to have shown that Uiey would fall, not exclusively on the produce of land, but generally on the ■produce of industry, or on all species of commodities. t That this unqualified assertion requires limitation is abundantly evi- dent. It proceeds on the supposition that whatever nature gives freely 'lie gives unlimitcdly. IJut this is not the fact: — wild fruits, precious f^tones, and metals, water-springs in sterile countries, may all be lighted upon by accident, and acquii'ed without labour; but they are not there- POLITICAL ECONOMY. oO <' Si je relranche,'' to use a striking illustration ol' this doc- Labour the irine given by M. Canard, " de ma montre, par la pensee tons les "f'wwuT travaux qui lui ont ete successivement appliquees, il ne resterai que quelques grains de mineral placces dans I'interieur de la terre d'ou on les a tires, et ou ils n'ont aucune valour. Dc meme si je decompose le pain que je mange, ct que j'en re- tranche successivement tous les travaux successifs qu'il a recus il ne restera que quelques tiges d'herbcs, graminees, eparses dans des deserts incultes, et sans aucune valeur.'' (Principes (P Economie Politique^ p. 6.)* It is to labour, therefore, and to labour only, that njan oues every thing possessed of exchangeable value. Labour is the talisman that has raised him from the condition of the savage — that has changed the desert and the forest into cultivated fields — fore destitute of exchangeable value — for they are limited in quantity, and «nce appropriated, become immediately the subject of exchange. Othe'- instances of value resulting, not from labour, but from the agency of na- ture, and the delayed returns of capital, may easily be found : for exam- ple, take a case of fermentation,— a cask of wine ripened by age, is doubled .jr trebled in value, without the addition of any labour. In this case we pay the interest of a delayed capital. Notwithstanding our author's caution in the use of terms, he has occa- sionally obscured this subject, by the indiscriminate application of tlie terms irealth and value. These terms, however, as already stated, are far from convertible. Of wealth, labour is certainly not the only source, tliough an essential element, and one primarily demanded. The productive powers of the soil and all other natural agents, constitute a second, and the powers of capital a third ; all which concur in production, and consequently in the advancement of wealth. Ao-ain, of exchangeable value there are two elements, viz. labour an'l capital. Natural agents are here excluded, since they are either gratuitous in use, such as air, steam. &c. or if rent be paid, as is the case on land, ^"< , such rent has no influence upon price. The propriety of distinguishing ca- pital from labour will hereafter be treated of. — E. Bishop Berkley entertained very just opinions respecting the source of wealth. In his Querist, published in 1735, he asks, — " AVhether it were not wrong to suppose land itself to be wealth ? And whether the ■indusln/ of the people is not first to be considered, as that which constitutes wealtli. wdiich makes even land and silver to be wealth, neither of which wouKl have any value, but as means and motives to industry .' " Whether, in tlie wastes of America, a man might not possess twent} miles square of land, and yet want his dinner or a coat to his back." — Qwc- rist. Numbers 38 and 39. We shall afterward notice Sir William Petty *s opinion on this subject. M. Say appears to think (Discours Prehminaire, p. 37) that Galiani was the first who showed, in his treatise Delia Moticla, published in 1750, that labour was the only source of wealth. But the passages we have noAV laid before the reader prove the erroneousness of this opinion. Galiani has entered into no analysis or ars;y)ncnt to prove the correctness of his slate - ■ment ; and, as it appears from other parts of his work, that he was well acquainted with ftlr. Locke's Tracts on Money, a suspicion naturally arises that he had seen the Essay on Civil Government, and that he was really indebted to it for a knowledge of this principle. This suspicion derive- strength from the circumstance of Galiani .being still less aware than Mr. Locke of the value of the discovery. — See Trattato Delia Moneia, p. 39. ediz. 1780. * " If in thought," says Canard. " I withdraw from my watch all the labour which has been successively applied to it, there will only remain a few grains of metal placed in the bowels of the earth, where they are desti- tute of value. In the same manner, if I analyze the bread which I eat, and successively separate from it all the successive labours bestowed upon il, there will only remain some stalks of grass seeded, scattered through un- cultivated deserts, and -vvilhont value.'" — Privri-plfs of Politirnl Eco- ■nomy. — E. Ob POLITICAL ECONOMY. Labour the that has covered the earth with cities and the ocean with ships — nf'wcaith" ^^^^ ^^^ given us plenty, comfort, and elegance, instead of want, misery, and barbarism. Having established this fundamental principle — having shown that it is labour only that gives exchangeable value to commodi- ties — it is plain the great practical problem of the science of Political Economy must resolve itself into a discussion of the means whereby labour may be rendered most efficient, or whereby the greatest amount of necessary, useful, and agreeable prodiicts may he obtained with the least quantity of labour. Wealth, as we have already shown, is always increased with every diminution of the labour required to produce the articles of which it consists. Every measure and invention that has any tendency to save labour, or to reduce the cost of producing commodities, must add proportionably to our power of obtaining wealth and riches, while every measure or regulation that has any tendency to waste labour, or to raise the cost of producing commodities, must equally lessen this power. This is the sim- ple and decisive test by which we are to judge of the expedien- cy of ever3'^ measure affecting the wealth of the country, and of the value of every invention. If they render labour more pro- ductive — if they have a tendency to reduce the exchangeable value of commodities, to render them more easily obtainable, and to bring them within the command of a greater portion of society, they must be advantageous ; but if their tendency be different, they must as certainly be disadvantageous. Consider- ed in this point of view, that great branch of the science of Po- litical Economy which treats of the production of wealth, will be found to be abundantly simple, and easily understood. Labour, according as it is applied to the raising of raw pro- duce — to the fashioning of that raw produce, when raised, into articles of utility, convenience, or ornament — and to the con- veyance of raw and wrought produce from one country and place to another — is said to be agricultural, manufacturing, or commercial. An acquaintance with the particular processes, and most advantageous methods, of applying labour in each of these grand departments of industry, forms the peculiar and ap- propriate study of the agriculturalist, manufacturer, and mer- chant. It is not consistent with the object of the political eco- nomist to enter into the details of particular businesses and pro- fessions. He confines himself to an investigation of the means by which labour in general may be rendered most productive, and how its powers may be increased in all the departments ot" industry. Sect. H. — Means by which the Productive Powers of Labour arc increased — Security of Property — Division of Labour — Accu- ■inulation and Employment of Capital. Meaysiiv 'Vho. most carcless and inattentive observer of the progress of wiiich thfi maiikind from poverty to affluence must have early perceived, Powiirs of that there are three circumstances whose conjoint operation is Liibour may nccessary to stimulate and improve the productive powers of ' iiM'rcasfHl. industry, and in the absence of which men could never have emerged from barbarism. The^rs^, and most indispensable, is the srrnnty of property, or a well foimded conviction in the mind POLITICAL ECONOMY, 67 of every individual that he will be allowed to dispose at plea- Means by sure of the fruits of his labour. The second is the introduction pr"auctiv'o of exchange or barter, and the consequent appropriation of par- l^^^l^^l^y ticular individuals to particular employments. And the third is be increaseii, the accumulation and employment of the produce of previous labour, or, as it is more commonly termed, of capital, or stock. All the improvements that have ever been made, or that ever can be made, in the great art of producing the necessaries, com- forts, and conveniencies of human life, are all resolvable into the more judicious and successful application of one or more of those means of stimulating labour, and adding to its power. To give a full exposition of the nature and influence of each would far exceed the limits of this article ; and we must content ourselves with such observations as may suffice to give a general idea of their operation. Security of Property. — Security of property is the first Security of and most indispensable requisite to the production of wealth, ^'op^""^ Its utility in this respect is, indeed, so obvious and striking, that it has been more or less respected in every country, and in the earliest and rudest periods of society. All have been impressed with the reasonableness of the maxim which teaches that those who sow ought to be permitted to reap — that the labour of a man's body and the work of his hands are to be considered as exclusively his own. No savage horde has ever been discover- ed in which the princif>le of ineum and tuum was not recognised. "^ Nothing, it is plain, could ever tempt any one to engage in any laborious employment — he would neither domesticate wild ani- mals, nor clear and cultivate the ground, if, after months and years of toil, when his flocks had become numerous, and his harvests were ripening for the sickle, a stranger were to be al- lowed to rob him of the produce of his industry. No wonder, therefore, that the utility of some general regulations, which should secure to every individual the peaceable enjoyment of the produce he had raised, and of the ground he had cultivated and improved, suggested itself to the first legislators. The au- thor of the book of Job places those who removed their neigh- bour's land-marks at the head of his list of wicked men ; and some of the earliest profiine legislators subjected those who were guilty of this offence to a capital punishment. (Goguet, De VOri- gine des Loix, ^c. Tom. I. p. 30. 4to. ed.) Dr. Paley has said that the law of the land is the real foun- dation of the right of property. But the obvious utility of se- * Personal property is much earlier recognised than that of land. It seems to be a natural prejudice, slowly overcome, that the earth, that " common mother of all, belongs equally to her children, and is not capa- ble of individual appropriation. Hence, among our northern Indians, land, though held by individuals, is the property of the nation at large. The in- security thus attached to improvements laid out upon it, may be considered as one of the greatest barriers to their civilization, and deserves the consi- deration of those, who, from political or benevolent views, are devising schemes for their advancement. The want of this stimulus among them to industry and accumulation, was repeatedly acknowledged to the Editor, in a recent visit made by liim to the Oneida and Tuscarora tribes, by their most intelligent Chiefs. See the reported speeches of Red Jacket, and other leaders of the heathen party, who are opposed to such appropriation, and whose arguments against it are all drawn, as our author argues, froTrs the advantasres it would bestow on the sober and industrious. — K. 58 POLITICAL ECONOMY. Security of curing to cach individual the produce which has been raised by Pfoportr. j^jg industry, has undoubtedly formed the irresistible reason u'hich has induced every people emerging from barbarism to establish this right. The institution of the right of property is. in truth, the foundation on which all the other institutions of society rest. Until property had been publicly guaranteed, men must have looked on each other as enemies, rather than as friends. The idle and improvident are alwaj's desirous of seizing on the earnings of the laborious and frugal ; and, if they were not restrained by the strong arm of the law — if they were permitted to prosecute their attacks, they would, by generating a feeling of insecurity, efl'ectu;diy check both industry and ac- cumulation, and sink all classes to the same level of hopeless jnisery as themselves. In truth, the security of property is even more necessary to accumulation than it is to production. No man ever did or ever will deny himself an immediate grati- fication when it is within his power, unless he thinks, that, by doing so, he has a fair prospect of obtaining a greater accession of comforts and enjoyments, or of avoiding a greater evil at some future period. Where the right of property is vigilantly protected, an industrious man, who produces as much by one (lay's labour as is sufficient to maintain him two days, does not iie idle the second day, but accumulates the surplus produce above his wants as a capital ; the increased consequence and enjoyments which the possession of capital brings along with it, being, in the great majority of cases, more than sufficient to counterbalance the desire of immediate gratitication. But, wherever property is insecure, we look in vain for the opera- tion of the principle of accumulation. " It is plainly better for lis," is then the invariable language of the people, " to enjoy while it is in our power, than to accumulate property which we shall not be permitted to use, and which will either expose us to the extortion of a rapacious government, or to the unre- :-traincd depredations of those who exist only by the plunder of J heir more industrious neighbours." But the security of property is not violated merely when a man is deprived of the power of peaceably enjoying the fruits of his industry ; it is also violated, and perhaps in a still more ?i;laring and unjustifiable manner, when he is prevented from using the powers with which nature has endowed him, in any wav, not injurious to others, that he considers most benefi- cial to himself. Of all the species of property which a man <:an possess, llie faculties of his mind and the porcers of his bodij are most particularly his own. He ought, therefore, to be per- mitted to enjoy, that is, to use or exert these powers at his dis- cretion. And hence the right of property is as much, or more infringed upon, when a man is interdicted from engaging in a particular branch of business, as it is when he is forcibly bereft of the property he had pro(hiced and accumulated. Every mo- nopoly which gives to a few individuals the exclusive power of carrying on certain branches of industry, is thus, in fact, esta- blished in direct violation of the right of property of every other individual. It prevents them from using their natural ca- pacities or powers in the manner which they might have consi- dered best : and. as every man who is not a slave is held, anrl POLITICAL ECONOMF. 59 justly held, to be the best, and, indeed, the only judge of what Sccufityof is advantageous for himself, the principles of natural law and '''^"P^'y- the right of property are both subverted when he is excluded from any employment. In like manner, the right of property is violated whenever any regulation is made to force an indi- vidual to employ his labour or capital in a particular way. The property of a landlord is violated when he is compelled to .idopt any system of cultivation, even supposing it to be really prefer- able to that which he was previously following. The property of the capitalist is violated when he is obliged to accept a par- ticular rate of interest for his stock,* and the property of the labourer is violated whenever he is obliged to betake himself, in preference, to any particular occupation. * Among tlie many instances of the unwise interference of governments in the regulation of private concerns, that of interest deserves peculiar at- tention. It is one of those omitted subjects, which, though elsewhere treated by the author, it is one of the proposed objects of these notes to supply. Regidation of Interest. Interest is the sum paid for the use of capital — money is but its inciden- tal and transient form — that which is truly borrowed, is circulating capital under any of its varied forms, such as coin, goods, or credit. The rate of interest may be considered as composed of two elements — 1 . The real price of money, 2. The premium of the risk that arises from lending. 1: The real price of money is determined by the profitable application that can be made of it ; it consequently varies with the state of the market ; being regulated, as all market prices are, by the opposing principles of de- mand and supply : the demand being grounded upon the profits of business or speculation, the supply upon the quantity of disposable capital thrown into the market. The high rate of this portion of interest is the best proof of commercial and general prosperity, since it ai'ises from brisk trade, extending markets, and high profits. 2. The second element of interest is of a difi'erent character. It is the premium paid to the lender against the risk of delay or loss. In loans to the govornment this portion of interest may be said to disappear, and tho rate to sink to its first portion, or the real value of money grounded upon its use. In all other cases, however, this premium appears and proceeds from the smallest item up to an unlimited amount, according to the vary- ing grades of risk. This, therefore, has its natural and fair value as well as the former, and is as little a proper subject for arbitrary limitations. The original grounds for the interference of government on this subject were two, both founded upon error. The first was a religious prejudice grounded upon a bigoted interpreta- tion of a municipal provision of the Jewish code, which led the govern- ments of Christendom, not to regulate, but to forbid all u^se or usury (for the terms are equivalent) of money lent, as an unchristian practice, and permissible therefore only to the Jews. This prejudice lost its hold under the influence of the Reformation, and in 1546 interest was first permitted in Europe. The second is a prejudice equally unfounded, but of more scientific pre- tensions. It arose from the fallacy of regarding money alone as wealtli. and the interest of money as so much extorted from the earnings of the industrious. Hence the holders of money were invidiously regarded as men pursuing their own interest to the detriment of the community. The} were therefore to be restrained in the exercise of the influence it gave them, the public was to be saved from the grasp of avarice, and the poor and ig- norant to be protected from their power. Sounder views now prevail, yfet the practical errors grounded on such misconceptions are still supported by government, and laws are still con- tinued in force, which, under the plea of public good, check the free circu- lation of capital, and under the plea of benevolence oppress every needy borrower. The argument against all su<"h attempts on the part of go- 60 POLITICAL ECOKOMV, Security of Property. Effects of Insecurity. The finest soil, the finest climate, and the finest intellectual powers, can prevent no people from becoming barbarous, poor, and miserable, if they have the misfortune to be subjected to a government which does not respect the right of property. This is the greatest of ail calamities. The ravages of civil war, of pestilence, and of famine, may be repaired ; but nothing can enable a nation to contend against the deadly influence of an established system of violence and rapine. It is the want of security — the want of any lively and well-founded expectation of being permitted freely to dispose of the fruits of their indus- try, that is the principal cause of the wretched state of the Ottoman dominions at the present day, as it was of the decline of industry and arts in Europe during the middle ages. When the Turkish conquerors overran those fertile and beautiful countries in which they are still permitted to encamp, they par- celled them among their followers, on condition of their per- forming certain military services, on a plan corresponding, in many important particulars, to the feudal system of our ances- tors. But these possessions are not hereditai'y. They do not vernment, to limit the rate of interest, may be reduced to these four con- siderations : — 1. The futihty of such laws in attaining the end proposed. 2. Their inexpediency in relation to public prosperity. 3. Their injustice towards the holders of capital. 4. Their oppressiveness towards the needy borrower. In the first place they are futile, — they never did and never can regu- late interest of capital, which is governed by its own necessary laws ; and in every change these penal statutes have undergone in lowering the rate of interest, they have followed the market, and not governed it. In tlie next place tliey are inexpedient, — they delay the circulation ot Capital from the barriers they oppose to its fair investment, and in so doing check one of the elements of public Avealth. It is true this check is com- paratively trifling, because individual cupidity will always find the means of evading such provisions, but in so far as they do operate, it is alike in the injury of the individual and the disadvantage of the public ; a result which is only to be avoided by one still more to be tlrcaded — the demo- ralizing influence of deceit and legal fraud. In tlie third place they are unjust, — setting limits to the profits of capital in one form, while they leave it free in every other. The price of goods, of rent, and of labour, are all left free to fuid their ovm natural value, while that of money alone is arbitrarily fixed at a price, sometimes too high, some- times too low, and right and equitable only by chance. In the last place, they are oppressive upon the very class of men whom they profess to defend, — the young, the ignorant, and the needy : — where- ever the risk of a loan exceeds that which legal interest will cover, no man will lend ; the conscientious retire from competition, and the borrower, quit- ting the open market, is left in the hands of the few, and comparatively, tmprincipled lenders. This constitutes their business a monopoly ; which, like all other monopolies, raises the price of that which it supplies. A more definite cause of advance, is the new risk it has added to the loan, — that of the loss of character, and of the legal penalties consequent on discovery, — this risk requires a new premium of insurance to be added to the real one, and may be confidently asserted to be a gratuitous and un- necessary tax, raised upon the necessitous borrower, by the very laws ■C'hich thus unwisely attempt to befriend him. These laws should therefore be abrogated. In every case where a con- tract is entered into, the parties are the best judges of the value of mo- ney ; and in those accidental cases whefe there is none, the decision may be made under a provisional law, or still "more equitably, left to a legal or commercial reference. On this subject, see .4dam Smith, B. I. ch. ix. B. II. ch. iv. Say, B. II. i;h. viij. sr>ct_. 1. Ricardo. Ch;'j>. xxi. xxvii. — K. l-OLITICAL KCON'OAIV. (j J descend to the children or legatees of the present possessor, security oi' but, on his death, revert to the Sultan. Among the occupiers '''■"I'f'^"' of land in Turkey there is, therefore, no thought of futurity. No one can feel any interest about the prosperity of an un- known successor ; and no one ever executes any improvemeni of which he does not expect to be able to reap all the advan- tage during his own life. This is assigned by Lady Wortley Montague as the cause why the Turks Sre so extremely care- less about their houses. They never construct them of solid or durable materials. And it would be a gratification to them to be assured that they would fall to pieces the moment after they had breathed their last. Under this miserable government the pa- laces have been changed into cottages, and the cities into villa- ges. The long continued want of security has extinguished the very spirit of industry, and destroyed not only the power, but even the desire to emerge from barbarism. Had it been possible for arbitrary power to pi'ofit by the les- sons of experience, it must long since have perceived that its own wealth, as well as the wealth of its subjects, would be most effectually promoted by maintaining the inviolability of pro- perty. Were the Turkish government to establish a vigilant system of police — to secure to each individual the unrestricted power of disposing of the fruits of his labour — and to substitute a regular plan of taxation in the place of the present odious system of extortion and tyranny, industry would revive, capital and population would be augmented, and moderate duties, im- posed on a few articles in general demand, would bring a much larger sum into the coff'erS*'of the treasury than all that is now obtained by force and violence. The stated public burdens to which the Turks are subjected are light when compared with those imposed on the English, the Hollanders, or the Fi'ench. 'But the latter know that when they have paid the taxes due to government, they will be permitted peaceably to enjoy or to accumulate the remainder of their earnings ; whereas the Turk has no security but that the next moment after he has paid his stated contribution, the Pacha, or one of his satellites, may strip him of every additional farthing he possesses ! Security is the foundation — the principal element in every well digested sj'stem of finance. When maintained inviolate, it enables a country to support, without much difficulty, a very heavy load of taxes : but where there is no security — where property is a prey to rapine and spoliation — to the attacks of the needy, the power- ful, or the profligate — the smallest burdens are justly regarded as oppressive, and uniformly exceed the means of the impove- rished and spiritless inhabitant. The Jews have been supposed to afford an instance of a peo- Caeeof iiie pie, whose property has been long exposed to an almost unin- ^®"^' terrupted series of attacks, and who have, notwithstanding, con- tinued to be rich and industrious. But when rightly examined, it will be found that the case of the Jews forms no exception to the general rule. The absurd prejudices with which the Jews have been almost universally regarded, long prevented their acquiring any property in land, and have excluded them from participating in the benfits derived from the charitable institu- tions of the different countries among which thev are scattered. G2 ruLlTICAL ECONOMY. Security of Having, therefore, no adventitious support on which lo depend; Vfojn-riy. jjj j^j^g event of their becoming infirm or destitute, they had a })o\verful additional motive to save and accumulate ; and being excluded from agriculture, they were of necessity compelled to addict themselves, in preference, to commerce. In an age when Ihe profession of a merchant was generally looked upon as some- thing mean and sordid, and.wjien, of course, they had compara- tively little competition, they must have made considerable pro- fits ; but these have been very greatly exaggerated.* It was na- tural that those who were indebted to the Jews should represent their gains as enormous ; for this inflamed the existing prejudi- ces against them, and afforded a miserable pretext for defraud- ing them of their just claims. There are a few rich Jews in most of the large cities of Europe ; but the majority of that race have ever been, and still are, as poor as their neighbours. Let us not, therefore, deceive ourselves by supposing that it is possible for any nation or any people to emerge from barba- rism, or to become wealthy, populous, and civilized, without the security of property. From whatever point of the politi- cal compass we may set out, this is the principle to which we must come at last. Security is indispensably necessary lo the successful exertion of the powers of industry. Where it is wanting, it is idle to expect either riches or civilization.! Objections Rousseau and some other sentimental writers have made an "ri^ouseeau objcctiou to the institution of the right of property, which has m founded"'' been, in some measure, sanctioned by the authority of the Mar- quis Beccaria.J They allow that the security of property is * la addition to the soiu'ces of Wealth enumerated by our author as pe- culiar to that persecuted people, is to be added, that monopoly of the mo- nied market, which, from the religious prejudices of the community, was thrown completely into their hands. They alone were money lenders, as they alone were permitted to derive a profit from its use ; an exclusive privilege of which they did not fail to take the full advantage. For their state in England, see Hume, reigns of Richard I. Appendix II. ^ Henry III., Edward I., Hallam's Middle Ages, Anderson's Hist, of Commerce. — E. t " Ce n'est que la ou les proprietcs sont assui-^s, ou Temploi des capi- taux est abandoun^ au choix de ceux qui les possedent ; ce n'est que la dis-je, que les particuliers seront encourages a se soumettre aux privations les plus dures pour compenser par leurs ^pargnes les retards que la profu- sion du gouvernement peut apporter aux progres de la richesse national. Si I'Angleterre, malgre ses guerres ruineuses, est parvenu a un haut de- gre d'opulence ; si malgre les contr»aitions enormes dont le peuple y est charge, son capital est pourtant accrue dans le silence par Teconomie des particuliars, il ne faut attribuer ces effets qu'a la liberie des personnes et a la surete des proprietes qui y regnent, plus que dans acun autre pays de I'Europe, la Suisse exceple." (Storch, Traitt (fEcimomie Politique^ Tom. I. p. 317.) " It is only where properly is secure, where the employment of capital is left free to its possessors, — it is only there I say, that individuals will submit to those privations, which make up by private savings, for that de- Jay which the profusion of government may impose on the progress of na- tional wealth. If England, notwithstanding her ruinous wars, has arrived at a high degree of opulence ; if, notwitVistanding the enormous contribu- tions with which her people are loaded, her capital has still silently in- creased by the parsimony of individuals, we cannot but attribute this re- sult, to that personal liberty and security of property, which reigns there beyond any other country in Euiope, Switzerland only excepted." (Storch's Treatise on Political Economy.) — E. % Speaking of theft, Beccaria calls it, " II delitto di quella infelice parte di uomini, a cui il diritfo di proprieta (terribile, e forse non nece^stirixt POLITICAL ECONOMV. (33 advantageous for those who possess it ; but they contend, that it security of is disadv^antageous for those who arc poor and destitute. It has ^"""['"'J- condemned, they affirm, the greater portion ot' mankind to a state of misery, and has provided for the exaltation of the few by the depression of the many ! The sophistry of this reason- ing is so apparent, as hardly to require to be pointed out. The right of property has not made poverty, but it has made oi'ea///;. Previous to the institution of this right, those nations which arc now most civilized, were sunk to the same level of wretched- ness and misery as the savages of New Holland and Kamtschat- ska. All classes have been benefited by this change ; and it is mere error and delusion to suppose that the rich have been be- nefited at the expense of the poor. The institution of the-right of property gives no advantage to any one man over any other man. It deals out justice impartially to all. It does not say. labour, and I will i-eward you ; but it says, " labour, and 1 shall take care that none shall be permitted to rob you of the produce of your exertions.'" The institution of the right of property has not made all men rich, because it could not make all men Irugai and industrious. But it has done more than all the other insti- tutions of society put together to produce this effect. It is not, as it has been sometimes ignorantly or knavishly represented, a bulwark thrown up to protect and secure the property of a few lavourites of fortune. It is a rampart raised by society against its common enemies — against rapine and violence, plunder and oppression. Without its protection the rich man would become poor, and the poor man would never be able to become rich — all would sink to the same bottomless abyss of barbarism and poverty. " It is the security of property,'' to use the just and forcible expressions of a profound writer, " that has overcome the natural aversion of man to labour, that has given him the empire of the earth, that has given him a fixed and permanent residence, that has implanted in his breast the love of his coun- try and of posterity. To enjoy immediately — to enjoy without labour, is the natural inclination of every man. This inclina- tion must be restrained ; for its obvious tendency is to arm all those who have nothing against those who have something. The law which restrains this inclination, and which secures to the humblest individual the quiet enjoyment of the fruits of his industry, is the most splendid achievement of legislative wisdom — the noblest triumph of which humanity has to boast." — (Ben- tham, Traite de Legislation, Tome II. p. 37.) diritlo,) non ha lasciafo, che una nuda essistenza."' — Dei Delitli e delU Pene, \ 22. " The crimes of that wretched portion of society, unto whom the right of property, (a terrible and perhaps an unnecessary right,) has left nothing beyond the means of bare existence." — (On Crimes and Punishments.') The Marquis Beccaria was, in point of time, the second public teach- er of Political Economy ; having been appointed to the chair founded for that purpose, in the University of Milan, by the Empress Maria The- resa, in 1769. His only predecessor was Genovesi, in the University of Naples, 1734. The merits of Beccaria as a writer have been overrated ; he was a be- nevolent man, but a weak reasoner. Of this the above quotation is a proof. For tlie apparent injustice, but real advantages of the institution of property, see Paley's homely but forcible illustrations in hi? Mornl Philo •sophy, Book II. ch. 1, 2, '3.—E. 04 I-ULITICAL KCONU.MV. nmsionot Division of Labour.* — The division of labour uaturally di- T.abour. videi^ itself into two separate branches; — 1st. The division of labour among individuals ; and 2d. Its division among nations. 1. Individual Division of Labour. — The division of labour can oniy be imperfectly introduced in rude societies, and thinly peopled countries. But in every state of society — in the rudest, ;is well as in the most improved — w^e can trace the operation and effects of this principle. The various physical powers, talents, and propensities with which men are endowed, natu- rally tit them for different occupations ; and a regard to mutual interest and convenience necessarily leads them, at a very early period, to establish a system of barter and a separation of em- ployments. Each individual finds that he can obtain a greater (quantity of all sorts of commodities by devoting himself to some particular business, and exchanging his surplus produce for such parts of the produce of other people's labour as he may have occasion for and they may be disposed to part with, than if he had attempted directly to produce all the articles which he con- sumes. As society advances, this division becomes more and more extended. In process of time, one man becomes a tan- ner, or dresser of skins ; another, a shoemaker ; a third, a weaver ; a fourth, a house carpenter ; a fifth, a smith, and so on. Each endeavours to cultivate and bring to perfection what- ever talent or genius he may possess for the species of industry in which he is employed. The national wealth and the com- forts of all classes are, in consequence, prodigiously augmented. In a country where the division of labour has been carried to J a considerable extent, agriculturists are not obhged to spend their time in clumsy attempts to manufacture their own pro- duce ; and manufacturers cease to interest themselves about the raising of corn and the fattening of cattle. The facility of ex- changing is the vivifying principle of industry. It stimulates agriculturists to adopt the best system of cultivation and to raise ihe largest crops, because it enables them to exchange whatever portion of the produce of their lands exceeds their own wants, for other commodities conducing to their comforts and enjoy- ments ; and it equally stimulates manufacturers and merchants to increase the quantity and to improve the quality of their goods, that they may thereby be enabled to obtain a greater supply of raw produce. A spirit of industry is thus universally diffused ; and that apathy and languor, which is characteristic of a rude state of society, entirely disappear. But it is not the mere facihty of exchanging, or the circum- stance of being able to barter the surplus produce of one's own labour for such parts of the surplus produce of other people's labour, as we may be desirous of obtaining and they may choose to part with, that renders the separation of employments of such signal advantage. The introduction of barter and the di- vision of labour not only enables each individual to betake him- '* The best illuslratioti of this subject, will be found in tracing the ac- tual progress of society from its earlier stages ; and is strikingly evinced in the rapid changes which our own is actually undergoing. Individual gain is the motive, national Avealth is the result. For further views on this sub- ject the student may consult. A. Smith. Book I. chap. 1.2., Say. Book I. '--hap. fi.—E. PGLITICAL liCONOMV. iid self in pretereiice to those departments which suit his taste and Division of disposition, but it makes a positive and a large addition to the ^'^''°"'- efficacy of his powers, and emibles him to produce a much greater quantity of commodities than he could have done had he engaged indiscriminatel}^ in different employments. Dr. Smith, who has treated this subject in the most masterly mantier, has classed the circumstances which conspire to increase the pro- ductive powers of industry, when labour is divided, under the following heads : — First, To the increase of the skill and dex- terity of every particular workman ; second, to the saving of time, which is commonly lost in passing from one particular employment to another ; and, tlnrcl, to the circumstance of the division of employments having a tendency to facilitate the in- vention of machines and of processes for abridging and saving labour. We shall make a few observations on each of these heads. 1st. Respecting the improvement of the skill and dexterity of Dmsiou oi the labourer, it is sufficiently plain that when a person's whole J'reas"s ihR attention is devoted to one branch of business, when all the skiii and energies of his mind and the powers of his body are made to theNvirk" converge, as it were, to a single point, he must attain to a de- '"^"• gree of proficiency in that particular branch, to which no indi- vidual engaged in a variety of occupations can be expected to reach. A peculiar play of the muscles, or sleight of hand, is necessary to perform the simplest operation in the best and most expeditious manner ; and this can only be acquired by habitual and constant practice. Dr. Smith has given a striking example, in the case of the nail manufacturer, of the extreme difference between training a workman to the precise occupa- tion in which he is to be employed, and training him to a simi- lar and closely allied occupation. " A common smith," says he, "who, though accustomed to handle the hammer, has never been used to make nails, if, upon some particular occasion, he is obliged to attempt it, will scarce, I am assured, be able to make above two or three hundred nails in a day, and those ver}' bad ones. A smith who has been accustomed to make nails, but whose sole or principal business has not been that of a nailer, can seldom, with his utmost diligence, make more than eight hundred or a thousand nails in a day. But I have seen several boys under twenty years of age, who hail never exer- cised any other trade but that of making nads, who, when they exerted themselves, could make, each of them, upwards of tn^o thousand three hundred nails in a day ;'''' or nearly three times the number of the smith who had been accustomed to make them, but who was not entirely devoted to that particular bu- siness ! 2d. The effect of the division of labour in preventing that Saves time: rsaste of time in moving from one employment to another, which must always take place when an individual is engaged in differ- ent occupations, is even more obvious than the advantage deri- ved from the improvement of the skill and dexterity of the la- bourer. When the same individual carries on different employ- ments, in different and perhaps distant places, and with different. sets of tools, it is plainly impossible he can avoid losing a consi- dprable portion of time in passing between them. If the differ- 66 POLITICAL ECONOMV. Division oi' ent businesses in which a labourer is to be engaged could be Labour. carried on in the same workshop, the loss of time would be less, but even in that case it would be considerable. " A man," as Dr. Smith has justly observed, '• commonly saunters a little in changing iVoni one business to another. When he tirst begins his wofk, he is seldom keen or hearty ; his mind is said not to go along with it, and for some time he rather tritles than applies himself in good earnest. The habit of sauntering and of indo- lent and careless application, which is naturally, or rather ne- cessarily acquired by every country workman, who is obliged to change his work and his tools every half hour, and to apply his hand in working different ways almost every day of his life, renders him almost always slothful and lazy, and incapable of any rigorous application, even on the most pressing occasion. Independent, therefore, of his deficiency in point of dexterity, this cause alone must always reduce considerably the quantity of work which he is capable of performing." — [Wealth of A''a- lioiis. Vol. 1. p. 14.)** iviuiafes 3d. With regard to the effect of the division of employments ti'lTn'of Ma- in facilltaiing the invention of machines, and processes for abridg- ohinos. {j^g (ifi^i saving labour, it is obvious that those engaged in any branch of industry, must be more likely to discover easier and readier methods for carrying it on, when the whole attention of their minds is devoted exclusively to it, than if it were dissipa- ted among a variety of objects. But it is a mistake to suppose, as has been sometimes done, that it is only the inventive genius of workmen and artificers that is whetted and and improved by the division of labour. As society advances, the study of par- licular branches of science and of philosophy becomes the prin- cipal or sole occupation of the most ingenious men. Chemistry becomes a distinct science from natural philosophy ; the phy- sical astronomer separates himself from the astronomical obser- ver, the political economist from the politician, and each medi- tating exclusively, or principally, on his peculiar department of science, attains to a degree of proficiency and expertness in it to which the general scholar seldom or never reaches. And hence, in labouring to promote our own ends, we all necessarily adopt that precise course which is most advantageous to all. Like the difierent parts of a well constructed engine, the inha- bitants of a civilized country are all mutually dependant on, and connected with, each other. Without any previous concert, and obeying only the powerful and steady impulse of self-interest, they universally conspire to the same great end, and contribute * Of the power of labour and its subdivisions, Adam Smith may be considered the great and able eulogist. The immense superiority of mo- dern over ancient times, in wealth and comfort, he attributes principally to this cause. Lauderdale, again, explains it liy the accumulation of capital. • And Say, by the greater natural agents which man has forced into his service, and made to labour for his benefit, the wind, the water, and the steam, which science has subjected to his power. As an instance of the immense diminution of the cost of production, and consequent accumula- tion of wealth, he instances the labour requisite to suppjy a single family in earlier times with bread ; tAvelvc slaves being described by Homer, as constantly engaged in grinding grain for the household of Ulysscs.^Odys- sey, L. XX. Compare with this, the labour of a single individual, directing the powers of a steam engine to the same result. — Say, B. I. ch. vii. — E. i'OLlTlCAL K(.ON'OAlV. t)7 lacli in tlieir respective sphere to furnish the greatest possible niiision pC supply of necessaries, luxuries, convenicncies, and enjoyments. ^'''^^""'^' But it is necessary to observe, thsrt the advantages derived nivUion or from the division of labour, though they may be, and in fact miu'dby tiio are, partially enjoyed in every country and state of society, j^^'ri^'I,"'^"'" can only be cari"ied to their full extent, where there is a great power of exchanging, or an extensive market. There are an infinite variety of employments which cannot be separately car- ried on out of the precincts of a large city ; and, in all cases, the division becomes just so much the more perfect, according as the demand for the produce of the workmen is extended. It is stated by Dr. Smith, that ten labourers employed in diflerent departments in a pin manui'actory can produce 48,OOU pins a day ; but it is evident that if the demand was not sutficiently extensive to take off this quantity, it would be impossible to carry the division so far. The same principle holds good in every case. A cotton mill could not be constructed in a small country which had no intercourse with its neighbours. The demand and competition of Europe and America has been ne- cessary to carry the manufactures of Glasgow, Manchester, and Birmingham, to their present state of improvement. The effects of the division of labour in increasing the quan- tity and perfection of the products of industry have been noti- fied by several of the writers who preceded Dr. Smith, and es- pecially by Mr. Harris and M. Turgot. But neither of these ivriters have done what Dr. Smith did. None of them have fully analysed and exhibited its various effects ; and none of them Jiave shown that the power of engaging in different employments depended on the porvcr of exchanging ; and that, consequently, the advantages derived from the division of labour were neces- sarily dependant on, and regulated by, the extent of the market. This is a principle of very great importance, and by establish- ing it Dr. Smith shed a new light on the whole science, and laid the foundation of many important practical conclusions. " Pn;- sent^e de cette maniere," says M. Storch, " I'idee de la division du travail t'toit absolument neuve ; et I'effet qu'elle a fait sur les contemporains de Smith, prouve bien qu'elle Petoit reellement pour eux. Telle qu'elle se trouve indiquee dans les passages que je viens de citer, elle n'a fait aucune impression. Develop- pee par Smith, cette idee a d'abord saisi tous ses lecteurs ; tous en ont senti la verite et I'importance ; et cela suffit pour lui en assurer tout I'honneur, lors meme que son genie ait ete guide par les indications de ses devanciers." — (Tome VI. p. 10.) * " Presented in this liglit, the idea of the subdivision of labour -was altogether new, and the effect it produced upon Smith's contenijioraries, proves that it was really so to them. Such as it appears in the passages I have just cited, (from preceding writers,) it produced no impression : de- veloped by Smith, it at once seized the minds of his readers. All felt its? truth and imi)ortance, and that is sufficient to secure to him the honour of the discovery, oven admitting tliat he may have been guided by the indica- tions afforded of it by his predecessors. — (Storch, \'ol. VI. p. 10.) The work of this author, who is as yet but little known in this country, is entitled, " Cours d'Economie Politique," and was published in Peters- burgh, 1815, under the especial patronage of Alexander. It appears in the foi-m of lectures, for the Grand Dukes Nicholas and Michael; and ac- cording to the opinion of our author, elsewhere expressed, stands " at the- t>8 POLITICAL ECONOMV. Tcrritorici '2, Ttrfitoriul Division of Labour, or Commerce. — Beside* f.ahum. "^ tliat sort of tlivisioti of labour which enables each individual in a limited society to confine himself to a particular employment, there is another and most important branch of the division oi' labour, which not only enables particular individuals, but the inhabitants of entire districts, and even nations, to addict them- selves in preference to certain branches of industry. It is ou this territorial division of labour, if we may so term it, that the commerce which is carried on between different districts of the same country, and between different countries, is founded. The various soils, climates, arid capacities of production, of different districts of an extensive country, tit them for being appropi'iated in preference to certain species of industry. A district where coal is abundant, which has an easy access to the ocean, and a considerable command of internal navigation, is the natural seat of manufiictures. Wheat and other species of grain are the proper products of rich arable soils ; and cattle, after being reared in mountainous districts, are most advantageously fat- tened in meadow and low grounds. Nothing is more obvious, than that the inhabitants of these different districts, by sepa- rately confining themselves to the particular branches of indus- try for the successful prosecution of which they have some pe- culiar natural capabilinj, must produce an infinitely greater quantity of useful and agreeable commodities than they could do were they to devote their labour indiscriminately to every different employment. It is impossible to doubt that vastly more manufactured goods, more corn, and more cattle, are pro- duced by the inhabitants of Glasgow, of the Carse of Govvrie, and of Argyleshire, respectively confining themselves to manu- factures, agriculture, and the rearing of cattle, than if each endeavoured directly to supply themselves with all these vari- ous products, without the intervention of an exchange. But it is easy to see that foreign trade, or the territorial divi- sion of labour between different and independent countries, will contribute to increase the wealth of each in precisely the same manner that the trade between different provinces of the same kingdom contributes to increase their wealth. There is a still greater difference between the productive powers wherewith nature has endowed different and distant countries than there is between the productive powers of the provinces of the same country. The establishment of a free intercourse between them must, therefore, be proportionably advantageous. It would evi- dently cost an infinitely greater expense to raise the wines of head of all the works on Political Economy ever imported from tlie conti- nent into England." The merits of Adam Smith on the score of originality, have been often, though vainly, contested ; it lies, not in scattered thoughts, but in the union of tlie whole, in that grasp of mind which could embody into one har- monious system, the jarring elements of reasoning and fact, which lay scat- . tcred through the writings of his predecessors. Among the claimants to the honour of having led the way in this particular point, is Beccaria, who wrote in 1769. The principles of Smith, however, were formed and taught Ijy him many years before they were published. He began to teach them to his class in the University at (llasgow, as early as the year 1752. For extracts from Beccaria, see Say, B. I. ch. 8. For the defence of the origi- nality of Smith, see Dugald Stewart's Memoir of Adam Smith, read be- fore the Royal Society, Edinburgh, 1793. — E. POLITICAL ECONOMT. G9 France or Spain in England, than it would do to make \ ork- Territorial shire yield the same products as Devonshire. Indeed, there LaC""°' are a multitude of products, and some of them of the very greatest utility, which cannot possibly be raised except in par- ticular situations. Were it not for commercial intercourse, we should not be able to obtain the smallest supply of tea, sugar, raw cotton, raw silk, gold bullion, and a thousand other equally useful and valuable commoillties. Providence, by giving differ- ent soils, climates, and natural productions to different coun- tries, has evidently provided for their mutual intercourse and civilization. By permitting the people of each to employ their capital and labour in those departments in which their geogra- phical situation, the physical capacities of their soil, their na- tional character and habits fit them to excel, foreign commerce has a wonderful effect in multiplying the productions of art and industry. When the freedom of commerce is not restricted, each country necessarily devotes itself to such employments as are most beneficial to each. This pursuit of individual ad- vantage is admirably connected with the good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the particular powers bestowed by nature, commerce distributes labour most effectively and most econo- mically ; while, by increasing the general mass of necessary and useful products, it diffuses general opulence, and binds to- gether the universal society of nations by the common and pow- erful ties of mutual interest and reciprocal obligation. Com- merce has enabled each particular state to profit by the inven- tions and discoveries of every other state. It has given us new tastes and new appetites, and it has also given us the means and the desire of gratifying them. The progress of domestic in- dustry has been accelerated by the competition of foreigners. Commerce has either entirely removed, or greatly weakened, a host of the most unworthy prejudices. It has shown, that nothing can be more illiberal, irrational, and absurd, than that dread of the progress of others in wealth and civilization that was once so prevalent ; and it has shown that the true glory and real interest of each particular people will be more cer- tainly advanced by emulating and outstripping each other in the career of science and civilization, than by labouring to at- tain a barren pre-eminence in the bloody and destructive art of war.* * That science and relig^ion eventually teach the same lesson, is a neces- sary consequence of the unity of truth, but ft is seldom that this union is so early and satisfactorily displayed as in the researches of Political Econo- my. In ruder ages they were esteemed altogether at variance. Wealth and virtue were in opposite scales, and rapine was the surest road to riches. In the imperfect developments of the science, which preceded the modern school, by which it appeared that national or individual aggi"andizement was counterbalanced by a correspondent diminution on the part of others, Political Economy was a study which a good man must have pursued wth pain, and practised with some feelings of remorse. But modern science shows a fairer picture, — the beauteous and harmonious union of public virtue and public wealth, of peace and benevolence uniting nations by the bonds of mutual interest, and national prosperity the result of all those in- ternal and external regulations, which a good man would desire for their own sake, and a religious man choose on the score of dniy and ii^ii. science. — E. O 70 PULITICAL ECONOMVi Territorial Division of Labour. Effect of tlie Territorial Division of Ijftbour in Augmenting National AVcalth. -Sophism of tlie French Economists on the Sub- ject of Com- merce. The inrluence of commerce in giving increased efficacy lo la- bour, and augmenting national wealth, may be easily illustrated. Thus, in the case of the intercourse, or territorial division of labour,* carried on between England and Portugal, it is plain that the superiority of the wool of England, our command of coals, of skilful workmen, of improved machinery, and of all the instruments of manufacturing industry, enables us to pro- duce cloth at a much cheaper rate than the Portuguese : but, on (he other hand, the soil and climate of Portugal being peculiarly favourable for the cultivation and growth of the grape, she is enabled to produce wine at an infinitely cheaper rate than it can be produced here. And hence it is obvious, that England, by t-onfining herself to the manufacture of cloth, in which she has a natural advantage on her side, and exchanging it with the Por- tuguese for wine, will obtain a vastly larger supply of that com- modity than if she had attempted to cultivate the grape at home : and Portugal, by exchanging her wine for the cloth of England, will, on her part, obtain a much greater quantity of cloth than if she had attempted to counteract the intention of nature, by converting a portion of her capital and industry from the raising of wine, in which she has an advantage, to the manufacture of cloth, in which the advantage is on the side of another. What we have already stated is sufficient to expose the soph- ism involved in the reasoning of the French economists, who contended, that as an equivalent must be always given for such commodities as are obtained from foreigners, it is impossible fo- reign commerce can ever become a means of increasing wealth. How, they asked, can the wealth of a country be increased by o-iving equal values for equal values ? They admitted, that com- merce might be the means of making a better distribution of the wealth of the world ; but as it did nothing more than exchange one sort of wealth for another, they denied that it could ever make any addition to that wealth. At first sight, this sophistical and delusive statement appears sufficiently conclusive ; but a very few words will be sufficient to demonstrate its fallacy. The advantage of commerce does not consist in its enabling either of the parties who carry it on to obtain commodities of greater value than those they give in exchange for them. It may have cost as much, or more, to produce the cloth where- Avith the Enghsh merchant purchases the wine of Portugal, as it did to produce the latter. But then, it must be observed, that in making the exchange, the value of the wine is estimated by "ichat it takes to produce it in Portugal, which has peculiar nutu- * Though science consists not in terms but in truth, yet the introduciion .)f a scientific term is often found to give clearness and precision to subjects before obscure. Thus the phrase " territorial division of labour," as ap- plied to nations, has brought that subject under analogies before \xnper- «;eived, and rendered more undeniable that inference so important, yet sc slowly acknowledged, that in tlie great family of mankind, nations are as individuals, and the mass of general wealth is increased in the one case, as in the other, by a subdivision of employment, grounded on their peculiar Jacilities of production. This argument our author here states so fairly and conclusively, that nothing need be added beyond the references he has given. As the work of Say, however, is more easy of access than most of those referred to, at least to the American reader, it may be mentioned that the subject will there be found. See Introduction; also. Book I. eh. ii.— ^. POLITICAL ECONOMY. 71 ral capabilities for that species of industry, and not by what it T«mtoiiai would take to produce it in England were the trade put an end "'hol°" "' to ; and, in like manner, the value of the cloth is estimated by what it takes to produce it in England, and not by what it would cost to produce it in Portugal. The advantage of the intercourse between the two countries consists in this, that it enables each of them to obtain commodities, for the production of which they have no natural capabilit}^ and which it would, therefore, cost a comparatively large sum to produce directly at home at the price which it costs to produce them in the most favourable cir- cumstances, and with the least possible expense. The gain of the one party is not the loss of the other. Both of them arc benefited by this intercourse. For both of them are thereby enabled to save labour and expense in the production of com- modities ; and the wealth of the two countries is not only better distributed, but it is also positively and greatly increased by the territorial division of labour established between them. To set this important principle in a clearer point of view, let us suppose that in England a given number of men can, in a given time, manufacture 10,000 yards of cloth, and raise 1000 quarters of wheat, and that the same number of men can, in the same time, manufacture in Poland 5000 yards of cloth and raise 2000 quarters of wheat. It is plain, that the establish- ment of a free intercourse between the two countries would, in these circumstances, enable England, by manufacturing cloth and exporting it to Poland, to obtain twice the quantity of corn in exchange for a given expenditure of capital and labour that she could obtain in return for the same expenditure directly laid out in the cultivation of land at home ; and Poland would, on the other hand, be enabled to obtain twice as much cloth in ex- change for her corn as she could have done had she attempted directly to manufacture it. How ridiculous then to contend, that commerce is not the means of adding to the efficacy of la- bour, and, consequently of increasing wealth ! Were the inter- course between England and Portugal and the West Indies put an end to, it would require, at the very^lgast, a hundred, or perhaps a thousand times the expense to produce Port wine, sugar, and coffee, directly in this country, that it does to pro- duce the equivalents sent to Portugal and the West Indies in exchange for them. "The commerce of one country with another is," to use the words of Mr. Mill, " merely an extension of that division of la- bour by which so many benefits are conferred on the human race. As the same country is rendered richer by the trade of one province with another ; as Us labour becomes thus infinitely more divided and more productive than it could otherwise have been ; and as the mutual interchange of all those commodities which one province has and another wants, multiplies the ac- commodations and comforts of the whole, and the country be- comes thus in a wonderful degree more opulent and happy ; so the same beautiful train of consequences is observable in the world at large, that vast empire of which the different kingdoms may be regarded as the provinces. In this magnificent empire, one province is favourable to the production of one species of produce, and another province to another. By their mutual <2 POLITICAL ECONOMY. Tcrritoriai iiitercoursc, mankind are enabled to distribute their labour as Labour" "^ ^^^^ ^^^ ^^^ genius of each particular country and people. The industry of the whole is thus rendered incomparably more pro- ductive ; and every species of necessary, useful, and agreeable accommodation is obtained in much greater abundance, and with infinitely less expense." — (^Commerce Defended, p. 38.) To enter into a more enlarged discussion of this interesting and important subject, would be inconsistent with the object and limits of this article. In our articles ou Colonies* and the * Of the articles here referred to, all are not from the pen of Mr. M'Cul- loch. The only one that will be here taken up is that of " Colonies." Colonies have been formed at different periods from different motives : in ancient times from the pressure of a surplus population, in modern times from the spirit of commercial enterprise : and in both as a relief from per- secution at home, real or imasrinmy. But from whatever motives esta- blished, the policy of the mother country towards them, has ever been the same : viz. that of enorossing to itself the benefits of their trade, by ex- I'luding all intercourse with strangers. Such were the provisions of the navigation laws of Greece, Rome, and Carthage, and such have been those of modern Europe, from the days of Venice downwards. Among these numerous instances, those of England have been the most systematic, and to us at least, the most interesting. They began with the Commercial Or- dinance of 1646, and were formed into a system by the celebrated Naviga- tion Act of 1631 ; an act regarded until lately, as tlie Palladium of British irommerce, As the subject of colonies is one in which this country is not practically interested, it will be sufficient to point out to the student some of the sources of scientific information upon it. They will be found in Adam Smith, Book IV. chap. 7., Say, Book I. chap. 19., Ricardo, chap, xxv., Mills, sect. 17. As practical arguments against the whole system of colonial restraint, may be mentioned the general fact of such colonies being sources of expense, in place of profit, to the mother country, — and of the particular instances of mutual advantage, to both Great Britain and her North American Colo- nies, resulting from the independence of the latter ; of the favourable ef- fects on English commerce, by the recent modification of the East India Company's charter ; and the open acknowledgment, on the part of her practical statesmen, of the impolicy of all such restrictions. Of these the most interesting as well as convincing, is the case of our own country — which therefore deserves some fuller notice. Great Britain and her American Colonies. The American coloMes were established, generally, in the spirit of free- dom, — it was the purchase which repaid J.he colonists for exile, — and so far as they were left free to pursue their own measures, they were in accord- ance with the liberal principles of the science of Political Economy : — arrived- at, not indeed by speculation, but by the clear-sightedness of men Avho pursue their own interests, unshackled by the arbitrary restraints of government. For proof of this, their charters, and still more, their early fundamental laws may be referred to. Monopolies, one of the great burthens they ha.d lain under at home, were strictly prohibited. In the New England code, issued 1641, it was enacted that there never should be " any bond slavery or villainage among the inhabitants of the province," — that there should be " no monopolies but of such new inventions as were profitable for the country, and those for a short time only." To use the language of the charter of William Penn, — the intent of these fundamental constitutions, was " for the support of power in reverence with the people, and to secure the people from the abuse of power ; since liberty without obedience is confusion, and obedience without liberty is slavery.'' The operation, however, of these salutary principles, was early checked by a spirit of colonial monopoly, on the part of the government at home. In 1C51, the Parliament of England passed the famous Act of Navigation, grounded upon a commercial jealousy of the Dutch, who, from their supe- tior cheapness of freight had become the carriers between the colonies and the mother countrv. This confined the trade to British bottoms, and was POLl'<^ "^'.CONOMY. 73 tJoRN Trade and Laws, '^y maive examined the policy of the ^oj[^J»'^'«'j. restrictions on the coloniaPtWadc, and on the corn trade ; and Labour! ° in the article Exchange, v.e have pointed out the circumstances which regulate the importation and exportation of the precious metals ; and have shown, that, instead ol the excess of exports over imports being any criterion of an advantageous commerce, immediately remonstrated against by the colonists, as an act at once of injustice and impolicy. The further acts of trade, after the Restoration in 1660, led to more spirited remonstrances, and eventually on the part of Massachusetts, to a resistance whicli required the interference of royal commissioners, — they came over in 1667, but seem to have returned with- out eflectnig the purpose of force or persuasion, on which they were sent. In 1670 and 1672, the Parliament proceeded ui the same unwise policy, from a jealousy of the shipping and fisheries of New England, to enforce customs on this fettered commerce ; and in 1676, upon complaint being made " that the inhabitants of New England, not only traded to most parts of Europe, but encouraged foreigners to go and traffic with them," the governors of these particular colonies, were commanded by royal autho- rity, to enforce a strict obedience to the laws of trade. For this purpose, collectors were now, for the first time, appointed : — among others, Edward Randolph for the town of Boston ; but " he was considered,''' says Chalmers, "as an enemy, and opposed with the steady zeal of men who deemed their chartered privileges invaded." — Chalmers, B. I. p. 320. H§ twice unsuccessfully attempted the performance of his invidious duty ; but on writing home that he was in danger of being pun- ished with death, by virtue of an ancient law, as a subverter of the Con- stitution, he was at length, in the year 1682, ordered to return to England. The power of the government, however, and the arbitrary policy of the latter Stuarts, was an overmatch for the spirit or wisdom of the Colonies : — a writ of " quo warranto," followed by the forfeiture of the colonial charters, was attended by such fatal consequences to the peace and pros- perity of society, that an unwilling and imperfect obedience to this restric- tive policy, was at length established. Its provisions, however, were not strictly entbrced, and " an irregular and scrambling trade," as Governor Pownall describes it, continued to be kept up with other countries, which somewhat relieved the burthen of thefe restrictions, though it was far from satisfymg either the feelings or demands of the Colonists. Matters continued much in this state until the termination of the French War, in 1763, when the fall of the Canadas having removed from Great- Britani all fear of rival influence on the American continent, she proceeded to enforce with greater strictness the provisions of the various acts of trade which had been past in relation to the Colonies, but which policy had hitherto permitted to remain comparatively unenforced. The new policy was alike unwise in its principles and fatal in its result. The Colonies were gradually driven, first to an unwilling resistance, and eventually to a still inore unwilling separation, — a separation, however, which by its happy results, in augmenting the wealth and resources of both countries, through the medium of a free trade, has for ever put down the policy of colonial re- strictions, and settled, we may consider conclusively, the greatest of all questions in the science of Political Economy. For further information on this head, see American Annals by Abiel Holmes, Cambridge 1805; Marshall's History of the Colonies; Brough- am's Colonial Policy; Anderson's History of Commerce; Seybert's Statis- tical Tables, Philadelphia 1818; and on the Navigation Laws, see Quar- terly Review, Vol. xxviii. p. 480, No. 48. Art. I. No. 56. Art. VIII. That the policy above stated materially retarded, though it could not altogether prevent, the mutual advantages of trade between Great Britam and this country, is evinced beyond all doubt by the different state of that commerce before and after the separation. This comparison, however, should not be instituted until after the organization of the federal govern- ment, when unity and steadiness were first given to its national policy. During the Revolutionary war commerce had been at an end ; nor did peace enable the country to resume it ; — domestic dissension and foreign 74 POLITICAL ECONOltfY. Territorial it IS just the reverse, and thattit is by the excess of the value of ribolS" "*^ '^*^ imports over the value of the ilmdrts that the direct gains of the merchants, and consequently of the community, are to be estimated. In the fourth book of the Wealth of Nations, Dr. Smith has examined and refuted the various arguments in fa- vour of the restrictions imposed on the freedom of commerce, jealousy, opposed many obstacles ; Great Britain, France, Spain, and For* tugal, all rejected our commercial overtures. Still the tone of our govern- ment was that of the truest liberality, and the highest wisdom, — " instead of embarrassing commerce," is the language of the Report of the Secretary of State, Feb. 23, 1791, " under piles of regulating laws, duties, and prohi- bitions, it should be relieved from all its shackles in all parts of the world, — would even a single nation begin with the United States this system of free commerce, it would be adviseable to begin it with that nation." ' From the year 1790, when the country may be considered as having first entered upon it, to 1806, a course of commercial prosperity existed, surpass- ing all former experience. About the latter period arose checks of a poli- tical nature, which continued to operate directly until the year 1816, and in- directly, it may be said, almost ever since. From these impediments, how- ever, the country is again rising in its native strength, and bids fair to rival, if not surpass, its former prosperity, notwithstanding some peculiar advan- tages it then enjoyed. The comparative influence of these two systems upon national prospe- rity, will be best illustrated by the following statistical statements, drawn from the best authorities, and exhibiting their respectite influence upon, I. Great Britain, 2. The Colonies, or United States at large, and 3. Upon the City of New-York in particular. 1. Great Britain. — Exports to the Thirteen Colonies in the year 1700, £ 343,828 stg. Exports to the Thirteen Colonies for an average of > „ gig q7a six years previous to 1774, British manufactures, ) ^ ' Exports to the United States, an arerage of six years > 2 119 817 previous to 1739, the year of our confederation, \ ' ' Exports to the United States on an average of eight ^ <; 144 op 7 years terminating in 1800, > ' ' Exports to the United States in 1806, the year of) y^ ggr rr, highest commercial prosperity, ^ ~5 » 2. United States. — Exports of the Colonies on an average of the three > a 1 qg.-> c^o years, 1771, 1772, 1773, \ ^ ^''^^^'^•^~ Total value of exports from the U. States in 1790, 19,012,041 Total value of exports from the U. States in 1795, 67,064,097 Increase in five years, 48,052,050 Total value of exports from the U. States in 1800, 94,115,925 Increase in ten years, 75,103,884 Total value of exports from the U. States in 1805, 101,536,963 Increase in fifteen years, 82,524,922 Total value of exports from the U. States in 1806, > ^Qg ^^^ ^rQ when at their maximum, ) ' ' Increase in sixteen years, 89,331,109 Styhcrfs Statistics. Of the year just past, 1824, the exports to England alone, exclusive of Scotland and Ireland, exceed the total amount of exports of 1790. being 19,487,123 Treasrirv Reports. POLITICAL ECONOMY. 75 in the most able and masterly manner, and ^ith an amplitude of Territorial illustration, which leaves nothing to be d-i ^c, oq7 ,0- and ending Sept. 30, 1824, $ ^^»y/,lJa Treasury Reports. * In addition to the references here made to articles in the supplement to the Encyclopedia from which the present is extracted, the Editor thinks best to give at once to his readers a complete list of tliose therein contain- ed, which fall within tlie science of Political Economy. Many of them are very ably written, and all worthy of reference. As adding to the interest that may be taken in them, the names of their respective authors are an- nexed, together with the signatures by which their contributions to that work are known, 76 POLITICAL ECONOMV. Arcumula- ACCUMULATION A^ < EMPLOYMENT OF CaPITAL. Capital may pioymennlif be defined to be ''tllU portion of the produce of labour which is Capital saved from immediate consumption., and employed in maintaining productive industry, or in facilitating production." Its accu- J. R. M'Culloch, Esq. known by ihe signature S. S. ; author of the pre- sent article ; now Ricardo Lecturer, London. Exchange. Interest. Money. Taxation. Cottage System. Corn Laws and Trade. Emigration. "i D. Buchanan, Esq. of Edinburgh. Sig- Banking. \ nature O. Cotton Manufactory. > D. Bannatyne, Esq. Glasgow. Signa- Credit. S ture T. T. i By the late David Ricardo, Esq. who may justly be Trading System. > considered, after A. Smith, as a second founder of ) the science. Signature E. B. E. "^ Rev. John B. Sumner, well known as the able Apologist of both Natural and Revealed Religion. This article Poor Laws. > is marked by that singular clearness and conclusive- ness of reasoning which distinguish his " Evidences." Signature N. N. N. Rev. T. R. Malthus, author of the well known works on p J . • f Population, Rent, k.c. and at present. Professor of Po- ^ * I litical Economy in the East India College, Hertford. ) Signature O. O. O. i Joseph Lowe, Esq. author of a valuable work, already alluded to. " The Present State of England." Sig- nature D. D. Coinage. — R. Mushet, Esq. of the Royal Mint. Signature A. A. Economists. ~1 , ,,.,, _ ^ i .. <- ,, r. ■.• , t ,• ,^ Bank for S v' <>■ J. Mill, Esq. London, author of " British India, ' T> ^ ' I " Elements of Political Economy," often quo- Benefit S ■ t I '■^'^ '" ^^^ present article, and a large contribu- Colonies."""" ^' J ^^^^ ^° ^'^^ supplement. The article on Money, here especially referred to in the text, is a long and able one from the pen of Mr. M'Culloch. Its length and the importance of the subject, put beyond the compass of a note, any analysis of its con- tents. A few observations on the subject must suffice. From the inconveniences of barter, arose among all nations at an early period, the adoption of some commodity which might serve as a measure of value, aud consequently as a medium of exchange. The substances so adopted were various, but have gradually disappeared before the superior facilities for that purpose, aflbrded by the precious metals. Upon their adoption, they first passed by weight, subsequently by tale — when coinage had ascertained the value of the pieces. Such money when coinage is free, passes for its intrinsic worth, i. e. the cost of its production, the stamp ascertaining its value, but not giving it. When coinage is monopolized by the government, as it commonly is, coin may bear a moderate advance of value beyond its real worth. This is termed a seigniorage, and is a tax imposed by government on the commu- nity, through the medium of the coin. The advantage of a seigniorage, is that it retains the coin in the country — it being there of greater value than elsewhere — its disadvantage is, that it tempts to private coining. On this subject see A. Smith, Book 1. ch. V. — Say, Book I. ch. 21. sect. 4. — Ricardo, ch. 13, and ^7; and Tracts on Bullion, reviewed in Quarterly, V^ol. III. p. 152. The inconveniences attending the transmission of coin, led gradually among commercial nations to the adoption of Bills of Exchange, and these 1o a general system of f)apcr credit, under the form of Promissory Notes, payable on demand ; under which form paper now supplies at a cheaper rate the services which would otherwise be performed by a metallic cur- rency. This is the system of Banking, a subject too extensive and compli- '•Hfed. to be here satisfactorily treated. I'OLlTrCAL ECOXOMV. // nmlation and employment is indispensably necessary to the sue- Kmpioymcnt cessful prosecution of almost every branch of industry. With- "' •''"'" out that species of capital, which chiefly consists of tools and engines, and which has been denominated fixed, labour could never be rendered considerably productive ; and without that species of capital which chiefly consists of the food and clothes required for the consumption of the labourer during the time he is employed in the production of commodities, and which has been denominated circulating, he never could engage in any un- dertaking which did not yield an almost immediate return. An A few principles, however, will be stated. . Instead of gold and silver currency being, as it was falsely esteemed by the mercantile writers, the only wealth of a country, it is now acknow- ledged to be the only portion of its wealth which is unproductive. Its value lies solely in the facility it gives to the exchange, of what is truly the active capital of the nation, its industry and commodities. Hence money is to be regarded in the light of an instrument or machine, whose only value consists in the work it executes. If a cheaper machine can perform the same work, it is consequently to be preferred, and the nation becomes the gainer by the difference of their cost. Such a machine is paper money, which is based upon credit, and not like coin upon intrinsic value ; and the gain to the country in its use, is the sur- plus coin which is sent abroad in productive exchanges. The danger of paper money, lies in a surplus issue by tliose who have the power of making it. The effect of such surplus is the rise of all mo- ney prices, the depreciation of the currency as compared with gold and silver, and all the disadvantages consequent on such a state of things, in an intercourse with foreign nations. Against this abuse of power on the part of government or of banks, the only sufficient check is the immediate con- vertibility of the paper at the will of the holder into that which it repre- sents, gold and silver. This keeps the amount of paper in circulation at the level demanded by the business of the country ; and that limitation of quantity maintains it at its full value. Wherever this check is removed, the power of issue will be abused. It was so by the bank of England under the restriction bill, of 1797 ; it was so also, by the banks in this city during the late war. This, therefore, is the fundamental principle on v.-hich all paper currency must rest — its convertibility at the will of the holder, into that of which it is but the representative, viz. gold and silver. But this like all other ends is to be attained by the cheapest means — it is convertibility and not actual conversion into intrinsic value, which is needed. All that the public v/ant, is a sufficient check against over issues. On this principle Ricardo, on the return of the bank of England to spe- cie payments, in the year 1818, urged the adoption of a new provision equally secure, and more economical, viz. convertibility into bullion and not intocoin. — See Economical and Safe Currency; also. Ed. Rev. No. 61, Art. 3. Had this taken place, it would have removed the check from the hands of the public to those of the bullion merchants, where it would have been more sensitive, equally efficacious, and more economical ; as it would have set free all the coin imprisoned in the vaults of the bank. Where a number of banks exist together, as in this city and counti-y, the public are saved the necessity of guarding against over issues by any indi- vidual bank, by the mutual jealousy of rival institutions — the frequent settlement of balances among themselves, as they become debtor or creditor to each other is the most delicate and powerful check against all indivi- dual encroacliment. This, however, is a matter of private interest, with which the public, as such, have nothing to do. Against a uniform increase of issues on the part of all the banks, it evidently affords no security : in that case individual holders must control them, by the power of returnii|g upon them a currency which they have degraded. For the history and principles of banking, see A. Smith, Book II. ch. 2. — Say, Book I. ch. 22.— Ricardo, Tracts on Currency, ^ills, ch. 3, sect. 9, 10, &c.— And for a defence of the Restriction Bill, «ee Thornton on the Paper CuiTency of Great Britain. — E. 10 supposing, as Mr. Malthus and many others have done, that men" m" a public expenditure is a cause of individual accumulation.* Its ^='"^*' "' effect is, in every instance, distinctly and completely the re- tiOT."™" '^ verse. The more government spends, the less remains for indi- viduals to save. Necessity may compel a man to exert himself to pay heavy taxes ; but it is choice, and not necessity, v.'hich makes him withdraw a portion of the produce of his industry from immediate consumption, and employ it as a stock. This distinction must be kept constantly in view. It cannot be deni- * Of all sophisms in Political Economy, this is the most dangerous. It lies at the basis of abuse of power, on the part of government, in impo- sing taxes and waste of wealth in disbursing them. This is an evil, how- ever, which rests not as yet, upon our nation. Great profits and cheap government make our public burthens light ; bu( what limit would there be to them, should the very virtue of our legislators be turned agauist us, by assuming this fallacious principle of the expenses of government teirio- an exciting cause of national wealth. Ip A popular error analogous to this may here be mentioned. It is that of regarding public expenditure not mei-ely as Malthus states it, a stimulus to increased accumulation, but as actually furnishing the sources of it; and to those who remember the excitement given to the industry and capital of the country during the late war, by the lavish expenditure of loans made by government, it will not appear an opinion destitute at least of plausibility. It may be worth while to detect its fallacy. When the government after making a loan, comes into the market as .1 consumer, like every other consumer it supports the productive industrj- of the country to the amount of its disbursements. A million expended by the government, is equal in its effects to a million expended in the country by a foreign consumer. The only difference lies in the source whence the money is derived, and the productive or unproductive manner in which it is expended. Now in the case of the foreign consumer it comes from abroad and i-: so much added to the wealth of the nation — in the latter case it is part of the domestic capital of the country, which has passed from the hands of individuals into those of the government. Tracing it one step fur- ther, we find that it is a portion of national wealth, which has not onlj- changed hands but changed its destination ; what before was capital is now " :• considered as income— what before was productively invested, is now un- productively consumed, and the sum of national wealth is consequently to the same amount diminished. If the amount so expended have been raised by tax, the diminution is immediate and sensible — if by loan it is gradual and distant ; but in either case it is a certain and necessary diminution of the public capital ; and whatever be the show of present prosperity it produces, it is as fallacious in the case of a nation, as every one sees it would be in the case of an indi\'idual who should by loan antedate his means, or convert his capital into income. On this subject which is too extensive and frnpoilant to be satisiffeftorilv treated of in a note, see Say, book III..r-h. 8 and 9. Ricardo, ch. G.~E. pita US POLITICAL ECONOMY. Acciimuia- cd that it is necessity that forces farmers and manufacturers to (lonof Ci- ggjj g portion of their produce to pay the taxes to which they are subjected ; but when these taxes are paid, the government is satisfied, and it is plainly their own free option — their de- !i a hnman being.''' Nothing can be more marvellously incorrect o"'capit'ia"'* than these representations. Instead of its being true that the hmJ industry. workmen employed in manufacturing establishments are less intelligent and acute than those employed in agriculture, the fact is distinctly and completely the reverse. The weavers, and other mechanics of Glasgow, Manchester, and Birmingham, possess infinitely more general and extended information than is possessed by the agricultural labourers of any county in the em- pire. And this is really what a more unprejudic(>d inquiry into the subject would have led us to anticipate. The variety of the occupations in which the husbandman is made successively to engage, their constant liability to be afi'ected by so variable a power as the weather, and the perpetual change in the appear- ance of the objects which daily meet his eyes, and with which he is conversant, occupy his attention, and render him a stran- ger to that ennui and desire for extrinsic and adventitious ex- citement which must ever be felt by those who are constantly engaged in burnishing the point of a pin, and in performing the same endless routine of precisely similar operations. This want of excitement cannot, however, be so cheaply or effect- ually gratified in any other way as it may be by cultivating — that is; by stimulating the mental powers. The generality of workmen have no time for dissipation ; and if they had, the wages of labour in all old settled and densely peopled coun- tries are too low, and the propensity to save and accumulate too powerful, to permit any very large proportion of them seeking to divert themselves by indulging in riot and excess. They are thus driven to seek for recreation in mental excitement ; and the circumstances in which they are placed aff'ord them every possible facility for amusing and diverting themselves in this manner. By working together, they have constant opportuni- ties of entering into conversation ; and a small individual con- tribution enables them to obtain a large supply of newspapers, and of the cheaper class of periodical publications. But what- ever diflference of opinion may exist respecting the cause, there can be no doubt of the fact, that the intelligence of the work- men employed in manufactures has increased according as their numbers have increased, and as their employments have been more and more subdivided. We do not believe that they ever were less intelligent than the agriculturists ; but whatever may have been the case formerl^s no one will now venture to affirm that they are inferior to them in intellectual acquirements, or that they are mere machines without sentiment or reason. Even Mr. Malthus, whose leanings are all on the side of agri- Euiogium of culture, has justly and eloquently observed, that " Most of the Mr- Maitims effects of manufactures and commerce on the general state of lactures. society are in the highejt degi'ee beneficial. They infuse fresh life and activity into all classes of the state, afford opportunity for the inferior orders to rise by personal merit and exertion, and stimulate the higher orders to depend for distinction upon other grounds than mere. rank and riches. They excite inven- tion ; encourage science and the useful arts ; spread intelli- gence and spirit ; inspire a taste for conveniencies and comforts among the labouring classes ; and, above all. give a new and 13 •102 T'OLITICAL ECONOMY. .•p)i>r.'irrt . . happ'Oi" structtire to society, by increasing the proportion of the of'cBpUaT'* '>niddle classes — that body on which the hberty , pubhc spirit, and and Industry, good government of every country must mainly depend."* — (^Observations on the Effects of the Corn Lazvs, p. 29.) * This defence of manufactures is ingenious, and true in its leading fea- tures, and will, it is to be hoped, serve to set aside those sweeping generali- zations by which some writers have sought to oppose their introduction into our country. The evils of manufacturing establishments are not ne- cessary but accidental, and may in a great measure be avoided by the pru- dent provisions of public authority or private benevolence. The very necessity of such provisions, however, may justly be considered a reason why manufacturing industry should not in an equal choice of labour, be preferred either by a nation or individuals. At the same time, to attempt its exclusion or delay when the state of the country calls for it, or what is equivalent, when the interest of individuals leads them to it, would be equally unwise and fruitless. On this course of manufacturing industry, our country has already en- tered with success, and every year will doubtless witness the introduction of new varieties and higher grades. It may not, therefore, be without its use to consider the evils to which such employments are naturally exposed, and the remedies by which they are to be met. They may be regarded as Physical and Moral. 1. The Physical evils that attend manufacturing establishments, arise from confinement — sedentary employment — the heated and impure atmos- phere of manufactories — the temptation of too early labour by the occu- pation of the youngest children, and of over labour by the introduction of task work : hence the deformed frame, the sickly countenance, the feeble physical powers wliich too often mark the inhabitants of large manufacto- ries, and painfully distinguish them from their more robust and healtliy brethren of the country. That these are CA'ils not practically small in magnitude, when private and present interest is the only governing prin- ciple of employment, will not be doubted by any one who has visited the manufactories of Europe, and by those who have not, may easily be ga- thered from the reports made of them, from the laws passed to regulate them, and from the exertions of bencA'olent individuals to remedy them. Among the latter, a gentleman now in this country, Mr. Robert Owen, of New Lanark, Scotland, has practically shown, not only that these evils are not in themselves irremediable, but tliat the real interests of the manufacturer are involved in that zeal and benevolence which alone can overcome them. Similar instances can doubtless be found in oiu" own country, and as one which has fallen under the Editor's notice, may be mentioned the Cotton Mill of Mr. M. Collet, Patterson, New Jersey. For further views on this subject, the student is referred to Mr. Owen's various publications, and to a Review of them in the 64th num- ber of the Edinburgh Review ; to Adam Smith ; to Say, book I. ch. 8 ; to the Edinburgh and Quarterly Reviews on these subjects especially ; and to the Reports of the Select Committee of the House of Commons. 2. The second charge against maiuifactures, arises from their supposed demoralizing and debasing influence ; and it cannot be denied that it is an evil to which large manufactories from various causes are peculiarly ex- posed, and one that ought to be guarded against by a vigilant internal po- licy, supported and enforced by the authority of law. The root of the evil lies in that neglect of education which is the natural result of the wages of young children. Parents, pressed by necessity, make their children as early as possible a source of profit — manufacturers find their interest in employing them — and thus too frequently are tliey sacri- ficed to the cupidity of parents and employers, and allowed to grow up in that ignorance, which is not only a bar to future respectability, but the strongest temptation to idleness and vice. Against this evil, therefore, pre- sent interest affords no security ; the check must be found, where a wise parental affection is not sufficient, in the power of law, or the influence of voluntary associations, regulating the age and working hours of children, and making provision for tlieir sufficient edncation. Against the immoral habits naturally consequent on such crowded and mixed associations, the check must be found in the virtue, firmness, zeal, and benevolence of those who have the management of them. POLITICAL ECONOMY. 103 Thus, then, we arrive, by a different route, at the same re- Diflercnt suit we have already endeavoured to establish. The inextin- of'capitaT'^ guishable passion for gain — the auri sacra fames — will always andinduBtry. induce capitalists to employ their stocks in those branches ofRateotPro- industry which yiel(t, all things considered, the highest rale of^y'^"^^^':'^- profit. And it is clear to demonstration, that those employments vuntageor which yield the highest profits, are always those in which it is pioymcnts. most for the public interest that capital should be invested. The profits of a particular branch of industry are rarely raised except by an increased demand for its produce. Should the de- mand for cottons increase, there would be an increased compe- tition for them ; and as their price would, in consequence, be augmented, the manufacturers would obtain comparatively high profits. But the rate of profit in different employments has a natural tendency to equality : and it can never, when monopo- lies do not interpose, continue either permanently higher or lower in one than in the rest. As soon, therefore, as the rise in the price of cottons had taken place, additional capital would begin to be employed in their production. The manufacturers engaged in the cotton trade would endeavour to borrow addi- tional capital, and the capitalists who were engaged in less lu- crative employments would gradually contract their businesses, and transfer a portion of their stock to where it would yield them a larger return. The equilibrium of profit would thus be again restored. For the additional capital employed in the pro- duction of cottons, by proportioning their supply to the in- creased demand, would infallibly reduce their price to its pro- per level. Such is the mode in which the interests of indivi- duals are, in every case rendered subservient to those of the public. High profits attract capital ; but high profits in parti- cular businesses are the effect of high prices ; and these arc always reduced, and the commodities brought within the com- mand of a greater number of purchasers, as soon as additional capital has been employed in their production. It is clear, there- fore, that that employment of capital is the best which yields the greatest profit ; and hence, if two capitals yield eqxial pro- fits, it is a plain proof that the departments of industry in which they are respectively invested, however much they may differ Against manufacturing labour carried on in families under parental guidance neither these nor the former objections are applicable. An in- stance of this may be found in the linen manufacture of Ireland ; and it l~ well deserving of philanthropic consideration how far the principle is ca- pable of application to the various branches of manufactures so rapidly introducing into our country. In cotton weaving it already exists to a very considerable extent, and in the neighbourhood of Philadelphia, as I am in- formed by an intelligent friend, is found attended witli such advantages that it is rapidly extending. That labours which require the operation of such securities to render them innocent in their effects, carry within themselves many arguments against themselves none will deny. The health, the freedom, the varied toil, the patriotic attachments of the husbandman cannot be thus exchan- ged, it would seem, without some sacrifice of personal happiness, and cer- tainly not without some risk of virtue. la these considerations there is at least argument sufficient to induce us not to hurry the change. With increase of population and capital, manu- factures ■will come, and when they do come let it be our boast, that in this as in many other points of national prosperity, we have the wisdom to at- tain the good and avoid the evil. — E, 104 POLITICAL K.rONOMV. Different ill mauy respects, are equally beneficial to the country.* No- o^ca^i™'!"'^ thing can be more nugatory than to apprehend that the utmost and Industry, freedom of industry can ever be the means of attracting capital to a comparatively disadvantageous employment. If capital flows to manufactures or commerce rather than to agriculture, it can only be because it has been found to yield larger profits to the individual, and consequently to the state. * In applying this test to the various employments of capital, there is great danger of drawing erroneous inferences from insufficient or partial data. This subject, of varying profits, as stated by a valued correspon- dent thus appears : " Farming gives a remunerating price for labour, and from two to three per cent, on capital, including land and stock. " The retail merchant receives a remunerating price for his labour, and twenty-five per cent, on his capital. " Manufacturing gives a remunerating price for labour and from ten to thirty per cent, on capital. " Navigation pays insurance and repairs, and eight per cent, on capital. " Public funds pay four 'and a half per cent, on capital. " The mechanic receives a remunerating price for his labour, and one hundred per cent, on his capital." The above statement whether precisely accurate or not, exhibits some of the apparent variations to which profits are liable. To show that these variations are but apparent, and that capital under all its various forms, is productive of but one average rate of profit, it is sufficient to remember that there is no investment of it, but is open to competition, and floating capital in the country sufficient to seize upon that whicli is most profitable. It therefore amounts to a moral demonstration that capital considered sim- ply as such, and free to seek its own investment, cannot yield in the same country two rates of profit. These facts, therefore, assuming their truth, must be otherwise explained ; and this explanation is to be found, in ave- raging the returns of all capital similarly employed, in the comparative security of its difiereut investments, in the various degrees of skill and devotion of time required for its management, in the superior indepen- dence of one occupation above another, and in tliose thousand nameless circumstances which, in the long run, balance a varying account, and which, to a moral and sentient being, are equivalent to a monied consideration. Thus, of the instances enumerated, but one may be said to give the real value of money, that is an investment in the public funds ; which by the attractions of perfect security of capital and perfect regularity of in- terest, and perfect freedom from labour, bring the returns of money down to their minimum or natural amount. This then is to be considered' as in all cases the real return of capital, and the successive advances that appear in other investments as wages of labour, premiums of insurance against risk, returns for previous capital invested in acquired skill, and the varied compensation for peculiar drudgery or disagreeableness of vocation. But of the returns from other investments as above stated, that of land falls below the minimum. This apparent inconsistency, however, is remo- ved by considering that a portion of the real returns from land are rein- vested in it, in the shape of increased value. The farmer does not take from the land all his profit, a portion remains and is worked up into his capital : a further allowance to be made on the part of farming consists in those numberless conveniencies which it afibrds in the support of a family, which, though they form a real and important return for capital, are not easily estimated. These allowances would elevate the profits of farming i;apital somewhat above the returns from stock. They stand, however, the next to it — the native and indefeasible charms of a countiy life — the slight degree of skill that is considered requisite to success in it — and the perfect se- curity ol' the principal invested in it, induce men to undervalue the circum- stance of its slow and doubtful returns, and thus bring down its profits the nearest to tlic minimum rate. Of the other instances, it is not necessary to enter into a detailed expla- nation. The principles already stated, will serve as a guide to Uieir de- velopemeut. See Edinburgh Review, Vol. XL, pp. 1. 28. — £. POLITICAL ECONOMY. 10i> PART III. DISTRIBUTION OF WEALTH. Having thus endeavoured to trace the various methods by which that labour which is the only source of wealth may be rendered most productive, and to exhibit the mutual relation and depcndance of the different kinds of industry, we now pro- ceed to the second division of our subject, or to an investigation of the laws regulating the proportions in which the various pro- ducts of art and industry are distributed among the various classes of the people. Sect. I. — Primary Division of the Produce of Industry — Value of Commodities measured in the Earliest Stages of Society by the (Quantities of Labour expended on their Production. It is self-evident that only three classes — the labourers, the I'limmy ni possessors of capital, and the proprietors of land, are ever di- « ^",',„ °j! J,'"*' rectly concerned in the production of commodities. It is to intUistiy. them, therefore, that all that is derived from the surface of the earth, or from its bowels, by the united application of immediate labour and of capital, or accumulated labour, must primarily be- long. The other classes of society have no revenue except what they derive either voluntarily, or by compulsion, from these three classes. But although there is no state of society in which any other class besides those of labourers, landlords, and capitalists, par- ticipates directly in the produce of industry, there are states of society in which that produce belongs exclusively to one only of these classes ; and others in which it belongs to two of them, to the exclusion of the third. The reason is, that, in the earliest stages of society, there is little or no capital accumulated, and the distinction between labourers and capitalists is, in conse- quence, unknown ; and that in all newly settled and unappro- priated countries, abundance of fertile land may be obtained without paying any rent. In that remote period preceding the establishment of a right of property in land, and the accumulation of capital or stock — when men roamed, without any settled habitations, over the sur- face of the earth, and existed by means of that labour only that was required to appropriate the spontaneous productions of the soil, the whole produce of labour would belong to the labourer, Quantity of and the quantity of labour that had been expended in the pro- ^,^^.?."'^ '|"^ curing of different articles, would plainly form the only standard Pnndpu/of by which their relative worth, or exchangeable value, could be ^'^'"'=- estimated.* " If among a nation of hunters," says Dr. Smith, * That the quantity of labour worked up in the commodity constitutes, at this early period, the only measure of value is evident, and by all ad- mitted. But that in a state of society so different as that which follows, where both labour and capital operate in production, labour should still continue to afford the sole measure of value, as our author and the school of Ricardo maintain, seems in no small degree inconsistent, not only with experience but with their own language and reasoning. For if this be so, there is no ground for the distinction here adopted, of difi'erent states of 106 POLITICAL ECONOMY. Quantity of " it usually costs twice the labour to kill a beaver that it does to n-'ukiL^*' kill a deer, one beaver would naturally exchange for or be worth Principle of two deer. It is natural, that what is usually the produce of two ^ "''"'■ days' or two hours' labour, should be worth double of what is usually the produce of one day's or one hour's labour. " If the one species of labour should be more severe than the other, some allowance will naturally be made for this supe- rior hardship ; and the produce of one hour's labour in the one way, frequently exchanges for that of two hour's labour in the other. "Or if the ^ne species of labour requires an uncommon degree of dexterity and ingenuity, the esteem which men have for such talents will naturally give a value to their produce, superior to what would be due to the time employed about it. Such talents can seldom be acquired but in consequence of long application, and the superior value of their produce may frequently be no more than a reasonable compensation for the time and labour which must be spent in acquiring them. In the advanced state of society, allowances of this kind, for superior hardship and superior skill, are commonly made in the wages of labour ; and something of the same kind must probably have taken place in the earliest and rudest period. " In this state of things, the whole produce of labour belongs to the labourer ; and the quantity of labour commonly employed in acquiring or producing any commodity, is the only circum- stance which can regulate the quantity of labour (q/" other com- modities) which it commonly ought to purchase, command, or exchange for." — (IVealth of Nations, Vol. I. p. 70.) Thus far there is no room for doubt or diflference of opinion. When there is no class but labourers, all the produce of labour must obviously belong to them ; and the quantity of labour re- quired to produce commodities must form the onl}^ standard by which their exchangeable worth or value can be estimated. It is at this point, therefore, that we are to begin the investigation of the laws regulating the division of the pi'oduce of industry among the three great classes, of labourers, capitalists, and land- lords ; and we shall do this by endeavouring, in the first place, to acquire a knowledge of the laws which regulate the exchange- able value of commodities in an advanced period of society., when circulating and fixed capital are employed in their pro- duction, and when land is appropriated, and rent paid. A pre- vious acquaintance with the circumstances which determine society, or of the different classes to whom in those states the produce of industry respectively belongs. If all value be resolvable into labour be- cause capital is but another name for accumulated labour, then interest is but another name for wages, and capitalists for workmen, and every state of society is resolvable into its first and only one. This confounding of terms, ordinarily and necessarily distinguished, would, it is evident, render science nugatory, — but it is the obvious result of that analysis which re- fines capital into labour. If they cannot in every case be comprehended under the same term, they ought not in any, — if a capitalist differ from a workman, capital differs from labour, — and if labour be the criterion of value where labour only is employed, a new element must certainly be brought into calculation when the agency of capital is further added. The necessity of the distinction may also be sliown by the different laws they obey, — the consideration of this, liowever, is deferred to Sect. IV. of tlie present part. See Malthus, Chap. II. Sect. 2, 3, 4, 6. — E. POLITICAL ECONOMY. 107 the value of commodities, will be found to be indispensable to Equality of enable us to ascertain the principles which regulate their dis- Y^oixs. "" tribution. Sect. II. — Preliminary Considerations — Equality of Wages and Profits — Inquiry into the Effect of Variations of Demand and Supply 071 Price — Cost of Production shown to be its regulating Principle. If the popular opinions on this subject were well founded, Preliminary the inquiry on which we are now about to enter might be dis- tions! ""^ posed of in a very few words. The exch.ingeable value of com- modities, when compared with each other, and their value or price when compared with money, is held almost universally to depend on their relative abundance or scarcity in the market, compared with the demand. We believe, however, that we shall be able to show, that this opinion rests on no good foundation, and that it is the cost of production which is the sole regulating principle of price. But, before proceeding further, it is neces- sary, in order to facilitate our investigations in this and the fol- lowing sections, to premise, that wherever industry is free, the rate of wages earned by the labourers engaged in any particular department of industry, and the rate of profit derived from the capital vested in it, cannot, for any considerable period, either fall below, or rise above, the rate of wages and pnfits accruing to the labo7irers and capitalists engaged in other departments. With regard to the first of these positions, or to the equality E.jiiaiity of of the wages earned by the labourers engaged in different em- |,ari?^d w^fhe ployments, it is not meant to infer that all labourers receive Labourers precisely the same sum of money, or the same proportional ^"lerlnt '" share of the produce of their labour. Such an opinion would Branches of be equally at variance with the fact, — and with the principle it " "^"^" is our object to elucidate. Wages are a compensation given to the labourer in return for the exertion of his physical powers, or of his skill, or ingenuity. They must, therefore, vary ac- cording to the greater intensity of the labour to be performed, and to the degree of skill and ingenuity required. Wages would not be equal if a jeweller or engraver, for example, received no higher rate than a common farm servant, or a scavenger. A long course of training is required to instruct a man in the business of jewelling and engraving ; and if this were not compensated, by a higher rate of wages, it is evident no one would choose to learn so difficult an art ; but would addict himself in preference to such employments as hardly require any training. The cost of producing artificers, or labourers, regulates the wages they obtain, precisely in the same way that the cost of producing commodities regulates their value. A man who practises a dit- ficult or nice business, loses all the time that is spent in his ap- prenticeship, and generally also the clothes and provisions con- sumed by him during the same period. This person ought, therefore, to obtain not only the same rate of wages as hus- bandry labourers, and those who do not require to serve an ap- prenticeship, but he ought also to obtain an additional rate pro- portioned to the extra time and expense spent in learning his business. If he does not obtain this additional rate, it is plain 108 POLITICAL ECONOMY. Equality of hc would not be SO wcll paid as the husbandry labourers ; and Proms!"" if he obtained more than what was a fair and reasonable com- pensation for the greater expense to which he had been put, there would be an immediate influx of labourers into that par- ticular business, and competition would not fail to reduce wages to their proper level. Besides tliis prominent cause of apparent inequality, wages vary in amount proportionably to the ease and hardship, the agreeableness and disHgreeableness, the constancy and incon- stancy of employment.* In the greater part of manufactures, a journeyman may, except in periods of general revulsion, ge- nerally be able to obtain constant employment. But there are several businesses, such, for example, as those of masons and bricklayers, that can neither be carried on in hard frost nor foul weather. Their earnings must therefore be able not only to maintain them while they are employed, but also while they are idle, and to make them some compensation for those anxious and desponding moments which the thought of so precarious a situ- ation must sometimes occasion. " Hence," says Dr. Smith, " where the daily earnings of the greater number of manufac- turers are nearly upon a level with the daily earnings of the superior class of farm servants, the wages of masons and brick- layers are generally from fifty to one hundred per cent, higher. Where common labourers earn four or five shillings a week, masons and bricklayers frequently earn seven and eight ; and where the former earn nine or ten, the latter commonly earn fifteen and eighteen." — (JVealth of JVations, I. p. 157.) * To this may be added the comparative respect or disgrace attached to the occupation, — which, in the higher divisions of the industrious classes of society, has an important influence. It may here be necessary to pre- mise, that the term wages in its scientific meaning is not confined to ma- nual labourers, but applies generally to all who derive their support, not from capital or land, but from personal exertion, — including all salaried officers, men of science, professional men, and artists, and forming what .Say terms the " industrious class." Thus Adam Smith remarks that the scholar, the poet, and the philosopher, are mamly paid in personal conside- ration, while the actor and the dancer are overpaid for their talents for the very reason that their persons are despised. This is painfully illustrated among ourselves, by the very low salaries to which the support of the covmtry clergy is reduced, frequently not going beyond the wages of a day labourer. It is well that higher motives should tempt to the profession, but it is not well that those motive* should be turned against the individual to diminish both his comforts and his influence, and his conscientiousness be made a plea for his starvation. The case of men of science was not fully analyzed by Smith, — this was reserved for Say ; who, while he elevates them into the prime movers of national wealth, explanis also the reasons why they in general partake of so little of it. This arises from the productions which they furnish of scientific truth being in their nature inconsumable. They are paid for them once while those who apply them are paid upon each successive reproduction. Thus the inventor starves amid the riches which he has himself created. Could the family of Fulton, for instance, receive one-thousandth part of the wealth which his successful experi- ment is annually producing in this country, they would not now liave to depend ujion the slow returns of public gratitude. The fruits of a man's mental labour are peculiarly his own ; and if society become the purchaser of them, it should be at an adequate price ; rewarding' inge- nuity and talent with some reasonable proportion of the mines of wealth which it opens to the community. See Say, Book II. chapter vii. 9C§t. 2. Smith, Book I. chap, x, — E. i'OLlTICAL ECONOMV. i 0^ f But these variations, instead of being inconsistent with the Equality of principle we have been entleavonring to establish, plainly result proifu^"" from it. The wages earned by different classes of workmen are equal, not when each earns the same number of shillings or of pence, in a given space of time — but when each is ])aid in pro- portion to the severity of the labour he has to perform, to the degree of previous education and of skill that it requires, and to the other causes of variation. So long, indeed, as the prin- ciple of competition is allowed to operate without restraint, or so long as each individual is allowed to employ himself as he pleases, we may be assured that the higgling of the market will always adjust the rate of wages in different employments on the principle we have now mentioned, and that it will be very nearly equal. If the rate of wages in one department were depressed below the common level, labourers would leave it to go to others ; and if it were to rise above this common level, then, it is plain, labourers would be attracted from those departments where wages were lower, until the increased supply had sunk them to their just level. A period of greater or less duration, according to the circumstances of the country at the time, is always required to bring about this equalization. But all the- oretical inquiries, and such as have the establishment of princi- ples for their object, either are, or ought to be founded on pe- riods of average duration ; and whenever such is the case, we may always, without occasioning the slightest error, assume, that the wages earned in different employments are, all things con- sidered, precisely equal. In like manner the profit, accruing to the cnpitaUsts engaged Eq"^i'^'y^«'' in different businesses must always vary proportionably to the of the Capi- greater or less risk, and other circumstances specially affecting [,f dtfiSeT*^ the capital they employ in them. It is obvious, indeed, that Busit^sscs. profits have not attained their level until they have been adjusted so as to balance these different advantages and disadvantages. None would engage in unusually hazardous undertakings, if the capital employed in them only yielded the same profit that might have been obtained by employing it in more secure businesses. No one would choose voluntarily to place his fortune in a situa- tion of comparative danger. Wherever there is extraordinary risk, that risk must be compensated. And hence, the well known distinction between gross and tiett profit.* Gross profit * Another necessary caution, is to remember, that it is not the profits ol the individual but of the business at large, as including all who are enga- ged in it, of which equality is asserted. While of two men equally com- petent and economical, one grows rich and the other poor, it would evi- dently be absurd to assert that the profits of each are equal. But taking into one common calculation, the gains and losses of all engaged in the same business or profession, it will be found that they nearly balance those of any other, supposing the same capital to be employed. The cause of the apparent variation is, that in different professions profits are differently divided among the individuals engaged in it. In farming, for instance, with comparative equality, — in commerce and the learned professions with great disparity. The chance of success in the various occupations of life, may be compared to lotteries of different schemes, — in some numerous small prizes and few or no blanks, — in others many blanks, but with the tempta- tion of a few capital prizes. The latter illustrates the hazards of business and of professional life. ''In a profession,*' says Smith, "Avhere twenty lail ibr one that, succeeds, that one ought to gain all that should have been 14 110 POLITICAL i:co.\o:m\% Knuaiityof ahvuys varies according to the risk, the respectability, and the* Vtoiil^'^'^ agreeableness of different employments, while nett profit is the same or very nearly the same, at any particular period, in them all. A gunpowder manufacturer, for examp]e,must obtain as much profit, over and above the profit obtained from the capital engaged in the securest bu.sinesses, as will suffice to guarantee or insure his capital, from the extraordinary risk to which it is exposed, in a business of such extreme hazard. If the gunpowder maau- facturer were to obtain more than this rate, additional capital would be attracted to his business, and if he were to obtain less, lie would withdraw capital from it. The great and constantly acting principle of competition, or, which is just the same thing, the self-interest of every individual will never permit the wages or the profits obtained by any particular set of workmen or capitalists, taking all things into account, to continue either long below or long above the common and average rate of wages and profits obtained by those who are employed, or who have capital invested in other businesses. It is by this common standard that the wages and profits of particular businesses are always regu- lated ; they can never diverge considerably from it ; they have a constant tendency to equalization ; and may, in all theoretical inquiries, be supposed, without occasioning any error of conse- quence, exactly to coincide. The principle of the equality, or rather of the constant ten- dency to equality, of the wages earned by the labourers, and of the profits derived from the capital employed, at the same time . in all the various branches of industry, was pointed out by Mr. Harris, and also by Mr. Cantillon, in his work entitled, The Ana- lysis of Trade, &,c. publishetl in 1759 ; but it was first fully de- monstrated in the eighth, ninth, and tenth chapters of the first book of the Wealth of Nations. The establishment of this prin- ciple %vas one of the greatest services rendered by Dr. Smith to the science of Political Economj'. Nothing can be clearer, more convincing and satisfactory, than his reasoning on this sub- ject. The equality of wages and of profits has, ever since the publication of his work, been always assumed as admitted and incontestible. t-r'^Demand '^^^^ principle of the equality of wages and profits once es- und Supply tablished, it is easy to show that variations in the demand and mrnenUiT' supply of Commodities can exert no lasting influence on price. fluenceon Jt is the cost of production — denominated by Smith and the Mar- quis (jrarnier necessary or natural price — which is the perm-a- iient and ultimate regulator of the exchangeable value or price of every commodity which is not subjected to a monopoly, and -.chich may be indefinitely increased in quantity by the application of fresh capital and labour to its production. That the market price of such commodities and the cost of production do not al- gained by the unsuccessful twenty." Thus it is perfectly fair that some great fortunes should grow out of commerce when so many are lost by it, — that a few lawyers and physicians should be in ^reat receipts as a coun- terbalance to those who starve. These few splendid prizes give reputation at a distance to the scheme that involves them, but like other schemes of ihancc tliey are fallacious, they tempt into them more adveutureis than they can maintain, — a consideration that sliould tend to content the fanner .in the enjoyment of liis more moderate, because uiore equal and cerUun.. »aiiis, — K, POLITICAL ECONOMY. Ill ways coincide is certain ; but they cannot, for any considerable Equality of period, be far separated, and have a constant tendency to equality. Pfjlt'^* '"' It is plain that no man will continue to produce commodities if they sell for less than the cost of their production — that is, for less than will indemnify him for his expenses, and yield him the common and average rate of profit on his capital. This is a limit below which it is obviously impossible prices can be per- manently reduced ; and it is equally obvious, that if they were, for any considerable period, to rise above it, additional capital would be attracted to the advantageous business, and the compe- tition of the producers would lower prices. A demand, to be effectual, must be such as will cover the ex-TheVViii pense of production. If it is not suflicient to do this, it can polve'rto never be a means of causing commodities to be produced and I'urciiasc brought to market. A real demander must have the power, as constftu'e well as the will, to purchase. A person with 20s. in his pocket i^'^'n^nd. may be as anxious, — nay, he may be ten times more anxious, to become the purchaser of a coach than of a hat ; why then does he not obtain the one as readily in exchange for his 20s. as the other ? The reason is obvious — 20s. will pay the expense of producing the one, and it will not pay the expense of producing the other. But if such an improvement were to take place in the art of coachmaking, as would enable any one to produce a coach as cheaply as a hat, then 20s. would buy a coach as easily as it can now buy a hat. The demand for any particular com- modity may become ten or ten thousand times more extensive, or it may decline in the same proportion ; but if the cost of its production continues the same, no permanent variation will be occasioned in its price. Suppose, for example, that the demand for hats is suddenly doubled, that circumstance would undoubt- edly occasion a rise of price, and the hatters would, in conse- quence, make large profits ; but this rise could only be of very limited duration ; for the large profits would immediately attract additional capital to the hat manufacture ; an increased supply of hats would be brought to market, and if no variation took place in the cost of production, their price would infallibly sink to its former level. Suppose, on the other hand, that the demand for hats is increased a thousand fold, and the cost of producing them diminished in the same proportion, we should, notwithstanding the increased demand, be able, in a very short time, to buy a hat for the thousandth part of what it now costs. Again, suppose the demand for hats to decline, and the cost of producing them to increase, the price would, notwithstanding the diminished demand, gradually rise, till it had reached the point at which it would yield the hatters the common and average rate of profit on the capital employed in their business. It is admitted that variations in the demand and supply occasion temporary varia- tions of price. But it is essential to remark, that these variations are only temporary. It is the cost of production that is the grand regulator of price — the centre of all those transitory and eva- nescent oscillations on the one side and the other ; and whei'ever industry is free, the competition of the producers will always ele- vate or sink prices to this level.* •"* That the cost of production is the regulator of price, is one of the , leadinsr doctrines of the modern school of Ricardo. The doctrine of tl»e 112 I'OMTICAL ECONOMY. Cost of Pro- In certain branches of industry, such, for example, as agri- r^g'iliating^ culture, uhlch are liable to be seriously affected by the varia- Principie of tions of the scasons, and from which capital cannot be easily withdrawn, there is a somewhat longer interval than in others, older school of Adam Smith, teaches lliat it is regulated by demand and supply, and the advocates of each maintain their respective sentiments with more zeal and pertinacity, than should belong to opinions which may be made harmoniously to unite. For the doctrine of Adam Smith, see Wealth of Nations, Book I. chap. v. and vii. Malthus, Chap. ii. sect. 3. Quarterly Review, Vol. XXX. p. 314. For the exposition and defence of the later doctrine, see Ricardo, Polit. Econ. Chap. XXX. Mill, Chap. III. Westminster Review, No. 4, Art. 1. For a clear understanding of this subject, the student must first make himself familiar with the distinction between the natural and market price of commodities ; and in the relation they bear to each other he will see the means of uniting these apparently discordant opinions! Natural price be- ing governed solely by the costs of production, while actual, or market price is governed by the general control of the costs of production, specifi- cally modified by the influence of demand and supply. In this subjection of market price to^the control of two regulating forces, it may be likened to the state of a satellite, which revolving around its primary planet, its actual position is the result of the laws of motion which regulate both. Thus of market price, natural price may be said to be the primary, about which the former like a satellite is continually revoh'ing, moving as it moves, and yet governed by its own laws of motion. As natural price by a straight for- ward movement, rises or falls with the increase or diminution of the costs of production, market price accompanies it with its ceaseless oscillations, with a constant tendency to settle at it as its centre, but for ever thrown beyond it by the successive reaction of demand on the one hand and supply on the other. If this illustration be correct, both opinions are true to a certain extent, and both defective if exclusively held : gradual and permanent changes of price are the result of corresponding alterations in the cost of production : sudden and temporary changes are the result of comparative demand and supply ; and actual price is the result of the operations of both. Asa prac- tical principle the doctrine of Adam Smith is the most valuable, since it is, First, of universal application, being equally true of all commodities, whether in state of monopoly or of free competition ; and Secondly, of practical application, as it relates to that actual market price upon which the profits of individuals depend. The doctrine of Ricardo, though essentially true, is yet modified by so many and such powerful causes, as to render it inapplicable in many very important cases. That the costs of production form tlie central point, about %vliich market price oscillates, is admitted. These oscillations, however, are slow or rapid in proportion to the rapidity of production and consump- tion, — the more rapid these are, the more does the market price coincide with the natural, — the slower they are, the greater may be their deviation, and the longer the period which must elapse before the costs of production can regulate the price. This may be instanced in the case of shipping and buildings, which are slowly consumed, — of skill and learning, which are slowly acquired, — the effect of which often is, in the case of the former, to retain market price below natural price ; and of the latter, above it for years together. Another case may be stated, in which centuries may elapse before such regulation takes place : of this our own country furnishes an example. The natural price of labour is, the lowest rate of wages by which the labourer and his children can be supported. The market price of it, in new and fertile countries, is always far beyond it, and will so continue under a liberal policy, until a crowded population produces a competition for employment and brings it down to its minimum, or natural price. How far we are removed from that point, will be best seen by comparing the situation of our labourers with those abroad See Quarterly Review, No. 56, Art. 4. Edinburgh Rev. No. 71, Art. 6. Quarterly Rev. Colquhouii on Condition of the Poor, Vol. VIII. p. 319. XII. p. 146. Report of Select Committee, Vol. XIX. p. 492.— £. rOLITICAL ECONOMY* llo before the market price of produce and the cost of producing coBtof Pro- jt can be equalized. But that such an equalization will be brought '/"I^^'iaJln"^' about in the end is absolutely certain. No farmer, and no pro- PrMicipio'"oi' ducer whatever, will continue to bring corn or other products to market, if they do not sell for such a price as will pay the ex- pense of their production, including therein the common and average rate of profit on the capital employed by them.* An excess of supply has now (January 1823) depressed the prices of corn and other farm produce below this level ; and the occu- piers of poor land are, in consequence, involved in the greatest difficulties ; but most assuredly this glut will not continue. A part of the cultivators of poor soils will be driven from their employment. A smaller supply will be brought to market ; and prices will be adjusted so as to yield the customary rate of profit, and no more, to the agriculturists who continue the cultivation of the poorest soils. — The self-interest of the cultivators will not permit prices to be permanently depressed below this level ; and the self-interest of the public will not permit them to be permanently raised above it ; for, if they were raised above it, then the cultivators would gain more than the common and average rate of profit, and capital would, of course, be imme- diately attracted to agriculture, and would continue flowing in that direction, until the natural and indestructible equilibrium of profit had been restored — that is, as we shall afterward show, imtil the price of agricultural produce had fallen to such a sum as would just yield the average rate of profit to the cultivators of the worst soils, or the improvers of the best. This is the point at which average prices must continue stationary, or about which market prices must oscillate, until the cost of production be increased or diminished. If any great discovery were made in agriculture — such a discovery, for instance, as would reduce the cost of cultivation a half, the price of agricultural produce would fall in the same proportion, and would continue to sell at that reduced rate until the increase of population forced re- course to soils of a decreasing degree of fertility. Whenever this took place, prices would again rise. Why is the price of corn almost invariably higher in this country than in France ? Is it because we have a greater demand for il, or because of the greater cost of production in this country ? A pound weight of gold is at present worth about fifteen Reason why pounds of silver. It cannot, however, be said that this is a ^'"''' '= j™"^" consequence of the demand for gold being greater than the de- than'siiver. mand for silver, for the reverse is the fact. Neither can it be said to be a consequence of an absolute scarcity of gold ; for, those who choose to pay a sufficient price for it m^y obtain it in any quantity they please. The cause of this difference in the price of the two metals consists entirely in the circumstance of its costing about fifteen times as much to produce a pound of * Some of the advocates of the agi-icultural uitevest have represented this as one of the " dangerous dogmas'" of the Scotch Economists ! But it can boast of a much more remote origin : — " JS'enio enivi samcs,''^ says Varro, "■debet telle impensam ac sump turn facere in cuUuram, si videt non posse re- Jiciy—^De Re Rust tea. Lib; \. \ 2.) " No man in his senses will lay out labour and expense in cultivation, if he foresees that he cannot be repaid." — (Varro on Agriculture.)—/?. 114 POLITICAL ECONOMY. Cost of Pro- gold as to produce a pound of silver. That this is reall}'^ the Sating^ case, is plain from the admitted fact that the producers of gold Principle of (]o not gain any greater prolit than the producers of silver, iron, lead, or any other metal. They have no monopoly of the busi- ness. Every individual who pleases may send capital to Brazil, and become a producer of gold ; and wherever this is the case, the principle of competition will always force the product to be sold at such a price as will just pay the expenses of its produc- tion and no more. Were a gold mine discovered of equal pro- ductiveness with the silver mines, the production of gold would immediately become the most advantageous of all businesses ; an immense supply of that metal would, in consequence, be thrown on the market, and its price would, in a very short period, be reduced to the same level as silver. Reasons why As a further illustration of this principle take the case of cot- /leciincd in^^ tons. No One Can deny that the demand for them has been pro- priof. digiously augmented within the last fifty or sixty years ; and yet their price, instead of increasing, as it ought to have done, had the popular theory of demand and supply been well founded, has been constantly and rapidly diminishing.* If it is said that this is a consequence of the supply of cottons having augmented in a still greater ratio than the demand, we answer that this is not enough to explain the f;ill of price. The supply would not and could not possibly have been brought to market, had not the constant diminution of prices, which has been going on since the invention of spinning-jennies in 1767, been balanced by an equal diminution of the cost of production. It is to this principle — to the vastly increased facility of production, occasioned by the stupendous inventions and discoveries of Hargreaves, Watt, Ark- %vright, Crompton, and others, that the lower price and increased demand for cottons is exclusively owing. The increased facility of production has brought them within the reach of all classes of the people ; and enabled the poorest individuals in the king- dom to clothe themselves in a dress which, at the accession of George III. was fully as expensive as silk. Competition ^^ J^^ bring a set of men together from various countries who of the Pro- are ignorant of each others wants, and of the labour and ex- ducers in a x i it_ i-i- i • i i Civilized So- pense necessary to produce the commodities which each pos- <=|<='y ^^.''' ^'" sesses, the commodities will be bought and sold according to the PYicestoiiic relative wants and fancies of the parties. In such circum- du"ct\on.^'^''' stances, a pound of gold might be given for a pound of iron, and a gallon of wine for a gallon of small beer. As soon, however, as a commercial intercourse has been established, and as the ■wants of society and the powers of production come to be well and generally known, an end is put to this method of barter- ing. Thousands of sellers, then enter the market. But when such is the case, it is no longer possible to sell a pound of gold for a pound of iron ; and why ? because the producers of iron will undersell each other until they have, by their competition, reduced its price to such a sum as will just suffice to pay the * This is not candidly stated. No theoiy teaches tliat price rises with demand, absolutely ; it is relative demand as compared with supply. Through the greater powers of machinery au increased supply was first thrown into the market, and each succeeding decrease of price has been accompanied by increase of quantity. — E. rOLlTICAL ECONOMV. 115 expense oi" its production. This is in every civilized society Cost of Pro the pivot on which exchangeable value always turns. A civili- re^^uiaiing"' zed man misht be able to obtain commodities from a savage, in i'".""'ii'i; "i" ^ . • c? ' IT rice exchange for toys or trinkets, which it cost infinitely less to pro- duce ; but if he tries to obtain the same advantage over his own countrymen, a very short experience will be enough to satisfy him that they are quite as clear-sighted and attentive to their own interests as he is. Thus, then, it appears, that no variation of demand, if it be unaccompanied by a variation in the cost of production, can have any lasting influence on price.* If the cost of production be diminished, price will be equally diminished, though the demand should be increased to any conceivable extent. If the cost of production be increased, price will be equally increased, though the demand should sink to the lowest possible limit. It must always be remembered, that this reasoning only ap- I'lfluenee of plies to the case of those commodities on which competition is °'"'^'° '**' allowed to operate without restraint, and whose quantity can be indefinitely increased by the application of fresh capital and in- dustry to their production. When a particular individual, or class of individuals, obtain the exclusive privilege of manufac- turing certain species of goods, the operation of the principle of competition is suspended with respect to them, and their price must, therefore, entirely depend on the proportion in which they are brought to market compared with the demand. If mono- polists supplied the market liberally, or kept it always as fully stocked with commodities as it would have been had there been no monopoly, the commodities produced by them would sell at their natural price, and the monopoly would have no further disadvantage than the exclusion of the public from an employ- ment which every one ought to have the right of carrying on. In point of fact, however, the market is never fully supplied with commodities produced under a monopoly. Every class of producers naturally endeavour to obtain the highest possible price for their commodities ; and if they are protected by means of a monopoly, against the risk of being undersold by others, they will either keep the market understocked, or supply it * The truth of this assertion depends on the extent given to the term lasting, and at any rate must, as we have seen, be limited by many conside- rations. It is altogether inapplicable in all cases of monopoly, or in those more numerous ones which approach to it, even in a state of freedom, such as peculiar talent or skill, which constitute as it were, a personal monopoly of the products which result from them, or of those numberless natural monopolies in which the bounty of nature is limited and cannot by the art of man be increased. The rule of our author is strikingly inaccurate in its application to the price of all raw produce, in which the market price seems to lose all reference to costs of production, and to be governed simply by the comparative demand and supply. Those who reject the costs of pro- duction as the regulating principle of exchangeable value, argue that they operate only in subordination to the dominant principle of demand and supply ; they are the necessary condition of the article or commodity be- ing brought into market, but when once there, it is effective demand as compared with supply which determines its price. For these views, see Malthus, ch, 2, sect. 3. Where such men, however, as Ricardo and Mal- thus differ, truth will generally be found in a middle opinion, and the dis- pute to be less about the nature of things than the meaning of words, or the light in which things are to be regarded. See Ricaiclo, ch. 1, and 3ft- :?av. Book II. ch. 1. and 4. — E, 116 POLITICAL ECONOMY. Cost of Pro- with inferior articles, or both. In such circumstiances, the price reg"ia"ing'' of the commodity, if it cannot be easily smuggled from abroad, principle of or clandestinely produced at home, will be elevated to the highest point to which the competition of the buyers can raise it, and may, in consequence, be sold for five, ten, or twenty times the sum for which it would be offered were competition permit- ted to operate in its production. The will and power of the purchasers to offer a high price forms the only limit to the rapa- city of monopolists. Besides the commodities produced under an artificial mono- poly, there is another class whose quantity cannot be increased by the operation of human industry, and whose price is not, therefore, dependant on the cost of their production. Ancient statues, vases, and gems, the pictures of the great masters, some species of wines which can be produced in limited quantities only from soils of a particular quality and exposure, and a few other commodities, come under this description. As their sup- ply cannot be increased, their price must vary inversely as the demand, and is totally unaffected by any other circumstance. Average But with these exceptions, which, when compared to the great c'oincidinr^' mass of Commodities, are extremely few and unimportant, wher- V ill. Cost of ever industry is unrestricted and competition allowed to operate, the average price of the various products of art and industry, always coincides with the cost of their production. When a fall takes place in the market price of any commodity, we can- not say whether that fall is really advantageous, or whether a part of the wealth of the producers be not gratuitously trans- ferred to the consumers, until we learn whether the cost of pro- duction has been equally diminished. If this is the case, the fall of price will not have been disadvantageous to the produ- cers, and will be permanent ; but if this has not been the case — if the cost of production continues the same, the fall must have been injurious to the producers, and prices will, in conse- quence, speedily attain their former level. It is the same with a rise of prices. No rise can be permanent except where the cost of production has been proportionably increased. If that cost has remained stationary, or has not increased in a corres- })onding ratio, prices will decline as soon as the ephemei'al causes of enhancement have disappeared. The extreme importance of having correct opinions respect- ing the regulating principle of price, and the discordant and erroneous opinions that are still so exceedingly prevalent with legard to it, will, we hope, be deemed a sufficient apology for the length of the previous remarks, and for the insertion of Opinion of the following paragraph from the Histoirt de la Monnaic of the Marquis ^|^g Marquis Gamier, in which the doctrine we have been en- deavouring to establish is enforced with equal ability and elo- quence : " Mais les productcurs tendentcontinullementareglerlaquan- tite des productions sur la somme des demandes ; ils ne restevont pas au-dessous de ce point, sans etre tenti's, d'accroitre la masse de leurs produits ; et ils ne peuvent le depasser sans s'exposer it perdre. Ces deux (juantitt^s, celle des produits et celle des de- mandes, s'efforcent done a se mettre en equilibre Tune avec I'autre. 11 existe done un point de repos vers lequel elle? POLITICAL ECONOMY. 117 graviteiit chacune de son cote; un point qui est leur niveau, Cost of Pro et c'est ce point qui constitue le prix naturel de la chose ve- f^g^ul^fing" nale. Quelle est la limite au-dela de laquelle le producteur pf'.ncipioof ne peut porter la quantite de ses produits ? C'est le prix na- turel ; car, s'il ne peut obtenir ce prix pour tout son produit, il sera en perte. Quelle est la boi'ne des demandes du consom- tnateur ? C'est le prix naturel ; car il ne veut pas donner plus que I'equivalent de ce qu'il re^oit. Si, par une decouverte, ou par un perfectionnement de I'industrie, le producteur est mis a meme d'etablir I'article sur lequel il s'exerce amoins de temps et de depense, alors le prix naturel baissera, mais aussi la som- me des demandes accroitra dans une proportion pareille, parce que plus de consommateurs seront en (5tat de payer ce prix naturel, moins eleve que I'ancien. Le prix naturel sera toujours, pour chaque chose vaiale, la limite commune au-dela de laquelle la somme des demandes de cette chose et la quantite de sa pro- duction ne devront plus /aire deprogres. Quand le prix courant est le prix naturel, le producteur et le consommateur se don- nent reciproquement I'equivalent de ce qu'ils re§oivent. Quand le prix courant s'ecarte du prix naturel, ou c'est la consom- mation quisouffre au profit de la production, ou c'est la pro- duction qui souffre au profit de la consommation. Get etat de soufirance ne peut durer, et de la procedent les variations du prix courant. Ces variations, que Smith a expliquees et analy- sees avec une si parfaite lucidite, nesont autre chose que les ef- forts pour revenir au prix naturel. Tenter d'expliquer ces variations, sans reconnaitre I'existence d'un prix naturel, ce serait vouloir expliquer les oscillations du pendule sans convenir de sa tendance vers un centre de gravitation ; ce serait supposer un effort sans but et sans mobile ; ce serait admettre le mouve- ment et nier le repos ; enfin, en voyant les phenomenes du cours des fluides et de I'^quilibre des solides, ce serait contester les lois du niveau et de la pesanteur. Si les choses venales n'ont point de prix naturel, alors les mom^emens de la circulation seront diriges par une force aveugle et inconnue ; les prix moyens ne seront plus que le r(^sultat de chances purement for- luites ; il n'y aura plus d'equivalent reel ; les valeurs n'auront plus de mesure naturelle ; I'economie politique ne pourra plus aspirer a etre au rang des sciences, puisqu'elle manquera du caractere essentiel qui les constitue telles, et que les faits dont elle traite ne seront plus fondes sur les lois immuables de la nature."* — (Tome I. Introduction, p. 62.) "*■ " Producers constantly seek to regulate the quantity of tlieir products by the extent of the demand. They cannot remain below this point with- out being tempted to increase the amount of their products, nor can they pass it without being exposed to loss. These two quantities, therefore, ol demaiid and supply are necessarily always tending to an equilibrium. There is a certain period of rest towards which each on its own side gra- vitates — a point which brings them to a level, and which constitutes the natural price of the thing sold. For what is the limit beyond which the producer cannot pass in the quantity of his products .'' It is their natural price — for he is a loser if he cannot obtain this price for all. What too is the limit of the demand of the consumer ? It is the natural price, for he will not give more than an equivalent for that which he receives. If by a new discovery or improvement, the producer is enabled to furnish the article on which he labours in less time and at less expense, the natural price will then sink, but at the same time the demand will increase in a 15 1 1 8 POLITICAL ■ KCONOMY. Nature and Having thus shoM'n that it is the cost of production which >s K^n^*^'" the sole regulating principle of price, we shall now proceed to investigate the elements which enter into and constitute the cost of producing commodities in an advanced state of society, when a rent is paid for land, and circulating and fixed capital employed to facilitate the lahour of the workman. This is, of all others, the most important, as it is the most radical inquiry in the science of the distribution of wealth ; and it is indeed impossible, with- out possessing accurate notions on this subject, to advance a single step without falling into errors. We shall begin by en- deavouring to ascertain whether rent enters into the cost of pro- duction, or not. Sect. III. ~^J\'aiiirc, Origin, and Progress of Rent — jYot a Cause but a Conseqiience of the High Value of Raw Produce — Does not enter into Price — Distinction between Agriculture and Manufactures. Dr. Smith was of opinion, that, after land had become pro- perty, and rent began to be paid, such rent made an equivalent addition to the exchangeable value of the produce of the soil. (^Wealth of JVations, I. p. 75.) This opinion was first called in question in two pamphlets of extraordinary merit, published nearly at the same time, by Mr. Malthus,* and a Fellow of Uni- versity College, Oxford. t These writers endeavoured to show- that rent was not, as had been generally supposed, a consequence of land being appropriated and of limited extent, but of the superior productiveness of one species of land over another ; like proportion, because more consumers will be able to purchase at this reduced cost. JVatural price, therefore, in every case, constitutes the limit fteyond lohich, in all vendible commodities, demand and supply cannot ad- vayice. When the market price conours with the natural, the producer and consumer give in turn an equivalent for that which they receive. When- ever the market price deviates from the natuial, either the consumer suf- fers for the profit of the producer, or the producer suffers for that of the consumer. This state of loss cannot be permanent ; and hence proceed the variations of market price. These variations which Smith has explain- ed and analyzed with such perfect clearness, are nothing else than efforts to return to the natural price. To attempt the explanation of these vari- ations without referringto a natural price, would be to explain the oscilla- tions of a pendulum without acknowledging its tendency to the centre of gravity; it would be to suppose' an effort without aim, to admit motion and deny rest ; it would be equivalent in fine, after witnessing the phe- nomena of the course of fluids and the weight of solids, to a denial of the laws which bring the one to a level and the other to an equilibrium. If ven- dible commodities have no natural price, then the movements of its circu- lation will be directed by a blind and unknown force, and average prices will be the result of causes altogether fortuitous ; there will be no such thing as a real equivalent ; value will have no natural measure ; Political Economy can no longer aspire to the rank of science, since it will want that which constitutes it such, viz. — that the facts of which it treats are founded upon the immutable laws of nature." — E. * An Inquiry into the JValure and Progress of Rent, by the Rev. T. R. Malthus, 1815. t An Essay on the Application of Capital to Land, by a Fellow of Uni- versity College, Oxford, 1815. See note p. 43, where mention is made of this essay ; though its prio- rity to tiie Inquiry of Malthus is incorrectly stated. Malthus' Inquiry into the nature of Rent liaving been published in 1815, his Principles "f Political Economv not until 1819.—^:. POLITICAL ECONOMY. 1 1 9 jmd that the annihilation of rents would not, provided tHe same Nature and extent of land was cultivated, enable its produce to be sold at a r^Ui*" "' lower price. Mr. Ricardo has illustrated and enforced this doctrine witii his usual ability — has stripped it of the errors by which it had been encumbered, and has shown its vast impor- tance to a right understanding of the laws which regulate tlie rise and fall of profits. But the subject is still far from being exhausted ; and we hope to be able to treat it in a somewhat different manner from what it has been treated by either of these gentlemen, and to obviate some rather specious objections which have not come under their notice.* Rent is properly -' that portion of the produce of the earth Definition which is paid by the farmer to the landlord for the use of the °' '''^^ natural and inherent powers of the soil." If buildings have been erected on a farm, or if it has been inclosed, drained, or in any way improved, by an expenditure of capital and labour, the sum which a farmer will pay to the landlord for its use will be composed, not only of what is properly rent, but also of a remuneration for the use of the capital which has been laid out in its improvement. In common language, these two sums are always confounded together, under the name of rent ; but in an inquiry of this nature, it is necessary to consider them as per- fectly distinct. The laws by which rent and profits are regu- lated being totally different, those which govern the one cannot be ascertained if it be not considered separately from the other. On the first settling of any country abounding in large tracts NoUentpaid of unappropriated land, no rent is ever paid ; and for this plain ""ttUn-^o? and obvious reason, that no person will pay a rent for what may any Country. be procured in unlimited quantities for nothing.! Thus in New Holland, where there is an ample supply of fertile xmdunappro- priated land, it is certain that until the best lands are all culti- vated no such thing as rent will ever be heard of Suppose, * Regarding as the Editor does this new analysis of Rent as one of the peculiar merits of the modern school, and the present as one of the ablest exhibitions of it, ho is not inclined to trouble the reader with the arguments of its opponents ; they may be found in their original form in the Wealth of Nations, Book I. ch. 11. Part !< 2, and 3. hi Say, Book II. eh. 9 ; and in a note of the translation of Say, Vol. II. p. 118, Boston, 1821 ; and in the Quarterly Review, No. GO. The arguments of its maintainers may be seen in the essays above referred to, in Malthus' Political Economy, ch. 3, and Ricsfrdb, ch. 2, or Mills' Elements, ch. 2, sect. 1 ; Edinburgh Review of Ricardo. — E. t Of the truth of this position the interior of our country affords abun- dant illustration. Distance from a market, and the previous labour of clearing render a land-owner poor in the midst of the materials of wealth, and cause the full returns of land to be no more than a fair equivalent for the labour necessary to its cultivation. It is indeed true that the apprecia- ■ tion of the land arising from this labour is to the owner an equivalent for rent, but it is equally true that this being an incidental result and not paid for by the tenant, does not enter into the price of the grain so raised, since it will continue to be raised at a price which repays simply the labour employed in its production. Hence in our country the anomalous class of indigent rich men — capitalists who with funds locked up in land, which the needs of society have not yet brought into cultivation, starve in the midst of the bounties of nature. By such at least the discriminating judgment of Madam de Sevigne will not be questioned when she writes from the country — " I wish my son could come here and convince himself of the fal- lacy of fancying ourselves possessed of wealth when one is only possessed of lands." De Sevigne, let. 224. Say, Book I. ch. 9. 120 POLITICAL ECONOMY. I Nature and howcver, that tillage has been carried to this point, and that the Causes of jn(.reasing demand can, in the actual state of the science of agriculture, be no longer supplied by the best lands, it is plain that either the increase of population must cease, or the inha- bitants must consent to pay such an additional price for raw produce as will enable the second quality of land to be culti- vated. No advance short of this will procure them another bushel of corn ; and competition will not, as we shall imme- diately show, allow them to pay more for it. They have, there- fore, but one alternative. If they choose to pay a price suffi- cient to cover the expense of cultivating land of the second quality, they will obtain additional supplies ; if they do not, they Origin of must Want them. Suppose, now, that the consumers offer such ^"'' a price as wdl pay the expense of producing corn on soils which, in return for the same expenditure as would have produced 100 quarters on lands of the Jirst quality, willonly yield 90quarters ; it is plain it will then be just the same thing to a farmer whether he pays a rent of ten quarters for the first quality of land, or farms the second quality, which is unappropriated and open to him, Progress of without paying any rent. If the population went on increasing, Rent. lands which would yield only 80, 70, 60, 50, &.c. quarters in re- turnfor the same expenditure that had obtained 100 quarters fromthe best lands, might be successively brought under cultivation. And when recourse had been had to these inferior lands, the rent of the land of the higher qualities would plainly be equal to the dif- ference, or the value of the difference, between their produce and the produce of the worst quality under cultivation. Suppose, for example, that the worst quality under cultivation yields 60 quar- ters, then the rent of the first quality will be 40 quarters, or 100 — 60 ; the rent of the second quality would, in like manner, be equal to the diiference between 90 and 60, or 30 quarters ; the rent of the third quality would be equal to 80 — 60, or 20 quarters, and so on. The produce raised on the land last culti- vated, or with the capital last applied to the soil, would always be sold at its necessary price, or at that price which is just suffi- cient to yield the cultivators the common and average rate of profit, or, which is the same thing, to cover the cost of its pro- duction. If the price were above this level, then agriculture would be the best of all businesses, and tillage would be imme- diately extended ; if, on the other hand, the price f^l\ below this level, capital would be withdrawn from the soil, and the poorer lands thrown out of cultivation. In such circumstances, it is undeniably certain that no rent could enter into the price of that portion of produce raised with the capital last applied to the soil. Its price is exclusively made up of wages and profits. The proprietors of the superior lands obtain rent ; but this is the necessary result of their greater fertility. The demand can- not be supplied without cultivating inferior soils ; and to enable them to be cultivated, their produce must sell for such a price as will afford the ordinary rate of profit to their cultivators. This price will, however, yield a surplus over and above the ordinary rate of profit to the cultivators of the more fertile lands, and this surplus is rent. An increase of rent is not, therefore, as is very generally svipposed, occasioned by improvements in agriculture, or by an POLITICAL ECOXOMY. 121 increase in the fertility of the soil. It results entirely from the Nature and necessity of resorting, as population increases, to soils of a de- ReHr^"^ creasing degree of fertility. Rent varies in an inverse propor- tion to the amount of produce obtained by means of the capital and labour employed in cultivation ; — that is, it increases when the profits of agricultural labour diininish, and di7ninish€s when they increase. Protits are at their maximum in countries like New Holland, Indiana, and Illinois,* and generally in all situations in which no rent is paid, and the best lands only cultivated ; but it cannot be said that rents have attained their maximum so long as capital yields any surplus in the shape of profit. A quarter of wheat may be raised in the Vale of Gloucester, or in the Carse of Gowrie, at perhaps a fourth or a fifth part of the expense necessary to raise it on the worst soils in cultivation. There cannot, however, be at the same time two or more prices for the same article in the same market. And it is plain, that if the average market price of wheat be not such as will indemnify the producers of that which is raised on the n^orst soils, they will cease bringing it to market, and the required supplies will no longer be obtained ; and it is equally plain, that if the market price of wheat exceeds this sum, fresh capital will be applied to its production, and competition will soon sink prices to their natural level — that is, to such a sum as will just afford the com- mon and ordinary rate of profit to the raisers of that portion of the required supply of corn which is produced in the most unfa- vourable circumstances, and with the greatest expense. It is by the cost of producing this portion that the average price of all the rest must always be regulated. And, therefore, it is plainly all one to the consumers whether, in an advanced stage of society, the excess of return over the cost of production on lands of the tirst quality belongs to a non-resident landlord, or an occupier. It must belong to the one or the other. Corn is not high because a rent is paid, but a rent is paid because corn is high — because the demand- is such that it cannot be supplied without cultivating soils of a diminished degree of fertility, as * Our nearer acquaintance with the sections of country here specified, enables us to perceive that some error must lurk in the reasoning which se- lects them as instances of peculiarly high profits. The simple fact of no rents being paid, or what is equivalent, only the first quality of land culti- vated is not a sullicient criterion ; that may arise from two causes, from eitlier the want of a market for produce, or a present surplus of fertile land. It is from the latter alone that high profits and great prosperity flow. If the non-existence of rent arising from the former cause were sufficient, then the closing of our roads and great canal would bring our western coun- try to a more flourishing state than it is at present, for it would infallibly greatly reduce, if not altogether abolish rents, and confine its inhabitant? to the cultiA'ation of the first quality of soil. It would also have been more correct in our author to have made tlie reference general to the United States, the sea ports of which participate equally with the new country in profits arising from an abundance of fer- tile soil. It is besides contrary to the fundamental proposition of the ave- rage profits of capital in a country, to institute a distinction between its rate in different parts of it. The truth is, the rate of profit is no higher in Indiana thcui in . New-York, except in so far as a premium is paid for the risk of the employment of capital, or as it is united with those higher wages for personal services which must bribe a man to that sacrifice of comfort and enjoyment necessarily involved in a removal to a new countr}'. — F. 122 POLITICAL ECONOMY. Nature and Compared with the best.* Suppose there is an eifectual demand iientf^ °^ for 10 millions of quarters, and that it is necessary to raise one million of these quarters on lands which yield nothing but the common and average rate of profit to their cultivators ; it is clear that the relinquishing of the rents payable on the superior lands would be no boon whatever to the cultivators of the infe- rior lands. It would not lessen their expenses ; that is, it would not lessen the quantum of capital and labour necessary to pro- duce that portion of the required supply which is raised in the most unfavourable circumstances ; and, if.it did not reduce this expense, it is utterly impossible, supposing the demand not to decline, that it could lower prices. Mr. Malthus is, therefore, right in saying, that although landlords were to give up the whole of their rents, their doing so would have no influence on the price of corn. Such an act would only turn farmers into gen- tlemen, and gentlemen into beggars. The case is, however, distinctly and completely different when the cost of production varies. If it is diminished, the competition of the producers will infallibly sink prices in an equal proportion : If it is in- creased, no supplies will be brought to market, unless the price be raised to a corresponding level. In no case, therefore,, whether the demand be great or small — whether for one or one million of quarters, can the price of raw produce ever perma- nently exceed or fall below the sum necessary to pay the cost of producing that portion of the supply that is raised on the worst land, or with the last capital laid out on the soil. Objectionsto Two objections have been made to this theory. In the Jirst *"^ ' place, it has been said that; though it might hold good in a coun- try like New Holland, where land is not appropriated, still it is true that all the lands in every civilized and appropriated coun- try like England, always yield some small rent to the proprietor ; and that, therefore, it cannot be said that the price of produce is, in such countries, determined by the cost of raising it on that quality of land which pays no rent.' Mr. Mill has justly observed of this objection, that even if it were well founded, it could not practically affect any of the con- clusions we have endeavoured to establish. There are in Eng- land and Scotland thousands of acres of land which do not let for L. 20 ; but to cultivate them would require an outlay of many thousands ; and the rent would consequently bear so small a proportion to the expenses of production, as to become alto- gether evanescent and inappreciable. (^Elements of Political Economy, Y^. 19, 1st edit.) Land in eve- There can be no doubt, however, that there is in this, and CountTv^'^* most other extensive countries, a great deal of land which yields which yields no rent whatever. In the United States and Russia such is unques- no ent. tionably the case ; and yet no one presumes to say that the laws which regulate I'ent in the United States and Russia are different from those which regulate it in England and France. The poorest lands are always let in immense tracts. If it were at- * That this explanation of the origin of rent is satisfactory and conclu- sive, may be drawn from the silence of those writers who maintain the sentiments of Adam Smith in opposition to what they term the novel- ties of the school of Ricardo. ,See Quarterly Review, Vol. XXX. p. 307.— T?:. . • .POLITICAL ECONOMV. 123 tempted to let particular portions of these tracts separately, they Nature and would bring no rent whatever ; but they appear to yield rent, Rent" ° because rent is paid not for them, but for the more fertile spots ' — intermixed with them. But although it were really true that Ken7on'a°[ every rood of land in Britain paid a high rent, it would still be soiisnotin true that such rent did not, and could not, enter into the price of with'tiio"' raw produce. The rent of a country consists of the aijference, 'V'j'"!'''*' or the value of the difference, bet-ween the produce obtained from esdoes ,. iiif !■•• not depend ted, the relative, or exchangeable value or commodities is noonthoauan- longer, as in the early stages of society, determined by the total taUmp*i^^yed quantities of labour required to bring them to market, but by '" t'^^'f Pro- the quantities of capital expended on their production. At bot- tom, however, this theory is precisely the same with that which we have just explained. Capital is nothing but immediate la- bour accumulated ; and to say that the exchangeable value of commodities depends on the quantity of it employed in their production, is only another way of expressing the identical pro- position we have illustrated. Colonel Torrens, however, and those who agree with him, contend that the dift'erence between the two theories is not apparent but real. " If," say they. " two capitalists employ equal stocks, the one in paying the wages of masons employed to build a house, and the other < in purchasing wine after it has been put into casks, and keeping- it until it has become fit for use, then, as the products of equal capitals must always be equal, the house and the wine will be worth precisely the same sum, though it is plain they are pro- duced by very different quantities of labour." This case is very ingeniously put ; and it deserves attention from the oppor- tunity which it affords of explaining a point respecting which there has been a great deal of misconception. At first sight, it certainly seems as if both accumulated labour and immediate labour had been employed in the construction of the house, and accumulated labour only in the production of the wine. But, in point of fact, all that is done in either case is, to change the form of equal capitals ; to transmute, if we may so speak, a certain quantity of capital, through the medium of human hands, 18 142 I'ULITICAL ECONOMY. Exchange- ifito a house ; and to transmute the same quantity ot' stock. able Value, (h^ough the medium of natural powers, into wine fit for drink- ing. The capital which is consumed by the mason in food and clothes is plainly not expended on the house, but on himself; and it is his immediate labour only, or the exertion of his phy- sical powers, that forms the only labour really expended on the house. The employer of the mason paid him his wages, not, as Colonel Torrens supposes, in the unreasonable expectation, that he would la}' out these wages, in addition to the labour of his hands, on his house, but that he might lay out the wages on himself, and give him his labour as an equivalent for them. The object which the builder of the house had really in view was. to convert a certain amount of capital into a house, and to ac- complish this object, it was necessary that the capital should, in the first j)lace, be exchanged for, or converted into, the im- mediate labour of masons. In th'e production of the wine, this species of transmiitation was not necessary ; the effect which had, in the first case, been produced by the agency of men, being, in the second case, produced by the agency of the pro- cesses which nature herself carried on in the casks. It is clear, therefore, that no greater quantity of labour was required to produce the house than to produce the wine. Different «o^enra/Me. Large con- sumption is the destruction of large value,however small the bulk in which that value may happen to be compressed. Consumption, in the sense in which the word is used by Po- Consump- litical Economists, is synonymous with use. We produce com- of Produc- modities only that we may be able to use or consume them.j "°"- for its importance, — a few further hints will open the siibject to the reader in some of its many bearings, and lay down the principles that should go- vern the practical legislator as well as the theoretical economist in deciding upon them. — E. * This definition extended a step further, so as to embrace that accumu- lation of products which we term capital, will throw light on that impor- tant subject. It is a common prejudice to regard capital as existing in cer- tain definite forms, — such as money, houses, or lands. This definition, however, extends our notion of it to all that possesses value. The mate- rial form is something incidental and unimportant, the real capital is im- material, and, as it were, spiritual, existing in value and use, in its relation to the wants of man and the needs of society. Thus a man's capital may be doubled or diminished to one half its amount, without the alteration of one particle of the matter of that in which it consisted, a position which is illustrated in every rise and fall of property — as, for instance, city lots and houses doubling in value by increase of inhabitants, — farms, by facility of intercourse, — or, on the other hand, houses without chance of tenants, or ships of freight. — E. t As an exception to this assertion might be started by an unpractised reader, the case of articles produced for sale. The answer is, that the language of our author is general and scientific, — having reference, not to individuals, but to man in general. To him, consumption is the sole object of production and the sole application of products. In regard of the foreign exchanges which one country makes witli another, there may appear some doubt as to the true method of stating them, in estimating its production and consumption. The clearest and simplest light in which they can be placed is to rank all exportation as consumption, and all importation as reproduction. The merchant consumes his exports and reproduces his imports. Among the just and striking analogies which arise on viewing the subject in tliis light, are the following : — 1. Commerce appears under a new character, it becomes a species of ma- nufacture, which consuming reproductively the surplus of the annual yield of the country, reproduces it under a new and more valuable form, — by a 156 JPOLITICAL ECONOMl'. Consump- Cousuiiiption is the great end and object of all human industry. Wealth. Production is merely a means to attain an end. No one would produce were it not that he might afterward consume. All the products of art and industry are destined to be consumed, or made use of; and when a commodity is brought into a state fit to be used, if its consumption be deferred a loss is incurred. All products are intended either to satisfy the immediate waats, or to add to the enjoyment of their producers ; or they are intended to be employed as capital, and made to reproduce a greater value than themselves. In the Jirst case, by delaying to use them, it is plain we either refuse to satisfy a want, or deny ourselves a gratification it is in our power to obtain ; — and in the second, new kind of alchemy it converts wheat into gold and cotton into silk, or into whatsoever other metal, or material, or form, the dealers a tthis uew ma- uufacturing mill may choose to require. If we could suppose this trans- i'ormation thus effected by art and skill, what limit could we set to the na- tional value of an engine of such superhuman powers, and what difference does it make to the nation, while it receives the benefit, as to the par- ticular process by which the conversion is effected. 2. In estimating the benefits of commerce, it teaches us that we need look no further than the warehouse of the merchant ; that which goes in is to be compared with that which comes out ; what passes in the interval is nothing more than the process of the manufacture, — the merchant scatters his wheat upon the waters as the farmer does his upon the land, and " after many days he finds it," — to judge of the national benefit, there is no more ne- •cessity of tracing the changes it undergoes on the bosom of the one than in the dark recesses of the other. In the case of the farmer, we learn the quantity sown and the crop that he has reaped, and are satisfied that in the proportion which exists between them lies all which is material to himself or the nation. The subdivision of his farm, the rotation of his crops, and the nature of his fences, we leave confidently to the operation of self-inte- rest and private judgment. So is it with the merchant, he sows cotton and reaps silk ; what is it to the public whether it be upon land or water ; that it brings a good crop is all that concerns the public to know, and that is known by it continuing to be cultivated. As to the various processes through which that which is consumed passes before it issues again in its new form, that is, as to all the detail of commercial balances, markets, and exchanges, — it is an analysis as foreign to the determination of the result, as an examination into the progress of vegetation would be, previous to deci- ding on the profits of the farmer. 3. This analogy serves to set in a still stronger light, the absurdity of resting the benefits of commerce upon the balance of trade, — or rather it shows that the rule is to be reversed, so far as any conclusion can be drawn from it. In a good crop, whether from land or sea, the returns must ex- ceed the outlay — and tlie farmer, and the merchant, and the country alike grow rich, just in proportion as they do so. These observations may serve also to show the identity of interest that prevails throughout all the classes of the community, and the fallacy of di- viding tliem into separate interests. Who is the farmer, and who is the manufacturer .'' Or rather, what merchant is there who is not either the one or the other. If he furnish to the country of the produce of the ground he is the former, if the results of after labour he is the latter, — no matter what materials he makes them out of, or witli what machines he works, or by what name he may be popularly distinguislied, to the eye of the political economist, and in so far as he is connected with national inte- rests, the merchant is a woollen, or cotton, or iron manufacturer, the pro- prietor of a vineyard, or tlie manager of a sugar plantation, just according to the varying nature of the products which are the result of his labour. The community, as such, has but one interest, viz. the cheapness and good- ness of the commodities it consumes. The science knows no such interest as that of the producer, — that interest is always a monopoly. Production is but the means to an end, — and the producer is. in all cases, but the ser- vant of the public. — E- POLITICAL ECONOMV. lo', by delaying to use them, it is equally plain we allow the instru- Consump- ments of production to lie idle, and lose the profit that might be weaik derived from their employment. But, although all commodities are produced only to be con- Tost of ad- sumed, we must not fall into the error of supposing, that all con- cmis^ump-^ sumption is equally advantageous to the individual, or the so- ^'°"- ciety. If an individual employs a set of labourers to build him a house the one summer, and to pull it down the next, their la- bour, or rather the capital he gave them in exchange for their labour, and which they have consumed during the time they were engaged in this futile employment, is evidently destroyed for ever, and absolutely lost both to himself and the public ; whereas, had he employed them in the raising of corn, or in the production of any species of valuable produce, he would have obtained commodities of equal, or more than equal, value to the capital he gave them. The-cmlue of the returji, or the advantage obtained from the consumption, is, therefore, the true and only test of advantageous and disadvantageous, or, as it is more commonly termed, of productive and unproductive consumption. Com- modities ?^ve comnm^di productively when the advantage or benefit accruing in consequence to their possessors, or when the value of the products obtained in their stead exceeds their value ; and they are consumed unproductively when the value of the advan- tage or benefit, or the value of the new commodities, is less than their value. It is on this balance of consumption and re- pi-oduction, and not, as was so long supposed, on the balance of trade, that the prosperity or decay of every nation depends. If, in given periods, the commodities produced in a country exceed those consumed in it, the means of increasing its capital will be provided, and its population will either increase, or the actual numbers will be better accommodated, or both. If the con- sumption in such periods fully equals the reproduction, no means will be afforded of increasing the stock or capital of the nation, and society will be at a stand. And if the consumption exceeds the reproduction, every succeeding period will see the society worse supplied ; its prosperity and population will evidently de- cline, and pauperism will gradually and progressively spread it- self over the whole country. It is impossible, however, to fix on any standard by a compari- son with which we may be able to obtain even a tolerable ap- proximation to the comparative value or advantage of different kinds of consumption. This is a point on which the sentiment? of no t«o individuals can ever exactly coincide. The opinions of each will always depend more or less on the situation in which he is placed. The rich man will naturally be inclined to give a greater extension to the limits of advantageous consumption than the man of middling fortune ; and the latter than the man who is poor. And it is undoubtedly true that a man's expenses ought alwaj's to bear some proportion to the magnitude of his fortune, and his condition in society ; and that v/hat might be proper and advantageous expenditure in one case, might be exceedmgly im- proper and disadvantageous in another. It is, therefore, quite impossible to liame any system Of rules on the subject of expen- diture, which shall be applicable to the case of evei-y individual : and even if it were practicable, there is no ground to think that 20 loB FULITICAL KCGNOMV. Consump- fion of Wealth. Luxury not diaadvan- tageous. the lormalion of such rules would be of the smallest utility. The state has no right whatever to control individual expenditure ; nor, even if it had such a right, could it exercise it without oc- casioning serious injury. The public interest requires that the national capital should, if possible, be constantly kept on the in- crease ; or, which is the same thing, that the consumption of any given period should be made the means of reproducing a greater value. But we have sufficiently proved that this cannot, in any case, or under any circumstances, be the result of a system of surveillance and restriction. Industry and frugality never have been, and never can be, promoted by such means. To render a man industrious, secure him the peaceable enjoyment of the fruits of his industry ; — to wean him from extravagance, and to render him frugal and parsimonious, allow him to reap all the disadvantage of the one line of conduct, and all the advantage of the other. The poverty and loss of station which is the neces- sary and inevitable result of improvident and prodigal consump- tion, is a sufficient secvirity against its ever becoming injuriously prevalent ; and v/herever the public burdens are moderate, property protected, and the perfect and uncontrolled freedom of industry secured, the constant efforts of the great body of the people to rise in the world and improve their condition-, will en- sure the continued increase of national wealth. It is idle to ex- pect that all unproductive and unprofitable expenditure can ever be avoided ; but the experience of all tolerably well governed states proves, that the amount of the produce of industry pro- ductively expended, is always infinitely greater than that which is expended unproductively. It was long a prevalent opinion among moralists, that the la- bour bestowed on the production of luxuries, and consequently their consumption, was unproductive. But this opinion is now almost universally abandoned. Unless, indeed, all comforts and enjoyments are to be proscribed, it is impossible to say where necessaries end, and luxuries begin. But if we are to under- stand by necessaries such products only as are absolutely re- quired tor the support of human life, every thing but wild fruits, roots, and water, must be deemed superfluous ; and in this view of the matter, the peasantry of Ireland, who live only on po- tatoes and butter-milk, must be considered as contributing much more to the national wealth than the peasantry of Britain ! The mere statement of such a doctrine is sufficient for its refutation. Every thing that stimulates exertion is advantageous. The mere necessaries of life may be obtained with comparatively little labour ; and those savage and uncivilized hordes, who have no desire to possess its comforts, are proverbially and notoriously indolent and dissipated. To make men industrious — to make them shake ofl' that lethargy which is natural to them, they must be inspired with a taste for the luxuries and enjoyments of civilized life. When this is done, their artificial wants will be- come equally clamorous with those that are strictly necessary, and they will increase exactly as the means of gratifying them increase. Wherever a taste for comforts and conveniencies has been generally diffused, the wants and desires of man become altogether unlimited. The gratilication of one leads directly to tlie fox'mation of another. In highly civilized societies, new POLITICAL KCONOxMV. 159 products and new modes of enjoyment are constantly presenting Consump- themselves as motives to exertion, htuI as means of rewarding it. wcaiiti Perseverance is, in consequence, given to all the operations of industry ; and idleness, and its attendant ti'ain of evils, almost entirely disappear. " What," asks Dr. Paley, " can be less necessary, or less connected with the sustentation of human life, than the whole produce of the silk, lace, and plate manuiactory ? Yet what multitudes labour in the dilierent branches of these arts ! What can be imagined more capricious than the fondness for tobacco and snuff ? Yet how many various occupations, and how many thousands in each, are set at work in administering to this frivolous gratification !" It is the stimulus which the de- sire to possess these articfes of luxury gives to industry that renders their introduction advantageous. The earth is capable of furnishing food adequate for the support of a much greater portion of human beings than can be employed in its cultivation. But those who are in possession of the soil will not part with their produce for nothing ; or rather, they will not raise at all what they can neither use themselves nor exchange for what they want. As soon, however, as a taste for conveniencies and luxuries has been introduced, the occupiers of the ground raise from it the utmost that it can be made to produce, and exchange the surplus for such conveniencies and gratifications as they are desirous of obtaining : and, in consequence, the producers of these articles, though they have neither property in the soil, nor any concern in its cultivation, are regularly and liberally supplied with its produce. In this way, the quantity of necessaries, as well as of useful and agreeable products, is vastly increased by the introduction of a taste for luxuries ; and the population are, in consequence, not only better provided for, but their numbers are proportionably and greatly augmented. . It is plain, therefore, that the consumption of luxuries cannot, provided it be confined within. proper limits, be justly considered as either disadvantageous or unproductive. If, indeed, a man vv^ere to consume more luxuries than his labour or his fortune enabled him to command, his consumption would be disadvanta- geous. But it is plain, the same thing would equally have hap- pened had he consumed a greater quantity of necessaries than he could afford. The mischief does not consist in the species of articles consumed, but in the excess of their value over the means of purchasing them possessed by the consumers. This, how- ever, is a fault which ought always to be left to be corrected by the self-interest of those concerned. The poverty and degrada- tion caused by indulging in unproductive consumption is a natural and sufficient guarantee against its ever being carried to an inju- rious extent. To attempt to lessen unproductive consumption by proscribing luxury, is really the same thing as to attempt to enrich a country by taking away some of the most powerful mo- tives to production.* * That sumptuary laws are unwise may be judged from their general abandonment ; once they were common throughout Europe, now they are confined almost to the mountains of Switzerland. At an early period, tliey formed a prominent feature of the colonial laws of our country, but as their old annalist observ.es, survived not its " golden age." They were found here, as elsewhere, to be inconsistent with the progress of ]60 POLITICAL ECOXOMV. consump Dr. Smith has given another criterion of productive and un- WwUh. productive consumption ; but his opinions on this subject, though — . , exceedingly ingenious, and supported with his usual ability, ap- CritevTon o*f pear to rest on no solid foundation. He divides society into two Productive orj-eat classes. The first consist of those who fix, or, as he terms; ana Unpro- » . , • i i • • • . •' ,-, , ductiveCoii- it, " realize their labour m some particular subject, or vendible sumption, commodity, which lasts for some time at least atler that labour is past ;" the second of those whose labour leaves nothing in exists ence after the moment of exertion, but perishes in the act of per- formance. The former are said by Dr. Smith to be productive, the latter unproductive hihourers. Not that, in making this dis- tinction, Dr. Smith means to undervalue the services performed by the unproductive class, or to deny that they are often of the highest utility ; for he admits that such is frequently the case : but he contends, that these services, however useful, do not aug- ment the wealth of the country ; and, consequently, that the'com- modities consumed by this class are unproduetively consumed, and have a tendency to impoverish, not to enrich the society. '' But to avoid the chance of misrepresentation, we shall give Dr. Smith's opinions in his own words. " There is one sort of labour," says he, " which adds to the value of the subject upon which it is bestowed ; there is another which has no such effect. The former, as it produces a value, may be called productive ; the latter unproductive labour. Thus the labour of a manufacturer adds, generally, to the value of the materials which he works upon, that of his own maintenance, wealth. Franklin in his homely way illustrates the principle by the eifect produced by " a fine bonnet" from Philadelphia, upon the habits of a re- tired village in Pennsylvania ; it turned all the idle young women into in- dustrious knitters and spinners, in order to procure the means of similar display. It has been often questioned whether Political Economy be a moral science ; the decision of Adam Smith and his followers is against it ; the production of material wealth is the only question they admit. National prosperity as it rests upon the higher sources of talent, learning, science, and virtue, is altogether excluded, together with all reference to indivi- dual enjoyment. According to the policy of this system, every man would labour like a slave, hoard like a miser, and live like an anchorite ; and if • this is not to be the result, it is because reason and propriety and prudence are overruling considerations, and these are moral motives. We may, therefore, regard Political Economy to "he what all science must be, whicli, has reference to the conduct and wellbeing of man, a moral science, go- verned by those limitations which are imposed by virtue and prudence, and including all those operating causes which influence his character, and happiness. To this view of it, there lies indeed the objection, that it introduces many considerations of a general and moral nature', and there- fore not easily estimated. But in answer, let it be observed, that it also gives to the science the greater advantage of truth of application, and . forms the politician, not upon the rashness of theory, but upon tne calm confidence of practical investigation. He alone who studies Political Eco- nomy as a moral science, brings into calculation all the elements upon which national prosperity deiiends ; hence, the results at which he arrives are most likely to be found in accordance with fact, and the principles he deduces to be true, and practical, and operative, since they arc derived from a joint examination of the nature of wealth and the nature of man who estimates it. The ground of this decision is a universal axiom. Eve- ry rule and law which is intended to be operative upon man, must be based upon the knowledge of that compound nature which it proposes to regulate, for otherwise it will in practice be found to be cither inapplica- ble, inefficient, or injurioue. — F. POLITICAL ECOXOMV. Itil and of his master's profit. The labour of a menial servant, on consump- the contrary, adds to the value of nothing. Though the manu- vveaUh. facturer has his wages advanced to him by his master, he, in re- ality, costs him no expense, the value of those wages being .generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the main- tenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers ; he grows poor by maintaining a multitude of menial servants. The labour of the latter, however, has its value and deserves its reward as well as that of the former. But the labour of the manufacturers fixes and realizes itself in some particular subject, or vendible commodity, which lasts for some time at least afler that labour is past. It is, as it were, a certain quantity of labour stocked and stored up to be employed, if necessary, upon some other occasion. That subject, or, what is the same thing, the price of that subject, can afterward, if necessary, put into motion a quan- tity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their per- formance, and seldom leave any trace or value behind them for which an equal quantity of service could afterward be pro- cured. " The labour of some of the most respectable orders in the society is like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterward be pro- cured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how necessary, or how useful soever, produces nothing for which an equal quantity of service can afterward be procured. The protection, security, and defence of the commonwealth, the effect of their labour this year, will not purchase its "protection, security, and defence for the year to oome. In the same class must be ranked some both of the greatest and most important, and some of the most frivolous professions : churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musi- cians, opera-singers, opera-dancers, &c. The labour of the mean- est of these has a cei'tain value, regulated by the very same prin- ciples which regulate that of every other sort of labour ; and that of the noblest and most useful produces nothing which could af- terward purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production." (Wealth of JVations, II. p. 1.)* * The invidious distinction here drawn between the various classes of the community by arranging them as productive or unproductive labourers, is one of the narrow and imperfect views which is justly discarded in thf liberal svstem of Political Economv. 162 POLITICAL ECONOMV. Gonsump- Sucli arc the opinions of Dr. Smith, and it Avill not, we think. Wealth. be very difficult to show the fallacy of the distinction he has P^~ endeavoui-ed to establish between the labour, and consequently Distinction also the cousuuiption, of the different classes of society. To Different''"' ^egin with the case of the menial servant : — Dr. Smith says, that. ciu8sesof his labour is unproductive, because it is not realized in a vendible 6ho*wii'^o be commodity, while the labour of the manufacturer is productive, iii-foundcd. bccause it is so reahzed. But of what, may we ask, is the la- It is an early and natural prejudice, that some portions of society are idle, contribute nothing; to public prosperity, and live solely upon the la- bour of others. This error meets us under different forms. 1. The vulgar prejudice against the rich as if they were supported by the poor, and themselves contributed nothing to the common sustenance of the whole. Science has put down this language of ignorance and envy, and shown that the capital of the rich man is as effective in the support of society, as the manual labour of the poor. Indeed if any distinction is to be drawn between them it is in favour of capital as the higher agent, Avhich sets in motion, and so far supports all the productive industry of the country, that if it should be diminished one half, one half the labourers Avould immediately be driven away by starvation. 2. A more scientific, but not better founded opinion, is that of the French economists, who stigmatized as unproductive labourers all those who contributed not to the products of agriculture. This alone, accord- ing to them, furnished a surplus return to labour, which appeared in the fomi of rent paid to the landholder for the productive services of the soil. This prejudice is also exploded by advcUicing science, which shows — First, that rent is the result, not of the higher, but of the more stinted energies of nature in the processes of agriculture — Secondly, that all other classes are equally with the farmer raisers of grain, provided their labours enable him to devote himself unreservedly to its cultivation— and lastly, that raw produce is without value till manufacturing labour brings it into a form subservient to the use of man, and commercial labour has, by a series of exchanges, brought it to the hands of the consumer. 3. The most liberal form under which tliis prejudice exists, is that main- tained by Adam Smith, as quoted in the text, excluding all from the pro- ductive class %vhose labour is not realized in a material form. This dis- tinction arose necessarily from his definition of wealth, which he confined to material products. The result of these views, was the division of society, by ^dam Smith, into the four following classes : — 1 . Labourers, who perform the work, and who live on wages. 2. Capitalists, i. e. holders of land or money, who furnish to the former the means of labour, and who .live on rent. 3. Traders, who facilitate the exchanges necessary to society, and who live on profits. . 4. Servants or drones of society, comprising the discordant assemblage of king, magistrates, professional men, players, house servants, and va- gabonds. The question lies, not with regard to tlie correctness of his conclusions which are incontrovertible upon the principles on which he sets out, but to the expediency of the premises themselves. For a defence of the views of .A.dam Smith, see the Review of this article, in the Quarterlv. Vol. XXX. p. 299. The frequent anomalies wliich arise out of this limitation of wealth, would seem to show that there is something erroneous in the principle upon which it rests. As for instance, a musical instrument is a portion of wealth, and he who made it is a productive labourer, while he whose skill ap- plies it to the only use for which it was made, and thereby prevents it from being wholly useless, he is an unproductive labourer. He who polishes boots to be sold is a productive labourer — he who performs the same office in a family is an unproductive labourer. Indeed this inconjistency may be made to appear in a thousand instances, and is very well exemplified by our author in the text. rOLITICAL ECONOJIY* 1G3 bour of ihe manufacturer really productive ? Does it not consist Coneump- exclusively of comforts and conveniencies required for the use wealth, and accommodation of society ? The manufacturer is not a pro- ducer of matter, but of utility only. And is it not obvious that the labour of the menial servant is also productive of utility ? If, for example, the labour expended in converting the wool of the sheep into a coat be, as it unquestionably is, productive, then surely the labour expended in cleaning and brushing the coat, and rendering it fit to be worn, must be so too. It is universally allowed, that the labour of the husbandman in raising corn, beef, and other articles of provision, is productive ; but if so, why is the labour of the menial servant who performs the necessary and indispensable task of preparing and dressing these articles, and fitting them to be used, to be stigmatized as unproductive ? It is clear to demonstration, that there is no difference whatever between the two sppcies of industry — that they are either both productive, or both unproductive. To produce a fire, is it not In opposition to these exclusive views, appears the liberal system of Ganihl, Say, Malthus, &c. According to this system every man is a pro- ductive labourer, if neither thief nor beggar. If he maintain himself, he must do it by producing either the direct means of subsistence, or what society considers as an equivalent, he exchanges equal values with those around him — he gives either labour, or capital, or land, or skill, or talent of some kind or other, but of equal value in the eyes of the community, with that which he receives in exchange. But to this wide principle there are two exceptions — political and moral. 1. Political. — Wlien left to the voluntary support of society, no order of men can become too numerous — arbitrarily supported, they may, and often do — as ecclesiastics in Romish- countries, and officers of state under monarcliical governments. 2. Moral. — This exception is twofold. — 1. Exclusive. 2. Limiting. 1. Excluding those who live by preying upon the vices of men and the corruptions of society. The kidnapper, the gambler, the provider of the means of gaming, intemperance, and vice, all fall under this head. They are self supported, but at the same time ruinous members of the commu- nity. Among these specifications as a prominent evil of our countiy, and more especially of the city of New- York, may be mentioned the facilities given to intemperance by a needless multiplication of licensed retailers of spirituous liquors. It is an evil great and manifold, moral, political, and. economical, striking at the rout of national prosperity, and filling society witli poverty and crime. 2. Limiting by the rules of moderation and prudence those who furnish the means of public amusement. This is a check, however, which lies not in the laws but in the manners of society, and is a further proof of the moral character of the science which requires it. The division which Say makes of the various classes of society is a'i follows. He brings into the rank of productive labourers, all who fall within the following classification : 1. Holders of land or of any other natural agent. 2. Capitalists who furnish the means of supporting the labourer. And. 3. The industrious class which includes all who live upon labour, men- tal or corporeal. This class compi-ehends the excluded labourers of Adam Smith, and is subdivided as follows : — 1. Those who obtain the raw materials, or agriculturists. 2. Who give to it utility by change of form, or manufacturing labourer.-. 3. Who bring it to the hands of the consumer, 'A^ommercial labourers. 4. Who increase the p«wer of the preceding lauo^irers, direct tlieir ef- forts, or secure the fruits of their labour. This includes, 1. Government in all its branches, who preserve the peace, safety, and good order of society. 2. Education in all its forms, intellectual, moral, and religious, 3. Science in all its inodifications. — E. 164 I'OLITICAL ECONOMY. Consump- just as iiecessary that coals should be carried from the cellar lo WeaUh. the grate, as that they should be carried from the bottom of the mine to the surface of the earth ? And if it is said, that the miner is a productive labourer, must we not also say the same of the servant, who is employed to make and mend the fire ? The whole of Dr. Smith's reasoning proceeds on a false hypothesis. He has made a distinction where there is none, and where there can be none* The end of all human exertion is the same — that is, to increase the sum of necessaries, comforts, and enjoyments ; and it must be left to the judgment of every man to determine what proportion of these comforts he will have in the shape of menial services, and what in the shape of material products. It is an error to suppose that a man is impoverished by maintaining menial servants, any more than by indulging in any other species of expense. It is true he will be ruined if he keeps more ser- vants than he has occasion for, or than he can afford to pay ; but his ruin would be equally certain were he to purchase an ex- cess of food or clothes, or to employ more workmen in any branch of manufacture than are required to carry it on, or than his capital could employ. To keep two ploughmen when one only might suffice, is just as improvident and wasteful expen- diture as it is to keep two footmen to do the business of one. // is in the extravagant quantity of the commodities we consume or of the labour we employ, and not in the particular species of com- modities or labour, that we must seek for the causes of impover- ishment. '\ * For an able defence of Smith against this heavy charge, see the Re- view of this article, already quoted, in the Quarterly, No. 60 ; where the rcWewer has the accidental advantage of pressing upon our author the inconsistency of these sentiments, with the definition with which he com- mences, viz., that Political Economy is " the science of the laws whiclt regulate the production, distribution, and consumption oi material pro- ducts.'''' This, however, is foreign to the merits of the decision. The real question turns upon this single consideration — whether tlie science relates to exchangeable value in general, or solely to that value which exists in material products. It is, in short, a question of consistency of definition, rather than of truth of reasoning. The conclusions of Adam Smith are equally logical with those of Ricardo. The choice is to be made in the premises from which they set out, and that choice is to be determined by comparing them, and the results which flow from them, with the truth and nature of things. If there be such a portion of national wealth as skill, science, and learning, then is the definition to be rejected which excludes • the consideration of them. If from certain premises we arrive at the con- clusion that such men as Watt, and Whitney, and Fulton, were unproduc- tive labourers, then are the premises to be denied from which follows so imjust a conclusion. — E. t The principle here laid down, is not only true in theory, but highly valuable in practice. It affords a solution of the anomalous case of ill suc- cess combined with economy, — poverty resulting, not from e:xtravagance, but from want of good management. Such persons are economical, per- haps penurious in their habits ; live miserably and yet succeed ill, — while others, with no greater advantages, aflbrd themselves all reasonable com- forts, and yet go on and prosjjer. . The reason may be stated in the words of our author, "they keep two ploughmen to do the work of one;" what- ever be their business, there is a wastefulness of time, of labour, or of capi- tal, in all their arrangements, which increases to them the cost of produc- tion, and renders the natural price of the commodity which they furnish, an insufficient return for that wliich it costs them. The natural price ol the commodity, whether it be tlie result «>f mental or manual labour, is always regulated bv the cost at which the industrious and skilfulcan fur- i'lJLITlCAL ECONOMY. 1 - pressed in a thousand different shapes, " Si les riches ne depen- wcauh. * sent pas heaucoup les pauvres mourront defaiin.^^'^ (Liv. VII. ^ chap. 4.) Montesquieu was betrayed into this error, from his Montesquieu. being unacquainted with the nature and functions of capital. The profusion of the rich, far from being of any advantage to the poor, is really one of the greatest calamities that can befal them. It is impossible that the demand for labour can be in- creased without an increase of capital. When the parsimonious principle predominates, capital increases, and as capital in- creases, the demand for labour is increased, the existing inhabi- tants are better provided for, and their numbers are increased ; on the contrary, wherever profusion and wasteful expenditure predominates, capital is diminished, the inhabitants are daily- worse and worse provided for, and idleness, pauperism, and dis- ease prevail. Besides, it must be remembered, that what is annually saved, is as regularly consumed as what is annually spent. The only difference is, that it is consumed in a different manner — consumed by those who render a greater value in re- turn, instead of being consumed by such as render no real value whatever.! " By what a frugal man annually saves," says Dr. Smith, " he not only affords maintenance to an additional number of labour- ers for that or the ensuing year, but, like the founder of a pub- lic workhouse, he establishes, as it were, a perpetual fund for the maintenance of an equal number in all time to come. The perpetual allotment and destination of this fund, indeed, is not always guarded by any positive law, by any trust-right, or deed of mortmain. It is always guarded, however, by a very power- ful principle, the plain and evident interest of every individual to whom any share of it shall ever belong. No part of it can afterward be employed to maintain any but productive hands, without an evident loss to the person who thus perverts it from its proper destination." (^Wealth of JVations, 11. p. 14.) We have already stated the impossibility of laying down any general rules on the subject of individual consumption. What the public is really interested in is, that it should never be car- ried on for the absurd purpose of occasioning a demand for the products of industry, and that it should be less than the repro- duction ; or, in other words, that the capital of the country should be kept constantly on the increase. But there is no in- stance of any people having ever missed an opportunity to save and accumulate. And in all tolerably well governed countries " If a particular trade be at any time overstocked, will not the disease cure itself ? That is, will not some persons take to other ti-ades, and fewer young people be bred up to that which is least profitable ? And whether any other remedy but this is not, in fact, curing one transient disorder bi/ bringing on many which are dangerous^ and will grow inveterate ? "Whether it is not aj» infallible maxim, that one man's la- bour creates EMPLOYMENT FOR ANOTHER ? (p. 13.) For a further demonstration of the same principle, see Mr. Mills's Com- rnerce Defended, p. 80. * " The economy of the rich starves the poor." — E. t For a further and very able discussion of the opinion of Montesquieu, see the 7th chapter of the Commentaire sur V Esprit des Loix of M. De- stutt-Tracy, and Tom. IV. p. 383, of the Ekmcns rf' Ideologic of the sara* author. 172 POLITICAL ECONOMY. ConBump- tion of Wealth. ConBump- tion of Go- vernment. the principle of accumulation in individuals has always had u marked ascendancy over the principle of expense, and the na- tional capital, and, consequently, the riches of the country, have heen constantly augmented. But this is seldom the case with the consumption carried on by goverments and their servants.* Individuals are fully sensible * With the sound principles maintained by our author, it is to be re- gi'etted that he had not somewhat enlarged on the subject of the consump- tion of government, which forms one of the most ample and practically important divisions of the science, embracing all questions relating to the nature and influence of government expenditure, and the sources whence it is be derived with the least injury to the interests of the community. An outline of these may serve to excite inquiry ou the part of the student and direct him to further sources of information. The fundamental principle upon which this subject rests is that the ex- penditure of government is unproductive, except in so far as the security and happiness of society is the result. What government really consumes, is not the money wliich it takes from the community, for that is returned — nor the provisions and equipments it demands, for they are paid for — but it consists in the time, talents, and per- sonal services of those whom it employs, and who otherwise would furnish to society an equivalent for their support. The means by which governments have met this expenditure, have va- ried with the progress of society. 1. In ancient times by the accumulation of treasure. This mode was doubly injurious. First, by withdrawing from society a portion of its pro- ductive capital — and secondly, in rendering government tyrannical, by ma- king them independent of the public purse. 2. By taxes. In this improved mode of supplying the needs of govern- ment, money is taken only when needed, and consequently has this advan- tage of leaving capital productively employed until it is wanted. The definition of a tax, is the portion of income which a man pays in re- turn for the protection of government. If it goes beyond income and trenches upon principal, it is fatal to accumulation, and reacts to its own diminution. If levied upon capital, it is unjust — a case exemplified in taxes upon wild lands — a capital unproductive, not through the will of the holder, but of necessity. The nature of a tax, is, that it is withdrawn from society without equi- valent. The money returns, but it is in exchange for a second value. See Hamilton on The JVational Debt of Gieat Britain. Say, Vol. II. Note, p. 201. The object of a tax, is solely the support of government, its influence on national properity being always injurious. The subject of taxation is, however disguised, the income of indivi- iluals, the commodity on which it is imposed, being but an equitable mode of assessing them. The form of a tax, may be either direct or indirect — direct when impo- sed on the individual — indirect when levied on the commodity. A direct tax is more certain in its returns, but more invidious in its operation. An indirect tax is comparatively voluntary, but doubtful in its returns. Say, Vol. II. p. 265. Ricardo, ch. 8, 9, &c. The effect of taxation, when light, is a drawback — when heavy, is u i>urse, being equivalent to a sterile soil, or a bad harvest, or any other ca- lamity which adds to the costs of production. For the definite influence it exerts, according as it is imposed on raw produce, rent, profits, or wages, see Ricardo as above ; Mills, ch. 4, sect. 5, 6, &c.; Adam Smith, Book IV. th. 2, part 2. Among the criteria which may be adopted for testing tlie compara- tive preference that should be given in a choice among various taxes, the following may be mentioned. 1. The lowest in amount is to be preferred — tliis arises from its very na- ture, which is unproductive expenditure. 2. The cheapest in collecting, for what is so spent, is utterly lost, both to individuals and to the public. As an illustration of a tax unfavourable POLITICAL ECONOMY* 173 of the value of the articles they expend. In the vast majority Consump- of instances, they are the direct result of their industry, perse- weaUh verance, and economy ; and they will not consume them, unless to obtain an equivalent advantage. But such is not the situation upon this principle, may be mentioned, the ordinary road tax of our state as worked 'OUt by the individuals assessed. What society pays, is the value of SO many good day's labour — what society receives, is the loitering^ ■work of unpaid workmen ; the difl'erence between them is, in this tax, the cost of levying. 3. Which falls on luxuries rather than on necessaries — the former raises the price of the article alone, on which it is laid — the latter, operating tlirough the wages of labour, eitlier raises the price of all commodities, or lowers the profits of all capital. 4. Which are most favourable to good morals. Among the instances of the reverse, may be mentioned lotteries ; a tax which, although voluntarily paid, is yet most injurious in its results. Under the new constitution of our state, they are for ever excluded, and justly, since they offend against every principle of a wise tax. Their con- tinuance, however, in other parts of our country, justifies a few words in explanation of their nature and influence. A lottery is a tax which is ex- pensive in collecting — of what society pays, not one fiftieth goes into the treasury. All the time that is wasted, and money that is squandered, and vicious habits that are formed, by the deluded adventurers in this licenced gambling, is to be added as part of the expense of collecting in addition to the direct costs. It is a tax which falls principally on the poor and necessitous. This class of society is most allured by the prospect of gain without labour, and least able to judge of the delusiveness of the scheme. They, therefore, are the largest contributors. It is a tax which is based upon the passions and vices of man — is a direct bounty upon gambling — an indirect one upon idleness, and teaches to all a lesson most fatal to individual success, and most injurious to national wealth — that of looking to fortune for bettering the condition, instead of industry and economy. On this subject, see Say, Book III. ch. 8. Ricardo, for a modified de- fence of the influence of taxation, Principles, Slc. ch. 8. Weallh of J\'a- iions. Book V. ch. 2. The third and latest method of supplying the exigencies of government, is by means of voluntary loans. In which government is the borrower, monied men the lenders, and society the payers. The advantages attending this mode of meeting public exigencies, arise from the facility, rapidity, and certainty with which large sums can be rais- ed in a moment of exigency. • The disadvantages, or rather the dangers to be dreaded from them, flow from these same causes. A loan is an operation in which no man feels his rights invaded; hence it removes, from the expenditure of government that wholesome check of public feeling, which operates upon it when its means are drawn from taxation. The nature, history, and operation of government loans, constitute a large and important branch of this science. A public loan, in its nature, is a tax, like all other revenue of govern- ment. It is not recognized as such, because it is not presently paid ; third persons, that is, the capitalists of society coming forward in the mean time to advance the amount, until it shall be convenient for the community to pay it, and receiving in the mean time a certain interest, which in the form of a tax, is immediately levied upon society. The operation of a loan, is for a time, to diffuse that air of wealth and prosperity which always arises from increased expenditure ; its permanent effect is to cripple the energies of the nation. A certain poi-tion of its ca- pital lutherto productive in the hands of individuals, has been unproduc- tively consumed by the government, and posterity is burthened with the repayment of it to those who originally advanced it, or to those who have chosen to stand in their places. In the older governments of Europe, tlie repayment of the principal is generally abandoned, and the interest payable forms a permanent annual 174 POLITICAL ECONOMV. consump- of govemmcnts. They consume the produce of the laboor o-t" Vve^ti). others, not of their own ; and this circumstance prevents them from being so much interested in its profitable expenditure, and go much ahve to the injurious consequences of extravagant and wasteful expenditure as their subjects. But economy on the part of government, though more difficult to be obtained, is of infinitely greater importance than economy on the part of any individual. Should a private gentleman think of acting on the principle that profusion is a virtue, and that industry may be en- couraged by increasing unprofitable consumption, he will most certainly be ruined ; his ruin, however, will only be directly in- jurious to the individuals in his own employment, and will have but a very slight indirect effect on others. But similar conduct on the part of government would most probably be productive either of revolution, or of national poverty and degradation. If, then, it is most desirable that individuals should have a correct knowledge of their real interest in the consumption of commo- dities ; how much more so must it be that goverment should pos- sess that knowledge ? Economy and frugality are virtues in a private station ; but in a public station their influence upon na- tional happiness is so vast, that they are not only the first of vir- tues, but the most pressing of duties. addition to the oi-dinary taxes. It would seem at first sight to make a very material difference whether the loan is to be repaid or not, but in truth, so tar as regards the general progress of national wealth, it is a matter of perfect indifference. The original capital that government expended, has been altogether consumed, and can never by any process be replaced ; fu- ture economy may provide a substitute, but the original values, like food consumed, have been utterly destroyed. If it is ever paid, society pays it out of the capital or income of indivi- duals, and the only change it produces is this — while it remains unpaid, the community at large hold and employ the principal, the stockholders re- ceive and employ the interest — when paid, the principal itself is trans- ferred to the stockholders, and seeks a new investment. According to this view of tlie subject, the various provisions adopted for the purpose of repaj'^ment, under the title of sinking funds are nugatory, or rather injurious, since they burthen society with the furtlier expenses incidental on this mock form of payment. These views will be found in Hamilton on " The Kaiional Debt of Great Britain.'''' Lowe's Present atate of England. See also. Review of Hamilton in the Edinburgh Re- view, No. 48, art. 3 ; of Boyd on Finance, No. 50, art 13, No. 78, art. 1 ; and in the Quarterly Review, National Debt, Vol. XII. p. 431, No. 53, art. 11, No. 62, art. 2; Ravenstone on the Funding System. Of our own country, the public debt though the same in principle with that of England, is yet so different both in amount and in proportion to our means of repayment, as to remove from it much of the reasoning of the writers referred to. For its detailed history, see Seybert's Statistics, chap- ter Public Debt. The outline of it is as follows : Originating in the debts contracted by Congress during the Revolutionary war, the Public Debt of the United States amounted in 1791, to $75,169,974 Expenses of the war of 1812, raised it in 1816, to - - 123,016,375 Reduced in 1821, to 91,294,416 This debt, though larger in amount, is much lighter in reality, that is, in proportion to the population and resources of the country now, than it was in 1791. In 1791, it gave to every inhabitant the sum of - - $23 25 1821, - - - 11 28 Being reduced, compared with our means, to less than one half. The debt of Great Britain gives to each individual of the kingdom as his share of the debt, about $175, and to each family more than $1000. — E. rOLITICAL ECONOMV. 175 -' Si les depenses publiques," M. Say observes, " aifectent la Consump- •5omme des richesses pr^cis«'ment de la mOnie maniere que les wcaui'. depenses privces, les rnumes principes d'econoniie doivent pre- ^ — „ •1 / * J/ 'f 11 4 jY Opinion of sider aux unes et aux autres. 11 n y a pas plus deux soiies a eco- ji. Say. nomie, qxCil n'y a deux sortes de probile, deux sortes de morale. Si un gouvernerncnt comme un particuHor font dcs consoniina- tions desquelles il doive I'esulter une production de valeur supc- rieure a la valeur consomme, ils exercent une Industrie produc- tive ; si la valeur consomme n'a laisso aucnn produit, c'est une valeur perdue pour I'une comme pour I'autre, mais qui en se dissipant, a fort bion pu rendrc le service qu'on en attendait. Les munitions de guerre et de bouche, le terns et les travaux de fonc- tionnaires civils et militaires qui ont sorvi a la defense de I'etat, n'existent plus, quoique ayant ttt; parl'aitement bien employes, il en est des ces choses comme des denrees et des services qu'une famille a consommes pour son usage. Get emploi n'a presentee aucun avantage autre que la satisfaction d'un besoin ; si le besoin n'existoit pas, la consommation, la depense, n'ont plus ete qu'un mal sans compensation. II en est de meme des consommations de I'etat ; — consommer pour consommer, depcnser par systeme, reclamer une service pour I'avantage de lui accorder une salaire, auneantir une chose pour avoir occasion de la payer est une ex- travagance de la part d'un gouvernement comme de la part d'na particulier, dans un 'petit etat comme dans un grand, dans une republique comme dans un monarchie. Un gouvei-nement dis- sipateur est meme bien plus coupable qu'un particulier : celui ci consomme les products, qui lui appartiennent tandis qu'un gou- vernement n'est pas proprietaire : il n'est qu'administrateurde la, fortune publique."* (Tome II. p. 268.) We have now shown how labour may be rendered most pro- Conclusion. ductive of wealth — how that wealth is distributed among the va- rious classes of the society — and how it may be most advanta- geously consumed. We have shown the close and indissoluble * If public expenditure affect the sum of national riches precisely in the same manner as private expenditure, the same principles of economy should preside over both. There are no more two sorts of economy than, there are two sorts of honesty or morality. If from the consumption of go- vernment there arise, as from that of an individual, the production of a superior value to that which is consujiied, then government exercises pro- ductive industry ; if the value consumed has left no product, it is a value destroyed in the one case as in the other ; the consumption of which, how- ever, may have perfectly answered the ends proposed by it. The military stores and provisions, the time and labours of public functionaries, civil and military, which, after serving for the defence of the nation, no longer exist, yet having been perfectly well applied, is an expense that stands on the same footing as that by which a family is supported. This is an ex- penditure that presents no other advantage than the supply of a certain want; if the want existed not, the consumption and expense is an evil without compensation. It is precisely the same with the consumption of the state — to consume for consumption's sake — to spend upon system — to invent an office, lor the purpose of giving a salary — to destroy a value, iti order to have occasion to pay for it, is the same extravagance and folly on the part of a government as of an individual, in a small state as in a great one, in a republic as in a monarchy. A government in its waste, is even more culpable than an individual ; he but consumes the products that be- long to him, 'while government is only the administrator, not the owner of the«public fortune.'"— E. 176 POLITICAL ECONOMY. Conciusiou. connexion subsisting between private and public opulence, and that whatever has any tendency to increase the former, naust, to the same extent, increase the latter ; — and we have shown that SECURITY OF PROPERTY, FREEDOM OF INDUSTRV, AND MODERATION IN THE PUBLIC EXPENDITURE, are the only, as they are the cer- tain, means by which the various powers and resources of human talent and ingenuity can be called into action, and society made continually to advance in the career of wealth and civilization. Every increase of security or of freedom is a benefit, as every di- minution, whether of the one or the other, is an evil. It is by the spontaneous and unconstrained efforts of individuals to improve their condition and to rise in the world, and by these efforts only, that nations become rich and powerful. The labour and the sa- vings of individuals are at once the source and the measure of national opulence and public prosperity. They may be com- pared to the drops of dew which invigorate and mature all vege- table nature. None of them has singly any perceptible influ- ence ; but we owe the foliage of summer and the fruits of autumn to their combined action. (s. s.) The foregoing notes, having been prepared for the printer as the work progressed, the Editor is conscious, on now reviewing them, that they lie open to the charge of occasional obscurity from want of detail, and tedious- ness from unnecessary repetition. He believes, however, that they will be found to be sound in principle and correct in statement, and trusts that the references they contain to fur- ther sources of information may tend to lessen the labour of the student, and favour the formation of liberal and independent opinions. Among the omitted references which may add interest or clearness to the subjects discussed, may be added the following: In connexion with note p. 44, on Economical Science in America, the early American pamphlets, will be found noticed in the first five volumes of the North American Review. Two early tracts on Banking, published in Boston in 1714 and 1720, are particularly worthy of being consulted. A notice of Pownal's administratoin, will also be found, Vol. V. At a la- ter period, Mr. Jefferson's Reports and Essays deserve a fuller reference'; they contain the principles of the liberal system of national practice, though often symbolizing in theory with the narrow views of the French econo- mists. Raymond's recent work on Political Economy, Baltimore, 1820, demands notice, as strongly marked by sound and good feeling, but dia- metrically opposed to the principles of Adam Smith and Ricardo.. This work is ably reviewed in the North American Review, No. 31. To the note on Banking, p. 75, may be added the following : The article Banking in the supplement to the Encyclopedia Britannica, Pucardo on Bullion; Reviewed, in the Quarterly, Vol. XXV. Huskisson on Depreciation of Currency, Edmburgh Review Vol. XVII. p. 339, Vol. XVIII. p. 470 ; Reviewed in the Quarterly, Vol. IV. p. 414, Vol. XVI. p. 225. On Bank Restriction, Quarterly Review, Vol. III. p. 158, Vol. XII. p. 429 ; and an able review of Tracts on Money, Edinburgh Review, No. 70, art. 11. To the note relative to Farming in America, p. 123, see North Ameri- ran Review, Skinner's Amerimn Farmer. No. 14, art. 4. POLITICAL FXONOMY. 177 in order to show the relative bearing and connexion of the various subjects comprehended within this science, the Editor has thought well to add the following analytic arrangement of them. SUMMARY. Political Economy is the science that relates to the nature and causes of the wealth of nations. Definitions. 1. Wealth — Utility which is the result of labour, or whatever possesses exchangeable value. f?. J^ational Wealth — the sum of the wealth of the indivi- duals that compose the nation. 3. The Nature of the Wealth of jYations — is, therefore, the same with that of individuals, — governed by the same laws and to be increased from the same sources, viz. In- dustry and Economy. 4. The Causes of National Wealth — are to be found in the fa- cihties given to individual acquisition. These are great- est where industry, enterprise, and capital, are left free, with two exceptions : 1. Where the public safety or interest is jeopardized by the individual. 2. Where the public morals are the sacrifice at which his gains are made. The science of Political Economy consists in analyzing the phenomena which wealth exhibits. 1. In its PRODUCTION, 2. DISTRIBUTION, 3. EXCHANGES, 4. CONSUMPTION. Of these Production and Consumption are in their nature the most important, — Production forming the immediate and Con- sumption the final end of all human labour. Distribution and Exchanges are but intermediate means, and valuable only in re- ference to the former two, — Distribution having reference to Production and being governed by the law of equity. Exchan- ges having reference to Consumption and being governed by the law of convenience. I. PRODUCTION.— Under this first head the leading considera- tions are, — 1. The nature 2. The variety ^ ^^ Production. 3. The agents 4. The stimulants 1. Nature. — Production has reference to utility, not to matter, — utility given or increased by means of hu- man labour, either bodily or mental, constitutes a product. 178 POLITICAL ECONOMY. 2. Variety. — This exists in form, not in nature. The na- ture of Production in all its forms is, labour creating utility. Its forms are indefinitely varied, but may be arranged under the three following classes : 1. The obtaining of raw produce. — This includes labour on land, and in lisheries, and mines, and using the term in a wide sense, may be styled Agricultural. 2. The giving to raw produce thus obtained a new value by some change of form, — this is Manufacturing. 3. The adding a further value to the values thus given by change of place, or more correctly, by bringing the product from the producer to the hands of the consumer, — this form of production bears the name of Commercial. This classitication is convenient for reference but dan- gerous in reasoning, as tending to lead the economist to the false inference, of divided or opposite interests among the diiferent classes of the community. 3. Agents. — The agents of Production may be reduced tu three. * 1. Labour, or the primary agent, r> Canital ) o' XT f^ i' * i ? secondary agents, or aids to labour. 3. Natural Agents, ^ j & ' 1. Labour the original and primary agent of all Produc- tion. In nature, 1. Manual, yielding material products, as grain, cloth, &c. 2. Mental, yielding immaterial products, as skill, science, Lc. In subdivision, 1. Territorial, or that subdivision of labour on which national exchanges rest, and which adds to the common mass of wealth, by consulting the facilities of national Production. 2. Individual, or that subdivision of labour on which the internal exchange^ 'of a community are founded, and which add§ to the wealth of soci- ety by the increased skill and economy of time which result from such division. 2. Capital, second in point of time to labour, but equally ctBcient with it, as an agent of Production. In nature, — it is the accumulated products of anterior labour. In form,- -it is indefinitely varied. While the real ca- pital is invariable, consisting always in the utility or exchangeable value of that which is employed, • the form under which it appears, as that of mo- ney, materials, &.c. is a matter, incidental, varia- ble, and unimportant. In its services, — it increases the power of unaided labour : rOLlTICAT. ECONOMV. 1T9 1. By supporting its subdivisions through the means of surphjs food, m;iterials, &c. in vyhich state it is termed circulating capital. 2. By providing buildings and introducing machine- ry, and thus appropriated it is termed Jixed ca- pital. 3. JVatural agents or the elements of nature which through the agency of capital are made to work for man. Tliis they do : 1. By performing services peculiar, and otherwise unattainable, as land in producing, tire in melt- ing, &.C. 2. By performing attainable services but at a cheaper rate, being used merely as a substitute for animal or human power, as water, wind, or steam, used as moving powers, and exemplified in canals, mills, and steam engines. The means by which the natural agent is applied to Production and controlled in its operation constitutes a machine, ftlachines are : 1. Simple, — as mechanical tools, the saw, plough, &c. 2. Complex, — as mills and steam engines. The influence of labour-saving machinery upon the working class is, — 1 . Temporary embarrassment by the numbers thrown out of employ. 2. Eventual benefit by the diminished cost of the pro- duct. 4. Stimulants. — The stimulants to Production are two : — ■ 1. The desire of accumulation. 2. The desire of enjoyment. The conditions under which these operate most effectu- ally are, — 1. Secure possession to the individual of the fruits of his industry. 2. Perfect freedom in the direction of it. Beyond these all stimulants on the part of the govern- ment are partial, unjust, and injurious. II. DISTRIBUTION.— The second great division of the science, embraces the laws which regulate the Distribution of that common mass of products which arise from the union of labour, capital, and natural agents. The law of Distribution is this, — products are divided among the productive classes of the community in proportion to the productive services they have respectively contributed. From the three agents of Production arises, consequently, a threefold division of those products which are the result of their combination, viz : 1. The share of Labour, which is termed Wages, 2. Capital, Interest, 3. '• Natural Agents, Rent. All who live in society self-supported, derive their income from one or other of these sources, which therefore divide? the community into the three great classes of. 180 POLITICAL tCONOMV. 1. The industrious class who live on wages, and exer- cise an industry either bodily or mental. 2. The capitalists who live on interest. This supposes them to loan out their capital, otherwise their returns will also include the wages of personal service. 3. Landholders, &c. who live on rent. Of these each is governed by its own laws, and dependant as to its numbers and increase, on the age, state, and progress, of society. 1. Wages — or the share of labour. Those who receive it constitute the industrious class, — it is an equivalent for personal services, whether mental or corporeal. This class, consequently, comprehends all magistrates, professional and scientitic men, artists, men of skill, and the whole body of ordinary labourers. Of these, the laws which regulate the last, or the body of ordinary labourers, are the most complex and important. Under the term " wages of labour" things essentially different may be meant, — it may mean, 1. Money Wages ^ — this is merely nominal. 2. Proportional Wages, — this determines proportional profits, or the comparative situation of the la- bourer and the capitalist. 3. Real Wages^ — or the values received. This alone regulates the comlbrts of the poor, and the gene- ral prosperity of society. Wages are equitably equal to all classes of workmen. The causes of apparent inequfJlity are the considerations of comparative ease, skill, danger, certainty, repu- tation, &c. The principle is, that men are to be paid for that which they sacrifice, whether it be time, health, comfort, money, or reputation. 2. Interest, — or the share of capital. This is received from money lent, — when employed by the owner him- self, the returns of capital, under the name of profits, include two things, — 1 . Interest on the capital employed, which is always at an average rate throughout a country. 2. Wages for the personal services required in the busi- . ness, — these vary according to the laws which re- gulate wages. Interest of money lent is divisible into two portions. \. That portion which represents the value of the capi- tal, or the real use of the money lent. This por- tion rises and falls with the profits to be made from it,— varying, 1 . Temporarily, with the demand and supply of dis- posable capital. 2. Permanently, sinking with a gradual fall in the pro- gress of society, arising from the diminished rc- Inrns of capital invested in agriculture. POLITICAL ECONOMY. 181 2. That portion which represents the chance of loss, and which may therefore be termed a premium of risk. This risk is threefold : 1 . Of character in the borrower, 2. Of business in which it is employed, 3. Of interference of government. This last, in regular governments, appears in the shape of laws regulating interest, which form a perfectly gratuitous artificial impediment, and one. which the good sense of society will soon discard. 3. Rent, — or the share corresponding to the services of the natural agents employed. Rent appertains to those natural agents only which pos- sess locality, and which, consequently, vary in power and are limited in quantity. It arises from the power of appropriation, and is the measure of the surplus production of the superior qualities over those last brought into use. In all other natural agents, viz. such as are equal and unlimited, no rent is paid, the application of them to the purposes of production, being simply a matter of capital, — their cost is the interest of the machinery requisite. Rent has in no case any influence on the price of com- modities, being the effect and not the cause of its ele- vation. The natural price of raw produce is the cost of its pro- duction from land that pays no rent. HI. EXCHANGES. — The third great division of tlie science re- lates to the law of Exchanges. The distribution of pro- ducts is a matter of right, — their Exchange is a matter of convenience. In extent — it comprehends a large class of society, viz. all who stand between the producer and the consumer. In mode — it is twofold : 1 . By barter, which was the original mode, and still forms the essential principle of exchanges. 2. By a medium of exchange, or monev- Under this head are to be considered, — 1. The nature of money, 2. Its services. 1 . Nature. — The money of society is of a double nature : 1. Metallic, or that which has its value within itself, and appears as coin. 2. Paper, or that which is representative of value, and appears under the form of "promissory notes and other varieties of credit. These' two agree in the services which they perform. but differ in the laws by which they are regulated. 1. Metallic money, from its having intrinsic value, is a commodity of commerce as well as a medium of exchange, — it consequently regulates itself, and requires no legal provisions as to its quantity. la.^ rOLITICAL ECONOMY. ^mission, or exportation. Under a tree trade, a nation will have what it wants, and will retain no more. 2. Paper money, or tliat which is but representative of value. This is a cheaper machine than me- tallic coin, answering the same end but more li- able to derangement. Having no value in itself it is not a commodity of com- merce. An artificial market must, therefore, be kept open at home, to absorb a surplus whenever such takes place. That market is the government or bank that issues it, while this is open, freely exchanging paper for real value, paper like metallic money will regu- late itself as to quantity, by the demands of soci- ety, and can never be greater than its needs. 2. The Services of money. — The costs of production, or the values for which articles are exchanged when estimated in money, are termed price. Price is of two kinds, — 1. Regulating, or natural price, — this is determined by the costs of production, and rises or falls with their increase or diminution. 2. Actual, or market price, — this is governed by de- mand and supply, being directly as the former and inversely as the latter. Market price may be again considered as, — 1, Nominal, as estimated in money: from the chan- ges of this we learn only the comparative plen- ty or scarcity of the medium of exchange. 2. Real, as estimated in other commodities, — from the changes of this we learn the comparative plenty or scarcity of the article itself. Rent being excluded from price it is divisible into two portions. 1. Wages, which repays the labourer. This por- tion is always advanced by the capitalist, and the residue of price after this is abstracted constitutes, 2. Profits, which remains to the capitalist, a return for his capital and personal services. Hence, a rise of wages is equivalent to a fall of pro- fits, and a fall of wages to a rise of profits. IV. CONSUMPTION.— The last division of the science conipre- hends an examination into the laws which regulate the con- sumption of products ; under this head are to be consi- • dered — 1. The nature \ 2. The extent fen *• o rr.1 , • i > of Consumption. 3. The object C * 4. The agents j 1. Nature. — Consumption is the reverse of production, be- ing the destruction of that value, the giving of which ronstitnted production. POLITICAL KCO.VOMV. 183 ^. Extent. — Consumption is coextensive with production. Exportation being the mode by which a country con- sumes whatever is surplus over its domestic demands. 3, Object. — The object of consumption is twofold. 1. Reproductive with a view to a greater return. 2. Unproductive for the convenience or gratification be- stowed. On the proportion which these two bear to each other depends the progress or decline of wealth, whether in- dividual or national ; if equal, capital remains statioa- ary — if unproductive exceeds, it is diminished — if repro- ductive, it is increased. 4. Agents. — The agents of consumption are likewise two fold. 1 . Individuals. — These consume products both material as food, clothes, &c., and immaterial as personal services, skill, &;c. 2. Government. — This consumes products solely imma- terial, as the time and services of those it employs. The consumption of government is that by which the body politic is supported, and like the sustentationof the natural body is unproductive in its nature, and redeemed only by the value of its results. Hence a wise economy is the true policy of all governments. The interference of government with individual rights and freedom is an evil which is to be limited by the necessity on which it is founded — it relates to, 1. Individual gains. — As in taxation, which is unjust and tyrannical except in so far as it is necessary to the great ends for which government is established, viz. the peace and good order of the community. Taxa- tion, therefore, is to be hmited by that necessity. It is justifiable only with a view to revenue. 2. Individual enterprise. — The interference of govern- ment with the industry and capital of individuals ma\' be ranked under the tbllowing heads. 1. Production. — Government seeks to regulate produc- tion by, 1. Monopolies — the eflect of these is jnvariably to elevate and sustain market price above the natu- ral price of the article which forms the sub- ject of the monopoly, and thus to burthen society with needless expenses. These are reducible to, 1. Private monopolies or patent rights — justifiable only when they are an equivalent or purchase on the part of the public of the natural and equitable rights of the discoverer or inventor of that which is patented. 2. Trading companies — these, however justifiable in early times, are altogether injurious where capital, knowledge, and enterprise abound. / 18-1 POLITICAL ECONOMY. 3, Colonial monopolies — a narrow and unwise po- licy, equally unfavourable to the advancement of the colony and of the mother country. 4. Banking companies — as these are generally con- stituted, they arc doubly prejudicial to the in- terests of society. 1. In adding to the cost of that which is to be effected, the premium of a monopoly price. 2. In opening a door to fraud and collusion, by li- miting the responsibility of those concerned, and thus striking at the root of public pros- perity by impairing the validity of contracts. The objects proposed by these chartered com- panies, would be more safely and cheaply attained by voluntary associations of capitalists individu- ally responsible. ".'. Regulating Duties. — These are imposed by govern- ment, with a view to direct the enterprise and capi- tal of the nation into certain channels, into which they would not otherwise run. Except in reference to public morals or national de- fence, these are unwise and impolitic ; for if no indivi- dual in the nation be a gainer by being thus controlled, it is evident that neither can the public be a gainer, for it consists of none other than those very individuals ; a sum total of private loss, can never constitute a public gain. These regulating laws appear in the form of, 1. Bounties to encourage production and exportation ; the bounty, though paid by the government to its own subjects, is eventually transferred to the na- tion that consumes ; it there appears in the shape of reduced prices. 2. Prohibitory duties to restrain importation : these operate primarily on the foreign producer, but eventually, on the domestic consumer — being equivalent to a tax levied on the community, to the amount of the difference of the cost of pro- duction at home or abroad, and paid as a bounty to the domestic producer, to enable him to sup- port the competition. These regulating laws when intended to meet the acts of foreign governments, are entitled countervailing du- ties ; but even these are politic only as an offensive measure directed against the nation that imposes the re- straint, and as intended to drive them from it. While they continue, they double the evils felt by both nations. 3. Distribution. — Government interferes with the national distribution of products, by the compulsory support of certain classes of the community. 1. Of the officers of government. — The very nature of government requires an establishment — known func- tionaries with fixed salarios. POLITICAL ECONOMY. IHo The rule of wise economy prescribes such amount of salary as may purchase the grade of talent, of learning, and of character, which the duties of the station de- mand. 2. Of ministers of religion, as supported by tythes or other certain revenues. — This goes upon the prin- ciple that the natural sense of religion is insuffi- cient to justify their being left to the voluntary sup- port of society. On this point, the experiment made by the United States may be considered as conclusive ; it has settled principles never before satisfactorily tried. Religion needs no state patronage — the state needs no church establishment. 3. Of the poor. — That poverty will ever be banished from society, is one of the dreams of enthusiasm ; that it may be indefinitely diminished, is the rule and the motive of the benevolent economist. To relieve poverty by legal provisions, is a remedy that has always been found to scatter more widely the seeds of pauperism. The only true policy is to seek to diminish poverty by removing the causes of it, which are ignorance and vice. The best poor laws are to be found in, 1 . Provisions for the education of the poor ; as cha- rity schools, common schools, education socie- ties, &c. 2. Restraints upon vice, by houses of refuge, well re- gulated penitentiaries, and a strict police in rela- tion to all the resorts of intemperance. 4. Exchanges. — The interference of government in the exchanges of society, is always impolitic. It appears in the control of markets and the regulation of prices, and is intended to guard the interests of certain por- tions of the community against the extortion of others, ft may be instanced in the regulation of, 1. Wages — intended to guard against combinations of workmen. 2. Profits — against the exorbitant demands of traders. 3. Interest — against the extortion of money lenders. The limitation of these by law, is either nugatory or un- just. When the labourer is free in his person and in his trade, and the capitalist is unrestrained in his investments, competition will always reduce wages, profits, and interest to their lowest equitable rate. To these is also to be added, ■1. The control of the corn market by laws regulating the opening and shutting of the ports for its impor- tation and exportation. The object of corn laws is to guard against a scarcity ; their effect is rather to produce one, and at all times to burthen corn with increased costs of production. o. Consumption. — The interference of government in the consumption of products, except upon moral grounds. 18t) POLITICAL ECONOMY. is both arbitrary and unfavourable to the advance- ment of wealth — it appears in, 1. Sumptuary laws, regulating individual expenditure — this is unfavourable, as it robs society of the great stimulus to production. 2. Laws of moral police — regulating licences and impo- sing penalties in relation to the consumption of spirituous liquors, and here we have only to regret the backwardness of government in using so spa- ringly, a power which constitutes no small portion of the moral responsibility that is attached to offi- cial station. CONCLUDING REMARKS. In concluding the notes on the foregoing Essay, the Editor would indulge the hope, that the present publication may be the means of exciting others to the task of elucidating the princi- ples of this science, whose leisure may enable them to give to the subject, that fulness and correctness unattainable amid the daily labours of academical duty, and whose station may add weight to opinions sound, but not popular. They are opinions, however, which are destined eventually to triumph, and to form the prosperity and pride of the nation that first models itself upon them. The language of Political Economy is the language of reason and of enlarged experience, blinded by no prejudices, drawn aside by no private motives, coloured by no sectional feelings, but holding singly and steadily the course of true patriotism, the common good of our common country. Withotjt incurring the charge of enthusiasm, it may be main- tained to be the redeeming science of modern times — the rege- nerating principle that in connexion with the spirit of Christian- ity, is at work in the civilized governments of the world, not to revolutionize, but to reform. The policy which it prescribes is a safe as well as a sound one. Upon the older nations of Eu- rope it imposes the obligation of removing, but with a caution proportioned to the extent and duration of the evil, all those barriers which an unwise policy may have heretofore establish- ed among them, against the progress of knowledge and the ad- vancement of wealth. To the rising governments of America, it teaches wisdom by European experience ; and to all nations it facilitates their approach to that undefinable limit of the per- fectibility of man, which in every age has furnished the brightest visions to the patriot and philanthropist, and the strongest mo- tives as well as the highest reward to the exertions of the wise, the benevolent, and the good. The high principles which this science teaches, entitle it to be regarded as the moral instructor of nations. To them that will give ear, it demonstrates the necessary connexion that sub- POLITICAL ECONOMY. 187 sists between national virtue, national interest, and national hap- piness. It is to states what religion is to individuals, the "preacher of righteousness" — what religion reproves as wrong, Pohtical Eco- nomy rejects as inexpedient — what religion condemns as contra- ry to duty and virtue, Political Economy proves to be equally opposed to the peace, good order, and permanent prosperity of the community. Thus slave labour is exploded for its expen- siveness — non-intercourse is condemned for its extravagance — privateering for its waste of wealth — and war for the injury sustained even by the victor ; and thus freedom of person, friendly intercourse between nations, kindness even in hostilities, and if possible universal peace, which are the highest blessings as well as the greatest virtues, are supported by the all power- ful considerations of self-interest. That these principles will ever be universall)'^ reduced to practice, is a hope which seems to be forbidden by that corrup- tion of nature, which renders necessary the restraints of go- vernment ; but there is nothing either in nature or experience, that forbids the expectation of an indefinite approximation to them. Principles once sown propagate themselves, and become rooted in the mind in proportion as they harmonize with the common sense of mankind. Sound principles of national po- licy, adopted by individuals, will gradually operate upon go- vernment, and more especially upon a government that emanates firom the people ; government again will react upon individual opinion, until in time these principles will be received as part of that accumulating inheritance of settled truth to w'hich suc- cessive generations are born, and upon which they seem to en- ter with intuitive sagacity, without any of those doubts which perplexed the minds of their forefathers who first received them. Such knowledge too, is in its nature cumulative, and so is the power that results from it ; each successive step renders that which follows more sure and easy — error is more clearly discerned, and truth has greater power ; and thus, under the guidance of sound and settled principles, must ensue to society a course of unremitting improvement, unbroken but by human infirmity, and unlimited but by the duration of the human race. This picture, however, presupposes virtue in the people. Po- litical Economy is a science which guards against involuntary not voluntary error. It enters into harmonious alliance with religion, but cannot supply its place. It must find public men true to their trust, otherwise it renders them but more inge- nious in their abuse of power. Hitherto, however, want of science, rather than of virtue, has stamped the errors of our policy. But ignorance is a reproach that should now no longer rest upon us. We have the wealth, the talent, and the institutions that are needful to disperse it. Let them then be definitely direct- ed to that object — let professorships of Political Economy be eS' tablished in our colleges, and open lectureships encouraged in our cities — let the elements of the science be embodied into the books of primary instruction which are used in our academies laS POLITICAL ECONOMY. and schools, and such is the consonance of the truths it teaches with the first dictates of reason and common sense, that the youthful mind will imbibe them with the avidity of its natural food, and the rising generation grow up with a patrimony of po- litical wisdom that will make them wiser than their teachers that will require only the guidance of conscientious minds to secure to themselves and to their country, all the blessings which temporal prosperity can bestow — liberty, peace, and abundance. CoL. Coll. July 16, 1825. 14 DAY USE RETURN TO DESK FROM WHICH BORROWED LOAN DEPT. This book is due on the last date stamped below, or on the date to which renewed. Renewed books are subject to immediate recall. 11 196&8 7 — WK \6^^ ^7¥t puP REC'D LD wwrr^ ,^m DEC 2 ^ ^ , ■ , __ _). % tNTER LIBRARY ONE /v\ NOisi-RtNliVVABLE mr? ^1 w^ 23^^? REC'D LD S£.P2 4'65 - gP>i LD 21A-50m-8,'57 (C8481sl0)476B General Library University of California Berkeley \W052®^'' lVil62540 THE UNIVERSITY OF CAUFORNIA UBRARY ■ '■ t.