I ,
 
 PRINCIPLES 
 
 POLITICAL ECONOMY

 
 
 PRINCIPLES 
 
 POLITICAL ECONOMY 
 
 WITH 
 
 SOME OF THEIR APPLICATIONS TO SOCIAL 
 PHILOSOPHY. 
 
 JOHN STUART MILL 
 
 PEOPLE S EDITION 
 
 LONDON 
 
 LONGMANS, GREEN AND CO 
 
 1885.
 
 Stack 
 Annex 
 
 PltEFACB. 
 
 TIIK appearance of a treatise like the present, on a subject on which so 
 many works of merit already exist, may be thought to require some 
 explanation. 
 
 It might perhaps be sufficient to say, that no existing treatise on 
 Political Economy contains the latest improvements which have been 
 made in the theory of the subject. Many new ideas, and new applica- 
 tions of ideas, have been elicited by the discussions of the last few 
 years, especially those on Currency, on Foreign Trade, and on the 
 important topics connected more or less intimately with Colonization : 
 and there seems reason that the field of Political Economy should be 
 re- surveyed in its whole extent, if only for the purpose of incorporating 
 the results of these speculations, and bringing them into harmony with 
 the principles previously laid down by the best thinkers on the subject. 
 
 To supply, however, these deficiencies in former treatises bearing a 
 similar title, is not the sole, or even the principal object which the 
 author has in view. The desigu of the book is different from that of 
 any treatise on Political Economy which has been produced in England 
 since the work of Adam Smith. 
 
 The most characteristic quality of that work, and the one in which it 
 most differs from some others which have equalled and even surpassed 
 it as mere expositions of the general principles of the subject, is that it 
 invariably associates the principles with their applications. This of 
 itself implies a much wider range of ideas and of topics, than are 
 included in Political Economy, considered as a branch of abstract specu- 
 lation. For practical purposes, Political Economy is inseparably inter- 
 twined with many other branches of social philosophy. Except on 
 matters of mere detail, there are perhaps no practical questions, even 
 among those which approach nearest to the character of purely econo- 
 mical questions, which admit of being decided on economical premises 
 alone. And it is because Adam Smith never loses sight of this truth ; 
 because, in his applications of Political Economy, he perpetually appeals 
 to other and often far larger considerations than pure Political Economy 
 affords that he gives that well-grounded feeling of command over the 
 
 a
 
 vi HiliFACE. 
 
 principles c( the subject for purposes of practice, owing to which 
 the " Wealth of Nations," alone among treatises on Political Economy, 
 lias not only been popular with general readers, but has impressed 
 itself strongly on the minds of meii of the world and of legislators. 
 
 It appears to the present writer, that a wcrk similar in its object and 
 general conception to that of Adam Smith, but adapted to the more 
 extended knowledge and improved ideas of the present age, is the kind 
 tf contribution which Political Economy at present requires. The 
 "Wealth of Nations" is in many parts obsolete, and in all, imperfect. 
 Political Economy, properly so called, has grown up almost from 
 infancy since the time of Adam Smith : and the philosophy of society, 
 from which practically that eminent thinker never separated his more 
 peculiar theme, though still in a very early stage of its progress, has 
 advanced many steps beyond the point at which he left it. No 
 attempt, however, has yet been made to combine his practical mode of 
 treating his subject with the increased knowledge since acquired of its 
 theory, or to exhibit the economical phenomena of society in the rela- 
 tion in which they stand to the best social ideas of the present time, as 
 he did, with such admirable success, in reference to the philosophy of 
 bis century. 
 
 Such is the idea which the writer of the present work has kept before 
 him. To succeed even partially in realizing it, would be a sufficiently 
 useful achievement, to induce him to incur willingly all the chances of 
 failure. It is requisite, however, to add, that although his object is 
 practical, and, as far as the nature of the subject admits, popular, he 
 has not attempted to purchase either of those advantages by the 
 sacriBcc of strict scientific reasoning. Though he desires that his 
 treatise should be more than a mere exposition of the abstract doctrines 
 of Political Economy, he is also desirous that such an exposition should 
 be found in. it. 
 
 The present edition is an exact transcript from the sixth, except that 
 all extracts and most phrases in foreign languages have been translated 
 into English, and a very small number of quotations, or parts of quota- 
 tions, which appeared superfluous, have been struck out. A reprint of 
 an old controversy with the " Quarterly Review" on the condition of 
 lauded property in France, which had been subjoined as an Appendix, 
 has been dispensed with.
 
 CONTENTS. 
 
 PRELIMINARY KEMARKS i t * , 1 
 
 BOOK I. 
 PRODUCTION. 
 
 CUAPTEB I. Of the Requisites of Production. 
 
 1. Koquisites of production, what 15 
 
 2. The function of labour defined 16 
 
 3. Does nature contribute more to the efficacy of labour in some occu- 
 
 pations than in others ? 17 
 
 4. Some natural agents limited, others practically unlimited, ia 
 
 quantity ll 
 
 CHAPTEE II. Of Labour as an Agent of Production. 
 
 % 1. Labour employed either directly about the thing produced, or in 
 
 operations preparatory to its production 19 
 
 2. Labour employed in producing subsistence for subsequent labour . 20 
 
 3. in producing materials 21 
 
 4. or implements 22 
 
 n. in the protection of labour 23 
 
 G. in the transport and distribution of the produce 24 
 
 7. Labour which relates to human beings 25 
 
 8. Labour of invention and discovery 2G 
 
 9. Labour agricultural, manufacturing, and commercial 27 
 
 CHAPTER III. Of Unproductive Labour. 
 
 1. Labour does not produce objects, but utilities . 28 
 
 2. -which are of three kinds 2? 
 
 3. Productive labour is that which produces utilities fixed and em- 
 
 bodied in material objects 30 
 
 4. All other labour, however useful, is classed as unproductive . . 31 
 
 5. Productive and Unproductive Consumption 32 
 
 6. Labour for the supply of Productive Consumption, and labour for 
 
 the supply of Unproductive Consumption 33 
 
 CHAPTEB IV. Of Capital. 
 
 1. Capital is wealth appropriated to reproductive employment ... 34 
 
 2. More capital devoted to production than actually employed in it . 3G 
 
 8. Examination of some cases illustrative of the idea of capital . . 37 
 
 a. 2
 
 ;; CONTENTS. 
 
 CHAPTER V. Fundamental Propositions respecting Capital. 
 
 TAG* 
 
 1. Industry is limited by Capital . .- . 39 
 
 2. but docs not always come up to that limit 41 
 
 3. Increase of capital gives increased employment to labour, without 
 
 assignable bounds 41 
 
 4. Capital is the result of saving 43 
 
 5. All capital is consumed _ 44 
 
 6. Capital is kept up, not by preservation, but by perpetual repro- 
 
 duction . . . 40 
 
 7. Why countries recover rapidly from a state of devastation ... 47 
 
 8. Effects of defraying government expenditure by loans .... 47 
 
 9. Demand for commodities is not demand for labour ..... 49 
 10. Fallacy respecting Taxation 55 
 
 CHAPTEE VI. Of Circulating and Fixed Capital. 
 
 I 1 . Fixed and Circulating Capital, what 57 
 
 2. Increase of fixed capital* when at the expense of circulating, might 
 
 be detrimental to the labourers 58 
 
 3. but this seldom if ever occurs 61 
 
 CHAPTEB VII. On what depends the dcrjree of Productiveness 
 of Productive Agents. 
 
 1. Land, labour, and capital, are of different productiveness at diffe- 
 rent times and places 63 
 
 2. Causes of superior productiveness. Natural advantages ... 63 
 
 3. greater energy of labour 65 
 
 4. superior skill and knowledge 66 
 
 f>. superiority of intelligence and trustworthiness in the commu- 
 nity generally 67 
 
 6. superior security 70 
 
 CHAPTEE VIII. Of Co-operation, or the Combination of Labour. 
 
 | 1. Combination of Labour a principal cause of superior productiveness 71 
 
 2. Effects of separation of employments analysed 73 
 
 3. Combination of labour between town and country ...... 74 
 
 4. The higher degrees of the division of labour 75 
 
 5. Analysis of its advantages 77 
 
 6. Limitations of the division of labour 80 
 
 CHAPTEB IX. Of Production on a Large, and, Production on 
 a Small Scale. 
 
 j 1. Advantages of the large system of production in manufactures . 81 
 
 2. Advantages and disadvantages of the joint-stock principle ... 84 
 
 3. Conditions necessary for the large system of production .... 87 
 
 4. Large and small farming compared 89 
 
 CHAPTER X. Of the Law of the Increase of Labour. 
 
 1. The law of the increase of production depends on those of three 
 
 elements, Labour, Capital, and Land 90 
 
 2. The Law of Population m 07 
 
 3. By what checks the increase of population is practically limited . 93
 
 CONTENTS. 
 
 CHAPTER XI. Of the Law of the Increase of Capital. 
 
 PiGl 
 
 1. Means and motives to saving, on what dependent 100 
 
 2. Causes of diversity in the effective strength of the desire of accu- 
 
 mulation 102 
 
 3. Examples of deficiency in the strength of this desire 103 
 
 4. Exemplification of its excess 107 
 
 CHAPTEB XII. Of the L<no of the Increase of Production 
 from Land. 
 
 1. The limited quantity and limited productiveness of land, tho real 
 
 limits to production 108 
 
 2. The law of production from the soil, a law of diminishing return 
 
 in proportion to the increased application of labour and capital . 109 
 
 3. Antagonist principle to the law of diminishing return ; the pro- 
 
 gress of improvements in production Ill 
 
 CHAPTER XIII. Consequences of the foregoing Laics. 
 
 1. Remedies when the limit to production is the weakness of the 
 
 principle of accumulation 117 
 
 2. Necessity of restraining population not] confined to a state of 
 
 inequality of property 117 
 
 3. nor superseded by free trade in food 119 
 
 4. nor in general by emigration r 121 
 
 BOOK II. 
 DISTRIBUTION. 
 
 CHAPTER I. Of Property . 
 
 1. Introductory remarks 1t8 
 
 2. Statement of the question 124 
 
 3. Examination of Communism .....125 
 
 4. of St. Sirnonisin and Fourieiism liJO 
 
 CHAPTBE II. The same subject continued. 
 
 1. The institution of property implies freedom of acquisition by con- 
 tract 133 
 
 2. the validity of prescription 134 
 
 3. the power of bequest, but not the right of inheritance. Ques- 
 
 tion of inheritance examined 135 
 
 4. Should the right of bequest be limited, and how? 138 
 
 5. Grounds of property in land, different from those of property in 
 
 moTeablos 140 
 
 6. only valid on certain conditions, which arc not always realized. 
 
 The limitations considered 141 
 
 7. Eights of property in abuses 1 14
 
 x CONTENTS. 
 
 CHAPTER III. Of the Classes among whom the Produce 
 is distributed. 
 
 Pi OH 
 
 1. The produce sometimes shared among three classes 145 
 
 2. sometiincs belongs undividcdly to one 145 
 
 3. sometimes divided between two ........... 146 
 
 CHAPTER IV. Of Competition and Custom. 
 
 1. Competition not the sole regulator of the division of the produce . 147 
 
 2. Influence of custom on rents, and on the tenure of land . . . 148 
 
 3. Influence of custom on prices 149 
 
 CHAPTER V. Of Slavery. 
 
 1. Slavery considered in relation to the slaves ........ 151 
 
 2. in relation to production 152 
 
 3. Emancipation considered in relation to the interest of the slave- 
 
 owners 153 
 
 CHAPTER VI. Of Peasant Proprietors. 
 
 1. Difference between English and Continental opinions respecting 
 
 peasant properties 155 
 
 2. Evidence respecting peasant properties in Switzerland . . . . 1~>6 
 
 3. in Norway 159 
 
 4. in Germany 1G1 
 
 5. in Belgium 1 64 
 
 6. in the Channel Islands 167 
 
 7. in France 168 
 
 CHAPTER VII. Continuation of thi same subject. 
 
 1. Influence of peasant properties in stimulating industry .... 171 
 
 2. in training intelligence 172 
 
 3. in promoting forethought and self-control 773 
 
 4. Their effect on population 174 
 
 5. en the subdivision of land 180 
 
 CHAPTER VIII. Of Metayers. 
 
 1. Nature of the metayer system, and its varieties 183 
 
 2. Its advantages and inconveniences 184 
 
 3. Evidence concerning its effects in different countries 185 
 
 4. Is its abolition desirable ? 191 
 
 CHAPTER IX. Of Cottiers. 
 
 1. Nature and operation of cottier tenure 193 
 
 2. In an overpeopled country its necessary consequence is nominal 
 
 rents , '. 195 
 
 3. which arc inconsistent with industry, frugality, or restraint on 
 
 population 19(5 
 
 $ Ryot tenancy of India ....... 197
 
 CONTENTS. xi 
 CHAPTER X. Means of alolishing Cottier Tenancy. 
 
 PAG* 
 
 1. Irish cottiers should be converted into peasant proprietors . . . 199 
 
 2. Present state of this question ............ 204 
 
 CHAPTER XI. Of Wages. 
 
 1. W.TXCS depend on the demand and supply of labour in other 
 
 words, on population and capital ........... 207 
 
 2. Examination of some popular opinions respecting wages . . . 208 
 
 3. Certain rare circumstances excepted, high wag(/s imply restraints 
 
 on population ................ .211 
 
 4. which are in some cases legal ........... 213 
 
 5. in others the effect of particular customs ........ 214 
 
 6. Due restriction of population the only safeguard of a labouring 
 
 .................... 216 
 
 CHAPTER XII. Of Popular Remedies for Low Wages. 
 
 1. A legal or customary minimum of wages, with a guarantee of 
 
 employment ................. 218 
 
 2. would require as a condition, legal measures for repression of 
 
 population .................. 219 
 
 3. Allowances in aid of wages ............. 221 
 
 4. The Allotment System ............... 223 
 
 CHAPTER XIII. The Remedies for Low Wages further 
 considered. 
 
 1. Pernicious direction of public opinion on the subject of population 225 
 
 2. Grounds for expecting improvement .......... 227 
 
 3. Twofold means of elevating the habits of the labouring people : 
 
 by education ................. 230 
 
 4. and by large measures of immediate relief, through foreign and 
 
 home colonization ................ 231 
 
 CHAPTER XIV. Of the Differences of Wages in different 
 Employments. 
 
 1. Differences of wages arising from different degrees of attractive- 
 
 ness in different employments ............ 233 
 
 2. Differences arising from natural monopolies ........ 236 
 
 3. Effect on wages of a class of subsidized competitors ..... 238 
 
 4. of the competition of persons with independent means of sup- 
 
 port .................... 240 
 
 5. Wages of women, why lower than those of men ...... 242 
 
 0. Differences of wages arising from restrictive laws, and from combi- 
 
 nations ................... 243 
 
 7. Casej in which wagos are fixed by custom ...,. 244 
 
 CHAPTER XV. Of Profits. 
 
 1. Profits resolvable into three parts; interest, insurance, and wages 
 
 of superintendence ................ 245 
 
 2. The minimum of profits ; and the variations to which it is liable . 246
 
 xii CONTENTS. 
 
 TAG* 
 
 3. Differences of profits arising from the nature of the particular em- 
 ployment ; 247 
 
 4. General tendency of profits to an equality '248 
 
 5. Profits do not depend on prices, nor on purchase and sale . . . 2">1 
 
 6. The advances of the capitalist consist ultimately in wages of labour 2~>'2 
 
 7. The rate of profit depends on the Cost of Labour 253 
 
 CHAPTER XVI. Of Sent. 
 
 } 1. Pent the effect of a natural monopoly 255 
 
 2. No land can pay rent except land of such quality or situation, as 
 
 exists in less quantity than the demand 255 
 
 3. The rent of land consists of the excess of its return above the 
 
 return to the worst land in cultivation 2">7 
 
 4. or to the capital employed in the least advantageous circum- 
 
 stances 2">8 
 
 6. Is payment for capital suiik in the soil, rent, or profit? .... 2;VJ 
 6. Rent does not enter into the cost of production of agricultural 
 
 produce 262 
 
 BOOK III. 
 EXCHANGE. 
 
 CHAPTER I. Of Value. 
 
 | 1. Preliminary remarks 264 
 
 2. Definitions of Value in Use, Exchange Value, and Price .... 265 
 
 3. What is meant by general purchasing power 265 
 
 4. Value a relative term. A general rise or fall of Values a contra- 
 
 diction 266 
 
 5. The laws of Value, how modified in their application to retail 
 
 transactions 267 
 
 CHAPTER II. Of Demand and Supply, in their relation to Value. 
 
 1. Two conditions of Value: Utility, and Difficulty of Attainment . 268 
 
 2. Three kinds of Difficulty of Attainment 269 
 
 3. Commodities which are absolutely limited in quantity .... 270 
 
 4. Law of their value, the Equation of Demand and Supply . . , 271 
 
 5. Miscellaneous cases falling under tkis law 272 
 
 CHAPTER III. Of Cost of Production, in its relation to Value. 
 
 1. Commodities which are susceptible of indefinite multiplication 
 
 without increase of cost. Law of their Value, Cost of Production 274 
 
 2. operating through potential, but not actual, alterations of supply 275 
 
 CHAPTER IV. Ultimata Analysis of Cost of Production. 
 
 K 1. Principal element in Cost of Production Quantity of Labour . . 277 
 
 2. Wages not an element in Cost of Production 278
 
 CONTENTS. xiii 
 
 PAG I 
 
 3. except in so far as they vary from employment to employment -J7'J 
 
 4. Profits an (-lenient in Cost of Production, in so far as they vary 
 
 from employment to employment 280 
 
 5. or are spread over unequal lengths of time 281 
 
 6- Occasional elements in Cost of Production : taxes, and scarcity 
 
 value of materials 283 
 
 CHAPTEB V. Of Kent, in its Relation to Value, 
 
 1. Commodities which are susceptible of indefinite multiplication, but 
 not without increase of cost. Law of their Value, Cost of Pro- 
 duction in the most unfavourable existing circumstances . . . 285 
 
 2. Such commodities, when produced in circumstances more favour- 
 
 able, yield a rent equal to the difference of cost 286 
 
 3. Rent of mines and fisheries, and ground-rent of buildings . . . 288 
 
 4. Cases of extra profit analogous to rent . 289 
 
 CHAPTEB VI. Summary of the Theory of Value. 
 
 1. The theory of Value recapitulated in a scries of propositions . . 290 
 
 2. JIow modified by the case of labourers cultivating for subsistence . 292 
 
 3. by the case of slave labour 293 
 
 CHAPTES VII. Of Money. 
 
 1. Purposes of a Circulating Medium 293 
 
 2. Gold and Silver, why fitted for those purposes 294 
 
 3. Money a mere contrivance for facilitating exchanges, which docs 
 
 not aft'ect the laws of Value 296 
 
 CHAPTEE VIII. Of the Value of Money, as de-pendent on 
 I)emand and Supply. 
 
 % 1 . Value of Money, an ambiguous expression 297 
 
 2. The value of money depends, caiteris paribus, on its quantity . . 298 
 
 3. together with the rapidity of circulation 300 
 
 4. Explanations and limitations of this principle 301 
 
 CHAPTEE IX. Of the Value of Money, as dependent on 
 Cost of Production. 
 
 1. The value of money, in a state of freedom, conforms to the value of 
 
 the bullion contained in it 303 
 
 2. which is determined by the cost of production 304 
 
 3. This law, how related to the principle laid down in the preceding 
 
 chapter 306 
 
 CHAPTER X. Of a Double Standard, and Subsidiary Coins. 
 
 1. Objections to a double standard 307 
 
 2. The use of the two metals as money, how obtained without making 
 
 both of them legal tender 308
 
 JT CONTENTS. 
 
 CHAPTER XI. Of Credit, as a Substitute for Money. 
 
 PAT,* 
 
 1. Credit not a creation but a transfer of the means of production . . 309 
 
 2. In what manner it assists production 310 
 
 3. Function of credit in economizing- the use of money oil 
 
 4. Bills of exchange " 312 
 
 5. Promissory notes , , . o 1 4 
 
 6. Deposits and cheques . 315 
 
 CHAPTER XII. Influence of Credit on Prices. 
 
 1. The influence of bank notes, bills, and cheques, on price, a part of 
 
 the influence of Credit 31 C 
 
 2. Credit a purchasing power similar to money 317 
 
 3. Effects of great extensions and contractions of credit. Phenomena 
 
 of a commercial crisis analysed 318 
 
 4. Bills a more powerful instrument for acting on prices than book 
 
 credits, and bank notes than bills 320 
 
 5. the distinction of little practical importance 322 
 
 6. Cheques an instrument for acting on prices, equally powerful with 
 
 bank notes 32-4 
 
 7. Are bank notes money? 32? 
 
 8. No generic distinction between bank notes and other forms of credit 327 
 
 CHAPTER XIII. Of an Inconvertible Paper Currency. 
 
 J . The value of an inconvertible paper, depending on its quantity, is 
 
 a matter of arbitrary regulation 328 
 
 2. If regulated by the price of bullion, an inconvertible currency 
 
 might be safe, but not expedient 330 
 
 3. Examination of the doctrine that an inconvertible currency is safe 
 
 if representing actual property 331 
 
 4. of the doctrine that an increase of the currency promotes 
 
 industry 332 
 
 5. Depreciation of currency a tax on the community, and a fraud on 
 
 creditors 334 
 
 6. Examination of some pleas for committing this fraud ..... 334 
 
 CHAPTER XIV. Of Excess of Supply. 
 
 1. Can there be an oversupply of commodities generally? .... 336 
 
 2. The supply of commodities in general, cannot exceed the power of 
 
 purchase 337 
 
 3. never does exceed the inclination to consume 338 
 
 4. Origin and explanation of the notion of general oversnpply . . . 339 
 
 CHAPTER XV. Of a Measure of Value. 
 
 1. A Measure of Exchange Value, in what sense possible .... 341 
 
 2. A Measure of Cost of Production 342 
 
 CHAPTER XVI. Of some Peculiar Cases of Value. 
 
 1. Values of commodities which have a joint cost of production . . 345 
 
 2. Values of the different kinds of agricultural produce ..... 344
 
 CONTENTS. sv 
 
 CHAPTER XVII. Of International Trade. 
 
 PAGl 
 
 1. Cost oi' production not the regulator of international values . . . 347 
 
 2. Interchange of commodities between distant places, determined by 
 
 differences not in their absolute, but in their comparative, cost 
 
 of production 348 
 
 3. The direct benefits of commerce consist in increased efficiency of 
 
 the productive powers of the world 349 
 
 4. not in a vent for exports, nor in the gains of merchants . . . 350 
 
 5. Indirect benefits of commerce, economical and moral; still greater 
 
 than the direct , . 351 
 
 CHAPIEE XVIII. Of International Values. 
 
 8 1 . The values of imported commodities depend on the terms of inter- 
 national interchange 352 
 
 2. which depend on the Equation of International Demand . . . 353 
 
 3. Influence of cost of carriage on international values 350 
 
 4. The law of values which holds between two countries, and two 
 
 commodities, holds of any greater number 356 
 
 5. Effect of improvements in production, on international values . . 358 
 
 6. The preceding theory not complete 360 
 
 7. International values depend not solely on the quantities demanded, 
 
 but also on the means of production available in each country 
 
 for the supply of foreign markets 361 
 
 8. The practical result little affected by this additional element . . 363 
 
 9. The cost to a country of its imports, on what circumstances 
 
 dependent 365 
 
 CHAPTER XIX. Of Money, considered as an Imported 
 Commodity. 
 
 g I. Money imported in two modes; as a commodity, and as a medium 
 
 of exchange 367 
 
 2. As a commodity, it obeys the same laws of value as other imported 
 
 commodities 367 
 
 3. Its value does not depend exclusively on its cost of production at 
 
 the mines 3G9 
 
 CHAPTER XX. Of the Foreign Exchanges. 
 
 1 . Purposes for which money passes from country to country as a 
 
 medium of exchange 370 
 
 2. Mode of adjusting international payments through the exchanges. 370 
 
 3. Distinction between variations in the exchanges which are self- 
 
 adjusting, and those which can only be rectified through prices. 373 
 
 CHAPTER XXI. Of the Distribution of the Precious Metals 
 through the Commercial World. 
 
 1. The substitution of money for barter makes no difference in exports 
 
 and imports, nor in the law of international values 374 
 
 2. The preceding theorem further illustrated 37g
 
 xvi CONTENTS. 
 
 FAG3 
 
 3. The precious metals, as money, are of the same value, and dis- 
 tribute themselves according to the same law, with the precious 
 
 metals as a commodity 379 
 
 4. International payments of a non-commercial character .... 379 
 
 CIIAPTEB XXII. Influence of Currency on the Exchanges and 
 on Foreign Trade. 
 
 1. Varialions in the exchange, which originate in the currency . . 380 
 
 2. Ell'cct of a sudden increase of a metallic currency, or of the sudden 
 
 creation of bank notes or other substitutes for money .... 38* 
 
 3. Eflect of the increase of an inconvertible paper currency. Eeal 
 
 and nominal exchange 384 
 
 CHAPTEE XXIII. Of the Rate of Interest. 
 
 1 . Tho rate of interest depends on the demand and supply of loans . 385 
 
 2. Circumstances which determine the permanent demand and supply 
 
 of loans 386 
 
 3. Circumstances which determine the fluctuations ...... 388 
 
 4. The rate of interest, how far, and in what sense, connected with 
 
 the value of money 390 
 
 5. The rate of interest determines the price of land and of securities . 393 
 
 CHAPTEE XXIV. Of the Regulation of a Convertible 
 Paper Currency. 
 
 % 1 . Two contrary theories respecting the influence of bank issues . . 394 
 
 2. Examination of each 395 
 
 3. Keasons for thinking that the Currency Act of 1844 produces a 
 
 part of the beneficial effect intended by it 397 
 
 4. but produces mischiefs more than equivalent 400 
 
 5. Should the issue of bank notes be confined to a single esta- 
 
 blishment? 408 
 
 6. Should the holders of notes be protected in any peculiar manner 
 
 against failure of payment ? 409 
 
 CHAPTEE XXV. Of the Competition of different Countries 
 in the same Market. 
 
 1. Causes which enable one country to undersell another .... 410 
 
 2. Low wages one of those causes 411 
 
 3. when peculiar to certain branches of industry 412 
 
 4. but not when common lo all 414 
 
 5. Some anomalous cases of trading communities examined . . . . 414 
 
 CHAPTEE XXVI. Of Distribution, as affected by Exchange. 
 
 | 1. Exchange and Money make no difference in the law of wages . . 416 
 
 2. in the law of rent . . . 417 
 
 3. nor in the law of profits 418
 
 CONTENT'S. xvii 
 
 BOOK IV. 
 
 INFLUENCE OF THE PROGRESS OF SOCIETY ON 
 PRODUCTION AND DISTRIBUTION. 
 
 CHAPTER I. General Characteristics of a Progressive State 
 of Wealth. 
 
 PAGB 
 
 i 1. Introductory Remarks 421 
 
 2. Tendency of the progress of society towards increased command 
 over the powers of nature ; increased security ; and increased 
 capacity of co-operation 421 
 
 CHAPTEB II. Influence of the Progress of Industry and 
 Population on Values and Prices. 
 
 1. Tendency to a decline of the value and cost of production of all 
 
 commodities 424 
 
 2. except the products of agriculture and mining, which have a 
 
 tendency to rise 425 
 
 3. that tendency from time to time counteracted by improvements 
 
 in production 42G 
 
 4. Effect of the progress of society in moderating fluctuations of value 427 
 
 5. Examination of the influence of speculators, and in particular of 
 
 corn dealers 423 
 
 CHAPTER III. Influence of the Progress of Industry and 
 Population on Rents, Profits, and Wages. 
 
 1 . First case ; population increasing, capital stationary 430 
 
 2. Second case; capital increasing, population stationary .... 432 
 
 3. Third case ; population and capital increasing equally, the arts of 
 
 production stationary 433 
 
 4. Fourth case; the arts of production progressive, capital and popu- 
 
 lation stationary 433 
 
 5. Fifth case ; all the three elements progressive ....... 437 
 
 CHAPTEB IV. Of the Tendency of Profits to a Minimum. 
 
 1. Doctrine of Adam Smith on the competition of capital .... 439 
 
 2. Doctrine of Mr. Wakefield respecting the field of employment . . 4 1C* 
 
 3. AVhat determines the minimum rate of profit 4 It 
 
 4. In opulent countries, profits habitually near to the minimum . . 441! 
 
 5. prevented from reaching it by commercial revulsions ....-111 
 
 6. by improvements in production 445 
 
 7. by the importation of cheap necessaries and instruments . . 41(5 
 
 8. by the emigration of capital . . . 417
 
 viij CONTENTS. 
 
 CHAPTER V. Consequences of the Tendency of Profits to 
 a Minimum. 
 
 PAOl 
 
 1. Abstraction of capital not necessarily a national loss 448 
 
 2. In opulent countries, the extension of machinery not detrimental 
 
 but beneficial to labourers 450 
 
 CHAPTER VI. Of the Stationary State. 
 
 1. Stationaiy state of wealth and population, dreaded and deprecated 
 
 by writers 452 
 
 2. but not in itself undesirable 453 
 
 CHAPTER VII. On the Probable Futurity of His Labouring 
 Classes. 
 
 1. The theory of dependence and protection no longer applicable to 
 
 the condition of modern society 455 
 
 2. The future well-being of the labouring classes principally dependent 
 
 on their own mental cultivation 458 
 
 3. Probable effects of improved intelligence in causing a better 
 
 adjustment of population Would be promoted by the social 
 independence of women 459 
 
 4. Tendency of society towards the disuse of the relation of hiring 
 
 and service 459 
 
 5. Examples of the association of labourers with capitalists . . . . 461 
 
 6. of the association of labourers among themselves ..... 4(55 
 
 7. Competition not pernicious, but useful and indispensable .... 476 
 
 BOOK V. 
 ON THE INFLUENCE OF GOVERNMENT. 
 
 CHAPTER I. Of the Functions of Government in general. 
 
 1. Necessary and optional functions of government distinguished . . 479 
 
 2. Multifarious character of the necessaiy functions of government . 480 
 
 3. Division of the subject 482 
 
 CHAPTER II. Of the General Principles of Taxation. 
 
 1 . Four fundamental rules of taxation 483 
 
 2. Grounds of the principle of Equality of Taxation 484 
 
 3. Should the same percentage be levied on all amounts of income ? . 485 
 
 4. Should the same percentage be levied on perpetual and on termi- 
 
 nable incomes ? 488 
 
 6. The increase of the rent of land from natural causes a fit subject of 
 
 peculiar taxation 492 
 
 6. A land tax, in some cases, not taxation, but a rent-charge in favour 
 
 of the public 493 
 
 7. Taxes falling on capital, not necessarily objectionable .... 494
 
 CONTENTS. xbt 
 CHAPTER III. Of Direct Taxes. 
 
 FXGB 
 
 1. Direct taxes either on income or on expenditure 495 
 
 2. Taxes on rent 496 
 
 3. on profits . 496 
 
 4. on wages 498 
 
 5. An Income Tax 490 
 
 6. A House Tax 501 
 
 CHAPTEB IV. Of Taxes on Commodities. 
 
 1 . A Tax on all Commodities would fall on profits ....... 504 
 
 2. Taxes on particular commodities fall on the consumer 505 
 
 3. Peculiar effects of taxes on necessaries 506 
 
 4. how modified by the tendency of profits to a minimum . . . 507 
 
 5. Effects of discriminating duties 510 
 
 6. Effects produced on international exchange by duties on exports 
 
 and on imports 512 
 
 CHAPTEB V. Of some other Taxes. 
 
 1 . Taxes on contracts ...517 
 
 2. Taxes on communication 518 
 
 3. Law Taxes 519 
 
 4. Modes of taxation for local purposes 520 
 
 CHAPTER VT. Comparison between Direct and Indirect 
 Taxation. 
 
 1. Arguments for and against direct taxation 521 
 
 2. "\Vliatfbrmsofindirecttaxationmosteligible ....... 523 
 
 3. Practical rules for indirect taxation 524 
 
 CHAPTEE VII. Of a National Delt. 
 
 1. Is it desirable to defray extraordinary public expenses by loans? . 526 
 
 2. Not desirable to redeem a national debt by a general contribution 528 
 
 3. In what cases desirable to maintain a surplus revenue for the 
 
 redemption of debt . . 529 
 
 CHAPTER VIII. Of the Ordinary Functions of Government, 
 considered as to tJieir Economical Effects. 
 
 1. KlTocts of imperfect security of person and property 531 
 
 2. Kfi'i.vls of over-taxation 532 
 
 3. Effects of imperfection in the system of the laws, and in the admi- 
 
 nistration of justice 533 
 
 CHAPTEK IX. The same subject continued. 
 
 1. Laws of Inheritance 526 
 
 2. Law and Custom of Primogeniture 537 
 
 3. Entails 539
 
 xx CONTENTS. 
 
 4. Law of compulsory equal division of inheritances 540 
 
 o. Laws of Partnership 541 
 
 6. Partnerships with limited liability. Chartered Companies . . . 542 
 
 7. Partnerships in cnmmandite 545 
 
 8. Laws relating to insolvency 548 
 
 CHAPTEB X. Of Interferences of Government grounded on \ 
 Erroneous Theories. 
 
 | 1. Doctrine of Protection to Native Industry 552 
 
 2. Usury Laws j^. 558 
 
 3. Attempts to regulate the prices of commodities 561 
 
 4. Monopolies 502 
 
 5. Laws against Combination of Workmen 5G3 
 
 6. Restraints on opinion or on its publication 506 
 
 CHAPTER XI. Of the Grounds and Limits of the Laisser-faire 
 or Non-interference Principle. 
 
 1. Governmental intervention distinguished into authoritative and 
 
 unauthoritative 567 
 
 2. Objections to government intervention the compulsory character 
 
 of the intervention itself, or of the levy of funds to support it . . 568 
 
 3. increase of the power and influence of government 570 
 
 4. increase of the occupations and responsibilities of government . 570 
 
 5. superior efficiency of private agency, owing to stronger interest 
 
 in the work 571 
 
 6. importance of cultivating habits of collective action in the 
 
 people 572 
 
 7. Laisser-faire the general rule 573 
 
 8. but liable to large exceptions. Cases in which the consumer is 
 
 an incompetent judge of the commodity. Education .... 575 
 
 9. Case of persons exercising power over others. Protection of chil- 
 
 dren and young persons ; of the lower animals. Case of women 
 
 not analogous 577 
 
 10. Case of contracts in perpetuity 579 
 
 11. Cases of delegated management 579 
 
 12. Cases in which public intervention may be necessary to give effect 
 
 to the wishes of the persons interested. Examples : hours of 
 labour; disposal of colonial lands 581 
 
 13. Case of acts done for the benefit of others than the persons con- 
 
 cerned. Poor Laws 585 
 
 14. Colonization 585 
 
 ,5. - other miscellaneous examples 539 
 
 "6. Government intervention may be necessary in default of private 
 
 agency, in cases where private agency would bo more suitable . 590
 
 PRINCIPLES 
 
 POLITICAL ECONOMY. 
 
 PRELIMINARY REMARKS. 
 
 IN every department of human affairs, 
 Practice long precedes Science : sys- 
 tematic enquiry into the modes of 
 action of the powers of nature, is the 
 tardy product of a long course of 
 efforts to use those powere for practical 
 ends. The conception, accordingly, of 
 Political Economy as a branch of 
 science, is extremely modern ; but the 
 (subject with which its enquiries are 
 conversant has in all ages necessarily 
 constituted one of the chief practical 
 interests of mankind, and, in some, a 
 most unduly engrossing one. 
 
 That subject is Wealth. Writers 
 on Political Economy profess to teach, 
 or to investigate, the nature of Wealth, 
 and the laws of its production and dis- 
 tribution : including, directly or re- 
 motely, the operation of all the causes 
 by which the condition of mankind, or 
 of any society of human beings, in 
 respect to this universal object of 
 human desire, is made prosperous or 
 the reverse. Not that any treatise on 
 Political Economy can discuss or even 
 Dmimerate all these causes ; but it 
 undertakes to set forth as much as is 
 known of the laws and principles ac- 
 cording to which they operate. 
 
 Every one lias a notion, sufficiently 
 correct for common purposes, of what 
 is meant by wealth. The enquiries 
 which relate to it are in no danger of 
 being confounded with those relating 
 to any other of the great human in- 
 t'Trsts. All know that it is one 
 tiling to be rich, another thing to be 
 enlightened, br~<i, or humane ; that 
 
 the questions how a nation is made 
 wealthy, and how it is made free, or 
 virtuous, or eminent in literature, in 
 the fine arts, in arms, or in polity, 
 are totally distinct enquiries. Those 
 things, indeed, are all indirectly con- 
 nected, and react upon one another. 
 A people has sometimes become free, 
 because it had first grown wealthy ; or 
 wealthy, because it had first becom 
 free. The creed and laws of a people 
 act powerfully upon their economical 
 condition ; and this again, by its influ- 
 ence on their mental development and 
 social relations, reacts upon their creed 
 and laws. But though the subjects 
 are in very close contact, they are 
 essentially different, and have never 
 been supposed to be otherwise. 
 
 It is no part of the design of this 
 treatise to aim at metaphysical nicety 
 of definition, where the ideas suggested 
 by a term are already as determinate 
 as practical purposes require. But, 
 little as it might be expected that any 
 mischievous confusion of ideas could 
 take place on a subject so simple as 
 the question, what is to be considered 
 as wealth, it is matter of history that 
 such confusion of ideas has existed 
 that theorists and practical politicians 
 have been equally, and at one period 
 universally, infected by it, and that 
 for many generations it gave a tho- 
 roughly false direction to the policy 
 of Europe. I refer to the set of doc- 
 trines designated, since the time of 
 Adam Smith, by the appellation of the 
 Mercantile System,
 
 PRELIMINARY REMARKS. 
 
 While this system prevailed, it was 
 assumed, either expressly or tacitly, in 
 the \\holepolicyofnations, that wealth 
 consisted solely of money ; or of the 
 precious metals, which, when not already 
 in the state of money, are capable of 
 being directly converted into it. Ac- 
 cording to the doctrines then preva- 
 lent, whatever tended to heap up 
 money or bullion in a country added to 
 its wealth. Whatever sent the precious 
 metals out of a country impoverished 
 it. If a country possessed no gold or 
 silver mines, the only industry by 
 which it could be enriched was foreign 
 trade, being the only one which could 
 bring in money. Any branch of trade 
 which was supposed to send out more 
 money than it brought in, however 
 ample and valuable migbt be the re- 
 turns in another shape, was looked 
 upon as a losing trade. Exportation of 
 goods was favoured and encouraged 
 (even by means extremely onerous to 
 the real resources of the country), be- 
 cause the exported goods being stipu- 
 lated to be paid for in money, it was 
 hoped that the returns would actually 
 be made in gold and silver. Importa- 
 tion of anything, other than the preci- 
 ous metals, was regarded as a loss to 
 the nation of the whole price of the 
 things imported; unless they were 
 brought in to be re-exported at a profit, 
 or unless, being the materials or in- 
 struments of some industry practised 
 in the country itself, they gave the 
 power of producing exportable articles 
 at smaller cost, and thereby effecting 
 a larger exportation. The commerce 
 of the world was looked upon as a 
 struggle among nations, which could 
 draw to itself the largest share of the 
 gold and silver in existence ; and in 
 this competition no nation could gain 
 anything, except by making others 
 lose as much, or, at the least, prevent- 
 ing them from gaining it. 
 
 It often happens that the universal 
 belief of one age of mankind a belief 
 from which no one was, nor without 
 an extraordinary effort of genius and 
 courage, could at that time be free 
 becomes to a subsequent age so palpa- 
 ble an absurdity, that the only difficulty 
 then is to imagine how such a thing 
 
 can ever have appeared credible. Tt 
 has so happened with the doctrine that 
 money is synonymous with wealth. 
 The conceit seems too preposterous to 
 be thought of as a serious opinion. It 
 looks like one of the crude fancies of 
 childhood, instantly corrected by a 
 word from any grown person. But let 
 no one feel confident that he would 
 have escaped the delusion if he had 
 lived at the time when it prevailed. 
 All the associations engendered by 
 common life, and by the ordinary course 
 of business, concurred in promoting it. 
 So long as those associations were the 
 only medium through which the sub- 
 ject was looked at, what we now 
 think so gross an absurdity seemed a 
 truism. Once questioned, indeed, it 
 was doomed ; but no one was likely to 
 think of questioning it whose mind had 
 not become familiar with certain modes 
 of stating and of contemplating econo- 
 mical phenomena, which have only 
 found their way into the general 
 understanding through the influence of 
 Adam Smith and of his expositors. 
 
 In common discourse, wealth is 
 always expressed in money. If you 
 ask how rich a person is, you are 
 answered that he has so many thousand 
 pounds. All income and expenditure, 
 all gains and losses, everything by 
 which one becomes richer or poorer, 
 are reckoned as the coming in or going 
 out of so much money. It is true that 
 in the inventory of a person's fortune 
 are included, not only the money in 
 his actual possession, or due to him, 
 but all other articles of value. These, 
 however, enter, not in their own cha- 
 racter, but in virtue of the sums of 
 money which they would sell for ; and 
 if they would sell for less, their owner 
 is reputed less rich, though the things 
 themselves are precisely the same. It 
 is true, also, that people do not grow 
 rich by keeping their money unused, 
 and that they must be willing to 
 spend in order to gain. Those who 
 enrich themselves by commerce, do so 
 by giving money for goods as well as 
 goods for money ; and the first is as 
 necessary a part of the process as the 
 last. But a person who buys goods 
 for purposes of gain, does so to sell
 
 PRELIMINARY REMARKS. 
 
 them again for money, and in the ex- 
 pectation of receiving more money than 
 he laid out : to get money, therefore, 
 Beems even to the person himself the 
 ultimate end of the whole. It often 
 happens that he is not paid in money, 
 but in something else ; having bought 
 goods to a value equivalent, which are 
 set off against those he sold. But he 
 accepted these at a money valuation, 
 and in the belief that they would 
 bring in more money eventually than 
 the price at which they were made 
 over to him. A dealer doing a large 
 amount of business, and turning over 
 his capital rapidly, has but a small 
 portion of it in ready money at any one 
 time. But he only feels it valuable to 
 him as it is convertible into money : he 
 considers no transaction closed until 
 the net result is either paid or credited 
 in money : when he retires from busi- 
 ness it is into money that he converts 
 the whole, and not until then does he 
 deem himself to have realized his 
 gains : just as if money were the only 
 wealth, and money's worth were only 
 the means of attaining it. If it be now 
 asked for what end money is desirable, 
 unless to supply the wants or pleasures 
 of oneself or others, the champion of 
 the system would not be at all embar- 
 rassed by the question. True, he would 
 say, these are the uses of wealth, and 
 very laudable uses while confined to 
 domestic commodities, because in that 
 case, by exactly the amount which you 
 expend, you enrich others of your 
 countrymen. Spend your wealth, if 
 you please, in whatever indulgences 
 you have a taste for ; but your wealth 
 is not the indulgences, it is the sum 
 of money, or the annual money income, 
 with which you purchase them. 
 
 While there were so many things to 
 render the assumption which is the 
 basis of the mercantile system plausi- 
 ble, there is also some small foundation 
 in reason, though a very insufficient 
 one, for the distinction which that sys- 
 tem so emphatically draws between 
 money and every other kind of valua- 
 ble possession. We really, and justly, 
 look upon a person as possessing the 
 advantages of wealth, not in proportion 
 to the useful and agreeable things of 
 
 which he is in the actual enjoyment, 
 but to his command over the general 
 fund of things useful and agreeable; 
 the power he possesses of providing for 
 any exigency, or obtaining any object 
 of "desire. Now, money is itself that 
 power ; while all other things, in a 
 civilized state, seem to confer it only 
 by their capacity of being exchanged 
 for money. To possess any other arti- 
 cle of wealth, is to possess that par- 
 ticular thing, and nothing else: if you 
 wish for another thing instead of it, 
 you have first to sell it, or to submit 
 to the inconvenience and delay (if not 
 the impossibility) of finding some one 
 who has what you want, and is wiDing 
 to barter it for what you have. But 
 with money you are at once able to 
 buy whatever things are for sale : and 
 one whose fortune is in money, or in 
 things rapidly convertible into it, seems 
 both to himself and others to possess not 
 any one thing, but all the things which 
 the money places it at his option tA 
 purchase. The greatest part of the 
 utility of wealth, beyond a very mode- 
 rate quantity, is not the indulgences it 
 procures, but the reserved power which 
 its possessor holds in his hands of at- 
 taining purposes generally ; and this 
 power no other kind of wealth confers 
 so immediately or so certainly as 
 money. It is the only form of wealth 
 which is not merely applicable to some 
 one use, but can be turned at once to 
 any use. And this distinction was the 
 more likely to make an impression 
 upon governments, as it is one of con- 
 siderable importance to them. A civi- 
 lized government derives comparatively 
 little advantage from taxes unless it 
 can collect them in money : and if it 
 has large or sudden payments to make, 
 especially payments in foreign countries 
 for wars or subsidies, either for the sake 
 of conquering or of not being conquered 
 (the two chief objects of national policy 
 until a late period), scarcely any 
 medium of payment except money will 
 serve the purpose. All these causes 
 conspire to make both individuals and 
 governments, in estimating their 
 means, attach almost exclusive im- 
 portance to money, either in csse or in 
 posse, and Icok upon all other things 
 B2
 
 PRELIMINARY REMARKS. 
 
 (when viewed as part of their resources) 
 scarcely otherwise than as the remote 
 means of obtaining that which alone, 
 when obtained, affords the indefinite, 
 and at the same time instantaneous, 
 command over objects of desire, which 
 best answers to the idea of wealth. 
 
 An absurdity, however, does not cease 
 to be an absurdity when we have dis- 
 covered what were the appearances 
 which made it plausible ; and the Mer- 
 cantile Theory could not fail to be seen 
 in its true character when men began, 
 even in an imperfect manner, to explore 
 into the foundations of things, and seek 
 their premises from elementary facts, 
 and not from the forms and phrases of 
 common discourse. So soon as they 
 asked themselves what is really meant, 
 by money what it is in its essential 
 characters, and the precise nature of 
 the functions it performs they reflected 
 that money, like other things, is only 
 a desirable possession on account of its 
 uses ; and that these, instead of being, 
 as they delusively appear, indefinite, 
 are of a strictly defined and limited 
 description, namely, to facilitate the 
 distribution of the produce of industry 
 according to the convenience of those 
 among whom it is shared. Further 
 consideration showed that the uses of 
 money are in no respect promoted by 
 increasing the quantity which exists 
 and circulates in a country ; the service 
 which it performs being as well rendered 
 by a small as by a large aggregate 
 amount. Two million quarters of corn 
 will not feed so many persons as four 
 millions ; but two millions of pounds 
 sterling will carry on as much traffic, 
 will buy and sell as many commodities, 
 as four millions, though at lower nomi- 
 nal prices. Money, as money, satisfies 
 no want ; its worth to any one, consists 
 in its being a convenient shape in which 
 to receive his incomings of all sorts, 
 which incomings he afterwards, at the 
 times which suit him best, converts into 
 the forms is which they can be useful 
 to him. Great as the difference would 
 be between a country with money, and 
 a country altogether without it, it would 
 be only one of convenience ; a saving of 
 time and trouble, like grinding by water 
 power instead of by hand, or (to use 
 
 Adam Smith's illustration) like the 
 benefit derived from roads ; and to mis- 
 take money for wealth, is the same sort 
 of error as to mistake the highway 
 which may be the easiest way of get- 
 ting to your house or lands, for the 
 house and lands themselves. 
 
 Money, being the instrument of an 
 important public and private purpose, 
 is rightly regarded as wealth ; but 
 everything else which serves any hu 
 man purpose, and which nature does 
 not afford gratuitously, is wealth also. 
 To be wealthy is to have a large stock 
 of useful articles, or the means of pur- 
 chasing them. Everything forms there- 
 fore a part of wealth, which has a power 
 of purchasing ; for which anything use- 
 ful or agreeable would be given in 
 exchange. Things for which nothing 
 could be obtained in exchange, how- 
 ever useful or necessary they may be, 
 are not wealth in the sense in which 
 the term is used in Political Economy. 
 Air, for example, though the most ab- 
 solute of necessaries, bears no price in 
 the market, because it can be obtained 
 gratuitously : to accumulate a stock of 
 it would yield no profit or advantage to 
 any one ; and the laws of its produc- 
 tion and distribution are the subject of 
 a very different study from Political 
 Economy. But though air is not wealth, 
 mankind are much richer by obtaining 
 it gratis, since the time and labour 
 which would otherwise be required for 
 supplying the most pressing of all wants, 
 can be devoted to other purposes. It 
 is possible to imagine circumstances in 
 which air would be a part of wealth. 
 If it became customary to sojourn long 
 in places where the air does not natur- 
 ally penetrate, as in diving-bells sunk 
 in the sea, a supply of air artificially 
 furnished would, like water conveyed 
 into houses, bear a price : and if from 
 any revolution in nature the atmosphere 
 became too scanty for the consumption, 
 or could be monopolized, air might ac- 
 quire a very high marketable value. IE 
 such a case, the possession of it, beyond 
 his own wants, would be, to its owner, 
 wealth; and the general wealth of 
 mankind might at first sight appear to 
 be increased, by what would be so great 
 a calamity to them. The error would
 
 PRELIMINARY REMARKS. 
 
 He in not considering, that however 
 rich the possessor of air might become 
 at the expense of the rest of the com- 
 munity, all persons else would be poorer 
 by all that they were compelled to pay 
 for what they had before obtained with- 
 out payment. 
 
 This leads to an important distinc- 
 tion in the meaning of the word wealth, 
 as applied to the possessions of an in- 
 dividual, and to those of a nation, or of 
 mankind. In the wealth of mankind, 
 nothing is included which does not of 
 itself answer some purpose of utility or 
 pleasure. To an individual, anything 
 is wealth, which, though useless in it- 
 self, enables him to claim from others 
 a part of their stock of things useful or 
 pleasant. Take, for instance, a mort- 
 gage of a thousand pounds on a landed 
 estate. This is wealth to the person 
 to whom it brings in a revenue, and 
 who could perhaps sell it in the market 
 for the full amount of the debt. But 
 it is not wealth to the country ; if the 
 engagement were annulled, the country 
 would be neither poorer nor richer. The 
 mortgagee would have lost a thousand 
 pounds, and the owner of the land would 
 nave gained it. Speaking nationally, 
 the mortgage was not itself wealth, but 
 merely gave A a claim to a portion of 
 the wealth of B. It was wealth to A, 
 and wealth which he could transfer to 
 a third person ; but what he so trans- 
 ferred was in i'act a joint ownership, to 
 the extent of a thousand pounds, in the 
 land of which B was nominally the 
 sole proprietor. The position of fund- 
 holders, or owners of the public debt of 
 a country, is similar. They are mort- 
 gagees on the general wealth of the 
 country. The cancelling of the debt 
 would be no destruction of wealth, but 
 a transfer of it : a wrongful abstraction 
 of wealth from certain members of the 
 community, for the profit of the govern- 
 ment, or of the tax-payers. Funded 
 property therefore cannot be counted 
 as part of the national wealth. This 
 is not always borne in mind by the 
 dealers in statistical calculations. For 
 example, in estimates of the gross in- 
 come of the country, founded on the 
 proceeds of the income-tax, incomes 
 deri red from the funds are not always 
 
 excluded: though the tax-payers are 
 assessed on their whole nominal income, 
 without being permitted to deduct from 
 it the portion levied from them in taxa- 
 tion to form the income of the fund- 
 holder. In this calculation, therefore, 
 one portion of the general income of the 
 country is counted twice over, and the 
 aggregate amount made to appear 
 greater than it is by almost thirty mil- 
 lions. A country, however, may include 
 in its wealth all stock held by its citi- 
 zens in the funds of foreign countries, 
 and other debts dne to them from 
 abroad. But even this is only wealth 
 to them by being a part ownership in 
 wealth held by others. It forms no 
 part of the collective wealth of the hu- 
 man race. It is an element in the dis- 
 tribution, but not in the composition, 
 of the general wealth. 
 
 It_has been proposed to define wealth 
 as signifying " instruments,: 1 ' meaning 
 riot tools and machinery alone, but the 
 whole accumulation possessed by indi- 
 viduals or communities, of means i'or 
 the attainment of their ends. Thus, a 
 field is an instrument, because it is a 
 means to the attainment of corn. Corn 
 is an instrument, being a means to the 
 attainment of flour. Flour is an instm 
 ment, being a means to the attainment 
 of bread. Bread is an instrument, as a 
 means to the satisfaction of hunger 
 and to the support of life. Here we at 
 last arrive at things which are not in- 
 struments, being desired on their own 
 account, and not as mere means to 
 something beyond. This view of thn 
 subject is philosophically correct ; or 
 father, this mode of expression may be 
 usefully employed along with others, not 
 as conveying a different view of the sub- 
 ject from the common one, but as giving 
 more distinctness and reality to the 
 common view. Itjdeparts, however, too 
 widely from the custom of language, to 
 be likely to obtain general acceptance, 
 or to be of use for any other purpose 
 than that of occasional illustration. 
 
 Another example of a possession 
 which is wealth to the person holding 
 it, but not wealth to the nation, or to 
 mankind, is slaves. It is by a strange 
 confusion of ideas that slave property 
 (as it is termed) is counted, at so mud
 
 PEEL1MINARY REMARKS. 
 
 per head, in an estimate of tlic wealth. 
 or of the capital, of the country which 
 tolerates the existence of such property. 
 If a human being, considered as an 
 object possessing productive ]>. 
 part of the national wealth when his 
 powers are owned by another man, he 
 cannot be less a part oi' it when they 
 are owned by himself. Whatever he 
 is worth to his master is so much pro- 
 perty abstracted from himself, and its 
 abstraction cannot augment the posses- 
 sions of the two together, or of the 
 country to which they both belong. In 
 propriety of classification, however, the 
 people of a country are not to be counted 
 in its wealth. They are that for the 
 sake of which its wealth exists. The 
 term wealth is wanted to denote the de- 
 sirable objects which they possess, not 
 inclusive of, but in contradistinction to, 
 their own persons. They are not wealth 
 to themselves, though they are means 
 of acquiring it. 
 
 Wgalth, then, may be defined, all 
 n i-o t'nl or agreeable things which possess 
 exchangeable value ; or, in other words, 
 all useful or agreeable things except 
 those which can be obtained, in the 
 quantity desired, without labour or sa- 
 crifice. To this definition, the only 
 objection seems to be, that it leaves in 
 uncertainty a question which has been 
 much debated whetherwhat are called 
 immaterial products are to be considered 
 as wealth : whether, for example, the 
 skill of a workman, or any other natural 
 or acquired power of body or mind, shall 
 be called wealth, or not : a question, 
 not of very great importance, and 
 which, so far as requiring discussion, 
 will be more conveniently considered in 
 another place.* 
 
 These things having been premised 
 respecting wealth, we shall next turn 
 our attention to the extraordinary dif- 
 ferences in respect to it, which exist 
 between nation and nation, and be- 
 tween different ages of the world ; dif- 
 ferences both in the quantity of wealth, 
 and in the kind of it ; as well as in the 
 manner in which the wealth existing 
 in the community is shared among its 
 saembers. 
 
 iL here is, perhaps, no people or corn- 
 Infra, book j. chap. iii. 
 
 munity, now existing, which subsists 
 entirely on the spontaneous produce of 
 vegetation. But many tribes still live 
 exclusively, or almost exclusively, on 
 wild animals, the produce of hunting or 
 fishing. Their clothing is skins ; theit 
 habitations, huts rudely formed of loga 
 or boughs of trees, and abandoned at 
 an hour's notice. The food they use 
 being little susceptible of storing up, 
 they have no accumulation of it, and 
 are often exposed to great privations. 
 The wealth of such a community con- 
 sists solely of the skins they wear ; a 
 few ornaments, the taste for which 
 exists among most savages ; some rude 
 utensils ; the weapons with which they 
 kill their game, or fight against hostile 
 competitors for the means of subsistence; 
 canoes for crossing rivers and lakes, or 
 fishing in the sea ; and perhaps some 
 furs or other productions of the wilder- 
 ness, collected to be exchanged with 
 civilized people for blankets, brandy, 
 and tobacco ; of which foreign produce 
 also there may be some unconsumcd 
 portion in store. To this scanty in- 
 ventory of material wealth, ought to be 
 added their land; an instrument of 
 production of which they make slender 
 use, compared with more settled com- 
 munities, but which is still the source 
 of their subsistence, and which has a 
 marketable value if there be any agri- 
 cultural community in the neighbour, 
 hood requiring more land than it pos- 
 sesses. This is the state of greatest 
 poverty in which any entire community 
 of human beings is known to exist ; 
 though there are much richer commu- 
 nities in which portions of the inhabit- 
 ants are in a condition, as to subsist- 
 ence and comfort, as little enviable as 
 that of the savage. 
 
 The first great advance beyond this 
 state consists in the domestication of 
 the more useful animals ; giving rise to 
 the pastoral or nomad state, in which 
 mankind do not live on the produce of 
 hunting, but on milk and its products, 
 and on the annual increase of flocks 
 and herds. This condition is not only 
 more desirable in itself, but more con- 
 ducive to further progress ; and a much 
 more considerable amount of wealth \ 
 accumulated under it. So long as tL\
 
 PRELIMINARY REMARKS. 
 
 rast natural pastures of the earth are 
 not yet so fully occupied as to be con- 
 sumed more rapidly than they are 
 spontaneously reproduced, a large and 
 constantly increasing stock of subsist- 
 ence may be collected and preserved, 
 with little other labour than that of 
 guarding the cattle from the attacks of 
 wild beasts, and from the force or wiles 
 of predatory men. Large flocks and 
 herds, therefore, are in time possessed, 
 by active and thrifty individuals through 
 their own exertions, and by the heads 
 of families and tribes through the ex- 
 ertions of those who are connected with 
 them by allegiance. There thus arises, 
 in the shepherd state, inequality of 
 possessions ; a thing which scarcely 
 exists in the savage state, where no 
 one has much more than absolute ne- 
 cessaries, and in case of deficiency must 
 share even those with his tribe. In the 
 nomad state, some have an abundance 
 of cattle, sufficient for the food of a mul- 
 titude, while others have not contrived 
 to appropriate and retain any super- 
 fluity, or perhaps any cattle at all. But 
 subsistence has ceased to be precarious, 
 since the more successful have no other 
 use which they can make of their sur- 
 plus than to feed the less fortunate, 
 while every increase in the number of 
 persons connected with them is an in- 
 crease both of security and of power : 
 and thus they are enabled to divest 
 themselves of all labour except that of 
 government and superintendence, and 
 acquire dependents to fight for them in 
 war and to serve them in peace. One 
 of the features of this state of society 
 is, that a part of the community, and 
 in some degree even the whole of it, 
 possess leisure. Only a portion of time 
 is required for procuring food, and the 
 remainder is not engrossed by anxious 
 thought for the morrow, or necessary 
 repose from muscular activity. Such 
 a life is highly favourable to the growth 
 of new wants, and opens a possibility 
 of their gratification. A desire arises 
 for better clothing, utensils, and imple- 
 ments, than the savage state contents 
 itself with ; and the surplus food ren- 
 ders it practicable to devote to these 
 purposes the exertions of a part of the 
 tribe. In all or most nomad commu- 
 
 nitk-s we find domestic manufactures 
 of a coarse, and in some, of a fine kind. 
 There is ample evidence that while 
 those parts of the world which have 
 been the cradle of modern civilization 
 were still generally in the nomad state, 
 considerable skill had been attained in 
 spinning, weaving, and dyeing woollen 
 garments, in the preparation of leather, 
 and in what appears a still more diffi- 
 cult invention, that of working in metals. 
 Even speculative science took its first 
 beginnings from the leisure character- 
 istic of this stage of social progress. 
 The earliest astronomical observations 
 are attributed, by a tradition which has 
 
 : much appearance of truth, to the shep- 
 herds of Chaldaea. 
 
 From this state of society to the 
 agricultural the transition is not indeed 
 easy, (for no great change in the habits 
 of mankind is otherwise than difficult, 
 
 ' and in general either painful or very 
 slow,) but it lies in what may he called 
 the spontaneous course of events. The 
 growth of the population of men and 
 cattle began in time to press upon the 
 earth's capabilities of yielding natural 
 pasture : and this cause doubtless pro- 
 duced the first tilling of the ground, 
 just as at a later period the same cause 
 made the superfluous hordes of the 
 nations which had remained nomad 
 precipitate themselves upon those 
 which had already become agricul- 
 tural ; until, these having become suf- 
 ficiently powerful to repel such inroads, 
 the invading nations, deprived of this 
 outlet, were obliged also to become 
 agricultural communities. 
 
 But after this great step had been 
 completed, the subsequent progress of 
 mankind seems by no means to have 
 been so rapid (certain rare combina- 
 tions of circumstances excepted) as 
 might perhaps have been anticipated. 
 The quantity of human food which the 
 earth is capable of returning even to 
 the most wretched system of agricul- 
 ture, so much exceeds what could be 
 obtained in the purely pastoral state, 
 that a great increase of population is 
 invariably the result. But this addi- 
 tional food is onjy obtained by a great 
 additional amount of labour; so that 
 not only an agricultural has much les?
 
 8 
 
 PRELIMINARY REMARKS. 
 
 leisure than a pastoral population, but, 
 with the imperfect tools and unskilful 
 processes which are for a long time 
 employed (and which over the greater 
 part of the earth have not even yet 
 been abandoned), agriculturists do not, 
 unless in unusually advantageous cir- 
 cumstances of climate and soil, produce 
 so great a surplus of food beyond their 
 necessary consumption, as to support 
 any large class of labourers engaged in 
 other departments of industry. The 
 surplus, too, whether small or great, is 
 usually torn from the producers, either 
 by the government to which they are 
 subject, or by individuals, who by 
 superior force, or by availing them- 
 selves of religious or traditional feel- 
 ings of subordination, have established 
 themselves as lords of the soil. 
 
 The first of these modes of appro- 
 priation, by the government, is cha- 
 racteristic of the extensive monarchies 
 which from a time beyond historical 
 record have occupied the plains of 
 Asia. The government, in those coun- 
 tries, though varying in its qualities 
 according to the accidents of personal 
 character, seldom leaves much to the 
 cultivators beyond mere necessaries, 
 and often strips them so bare even of 
 these, that it finds itself obliged, after 
 taking all they have, to lend part of it 
 back to those from whom it has been 
 taken, in order to provide them with seed, 
 and enable them to support life until an- 
 other harvest. Under the regime in 
 question, though the bulk of the popu- 
 lation are ill provided for, the govern- 
 ment, by collecting small contributions 
 from great numbers, is enabled, with 
 any tolerable management, to make a 
 show of riches quite out of proportion 
 to the general condition of the society; 
 and hence the inveterate impression, 
 of which Europeans have only at a late 
 period been disabused, concerning the 
 great opulence of Oriental nations. In 
 this wealth, without reckoning the 
 large portion which adheres to the 
 iiands emp'oyed in collecting it, many 
 of course participate, besides 
 the immediate household of the sove- 
 A large part is distributed 
 among the various functionaries of go- 
 
 vernment, and among the objects of 
 the sovereign's favour or caprice. A 
 part is occasionally employed in works 
 of public utility. The tanks, wells, 
 and canals for irrigation, without which 
 in many tropical climates cultivation 
 could hardly be carried on ; the em- 
 bankments which confine the rivers, 
 the bazars for dealers, and the seraees 
 for travellers, none of which could have 
 been made by the scanty means in the 
 possession of those using them, owe 
 their existence to the liberality and 
 enlightened self-interest of the better 
 order of princes, or to the benevolence 
 or ostentation of here and there a rich 
 individual, whose fortune, if traced to 
 its source, is always found to have been 
 drawn immediately or remotely from 
 the public revenue, most frequently by 
 a direct grant of a portion of it from 
 the sovereign. 
 
 The ruler of a society of this descrip- 
 tion, after providing largely for his 
 own support, and that of all persons in 
 whom he feels an interest, and after 
 maintaining as many soldiers as he 
 thinks needful for his security or his 
 state, has a disposable residue, which 
 he is glad to exchange for articles of 
 luxury suitable to his disposition : as 
 have also the class of persons who 
 have been enriched by his favour, or by 
 handling the public revenues. A de- 
 mand thus arises for elaborate and costly 
 manufactured articles, adapted to a 
 narrow but a wealthy market. This 
 demand is often supplied almost ex- 
 clusively by the merchants of more 
 advanced communities, but often also 
 raises up in the country itself a class 
 of artificers, by whom certain fabrics 
 are carried to as high excellence as 
 can be given by patience, quickness 
 of perception and observation, and 
 manual dexterity, without any con- 
 siderable knowledge of the properties 
 of objects: such as some of the cotton 
 fabrics of India. These artificers are 
 fed by the surplus food which has 
 been taken by the government and its 
 agents as their share of the produce. 
 So literally is this the case, that in 
 some countries the workman, instead 
 of taking the work home, and being
 
 PRELIMINARY REMARKS. 
 
 9 
 
 paid for it after it is finished, proceeds 
 with his tools to his customer's house, 
 and is there subsisted until the work is 
 complete. The insecurity, however, of 
 all possessions in this state of society, 
 induces even the richest purchasers to 
 give a preference to such articles as, 
 being of an imperishable nature, and 
 containing great value in small bulk, 
 are adapted for being concealed or car- 
 ried off. Gold and jewels, therefore, 
 constitute a large proportion of the 
 wealth of these nations, and many a 
 rich Asiatic carries nearly his whole 
 fortune on his person, or on those of 
 the women of his harem. No one, 
 except the monarch, thinks of invest- 
 ing his wealth in a manner not suscep- 
 tible of removal. He, indeed, if he 
 feels safe on his throne, and reasonably 
 secure of transmitting it to his descen- 
 dants, sometimes indulges a taste for 
 durable edifices, and produces the 
 Pyramids, or the Taj Mehal and the 
 .Mausoleum at Sekundra. The rude 
 manufactures destined for the wants of 
 the cultivators are worked up by vil- 
 lage artisans, who are remunerated by 
 land given to them rent-free to culti- 
 vate, or by fees paid to them in kind 
 from such share of the crop as is left 
 to the villagers by the government. 
 This state of society, however, is not 
 destitute of a mercantile class ; com- 
 posed of two divisions, grain dealers 
 and money dealers. The grain dealers 
 do not usually buy grain from the pro- 
 ducers, but from the agents of govern- 
 ment, who, receiving the revenue in 
 kind, are glad to devolve upon others 
 the business of conveying it to the 
 places where the prince, his chief civil 
 and military officers, the bulk of his 
 troops, and the artisans who supply 
 the wants of these various persons, are 
 assembled. The money dealei's lend 
 to the unfortunate cultivators, when 
 ruined by bad seasons or fiscal exac- 
 tions, the means of supporting life and 
 continuing their cultivation, and are 
 repaid with enormous interest at the 
 next harvest : or, on a larger scale, 
 they lend to the government, or to 
 those to whom it has granted a portion 
 oi the revenue, and are indemnified by 
 
 assignments on the revenue collectors, 
 or by having certain districts put into 
 their possession.that they may pay them- 
 selves from the revenues ; to enable 
 them to do which, a great portion of 
 the powers of government are usually 
 made over simultaneously, to be exer- 
 cised by them until either the districts 
 are redeemed, or their receipts have 
 liquidated the debt. Thus, the com- 
 mercial operations of both these classes 
 of dealers take place principally upon 
 that part of the prod.ice of the country 
 which forms the revenue of the govern- 
 ment. From that revenue their capital 
 is periodically replaced with a profit, 
 and that is also the source from which 
 their original funds have almost always 
 been derived. Such, in its general 
 features, is the economical condition of 
 most of the countries of Asia, as it has 
 been from beyond the commencement 
 of authentic history, and is still, wher- 
 ever not disturbed by foreign influ- 
 ences. 
 
 In the agricultural communities of 
 ancient Europe whose early conditiot 
 is best known to us, the course of 
 things was different. These, at their 
 origin, were mostly small town-commu- 
 nities, at the first plantation of which, 
 in an unoccupied country, or in one 
 from which the former inhabitants had 
 been expelled, the land which was 
 taken possession of was regularly 
 divided, in equal or in graduated allot- 
 ments, among the families composing 
 the community. In some cases, in- 
 stead of a town there was a confedera- 
 tion of towns, occupied by people of the 
 same reputed race, and who were sup- 
 posed to have settled in the country 
 about the same time. Each family 
 produced its own food and the mate- 
 rials of its clothing, which were worked 
 up within itself, usually by the women 
 of the family, into the coarse fabrics 
 with which the age was contented. 
 Taxes there were none, as there were 
 either no paid officers of government, 
 or if there were, their payment had 
 been provided for by a reserved portion 
 of land, cultivated by slaves on account 
 of the state ; and the army consisted 
 of the body of citizens. The wholo
 
 io 
 
 PRELIMINARY REMARKS 
 
 produce of the soil, therefore, belonged, 
 without deduction, to the family which 
 cultivated it. So long as the progress 
 of events permitted this disposition of 
 property to last, the state of society 
 was, for the majority of the free culti- 
 vators, probably not an undesirable 
 one ; and under it, in some cases, the 
 advance of mankind in intellectual cul- 
 ture was extraordinarily rapid and 
 brilliant. This more especially hap- 
 pened where, along with advantageous 
 circumstances of race and climate, and 
 no doubt with many favourable acci- 
 dents of which all trace is now lost, 
 was combined the advantage of a 
 position on the shores of a great inland 
 sea, the other coasts of which were 
 already occupied by settled commu- 
 nities. The knowledge which in such 
 a position was acquired of foreign pro- 
 ductions, and the easy access of foreign 
 ideas and inventions, made the chain 
 of routine, usually so strong in a rude 
 people, hang loosely on these commu- 
 nities. To speak only of their indus- 
 trial development ; they early acquired 
 variety of wants and desires, which 
 stimulated them to extract from their 
 own soil the utmost which they knew 
 how to make it yield ; and when their 
 Boil was sterile, or after they had 
 reached the limit of its capacity, they 
 often became traders, and bought up 
 the productions of foreign countries, to 
 sell them in other countries with a 
 profit. 
 
 The duration, however, of this state 
 of things was from the first precarious. 
 These little communities lived in a 
 state of almost perpetual war. For 
 this there were many causes. In the 
 ruder and purely agricultural commu- 
 nities a frequent cause was the mere 
 pressure of their increasing population 
 upon their limited land, aggravated as 
 that pressure so often was by deiicient 
 harvests in the rude state of their agri- 
 culture, and depending as they did for 
 food upon a very small extent of coun- 
 try. On these occasions, the commu- 
 nity often emigrated in a body, or sent 
 forth a swarm of its youth, to seek, 
 Bword in hand, for some less warlike 
 people, who could be expelled from their 
 land, or detained to cultivate it as 
 
 slaves for the benefit of their despoilers. 
 What the less advanced tribes did 
 from necessity, the more prosperous 
 did from ambition and the military 
 spirit : and after a time the whole of 
 these city-communities were either 
 conquerors or conquered. In some 
 cases, the conquering state contented 
 itself with imposing a tribute on the 
 vanquished : who being, in considera- 
 tion of that burden, freed from the ex- 
 pense and trouble of their own military 
 and naval protection, might enjoy 
 under it a considerable share of econo- 
 mical prosperity, while the ascendant 
 community obtained a surplus of 
 wealth, available for purposes of collec- 
 tive luxury or magnificence. From 
 such a surplus the Parthenon and the 
 Propylaea were built, the sculptures of 
 ; ; paid for, and the festivals 
 
 celebrated, for which ^Eschy his, Sopho- 
 cles, Euripides, and Aristophanes com- 
 posed their dramas. But this state of 
 Eolitical relations, most useful, while it 
 isted, to the progress and ultimate 
 interest of mankind, had not the ele- 
 ments of durability. A small conquer- 
 ing community which does not incor- 
 porate its conquests, always ends by 
 being conquered. Universal dominion, 
 therefore, at -last rested with the 
 people who practised this art with the 
 Romans ; who, whatever were their 
 other devices, always either began or 
 ended by taking a great part of the 
 land to enrich their own ler.ding citi- 
 zens, and by adopting into the govern- 
 ing body the principal possessors (>f the 
 remainder. It is unnecessary to dwell 
 on the melancholy economical history 
 of the Roman empire. When in- 
 equality of wealth once .commences, in 
 a community not constantly engaged 
 in repairing by industry the . injuries of 
 fortune, its advances are gigantic ; the 
 great masses of wealth swallow up the 
 smaller. The Roman empire ulti- 
 mately became covered with the vast 
 landed possessions of a comparatively 
 few families, for whose luxury,'- and 
 still more for whose ostentation, the 
 most costly products were raised, whilo 
 the cultivators of the soil were slaves, 
 or small tenants in a nearly servile 
 condition. From this time the wealth
 
 PRELIMINARY REMARKS. 
 
 11 
 
 of the empire progressively declined. 
 In the beginning, the public revenues, 
 and the resources of rich individuals, 
 sufliei.-d at least to cover Italy with 
 splendid edifices, public and private : 
 but at length so dwindled under the 
 enervating influencesofmisgovernment, 
 that what remained was not even suffi- 
 ci<-iit to keep those edifices from decay. 
 The strength and riches of the civilized 
 world became inadequate to make head 
 against the nomad population which 
 skirted its northern frontier : they 
 overran the empire, and a different 
 order of things succeeded. 
 
 In the new frame in which European 
 society was now cast, the population 
 of each country may be considered as 
 composed, in unequal proportions, of 
 two distinct nations or races, the con- 
 querors and the conquered : the first the 
 proprietors of the land, the latter the 
 tillers of it. These tillers were allowed 
 to occupy the land on conditions which, 
 being the product of force, were always 
 onerous, but seldom to the extent of 
 absolute slavery. Already, in the later 
 times of the Roman empire, predial 
 s-lavi-ry had extensively transformed 
 itself into a kind of serfdom : the coloni 
 of the Romans were rather villeins than 
 actual slaves ; and the incapacity and 
 distaste of the barbarian conquerors 
 for personally superintending industrial 
 occupations, left no alternative but to 
 allow to the cultivators, as an incentive 
 to exertion, some real interest in the 
 soil. If, for example, they were com- 
 pelled to labour, three days in the 
 week, for their superior, the produce of 
 the remaining days was their own. If 
 they were required to supply the pro- 
 visions of various sorts, ordinarily 
 needed for the consumption of the 
 castle, and were often subject to 
 requisitions in excess, yet after sup- 
 plying these demands they were suf- 
 fered to dispose at their will of what- 
 ever additional produce they could 
 raise. Under this system during the 
 Middle Ages it was not impossible, no 
 more than in modern Russia (where, 
 up to the recent measure of emancipa- 
 tion, the same system still essentially 
 prevailed) for serfs to acquire property ; 
 and in fact, their accumulations are the 
 
 primitive source of the wealth of 
 modern Europe. 
 
 In that age of violence and disorder, 
 the first use made by a serf of any small 
 provision which he had been able to 
 accumulate, was to buy his freedom 
 and withdraw himself to some town or 
 fortified village, which had remained 
 undestroyed from the time of the Ro- 
 man dominion ; or, without buying his 
 freedom, to abscond thither. In that 
 place of refuge, surrounded by others of 
 his own class, he attempted to live, se- 
 cured in some measure from the out- 
 rages and exactions of the warrior caste, 
 by his own prowess and that of his fel- 
 lows. These emancipated serfs mostly 
 became artificers ; and lived by ex- 
 changing the produce of their industry 
 for the surplus food and material which 
 the soil yielded to its feudal proprietors. 
 This gave rise to a sort of European 
 counterpart of the economical condition 
 of Asiatic countries; except that, in 
 lieu of a single monarch and a fluctua- 
 ting body of favourites and employes, 
 there was a numerous and in a consider 
 able degree fixed class of great land- 
 holders ; exhibiting far less splendour, 
 because individually disposing of a 
 much smaller surplus produce, and for 
 a long time expending the chief part of 
 it in maintaining the body of retainers 
 whom the warlike habits of society, and 
 the little protection afforded by govern- 
 ment, rendered indispensable to their 
 safety. The greater stability, the fixity 
 of personal position, which this state 
 of society afforded, in comparison with 
 the Asiatic polity to which it economi- 
 cally corresponded, was one main rea- 
 son why it was also found more favour- 
 able to improvement. From this time 
 the economical advancement of society 
 has not been further interrupted. Se- 
 curity of person and property grew 
 slowly, but steadily ; the arts of life 
 made constant progress; plunder ceased 
 to be the principal source of accumula- 
 tion ; and feudal Europe ripened into 
 commercial and manufacturing Europe. 
 In the latter part of the Middle Ages, 
 the towns of Italy and Flanders, tho 
 free cities of Germany, and some towns 
 of France and England, contained a 
 large and energetic population of arti-
 
 12 
 
 PRELIMINARY REMARKS. 
 
 sans, and many ricn burghers, whose 
 wealth had been acquired by manufac- 
 turing industry, or by trading in the 
 produce of such industry. The Com- 
 mons of England, the Tiers-Etat of 
 France, the bourgeoisie of the Conti- 
 nent generally, are the descendants of 
 this class. As these were a saving 
 class, while the posterity of the feudal 
 aristocracy were a squandering class, 
 the former by degrees substituted them- 
 selves for the latter as the owners of 
 a great proportion of the land. This 
 natural tendency was in some cases 
 retarded by laws contrived for the pur- 
 pose of detaining the land in the fami- 
 lies of its existing possessors, in other 
 cases accelerated by political revolu- 
 tions. Gradually, though more slowly, 
 the immediate cultivators of the soil, in 
 all the more civilized countries, ceased 
 to be in a servile or semi-servile state : 
 though the legal position, as well as 
 the economical condition attained by 
 them, vary extremely in the different 
 nations of Europe, and in the great 
 communities which have been founded 
 beyond the Atlantic by the descendants 
 of Europeans. 
 
 The world now contains several ex- 
 tensive regions, provided with the va- 
 rious ingredients of wealth in a degree 
 of abundance of which former ages had 
 not even the idea. Without compulsory 
 labour, an enormous mass of food is 
 annually extracted from the soil, and 
 maintains, besides the actual producers, 
 an equal, sometimes a greater number 
 of labourers, occupied in producing 
 conveniences and luxuries of innumer- 
 able kinds, or in transporting them from 
 place to place ; also a multitude of per- 
 sons employed in directing and super- 
 intending these various labours; and 
 over and above all these, a class more 
 numerous than in the most luxurious 
 ancient societies, of persons whose oc- 
 cupations are of a kind not directly 
 productive, and of persons who have 
 no occupation at all. The food thus 
 raised, supports a far larger population 
 than had ever existed (at least in the 
 same regions) on an equal space of 
 ground; and supports them with cer- 
 tainty, exempt from those periodically 
 
 recurring famines so abundant in the 
 early history of Europe, and in Oriental 
 countries even now not nnfrequent. 
 Besides this great increase in the quan- 
 tity of food, it has greatly improved in 
 quality and variety ; while conveniences 
 and luxuries, other than food, are no 
 longer limited to a small and opulent 
 class, but descend, in great abundance, 
 through many widening strata in so- 
 ciety. The collective resources of one 
 of these communities, when it chooses 
 to put them forth for any unexpected 
 purpose ; its ability to maintain fleets 
 and armies, to execute public works, 
 cither useful or ornamental, to perform 
 national acts of beneficence like the 
 ransom of the West India slaves; to 
 found colonies, to have its people 
 taught, to do anything in short which 
 requires expense, and to do it with no 
 sacrifice of the necessaries-or even the 
 substantial comforts of its inhabitants, 
 are such as the world never saw 
 before. 
 
 But in all these particulars, charac- 
 teristic of the modern industrial com- 
 munities, those communities differ 
 widely from one another. Though 
 abounding in wealth as compared with 
 former ages, they do so in very different 
 degrees. Even of the countries which 
 are justly accounted the richest, some 
 have made a more complete use of their 
 productive resources, and have obtained, 
 relatively to their territorial extent, a 
 much larger produce, than others ; nor 
 do they differ only in amount of wealth, 
 but also in the rapidity of its increase. 
 The diversities in the distribution of 
 wealth are still greater than in the 
 production. There are great differences 
 in the condition of the poorest class in 
 different countries ; and in the propor- 
 tional numbers and opulence of the 
 classes which are above the poorest. 
 The very nature and designation of the 
 classes who originally share among 
 them the produce of the soil, vary not 
 a little in different places. In some, 
 the landowners are a class in them, 
 selves, almost entirely separate from 
 the classes engaged in industry: in 
 others, the proprietor of the land is 
 almost universally its cultivator, own-
 
 PRELIMINARY REMARKS. 
 
 13 
 
 Ing the plough, and often himself hold- 
 ing it. Where the proprietor himself 
 does not cultivate, there is sometimes, 
 between him and the labourer, an in- 
 termediate agency, that of the farmer, 
 who advances the subsistence of the 
 labourers, supplies the instruments of 
 production, and receives, after paying 
 a rent to the landowner, all the pro- 
 duce : in other cases, the landlord, 
 his paid agents, and the labourers, are 
 the only sharers. Manufactures, again, 
 are sometimes carried on by scattered 
 individuals, who own or hire the tools 
 or machinery they require, and employ 
 little labour besides that of their own 
 family ; in other cases, by large num- 
 bers working together in one building, 
 with expensive and complex machinery 
 owned by rich manufacturers. The 
 same difference exists in the operations 
 of trade. The wholesale operations in- 
 deed are everywhere carried on by large 
 capitals, where such exist ; but the 
 retail dealings, which collectively oc- 
 cupy a very great amount of capital, 
 are sometimes conducted in small shops, 
 chiefly by the personal exertions of the 
 dealers themselves, with their families, 
 and perhaps an apprentice or two ; and 
 sometimes in large establishments, of 
 which the funds are supplied by a 
 wealthy individual or association, and 
 the agency is that of numerous salaried 
 shopmen or shopwomen. Besides these 
 differences in the economical pheno- 
 mena presented by different parts of 
 what is usually called the civilized 
 world, all those earlier states which we 
 previously passed in review, have con- 
 tinued in some part or other of the 
 world, down to our own time. Hunt- 
 ing communities still exist in America, 
 nomadic in Arabia and the steppes of 
 Northern Asia ; Oriental society is in 
 essentials what it has always been ; the 
 great empire of Russia is even now, in 
 many respects, the scarcely modified 
 image of feudal Europe. Every one of 
 the great types of human society, down 
 to that of the Esquimaux or Patago- 
 nians, is still extant. 
 
 These remarkable differences in the 
 state of different portions of the human 
 fcoe, with regard to the production and 
 
 distribution of wealth, must, like all 
 other phenomena, depend on causes. 
 And it is not a sufficient explanation 
 to ascribe them exclusively to the de- 
 grees of knowledge, possessed at dif- 
 ferent times and places, of the laws of 
 nature and the physical arts of life. 
 Many other causes co-operate ; and 
 that very progress and unequal dis- 
 tribution of physical knowledge, are 
 partly the effects, as well as partly the 
 causes, of the state of the production 
 and distribution of wealth. 
 
 In so far as the economical condition 
 of nations turns upon the state of phy- 
 sical knowledge, it is a subject for the 
 physical sciences, and the arts founded 
 on them. But in so far as the causes 
 are moral or psychological, dependent 
 on institutions and social relations, or 
 on the principles of human nature, 
 their investigation belongs not to phy- 
 sical, but to moral and social science, 
 and is the object of what is called Po- 
 litical Economy. 
 
 The production of wealth ; the ex- 
 traction of the instruments of human 
 subsistence and enjoyment from the 
 materials of the globe, is evidently not 
 an arbitrary thing. It has its neces- 
 sary conditions. Of these, some are 
 physical, depending on the properties 
 of matter, and on the amount of 
 knowledge of those properties possessed 
 at the particular place and time. These 
 Political Economy does not investigate, 
 but assumes; referring for the grounds, 
 to physical science or common expe- 
 rience. Combining with these facts 
 of outward nature other truths relating 
 to human nature, it attempts to trace 
 the secondary or derivative laws, by 
 which the production of wealth is de- 
 termined ; in which must lie the ex- 
 planation of the diversities of riches 
 and poverty in the present and past, 
 and the ground of whatever in- 
 crease in wealth is reserved for the 
 future. 
 
 Unlike the laws of Production, those 
 of Distribution are partly of human 
 institution : since the manner in which 
 wealth is distributed in any given so- 
 ciety, depends on the statutes or usage* 
 therein obtaining. But though govern
 
 PRELIMINAttY REMARKS. 
 
 mcnts or nations have the power of de- 
 ciding what institutions shall exist, 
 they cannot arbitrarily determine hnw 
 those institutions shall work. The con- 
 ditions on which the power they possess 
 over the distribution of wealth is depen- 
 dent, and the manner in which the dis- 
 tribution is affected by the various modes 
 
 of conduct which society may think fit to 
 adopt, are as much a subject for scien- 
 tific inquiry as any of the physical laws 
 of nature. 
 
 The laws of Production and Distri- 
 bution, and some of the practical con- 
 sequences deducible from them, are the 
 subject of the following treatise.
 
 BOOK L 
 
 PEODUCTIOIST. 
 
 CHAPTER I. 
 
 OP THE REQUISITES OP PRODUCTION. 
 
 1. THE requisites of production are 
 two: labour, and appropriate natural 
 objects. 
 
 Labour is cither bodily or mental ; 
 or, to express the distinction more com- 
 prehensively, either muscular or nerv- 
 ous ; and it is necessary to include in 
 the idea, not solely the exertion itself, 
 but all feelings of a disagreeable kind, 
 all bodily inconvenience or mental an- 
 noyance, connected with the employ- 
 ment of one's thoughts, or muscles, or 
 both, in a particular occupation. Of 
 the other requisite appropriate na- 
 tural objects it is to be remarked, that 
 some objects exist or grow up sponta- 
 neously, of a kind suited to the supply 
 of human wants. There are caves and 
 hollow treeB capable of affording shel- 
 ter ; fruit, roots, wild honey, and other 
 natural products, on which human life 
 can be supported ; but even here a con- 
 siderable quantity of labour is generally 
 required, not for the purpose of creating, 
 but of finding and appropriating them. 
 In all but these few and (except in the 
 very commencement of human society) 
 unimportant cases, the objects supplied 
 by nature are only instrumental to hu- 
 man wants, after having undergone 
 Bome degree of transformation by hu- 
 man exertion. Even the wild animals 
 of the forest and of the sea, from which 
 the hunting and fishing tribes derive 
 their sustenance though the labour of 
 which they are the subject is chiefly 
 that required for appropriating them 
 must yet, before they are used as food, 
 be killed, divided into fragments, and 
 iubjected in almost all cases to some 
 
 culinary process, which are operations 
 requiring a certain degree of human 
 labour. The amount of transformation 
 which natural substances undergo bo- 
 fore being brought into the shape in 
 which they are directly applied to hu- 
 man use, varies from this or a still less 
 degree of alteration in the nature and 
 appearance of the object, to a change 
 so total that no trace is perceptible of 
 the original shape and structure. There 
 is little resemblance between a piece of 
 a mineral substance found in the earth, 
 and a plough, an axe, or a saw. There 
 is less resemblance between porcelain 
 and the decomposing granite of which 
 it is made, or between sand mixed with 
 sea-weed, and glass. The difference is 
 greater still between the fleece of a 
 sheep, or a handful of cotton seeds, and 
 a web of muslin or broad cloth ; and 
 the sheep and seeds themselves are not 
 spontaneous growths, but results of pre- 
 vious labour and care. In these se- 
 veral cases the ultimate product is s 
 extremely dissimilar to the substance 
 supph'ed by nature, that in the custom 
 of language nature is represented as 
 only furnishing materials. 
 
 Nature, however, does more than 
 supply materials; she also supplies 
 powers. The matter of the globe is 
 not an inert recipient of forms and pro- 
 perties impressed by human tends ; it 
 has active energies by which H co-ope- 
 rates with; and may even be used as a 
 substitute for, labour. In the early 
 ages people converted their com into 
 flour by pounding it between two stones; 
 they next hit on a contrivance whicb
 
 COOK I. CHAPTER I. 2. 
 
 enabled them, by turning a handle, to 
 make one of the stones revolve upon 
 the other ; and this process, a little im- 
 proved, is still the common practice of 
 the East. The muscular exertion, 
 however, which it required, was very 
 severe and exhausting, insomuch that 
 it was often selected as a punishment 
 for slaves who had offended their 
 masters. When the time came at 
 which the labour and sufferings of 
 slaves were thought worth economizing, 
 the greater part of this bodily exertion 
 was rendered unnecessary, by contriv- 
 ing that the upper stone should be 
 made to revolve upon the lower, not by 
 human strength, but by the force of 
 the wind or of falling water. In this 
 case, natural agents, the wind or the 
 gravitation of the water, are made to 
 4o a portion of the work previously 
 done by labour. 
 
 2. Cases like this, in which a cer- 
 tain amount of labour has been dis- 
 pensed with, its work being devolved 
 upon some natural agent, are apt to 
 suggest an erroneous notion of the 
 comparative functions of labour and 
 natural powers ; as if the co-operation 
 of those powers with human industry 
 were limited to the cases in which they 
 are made to perform what would other- 
 wise be done by labour ; as if, in the 
 case of things made (as the phrase is) 
 by hand, nature only furnished passive 
 materials. This is an illusion. The 
 powers of nature are as actively opera- 
 tive in the one case as in the other. A 
 workman takes a stalk of the flax or 
 hemp plant, splits it into separate 
 fibres, twines together several of these 
 fibres with his fingers, aided by a simple 
 instrument called a spindle ; having 
 thus formed a thread, he lays many 
 such threads side by side, and places 
 other similar threads directly across 
 them, so that each passes alternately 
 over and under those which are at right 
 .ingles to it ; this part of the process 
 being facilitated by an instrument 
 called a shuttle. Pie has now produced 
 a web of cloth, either linen or sack- 
 cloth, according to the material. He 
 is said to have done this by hand, 
 BO natural force being supposed to 
 have acted in concert with him. 
 
 Hut by what force Is each step 
 of this operation rendered possi- 
 ble, and the web, when produced, 
 held together? By the tenacity, or 
 force of cohesion of the fibres : which 
 is one of the forces in nature, and which 
 we can measure exactly against other 
 mechanical forces, and ascertain how 
 much of any of them it suffices to neu- 
 tralize or counterbalance. 
 
 If we examine any other case of what 
 is called the action of man upon r.a- \ 
 ture, we shall find in like manner that 
 the powers of nature, or in other words 
 the properties of matter, do all the work, 
 when once objects are put into the rigLt 
 position. This one operation, of putting 
 things into fit places for being acted upon 
 by their own internal forces, and by 
 those residing in other natural objects, 
 is all that man does, or can do, with mat 
 ter. He only moves one thing to or from 
 another. He moves a seed into the 
 ground ; and the natural forces of vege- 
 tation produce in succession a root, a 
 stem, leaves, flowers, and fruit. He . 
 moves an axe through a tree, and it 
 falls by the natural force of gravitation ; 
 he moves a saw through it, in a parti- 
 cular manner, and the physical proper- 
 ties by which a softer substance gives 
 way before a harder, make it separate 
 into planks, which he arranges in cer- 
 tain positions, with nails driven through 
 them, or adhesive matter between them, 
 and produces a table, or a house. He 
 moves a spark to fuel, and it ignites, 
 and by the force generated in combus- 
 tion it cooks the food, melts or softens 
 the iron, converts into beer or sugar 
 the malt or cane-juice, which he lias 
 previously moved to the spot. He has 
 no other means of acting on matter 
 than by moving it. Motion, and re- 
 sistance to motion, are the only things 
 which his muscles are constructed for. 
 By muscular contraction he can create 
 a pressure on an outward object, which, 
 if sufficiently powerful, will set it in 
 motion, or if it be already moving, will 
 check or modify or altogether arrest its 
 motion, and he can do no more. But 
 this is enough to have given all the 
 command which mankind have acquired 
 over natural forces immeasurably more 
 powerful than themseJvas : a command
 
 REQUISITES OF PRODUCTION. 
 
 17 
 
 which, great as it is already, is without 
 doubt destined to become indefinitely 
 greater. He exerts this power either 
 by availing himself of natural forces in 
 existence, or by arranging objects in 
 those mixtures and combinations by 
 \vhich natural forces are generated ; &a 
 when by putting a lighted match to 
 fuel, and water into a boiler over it, he 
 generates the expansive force of steam, 
 a power which has been made so largely 
 available for the attainment of human 
 purposes.* 
 
 (Labour, then, in the physical world, 
 is always and solely employed in put- 
 ting objects in motion ; the properties 
 of matter, the laws of nature, do the 
 rest. The skill and ingenuity of hu- 
 man beings are chiefly exercised in 
 discovering movements, practicable by 
 their powers, and capable of bringing 
 about the effects which they desire. 
 But, while movement is the only effect 
 which man can immediately and 
 directly produce by his muscles, it is 
 not necessary that he should produce 
 directly by them all the movements 
 which he requires. The first and most 
 obvious substitute is the muscular ac- 
 tion of cattle : by degrees the powers 
 of inanimate nature are made to aid in 
 this too, as by making the wind, or 
 water, things already in motion, com- 
 municate a part of their motion to the 
 wheels, which before that invention 
 were made to revolve by muscular 
 force. This service is extorted from 
 the powers of wind and water by a set 
 of actions, consisting like the former in 
 moving certain objects into certain 
 positions in which they constitute 
 what is termed a machine ; but the 
 muscular action necessary for this is 
 not constantly renewed, but performed 
 once for all, and there is on the whole 
 a great economy of labour. 
 
 3. Some writers have raised the 
 question, whether nature gives more 
 assistance to labour in one kind of 
 industry or in another ; and have said 
 
 * This essential and primary law of man's 
 power over nature was, I believe, first illus- 
 trated ami made prominent as a fundamental 
 principle of Political Economy, in the first 
 chapte* of Mr. Mill's Element*. 
 
 that in some occupations labour does 
 most, in others nature most. In this, 
 however, there seems much confusion 
 of ideas. The part which nature has 
 in any work of man, is indefinite ar.d 
 incommensurable. It is impossible to 
 decide that in any one thing nature 
 does more than in any other. One 
 cannot even say that labour does less. 
 Less labour may be required ; but if 
 that which is required is absolutely 
 indispensable, the result is just as 
 much the product of labour, as of 
 nature. When two conditions arc 
 equally necessary for producing the 
 effect at all, it is unmeaning to say 
 that so much of it is produced by ono 
 and so much by the other ; it is like 
 attempting to decide which half of a 
 pair of scissors has most to do in the 
 act of cutting ; or which of the factors, 
 five and six, contributes most to the 
 production of thirty. The form which i 
 this conceit usually assumes, is that o< : 
 supposing that nature lends more assist- 
 ance to human endeavours in agricul- 
 ture, than in manufactures. This 
 notion, held by the French Economistcs, 
 and from which Adam Smith was not 
 free, arose from a misconception of the 
 nature of rent. The rent of land being 
 a price paid for a natural agency, and 
 no such price being paid in manufac- : 
 tures, these writers imagined that since 
 a price was paid, it was because there 
 was a greater amount of service to be 
 paid for : whereas a better considera- 
 tion of the subject would have shown 
 that the reason why the use of land 
 bears a price is simply the limitation 
 of its quantity, and that if air, heat, 
 electricity, chemical agencies, and the 
 other powers of nature employed by 
 manufacturers, were sparingly supplied, 
 and could, like land, be engrossed and 
 appropriated, a rent could be exacted 
 for them also. 
 
 4. This leads to a distinction 
 which we shall find to be of primary 
 importance. Of natural powers, some 
 are unlimited, others limited in quan- 
 tity. By an unlimited quantity is of 
 course not meant literally, but prac- 
 tically unlimited : a quantity beyond 
 the use which can in any, or at least
 
 BOOK I. CHAPTER 1. 4. 
 
 in present circumstances, be made of 
 it. Land is, in some newly settled 
 countries, practically unlimited in 
 quantity : there is more than can be 
 used by the existing population of the 
 country, or by any accession likely to 
 In- made to it for generations to come. 
 But even there, land favourably situa- 
 ted with regard to markets or means 
 of carriage, is generally limited in 
 quantity : there is not so much of it as 
 persons would gladly occupy and culti- 
 vate, or otherwise turn to use. In all 
 old countries, land capable of cultiva- 
 tion, land at least of any tolerable 
 fertility, must be ranked among agents 
 limited in quantity. Water, for ordi- 
 nary purposes, on the banks of rivers 
 or lakes, may be regarded as of un- 
 limited abundance ; but if required for 
 irrigation, it may even there be in- 
 sufficient to supply all wants, while in 
 places which depend for their consump- 
 tion on cisterns or tanks, or on wells 
 which are not copious, or are liable to 
 fail, water takes its place among things 
 the quantity of which is most strictly 
 limited. Where water itself is plenti- 
 ful, yet water-power, i.e. a fall of water 
 applicable by its mechanical force to 
 the service of industry, may be ex- 
 ceedingly limited, compared with the 
 use which would be made of it if it 
 were more abundant. Coal, metallic 
 ores, and other useful substances found 
 in the earth, are still more limited than 
 land. They are not only strictly local, but 
 exhaustible ; though, at a given place 
 and time, they may exist in much 
 greater abundance than would be ap- 
 plied to present use even if they could 
 be obtained gratis. Fisheries, in the 
 sea, are in most cases a gift of nature 
 practically unlimited in amount ; but 
 the Arctic whale fisheries have long 
 been insufficient for the demand which 
 exists even at the very considerable 
 price necessary to defray the cost of 
 appropriation : and the immense ex- 
 tension which the Southern fisheries 
 have iu consequence assumed, ie tend- 
 
 ing to exhaust them likewise. River 
 fisheries are a natural resource of a 
 very limited character, and would be 
 rapidly exhausted, if allowed to be used 
 by every one without restraint. Air, 
 even that state of it which we term 
 wind, may, in most situations, be ob- 
 tained in a quantity sufficient for every 
 possible use ; and so likewise, on the 
 sea coast or on large rivers, may water 
 carriage : though the wharfage or 
 harbour-room applicable to the service 
 of that mode of transport is in many 
 situations far short of what would be 
 used if easily attainable. 
 
 It will be seen hereafter how much 
 of the economy of society depends on 
 the limited quantity in which some of 
 the most important natural agents 
 exist, and more particularly, land. For 
 the present I shall only remark that so 
 long as the quantity of a natural agent 
 is practically unlimited, it cannot, un- 
 less susceptible of artificial monopoly, 
 bear any value in the market, since no 
 one will give anything for what can be 
 obtained gratis. But as soon as a 
 limitation becomes practically opera- 
 tive ; as soon as there is not so much 
 of the thing to be had, as would be 
 appropriated and used if it could be 
 obtained for asking; the ownership or 
 use of the natural agent acquires an 
 exchangeable value. When more 
 water-power is wanted in a particular 
 district, than there are falls of water to 
 supply it, persons will give an equiva- 
 lent for the use of a fall of water. 
 When there is more land wanted for 
 cultivation than a place possesses, or 
 than it possesses of a certain quality 
 and certain advantages of situation, 
 land of that quality and situation may 
 be sold for a price, or let for an annual 
 rent. This subject will hereafter be 
 discussed at length ; but it is often 
 useful to anticipate, by a brief sugges- 
 tion, principles and deductions which 
 we have not yet reached the place for 
 exhibiting and illustratiu g fully.
 
 LABOUR AS AN AGENT OF PRODlfCTtON. 
 
 19 
 
 CHAPTER IT. 
 
 OF I.AnOUR AS AX AGENT OF PRODUCTION. 
 
 1. Tnr. labour which terminates in 
 *lio production of an article fitted for 
 some human use, is 'either employed 
 directly about the thing, or in previous 
 operations destined to facilitate, perhaps 
 r s-ential to the possibility of, the SUD- 
 sequent ones. In making bread, for 
 example, the labour employed about 
 the thing itself is that of the baker; 
 but the labour of the miller, though 
 employed directly in the production 
 not of bread but of flour, is equally part 
 of the aggregate sum of labour by 
 which the bread is produced ; as is 
 also the labour of the sower, and of the 
 reaper. Some may think that all these 
 persons ought to be considered as em- 
 ploying their labour directly about the 
 thing ; the corn, the flour, and the 
 bread being one substance in three 
 different states. Without disputing 
 about this question of mere language, 
 there is still the ploughman who pre- 
 pared the ground for the seed, and 
 whose labour never came in contact 
 with the substance in any of its states ; 
 and the plough-maker, whose share in 
 the result was still more remote. All 
 these persons ultimately derive the re- 
 muneration of their labour from the 
 bread, or its price : the plough-maker 
 as much as the rest ; for since ploughs 
 are of no use except for tilling the soil, 
 no one would make or use ploughs for 
 any other reason than because the in- 
 creased returns, thereby obtained from 
 the ground, afforded a source from 
 which an adequate equivalent could be 
 asMLrned for the labour of the plough- 
 maker. If the produce is to be used 
 or consumed in the form of bread, it is 
 from the bread that this equivalent 
 must come. The bread must suffice 
 to remunerate all these labourers, and 
 several others ; such as the carpenters 
 and bricklayers who erected the farm- 
 buildings ; the hedgers and ditchers 
 who made the fences necessary for the 
 protection of the crop ; the miners and 
 
 smelters who extracted or prepared 
 the iron of which the plough and 
 other implements were made. These, 
 however, and the plough-maker, do not 
 depend for their remuneration upon 
 the bread made from the produce of 
 a single harvest, but upon that made 
 from the produce of all the har- 
 vests which are successively gathered 
 until the plough, or the buildings and 
 fences, are worn out. ^A'e must add 
 yet another kind of labour; that of 
 transporting the produce from the place 
 of its production to the place of its 
 destined use : the labour of carrying 
 the com to market, and from market 
 to the miller's, the flour from the 
 miller's to the baker's, and the bread 
 from the baker's to the place of its final 
 consumption. This labour is some- 
 times very considerable : flour is trans- 
 ported to England from beyond the 
 Atlantic, corn from the heart of Russia ; 
 and in addition to the labourers imme- 
 diately employed, the waggoners and 
 sailors, there are also costly instru- 
 ments, such as ships, in the construc- 
 tion of which much labour has been 
 expended : that labour, however, not de- 
 pending for its whole remuneration upon 
 the bread, but for a part only ; ships 
 being usually, during the course of their 
 existence, employed in the transport of 
 many different kinds of commodities. 
 
 To estimate, therefore, the labour of 
 which any given commodity is the re- 
 suit, is far from a simple operation. 
 The items in the calculation are very 
 numerous as it may seem to some 
 persons, infinitely so ; for if, as a part 
 of the labour employed in making 
 bread, we count the labour of tho 
 blacksmith who made the plough, why 
 not also (it may be asked) the labour 
 of making the tools used by the black- 
 smith, and the tools used in making these 
 tools, and so back to the origin of 
 things ? But after mounting one or two 
 steps in this ascending scale, we corns
 
 20 
 
 into a region of fractions too minute 
 for calculation. Suppose, for instance, 
 that the same plough will last, before 
 being worn out, a dozen years. Only 
 one-twelfth of the labour of making the 
 plough must be placed to the account 
 of each year's harvest. A twelfth part 
 of the labour of making a plough is an 
 appreciable quantity. But the same set 
 of tools, perhaps, suffice to the plough- 
 maker for forging a hundred ploughs, 
 which serve during the twelve years of 
 
 their existence to prepare the soil of 
 as many different farms. A twelve- 
 hundredth part of the labour of making 
 his tools, is as much, therefore, as has 
 been expended in procuring one year's 
 harvest of a single farm : and when 
 this fraction comes to be further appor- 
 tioned among the various sacks of corn 
 and loaves of bread, it is seen at once 
 that such quantities are not worth 
 taking into the account for any prac- 
 tical purpose connected with the com- 
 modity. It is true that if the tool- 
 maker had not laboured, the com and 
 bread never would have been produced ; 
 but they will not be sold a tenth part 
 of a farthing dearer in consideration of 
 his labour. 
 
 2. Another of the modes in which 
 labour is indirectly or remotely instru- 
 mental to the production of a thing, 
 requires particular notice : namely, 
 when it is employed in producing sub- 
 sistence, to maintain the labourers 
 while they are engaged in the produc- 
 tion. This previous employment of 
 labour is an indispensable condition to 
 every productive operation, on any 
 other than the very smallest scale. 
 Except the labour of the hunter and 
 fisher, there is scarcely any kind of 
 labour to which the returns are imme- 
 diate. Productive operations require 
 to be continued a certain time, before 
 their fruits are obtained. Unless the 
 labourer, before commencing his work, 
 possesses a store of food, or can obtain 
 access to the stores of some one else, 
 in .sufficient- quantity to maintain him 
 until the production is completed, he 
 ca.i undertake no labour but such as 
 can be carried on at odd intervals, 
 concurrently with the oursuit of his 
 
 BOOK 1. CHAFTEU II. 2. 
 
 subsistence. lie cannot obtain food 
 itself in any abundance ; for eveiy 
 mode of so obtaining it, requires that 
 there be already food in store. Agri- 
 culture only brings forth food after the 
 lapse of months ; and though the 
 labours of the agriculturist are not 
 necessarily continuous during the whole 
 period, they must occupy a considera- 
 ble part of it. Not only is agriculture 
 impossible without food produced in 
 advance, but there must be a very 
 
 great quantity in advance to enable 
 any considerable community to sup- 
 port itself wholly by agriculture. A 
 country like England or France is only 
 able to carry on the agriculture of the 
 present year, because that of past years 
 has provided, in those countries or 
 somewhere else, sufficient food to sup- 
 port their agricultural population until 
 the next harvest. They are only 
 enabled to produce so many other 
 things besides food, because the food 
 which was in store at the close of the 
 last harvest suffices to maintain not 
 only the agricultural labourers, but a 
 large industrious population besides, 
 
 The labour employed in producing 
 this stock of subsistence, forms a groat 
 and important part of the past labour 
 which has been necessary to enable 
 present labour to be carried on. But 
 there is a difference, requiring parti- 
 cular notice, between this and the other 
 kinds of previous or preparatory labour. 
 The miller, the reaper, the ploughman, 
 the plough-maker, the waggoner and 
 waggon-maker, even the sailor and 
 ship-builder when employed, derive 
 their remuneration from the ultimate 
 product --the bread made from the corn 
 on which they have severally operated, 
 or supplied the instruments for ope- 
 rating. The labour that produced the 
 food which fed all these labourers, is as 
 necessary to the ultimate result, the 
 bread of the present harvest, as any of 
 those other portions of labour ; but is 
 not, like them, remunerated from it. 
 That previous labour bus received its 
 remuneration from the previous food. 
 In order to raise any product, there are 
 needed labour, tools, and materials, and 
 food to feed the labourers. But the 
 tools and materials arc of o use except
 
 LABOUR AS AN AGENT OF PKODUCTION. 
 
 for obtaining the product, or at least 
 are to be applied to no other use, and 
 the labour of their construction can be 
 remunerated only from the product 
 when obtained. The food, on the con- 
 tiary, is intrinsically useful, and is ap- 
 plied to the direct use of feeding human 
 beings. The labour expended in pro- 
 ducing the food, and recompensed by 
 it, needs not be remunerated over again 
 from the produce of the subsequent 
 labour which it has fed. If we suppose 
 that the same body of labourers carried 
 on a manufacture, and grew food to 
 F-u.-itaiu themselves while doing it, they 
 have had for their trouble the food and 
 the manufactured article ; but if they 
 also grew the material and made the 
 tools, they have had nothing for that 
 trouble but the manufactured article 
 alone. 
 
 The claim to remuneration founded 
 on the possession of food, available for 
 the maintenance of labourers, is of an- 
 other kind; remuneration for abstinence, 
 not for labour. If a person has a store 
 of food, he has it in his power to con- 
 sume it himself in idleness, or in feed- 
 ing others to attend on him, or to fight 
 for him, or to sing or dance for him. 
 If, instead of these things, he gives it 
 to productive labourers to support them 
 during their work, he can, and natur- 
 ally will, claim a remuneration from the 
 produce. He will not be content with 
 simple repayment ; if he receives merely 
 that, he is only in the same situation 
 as at first, and has derived no advan- 
 tage from delaying to apply his savings 
 to his own benefit or pleasure. He will 
 look for some equivalent for this for- 
 bearance : he will expect his advance 
 of food to come back to him with an 
 increase, called in the language of busi- 
 ness, a profit ; and the hope of this 
 profit will generally have been a part of 
 the inducement which made him accu- 
 mulate a stock, by economizing in his 
 own consumption ; or, nt any rate, 
 which made him forego the .application 
 of it, when accumulated, to his personal 
 ease or satisfaction. The food also 
 which maintained other workmen while 
 producing the tools or materials, must 
 have Lcen provided in advance by some 
 one, a id he, too, must have his profit 
 
 from the ultimate product ; but there 
 is this difference, that here the ultimate 
 product has to supply not only the 
 profit, but also the remuneration of the 
 labour. The tool-maker (say, for in- 
 stance, the plough-maker) does not in- 
 deed usually wait for his payment until 
 the harvest is reaped ; the farmer ad- 
 vances it to him, and steps into his 
 place by becoming the owner of tho 
 plough. Nevertheless, it is from tho 
 harvest that the payment is to come , 
 since the fanner would not undertake 
 this outlay unless he expected that the 
 harvest would repay him, and with a 
 profit too on this fresh advance ; that 
 is, unless the harvest would yield, be- 
 sides the remuneration of the farm 
 labourers (and a profit for advancing 
 it), a sufficient residue to remunerate 
 the plough-maker's labourers, give the 
 plough-maker a profit, and a profit to 
 the fanner on both. 
 
 3. From these considerations it ap- 
 pears, that in an enumeration and clas- 
 sification of the kinds of industry which 
 are intended for the indirect or rena >te 
 furtherance of other productive labour, 
 we need not include the labour of pro- 
 ducing subsistence or other necessaries 
 of life to be consumed by productive 
 labourers ; for tho main end and pur- 
 pose of this labour is the subsistence 
 itself; and though the possession of a 
 store of it enables other work to be done, 
 this is but an incidental consequence. 
 The remaining modes in which labour is 
 indirectly instrument*! to production, 
 may be arranged under five heads. 
 
 First : Labour employed in producing 
 materials, on whica industry is to bf. 
 afterwards employed. This is, in many 
 cases, a labour of mere appropriation ; 
 extractive industry, as it has been aptly 
 named by M. Dunoyer. The labour of 
 the miner, for example, consists of ope- 
 rations for digging out of the earth 
 substances convertible by industry into 
 various articles fitted for human use. 
 Extractive industry, however, is not 
 confined to the extraction of materials. 
 Coal, for instance, is employed, not 
 only in the processes of industry, but in 
 directly warming human beings. When 
 so used, it is not a material of produc-
 
 22 
 
 BOOK I. CHAPTER II. 4. 
 
 tion, but is itself the ultimate product. 
 So, also, in the case of a mine of pre- 
 cious stones. These are to some small 
 extent employed in the productive arts, 
 as diamonds by the glass-cutter, emery 
 and corundum for polishing, but their 
 principal destination, that of ornament, 
 is a direct use ; though they cotnmcrnTy 
 require, before being soused, some pro- 
 cess of manufacture, which may per- 
 haps warrant our regarding them as 
 materials. Metallic ores of all sorts are 
 materials merely. 
 
 Under the head, production of mate- 
 rials, we must include the industry of 
 the wood-cutter, when employed in 
 cutting and preparing timber for build- 
 ing, or wood for the purposes of the 
 carpenter's or any other art. In the 
 forests of America, Norway, Germany, 
 the Pyrenees and Alps, this sort of 
 labour is largely employed on trees of 
 spontaneous growth. In other cases, 
 we must add to the labour of the wood- 
 cutter that of the planter and culti- 
 vator. 
 
 Under the same head are also com- 
 prised the labours of the agriculturists 
 in growing flax, hemp, cotton, feeding 
 silk-worms, raising food for cattle, pro- 
 ducing bark, dye-stuffs, some oleaginous 
 plants, and many other things only 
 useful because required in other de- 
 partments of industry. So, too, the 
 labour of the hunter, as' far as his 
 object is furs or feathers ; of the shep- 
 herd and the cattle-breeder, in respect 
 of wool, hides, horn, bristles, horse-hair, 
 and the like. The things u-ed as 
 materials in some process or other of 
 manufacture are of a most miscel- 
 laneous character, drawn from almost 
 every quarter of the animal, vegetable, 
 and mineral kingdoms. And besides 
 this, the finished products of many 
 branches of industry are the materials 
 of others. The thread produced by 
 the spinner is applied to hardly any 
 use except as material for the weaver. 
 Even the product of the loom is chiefly 
 used as material for the fabricators of 
 articles of dress or furniture, or of 
 further instruments of productive in- 
 dustry, as in the case of the sailmaker. 
 The currier and tanner find their 
 whole occupation in converting raw 
 
 material into what may be termed 
 prepared material. In strictness of 
 speech, almost all food, as it comes 
 from the hands of the agriculturist, is 
 nothing more than material for the 
 occupation of the baker or the cook. 
 
 4. The second kind of indirect 
 labour is that employed in making 
 tools or implements for the assistance 
 of labour. I use these terms in their 
 most comprehensive sense, embracing 
 all permanent instruments or helps to 
 production, from a flint and steel for 
 striking a light, to a steam ship, or 
 the most complex apparatus of manu- 
 facturing machinery. There mny be 
 some hesitation where to draw the line 
 between implements and materials ; 
 and some things used in production 
 (such as fuel) would scarcely in com- 
 mon language be called by either name, 
 popular phraseology being shaped out 
 by a different class of necessities from 
 those of scientific exposition. To 
 avoid a multiplication of classes and 
 denominations answering to distinc- 
 tions of no scientific importance, poli- 
 tical economists generally include all 
 things which are used as immediate 
 means of production (the means wliich 
 are not immediate will be considered 
 presently) either in the class of imple- 
 ments or in that of materials. Per- 
 haps the line is most usually and most 
 conveniently drawn, by considering as 
 a material every instrument of produc- 
 tion which can only be used once, being 
 destroyed (at least as an instrument 
 for the purpose in hand) by a single 
 employment. Thus fuel, once burnt, 
 cannot be again used as fuel ; what 
 can be so used is only any portion 
 which has remained unburnt the first 
 time. And not only it cannot be used 
 without being consumed, but it is only 
 useful by being consumed ; for if no 
 part of the fuel were destroyed, no 
 heat would be generated. A fleece, 
 again, is destroyed as a fleece by being 
 spun into thread ; and the thread can- 
 not be used as thread when woven 
 into cloth. But an axe is not de- 
 stroyed as an axe by cutting down a 
 tree : it may be used afterwards to 
 cut down a hundred or a thousand
 
 LABOUR AS AN AGENT OF PRODUCTION. 
 
 23 
 
 more ; and though deteriorated in 
 some small degree by each use, it does 
 not do its work by being deteriorated, 
 as the coal and the fleece do theirs by 
 oeing destroyed ; on the contrary, it is 
 the better instrument the better it re- 
 si-ts deterioration. There are some 
 things, rightly classed as materials, 
 which may be used as such a second 
 and a third time, but not while the 
 product to which they at first contri- 
 buted remains in existence. The iron 
 which formed a tank or a set of pipes 
 may be melted to form a plough or a 
 eteam-engine ; the stones with which 
 a house was built may be used after it 
 is pulled down, to build another. But 
 this cannot be done while the original 
 product subsists ; their function as 
 materials is suspended, until the ex- 
 haustion of the first use. Not so with 
 the things classed as implements ; they 
 may be used repeatedly for fresh work, 
 until the time, sometimes very distant, 
 at which they are worn out, while the 
 work already done by them may sub- 
 sist unimpaired, and when it perishes, 
 does so by its own laws, or by casual- 
 ties of its own.* 
 
 The only practical difference of much 
 importance arising from the distinction 
 between materials and implements, is 
 one which has attracted our attention 
 in another case. Since materials are 
 destroyed as such by being once used, 
 the whole of the labour required for 
 their production, as well as the absti- 
 nence of the person who supplied the 
 means of carrying it on, must be 
 remunerated from the fruits of that 
 
 * The able and friendly reviewer of this 
 treatise in the Edinburgh Review (October 
 18 IS) conceives the distinction between ma- 
 terials and implements rather differently : 
 proposing to consider as materials " all the 
 things which, after having undergone the 
 change implied in production, are them- 
 selves matter of exchange," and as imple- 
 ments (or instruments) " the things which 
 are employed in producing that change, but 
 do not themselves become part of the ex- 
 changeable result." According to these 
 definitions, the fuel consumed in a manufac- 
 tory would be considered, not as a material, 
 but as an instrument. This use of the terms 
 accords better than that proposed in the 
 text, with the primitive physical meaning of 
 the word " material ;" but the distinction on 
 which it is grounded is one almost irrelevant 
 to political economy. 
 
 single use. Implements, on the con 
 trary, being susceptible of repeated 
 employment, the whole of the products 
 which they are instrumental in bring- 
 ing into existence are a fund whiVh 
 can be drawn upon to remunerate the 
 labour of their construction, and the 
 abstinence of those by whose accumu- 
 lations that labour was supported. It 
 is enough if each product contributes 
 a fraction, commonly an insignificant 
 one, towards the remuneration of that 
 labour and abstinence, or towards in- 
 demnifying the immediate producer for 
 advancing that remuneration to the 
 person who produced the tools. 
 
 5. Thirdly : Besides materials 
 for industry to employ itself on, and 
 implements to aid it, provision must be 
 made to prevent its operations from ! 
 being disturbed and its products in- 
 jured, either by the destroying agencies 
 of nature, or by the violence or rapa- 
 city of men. This gives rise to an- 
 other mode in which labour not I 
 employed directly about the product 
 itself, is instrumental to its production ; 
 namely, when employed for the protec- 
 tion of industry. Such is the object of 
 all buildings for industrial purposes, 1 
 all manufactories, warehouses, docks, 
 granaries, barns, farm-buildings de- 
 voted to cattle, or to the operations of 
 agricultural labour. I exclude those 
 in which the labourers live, or which 
 are destined for their personal accom- 
 modation : these, like their food, supply 
 actual wants, and must be counted in 
 the remuneration of their labour. 
 There are many modes in which labour 
 is still more directly applied to the 
 protection of productive operations. 
 The herdsman has little other occupa 
 tion than to protect the cattle from 
 harm : the positive agencies concerned 
 in the realization of the product, go on 
 nearly of themselves. 1 have already 
 mentioned the labour of the hcdger and 
 ditcher, of the builder of walls or dykes. 
 To these must be added that of the 
 soldier, the policeman, and the judge. 
 These functionaries are not indeed 
 employed exclusively in the protection 
 of industry, nor dors their payment 
 constitute, to the individual producer,
 
 BOOK I. CHAFFER II. 9. 
 
 a part of the expenses of production. 
 Tut they are paid from the taxes, 
 which are derived from the produce of 
 industry ; and in any tolerably go- 
 verned coiuitry they render to its 
 operations a sen-ice far more than 
 equivalent to the cost. To society at 
 large they are therefore part of the 
 expenses of production : and if the 
 returns to production were not suf- 
 ficient to maintain these labourers in 
 addition to all the others required, 
 production, at least in that form and 
 manner, could not take place. l>c- 
 sides, if the protection which the 
 government affords to the operations of 
 industry were not afforded, the pro- 
 ducers would be under a necessity of 
 cither withdrawing a large share of 
 heir time and labour from production, 
 to employ it in defence, or of engaging 
 armed men to defend them ; all which 
 labour, in that case, must be directly 
 remunerated from the produce ; and 
 things which could not pay for this 
 additional labour, would not be pro- 
 duced. Under the present arrange- 
 ments, the product pays its quota to- 
 wards the same protection, and not- 
 withstanding the waste and prodigality 
 incident to government expenditure, 
 obtains it of better quality at a much 
 smaller cost. 
 
 6. Fourthly : There is a very 
 great amount of labour employed, not 
 in bringing the product into existence, 
 but in rendering it, when in existence, 
 accessible to those for whose use it is 
 intended. Many important classes of 
 labourers find their sole employment in 
 some function of this kind. There is 
 first the whole class of carriers, by 
 land or water : muleteers, waggoners, 
 bargemen, sailors, wharfmen, coal- 
 neavers, porters, railway establish- 
 ments, and the like. Next, there are 
 the constructors of all the implements 
 of transport ; ships, barges, carts, loco- 
 motives, &c., to which must be added 
 roads, canals, and railways, lloads 
 are sometimes made by the govern- 
 ment, and opened gratuitously to the 
 public ; but the labour of making them 
 is not the less paid for from the pro- 
 duce. Each producer, in paying his 
 
 quota of the taxes levied generally fo 
 the construction of roads, pays for the 
 use of those which conduce to his con- 
 venience ; and if mad; with any toler- 
 able judgment, they increase the re- 
 turns to his industry by far more than 
 an equivalent amount. 
 
 Another numerous ckss of labourers 
 employed in rendering the things pro- 
 duced accessible to their intended con- 
 sumers, is the class of dealers and 
 traders, or, as they may be termed, 
 distributors. There would be a great 
 waste of time and trouble, and an in- 
 convenience often amounting to im- 
 practicability, if consumers could only 
 obtain the articles they want by treat- 
 ing directly with the producers. Doth 
 producers and consumers are too much 
 scattered, and the latter often at too 
 great a distance from the former. To 
 diminish this loss of time and labour, 
 the contrivance of fairs and markets 
 was early had recourse to, where con- 
 sumers and producers might periodi- 
 cally meet, without any intermediate 
 agency : and this plan answers toler- 
 ably well for many articles, especially 
 agricultural produce, agriculturists 
 having at some seasons a certain quan- 
 tity of spare time on their hands. 1 !ut 
 even in this case, attendance is often 
 very troublesome and inconvenient to 
 buyers who have other occupations, 
 and do not live in the immediate 
 vicinity ; while, for all articles the pro- 
 duction of which requires continuous 
 attention from the producers, these 
 periodical markets must be held at 
 such considerable intervals, and the 
 wants of the consumers must cither be 
 provided for so long beforehand, of 
 must remain so long unsupplied, that 
 even before the resources of society 
 admitted of the establishment of shops, 
 the supply of these wants fell univer- 
 sally into the hands of itinerant 
 dealers ; the pedlar, who might appear 
 once a month, being preferred to the 
 fair, which only returned once or twice 
 a year. In country districts, remote 
 from towns or large villages, the in- 
 dii.-try of the pedlar is not yet wholly 
 superseded. But a dealer who has a 
 fixed abode and fixed customers is so 
 much more to be depended on, that
 
 LABOUR AS AN AGENT OF PRODUCTION. 
 
 25 
 
 consumers prefer resorting to him if he 
 is conveniently accessible ; and dealers 
 therefore find their advantage in esta- 
 blishing themselves in every locality 
 where there are sufficient consumers 
 IK ,u- at hand to afford them a remune- 
 ration. 
 
 In many cases the producers and 
 i.l<-alcrs are the same persons, at least 
 as to the ownership of the funds and 
 the control of the operations. The 
 tailor, the shoemaker, the baker, and 
 many other tradesmen, are the pro- 
 ducers of the articles they deal in, so 
 far as regards the last stage in the 
 production. This union, however, of 
 the functions of manufacturer and re- 
 tailer, is only expedient when the article 
 can advantageously be made at or near 
 the place convenient for retailing it, 
 and is, besides, manufactured and sold 
 in small parcels. When things have 
 to be brought from a distance, the 
 same person cannot effectually superin- 
 tend both the making and the retailing 
 of them : when they are best and most 
 cheaply made on a large scale, a single 
 manufactory requires so many local 
 channels to carry off its supply, that 
 the retailing is most conveniently dele- 
 gated to other agency : and even shoes 
 and coats, when tney are to be furnished 
 in large quantities at once, as for the 
 supply of a regiment or of a workhouse, 
 are usually obtained not directly from 
 the producers, but from intermediate 
 dealers, who make it their business to 
 ascertain from what producers they can 
 be obtained best and cheapest. Even 
 when things are destined to be at last 
 sold by retail, convenience soon creates 
 a class of wholesale dealers. When 
 products and transactions have multi- 
 plied beyond a certain point ; when 
 one manufactory supplies many shops, 
 and one shop has often to obtain goods 
 from many different manufactories, the 
 loss of time and trouble both to the 
 manufacturers and to the retailers by 
 treating directly with one another, 
 makes it more convenient to them to 
 treat with a smaller number of great 
 lealcrs or merchants, who only buy to 
 sell again, collecting goods from the 
 various producers, and distributing 
 them to the retailers, to be by them 
 
 further distributed among the con- 
 sumers. Of these various elements is 
 composed the Distributing Class, whose 
 agency is supplementary to that of the 
 Producing Class : and the produce so 
 distributed, or its price, is the source 
 from which the distributors arc remu- 
 nerated for their exertions, and for the 
 abstinence which enabled them to ad- 
 vance the funds needful for the business 
 of distribution. 
 
 7. We have now completed the 
 enumeration of the modes in which 
 labour employed on external nature is 
 subservient to production. But there 
 is yet another mode of employing labour 
 which conduces equally, though still 
 more remotely, to that end: this is, 
 labour of which the subject is human 
 beings. Every human being has been 
 brought up from infancy at the expense 
 of much labour to some person or per- 
 sons, and if this labour or part of it, 
 had not been bestowed, the child would 
 never have attained the age and 
 strength which enable him to become 
 a labourer in his turn. To the com- 
 munity at large, the labour and ex- 
 pense of rearing its infant population 
 form a part of the outlay which is a 
 condition of production, and which is 
 to be replaced with increase from the 
 future produce of their labour. By the 
 individuals, this labour and expense are 
 usually incurred from other motives 
 than to obtain such ultimate return, 
 and, for most purposes of political eco- 
 nomy, need not be taken into account 
 as expenses of production. But the 
 technical or industrial education of the 
 community ; the labour employed in 
 learning and in teaching the arts of 
 production, in acquiring and communi- 
 cating skill in those arts ; this labour 
 is really, and in general solely, under- 
 gone for the sake of the greater or more 
 valuable produce thereby attained, and 
 in order that a remuneration, equivalent 
 or more than equivalent, may be reaped 
 by the learner, besides an adequate re- 
 muneration for the labourof the teacher, 
 when a teacher has been employed. 
 
 As the labour which confers produc- 
 tive powers, whether of hand or of head, 
 may be looked upon as part of the la
 
 ?G 
 
 COOK 1. CHAPTER II. 
 
 hour by which society accomplishes its 
 
 productive operations, or in other words, 
 
 as part of what the produce costs to 
 
 society, so too may the labour employed 
 
 /n keeping up productive powers ; in 
 
 preventing them from being destroyed 
 
 or weakened by accident or disease. 
 
 The labour of a physician or surgeon, 
 
 when made use of by persons engaged Newton could not have produced the 
 
 in industry, must be regarded in the Principia without the bodily exertion 
 
 economy of society as a sacrifice in- 
 
 be taught to do it. The 
 dullest human being, instructed before- 
 hand, is capable of turning a mill ; but 
 a horse cannot turn it without some- 
 body to drive and watch him. On the 
 other hand, there is some bodily ingre- 
 dient in the labour most purely mental, 
 when it generates any external result. 
 
 turred, to preserve from perishing by 
 death or infirmity that portion ot the 
 productive resources of society which is 
 tixed in the lives and bodily or mental 
 powers of its productive members. To 
 the individuals, indeed, this forms but 
 a part, sometimes an imperceptible part, 
 of the motives that induce them to sub- 
 mit to medical treatment : it is not 
 principally from economical motives 
 that persons have a limb amputated, 
 or endeavour to be cured of a fever, 
 though when they do so, there is gene- 
 rally sufficient inducement for it even 
 on that score alone. This is, therefore, 
 one of the cases of labour and outlay 
 which, though conducive to production, 
 yet not being incurred for that end, or 
 for the sake of the returns arising from 
 it, are out of the sphere of most of the 
 general propositions which political eco- 
 nomy has occasion to assert respecting 
 productive labour : though, when so- 
 ciety and not the individuals are con- 
 sidered, this labour and outlay must 
 be regarded as part of the advance by 
 which society effects its productive ope- 
 rations, and for which it is indemnified 
 by the produce. 
 
 8. Another kind of labour, usually 
 classed as mental, but conducing to the 
 ultimate product as directly, though 
 not so immediately, as manual labour 
 itself, is the labour of the inventors of 
 industrial processes. I say, usually 
 classed as mental, because in reality it 
 is not exclusively so. All human exer- 
 tion is compounded of some mental and 
 some bodily elements. The stupidest 
 hodman, -who repeats from day to day 
 the mechanical act of climbing a ladder, 
 performs a function partly intellectual ; 
 so much so, indeed, that the most in- 
 telligent dog or elephant could not, 
 
 either of penmanship or of dictation; 
 and he must have drawn many dia- 
 grams, and written out many calcula- 
 tions and demonstrations, while he was 
 preparing it in his mind. Inventors, 
 besides the labour of their brains, gene- 
 rally go through much labour with their 
 hands, in the models which they con- 
 struct and the experiments they have 
 to make before their idea can realize 
 itself successfully in act. Whether 
 mental, however, or bodily, their labour 
 is a part of that by which the produc- 
 tion is brought about. The labour of 
 Watt in contriving the steam-engine 
 was as essential a part of production 
 as that of the mechanics who build or 
 the engineers who work the instru- 
 ment ; and was undergone, no less than 
 theirs, in the prospect of a remuneration 
 from the produce. The labour of inven- 
 tion is often estimated and paid on the 
 very same plan as that of execution. 
 Many manufacturers of ornamental 
 goods have inventors in their employ- 
 ment, who receive wages or salaries for 
 designing patterns, exactly as others do 
 for copying them. All this is strictly 
 part of the labour of production ; as the 
 labour of the author of a book is equally 
 a part of its production with that of the 
 printer and binder. 
 
 In a national, or universal point of 
 view, the labour of the savant, or spe- 
 culative thinker, is as much a part of 
 production in the very narrow'.- ; 
 as that of the inventor of a practical 
 art; many such inventions Laving been 
 the direct consequences of theoretic 
 discoveries, and every extension of 
 knowledge of the powers of nature 
 being fruitful of applications to the 
 purposes of outward life. The electro- 
 magnetic telegraph was the wonderful 
 and most unexpected consequence of 
 the experiments of Gutted and the
 
 LABOUR AS AN AGENT OF PftODUCTION. 
 
 27 
 
 mathematical investigations of Am- 
 pere : and the modern art of naviga- 
 tion is an unforeseen emanation fi-oin 
 tlic purely speculative and apparently 
 
 rurioiis iii(|in'ry, by the mathe- 
 maticians of Alexandria, into the pro- 
 perties of three curves formed by the 
 intersection of a. plane surface and a 
 cone. No limit can be set to the im- 
 portance, even in a purely productive 
 and material point of view, of mere 
 thought. Inasmuch, however, as these 
 
 .1 fruits, though the result, are 
 seldom the direct purpose of the pur- 
 suits of savants, nor is their remu- 
 neration in general derived from the 
 increased production which may be 
 caused incidentally, and mostly after 
 a long intcival, by their discoveries; 
 this ultimate influence does not, for 
 most of the purposes of political eco- 
 nomy, require to be taken into con- 
 sideration ; and speculative thinkers 
 are generally classed as the producers 
 only of the books, or other useable or 
 saleable articles, which directly ema- 
 nate from them. But when (as in po- 
 litical economy one .should always be 
 prepared to do) we shift our point of 
 view, and consider not individual acts, 
 and the motives by .which they are 
 determined, but national and universal 
 results, intellectual speculation must 
 be looked upon as a most influential 
 part of the productive laoour of society, 
 and the portion of its resources em- 
 
 in carrying on and in remune- 
 rating such labour, as a highly produc- 
 tive part of its expenditure. 
 
 9. In the foregoing survey of the 
 modes of employing labour in further- 
 ance of production, I have made little 
 r.ss of the popular distinction' of indus- 
 try into agricultural, manufacturing, 
 and commercial. For, in truth, this 
 division fulfils very badly the purposes 
 of a classification. Many great Blanches 
 of productive industry find no place in 
 it, or not without much straining; for 
 example (not to speak of hunters or 
 fishers) the miner, the road-maker, and 
 the sailor. The limit, too, between 
 agricultural and manufacturing indus- 
 try cannot be precisely drawn. The 
 tuiiler, ''or instance, and the baker 
 
 are they to be reckoned among agri- 
 culturists, or among manufacturers? 
 Their occupation is in its nature ma- 
 nufacturing; the food has finally parted 
 company with the soil before it is 
 handed over to them : this, however, 
 might be said with equal truth of tha 
 thresher, the winnower, .the makers of 
 butter and cheese ; operations always 
 counted as agricultural, probably be- 
 cause it is the custom for them to .be 
 performed by persons resident on the 
 farm, and under the same superinten- 
 dence as tillage. For many purposes, 
 all these persons, the miller and baker 
 inclusive, must be placed in the same 
 class with ploughmen and reapers. 
 They are all concerned in producing 
 food, and depend for their remuneration 
 on the food produced; when the one 
 class abounds and flourishes, the others 
 do so too ; they form collectively the 
 " agricultural interest ;" they render 
 but one service to the community by 
 their united labours, and are paid fiom 
 one common source. Even the tillers 
 of the soil, again, when the produce is 
 not food, but the materials of what are 
 commonly termed manufactures, belong 
 in many respects to the same division 
 in the economy of society as manufac- 
 turers. The cotton-planter of Carolina, 
 and the wool-grower of Australia, have 
 more interests in common with the 
 spinner and weaver than with the 
 corn-grower. But, on the other hand, 
 the industry which operates immedi- 
 ately upon the soil has, as we shall see 
 hereafter, some properties on which 
 many important consequences depend, 
 and which distinguish it from all the 
 subsequent stages of production, whe- 
 ther carried on by the same person or 
 not ; from the industry of the thresher 
 and winnower, as much as from that of 
 the cotton-spinner. When I speak, 
 therefore, of agricultural labour, I shall 
 generally mean this, and this exclu- 
 sively, unless the contrary is either 
 stated or implied in the context. The 
 tenn manufacturing is too vague to be 
 of much use when precision is required, 
 and when I employ it, I wish to be un- 
 derstood as intending to speak pcpu- 
 larly rather thin scientifically.
 
 26 
 
 BOOK I. CHAPTER III. 1, 
 
 CHA1TER IIL 
 
 Or CXPKODUGTIYK LABOUR. 
 
 1. LABOUR is indispensable to pro- 
 duction, but has not always production 
 for its effect. There is much labour, 
 and of a high order of usefulness, of 
 which production is not the object. 
 Labour has accordingly been distin- 
 guished into Productive and Unpro- 
 ductive. There has been not a little 
 controversy among political economists 
 on the question, what kinds of labour 
 should be reputed to be unproductive ; 
 and they have not always perceived, 
 that there was in reality no matter of 
 I'act in dispute between them. 
 
 Many writers have been unwilling to 
 class any labour as productive, unless 
 its result is palpable in some material 
 object, capable of being transferred 
 from one person to another. There are 
 others (among whom are, Mr. M'Culloch 
 and M. Say) who looking upon the 
 word unproductive as a term of dis- 
 paragement, remonstrate against im- 
 posing it upon any labour which is 
 regarded as useful which produces a 
 benefit or a pleasure worth the cost. 
 The labour of officers of government, 
 of the army and navy, of physicians, 
 lawyers, teachers, musicians, dancers, 
 actors, domestic servants, &c. when 
 they really accomplish what they are 
 paid for, and are not more numerous 
 than is required for its performance, 
 ought not, say these writers, to be 
 "stigmatized" as unproductive, an ex- 
 pression which they appear to regard 
 as synonymous with wasteful or worth- 
 less. But this seems to be a misunder- 
 standing of the matter in dispute. Pro- 
 ihiction not being the sole end of human 
 existence, the term unproductive does 
 not necessarily imply any stigma ; nor 
 was ever intended to do so in the pre- 
 sent case. The question is one of mere 
 language and classification. Differ- 
 ences of language, however, arc by no 
 means unimportant, even when not 
 grounded on differences of opinion ; for 
 though either of two expressions may 
 
 be consistent with the whole truth, they 
 generally tend to fix attention upon 
 different parts of it. We must there- 
 fore enter a little into the considera- 
 tion of the various meanings which 
 may attach to the words productive 
 and unproductive when applied to 
 labour. 
 
 In the first place, even in what is 
 called the production of material ob- 
 jects, it must be remembered that what 
 is produced is not the matter composing 
 them. All the labour of all the human 
 beings in the world could not produce 
 one particle of matter. To weave 
 broadcloth is but to re-arrange, in a 
 peculiar manner, the particles of wool : 
 to grow corn is only to put a portion of 
 matter called a seed, into a situation 
 where it can draw together particles of 
 matter from the earth and air, to form 
 the new combination called a plant. 
 Though we cannot create matter, we 
 can cause it to assume properties, by 
 which, from having been useless to us, 
 it becomes useful. What we produce, 
 or desire to produce, is always, as M. 
 Say rightly terms it, an utility. La- 
 bour is not creative of objects, but of 
 utilities. Neither, again, do we con- 
 sume and destroy the objects them- 
 selves ; the matter of which they were 
 composed remains, more or less ahcrcd 
 in form: what ha-- really been consumed 
 is only the qualities by which they were 
 fitted for the purpose they have been 
 applied to. It is, therefore, pertinently 
 asked by M. Say and others since, 
 when we are said to produce objects, 
 we only produce utility, why should not 
 all labour which produces utility be 
 accounted productive ? Why refuse 
 that title to the surgeon who sets a 
 limb, the judge or legislator who con- 
 fers security, and give it to the lapi- 
 dary who cuts and polishes a diamond? 
 Why deny it to the teacher from whom 
 I learn an art by which I can gain my 
 bread, and accord it to the confectioner
 
 UNPRODUCTIVE LABOUR. 
 
 29 
 
 who i. mkes bonbons for the momentary 
 pleasure of a sense of taste ? 
 
 It is quite true that all these kinds 
 of labour are productive of utility ; and 
 the question which now occupies us 
 could not have been a question at all, 
 if the production of utility were enough | 
 to satisfy the notion which mankind 
 have usually formed of productive la- 
 bour. Production, and productive, are 
 d! i I'nrsc elliptical expressions, involv- 
 ing the idea of a something produced ; 
 but this something, in common appre- 
 h.'iisi>.ii, I conceive to be, not utility, 
 but Wealth. Productive labour means 
 labour productive of wealth. We are 
 recalled, therefore, to the question 
 touched upon in our first chapter, what 
 Wealth is, and whether only material 
 products, or all useful products, are to 
 U: included in it. 
 
 2. Now the utilities produced by 
 labour are of three kinds. They are, 
 
 First, utilities fixed and embodied in 
 outward objects ; by labour employed 
 in investing external material things 
 with properties which render them ser- 
 viceable to human beings. This is the 
 common case, and requires no illus- 
 tration. 
 
 Secondly, utilities fixed and embodied 
 in human beings ; the labour being in 
 this case employed in conferring on 
 human beings, qualities which render 
 them serviceable to themselves and 
 others. To this class belongs the la- 
 bour of all concerned in education ; not 
 only schoolmasters, tutors, and profes- 
 sors, but governments, so far as they 
 aim successfully at the improvement of 
 the people ; moralists, and clergymen, 
 as far as productive of benefit ; the 
 labour of physicians, as far as instru- 
 mental in preserving life and physical 
 or mental efficiency ; of the teachers of 
 bodily exercises, and of the various 
 trades, sciences, and arts, together with 
 the labour of the learners in acquiring 
 them ; and all labour bestowed by any 
 persons, throughout life, in improving 
 the knowledge or cultivating the bodily 
 or mental faculties of themselves or 
 others. 
 
 Thirdly and lastly, utilities not fixed 
 or embodied in am 
 
 ing in a mere seiviee rendered ; a plea- 
 sure given, an inennvcnidi'v or a pnin 
 averted, during a longer or a thorter 
 time, but without leaving a permanent 
 acquisition in the improved qualities of 
 any person or thing ; the labour being 
 employed in producing an utility di- 
 rectly, not (as in the two former cases) 
 in fitting some other thing to afford an 
 utility. Such, for example, is the la- 
 bour of the musical performer, the actor, 
 the public declaimer or reciter, and the 
 showman. Some good may no doubt 
 be produced, and much more might be 
 produced, beyond the moment, upon the 
 feelings and disposition, or general state 
 of enjoyment of the spectators ; or in- 
 stead of good there may be harm ; but 
 neither the one nor the other is the 
 effect intended, is the result for which 
 the exhibitor works and the spectator 
 pays ; nothing but the immediate plea- 
 sure. Such, again, is the labour of the 
 army and navy ; they, at the best, pre- 
 vent a country from being conquered, 
 or from being injured or insulted, which 
 is a service, but in all other respects 
 leave the country neither improved nor 
 deteriorated. Such, too, is the labour 
 of the legislator, the judge, the officer 
 of justice, and all other agents of go- 
 vernment, in their ordinary functions, 
 apart from any influence they may 
 exert on the improvement of the na- 
 tional mind. The service which they 
 render, is to maintain peace and secu- 
 rity ; these compose the utility which 
 they produce. It may appear to some, 
 that earners, and merchants or dealers, 
 should be placed in this same class, 
 since their labour does not add any 
 properties to objects : but I reply that 
 it does: it adds the property of being 
 in the place where they are wanted, 
 instead of being in some other place : 
 which is a very useful property, and 
 the utility it confers is embodied in the 
 things themselves, which now actually 
 are in the place where they are re- 
 quired for use, and in consequence of 
 that increased iitility could be sold at 
 an increased price, proportioned to the 
 labour expended in conferring it. This 
 labour, therefore, does not belong to the 
 third class, but to the first.
 
 80 BOOK I. CHAPTER HI. 
 
 3. We have now to consider which 
 of these three classes of labour should 
 be accounted productive of wealth, since 
 that is what the term productive, when 
 used by itself, must be understood to 
 import. Utilities of the third class, 
 consisting in pleasures which only exist 
 while being enjoyed, and services which 
 only exist while being performed, can- 
 not be spoken of as wealth, except by 
 an acknowledged metaphor. It is es- 
 sential to the idea of wealth to be sus- 
 ceptible of accumulation : things which 
 cannot, after being produced, be kept 
 for some time before being used, are 
 never, I think, regarded as wealth, 
 since howaver much of them may be 
 produced and enjoyed, the person bene- 
 fited by them is no richer, is nowi-c 
 improved in circumstances. But there 
 is not so distinct and positive a viola- 
 tion of usage in considering as wealth 
 any product which is both useful and 
 susceptible of accumulation. The skill, 
 
 and the energy and perseverance, of 
 the artisans of a country, are reckoned 
 part of its wealth, no less than their 
 tools and machinery.* According to 
 this definition, we should regard all 
 labour as productive which is employed 
 
 * Some authorities look upon it as an essen- 
 tial element in the idea of wealth, that it 
 should he capable not solely of being accu- 
 mulated, but of being transferred; and inas- 
 much as the valuable qualities, and even 
 the productive capacities, of a human being 
 cannot be detached from him and passed to 
 some one else, they deny to these the appel- 
 lation of wealth, and to the labour expended 
 in acquiring them the name of productive 
 labour. It seems to me, however, that the 
 skill of an artisan (for instance) being both 
 a desirable possession and one of a certain 
 durability (not to say productive even of 
 material wealth), there is no better reason for 
 refusing to it the title of wealth because it is 
 attached to a man, than to a coalpit or a 
 manufactory because they are attached to a 
 place. Besides, if the skill itself cannot be 
 parted with to a purchaser, the use of it niny ; 
 if it cannot be sold it can be hire.l ; and it 
 may be, and is, sold outright in all countries 
 whose laws permit that the man himself 
 should be sold along with it. Its defect of 
 transferability does not result from a natural, 
 but from a legal and moral obstacle. 
 
 The human being himself (as formerly 
 observed) I do not class as wealth. He is 
 the purpose fur which wealth exists. But 
 his acquired capacities, which exist only as 
 means, and have been called into existence 
 by labour, fall rightly, as it seems to me, 
 within that designation. 
 
 3. 
 
 in creating permanent utilities, whe- 
 ther embodied in human beings, or in 
 any other animate or inanimate objects. 
 This nomenclature I have, in a former 
 publication, f recommended as the most 
 conducive to the ends of classification; 
 and I ii m still of that opinion.. 
 
 But in applying the term wealth to 
 the industrial capacities of human be- 
 ings, there seems always, in popular 
 apprehension, to be a tacit reference to 
 material products. The skill of an 
 artisan is accounted wealth, only as 
 being the means of acquiring wealth in 
 a material sense ; and any qualities 
 not tending visibly to that object are 
 scarcely so regarded at all. A country 
 would hardly be said to be richer, ex- 
 cept by a metaphor, however precious 
 a possession it might have in the 
 genius, the virtues, or the accomplish- 
 ments of its inhabitants ; unless indeed 
 these were looked upon as marketable 
 articles, by which it could attract the 
 
 material wealth of other countries, as 
 the Greeks of old, and several modem 
 nations have done. While, therefore, 
 I should prefer, were I constructing a 
 new technical language, to make the 
 distinction turn upon the pcrmaner 
 riali 
 
 rather than ur 
 
 materiality ol 
 employing terms 
 ) has taken corn- 
 
 product, yet when 
 which common usa c 
 plete possession of, it seems advisable 
 so to employ them as to do the least 
 possible violence to usage ; since any 
 improvement in terminology obtained 
 by straining the received meaning of a 
 popular phrase, is generally purchased 
 beyond its value, by the obscurity 
 arising from the conflict between new 
 and old associations. 
 
 I shall, therefore, in this treatise, 
 when speaking of wealth^ understand 
 by it only w'hat is called mafanaT 
 wcalil), and by productive labour only 
 those kinds of exertion which produce 
 utilities embodied in materiaLolaejts. ; 
 But in limiting myself to "this sense of 
 the word, I mean to avail myself of the 
 full extent of that restricted accepta- 
 tion, and I shall not refuse the appella- 
 tion productive, to labour which yields 
 
 t Et.i'uts on tome Umeltled Questions of 
 Political Economy. Essay III. On the word* 
 Productive and Unproductive.
 
 UNPRODUCTIVE LABOUR. 
 
 51 
 
 no material product as its direct result, 
 provided that an increase of material 
 products is its ultimate consequence. 
 Thus, jabour__xpciuled in the acquj- 
 ni t i on of manufacturing skill, 1 class as 
 Plj^uctive. not in virtue ot tne skill 
 itself, but of the manufactured products 
 created by the skill, and to the creation 
 of which the labour of learning the 
 trade is essentially conducive. The 
 labour of officers of government in 
 ail' 'idTng the protection which, afforded 
 in some manner or other, is indispen- 
 sable to the prosperity of industry, must 
 be classed as productive even of mate- 
 rial wealth, because" without it, mate- 
 rial wealth, in anything like its pre- 
 sent abundance, could not exist. Such 
 lal'nur may be said to be productive 
 indirectly or mediately, in opposition 
 to the labour of the ploughman and the 
 cotton-spinner, which are productive 
 immediately. They are all alike in 
 this, that they leave the community 
 richer in material products than they 
 found it ; they increase, or tend to in- 
 crease, material wealth. 
 
 4. By Unproductive Labour, on 
 
 !tho contrary, will be understood labour 
 which does not terminate in. .the ,cjca- 
 t in of material wealth; which, Imw- 
 eVer largely or successfully practised, 
 does not render the community, and the 
 world at large, richer in material pro- 
 ducts, but poorer by all that is con- 
 sumed by the labourers while so em- 
 ployed. 
 
 All labour is, in the language of 
 political economy, unproductive, which 
 ends in immediate enjoyment, without 
 any increase of the accumulated stock 
 of permanent means of enjoyment. 
 And all labour, according to our pre- 
 sent definition, must be classed as un- 
 luctive, which terminates in a per- 
 manent benelit, however important, 
 provided that an increase of material 
 products forms no part of that benefit. 
 The labour of saving a friend's life is 
 not productive, unless the friend is a 
 productive labourer, and produces more 
 than ho consumes. To a religious per- 
 son the saving of a soul must appear a 
 far more important service than the 
 saving of a life ; but he will not there- 
 
 fore call a missionary or a clergyman 
 productive labourers, unless they teach, 
 as the South Sea Missionaries have in 
 some cases done, the arts of civilization 
 in addition to the doctrines of their 
 religion. It is, on the contrary, evi- 
 dent that the greater number of mis- 
 sionaries or clergymen a nation main- 
 tains, the less it has to expend on other 
 things ; while the more it expends 
 judiciously in keeping agriculturists 
 and manufacturers at work, the more it 
 will have for every other purpose. By 
 the former it diminishes, cceteris pari- 
 '.?, its stock of material products ; by 
 the latter, it increases them. 
 
 Unproductive may be as useful as pro- 
 ductive labour ; it may be more useful, 
 even in point of permanent advantage ; 
 or its use may consist only in pleasur- 
 able sensation, which when gone leaves 
 no trace ; or it may not afford even 
 this, but may be absolute waste. In 
 any case society or mankind grow no 
 richer by it, but poorer. All material 
 products consumed by any one while he 
 produces nothing, are so much sub- 
 traced, for the time, from the material 
 products which society would other- 
 wise have possessed. But though 
 society grows no richer by unproduc- 
 tive labour, the individual may. An 
 unproductive labourer may receive for 
 his labour, from those who derive 
 pleasure or benefit from it, a remunera- 
 tion which may be to him a considera- 
 ble source of wealth ; but his gain is 
 balanced by their loss ; they may 
 have received a full equivalent for 
 their expenditure, but they are so 
 much poorer by it. When a tailor 
 makes a coat and sells it, there is a 
 transfer of the price from the customer 
 to the tailor, and a coat besides which 
 did not previously exist; but what is 
 gained by an actor is a mere transfer 
 from the spectator's funds to his, leav- 
 ing no article of wealth for the specta- 
 tor's indemnification. Thus the com- 
 munity collectively gains nothing by 
 the actor's labour ; and it loses, of hii 
 receipts, all that portion which he con- 
 sumes, retaining only that which he 
 lays by. A community, however, may 
 add to its wealth by unproductive 
 labour, at the expense of other coui-
 
 32 
 
 BOOK I. CHAPTER III 5. 
 
 m unities, as an individual may at the 
 expense of other individuals. The 
 gains of Italian opera singers, German 
 governesses, French ballet dancers, 
 &c., arc a source of wealth, as far as 
 , they go, to their respective countries, 
 / if they return thither. The petty 
 states of Greece, especially the ruder 
 and more backward of those states, 
 were nurseries of soldiers, who hired 
 themselves to the princes and satraps 
 of the East to carry on useless and de- 
 structive wars, and returned with their 
 savings to pass their declining years in 
 their own country : these were unpro- 
 ductive labourers, and the pay they 
 received, together with the plunder they 
 took, was an outlay without return to 
 the countries which furnished it ; but, 
 though no gain to the world, it was a 
 gain to Greece. At a later period the 
 same country and its colonies supplied 
 the Boman empire with another class 
 of adventurers, who, under the name of 
 philosophers or of rhetoricians, taught 
 to the youth of the higher classes what 
 were esteemed the most valuable ac- 
 complishments : these were mainly 
 unproductive labourers, but their ample 
 recompense was a source of wealth to 
 their own country. In none of these 
 cases was there any accession of 
 wealth to the world. The services of 
 the labourers, if useful, were obtained 
 at a sacrifice to the world of a portion 
 of material wealth ; if useless, all that 
 these labourers consumed was, to the 
 world, waste. 
 
 To be wasted, however, is a liability 
 .not confined to unproductive labour, 
 i Productive labour may equally be 
 ! wasted if more of it is expended than 
 really conduces to production. If de- 
 fect of skill in labourers, or of judgment 
 in those who direct them, causes a 
 ini.sapplicalion of productive industry ; 
 if a farmer persists in ploughing with 
 three horses and two men, when ex- 
 perience has shown that two horses 
 and one man are sufficient, the sur- 
 plus labour, though employed for pur- 
 poses of production, is wasted. If a 
 new process is adopted which proves 
 no better, or not so good as those before 
 in use, the labour expended in perfect- 
 ing the invention and in carrying it 
 
 into practice, though employed for a 
 productive purpose, is wasted. Pro- 
 ductive labour may render a nation 
 poorer, if the wealth it produces, that 
 is, the increase it makes in the stock 
 of useful or agreeable things, be of a 
 kind not immcdi itely wanted : as 
 when a commodity is unsaleable, be- 
 cause produced in a quantity beyond 
 the present demand ; or when specula- 
 tors build docks and warehouses befoic 
 there is any trade. Tho bankrr.pl 
 states of North America, with their 
 premature railways and canals, have 
 made this kind ol mistake ; and it 
 was for some time doubtful whether 
 England, in the disproportionate de- 
 velopment of railway enterprise, had 
 not, in some degree, followed the 
 example. Labour sunk in expectation 
 of a distant return, when the great 
 exigencies or limited resources of the 
 community require that the return be 
 rapid, may leave the country not only 
 poorer in the meanwhile, by all which 
 those labourers consume, but less rich 
 even ultimately than if immediate re- 
 turns had been sought in the first 
 instance, and enterprises for distant 
 profit postponed. 
 
 5. The distinction of Productive 
 and Unproductive is applicable to con- 
 sumption as well as to labour. All the 
 members of the community are not 
 labourers, but all are consumers, and 
 consume either unproductively or pro- 
 ductively. Whoever contributes no- 
 thing directly or indirectly to produc- 
 tion, is an unproductive consumer. 
 The only productive consumers are j 
 productive labourers ; the labour of I 
 direction being of course included, as 
 well as that of execution. But tho 
 consumption even of productive labour 
 ers is not all of it productive consump- 
 tion. There is unproductive consump- 
 tion by productive consumers. "\Vhat 
 they consume in keeping up or im- 
 proving their health, strength, and 
 capacities of work, or in rearing other 
 productive labourers to succeed them, 
 is productive consumption. But con- 
 sumption on pleasures or luxuries, 
 whether by the idle or by the indus- 
 trious, since r'JOduction is neither its
 
 UNPRODUCTIVE LABOCK. 
 
 93 
 
 object nor is in any way advanced by 
 h, must be reckoned unproductive : 
 with a reservation perhaps of a certain 
 quantum of enjoyment which may be 
 classed among necessaries, since any- 
 thing short of it would not be consistent 
 with the greatest efficiency of labour. 
 That alone is productive consumption, 
 which goes to maintain and increase 
 the prod active powers of the commu- 
 nity; either those residing in its soil, 
 in its materials, in the number and 
 efficiency of its instruments of produc- 
 tion, or in its people. 
 
 There are numerous products which 
 may be said not to admit of being con- 
 sumed otherwise than unproductively. 
 The annual consumption of gold lace, 
 pine apples, or champagne, must be 
 reckoned unproductive, since these 
 things give no assistance to produc- 
 tion, nor any support to life or strength, 
 but what would equally be given by 
 tilings much less costly. Hence it 
 might be supposed that the labour em- 
 ployed in producing them ought not to 
 be regarded as productive, in the sense 
 in which the term is understood by 
 political economists. I grant that no 
 labour tends to the permanent enrich- 
 ment of society, which is employed in 
 producing things for the use of unpro- 
 ductive consumers. The tailor who 
 makes a coat for a man who produces 
 nothing, is a productive labourer ; but 
 in a few weeks or months the coat is 
 worn out, while the wearer has not 
 produced anything to replace it, and 
 the community is then no richer by the 
 labour of the tailor, than if the same 
 sum had been paid for a stall at the 
 opera. Nevertheless, society has been 
 richer by the labour while the coat 
 lasted, that is, until society, through 
 one of its unproductive members, chose 
 to consume the produce of the labour 
 unproductively. The case of the gold 
 lace or the pine apple is no further 
 dill'erent, than that they are still fur- 
 ther removed than the coat from the 
 character of necessaries. These things 
 also are wealth until they have been 
 consumed. 
 
 6. We see, however, by this, that 
 there is a distinction, more important 
 
 to the wealth of a community than 
 even that between productive and un- 
 productive labour; the distinction, 
 namely, between labour for the supply 
 of productive, and for the supply of 
 unproductive, consumption ; between 
 labour employed in keeping up or in 
 adding to the productive resources oi 
 the country, and that which is em- 
 ployed otherwise. Of the produce of 
 the country, a part only is destined to 
 be consumed productively ; the re- 
 mainder supplies the unproductive con- 
 sumption of producers, and the entire 
 consumption of the unproductive classes. 
 Suppose that the proportion of the 
 annual produce applied to the first pur- 
 pose amounts to half; then one-half 
 the productive labourers of the country 
 are all that are employed in the opera- 
 tions on which the permanent wealth 
 of the country depends. The other 
 half are occupied from year to year and 
 from generation to generation in pro- 
 ducing things which are consumed and 
 disappear without return ; and what- 
 ever this half consume is as completely 
 lost, as to any permanent effect on the 
 national resources, as if it were con- 
 sumed unproductively. Suppose that 
 this second half of the labouring popu- 
 lation ceased to work, and that the 
 government or their parishes main- 
 tained them in idleness for a whole 
 year : the first half would suffice to 
 produce, as they had done before, their 
 own necessaries and the necessaries of 
 the second half, and to keep the stock 
 of materials and implements undi- 
 minished : the unproductive classes, 
 indeed, would be either starved or 
 obliged to produce their own subsist- 
 ence, and the whole community would 
 be reduced during a year to bare neces- 
 saries ; but the sources of production 
 would be unimpaired, and the next 
 year there would not necessarily be a 
 smaller produce than if no such interval 
 of inactivity had occurred ; while if 
 the case had been reversed, if the first 
 half of the labourers had suspended 
 their accustomed occupations, and the 
 second half had continued theirs, the 
 country at the end of the twelvemonth 
 would have been entirely impOTorished. 
 It would be a great error to regret
 
 34 
 
 BOOK I. CHAPl'EK IT. 1. 
 
 the large proportion of the annual pro- 
 duce, which in an opulent country goes 
 to supply unproductive consumption. 
 It would be to lament that the com- 
 munity has so much to spare from its 
 necessities, for its pleasures and for all 
 higher uses. This portion of the pro- 
 duce is the fund from which all the 
 wants of the community, other than 
 that of mere living, are provided for ; 
 the measure of its means of enjoyment, 
 and of its power of accomplishing all 
 purposes not productive. That so great 
 
 a surplus should be available for stich 
 purposes, and that it should be applied 
 to them, can only be a subject of con- 
 gratulation. The things to be re- 
 gretted, and which are not incapable of 
 being remedied, are the prodigious 
 inequality with which this surplus is 
 distributed, the little worth of the ob- 
 jects to which the greater part of it is 
 devoted, and the large share which falla 
 to the lot of persons who render no 
 equivalent service in return. 
 
 CHAPTER IV. 
 
 OF CAPITAL. 
 
 1. IT has been seen in the pre- 
 ceding chapters that besides the pri- 
 mary and universal requisites of pro- 
 duction, labour and natural agents, 
 there is another requisite without which 
 no productive operations beyond the 
 rude and scanty beginnings of primitive 
 industry, are possible : namely, a stock, 
 previously accumulated, of the products 
 of former labour. This accumulated 
 stock of the produce of labour is termed 
 Capital. The function of Capital in 
 production, it is of the utmost import- 
 ance thoroughly to understand, since 
 a number of the erroneous notions with 
 which our subject is infested, originate 
 in an imperfect and confused appre- 
 hension of this point. 
 
 Capital, by persons wholly unused 
 to reflect on the subject, is supposed to 
 be synonymous with money. To ex- 
 ' pose this misapprehension, would be to 
 | repeat what has been said in the intro- 
 ductory chapter. Money is no more 
 ] synonymous with capital than it is 
 J with wealth. Money cannot in itself 
 perform any part of the office of capital, 
 since it can afford no assistance to 
 production. To do this, it must be 
 exchanged for other things ; and any- 
 thing, which is susceptible of being 
 exchanged for other things, is capable 
 . of contributing to production in the 
 same degree. What capital does for 
 
 production, is to afford the shelter, 
 protection, tools and materials which 
 the work requires, and to feed and 
 otherwise maintain the labourers during 
 the process. These are the services 
 which present labour requires from 
 past, and from the produce of past, 
 labour. Whatever things are destined 
 for this use destined to supply pro- 
 ductive labour with these various pre- 
 requisites are Capital. 
 
 To familiarize ourselves with the 
 conception, let us consider what is 
 done with the capital invested in any 
 of the branches of business which com- 
 pose the productive industry of a 
 country. A manufacturer, for example, 
 has one part of ha eapital in the form 
 of buildings, fitted and destined for 
 carrying on his branch of manufacture. 
 Another part he has in the form of 
 macliinery. A. third consists, if he be 
 a spinner, of raw cotton, flax, or wool ; 
 if a weaver, of flaxen, woollen, silk, or 
 cotton, thread ; and the like, according 
 to the nature of the manufacture. 
 Food and clothing for his operatives, it 
 is not the custom of the present age 
 that ho should directly provide ; and 
 few capitalists, except the producers of 
 food or clothing, have any portion 
 worth mentioning of their capital in 
 that shape. Instead of this, each 
 capitalist ha.s money, which he pays to
 
 CAPITAL. 
 
 35 
 
 his workpeople, and so enables them to 
 supply themselves : he has also finished 
 pio'ls in hi.s warehouses, by the sale of 
 which he obtains more money, to em- 
 ploy in the same manner, as well as to 
 replenish his stock of materials, to 
 keep his buildings and machinery in 
 repair, and to replace them when worn 
 out. His money and finished goods, 
 however, are not wholly capital, for he 
 does not wholly devote them to these 
 purposes : he employs a part of the 
 one, and of the proceeds oi the other, 
 in supplying his personal consumption 
 and that of his family, or in hiring 
 grooms and valets, or maintaining 
 hunters and hounds, or in educating 
 his children, or in paying taxes, or in 
 charity. What then is his capital ? 
 Precisely that part of his possessions, 
 whatever it be, which is to constitute 
 his fund for carrying on fresh produc- 
 tion. It is of no consequence that a 
 part, or even the whole of it, is in a 
 form in which it cannot directly supply 
 the wants of labourers. 
 
 Suppose, for instance, that the capi- 
 talist is a hardware manufacturer, and 
 that his stock in trade, over and above 
 his machinery, consists at present 
 wholly in iron goods. Iron goods 
 cannot feed labourers. Nevertheless, 
 by a mere change of the destination of 
 these iron goods, he can cause labourers 
 to be fed. Suppose that with a portion 
 of the proceeds he intended to maintain 
 a pack of hounds, or an establishment 
 of servants ; and that he changes his 
 intention, and employs it in his busi- 
 paying it in wages to additional 
 workpeople. These workpeople are 
 enabled to buy and consume the food 
 which would otherwise have been con- 
 sumed by the hounds or by the ser- 
 vants ; and thus without the employer's 
 having seen or touched one particle of 
 the food, his conduct has determined 
 that so much more of the food existing 
 in the country has been devoted to the 
 use of productive labourers, and so 
 much less consumed in a manner 
 wholly unproductive. Now vary the 
 hyp.'thrMs, and suppose that what is 
 thus paid in wages would otherwise 
 have been laid out not in feeding ser- 
 Tants or hounds, but in buying plate 
 
 and jewels ; and in order to render the 
 effect perceptible, let us suppose that 
 the change takes place on a considera- 
 ble scale, and that a large sum is 
 divert i d from buying plate and jewels 
 to employing productive labourers, 
 whom we shall suppose to have been 
 previously, like the Irish peasantry, 
 only half employed and half fed. The 
 labourers, on receiving their increased 
 wages, will not lay them out in plate 
 and jewels, but in food. There is not, 
 however, additional food in the country ; 
 nor any unproductive labourers or ani- 
 mals, as in the former case, whose food 
 is set free for productive purposea 
 Food will therefore be imported if 
 possible ; if not possible, the labourers 
 will remain for a season on their short 
 allowance : but the consequence of 
 this change in the demand for com- 
 modities, occasioned by the change in 
 the expenditure of the capitalists from 
 unproductive to productive, is that next 
 year more food will be produced, and 
 less plate and jewellery. So that 
 again, without having had anything to 
 do with the food of the laboureni 
 directly, the conversion by individual)! 
 of a portion of their property, no matter 
 of what sort, from an unproductive 
 destination to a productive, has had the 
 effect of causing more food to be appro- 
 priated to the consumption of produc- 
 tive labourers. The distinction, then, 
 between Capital and Not-capital, dpea 
 not lie in the kind of commodities, but 
 
 iiii'1 of tin.- ea- '. 
 
 will to employ them forgone purpose 
 rather than another ; and all property, 
 however ill adapted in itself for the 
 use of labourers, is a part of capital, so 
 soon as it, or the value to be received 
 from it, is set apart for productive re- 
 investment. The sum of all the values 
 so destined by their respective posses- 
 sors, composes the capital of the country. 
 Whether all those values are in a shape 
 directly applicable to productive uses, 
 makes no difference. Their shape, 
 whatever it may be, is a temporary 
 accident ; but, once destined for pro- 
 duction, they do not fail to find a way 
 of transforming themselves into tilings 
 capable of being applied to it.
 
 36 
 
 BOOK I. CHAPTER IV. 2. 
 
 2. As whatever of the produce of 
 the country is devoted to production is 
 capital, so, conversely, the whole of the 
 capital of the country is devoted to 
 production. This second proposition, 
 however, must, be taken with some 
 limitations and explanations. A fund 
 may be seeking for productive employ- 
 ment, and find none, adapted to the 
 inclinations of its possessor : it then is 
 capital still, but unemployed capital. 
 Or the stock may consist of unsold 
 goods, not susceptible of direct applica- 
 tion to productive uses, and not, at the 
 moment, marketable : these, until sold, 
 are in the condition of unemployed 
 capital. Again, artificial or accidental 
 circumstances may render it. necessary 
 to possess a larger stock in advance, 
 that is, a larger capital before entering 
 on production, than is required by the 
 nature of things. Suppose that the 
 government lays a tax on the produc- 
 tion in one of its eavlier stages, as for 
 instance by taxing the material. The 
 manufacturer has to advance the tax, 
 before commencing the manufacture, 
 and is therefore under a necessity of 
 having a larger accumulated fund than 
 is required for, or is actually employed 
 in, the production which he carries on. 
 He must have a larger capital, to 
 maintain the same quantity of produc- 
 tive labour ; or (what is equivalent) 
 with a sri\e:i capital he maintains less 
 labour. Tli's mode of levying taxes, 
 liu. 1 re lore, li...its unnecessarily the in- 
 dustry of the country: a portion of the 
 fund destined by its owners for produc- 
 tion being diverted from its purpose, 
 and kept in a constant state of advance 
 to the government. 
 
 For another example : a farmer may 
 enter on his farm at such a time of the 
 year, that he may be required to pay 
 one, two, or even three quarters' rent 
 before obtaining any return from the 
 produce. This, therefore, must be paid 
 out of his capital. Now rent, when 
 paid for the land itself, and not for 
 improvements made in it by labour, is 
 not a productive expenditure. It is 
 not an outlay for the support of labour, 
 or for the provision of implements or 
 materials the produce of labour. It is 
 the price paid for the use of an appro- 
 
 priated natural agent. This natural 
 agent is indeed as indispensable (and 
 even more so) as any implement : but 
 the having to pay a price for it, is not. 
 In the case of the implement (a thing 
 produced by labour) a price of some 
 sort is the necessary condition of its 
 existence : but the land exists by 
 nature. The payment for it, therefore, 
 is not one of the expenses of produc- 
 tion ; and the necessity of making the 
 payment out of capital, makes it requi- 
 site that there should be a greater 
 capital, a greater antecedent accumu- 
 lation of the produce of past labour, 
 than is naturally necessary, or than ia 
 needed where land is occupied on a 
 different system. This extra capital, 
 though intended by its owners for pro- 
 duction, is in reality employed nnpro- 
 ductively, and annually replaced, not 
 from any produce of its own, but from 
 the produce of the labour supported by 
 the remainder of the farmer's capital. 
 
 Finally, that large portion of the 
 productive capital of a country which 
 is employed in paying the wages and 
 salaries of labourers, evidently is not, 
 all of it, strictly and indispensably 
 necessary for production. As much of 
 it as exceeds the actual necessaries of 
 life and health (an excess which in the 
 case of skilled labourers is usually con- 
 siderable) is not expended in supporting 
 labour, but in remunerating it, and the 
 labourers could wait for this part of 
 their remuneration until the production 
 is completed : it needs not necessarily 
 pre-exist as capital : and if they un- 
 fortunately had to forego it altogether, 
 the same amount of production might 
 take place. In order that the whole 
 remuneration of the labourers should 
 be advanced to them in daily or weekly 
 payments, there must exist in advance, 
 and be appropriated to productive use, 
 a greater stock, or capital, than would 
 suih'ce to carry on the existing exte.it 
 of production : greater, by whatever 
 amount of remuneration the labourers 
 receive, beyond what the self-interest 
 of a prudent slave-master would as.-ign 
 to his slaves. In truth, it is only after 
 an abundant capital had already been 
 accumulated, that the practice of pay- 
 ing in advance any remuneration o'
 
 CAPITAL. 
 
 labour beyond a bare subsistence, could 
 possibly have arisen : since whatever is 
 so pakl, is not really applied to produc- 
 tion, but to the unproductive consump- 
 tion of productive labourers, indicating 
 a fund for production sufficiently ample 
 to admit of habitually diverting a part 
 of it to a mere convenience. 
 
 It will be observed that I have 
 assumed, that the labourers are always 
 subsisted from capital: and this is 
 obviously the fact, though the capital 
 needs not necessarily be furnished by a 
 person called a capitalist. When the 
 labourer maintains himself by funds of 
 his own, as when a peasant-farmer or 
 proprietor lives on the produce of his 
 land, or an artisan works on his own 
 account, they are still supported by 
 capital, that is, by funds provided in 
 advance. The peasant does not subsist 
 this year on the produce of this year's 
 harvest, but on that of the last. The 
 artisan is not living on the proceeds of 
 the work he has in hand, but on those 
 of work previously executed and dis- 
 posed of. Each is supported by a small 
 capital of his own, which he periodically 
 replaces from the produce of his labour. 
 The large capitalist is, in like manner, 
 maintained from funds provided in 
 advance. If he personally conducts 
 his operations, as much of his personal 
 or household expenditure as does not 
 exceed a fair remuneration of his labour 
 at the market price, must be considered 
 a part of his capital, expended, like any 
 other capital, for production : and his 
 personal consumption, so far as it con- 
 sists of necessaries, is productive con- 
 sumption. 
 
 3. At the risk of being tedious, 
 I must add a few more illustrations, to 
 bring out into astill clearerand stronger 
 light the idea of Capital. As M. Say 
 truly remarks, it is on the very elements 
 of our subject that illustration is most 
 usefully bestowed, since the greatest 
 errors which prevail in it may be traced 
 to the want of a thorough mastery 
 over the elementary ideas. Nor is this 
 surprising : a branch may be diseased 
 and all the rest healthy, but unsound- 
 ness at the root diffuses unhealthiness 
 through the whole tree. 
 
 Let ns therefore consider whether, 
 and in what cases, the property of those 
 who live on the interest of what they 
 possess, without being personally en- 
 gaged in production, can be regarded 
 as capital. It is so called in common 
 language, and, with reference to the 
 individual, not improperly. All funds 
 (mm which the possessor derives an in- 
 come, which income he can use without 
 sinking and dissipating the fund itself, 
 are to him equivalent to capital. But 
 to transfer hastily and inconsiderately 
 to the general point of view, proposi- 
 tions which are true of the individual, 
 has been a source of innumerable 
 errors in political economy. In the 
 present instance, that which is virtually 
 capital to the individual, is or is not 
 capital to the nation, according as the 
 fund which by the supposition he lias 
 not dissipated, has or has not been dis- 
 sipated by somebody else. 
 
 For example, let property of the 
 value of ten thousand pounds belonging 
 to A, be lent to 13, a farmer or manufac- 
 turer, and employed profitably in B's 
 occupation. It is as much capital as if 
 it belonged to B. A is really a farmer 
 or manufacturer, not personally, but in 
 respect of his property. Capital worth 
 ten thousand pounds is employed in 
 production in maintaining labourers 
 and providing tools and materials; 
 which capital belongs to A, while B 
 takes the trouble of employing it, and 
 receives for his remuneration the dif- 
 ference between the profit which it 
 yields and the interest he pays to A. 
 This is the simplest case. 
 
 Suppose next that A's ten thousand 
 pounds, instead of being lent to B, aro 
 lent on mortgage to C, a landed pro- 
 prietor, by whom they are employed in 
 improving the productive powers of hia 
 estate, by fencing, draining, road-mak- 
 ing, or permanent manures. This is 
 productive employment. The ten thou- 
 sand pounds are sunk, but not dis- 
 sipated. They yield a permanent re- 
 turn ; the land now affords an increase 
 of produce, sufficient, in a few years, if 
 the outlay has been judicious, to replace 
 the amount, and in time to multiply it 
 manifold. Here, then, is a value of 
 ten thousand pounds, employed in in-
 
 BOOK I. CHAPTER IV. 3. 
 
 ie produce f ^ le country. 
 This constitutes a capital, for which C, 
 it* he lets his land, receives the returns 
 in the nominal form of increased rent ; 
 nnd the mortgage entitles A to reo.-ive 
 from these returns, in the shape of in- 
 terest, such annual sum as has heen 
 agreed on. We will now vary the cir- 
 cumstances, and suppose that C does 
 not employ the loan in improving his 
 land, but in paying off a former mort- 
 gage, or in itiaking a provision for 
 children. Whether the ten thousand 
 pounds thus employed are capital cr 
 not, will depend on what is done with 
 the amount by the ultimate receiver. 
 If the children invest their fortunes in 
 a productive employment, or the mort- 
 gagee on being paid off lends the 
 amount to another landholder to im- 
 prove his land, or to a manufacturer to 
 extend his business, it is still capital, 
 because productively employed. 
 
 Suppose, however, that C, the bor- 
 rowing landlord, is a spendthrift, who 
 burdens his land not to increase his 
 fortune but to squander it, expending 
 the amount in equipages and entertain- 
 ments. In a year or two it is dissi- 
 pated, and without return. A is as 
 rich as before ; he has no longer his 
 ten thousand pounds, but he has a lien 
 on the land, which he could still sell for 
 that amount. C, however, is 10,OOOZ. 
 poorer than formerly ; and nobody is 
 richer. It may be said that those are 
 richer who have made profit out of the 
 money while it was being spent. Xo 
 doubt if C lost it by gaming, or was 
 cheated of it by his servants, that is a 
 mere transfer, not a destruction, and 
 those who have gained the amount may 
 employ it productively. But if C has 
 received the fair value for his expendi- 
 ture in articles of subsistence or luxury, 
 which he has consumed on himself, or 
 by means of his servants or guests, 
 these articles have ceased to exist, and 
 nothing has been produced to replace 
 them : while if the same sum had been 
 employed in farming or manufacturing, 
 the consumption which would have 
 taken place would have been mere than 
 balanced at the end of the year by new 
 products, created by the labour of those 
 TJO would in that case have been the 
 
 consumers. By C's prodigality, that 
 which would have been consumed with 
 a return, is consumed without return. 
 C?fl tradesmen may have made a profit 
 during the process ; but if the capital 
 had been expended productively, an 
 equivalent profit would have been made 
 by builders, fencers, tool-makers, and 
 the tradespeople who supply the con- 
 sumption of the labouring classes ; while 
 at the expiration of the time (to say 
 nothing of any increase), C would have 
 had the ton thousand pounds or its 
 value replaced to him, which now he 
 has not. There is, therefore, on the 
 general result, a difference to the dis- 
 advantage of the community, of at least 
 ten thousand pounds, being the amount 
 of C's unproductive expenditure. To 
 A, the difference is not material, since 
 his income is secured to him, and while 
 the security is good, and the market 
 rate of interest the same, he can always 
 sell the mortgage at its original value. 
 To A, therefore, the lien of ten thou- 
 sand pounds on C's estate, is virtually 
 a capital of that amount; but is it so 
 in reference to the community ? It is 
 not. A had a capital of ten thousand 
 pounds, but this has been extinguished 
 dissipated and destroyed by C's pro- 
 digality. A now receives his income, 
 not from the produce of his capital, but 
 from some other source of income be- 
 longing to C, probably from the rent of 
 his land, that is, from payments made 
 to him by farmers out of the produce of 
 tli, ir capital. The national capital is 
 diminished by ten thousand pounds, 
 and the national income by all which 
 those ten thousand pounds, employed as 
 capital, would have produced. The 
 loss does not fall on the owner of the 
 destroyed capital, since the destroyer 
 has agreed to indemnify him for it. 
 But his loss is only a small portion of 
 that sustained by the community, since 
 what was devoted to the use and con- 
 sumption of the proprietor was only the 
 interest ; the capital itself was, or 
 would have been, employed in the per- 
 petual maintenance of an equivalent 
 number of labourers, regularly repro- 
 ducing what they consumed : and o! 
 this maintenance they are deprived 
 without compensation.
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 39 
 
 I. ft us no-.y vary the hypothesis still 
 further, and suppose that the money is 
 borrowed, not by a landlord, but by the 
 State. A lends his capital to Govern- 
 ment to carry on a war : he buys from 
 the State what are called government 
 securities ; that is, obligations on the 
 government to pay a certain annual in- 
 come. If the government employed 
 the money in making a railroad, this 
 might be a productive employment, and 
 A's property would still be used as 
 capital ; but since it is employed in 
 war, that is, in the pay of officers and 
 soldiers who produce nothing, and in 
 destroying a quantity of gunpowder and 
 bullets without return, the government 
 is in the situation of C, the spendthrift 
 landlord, and A's ten thousand pounds 
 are so much national capital which 
 once existed, but exists no longer : 
 virtually thrown into the sea, as far as 
 vealth or production is concerned ; 
 though for other reasons tho employ- 
 ment of it may have been justifiable. 
 A's subsequent income is derived, not 
 from the produce of his own capital, but 
 from taxes drawn from the produce of 
 the remaining capital of the commu- 
 nity ; to whom his capital is not yield- 
 
 ing any return, to indemnify them for 
 the payment ; it is lost and gone, and 
 what he now possesses is a claim on the 
 returns to other people's capital and in- 
 dustry. This claim he can sell, and 
 get back the equivalent of his capital, 
 which he may afterwards employ pro- 
 ductively. True ; but he does not get 
 back his own capital, or anything which 
 it has produced ; that, and all its possi- 
 ble returns, are extinguished : what ho 
 gets is the capital of some other per- 
 son, which that person is willing to ex- 
 change for his lien on the taxes. An- 
 other capitalist substitutes himself for 
 A as a mortgagee of the public, and A 
 substitutes himself for the other capi- 
 talist as the possessor of a fund em- 
 ployed in production, or available for it. 
 By this exchange the productive powers 
 of the community are neither increased 
 nor diminished. The breach in the 
 capital of the country was made when 
 the government spent A's money : 
 whereby a value of ten thousand pounds 
 was withdrawn or withheld from pro- 
 ductive employment, placed in the fund 
 for unproductive consumption, and de- 
 stroyed without equivalent. 
 
 CHAPTER V. 
 
 FUNDAMENTAL PROPOSITIONS RESPECTING CAPITAL. 
 
 1. IF the preceding explanations 
 have answered their purpose, they have 
 given not only a sufficiently complete 
 possession of the idea of Capital accord- 
 ing to its definition, but a sufficient 
 familiarity with it in the concrete, and 
 amidst the obscurity with which the 
 complication of individual circumstances 
 surrounds it, to have prepared even the 
 unpractised reader for certain elemen- 
 tary propositions or theorems respecting 
 capital, the full comprehension of which 
 is already a considerable step out of 
 darkness into light. 
 
 The first of these propositions is, 
 That industry is limited by capital. 
 This is so obvious as to be taken for 
 
 granted in many common forms of 
 speech ; but to see a truth occasionally 
 is one thing, to recognise it habitually, 
 and admit no propositions inconsistent 
 with it, is another. The axiom was 
 until lately almost universally disre- 
 garded by legislators and political 
 writers ; and doctrines irrcconcileablo 
 with it are still very commonly pro- 
 fessed and inculcated. 
 
 The following are common expres- 
 sions, implying its truth. The act of 
 directing industry to a particular em 
 ployment is described by the phrase 
 " applying capital " to the employment. 
 To employ industry on the land is to 
 apply capital to the land. To etnjiloj
 
 BOOK I. CHAPTER V. J 1. 
 
 labour in A manufacture is to invest 
 capital in the manufacture. This im- 
 plfes that industry cannot be employed 
 to any greater extent than there is 
 capital to invest. The proposition, in- 
 deed, must be assented to as soon as it 
 is distinctly apprehended. The ex- 
 pression " applying capital " is of 
 course metaphorical : what is really 
 applied is labour ; capital being an in- 
 dispensable condition. Again, we often 
 speak of the "productive powers of 
 capital." This expression is not lite- 
 rally correct. The only productive 
 powers are those of labour and natural 
 agents ; or if any portion of capital 
 can by a stretch of language be said to 
 have a productive power of its own, it 
 is only tools and machinery, which, like 
 wind or water, may be said to co-ope- 
 rate with labour. The food of labourers 
 and the materials of production have 
 no productive power ; but labour cannot 
 exert its productive power unless pro- 
 vided with them, 'riiere can be no 
 more industry than is supplied with 
 materials to work up and food to eat. 
 Self-evident as the thing is, it is often 
 forgotten that the people of a country 
 are maintained and have their wants 
 supplied, not by the produce of present 
 labour, but of past. They consume 
 what has been produced, not what is 
 about to be produced. Now, of what 
 has been produced, a part only is al- 
 lotted to the support of productive 
 labour ; and there will not and cannot 
 be more of that labour than the por- 
 tion so allotted (which is the capital 
 of the country J can feed, and provide 
 with the materials and instruments of 
 production. 
 
 Yet, in disregard of a fact so evident, 
 it long continued to be believed that 
 laws and governments, without creat- 
 ing capital, could create industry. 
 Not by making the people more labo- 
 rious, or increasing the efficiency of 
 their labour; these are objects to 
 whict the government can, in some 
 degree, indirectly contribute. But 
 without any increase in the skill or 
 energy of the labourers, and without 
 causing any persons to labour who had 
 previously been maintained in idleness, 
 it WW still thought that the govern- 
 
 ment, without providing additional 
 funds, could create additional employ- 
 ment. A government would, by pro- 
 hibitory laws, put a stop to the impor- 
 tation of some commodity ; and when 
 by this it had caused the commodity 
 to be produced at home, it would plume 
 itself upon having enriched the country 
 with a new branch of industry, would 
 parade in statistical tables the amount 
 of produce yielded and labour em- 
 ployed in the production, and take 
 credit for the whole of this as a gai n 
 to the country, obtained through the 
 prohibitory law. Although this sort 
 of political arithmetic has fallen a 
 little into discredit in England, it still 
 flourishes in the nations of Continental 
 Europe. Had legislators been aware 
 that industry is limited by capital, 
 they would have seen that, the aggre- 
 gate capital of the country not having 
 been increased, any portion of it which 
 they by their laws had caused to be 
 embarked in the newly-acquired branch 
 of industry must have been withdrawn 
 or withheld from some other ; in which 
 it gave, or would have given, employ- 
 ment to probably about the same quan- 
 tity of labour which it employs in its 
 new occupation.* 
 
 * An exception must be admitted when 
 the industry created or upheld by the re- 
 strictive law belongs to the class of what are 
 called domestic manufactures. These beiiig 
 carried on by persons already fed by la- 
 bouring families, in the intervals ol other 
 employment no transfer of capital to the 
 occupation is necessary to its being under- 
 taken, beyond the value of the materials and 
 tools, which is often inconsiderable If, 
 therefore, a protecting duty causes this occu- 
 pation to be carried on, when it otherwise 
 would not, there is in this case a real increase 
 of the production of the country. 
 
 In order to render our theoretical proposi- 
 tion invulnerable, this peculiar case must be 
 allowed for : but it does not touch the prac- 
 tical doctrine of free trade. Domestic 
 manufactures cannot, from the very nature 
 of things, require protection, since the sub- 
 sistence of the labourers being provided from 
 other sources, the price of the product, how- 
 ever much it may be reduced, is nearly all 
 elear gain. If, therefore, the domestic pro- 
 ducers retire from the competition, it is 
 never from necessity, but because the pro. 
 duct is not worth the labour it costs, in the 
 opinion of the best judges, those who enjoy 
 the one and undergo the other. They prefer 
 the sacrifice of buying their clothing to ihe 
 labour of making it. They will not continue
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 41 
 
 2. Because industry is limited by 
 capita], we are not however to infer that 
 it always reaches that limit. Capital 
 may be temporarily unemployed, as in 
 the case of unsold goods, or funds that 
 have not yet found an investment ; 
 during this interval it does not set in 
 motion any industry. Or there may 
 not be as many labourers obtainable, 
 as the capital would maintain and em- 
 ploy. This has been known to occur 
 in new colonies, where capital has 
 sometimes perished uselessly for want 
 of labour : the Swan River settlement 
 (now called Western Australia), in the 
 first years after its foundation, was an 
 instance. There are many persons 
 maintained from existing capital, who 
 produce nothing, or who might produce 
 much more than they do. If the 
 labourers were reduced to lower wages, 
 or induced to work more hours for the 
 same wages, or if their families, who 
 are already maintained from capital, 
 were employed to a greater extent 
 than they now are in adding to the 
 produce, a given capital would afford 
 employment to more industry. The 
 unproductive consumption of produc- 
 tive labourers, the whole of which is 
 now supplied by capital, might cease, 
 r be postponed until the produce 
 came in ; and additional productive 
 labourers might be maintained with 
 the amount. By such means society 
 might obtain from its existing re- 
 sources a greater quantity of produce : 
 and to such means it has been driven, 
 when the sudden destruction of some 
 large portion of its capital rendered 
 the employment of the remainder with 
 the greatest possible effect, a matter of 
 paramount consideration for the time. 
 
 Where industry has not come up to the 
 limit imposed by capital, governments 
 may, in various ways, for example by 
 importing additional labourers, bring 
 it nearer to that limit : as by the im- 
 portation of Coolies and free Negroes 
 into the West Indies. There is an- 
 other way in which governments can 
 create additional industry. They can 
 create capital. They may lay on 
 
 their labour unless society will give them 
 more for it, than in their own opinion its 
 product is worth. 
 
 taxes, and employ the amount produc- 
 tively. They may do what is nearly 
 equivalent ; they may lay taxes on 
 income or expenditure, and apply the 
 
 Sroceeds towards paying off the public 
 ebts. The fundholder, when paid off, 
 would still desire to draw an income 
 from his property, most of which there- 
 fore would find its way into productive 
 employment, while a great part of it 
 would have been drawn from the fund 
 for unproductive expenditure, since 
 people do not wholly pay their taxes 
 from what they would have saved, but 
 partly, if not chiefly, from what they 
 would have spent. It may be added, 
 that any increase in the productive 
 power of capital (or, more properly 
 speaking, of labour) by improvements 
 in the arts of life, or otherwise, tends 
 to increase the employment for labour ; 
 since, when there is a greater produce 
 altogether, it is always probable that 
 some portion of the increase will be 
 saved and converted into capital ; 
 especially when the increased returns 
 to productive industry hold out an 
 additional temptation to the conver- 
 sion of funds from an unproductive 
 destination to a productive. 
 
 3. While, on the one hand, in- 
 dustry is limited by capital, so on the 
 other, every increase of capital gives, 
 or is capable of giving, additional em- 
 ployment to industry ; and this with- 
 out assignable limit. I do not mean 
 to deny that the capital, or part of it, 
 may be so employed as not to support 
 labourers, being fixed in machinery, 
 buildings, improvement of land, and the 
 like. In any large increase of capital 
 a considerable portion will generally be 
 thus employed, and will only co-operate 
 with labourers, not maintain them. 
 What I do intend to assert is, that the 
 portion which is destined to their 
 maintenance, may (supposing no altera- 
 tion in anything else) be indefinitely 
 increased, without creating an impos- 
 sibility of finding them employment : 
 in other words, that if there are human 
 beings capable of work, and food t 
 feed them, they may always be em- 
 ployed in producing something. Thia 
 proposition requires to be somewhat
 
 BOOK I. CHAFf/EH V. 3. 
 
 dwelt upon, being one of those which 
 it is exceedingly easy to assent to 
 when presented in general terms, but 
 somewhat difficult to keep fast hold of, 
 in the crowd and confusion of the 
 actual facts of society. It is also very 
 much opposed to common doctrines. 
 There is not an opinion more general 
 among mankind than this, that the 
 unproductive expenditure of the rich is 
 necessary to the employment of the 
 poor. Before Adam Smith, the doc- 
 trine had hardly been questioned ; and 
 even since his time, authors of the 
 highest name and of great merit* have 
 contended, that if consumers were to 
 save and convert into capital more 
 than a limited portion of their income, 
 and were not to devote to unproductive 
 consumption an amount of means bear- 
 ing a certain ratio to the capital of the 
 country, the extra accumulation would 
 be merely so much waste, since there 
 would be no market for the commo- 
 dities which the capital so created 
 would produce. I conceive this to be 
 one of the many errors arising in poli- 
 tical economy, from rte practice of not 
 beginning with the examination of 
 simple cases, but rushing at once into 
 the complexity of concrete phenomena. 
 Ever)- one can see that if a benevo- 
 lent government possessed all the food, 
 and all the implements and materials, 
 of the community, it could exact pro- 
 ductive labour from all capable of it, 
 to whom it allowed a share in the food, 
 and could be in no danger of wanting 
 a field for the employment of this pro- 
 ductive labour, since as long as there 
 was a single want unsaturatcd (which 
 material objects could supply), of any 
 one individual, the labour of the com- 
 munity could be turned to the produc- 
 tion of something capable of satisfying 
 that want. Now, the individual pos- 
 sessors of capital, when they add to it 
 by fresh accumulations, are doing pre- 
 cisely the same thing which we sup- 
 pose to be done by a benevolent govern- 
 ment. As it is allowable to put any 
 case by way of hypothesis, let us ima- 
 gine the most extreme case conceiv- 
 able. Suppose that every capitalist 
 
 For example, Mr. Malthus, Dr. Chalmers, 
 M. de Sismondi. 
 
 came to be of opinion that not being 
 more meritorious than a well-conducted 
 labourer, he ought not to fare better ; and 
 accordingly laid by, from conscientious 
 motives, the surplus of his profits ; or 
 suppose this abstinence not sponta- 
 neous, but imposed by law or opinion 
 upon all capitalists, and upon land- 
 owners likewise. Unproductive ex- 
 penditure is now reduced to its lowest 
 limit : and it is asked, how is the in- 
 creased capital to find employment ? 
 Who is to buy the goods which it will 
 produce ? There are no longer cus- 
 tomers even for those which were pro- 
 duced before. The goods, therefore, 
 (it is said) will remain unsold ; they 
 will perish in the warehouses ; until 
 capital is brought down to what it was 
 originally, or rather to as much less, 
 as the demand of the consumers lias 
 lessened. But this is seeing only one- 
 half of the matter. In the case sup- 
 posed, there would no longer be any 
 demand for luxuries, on the part 
 of capitalists and landowners. But 
 when these classes turn their in- 
 come into capital, they do not thereby 
 annihilate their power of consumption ; 
 they do but transfer it from themselves 
 to the labourers to whom they give 
 employment. Now, there are two pos- 
 sible suppositions in regard to the 
 labourers ; either there is, or there is 
 not, an increase of their numbers, pro- 
 portional to the increase of capital. If 
 there is, the case offers no difficulty. 
 The production of necessaries for tho 
 new population, takes the place of the 
 production of luxuries for a portion of 
 the old, and supplies exactly the 
 amount of employment which has been 
 lost. But suppose that there is no in- 
 crease of population. The whole of 
 what was previously expended in 
 luxuries, by capitalists and landlords, 
 is distributed among the existing 
 labourers, in the form of additional 
 wages. We will assume them to be 
 already sufficiently supplied with neces- 
 saries. What follows? That the 
 labourers become consumers of luxu- 
 ries ; and the capital previously em- 
 ployed in the production of luxuries, ia 
 still able to employ itself in the same 
 j manner : the difference being, that tho
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 43 
 
 Kixuries are shared among the com- 
 munity generally, instead of being con- 
 ,-i few. The increased accumu- 
 lation and increased production might, 
 rigorously speaking, continue, until 
 every labourer had every indulgence of 
 wealth, consistent with continuing to 
 work ; supposing that the power of 
 their labour were physically sufficient to 
 produce all this amount of indulgences 
 for their whole number. Thus the 
 limit of wealth is never deficiency of 
 consumers, but of producers and pro- 
 ductive power. Every addition to 
 capital gives to labour cither additional 
 employment, or additional remunera- 
 tion ; enriches either the country, or 
 the labouring class. If it finds addi- 
 tional hands to set to work, it increases 
 the aggregate produce : if only the 
 same hands, it gives them a larger 
 share of it ; and perhaps even in this 
 case, by stimulating them to greater 
 exertion, augments the produce itself. 
 
 4. A second fundamental theorem 
 respecting Capital, relates to the source 
 from which it is derived. It is the re- 
 sult of saving. The evidence of this 
 lies abundantly in what has been al- 
 ready said on the subject. But the 
 proposition needs some further illus- 
 tration. 
 
 If all persons were to expend in per- 
 sonal indulgences all that they produce, 
 and all the income they receive from 
 what is produced by others, capital 
 could not increase. All capital, with a 
 trifling exception, was originally the 
 result of saving. I say, with a trifling 
 exception ; because a person who la- 
 bours on his own account, may spend 
 on his own account all he produces, 
 without becoming destitute ; and the 
 provision of necessaries on which he 
 subsists until he has reaped his harvest, 
 or sold his commodity, though a real 
 capital, cannot be said to have been 
 saved, since it is all used for the sup- 
 ply of his own wants, and perhaps as 
 speedily as if it had been consumed in 
 idleness. We may imagine a number 
 of individuals or families settled on as 
 many separate pieces of land, each 
 living on what their own labour pro- 
 duces, and consuming the -whole pro- 
 
 duce. But even these must >ave (that 
 is, spare from their personal consump- 
 tion) as much as is necessary for seed. 
 Some saving, therefore, there must have 
 been, even in this simplest of all states 
 of economical relations; people must 
 have produced more than they used, or 
 used less than they produced. Still 
 more must they do so before they can 
 employ other labourers, or increase their 
 production beyond what can be accom- 
 plished by the work of their own hands. 
 All that anyone employs in supporting 
 and carrying on any other labour than 
 his own, must have been originally 
 brought together by saving ; somebody 
 must have produced it and forborne to 
 consume it. We may say, therefore, 
 without material inaccuracy, that all 
 capital, and especially all addition to 
 capital, are the result of saving. 
 
 In a rude and violent state of society, 
 it continually happens that the person 
 who has capital is not the very person 
 who has saved it, but some one who, 
 being stronger, or belonging to a more 
 powerful community, has possessed 
 himself of it by plunder. And even in 
 a state of things in which property waa 
 protected, the increase of capital baa 
 usually been, for a long time, mainly 
 derived from privations which, though 
 essentially the same with saving, are 
 not generally called by that name, be- 
 cause not voluntary. The actual pro- 
 ducers have been slaves, compelled to 
 produce as much as force could extort 
 from them, and to consume as little as 
 the self-interest or the usually very 
 slender humanity of their taskmasters 
 would permit. This kind of compul- 
 sory saving, however, would not have 
 caused any increas? of capital, unless 
 a part of the amouut had been saved 
 over again, voluntarily, by the master. 
 If all that he made his slaves produce 
 and forbear to consume, had been con- 
 sumed by him on personal indulgences, 
 he would not have increased his capital, 
 nor been enabled to maintain an in- 
 creasing number of slaves. To main- 
 tain any slaves at all, implied a pre- 
 vious saving ; a stock, at least of food, 
 provided in advance. This saving may 
 not, however, have been made by any 
 self-imposed privation of the mister;
 
 44 
 
 but more probably by that of the slaves 
 themselves while free ; the rapine or 
 war, which deprived them of their per- 
 sonal liberty, having transferred also 
 their accumulations to the conqueror. 
 
 There are other cases in which the 
 term saving, with the associations usu- 
 ally belonging to it, does not exactly 
 fit the operation by which capital is 
 increased. If it were said, for instance, 
 that the only way to accelerate the in- 
 crease of capital is by increase of saving, 
 the idea would probably be suggested 
 of greater abstinence, and increased 
 privation. But it is obvious that what- 
 ever increases the productive power of 
 labour, creates an additional fund to 
 make savings from, and enables capital 
 to be enlarged not only without addi- 
 tional privation, but concurrently with 
 an increase of personal consumption. 
 Nevertheless, there is here an increase 
 of saving, in the scientific sense. 
 Though there is more consumed, there 
 is also more spared. There is a greater 
 excess of production over consumption. 
 It is consistent with correctness to call 
 this a greater saving. Though the 
 term is not unobjectionable, there is no 
 other which is not liable to as great 
 objections. To consume less than is 
 produced, is saving ; and that is the 
 process by which capital is increased ; 
 not necessarily by consuming less, ab- 
 solutely. We must not allow ourselves 
 to be so much the slaves of words, as 
 to be unable to use the word saving in 
 this sense, without being in danger of 
 forgetting that to increase capital there 
 is another way besides consuming less, 
 namely, to produce more. 
 
 5. A third fundamental theorem 
 respecting Capital, closely connected 
 with the one last discussed, is, that 
 although saved, and the result of 
 saving, it is nevertheless consumed. 
 The word saving does not imply that 
 what is saved is not consumed, nor 
 even necessarily that its consumption 
 is deferred ; but only that, if consumed 
 immediately, it is not consumed by the 
 person who saves it. If merely laid 
 by for future use, it is said to be 
 hoarded; and while hoarded, is not 
 consumed at all. But if employed as 
 
 BOOK I. CHAPTER V. 5. 
 
 capital, it is all consumed ; though not 
 by the capitalist. Part is exchanged 
 for tools or machinery, which are worn 
 out by use : part for seed or materials, 
 which are destroyed as such by being 
 sown or wrought up, and destroyed al- 
 together by the consumption of the 
 ultimate product. The remainder is 
 paid in wages to productive labourers, 
 who consume it for their daily wants ; 
 or if they in their turn save any part, this 
 also is not, generally speaking, hoarded, 
 but (through savings banks, benefit 
 clubs, or some other channel) re-em- 
 ployed as capital, and consumed. 
 
 The principle now stated is a strong 
 example of the necessity of attention to 
 the most elementary truths of our sub- 
 ject : for it is one of the most elemen- 
 tary of them all, and yet no one who 
 has not bestowed some thought on the 
 matter is habitually aware of it, and 
 most are not even willing to admit 't 
 when first stated. To the vulgar, it is 
 not at all apparent that what is saved 
 is consumed. To them, every one who 
 saves, appears in the light of a person 
 who hoards ; they may think such con- 
 duct permissible, or even laudable, when 
 it is to provide for a family, and the 
 like ; but they have no conception of it 
 as doing good to other people : saving 
 is to them another word for keeping a 
 thing to oneself; while spending ap- 
 pears to them to be distributing it 
 among others. The person who ex- 
 pends his fortune in unproductive con- 
 sumption, is looked upon as diffusing 
 benefits all around ; and is an object 
 of so much favour, that some portion 
 of the same popularity attaches even 
 to him who spends what does not be- 
 long to him ; who not only destroys his 
 own capital, if he ever had any, but, 
 under pretence of borrowing, and on 
 promise of repayment, possesses him- 
 self of capital belonging to others, and 
 destroys that likewise. 
 
 This popular error comes from at- 
 tending to a small portion only of the 
 consequences that flow from the saving 
 or the spending ; all the effects of 
 either which are out of sight, being out 
 of mind. The eye follows what is saved, 
 in t n imaginary strong box, and there 
 loses sight of it ; what is spent, it fol
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 45 
 
 lows into the hands of tradespeople and 
 dependents ; but without reaching the 
 ultimate destination in either case. 
 Saving (for productive investment), and 
 spending, coincide very closely in the 
 first stage of their operations. The 
 effects of both begin with consumption ; 
 with the destruction of a certain portion 
 of wealth ; only the things consumed, 
 and the persons consuming, are different. 
 There is, in the one case, a wearing out 
 of tools, a destruction of material, and 
 a quantity of food and clothing supplied 
 to labourers, which they destroy by use ; 
 in the other case, there is a consump- 
 tion, that is to say, a destruction, of 
 wines, equipages, and furniture. Thus 
 far, the consequence to the national 
 wealth has been much the same ; an 
 equivalent quantity of it has been de- 
 stroyed in both cases. But in the 
 mending this first stage is also the 
 final stage ; that particular amount of 
 the produce of labour has disappeared, 
 and there is nothing left ; while, on the 
 contrary, the saving person, during the 
 whole time that the destruction was 
 going on, has had labourers at work 
 repairing it ; who are ultimately found 
 to have replaced, with an increase, the 
 equivalent of what has been consumed. 
 And as this operation admits of being 
 repeated indefinitely without any fresh 
 act of saving, a saving once made be- 
 comes a fund to maintain a correspond- 
 ing number of labourers in perpetuity, 
 reproducing annually their own mainte- 
 nance with a profit. 
 
 It is the intervention of money which 
 obseurrg, to an unpractised apprehen- 
 sion, the true character of these pheno- 
 mena. Almost all expenditure being 
 carried on by means of money, the 
 money comes to be looked upon as the 
 main feature in the transaction ; and 
 since that does not perish, but only 
 changes hands, people overlook the 
 destruction which takes place in the 
 case of unproductive expenditure. The 
 money being merely transferred, they 
 think the wealth also has only been 
 handed over from the spendthrift to 
 other people. But this is simply con- 
 founding money with wealth. The 
 wealth which has been destroyed was 
 not the money, but the wines, equipages, 
 
 and furniture which the money pur- 
 chased ; and these having been de- 
 stroy, -d without return, society collec- 
 tively is poorer by the amount. It may 
 be said, perhaps, that wines, equipap's, 
 and furniture, are not subsistence, tools, 
 and materials, and could not in any 
 case have been applied to the support 
 of labour ; that they are adapteil for no 
 other than unproductive consumption, 
 and that the detriment to the wealth 
 of the community was when they were 
 produced, not when they were con- 
 sumed. I am willing to allow this, as 
 far as is necessary for the argument, 
 and the remark would be very perti- 
 nent if these expensive luxuries were 
 drawn from an existing stock, never to 
 be replenished. But since, on the con- 
 trary, they continue to be produced as 
 long as there are consumers for them, 
 and are produced in increased quantity 
 to meet an increased demand ; the 
 choice made by a consumer to expend 
 five thousand a year in luxuries, keeps 
 a corresponding number of labourers 
 employed from year to year in pro- 
 ducing things which can be of no use 
 to production ; their services being lost 
 so far as regards the increase of the 
 national wealth, and the tools, mate- 
 rials, and food which they annually 
 consume being so much subtracted 
 from the general stock of the commu- 
 nity applicable to productive purposes. 
 In proportion as any class is improvi- 
 dent or luxurious, the industry of the 
 country takes the direction of producing 
 luxuries for their use ; while not only 
 the employment for productive labourers 
 is diminished, but the subsistence and 
 instruments which arc the means of 
 such employment do actually exist in 
 smaller quantity. 
 
 Saving, in short, enriches, and spend- 
 ing impoverishes, the community uk-r:^ 
 with the individual ; which is but say- 
 ing in other words, that society at large 
 is richer by what it expends in main- 
 taining and aiding productive labour, 
 but poorer by what it consumes in its 
 enjoyments.* 
 
 * It is worth while to direct attention to 
 several circumstances which to a curtain ex- 
 tent diminish the detriment cau*e<l to th 
 general wealth by the prodigality of in-
 
 46 
 
 BOOK I. CHAPTER V. 6. 
 
 6. To return to our fundamental 
 theorem. Everything which is pro- 
 duced is consumed ; both what is saved 
 and what is said to be spent ; and the 
 former quite as rapidly as tho latter. 
 All the ordinary forms of language tend 
 to disguise this. When people talk of 
 the ancient wealth of a country, of 
 riches inherited from ancestors, and 
 similar expressions, the idea suggested 
 is, that the riches so transmitted were 
 produced long ago, at the time when 
 they are said to have been first ac- 
 quired, and that no portion of the 
 capital of the country was produced 
 this year, except as much as may have 
 been this year added to the total 
 amount. The fact is far otherwise. 
 The greater part, in value, of the 
 wealth now existing in England has 
 been produced by human hands within 
 the last twelve months. A very small 
 proportion indeed of that large aggre- 
 gate was in existence ten years ago ; 
 of the present productive capital of 
 the country scarcely any part, except 
 farm-houses and manufactories, and a 
 
 dividuals, or raise up a compensation, more 
 or less ample, as a consequence of the detri- 
 ment it sol f. One of these is that spend- 
 thrifts do not usually succeed in consuming 
 all they spend. Their habitual carelessness 
 as to expenditure causes them to be cheated 
 and robbed on all quarters, often by persons 
 of frugal habits. Large accumulations are 
 continually made by the agents, stewards, 
 and even domestic servants, of improvident 
 persons of fortune ; and they pay much 
 higher prices for all purchases than people 
 of careful habits, which accounts for their 
 being popular as customers. They are, 
 therefore, actually not able to get into their 
 possession and destroy a quantity of wealth 
 by any means equivalent to the fortune which 
 they dissipate. Much of it is merely trans- 
 ferred to others, by whom a part may be 
 saved. Another thing to be observed is, 
 that the prodigality of some may reduce 
 others to a forced economy. Suppose a sud- 
 den demand for some article of luxury, 
 caused by the caprice of a prodigal, which 
 not having been calculated on belbrehand, 
 there has been no increase of the usual 
 supply. The price will rise ; and may rise 
 beyond the means or the inclinations of some 
 of the habitual consumers, who may in con- 
 sequence forego their accustomed indulgence, 
 and save the amount. If they do not, but 
 continue to spend as great a value as before 
 on the commodity, the dealers in it obtain, 
 for only the same quantity of the article, a 
 return increased by the whole of what the 
 spendthrift has paid; and thug the amount 
 
 few ships and machines; and even 
 these would not in most cases have 
 survived so long, if fresh labour had 
 not been employed within th.it period 
 in putting them into repair. The land 
 subsists, and the land is almost tho 
 only thing that subsists. Everything 
 which is produced perishes, and most 
 things very quickly. Most kinds of 
 capital are not fitted by their nature to 
 be long preserved. There are a few, 
 and but a few productions, capable of 
 a very prolonged existence. West- 
 minster Abbey has lasted many cen- 
 turies, with occasional repairs ; some 
 Grecian sculptures have existed above 
 two thousand years ; the Pyramids 
 perhaps double or treble that time. 
 But these were objects devoted to un- 
 productive use. If we except bridges 
 and aqueducts (to which may in some 
 countries be added tanks and embank- 
 ments), there are few instances of any 
 edifice applied to industrial purposes 
 which has been of great duration ; 
 such buildings do not hold out against 
 wear and tear, nor is it good economy 
 
 which he loses is transferred bodily to them, 
 and may be added to their capital : his in- 
 creased personal consumption being made up 
 by the privations of the other purchasers, 
 who have obtained loss than usual of their 
 accustomed gratification for the same equiva- 
 lent. On the other hand, a counter-process 
 must be going on somewhere, since the 
 prodigal must have diminished his purchases 
 in some other quarter to balance the aug- 
 mentation in this ; he has perhaps called in 
 funds employed in sustaining productive la- 
 bour, and the dealers in subsistence and in 
 the instruments of production have had com- 
 modities left on their hands, or have re- 
 ceived, for the usual amount of commodities, 
 a less than usual return. But such losses of 
 income or capital, by industrious persons, 
 except when of extraordinary amount, are 
 generally made up by increased pinching and 
 privation ; so that the capital of the com- 
 munity may not be, on the whole, impaired, 
 and the prodigal may have had his self- 
 indulgence at the expense not of the perma- 
 nent resources, but of the temporary plea- 
 sures and comforts of others. For in every 
 case the community are poorer by what any 
 one spends, unless others are in consequence 
 led to curtail their spending. There are yet 
 other and more recondite ways in which the 
 profusion of some may bring about its com- 
 pensation in the extra savings of others; but 
 these can only be considered in that part 
 of the Fourth Hook, which treats of the 
 limiting principle to the accumulation of
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 to construct them of the solidity 
 necessary for permanency. Cubital 
 is kept in existence from age to age 
 not by preservation, but by perpetual 
 reproduction : every ]urt of it is used 
 and destroyed, generally very soon after 
 it is produced, but those who consume 
 it are employed meanwhile in produc- 
 ing more. The growth of capital is 
 similar to the growth of population. 
 Every individual who is born, dies, but 
 in each year the number born exceeds 
 the number who die : the population, 
 therefore, always increases, though not 
 one person of those composing it was 
 alive until a very recent date. 
 
 7. This perpetual consumption 
 and reproduction of capital affords the 
 explanation of what has so often excited 
 wonder, the great rapidity with which 
 countries recover from a state of devas- 
 tation ; the disappearance, in a short 
 time, of all traces of the mischiefs done 
 by earthquakes, floods, hurricanes, and 
 the ravages of war. An enemy lays 
 waste a country by fire and sword, and 
 destroys or carries away nearly all the 
 moveable wealth existing in it : all the 
 inhabitants are ruined, and yet in a 
 few years after, everything is much as 
 it was before. This vis medicatrix 
 natural has been a subject of sterile 
 astonishment, or has been cited to ex- 
 emplify the wonderful strength of the 
 principle of saving, which can repair 
 such enormous losses in so brief an in- 
 terval. There is nothing at all won- 
 derful in the matter. What the enemy 
 have destroyed, would have been de- 
 stroyed in a little time by the inhabit- 
 ants themselves : the wealth which 
 they so rapidly reproduce, would have 
 needed to be reproduced and would 
 have been reproduced in any case, and 
 probably in as short a time. Nothing 
 is changed, except that during the re- 
 production they have not now the ad- 
 vantage of consuming what had been 
 produced previously. The possibility 
 of a rapid repair of their disasters, 
 mainly depends on whether the country 
 Las been depopulated. If its effective 
 population have not been extirpated at 
 the time, and are not starved after- 
 wards ; then, with the same skill and 
 
 knowledge which they had before, with 
 their land and its permanent improve- 
 ments undestroyed, and the more dur- 
 able buildings probably unimpaired, or 
 only partially injured, they have nearly- 
 all me requisites for their former 
 amount of production. If there is as 
 much of food left to them, or of valu- 
 ables to buy food, as enables them by 
 any amount of privation to remain 
 alive and in working condition, they 
 will in a short time have raised as 
 great a produce, and acquired collec- 
 tively as great wealth and as great a 
 capital, as before ; by the mere conti- 
 nuance of that ordinary amount of ex- 
 ertion which they are accustomed to 
 employ in their occupations. Nor does 
 this evince any strength in the princi- 
 ple of saving, in the popular sense of 
 the term, since what takes place is not 
 intentional abstinence, but involuntary 
 privation. 
 
 Yet so fatal is the habit of thinking 
 through the medium of only one set of 
 technical phrases, and so little reason 
 have studious men to value themselves 
 on being exempt from the very same 
 mental infirmities which beset the vul- 
 gar, that this simple explanation was 
 never given (so far as I am aware) by 
 any political economist before Dr. 
 Chalmers ; a writer many of whose 
 opinions I think erroneous, but who has 
 always the merit of studying phenomena 
 at first hand, and expressing them in a 
 language of his own, which often un- 
 covers aspects of the truth that the re- 
 ceived phraseologies only tend to hide. 
 
 8. The same author carries out 
 this train of thought to some important 
 conclusions on another closely connected 
 subject, that of government loans for 
 war purposes or other unproductive ex- 
 penditure. These loans, being drawn 
 from capital (in lieu of taxes, which 
 would generally have been paid from 
 income, and made up in part or alto- 
 gether by increased economy) must, 
 according to the principles we have 
 laid down, tend to impoverish the 
 country : yet the years in which ex- 
 penditure of this sort has been on tho 
 greatest scale, have often been years of 
 great apparent prosperity : the wealth
 
 48 
 
 and resources of the country, instead of 
 diminishing, have given every sign of 
 rapid increase during the process, and 
 of greatly expanded dimensions after 
 its close. This was confessedly the 
 case with Great Britain during the last 
 long Continental war ; and it would 
 take some space to enumerate all the 
 unfounded theories in political economy, 
 to which that fact gave rise, and to 
 which it secured temporary credence ; 
 almost all tending to exalt unproduc- 
 tive expenditure, at the expense of pro- 
 ductive. Without entering into all the 
 causes which operated, and which 
 commonly do operate, to prevent these 
 extraordinary drafts on the productive 
 resources of a country from being so 
 much felt as it might seem reasonable 
 to expect, we will suppose the most 
 unfavourable case possible : that the 
 whole amount borrowed and destroyed 
 by the government, was abstracted by 
 the lender from a productive employ- 
 ment in which it had actually been in- 
 vested. The capital, therefore, of the 
 country, is this year diminished by so 
 much. But unless the amount ab- 
 stracted is something enormous, there 
 is no reason in the nature of the case 
 why next year the national capital 
 should not be as great as ever. The 
 loan cannot have been taken from that 
 portion of the capital of the country 
 which consists of tools, machinery, and 
 buildings. It must have been wholly 
 drawn from the portion employed in 
 paying labourers : and the labourers 
 will suffer accordingly. But if none of 
 them are starved ; if their wages can 
 bear such an amount of reduction, or 
 if charity interposes between them and 
 absolute destitution, there is no reason 
 that their labour should produce less 
 in the next year than in the year 
 before. If they produce as much as 
 usual, having been paid less by so 
 many millions sterling, these millions 
 are gained by their employers. The 
 breach made in the capital of the 
 country is thus instantly repaired, but 
 repaired by the privations and often 
 the real miserv of the labouring class. 
 Here is ample reason why such periods, 
 even in the most unfavourable circum- 
 utances, may easily be times of great 
 
 BOOR I. CHAPTER V. 8. 
 
 gain to those whose prosperity usual!* 
 passes, in the estimation of society, for 
 national prosperity.* 
 
 This leads to the vexed question to 
 which Dr. Chalmers has very particu- 
 larly adverted ; whether the funds re- 
 quired by a government for extraor- 
 dinary unproductive expenditure, are 
 best raised by loans, the interest only 
 being provided by taxes, or whether 
 taxes should be at once laid on to the 
 whole amount ; which is called in the 
 financial vocabulary, raising the whole 
 of the supplies within the year. Dr. 
 Chalmers is strongly for the latter 
 method. He says, the common notion 
 is that in calling for the whole amount 
 in one year, you require what is either 
 impossible, or very inconvenient ; that 
 the people cannot, without great hard- 
 ship, pay the whole at once out of their 
 
 * On the other hand, it must be remem- 
 bered that war abstracts from productive 
 employment not only capital, but likewise 
 labourers, that the funds withdrawn from 
 the remuneration of productive labourers 
 are partly employed in paying the same or 
 other individuals for unproductive labour ; 
 and that by this portion of its effects, war 
 expenditure acts in precisely the opposite 
 manner to that which Dr. Chalmers points 
 out, and, so far as it goes, directly counter- 
 acts the effects described in the text. So far 
 as labourers are taken from production to 
 man the army and navy, the labouring 
 classes are nut damaged, the capitalists are 
 not benefited, and the general produce of 
 the country is diminished by war expendi- 
 ture. Accordingly, Dr. Chalmers's doctrine, 
 though true of this country, is wholly inap- 
 plicable to countries differently circum- 
 stanced ; to France, for example, during the 
 Napoleon wars. At that period tlie draught 
 on the labouring population of France, for a 
 long series of years, was enormous, while 
 the funds which supported the war were 
 mostly supplied by contributions levied on 
 the countries overrun by the French arms, 
 a very small proportion alone consisting of 
 French capital. In France, accordingly, the 
 wages of labour did not fall, but rose ; the 
 employers of labour were not benefited, but 
 injured; while the wealth of the country was 
 impaired by the suspension or total loss of so 
 vast an amount of its productive labour. In 
 England all this was reversed. England 
 employed comparatively few additional 
 soldiers and sailors of her own, while she 
 diverted hundreds of millions of capital from 
 productive employment, to supply munitions 
 of war and support armies for her Conti- 
 nental allies. Consequently, as shown in the 
 text, her labourers suffered, her capitalist* 
 prospered, and her permanent productive 
 resources did not tall off.
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 49 
 
 veany income ; ami that it is much 
 tjetter to require of them a small pay- 
 ment every year in the shape of interest, 
 than so great a sacrifice once for all. 
 T.I \\hich his answer is, that the sacri- 
 fice is made equally in either case. 
 Whatever is spent, cannot but be 
 drawn from yearly income. The whole 
 and every part of the wealth produced 
 in the country, forms, or helps to form, 
 the yearly income of somebody. The 
 privation which it is supposed must 
 result from taking the amount in the 
 shape of taxes, is not avoided by taking 
 it in a loan. The suffering is not 
 averted, but only thrown upon the 
 labouring classes, the least able, and 
 who least ought, to bear it : while all 
 the inconveniences, physical, moral, 
 and political, produced by maintaining 
 taxes for the perpetual payment of the 
 interest, are incurred in pure loss. 
 Whenever capital is withdrawn from 
 production, or from the fund destined 
 for production, to be lent to the State 
 and expended unproductively, that 
 whole sum is withheld from the 
 labouring classes : the loan, therefore, 
 is in truth paid off the same year ; the 
 whole of the sacrifice necessary for 
 paying it off is actually made : only it 
 is paid to the wrong persons, and 
 therefore does not extinguish the claim ; 
 and paid by the very worst of taxes, a 
 tax exclusively on the labouring class. 
 And after having, in this most painful 
 and unjust way, gone through the 
 whole effort necessary for extinguishing 
 the debt, the country remains charged 
 with it, and with the payment of its 
 interest in perpetuity. 
 
 These views appear to me strictly 
 just, in so far as the value absorbed in 
 loans would otherwise have been em- 
 ployed in productive industry within 
 the country. The practical state of the 
 case, however, seldom exactly corre- 
 sponds with this supposition. The 
 loans of the less wealthy countries are 
 made chiefly with foreign capital, which 
 would not, perhaps, have been brought 
 in to be invested on any less security 
 than that of the government : while 
 those of rich and prosperous countries 
 we generally made, not with funds 
 withdrawn from productive employ- 
 
 ment, but with the new accumulations 
 constantly making from income, and 
 often with a part of them which, if not 
 so taken, would have migrated to colo- 
 nies, or sought other investment? 
 abroad. In these cases (which will 
 be more particularly examined here- 
 after*), the sum wanted may be ob- 
 tained by loan without detriment to the 
 labourers, or derangement of the na- 
 tional industry, and even perhaps with 
 advantage to both, in comparison with 
 raising the amount by taxation ; since 
 taxes, especially when heavy, are al- 
 most always partly paid at the expense 
 of what would otherwise have been 
 saved and added to capital. Besides, 
 in a country which makes so great 
 yearly additions to its wealth that a 
 part can be taken and expended un- 
 productively without diminishing capi- 
 tal, or even preventing a considerable 
 increase, it is evident that even if the 
 whole of what is so taken would have 
 become capital, and obtained employ- 
 ment in the country, the effect on the 
 labouring classes is far less prejudicial, 
 and the case against the loan system 
 much less strong, than in the case first 
 supposed. This brief anticipation of a 
 discussion which will find its proper 
 place elsewhere, appeared necessary to 
 prevent false inferences from the pre- 
 mises previously laid down. 
 
 9. We now pass to a fourth fun- 
 damental theorem respecting Capital, 
 which is, perhaps, oi'tener overlooked 
 or misconceived than even any of the 
 foregoing. What supports and employs 
 productive labour, is the capital ex- 
 pended in setting it to work, and not 
 the demand of purchasers for the pro- 
 duce of the labour when completed. 
 Demand for commodities is not demand 
 for labour. The demand for commodi- 
 ties determines in what particulai 
 branch of production the labour and 
 capital shall be emplo)-ed; it deter- 
 mines the direction of the labour ; but 
 not the more or less of the labour itself, 
 or of the maintenance or payment of 
 the labour. These depend on tho 
 amount of the capital, or other funds 
 
 Infra, bock iv. chaps, iv. v. 
 
 E
 
 BOOK I. CHAPTER V. 9. 
 
 directly devoted to the sustenance and 
 remuneration of labour. 
 
 Suppose, for instance, that there is 
 a demand for velvet ; a fund ready to 
 be laid out in buying velvet, but no 
 capital to establish the manufacture. 
 It is of no consequence how great the 
 demand may be ; unless capital is at- 
 tracted into the occupation, there will 
 be no velvet made, and consequently 
 none bought ; unless, indeed, the desire 
 of the intending purchaser for it is so 
 strong, that he employs part of the 
 price he would have paid for it, in 
 making advances to work-people, that 
 they may employ themselves in making 
 velvet ; that is, unless he converts part 
 of his income into capital, and invests 
 that capital in the manufacture. Let 
 us now reverse the hypothesis, and sup- 
 pose that there is plenty of capital 
 ready for making velvet, but no de- 
 mand. Velvet will not be made ; but 
 there is no particular preference on the 
 part of capital for making velvet. Ma- 
 nufacturers and their labourers do not 
 produce for the pleasure of their cus- 
 tomers, but for the supply of their own 
 wants, and having still the capital and 
 the labour which are the essentials of 
 production, they can either produce 
 something else which is in demand, or 
 if there be no other demand, they 
 themselves have one, and can produce 
 the things which they want for their 
 own consumption. So that the employ- 
 ment afforded to labour does not depend 
 on the purchasers, but on the capital. 
 I am, of course, not taking into con- 
 sideration the effects of a sudden 
 change. If the demand ceases unex- 
 pectedly, after the commodity to supply 
 it is already produced, this introduces 
 a different element into the question : 
 the capital has actually been consumed 
 in producing something which nobody 
 wants or uses, and it has therefore 
 perished, and the employment which 
 it gave to labour is at an end, not be- 
 cause there is no longer a demand, but 
 because there is no longer a capital. 
 This case therefore does not test the 
 principle. The proper test is, to sup- 
 pose that the change is gradual and 
 for<*een. and is attended with no waste 
 f capital, the manufacture being dis- 
 
 continued by merc-Iy not replacing tho 
 machinery as it v.-cars out, and not re- 
 investing the money as it comes in from 
 the sale of the produce. The capital 
 is thus ready for a new employment, in 
 which it will maintain as much labour 
 as before. The manufacturer and liLs 
 work-people lose the benefit of the skill 
 and knowledge which they had ac- 
 quired in the particular business, and 
 which can only be partially of use to 
 them in any other ; and that is the 
 amount of loss to the community by the 
 change. But the labourers can still 
 work, and the capital which previously 
 employed them will, either in the same 
 hands, or by being lent to others, 
 employ cither those labourers or an 
 equivalent number in some other occu- 
 pation. 
 
 This theorem, that to purchase prc 
 duce is not to employ labour ; that the 
 demand for labour is constituted by the 
 wages which precede the production, 
 and not by the demand which may 
 exist for the commodities resulting from 
 the production ; is a proposition which 
 greatly needs all the illustration it can 
 receive. It is, to common apprehen- 
 sion, a paradox ; and even among poli- 
 tical economists of reputation, I can 
 hardly point to any, except Mr. Eicardo 
 and M. Say, who have kept it con- 
 stantly and steadily in view. Almost 
 all others occasionally express them- 
 selves as if a person who buys com- 
 modities, the produce of labour, was an 
 employer of labour, and created a de- 
 mand for it as really, and in the same 
 sense, as if he bought the labour itself 
 directly, by the payment of wages. It 
 is no wonder that political economy 
 advances slowly, when such a question 
 as this still remains open at its very 
 threshold. I apprehend, that if by de- 
 mand for labour be meant the demand 
 by which wages are raised, or the num- 
 ber of labourers in employment in- 
 creased, demand for commodities does 
 not constitute demand for labour. I 
 conceive that a person who buys com- 
 modities and consumes them himself 
 does no good to the labouring classes , 
 and that it is only by what ho abstains 
 from consuming, and expends in direct 
 payments to labourers in exchange for
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 51 
 
 labour, that he benefits the labouring 
 classes, or a;lds anything to the amount 
 of their employment. 
 
 For the better illustration of the 
 principle, let us put the following case. 
 A consumer may expend his income 
 either in buying services or commodi- 
 ties. He may employ part of it in 
 hiring journeymen bricklayers to build 
 a house, or excavators to dig artificial 
 lakes, or labourers to make plantations 
 and lay out pleasure-grounds ; or, in- 
 stead of this, he may expend the same 
 value in buying velvet and lace. The 
 question is, whether the difference be- 
 tween these two modes of expending 
 his income affects the interest of the 
 labouring classes. It is plain that in 
 the first of the two cases he employs 
 labourers, who will be out of employ- 
 ment, or at least out of that employ- 
 ment, in the opposite case. But those 
 from whom I differ say that this is of 
 no consequence, because in buying 
 velvet and lace he equally employs 
 labourers, namely, those who make the 
 velvet and lace. I contend, however, 
 that in this last case he does not em- 
 ploy labourers ; but merely decides in 
 what kind of work some other person 
 shall employ them. The consumer 
 does not with his own funds pay to the 
 weavers and lacemakers their day's 
 wages. He buys the finished com- 
 modity, which has been produced by 
 labour and capital, the labour not being 
 paid nor the capital furnished by him, 
 but by the manufacturer. Suppose 
 that he had been in the habit of ex- 
 pending this portion of his income in 
 hiring journeymen bricklayers, who 
 laid out the amount of their wages in 
 food and clothing, which were also pro- 
 duced by labour and capital. Jle, 
 however, determines to prefer velvet, 
 for which he thus creates an extra de- 
 mand. This denicisid cannot be satis- 
 fied without an extra supply, nor can 
 the supply be produced without an ex- 
 tra capital : where, then, is the capital 
 to come from? There is nothing in the 
 consumer's change of purpose which 
 makes the capital of the country 
 greater than it otherwise was. It ap- 
 pears, then, that the increased demand 
 for velvet could not for the present be 
 
 supplied, were it not that the very cir- 
 cumstance which gave rise to it has set 
 at liberty a capital of the exact amount 
 required. The very sum which the 
 consumer now employs in buying vel- 
 vet, formerly passed into the hands of 
 journeymen bricklayers, who expended 
 it in food and necessaries, which they 
 now either go without, or squeeze by 
 their competition, from the shares of 
 other labourers. The labour and ca- 
 
 Sital, therefore, which formerly pro- 
 uced necessaries for the use of these 
 bricklayers, are deprived of their mar- 
 ket, and must look out for other em- 
 ployment ; and they find it in making 
 velvet for the new demand. I do not 
 mean that the very same labour and 
 capital which produced the necessaries 
 turn themselves to producing the vel- 
 vet ; but, in some one or other of a 
 hundred modes, they take the place of 
 that which does. There was capital 
 in existence to do one of two things 
 to make the velvet, or to produce ne- 
 cessaries for the journeymen brick- 
 layers ; but not to do both. It was at 
 the option of -the consumer which of 
 the two should happen ; and if he 
 chooses the velvet, they go without 
 the necessaries. 
 
 For further illustration, let us sup- 
 pose the same case reversed. The 
 consumer has been accustomed to buy 
 velvet, but resolves to discontinue that 
 expense, and to employ the same 
 annual sum in hiring bricklayers. If 
 the common opinion be correct, this 
 change in the mode of his expenditure 
 gives no additional employment to 
 labour, but only transfers employment 
 from velvet-makers to bricklayers. On 
 closer inspection, however, it will bo 
 seen that there is an increase of the 
 total sum applied to the remuneration 
 of labour. The velvet manufacturer, 
 supposing him aware of the diminished 
 demand for his commodity, diminishes 
 the production, and sets at liberty a 
 corresponding portion of the capital 
 employed in the manufacture. Thi 
 capital, thus withdrawn from the 
 maintenance of velvet-makers, is not 
 the same fund with that which the ciu 
 tomer employs in maintaining brick- 
 layers ; it ia a second fund. There are 
 E2
 
 BOOK I. CHAPTER V. 9. 
 
 therefore two funds to be employed in 
 the maintenance and remuneration of 
 labour, where before there was only 
 one. There is not a transfer of em- 
 ployment from velvet-makers to brick- 
 layers; there is a new employment 
 created for bricklayers, and a transfer 
 of employment from velvet-makers to 
 some other labourers, most probably 
 those who produce the food and other 
 things which the bricklayers consume. 
 
 In answer to this it is said, that 
 though money laid out in buying velvet 
 is not capital, it replaces a capital ; 
 that though it does not create a new 
 demand for labour, it is the necessary 
 means of enabling the existing demand 
 to be kept up. The funds (it may be 
 said) of the manufacturer, while locked 
 up in velvet, cannot be directly applied 
 to the maintenance of labour ; they do 
 not begin to constitute a demand for 
 labour until the velvet is sold, and the 
 capital which made it replaced from 
 the outlay of the purchaser ; and thus, 
 ; t may be said, the velvet-maker and 
 the velvet-buyer have not two capitals, 
 but only one capital between them, 
 which by the act of purchase the buyer 
 transfers to the manufacturer : and if 
 instead of buying velvet he buys 
 labour, he simply transfers this capital 
 elsewhere, extinguishing as much de- 
 mand for labour in one quarter as he 
 creates in another. 
 
 The premises of this argument are 
 not denied. To set free a capital 
 which would otherwise be locked up in 
 a form useless for the support of labour, 
 is, no doubt, the same thing to the in- 
 terests of labourers as the creation of a 
 new capital. It is perfectly true that 
 if I expend WOOL in buying velvet, I 
 enable the manufacturer to employ 
 1000Z. in the maintenance of labour, 
 which could not have been so employed 
 while the velvet remained unsold : and 
 if it would have remained unsold for 
 ever unless I bought it, then by chang- 
 ing my purpose and hiring bricklayers 
 instead, I undoubtedly create no new 
 demand for labour : for while I employ 
 1000J. in hiring labour on the one hand, 
 I annihilate for ever 1000?. of the 
 velvet-maker's capilal on the other. 
 But this is confounding the effects 
 
 arising from the mere suddenness of a 
 change with the effects of the change 
 itself. If when the buyer ceased to pur- 
 chase, the capital employed in making 
 velvet for his use necessarily perished, 
 then his expending the same amount 
 in hiring bricklayers would be no crea- 
 tion, but merely a transfer, of employ- 
 ment. The increased employment 
 which I contend is given to labour, 
 would not be given unless the capital 
 of the velvet-maker could be liberated, 
 and would not be given until it was 
 liberated. But every one knows that 
 the capital invested in an employment 
 can be withdrawn from it, if sufficient 
 time be allowed. If the velvet-maker 
 had previous notice, by not receiving 
 the usual order, he will have produced 
 1000Z. less velvet, and an equivalent 
 portion of his capital will have been 
 already set free. If he had no previous 
 notice, and the article consequently re- 
 mains on his hands, the increase of his 
 stock will induce him next year to sus- 
 pend or diminish his production until 
 the surplus is carried off. When this 
 process is complete, the manufacturer 
 will find himself as rich as before, with 
 undiminished power of employing la- 
 bour in general, though a portion of his 
 capital will now be employed in main- 
 taining some other kind of it. Until 
 this adjustment has taken place, the 
 demand for labour will be merely 
 changed, not increased : but as soon as 
 it has taken place, the demand for 
 labour is increased. 'Where there was 
 formerly only one capital employed in 
 maintaining weavers to make lOQQl. 
 worth of velvet, there is now that same 
 capital employed in making something 
 else, and 1000Z. distributed among 
 bricklayers besides. There are now 
 two capitals employed in remunerating 
 two sets of labourers ; while before, 
 one of those capitals, that of the cus- 
 tomer, only served as a wheel in tho 
 machinery' by which the other capital, 
 that of the manufacturer, carried on its 
 employment of labour from year to year. 
 The proposition for which I am con- 
 tending is in reality equivalent to tho 
 following, which to some minds will 
 appear a truism, though to others it is 
 a paradox : that a person does good tf
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 5i 
 
 labourers, not by what he consumes on 
 himself, but solely by what he does not 
 so consume. If instead of laying out 
 100Z. in wine or silk, I expend it in 
 wages, the demand for commodities is 
 precisely equal in both cases : in the 
 one, it is a demand i'or 100Z. worth of 
 wine or silk, in the other, for the same 
 value of bread, beer, labourers' clothing, 
 fuel, and indulgences ; but the la- 
 bourers of the community have in the 
 latter case the value of 100Z. more of 
 the produce of the community dis- 
 tributed among them. I have con- 
 sumed that much less, and made over 
 my consuming power to them. If it 
 were not so, my having consumed less 
 would not leave more to be consumed 
 by others ; which is a manifest contra- 
 diction. When less is not produced, 
 what one person forbears to consume is 
 necessarily added to the share of those 
 to whom he transfers his power of pur- 
 chase. In the case supposed I do not 
 necessarily consume less ultimately, 
 since the labourers whom I pay may 
 build a house for me, or make some- 
 thing else for my future consumption. 
 But I have at all events postponed my 
 consumption, and have turned over 
 part of my share of the present produce 
 of the community to the labourers. If 
 after an interval I am indemnified, it 
 is not from the existing produce, but 
 from a subsequent addition made to it. 
 I have therefore left more of the exist- 
 ing produce to be consumed by others ; 
 and have put into the possession of 
 labourers the power to consume it. 
 
 There cannot be a better reductio ad 
 aljsurdumot the opposite doctrine than 
 that afforded by the Poor Law. If it 
 be equally for the benefit of the labour- 
 ing classes whether I consume my 
 means in the form of things purchased 
 for my own use, or set aside a portion 
 in the shape of wages or alms for their 
 direct consumption, on what ground 
 can the policy be justified of taking my 
 money from me to support paupers ? 
 since my unproductive expenditure 
 would have equally benefited them, 
 while I should have enjoyed it too. If 
 society can both eat its cake and have 
 it, why should it not be allowed the 
 doable indulgence ? But common sense 
 
 tells every one in his own case (though 
 he does uot see it on the larger scale) 
 that the poor-rate which he pays is 
 really subtracted from his own con- 
 sumption ; and that no shifting of pay- 
 ment backwards and forwards will 
 enable two persons to eat the same 
 food. If he had not been required to 
 pay the rate, and had consequently 
 laid out the amount on himself, the 
 poor would have had as much less for 
 their share of the total produce of the 
 country, as he himself would have con- 
 sumed more.* 
 
 * The following case, which presents the 
 argument in a somewhat different shape, 
 may serve for still further illustration, 
 
 Suppose that a rich individual, A, expends 
 a certain amount daily in wages or alms, 
 which, as soon as received, is expended and 
 consumed, in the form of coarse food, by the 
 receivers. A dies, leaving his property to B, 
 who discontinues this item of expenditure, 
 and expends in lieu of it the same sum each 
 day in delicacies for his own table. I have 
 chosen this supposition, in order that the 
 two cases may be similar in all their cir- 
 cumstance', except that which is the subject 
 of comparison. In order not to obscure the 
 essential facts of the case by ?xhibiting them 
 through the hazy medium of a money trans- 
 action, let us further suppose that A, anc 1 
 B after him, are landlords of the estate on 
 which both the food consumed by the re- 
 cipients of A's disBursemente, and the arti- 
 cles of luxury supplied for B's table, are 
 produced ; and that their rent is paid to 
 them in kind, they giving previous notice 
 what description of produce they shall re- 
 quire. The question is, whether B's expen- 
 diture gives as much employment or as much 
 food to his poorer neighbours as A's gave. 
 
 From the case as stated, it seems to follow 
 that while A lived, that portion of his income 
 which he expended in wages or alms, would 
 be drawn by him from the farm in the shape 
 of food for labourers, and would be used a-- 
 such ; while B, who came after him, wotiKl 
 require, instead of this, an equivalent value- 
 in expensive articles of food, to be consumed 
 in his own household : that the farmer, 
 therefore, would, under B's regime, produce- 
 that much less of ordinary food, and more of 
 expensive delicacies, for each day of the 
 year, than was produced in A's time, and 
 that thei would be that amount less of 
 food shared, throughout the year, among the 
 labouring and poorer classes. This is what 
 would be conformable to the principles laid 
 down in the text. Those who think differ- 
 ently, must, on the other hand, suppose that 
 the luxuries required by B would be pro- 
 duced, not instead of, but in addition to, the 
 food previously supplied to A's labourers, and 
 that the aggregate produce of the country 
 would be increased in amount. But when it 
 is asked, how this double production woult 1
 
 M 
 
 It appears, then, that a demand de- 
 layed until the work is completed, and 
 furnishing no advances, but only re- 
 imbursing advances made by others, 
 contributes nothing to the demand for 
 labour ; and that what is so expended, 
 is, in all its effects, so far as regards 
 the employment of the labouring class, 
 a mere nullity ; it does not and cannot 
 create any employment except at the 
 expense of other employment which 
 existed before. 
 
 I>ut though a demand for velvet does 
 nothing more in regard to the employ- 
 ment tor labour and capital, than to 
 determine so much of the employment 
 which .already existed, into that par- 
 ticular channel instead of any other ; 
 still, to the producers already engaged 
 
 be effected how the farmer, whose capital 
 and labour were already fully employed, 
 would be enabled to supply the new wants of 
 ]{, without producing less of other things; 
 the only mode which presents itself is, that 
 he should Jirst produce the food, and then, 
 giving that food to the labourers whom A 
 formerly fed, should by means of their 
 labour, produce the luxuries wanted by B. 
 This, accordingly, when the objectors are 
 hard pressed, appears to be really their 
 meaning. But it is an obvious answer, that 
 on this supposition, B must wait for his 
 luxuries till the second year, and they are 
 wanted this year. By the original hypo- 
 thesis, he consumes his luxurious dinner day 
 by da.y,paripiifsit. with the rations of bread 
 and potatoes formerly served cut by A to his 
 labourers. There is not time to feed the 
 labourers first, and supply B afterwards: 
 he and they cannot both have their wants 
 ministered to : he can only satisfy his own 
 demand for commodities, by leaving as much 
 of theirs, as was formerly supplied from that 
 I'und, unsatisfied. 
 
 It may, indeed, be rejoined by an objector, 
 that, since on the present showing, time is 
 the only thing wanting to render the expen- 
 diture of B consistent with as large an em- 
 ployment to labour as was given by A, why 
 may we not suppose that B postpones his in- 
 creased consumption of personal luxuries 
 until they can be furnished to him by the 
 labour of the persons whom A employed ? In 
 that case, it may be said, he would employ 
 and feed as much labour as his predecessors. 
 Undoubtedly he would ; but why ? Because 
 his income would be expended in exactly 
 the same manner as his predecessor's; it 
 would be expended in wage?. A reserved 
 from his personal consumption a fund which 
 he paid away directly tc labourers; B does 
 I he same, only instead of paying it to them 
 himself, he leaves it in the hands of the 
 farmer, who pays it to them for him. On 
 this supposition, B, in the first year, neither 
 expending the amount, as far as lie is per- 
 
 BOOK I. CHAPTER V. 9. 
 
 in the velvet manufacture, and not in- 
 tending to quit it, tlii.s is of tlie utmost 
 importance. To them, a falling off in 
 the demand is a real loss, and one 
 which, even if none of their goods 
 finally perish unsold, may mount to 
 any height, up to that which would 
 make them choose, as the smaller evil, 
 to retire from the business. On the 
 contrary, an increased demand enables 
 them to extend their transactions to 
 make a profit on a larger capital, if 
 they have it, or can borrow it ; and, 
 turning over their capital more rapidly, 
 they will employ their labourers moro 
 constantly, or employ a greater num- 
 ber than before. So that an increased 
 demand for a commodity does really, 
 in the particular department, often 
 
 serially concerned, in A's manner nor in his 
 own, really saves that portion of his income, 
 and lends it to the farmer. And if, in sub- 
 sequent years, confining himself within the 
 year's income, he leaves the farmer in arrears 
 to that amount, it becomes an additional 
 capital, with which the farmer may per- 
 manently employ and feed A's labourers. 
 Nobody pretends that such a change as this, 
 a change from spending an income in wages 
 of labour, to saving it for investment, de- 
 prives any labourers of employment. What 
 is affirmed to have that effect is, the change 
 from hiring labourers to buying commodities 
 for personal use ; as represented by our 
 original hypothesis. 
 
 In our illustration we have supposed no 
 buying and selling, or use of money. But 
 the case as we have put it, corresponds with 
 actual fact in everything except the details 
 of the mechanism. The whole of any 
 country is virtually a single farm and manu- 
 factory, from which every member of the 
 community draws his-appointed share of the 
 produce, having a certain number of coun- 
 ters, called pounds sterling, put into his 
 hands, which, at his convenience, he brings 
 back and exchanges for such goods as he pre- 
 fers, up to the limit of the amount. He does 
 not, as in our imaginary case, give notice 
 beforehand what things he shall require; 
 but the dealers and producers are quite capa- 
 ble of finding it cut by observation, and any 
 change in the demand is promptly followed 
 by an adaptation of the supply to it. If a 
 consumer changes from paying away a part 
 of his income in wages, to spending it that 
 same day (not some subsequent and distant 
 day) in things for his own consumption, and 
 perseveres in this altered practice until pro- 
 duction has had time to adapt itself to the 
 alteration af demand, there will from that 
 time be less food and other articles for the 
 use of labourers, produced in the country, by 
 exactly the value of the extra luxuries now 
 demanded ; and the labourers, us a class, 
 will be worse off by the pr >cise amount.
 
 FUNDAMENTAL PROPOSITIONS ON CAPITAL. 
 
 56 
 
 cause a greater employment to be 
 given to labour by the same capital. 
 The mistake lies in not perceiving that 
 in the cases supposed, this advantage 
 is given to labour and capital in one 
 department, only by being withdrawn 
 from another; and that when the 
 change has produced its natural effect 
 of attracting into the employment ad- 
 ditional capital proportional to the in- 
 creased demand, the advantage itself 
 ceases. 
 
 The grounds of a proposition, when 
 well understood, usually give a tolera- 
 ble indication of the limitations of it. 
 The general principle, now stated, is, 
 that demand for commodities deter- 
 mines merely the direction of labour, 
 and the kind of wealth produced, but 
 not the quantity or efficiency of the 
 labour, or the aggregate of wealth. 
 ]>ut to this there are two exceptions. 
 First ; when labour is supported, but 
 not fully occupied, a new demand for 
 something which it can produce, may 
 stimulate the labour thus supported to 
 increased exertions, of which the re- 
 sult may be an increase of wealth, to 
 the advantage of the labourers them- 
 selves and of others. Work which can 
 be done in the spare hours of persons 
 subsisted from some other source, can 
 (as before remarked) be undertaken 
 without withdrawing capital from other 
 occupations, beyond the amount (often 
 very small) required to cover the ex- 
 pense of tools and materials ; and even 
 this will often be provided by savings 
 made expressly for the purpose. The 
 reason of our theorem thus failing, the 
 theorem itself fails, and employment 
 of this kind may, by the springing up 
 of a demand for the commodity, be 
 called into existence without depriving 
 labour of an equivalent amount of em- 
 ployment in any other quarter. The 
 demand does not, even in this case, 
 operate on labour any otherwise than 
 through the medium of an existing 
 capital ; but it affords an inducement 
 which causes that capital to set in 
 motion a greater amount of labour than 
 it did before. 
 
 The second exception, of which I 
 shall speak at length in a subsequent 
 chapter, consists in the known < 
 
 of an extension of the market for a com- 
 mo.lity, in rendering possible an in- 
 creased development of the division of 
 labour, and hence a more effective dis- 
 tribution of the productive forces of so- 
 ciety. This, like the former, is more 
 an exception in appearance, than it is 
 in reality. It is not the money paid by 
 the purchaser which remunerates the 
 labour ; it is the capital of the pro- 
 ducer : the demand only determines in 
 what manner that capital shall be em- 
 ployed, and what kind of labour it shal 1 
 remunerate ; but if it determines that 
 the commodity shall be produced on a 
 large scale, it enables the same capital 
 to produce more of the commodity, and 
 may, by an indirect effect in causing 
 an increase of capital, produce an even- 
 tual increase of the remuneration of the 
 labourer. 
 
 The demand for commodities is a 
 consideration of importance rather in 
 the theory of exchange, than in that 
 of production. Looking at things in 
 the aggregate, and permanently, the 
 remuneration of the producer is derived 
 from the productive power of his own 
 capital. The sale of the produce for 
 money, and the subsequent expenditure 
 of the money in buying other commo- 
 dities, are a mere exchange of equiva- 
 lent values, for mutual accommodation. 
 It is true that, the division of employ- 
 ments being one of the principal means 
 of increasing the productive power of 
 labour, the power of exchanging gives 
 rise to a great increase of the produce ; 
 but even then it is production, not ex- 
 change, which remunerates labour and 
 capital. We cannot too strictly repre- 
 sent to ourselves the operation of ex- 
 change, whether conducted by barter 
 or through the medium of money, as 
 the mere mechanism by which each 
 
 Eerson transforms the remuneration of 
 is labour or of his capital into the par- 
 ticular shape in which it is most conve- 
 nient to him to possess it; but in no wise 
 the source of the remuneration itself. 
 
 10. The preceding principles de- 
 monstrate the fallacy of many popular 
 arguments and doctrines, which are 
 continually reproducing themselves in 
 new iunus. Fur example, it fois been
 
 BOOK I. CHAPTER V. 10. 
 
 contended, and by some from whom 
 better things might have been ex- 
 pected, that the argument for the in- 
 come-tax, grounded on its falling on 
 the higher and middle classes only, 
 and sparing the poor, is an error ; some 
 have gone so far as to say, an impos- 
 ture ; because in taking from the rich 
 what they would have expended 
 among the poor, the tax injures the 
 poor as much as if it had been directly 
 levied from them. Of this doctrine 
 we now know what to think. So far, 
 indeed, as what is taken from the rich 
 in taxes, would, if not so taken, have 
 been saved and converted into capital, 
 or even expended in the maintenance 
 and wages of servants or of any class 
 of unproductive labourers, to that ex- 
 tent the demand for labour is no doubt 
 diminished, and the poor injuriously 
 affected, by the tax on the rich ; and 
 as these effects are almost always pro- 
 duced in a greater or less degree, it is 
 impossible BO to tax the rich as that 
 no portion whatever of the tax can fall 
 on the poor. But even here the ques- 
 tion arises, whether the government, 
 after receiving the amount, will not 
 lay out as great a portion of it in the 
 direct purchase of labour, as the tax- 
 payers would have done. In regard to 
 all that portion of the tax, which, if 
 not paid to the government, would 
 have been consumed in the form of 
 commodities (or even expended in ser- 
 vices if the payment has been advanced 
 by a capitalist), this, according to (he 
 principles we have investigated, falls 
 definitively on the rich, and not at all 
 on the poor. There is exactly the same 
 demand for labour, so far as this por- 
 tion is concerned, after the tax, as 
 before it. The capital which hitherto 
 employed the labourers of the country, 
 remains, and is still capable of employ- 
 ing the same number. There is the 
 same amount of produce paid in wages, 
 or allotted to defray the feeding and 
 clothing of labourers. 
 
 If those against whom I am now 
 contending were in the right, it would 
 be impossible to tax anybody except 
 the poor. If it is taxing the labourers, 
 to tax what is laid out in the produce 
 of labour, the labouring classes pay all 
 
 the taxes. The same argument, how- 
 ever, equally proves, that it is impos- 
 sible to tax the labourers at all ; since 
 the tax, being laid out either in labour 
 or in commodities, comes all back to 
 them ; so that taxation has the 
 singular property of falling on nobody. 
 On the same showing, it would do the 
 labourers no harm to take from them 
 all they have, and distribute it among 
 the other members of the community. 
 It would all be " spent among them," 
 which on this theory comes to the 
 same thing. The error is produced by 
 not looking directly at the realities of 
 the phenomena, but attending only to 
 the outward mechanism of paying and 
 spending. If we look at the effects 
 produced not on the money, which 
 merely changes hands, but on the com- 
 modities which are used and con- 
 sumed, we see that, in consequence of 
 the income-tax, the classes who pay it 
 do really diminish their consumption. 
 Exactly so far as they do this, they are 
 the persons on whom the tax falls. It 
 is defrayed out of what they would 
 otherwise have used and enjoyed. So 
 far, on the other hand, as the burthen 
 falls, not on what they would have 
 consumed, but on what they would 
 have saved to maintain production, or 
 spent in maintaining or paying unpro- 
 ductive labourers, to that extent the 
 tax forms a deduction from what would 
 have been used and enjoyed by the 
 labouring classes. But if the govern- 
 ment, as is probably the fact, expends 
 fully as much of the amount as the 
 tax-payers would have done in the 
 direct employment of labour, as in 
 hiring sailors, soldiers, and policemen, 
 or in paying off debt, by which last 
 operation it even increases capital; 
 the labouring classes not only do nol 
 lose any employment by the tax, but 
 may possibly gain some, and the whole 
 of the tax falls exclusively where it 
 was intended. 
 
 All that portion of the produce of 
 the country which any one, not a 
 labourer, actually and literally con- 
 sumes for his own use, does not contri- 
 bute in the smallest degree to the 
 maintenance of labour. No one is 
 benefited by mere consumption, except
 
 CIRCULATING AND FIXED CAPITAL. 
 
 57 
 
 the person wbo consumes. And a per- 
 son cannot both consume his income 
 himself, anil make it over to be con- 
 sumed by others. Taking away a cer- 
 tain portion by taxation cannot deprive 
 both him and them of it, but only him 
 
 or them. To know which is the suf- 
 ferer, we must understand whose con- 
 sumption will have to be retrenched in 
 consequence : this, whoever it be, is 
 the person on whom the tax really 
 falls. 
 
 CHAPTER VI. 
 
 ON CIRCULATING AND FIXED CAPITAL. 
 
 1. To complete our explanations 
 on the subject of capital, it is necessary 
 to say something of the two species 
 into which it is usually divided. The 
 distinction is very obvious, and though 
 not named, has been often adverted to, 
 in the two preceding chapters : but it is 
 now proper to define it accurately, and 
 to point out a few of its consequences. 
 
 Of the capital engaged in the pro- 
 duction of any commodity, there is a 
 part which, after being once used, 
 xists no longer as capital ; is no 
 longer capable of rendering service to 
 production, or at least not the same ser- 
 vice, nor to the same sort of produc- 
 tion. Such, for example, is the portion 
 of capital which consists of materials. 
 The tallow and alkali of which soap is 
 made, once used in the manufacture, 
 are destroyed as alkali and tallow ; and 
 cannot be employed any further in the 
 soap manufacture, though in their al- 
 tered condition, as soap, they are 
 capable of being used as a material or 
 an instrument in other branches of 
 manufacture. In the same division 
 must be placed the portion of capital 
 which is paid as the wages, or con- 
 sumed as the subsistence, of labourers. 
 That part of the capital of a cotton- 
 spinner which he pays away to his 
 workpeople, once so paid, exists no 
 longer as his capital, or as a cotton- 
 spinner's capital : such portion of it 
 as the workmen consume, no longer 
 exists as capital at all : even if they 
 save any part, it may now be more 
 properly regarded as a fresh capital, 
 the result of a second act of accumula- 
 tion. Capital which in this manner 
 
 fulfils the whole of its office in the pro- 
 duction in which it is engaged, by a 
 single use, is called Circulating Capital. 
 The term, which is not very appro- 
 priate, is derived from the circum- 
 stance, that this portion of capital re- 
 quires to be constantly renewed by the 
 sale of the finished product, and when 
 renewed is perpetually parted with in 
 buying materials and paying wages ; 
 so that it does its work, not by being 
 kept, but by changing hands. 
 
 Another large portion of capital, 
 however, consists in instruments of pro- 
 duction, of a more or less permanent 
 character : which produce their effect 
 not by being parted with, but by being 
 kept ; and the efficacy of which is not 
 exhausted by a single use. To this 
 class belong buildings, machinery, and 
 all or most things known by the name 
 of implements or tools. The durability 
 of some of these is considerable, and 
 their function as productive instruments 
 is prolonged through many repetitions 
 of the productive operation. In this 
 class must likewise be included capital 
 sunk (as the expression is) in permanent 
 improvements of land. So also the 
 capital expended once for all, in the 
 commencement of an undertaking, to 
 prepare the way for subsequent opera- 
 tions : the expense of opening a mine, 
 for example : of cutting canals, of 
 making roads or docks. Other ex- 
 amples might be added, but these are 
 sufficient. Capital which exists in any 
 of these durable shapes, and the return 
 to which is spread over a period of 
 corresponding duration, is called Fixed 
 Capital.
 
 BOOK I. CHAPTER VI. 2. 
 
 Of fixed capitals, some kinds require 
 to Le occasionally or periodically re- 
 newed. Such are all implements and 
 buildings : they require, at intervals, 
 partial renewal by means of repairs, 
 and are at last entirely worn out, and 
 cannot be of any further service as 
 buildings and implements, but fall back 
 into the class of materials. In other 
 cases, the capital docs not, unless as a 
 con.sequence of some unusual accident, 
 require entire renewal : but there is 
 always some outlay needed, either 
 regularly or at least occasionally, to 
 keep it up. A dock or a canal, once 
 made, does not require, like a machine, 
 to be made again, unless purposely 
 destroyed, or unless an earthquake or 
 some similar catastrophe has filled it 
 up : but regular and frequent outlays 
 are necessary to keep it in repair. 
 The cost of opening a mine needs not 
 be incurred a second time ; but unless 
 some one goes to the expense of keeping 
 the mine clear of water, it is soon ren- 
 dered useless. The most permanent 
 of all kinds of fixed capital is that em- 
 ployed in giving increased productive- 
 ness to a natural agent, such as land. 
 The draining of marshy or inundated 
 tracts like the Bedford Level, the 
 reclaiming of land from the sea, or its 
 protection by embankments, are im- 
 provements calculated for perpetuity; 
 but drains and dykes require frequent 
 repair. The same character of perpe- 
 tuity belongs to the improvement of 
 land by subsoil draining, which adds 
 so much to the productiveness of the 
 clay soils ; or by permanent manures, 
 tha't is, by the addition to the soil, not 
 of the substances which enter into the 
 composition of vegetables, and which 
 are therefore consumed by vegetation, 
 but of those -which merely alter the 
 relation of the soil to air and water ; 
 as sand and lime on the heavy soils, 
 clay and marl on the light. Even such 
 works, however, require some, though 
 it may be very little, occasional out.ay 
 to maintain their lull effect. 
 
 These improvements, however, by 
 
 the very fact of their deserving that 
 
 title, produce an increase of return, 
 
 which, alter defraying all expenditure 
 
 1"'^ them up, still 
 
 leaves a surplus. This surplus formn 
 the return to the capital sunk in the 
 first instance, and that return does not, 
 as in the case of machinery, terminate 
 by the wearing out of the machine, but 
 continues for ever. The land thus in- 
 creased in productiveness, bears a 
 value in the market, proportional to 
 the increase : and hence it is usual to 
 consider the capital which was in- 
 vested, or sunk, in making the improve- 
 ment, as still existing in the increased 
 value of the land. There must be no 
 mistake, however. The capital, like 
 all other capital, has been consumed. 
 It was consumed in maintaining the 
 labourers who executed the improve- 
 ment, and in the wear and tear of the 
 tools by which they were assisted. 
 But it was consumed productively, and 
 lias left a permanent result in the im- 
 proved productiveness of an appropri- 
 ated natural agent, the land. Wo 
 may call the increased produce the 
 joint result of the laud and of a capital 
 fixed in the land. But as the capital, 
 having in reality been consumed, can- 
 not be withdrawn, its productiveness 
 is thenceforth indissolubly blended 
 with that arising from the original 
 qualities of the soil ; and the remune- 
 ration for the use of it thenceforth de- 
 pends, not upon the laws which govern 
 the returns to labour and capital, but 
 upon those which govern the recom- 
 pense for natural agents. What tliee 
 are, we shall see hereafter.* 
 
 2. There is a great difference be- 
 tween the effects of circulating and 
 those of fixed capital, on the amount of 
 the gross produce of the country. Cir- 
 culating capital being destroyed as 
 such, or at any rate finally lost to the 
 owner, by a single use ; and the pro- 
 duct resulting from that one use being 
 the only source from which the ownjr 
 can replace the capital, or obtain any 
 remuneration for its productive em- 
 ployment ; the product must of course 
 be sufficient for those purposes, or in 
 other words, the result of a single use 
 must be a reproduction equal to tho 
 whole amount of the circulating capi- 
 tal used, and a profit besides. This, 
 
 * Infra, book ii, chap. xvi. On I(ent.
 
 CIRCULATING AND FIXED CAPITAL. 
 
 59 
 
 however, is by no means necessary in 
 the case of fixed capital. Since ma- 
 iliiiK i-y, for example, is not wholly 
 cosi-umed by one use, it is not neces- 
 sary that it should be wholly n placed 
 t'n in the product of that use. The 
 machine answers the purpose of its 
 if it brings in, during each in- 
 terval of time, enough to cover the ex- 
 pense of repairs, and the deterioration 
 in value which the machine has sus- 
 tained during the same time, with a 
 surplus sufficient to yield the ordi- 
 iary profit on the entire value of the 
 machine. 
 
 From this it follows that all increase 
 of fixed capital, when taking place at 
 the expense of circulating, must be, at 
 least temporarily, prejudicial to the in- 
 terests of the labourers. This is true, 
 not of machinery alone, but of all im- 
 provements by which capital is sunk ; 
 that is, rendered permanently incapa- 
 ble of being applied to the maintenance 
 Mild remuneration of labour. Suppose 
 that a person farms his own land, with 
 a capital of two thousand quarters of 
 corn, employed in maintaining la- 
 bourers during one year (for simplicity 
 we omit the consideration of seed and 
 tools), whose labour produces him an- 
 nually two thousand four hundred 
 quarters, being a profit of twenty per 
 cent. This profit we shall suppose 
 that he annually consumes, carrying 
 on his operations from year to year on 
 the original capital of two thousand 
 quarters. Let us now suppose that by 
 tne expenditure of half his capital he 
 effects a permanent improvement of his 
 land, which is executed by half his 
 labourers, and occupies them for a 
 year, after which he will only require, 
 for the effectual cultivation of his land, 
 half as many labourers as before. The 
 remainder of his capital he employs as 
 usual. In the first year there is no 
 difference in the condition of the la- 
 bourers, except that part of them have 
 received the same pay for an operation 
 on the land, which they previously 
 obtained for ploughing, sowing, and 
 reaping. At the end of the year, how- 
 ever, the improver has not, as before, 
 a capital of two thousand quarters of 
 corn. Only one thousand quarters of 
 
 his capital have been reproduced in 
 tho usual way: he has now (inly 
 those thousand quarters and his im- 
 provements, lie will employ, in the 
 next and in each following year, only 
 half the number of labourers, and will 
 divide among them only half the 
 former quantity of subsistence. The 
 loss will soon be made up to them if 
 the improved land, with the diminished 
 quantity of labour, produces two 
 thousand four hundred quarters as be- 
 fore, because so enormous an accession 
 of gain will probably induce the im- 
 prover to save a part, add it to his 
 capital, and become a larger employer 
 of labour. But it is conceivable that 
 this may not be the case ; for (sup- 
 posing, as we may do, that the im- 
 provement will last indefinitely, with- 
 out any outlay worth mentioning to 
 keep it up) the improver will havo 
 gained largely by his improvement if 
 the land now yields, not two thousand 
 four hundred, but one thousand five 
 hundred quarters ; since this will re- 
 place the one thousand quarters forming 
 his present circulating capital, with a 
 profit of twenty-five per cent (instead 
 of twenty as before) on the whole capital, 
 fixed and circulating together. Tho 
 improvement, therefore, may be a very 
 profitable one to iim, and yet very 
 injurious to the labourers. 
 
 The supposition, in the terms in 
 which it has been stated, is purely 
 ideal; or at most applicable only to 
 such a case as that of the conversion of 
 arable land into pasture, which, though 
 formerly a frequent practice, is re- 
 garded by modern agriculturists as the 
 reverse of an improvement. The cleap- 
 ing away of the small farmers in the 
 north of Scotland, within the present 
 century, was however a case of it ; and 
 Ireland, since the potato famine and 
 the repeal of the corn-laws, is another. 
 The remarkable decrease which has 
 lately attracted notice in the gross 
 produce of Irish agriculture, is, to all 
 appearance, partly attributable to the 
 diversion of land from maintaining 
 human labourers to feeding cattle : and 
 it could not have taken place without 
 the removal of a large part of the Irish 
 population by emigration or death-
 
 60 BOOK I. CHAPTER VI. 
 
 We have thus two recent instances in 
 which what was regarded as an agri- 
 cultural improvement, has diminished 
 the power of the country to support its 
 population. The effect, however, of 
 all the improvements due to modern 
 science is to increase, or at all events, 
 not to diminish the gross produce. But 
 this does not affect the substance of 
 the argument. Suppose that the im- 
 provement does not operate in the 
 manner supposed does not enable a 
 part of the labour previously employed 
 on the land to be dispensed' with but 
 only enables the same labour to raise 
 a greater produce. Suppose, too, that 
 the greater produce, which by means of 
 the improvement can be raised from 
 the soil with the same labour, is all 
 wanted, and will find purchasers. The 
 improver will in that case require the 
 same number of labourers as before, at 
 the same wages. But where will he 
 find the means of paying them ? He 
 
 has no longer his original capital of 
 two thousand quarters disposable for 
 the purpose. One thousand of them 
 are lost and gone consumed in making 
 the improvement. If he is to employ 
 as many labourers as before, and pay 
 them as highly, he must borrow, or 
 obtain from some other source, a thou- 
 sand quarters to supply the deficit. 
 But these thousand quarters already 
 maintained, or were destined to main- 
 tain, an equivalent quantity of labour. 
 They are not a fresh creation ; their 
 destination is only changed 1'rom one 
 productive employment to another; 
 and though the agriculturist has made 
 up the deficiency in his own circulating 
 capital, the breach in the circulating 
 capital of the community remains un- 
 repaired. 
 
 The argument relied on by most of 
 those who contend that machinery can 
 never be injurious to the labouring 
 class, is, that by cheapening produc- 
 tion it creates such an increased de- 
 mand for the commodity, as enables, 
 ore long, a greater number of persons 
 than ever to find employment in pro- 
 ducing it. This argument does not 
 seem to me to have the weight com- 
 monly ascribed to it. The fact, though 
 loo broadly stated, is, no doubt, often 
 
 2. 
 
 true. The copyists who were thrown 
 out of employment by the invention 
 of printing, were doubtless soon out- 
 numbered by the compositors and 
 pressmen who took their place : and 
 the number of labouring persons now 
 occupied in the cotton manufacture is 
 many times greater than were so occu- 
 pied previously to the inventions of 
 Hargreaves and Arkwright, which 
 shows that besides the enormous fixed 
 capital now embarked in the manufac- 
 ture, it also employs a far larger circu- 
 lating capital than at any former time. 
 But if this capital was drawn from 
 other employments ; if the funds which 
 took the place of the capital sunk in 
 costly machinery, were supplied not by 
 any additional saving consequent on 
 the improvements, but by drafts on the 
 general capital of the community; 
 what better are the labouring classes 
 for the mere transfer? In what manner 
 is the loss they sustained by the con- 
 
 version of circulating into fixed capital, 
 made up to them by a mere shifting of 
 part of the remainder of the circulating 
 capital from its old employments to a 
 new one ? 
 
 All attempts to make out that the 
 labouring classes as a collective body 
 cannot suffer temporarily by the intro- 
 duction of machinery, or by the sinking 
 of capital in permanent improvements, 
 are, I conceive, necessarily fallacious. 
 That they would suffer in the par- 
 ticular department of industry to which 
 the change applies, is generally ad- 
 mitted, and obvious to common sense ; 
 but it is often said, that though em- 
 ployment is withdrawn from labour in 
 one department, an exactly equivalent 
 employment is opened for it in others, 
 because what the consumers save in 
 the increased cheapness of one par- 
 ticular article enables them to augment 
 their consumption of others, therein' 
 increasing the demand for other kin-Is 
 of labour. This is plausible, but, as 
 was shown in the last chapter, involves 
 a fallacy ; demand for commodities 
 being a totally different thing . from 
 demand for labour. It is true, the con- 
 sumers have now additional means of 
 buying other things; but this will not 
 create the other things, unleis there is
 
 CIRCULATING AND FIXED CAPITAL. 
 
 61 
 
 capital to produce them, and the im- 
 provement has not set at liberty any 
 capital, if even it has not nbsorl.ed 
 some from other employments. The 
 supposed increase of production and of 
 employment for labour in other depart- 
 ments therefore will not take place ; 
 and the increased demand for com- 
 modities by some consumers, will be 
 balanced by a cessation of demand on 
 the part of others, namely, the la- 
 bourers who were superseded by the 
 improvement, and who will now be 
 maintained, if at all, by sharing, either 
 in the way of competition or of charity, 
 in what was previously consumed by j 
 other people. 
 
 3. Nevertheless, I do not believe \ 
 that as things are actually transacted, 
 improvements in production are often, 
 if ever, injurious, even temporarily, to 
 the labouring classes in the aggregate. 
 They would be so if they took place 
 suddenly to a. great amount, because 
 much of the capital sunk must ne- 
 cessarily in that case be provided from 
 funds already employed as circulating 
 capital. But improvements are always 
 introduced very gradually, and are 
 seldom or never made by withdrawing 
 circulating capital from actual produc- 
 tion, but are made by the employment 
 of the annual increase. There are 
 few, if any, examples of a great in- 
 crease of fixed capital, at a time and 
 place where circulating capital was 
 not rapidly increasing likewise. It is 
 not in poor or backward countries that 
 great and costly improvements in pro- 
 duction are made. To sink capital in 
 land for a permanent return to intro- 
 duce expensive machinery are acts 
 involving immediate sacrifice for dis- 
 tant objects ; and indicate, in the first 
 place, tolerably complete security of 
 property; in the second, considerable 
 activity of industrial enterprise ; and 
 in the third, a high standard of what 
 has been called the " effective desire 
 f accumulation :" which three things 
 are the elements of a society rapidly 
 progressive in its amount of capital. 
 Although, therefore, the labouring 
 classes must suffer, not only if the in- 
 crease of fixed capital takes place at 
 
 the expense of circulating, but even if 
 it is so large and rapid as to retard 
 that ordinary increase to which the 
 growth of population has habitually 
 adapted itself; yet, in point of fact, 
 this is very unlikely to happen, since 
 there is probably no country whose 
 fixed capital increases in a ratio more 
 than proportional to its circulating. 
 If the whole of the railways which, 
 during the speculative madness of 
 1845, obtained the sanction of Parlia- 
 ment, had been constructed in the 
 times fixed for the completion of each, 
 this improbable contingency would, 
 most likely, have been realized; but 
 this very case has afforded a striking 
 example of the difficulties which op- 
 pose the diversion into new channels of 
 any considerable portion of the capital 
 that supplies the old : difficulties 
 generally much more than sufficient to 
 prevent enterprises that involve the 
 sinking of capital, from extending 
 themselves with such rapidity as to 
 impair the sources of the existing em- 
 ployment for labour. 
 
 To these considerations must be 
 added, that even if improvements did 
 for a time decrease the aggregate pro- 
 duce and the circulating capital of the 
 community, they would not the less 
 tend in the long run to augment both. 
 They increase the return to capital ; 
 and of this increase the benefit must 
 necessarily accrue either to the capi- 
 talist in greater profits, or to the cus- 
 tomer in diminished prices ; affording, 
 in either case, an augmented fund from 
 which accumulation may be made, 
 while enlarged profits also hold out an 
 increased inducement to accumulation. 
 In the case we before selected, in which 
 the immediate result of the improve- 
 ment was to diminish the gross pro- 
 duce from two thousand four hundred 
 quarters to one thousand five hundred, 
 yet the profit of the capitalist being 
 now five hundred quarters instead of 
 four hundred, the extra one hundred 
 quarters, if regularly saved, would in 
 a few years icplace the one thousand 
 quarters subtracted from his circulating 
 capital. Now the extension of business 
 which almost certainly follows in any 
 department in which an improvement
 
 62 
 
 BOOK I. CHAPTER VI. 3. 
 
 lias been made, affords a strong in- 
 ducement to those engaged in it to add 
 to their capital ; and hence, at the slow 
 pace at which improvements are usually 
 introduced, a great part of the capital 
 which the improvement ultimately ab- 
 sorbs, is drawn from the increased 
 profits and increased savings which it 
 has itself called forth. 
 
 This tendency of improvements in 
 production to cause increased accumu- 
 lation, and thereby ultimately to in- 
 crease the gross produce, even if tem- 
 porarily diminishing it, will assume a 
 still more decided character if it should 
 appear that there are assignable limits 
 both to the accumulation of capital, 
 and to the increase of production from 
 the land, which limits once attained, 
 all further increase of produce must 
 stop ; but that improvements in pro- 
 duction, whatever may be their other 
 effects, tend to throw one or both of 
 these limits farther off. Now, these 
 are truths which will appear in the 
 clearest light in a subsequent stage of 
 our investigation. It will be seen, that 
 the quantity of capital which will, or 
 even which can, be accumulated in 
 any country, and the amount of gross 
 produce which will, or even which can, 
 be raised, bear a proportion to the state 
 of the arts of production there exist- 
 ing ; and that every improvement, 
 even if for the time it diminish the 
 circulating capital and the gross pro- 
 duce, ultimately makes room for a 
 larger amount of both, than could pos- 
 eibly have existed otherwise. It is 
 this which is the conclusive answer to 
 the objections against machinery ; and 
 the proof thence arising of the ulti- 
 mate benefit to labourers of mechanical 
 inventions even in the existing state of 
 society, will hereafter be seen to be 
 conclusive.* But this does not dis- 
 charge governments from the obligation 
 of alleviating, and if possible prevent- 
 ing, the evils of which this source of 
 ultimate benefit is or may be produc- 
 tive to an existing generation. If the 
 sinking or fixing of capital in ma- 
 chinery or useful works, were ever to 
 proceed at such a pace as to impair 
 materially the funds for the mainte- 
 * Infra, book iv, chap. T. 
 
 nance of labour, it would be incumbent 
 on legislators to take measures for mo- 
 derating its rapidity : and since im- 
 provements which do not diminish 
 employment on the whole, almost al- 
 ways throw some particular class of 
 labourers out of it, there cannot lie a 
 more legitimate object of the legisla- 
 tor's care than the interests of those 
 who are thus sacrificed to the gains of 
 their fellow-citizens and of posterity. 
 
 To return to the theoretical distinc- 
 tion between fixed and circulating 
 capital. Since all wealth which is 
 destined to be employed for reproduc- 
 tion comes within the designation of 
 capital, there are parts of capital which 
 do not agree with the definition of 
 either species of it ; for instance, the 
 stock of finished goods which a manu- 
 facturer or dealer at any time possesses 
 unsold in his warehouses. But this, 
 though capital as to its destination, is 
 not yet capital in actual exercise : it is 
 not engaged in production, but has 
 first to be sold or exchanged, that is, 
 converted into an equivalent value of 
 some other commodities ; and there- 
 fore is not yet either fixed or circulating 
 capital ; but will become either one or 
 the other, or be eventually divided 
 between them. With the proceeds of 
 his finished goods, a manufacturer will 
 partly pay his work-people, partly re- 
 plenish his stock of the materials of 
 his manufacture, and partly provide 
 new buildings and machinery, or repair 
 the old ; but how much will be devoted 
 to one purpose, and how much to 
 another, depends on the nature of the 
 manufacture, and the requirements of 
 the particular moment. 
 
 It should be observed further, that 
 the portion of capital consumed in tha 
 form of seed or material, though, un- 
 like fixed capital, it requires to be at 
 once replaced from the gross produce, 
 stands yet in the same relation to the 
 employment of labour as fixed capital 
 does. What is expended in materials 
 is as much withdrawn from the main- 
 tenance and remuneration of labourers, 
 as what is fixed in machinery ; and if 
 capital now expended in wages wero 
 diverted to the providing of materials, 
 the effect on the labourers would be a*
 
 DEGREES OF PRODUCTIVENESS. 
 
 63 
 
 prejudicial as if it were converted into 
 fixed capital. This, however, is a kind 
 of change which never takes place. 
 The tendency of improvements in pro- 
 duction is always to economize, never 
 
 to increase, the expenditure of seed or 
 material for a given produce ; and t'.y 
 interest of the labourers has no detri- 
 ment to apprehend from this source. 
 
 CHAPTER VII. 
 
 U.\ WHAT DEPENDS THE DEGREE OF PRODUCTIVENESS OF PRODUCTIVE A6EXTS 
 
 1 . WE have concluded our general i 
 survey of the requisites of production. 
 \Ve have found that they may be reduced 
 to three : labour, capital, and the mate- 
 rials and motive forces afforded by 
 nature. Of these, labour and the raw 
 material of the globe are primary and 
 indispensable. Natural motive powers 
 may be called in to the assistance of 
 labour, and are a help, but not an es- 
 sential, of production. The remaining 
 requisite, capital, is itself the product 
 of labour: its instrumentality in pro- 
 duction is therefore, in reality, that of 
 labour in an indirect shape. It does 
 not the less require to be specilk-d 
 separately. A previous application of 
 labour to produce the capital required 
 for consumption during the work, is no 
 less essential than the application of 
 labour to the work itself. Of capital, 
 again, one, and by far the largest, por- 
 tion, conduces to production only by 
 sustaining in existence the labour which 
 produces : the remainder, namely the 
 instruments and materials, contribute 
 to it directly, in the same manner with 
 natural agents, and the materials sup- 
 plied by nature. 
 
 We now advance to the second great 
 question in political economy ; on what 
 the degree of productiveness of these 
 agents depends. For it is evident that 
 their productive efficacy varies greatly 
 at various times and places. With the 
 same population and extent of territory, 
 some countries have a much larger 
 amount of production than others, and 
 the same country at one time a greater 
 amount than itself at another. Com- 
 pare England either with a similar 
 extent of territory in Russia, or with 
 
 an equal population of Russians. Com- 
 pare England now with England in 
 the Middle Ages ; Sicily, Northern Af- 
 rica, or Syria at present, with the same 
 countries at the time of their greatest 
 prosperity, before the Roman conquest. 
 Some of the causes which contribute 
 to this difference of productiveness are 
 obvious ; others not so much so. We 
 proceed to specify several of them. 
 
 2. The most evident cause of 
 superior productiveness is what are 
 called natural advantages. These are 
 various. Fertility of soil is one of the 
 principal. In this there are great 
 varieties, from the deserts of Arabia 
 to the alluvial plains of the Ganges, 
 the Niger, and the Mississippi. A 
 favourable climate is even more im- 
 portant than a rich soil. There are 
 countries capable of being inhabited, 
 but too cold to be compatible with 
 agriculture. Their inhabitants cannot 
 pass beyond the nomadic state ; they 
 must live, like the Laplanders, by the 
 domestication of the rein-deer, if not 
 by hunting or fishing, like the miser- 
 able Esquimaux. There are countries 
 where oats will ripen, but not wheat, 
 such as the North of Scotland ; others 
 where wheat can be grown, but from 
 excess of moisture and want of sun- 
 shine, affords but a precarious crop ; 
 as in parts of Ireland. With each 
 advance towards the south, or, in tho 
 European temperate region, towards 
 the east, some new branch of agricul- 
 ture becomes first possible, then advan- 
 tageous ; the vine, maize, figs, olives, 
 silk, rice, dates, successively present 
 themselves, until we come to the
 
 sugar, coffee, cotton, spices, &c. of 
 climates which also afford, of the more 
 common agricultural products, and 
 with only a slight degree of cultiva- 
 tion, two or even three harvests in a 
 year. Nor is it in agriculture alone 
 
 that differences of climate are impor- 
 tant. Their influence is felt in many 
 other branches of production : in the 
 durability of all work which is exposed 
 to the air ; of buildings, for example. 
 If the- temples of Karnac and Luxor 
 had not been injured by men, they 
 might have subsisted in their original 
 perfection almost for ever, for the in- 
 scriptions on some of them, though 
 anterior to all authentic history, are 
 fresher than is in our climate an in- 
 scription fifty years old : while at St. 
 Petersburg, the most massive -works, 
 solidly executed in granite hardly a 
 generation ago, are already, as tra- 
 vellers tell us, almost in a state to 
 require reconstruction, from alternate 
 exposure to summer heat and intense 
 frost. The superiority of the woven 
 fabrics of Southern Europe over those 
 of England in the richness and clear- 
 ness of many of their colours, is 
 ascribed to the superior quality of the 
 atmosphere, for which neither the know- 
 ledge of chemists nor the skill of dyers 
 has been able to provide, in our hazy and 
 damp climate, a complete equivalent. 
 
 Another part of the influence of 
 climate consists in lessening the phy- 
 sical requirements of the producers. 
 In hot regions, mankind can exist in 
 comfort with less perfect housing, less 
 clothing ; fuel, that absolute necessary 
 of liie in cold climates, they can almost 
 dispense with, except for industrial 
 uses. They also require less aliment ; 
 as experience had proved, long before 
 theory had accounted for it by ascer- 
 taining that most of what we consume 
 as food is not required for the actual 
 nutrition of the organs, but for keeping 
 up the animal heat, and for supplying 
 the necessary stimulus to the vital 
 functions, which in hot climates is 
 almost sufficiently supplied by air and 
 sunshine. Much, therefore, of the 
 labour elsewhere expended to procure 
 the mere necessaries of life, not being 
 required, more remains disposable for 
 
 BOOK I. CHAPTER VII. f 2. 
 
 its higher uses and its enjoyments: if 
 the character of the inhabitants docs 
 not rather induce them to use up these 
 advantages in over-population, or in 
 the indulgence of repose. 
 
 Amons natural advantages, besides 
 
 soil and climate, must be mentioned i 
 abundance of mineral productions, in 
 convenient situations, and capable of ' 
 being worked with moderate labour. 
 Such are the coal-fields of threat 
 Britain, which do so much to compen- 
 sate its inhabitants for the disadvan- 
 tages of climate ; and the scarcely 
 inferior resource possessed by this 
 country and the United State.s, in a 
 copious supply of an easily reduced 
 iron ore, at no great depth below the 
 earth's surface, and in close proximity 
 to coal deposits available for working 
 it. In mountain and hill districts, 
 the abundance of natural water-power 
 makes considerable amends for the 
 usually inferior fertility of those re- 
 gions. But perhaps a greater advan- 1 
 tage than all these is a maritime 
 situation, especially when accompanied 
 with good natural harbours ; and, next 
 to it, great navigable rivers, These 
 advantages consist indeed wholly in 
 saving the cost of carriage. But fe^v 
 who have not considered the subject, 
 have any adequate notion how great 
 an extent of economical advantage 
 this comprises ; nor, without having 
 considered the influence exercised on 
 production by exchanges, and by what 
 is called the division of labour, can it 
 be fully estimated. So important is it, 
 that it often does more than counter- 
 balance sterility of soil, and almost 
 every other natural inferiority ; es- 
 pecially in that early stage of industry 
 in which labour and science have not 
 yet provided artificial means of com- 
 munication capable of rivalling the 
 natural. In the ancient world, and in 
 the middle ages, the most prosperous 
 communities were not those which 
 had the largest territory, or the most 
 fertile soil, but rather those which had 
 been forced by natural sterility to 
 make the utmost use of a convenient 
 maritime situation ; as Athens, Tyre, 
 Marseilles, Venice, the free sitiea on 
 the Baltic, awl the lik-j.
 
 DEGilEES OF PRODUCTIVENESS 
 
 8 3. So much for natural advan- 
 the value of which, cateris 
 j"irilitts, is too obvious to be ever 
 underrated. But experience testifies 
 that natural advantages scarcely ever 
 do for a community, no more than 
 fortune and station do for an indivi- 
 dual, anything like what it lies in their 
 nature, or in their capacity, to do. 
 Neither now nor in former ages have 
 jhe nations possessing the best climate 
 and soil been either the richest or the 
 most powerful ; but (in so far as 
 regards the mass of the people) gene- 
 rally among the poorest, though, in 
 the midst of poverty, probably on the 
 whole the most enjoying. Human b'fe 
 in those countries can be supported on 
 BO little, that the poor seldom suffer 
 from anxiety, and in climates in which 
 mere existence is a pleasure, the 
 luxury which they prefer is that of 
 repose. Energy, at the call of passion, 
 they possess in abundance, but not 
 that which is manifested in sustained 
 and persevering labour: and as they 
 seldom concern themselves enough 
 about remote objects to establish good 
 political institutions, the incentives to 
 industry are further weakened by im- 
 perfect protection of its fruits. Suc- 
 cessful production, like most other 
 kinds of success, depends more on the 
 qualities of the human agents, than on 
 the circumstances in which they work : 
 and it is difficulties, not facilities, that 
 nourish bodily and mental energy. 
 Accordingly the tribes of mankind 
 who have overrun and conquered 
 others, and compelled them to labour 
 for their benefit, have been mostly 
 reared amidst hardship. They have 
 either been bred in the forests of 
 northern climates, or the deficiency of 
 natural hardships has been supplied, 
 as among the Greeks and Romans, by 
 the artificial ones of a rigid military 
 discipline. From the time when the 
 circumstances of modern society per- 
 mitted the discontinuance of that 
 discipline, the South lias no longer 
 produced conquering nations ; military 
 vigour, as well as speculative thought 
 and industrial energy, have all had 
 their principal seats in the less 
 favoured North. 
 JMJ. 
 
 As the second, therefore, of the 
 causes of superior productiveness, we 
 may rank the greater energy of labour. 
 By this is not to be understood occa- 
 sional, but regular and habitual energy. 
 No one undergoes, without murmur- 
 ing, a greater amount of occasional 
 fatigue and hardship, or has his bodily 
 powers, and such faculties of mind aa 
 he possesses, kept longer at their 
 utmost stretch, than the NortU Ame- 
 rican Indian ; yet his indolence is 
 proverbial, whenever he has a brief 
 respite from the pressure of present 
 wants. Individuals, or nations, do 
 not differ so much in the efforts 
 they are able and willing to make 
 under strong immediate incentives, 
 as in their capacity of present ex- 
 ertion for a distant object, and in 
 the thoroughness of their application 
 to work on ordinary occasions. Some 
 amount of these qualities is a necessary 
 condition of any great improvement 
 among mankind. To civilize a savage, 
 he must be inspired with new wants 
 and desires, even if not of a very ele- 
 vated kind, provided that their gratifi- 
 cation can be a motive to steady and 
 regular bodily and mental exertion. 
 If the negroes of Jamaica and De- 
 merara, after their emancipation, had 
 contented themselves, as it was pre- 
 dicted they would do, with the neces- 
 saries of life, and abandoned all labour 
 beyond the little which in a tropical 
 climate, with a thin population and 
 abundance of tha richest land, is 
 sufficient to support existence, they 
 would have sunk into a condition more 
 barbarous, though less unhappy, than 
 their previous state of slavery. The 
 motive which was most relied on for 
 inducing them to work was their love 
 of fine clothes and personal ornaments. 
 No one will stand up for this taste as 
 worthy of being cultivated, and in 
 most societies its indulgence tends tc 
 impoverish rather than to enrich ; but 
 in the state of mind of the negroes it 
 might have been the only incentive 
 that could make them voluntarily 
 undergo systematic labour, and so ac- 
 quire or maintain habits of voluntary 
 industry which may be converted to 
 ' uiore valuable ends, lii England, it is
 
 BOOK I. CHAPTER VII. 4. 
 
 not the desire of wealth that needs to 
 be taught, but the use of wealth, and 
 appreciation of the objects of desire 
 which wealth cannot purchase, or for 
 attaining which it is not required. 
 Every real improvement in the cha- 
 racter of the English, whether it 
 consist in giving them higher aspira- 
 tions, or only a juster estimate of the 
 value of their present objects of desire, 
 must necessarily moderate the ardour 
 of their devotion to the pursuit of 
 wealth. There is no need, however, 
 that it should diminish the strenuous 
 and business-like application to the 
 matter in hand, which is found in the 
 best English workmen, and is their 
 most valuable quality. 
 
 The desirable medium is one which 
 mankind have not often known how to 
 hit : when they labour, to do it with all 
 their might, and especially with all 
 their mind ; but to devote to labour, 
 for mere pecuniary gain, fewer hours 
 in the day, fewer days in the year, and 
 fewer years of life. 
 
 4. The third element which de- 
 termines the productiveness of the 
 labour of a community, is the skill and 
 knowledge therein existing; whether 
 it be the skill and knowledge of the 
 labourers themselves, or of those who 
 direct their labour. No illustration is 
 requisite to show how the efficacy of 
 industry is promoted by the manual 
 dexterity of those who perform mere 
 routine processes ; by the intelligence 
 of those engaged in operations in 
 which the mind has a considerable 
 part ; and by the amount of knowledge 
 of natural powers and of the properties 
 of objects, which is turned to the pur- 
 poses of industry. That the produc- 
 tiveness of the labour of a people is 
 limited by their knowledge of the arts 
 t>f life, is self-evident; and that any 
 progress in those arts, any improved 
 application of the objects or powers of 
 nature to industrial uses, enables the 
 eame quantity and intensity of labour 
 to raise a greater produce. 
 
 One principal department of these 
 Improvements consists in the invention 
 and use of tools and machinery. The 
 manner in which these serve to in 
 
 crease production and to economize 
 labour, needs not be specially detailed 
 in a work like the present : it will be 
 found explained and exemplified, in a 
 manner at once scientific and popular, 
 in Mr. Babbage's well-known "Eco- 
 nomy of Machinery and Manufac- 
 tures." An entire chapter of Mr. 
 Babbage's book is composed of in- 
 stances of the efficacy of machinery iu 
 " exerting forces too grtat for human 
 power, and executing operations too 
 delicate for human touch." But to 
 find examples of work which could not 
 be performed at all by unassisted 
 labour, we need not go so far. With- 
 out pumps, worked by steam-engines or 
 otherwise, the water which collects in 
 mines could not in many situations be 
 got rid of at all, and the mines, after 
 being worked to a little depth, must be 
 abandoned : without ships or boats the 
 sea could never have been crossed ; 
 without tools of some sort, trees could 
 not be cut down, nor rocks excavated ; 
 a plough, or at least a hoe, is necessary 
 to any tillage of the ground. Very 
 simple and rude instruments, however, 
 are sufficient to render literally possible 
 most works hitherto executed by man- 
 kind ; and subsequent inventions have 
 chiefly served to enable the work to be 
 performed in greater perfection, and, 
 above all, with a greatly diminished 
 quantity of labour: the labour thus 
 saved becoming disposable for other 
 employment. 
 
 The use of machinery is far from 
 being the only mode in which the 
 effects of knowledge in aiding produc- 
 tion are exemplified. In agriculture 
 and horticulture, machinery is only 
 now beginning to show that it can do 
 anything of importance, beyond the 
 invention and progressive improve- 
 ment of the plough and a few other 
 simple instruments. The greatest agri- 
 cultural inventions have consisted in 
 the direct application of more judicious 
 processes to the land itself, and to the 
 plants growing on it : such as rotation 
 af crops, to avoid the necessity of 
 leaving the land uncultivated for one 
 season in every two or three ; improved 
 manures, to renovate its fertility when 
 xhausted by cropping ; ploughing an.1
 
 DEGREES OF PRODUCTIVENESS. 
 
 67 
 
 draining the subsoil as well as the 
 surface ; conversion of bogs and marshes 
 into cultivable land ; such modes of 
 pruning, and of training and propping 
 up plants and trees, as experience has 
 shown to deserve the preference; in the 
 case of the more expensive cultures, 
 planting the roots or seeds further 
 apart, and more completely pulverizing 
 the soil in which they are placed, &c. 
 In manufactures and commerce, some 
 of the most important improvements 
 consist in economizing time ; in making 
 the return follow more speedily upon 
 the labour and outlay. There are 
 others of which the advantage consists 
 in economy of material. 
 
 5. But the effects of the in- 
 creased knowledge of a community in 
 increasing its wealth, need the less 
 illustration as they have become 
 familiar to the most uneducated, from 
 such conspicuous instances as railways 
 and steam-ships. A thing not yet so 
 well understood and recognised, is the 
 economical value of the general diffu- 
 sion of intelligence among the people. 
 The number of persons fitted to direct 
 and superintend any industrial enter- 
 prise, or even to execute any process 
 which cannot be reduced almost to an 
 affair of memory and routine, is always 
 far short of the demand ; as is evident 
 from the enormous difference between 
 the salaries paid to such persons, and 
 the wages of ordinary labour. The 
 deficiency of practical good sense, 
 which renders the majority of the la- 
 bouring class such bad calculators 
 which makes, for instance, their do- 
 mestic economy so improvident, lax, 
 and irregular must disqualify them 
 for any but a low grade of intelligent 
 labour, and render their industry far 
 less productive than with equal energy 
 it otherwise might be. The impor- 
 tance, even in Jhis limited aspect, of 
 popular education, is well worthy of 
 the attention of politicians, especially 
 in England ; since competent observers, 
 accustomed to employ labourers of 
 various nations, testify that in the 
 workmen of other countries they often 
 find great intelligence wholly apart 
 from instruction, but that if an English 
 
 labourer is anything but a hewer of 
 wood and a drawer of water, he is 
 indebted for it to education, which in 
 his case is almost always self-education. 
 Mr. Escher, of Zurich, (an engineef 
 and cotton manufacturer employing 
 nearly two thousand working men of 
 many different nations,) in his evidence 
 annexed to the Report of the Poor 
 Law Commissioners, in 1840, on tbn 
 training of pauper children, gives a 
 character of English as contrasted 
 with Continental workmen, which all 
 persons of similar experience will, I 
 believe, confirm. 
 
 " The Italians' quickness of percep- 
 tion is shown in rapidly comprehending 
 any new descriptions of labour put into 
 their hands, in a power of quickly com- 
 prehending the meaning of their em- 
 ployer, of adapting themselves to new 
 circumstances, much beyond what any 
 other classes have. The French work- 
 men have the like natural characteris- 
 tics, only in a somewhat lower degree. 
 The English, Swiss, German, and 
 Dutch workmen, we find, have all much 
 slower natural comprehension. As 
 workmen only, the preference is un- 
 doubtedly due to the English ; because, 
 as we find them, they are all trained 
 to special branches, on which they have 
 had comparatively superior training, 
 and have concentrated all their 
 thoughts. As men of business or of 
 general usefulness, and as men with 
 whom an employer would best like to 
 be surrounded, I should, however, deci- 
 dedly prefer the Saxons and the Swiss, 
 but more especially the Saxons, be- 
 cause they have had a very careful gen- 
 eral education, which has extended 
 their capacities beyond any special 
 employment, and rendered them fit to 
 take up, after a short preparation, any 
 employment to which they may be 
 called. If I have an English work- 
 man engaged in the erection of a 
 steam-engine, he will understand that, 
 and nothing else ; and for other cir- 
 cumstances or other branches of me- 
 chanics, however closely allied, he will 
 be comparatively helpless to adapt him- 
 self to all the circumstances that may 
 arise, to mako arrangements for them, 
 and give EC- void advice or write clear 
 F 2
 
 BOOK I. CHAPTER VH. 5. 
 
 Btatements and letters on his work 
 in the various related branches of 
 mechanics. 1 ' 
 
 On the connexion hetween mental 
 cultivation and moral trustworthiness 
 in the labouring class, the same wit- 
 ness says, " The better educated work- 
 men, we find, are distinguished by 
 superior moral habits in every respect. 
 In the first place, they are entirely so- 
 ber ; they are discreet in their enjoy- 
 ments, which are of a more rational 
 and refined kind ; they have a taste 
 for much better society, which they 
 approach respectfully, and consequently 
 find much readier admittance to it ; 
 they cultivate music ; they read ; they 
 enjoy the pleasures of scenery, and 
 make parties for excursions in the 
 country ; they are economical, and 
 their economy extends beyond their 
 own purse to the stock of their master ; 
 they are, consequently, honest and 
 trustworthy.'' And in answer to a 
 question respecting the English work- 
 men, " Whilst in respect to the work 
 to which they have been specially 
 framed they are the most skilful, they 
 are in conduct the most disorderly, de- 
 bauched, and unruly, and least respect- 
 able and trustworthy of any nation 
 whatsoever whom we have employed ; 
 and in saying this, I express the expe- 
 rience of every manufacturer on the 
 Continent to whom I have spoken, and 
 especially of the English manufactu- 
 rers, who make the loudest complaints. 
 These characteristics of depravity do 
 not apply to the English workmen who 
 have received an education, but attach 
 to the others in the degree in which 
 they are in want of it. When the un- 
 educated English workmen are re- 
 leased from the bonds of iron discipline 
 in which they have been restrained by 
 their employers in England, and are 
 treated with the urbanity and friendly 
 feeling which the more educated work- 
 men on the Continent expect and re- 
 ceive from their employers, they, the 
 English workmen, completely lose their 
 balance : they do not understand their 
 position, and after a certain time be- 
 come totally unmanageable and use- 
 less."* This result of observation is 
 
 The vhole evidence of this intelligent 
 
 borne out by experience in England 
 itself. As soon as any idea of equal- 
 ity enters the mind of an uneducated 
 English working man, his head is 
 turned by it. When he ceases to be 
 servile, he becomes insolent. 
 
 The moral qualities of the labourers 
 are fully as important to the efficiency 
 and worth of their labour, as the in- 
 tellectual. Independently of the effects 
 of intemperance upon their bodily and 
 mental faculties, and of flighty un- 
 steady habits upon the energy and con- 
 tinuity of their work (points so easily 
 understood as not to require being in- 
 sisted upon), it is well worthy of medi- 
 tation, how much of the aggregate 
 effect of their labour depends on their 
 trustworthiness. All the labour now 
 expended in watching that they fulfil 
 their engagement, or in verifying that 
 they have fulfilled it, is so much with- 
 drawn from the real business of pro- 
 duction, to be devoted to a subsidiary 
 function rendered needful not by the 
 necessity of things, but by the dis- 
 honesty of men. Nor are the greatest 
 outward precautions more than very 
 imperfectly efficacious, where, as is now 
 almost invariably the case with hired 
 labourers, the slightest relaxation of 
 vigilance is an opportunity eagerly 
 seized for eluding performance of their 
 contract. The advantage to mankind 
 of being able to trust one another, pen- 
 etrates into every crevice and cranny 
 of human life : the economical is per- 
 haps the smallest part of it, yet even 
 this is incalculable. To consider only 
 the most obvious part of the waste of 
 wealth occasioned to society by human 
 improbity ; there is in all rich commu- 
 nities a predatory population, who live 
 by pillaging or over-reaching other 
 people ; their numbers cannot bo 
 authentically ascertained, but on the 
 lowest estimate, in a country like 
 England, it is very large. The sup- 
 port of these persons is a direct bur- 
 then on the national industry. The 
 police, and the whole apparatus of pun- 
 ishment, and of criminal and partly of 
 
 and experienced employer of labour is de- 
 serving of attention ; as woll as mucli testi- 
 mony on similar points by other witnesses, 
 contained in the same volume.
 
 DEGREES OF PRODUCTIVENESS. 
 
 civil justice, are a second burthen ren- 
 dered necessary by the first. The ex- 
 orbitantly-paid profession of lawyers, 
 so far as their work is not created by 
 defects in the law of their own contri- 
 ving, are required and supported prin- 
 cipally by the dishonesty of mankind. 
 As the standard of integrity in a com- 
 munity rises higher, all these expenses 
 become less. But this positive saving 
 would be far outweighed by the im- 
 mense increase in the produce of all 
 kinds of labour, and saving of time and 
 expenditure, which would be obtained 
 if the labourers honestly performed 
 what they undertake ; and by the in- 
 creased spirit, the feeling of power 
 and confidence, with which works of 
 all sorts would be planned and carried 
 on by those who felt that all whose aid 
 was required would do their part faith- 
 fully according to their contracts. Con- 
 joint action is possible just in propor- 
 tion as human beings can rely on each 
 other. There are countries in Europe, 
 of first-rate industrial capabilities, 
 where the most serious impediment to 
 conducting business concerns on a 
 la' ge scale, is the rarity of persons who 
 are supposed fit to be trusted with the 
 receipt and expenditure of large sums 
 of money. There are nations whose 
 commodities are looked shily upon by 
 merchants, because they cannot depend 
 on finding the quality of the article 
 conformable to that of the sample. 
 Such short-sighted frauds are far from 
 unexampled in English exports. Every 
 one has heard of "devil's dust :'' and 
 among other instances given by Mr. 
 Babbage, is one in which a branch of 
 export trade was for a long time ac- 
 tually stopped by the forgeries and 
 frauds which had occurred in it. On 
 the other hand the substantial advan- 
 tage derived in business transactions 
 from proved trustworthiness, is not less 
 remarkably exemplified in the same 
 work. " At one ot our largest towns, 
 sales and purchases on a very exten- 
 sive scale are made daily in the course 
 of business without any of the parties 
 ever exchanging a written document." 
 Spread over a year's transactions, how 
 great a return, in saving of time, 
 trouble, and expense, is brought in to 
 
 the producers and dealers of such a 
 town from their own integrity. " The 
 influence of established character in 
 producing confidence operated in a- 
 very remarkable manner at the time ot 
 the exclusion of British manufactures 
 from the Continent during the last 
 war. One of our largest establish- 
 ments had been in the nabit of doing 
 extensive business with a house in the 
 centre of Germany : but on the closing 
 of the Continental ports against our 
 manufactures, heavy penalties were 
 inflicted on all those who contravened 
 the Berlin and Milan decrees. The 
 English manufacturer continued, never- 
 theless, to receive orders, with direc- 
 tions how to consign them, and appoint- 
 ments for the time and mode of pay- 
 ment, in letters, the handwriting of 
 which was known to him, but which 
 were never signed except by the 
 Christian name of one of the firm, and 
 even in some instances they were 
 without any signature at all. These 
 orders were executed, and in no in- 
 stance was there the least irregularity 
 in the payments."* 
 
 * Some minor instances noticed by Mr. 
 Babbage may be cited in further illustration 
 of the waste occasioned to society through 
 the inability of its members to trust one 
 another. 
 
 " The cost to the purchaser is the price he 
 pays for any article, added to the cost of 
 verifying the fact of its having that degree 
 of goodness for which he contracts. In some 
 cases, the goodness of the article is evident 
 on mere inspection ; and in those cases there 
 is not much difference of price at different 
 shops. The goodness of loaf sugar, for in- 
 stance, can be discerned almost at a glance ; 
 and the consequence is, that the price is so 
 uniform, and the profit upon it so small, that 
 no grocer is at all anxious to sell it ; whilst 
 on the other hand, tea, of which it is exceed- 
 ingly difficult to judge, and which can be 
 adulterated by mixture so as to deceive the 
 skill even of a practised eye, has a great 
 variety of different prices, and is that article 
 which every grocer is most anxious to sell to 
 his customers. The difficulty and expense 
 of verififtation are in some instances ?o great 
 as to justify the deviation from well-estab- 
 lished principles. Thus it is a general maxim 
 that Government can purchase any article 
 at a cheaper rate than that at which they 
 can manufacture it themselves. But it has, 
 nevertheless, been considered more econo- 
 mical to build extensive flour-mills (such aa 
 those at Deptford), and to grind their own 
 corn, than to verify each sack of purchased 
 flour, and to employ persons in devising me-
 
 70 
 
 BOOK I. CHAFfER Vlf. 6. 
 
 6. Among the secondaiy causes 
 frhich determine tlic productiveness of 
 productive agents, the most important 
 is Security. By security I mean the 
 wmpleteness or the protection which 
 society affords to its members. This 
 consists of protection by the govern- 
 ment, and protection against the go- 
 vernment. The latter is the more 
 important. Where a person known to 
 possess anything worth taking away, 
 can expect nothing but to have it torn 
 from him, with every circumstance of 
 tyrannical violence, by the agents of a 
 rapacious government, it is not likely 
 /hat many will exert themselves to 
 produce much more than necessaries. 
 This is the acknowledged explanation 
 of the poverty of many fertile tracts of 
 Asia, which were once prosperous and 
 populous. From this to the degree of 
 security enjoyed in the best governed 
 
 thods of detecting the new modes of adulte- 
 ration which might be continually resorted 
 to." A similar want of confidence might 
 deprive a nation, such as the United States, of 
 a large export trade in flour. 
 
 Again : " Some years since, a mode of pre- 
 paring old clover and trefoil seeds by a pro- 
 cess called doctoring became so prevalent as 
 to excite the attention of the House of Com- 
 mons. It appeared in evidence before a 
 Committee, that the old seed of the white 
 clover was doctored by first wetting it slightly, 
 and then drying it by the fumes of burning 
 sulphur; and that the red clover seed had its 
 colour improved by shaking it in a sack with 
 a small quantity of indigo ; but this being 
 detected after a time, the doctors then used 
 a preparation of logwood, fined by a little 
 copperas, and sometimes by verdigris ; tlius 
 at once improving the appearance of the old 
 seed, and diminishing, if not destroying, its 
 vegetative power, already enfeebled by age. 
 Supposing no injury had resulted to good 
 eed so prepared, it was proved that, from 
 the improved appearance, the market price 
 would be enhanced by this process from five 
 to twenty-five shillings a hundred-weight. 
 But the greatest evil arose from the circum- 
 stance of these processes rendering old and 
 worthless seed equal in appearance to the 
 best. One witness had tried some doctored 
 seed, and found that not above one grain in 
 a hundred grew, and that those which did 
 vegetate died away afterwards; whilst about 
 eighty or ninety per cent of good seed usually 
 grows. The seed so treated was sold to 
 retail dealers in the country, who of course 
 endeavoured to purchase at the cheapest 
 rate, and from them it got into the hands of 
 the farmers, neither of these classes being ca- 
 pable of distinguishing the fraudulent from 
 the genuine seed. Many cultivators in conse- 
 quence diminished their consumption of the 
 
 parts of Europe, there are 
 gradations. In many provinces of 
 France, before the Revolution, a vicious 
 system of taxation on the land, and 
 still more the absence of redress against 
 the arbitrary exactions which were 
 made under colour of the taxes, ren- 
 dered it the interest of every cultivator 
 to appear poor, and therefore to culti- 
 vate badly. The only insecurity which 
 is altogether paralyzing to the active 
 energies of producers, is that arising 
 from the government, or from persons 
 invested with its authority. Against 
 all other depredators there is a hope of 
 defending oneself. Greece and the 
 Greek colonies in the ancient world, 
 Flanders and Italy in the Middle Ages, 
 by no means enjoyed what any one 
 with modern ideas would call security : 
 the state of society was most unsettled 
 and turbulent ; person and property 
 
 articles, and others were obliged to pay a 
 higher price to thoee who had skill to distin- 
 guish the mixed seed, and who had integrity 
 and character to prevent them from dealing 
 in it." 
 
 The tame writer states that Irish flax, 
 though in natural quality inferior to none, 
 sells, or did lately sell, in the market at a 
 penny to twopence per pound less than 
 foreign or British flax; part of the difference 
 arising from negligence in its preparation, 
 but part from the cause mentioned in the 
 evidence of Mr. Corry, many years Secretary 
 to the Irish Linen Board : " The owners of 
 the flax, who are almost always people in the 
 lower classes of life, believe that they can 
 best advance their own interests by imposing 
 on the buyers. Flax being sold by weight, 
 various expedients are used to increase it ; 
 and every expedient is injurious, particularly 
 the damping of it ; a very common practice, 
 which makes the flax afterwards heat. The 
 inside of every bundle (and the bundles all 
 vary in bulk) is often full of pebbles, or dirt 
 of various kinds, to increase the weight. In 
 this state it ii purchased and exported to 
 Great Britain." 
 
 It was given in evidence before a Com- 
 mittee of the House of Commons that the 
 lace trade at Nottingham had greatly itulen 
 off, from the making of fraudulent and bad 
 articles : that " a kind of lace called tingle* 
 press was manufactured," (I still quote Mr. 
 Babbage) " which, although good to the eye, 
 became nearly spoiled in washing by the 
 slipping of the threads ; that not one person 
 in a thousand could distinguish the difference 
 between single-press and double-press lace; 
 that even workmen and manufacturers were 
 obliged to employ amagnifying-glass for that 
 purpose; and that in another similar article, 
 called warp-lace, such aid was essential."
 
 COMBINATION OF LABOUR. 
 
 Tl 
 
 were exposed to a thousand dangers. 
 But they were free countries; they 
 were in general neither arbitrarily op- 
 pressed, nor systematically plundered 
 by their governments. Against other 
 enemies the individual energy which 
 their institutions called forth, enabled 
 them to make successful resistance: 
 their labour, therefore, was eminently 
 productive, and their riches, while they 
 remained free, were constantly on the 
 increase. The Roman despotism, put- 
 ting an end to wars and internal con- 
 flicts throughout the empire, relieved 
 the subject population from much of 
 the former insecurity : but because it 
 left them under the grinding yoke of 
 its own rapacity, they became ener- 
 vated and impoverished, until they 
 were an easy prey to barbarous but 
 free invaders. They would neither 
 fight nor labour, because they were no 
 longer suffered to enjoy that for which 
 they fought and laboured. 
 
 Much of the security of person and 
 property in modern nations is the effect 
 of manners and opinion rather than of 
 law. There are, or lately were, coun- 
 tries in Europe where the monarch 
 was nominally absolute, but where, 
 from the restraints imposed by estab- 
 lished usage, no subject felt practically 
 in the smallest danger of having his 
 possessions arbitrarily seized or a con- 
 tribution levied on them by the govern- 
 ment. There must, however, be in 
 such governments much petty plunder 
 and other tyranny by subordinate 
 agents, for which redress is not ob- 
 tained, owing to the want of publicity 
 which is the ordinary character of 
 absolute governments. In England the 
 people are tolerably well protected, both 
 by institutions and manners, against 
 jhe agents of government ; but, for the 
 
 security they enjoy against other evil- 
 doers, they are very little indebted to 
 their institutions. The laws cannot be 
 said to afford protection to property, 
 when they afford it only at such a cost 
 as renders submission to injury in 
 general the better calculation. The 
 security of property in England is 
 owing (except as regards open violence) 
 to opinion, and the fear of exposure, 
 much more than to the direct operation 
 of the law and the courts of justice. 
 
 Independently of all imperfection in 
 the bulwarks which society purposely 
 throws round what it recognises as 
 property, there are various other modes 
 in which defective institutions impede 
 the employment of the productive re- 
 sources of a country to the best ad- 
 vantage. We shall have occasion for 
 noticing many of these in the progress 
 of our subject. It is sufficient here to 
 remark, that the efficiency of industry 
 may be expected to be great, in pro- 
 portion as the fruits of industry are 
 insured to the person exerting it : and 
 that all social arrangements are con- 
 ducive to useful exertion, according as 
 they provide that the reward of every 
 one for his labour shall be proportioned 
 as much as possible to the benefit which 
 it produces. All laws or usages which 
 favour one class or sort of persons to 
 the disadvantage of others; which 
 chain up the efforts of any part of the 
 community in pursuit of their own 
 good, or stand between those efforts 
 and their natural fruits are (indepen- 
 dently of all other grounds of condem- 
 nation) violations of the fundamental 
 principles of economical policy ; tend- 
 ing to make the aggregate productive 
 powers of the community productive 
 in a less degree than they would other- 
 wise be. 
 
 CHAPTER VI1L 
 
 OF CO-OPERATION, OR THB COMBINATION OP LABOUR. 
 
 1. Is- the enumeration of the 
 ciiviiiiistances which promote the pro- 
 ductiveness of labour, we have left 
 
 one untouched, which, because of its 
 importance, and of the many topics of 
 discussion which it involves, requires
 
 72 
 
 BOOK I. CHAPTER VIII. 1 
 
 to be treated apart. This is, co opera- 
 tion, or the combined action of numbers. 
 Of this great aid to production, a 
 tingle department, known by the name 
 of Division of Labour, has engaged a 
 large share of the attention of political 
 economists; most deservedly indeed, 
 but to the exclusion of other cases and 
 exemplifications of the same compre- 
 hensive law. Mr. Wakefield was, I 
 believe, the first to point out, that a 
 part of the subject had, with injurious 
 effect, been mistaken for the whole; 
 that a more fundamental principle lies 
 beneath that of the division of labour, 
 and comprehends it. 
 
 Co-operation, he observes,* is "of 
 two distinct kinds: first, such co- 
 operation as takes place when several 
 persons help each other in the same em- 
 ployment ; secondly, such co-operation 
 as takes place when several persons 
 help each other in different employ- 
 ments. These may be termed Simple 
 Co-operation and Complex Co-operation . 
 
 " The advantage of simple co-opera- 
 tion is illustrated by the case of two 
 greyhounds running together, which, 
 it is said, will kill more hares than four 
 greyhounds running separately. In 
 a vast number of simple operations 
 performed by human exertion, it is 
 quite obvious that two men working 
 together will do more than four, or 
 four times four men, each of whom 
 should work alone. In the lifting of 
 heavy weights, for example, in the 
 felling of trees, in the sawing of timber, 
 in the gathering of much hay or corn 
 during a short period of fine weather, 
 in draining a large extent of land 
 during the short season when such a 
 work may be properly conducted, in 
 the pulling of ropes on board ship, in 
 the lowing of large boats, in some 
 mining operations, in the erection of a 
 scaffolding for building, and in the 
 breaking of stones for the repair of a 
 road, so that the whole of the road 
 shall always be kept in good order ; in 
 all these simple operations, and thou- 
 sands more, it is absolutely necessary 
 that many persons should work to- 
 gether, at the same time, in the same 
 
 * Note to WaUefield's edition of Adam 
 EiuUi). vol. :. p. 20. 
 
 place, and in the Fame way. The 
 savages of New Holland never help 
 each other, even in the most simple 
 operations ; and their condition is 
 hardly superior, in some respects it 
 is inferior, to that of the wild animals 
 which they now and then catch. Let 
 any one imagine that the labourers of 
 England should suddenly desist from 
 helping each other in simple employ- 
 ments, and he will see at once the 
 prodigious advantages of simple co- 
 operation. In a countless number of 
 employments, the produce of labour is, 
 up to a certain point, in proportion to 
 such mutual assistance amongst the 
 workmen. This is the first step in 
 social improvement." The second is, 
 when " one body of men having com- 
 bined their labour to raise more food 
 than they require, another body of 
 men are induced to combine their 
 labour for the purpose of producing 
 more clothes than they require, and 
 with those clothes buying the surplus 
 food of the other body of labourers ; 
 while, if both bodies together have 
 produced more food and clothes than 
 they both require, both bodies obtain, 
 by means of exchange, a proper 
 capital for setting more labourers to 
 work in their respective occupations." 
 To simple co-operation is thus super- 
 added what Mr. Wakefield terms 
 Complex Co-operation. The one is 
 the combination of several labourers 
 to help each other in the same set of 
 operations ; the other is the combina- 
 tion of several labourers to help one 
 another by a division of operations. 
 
 There is " an important distinction 
 between simple and complex co-opera- 
 tion. Of the former, one is always 
 conscious at the time of practising it : 
 it is obvious to the most ignorant and 
 vulgar eye. Of the latter, but a very few 
 of the vast numbers who practise it are 
 in any degree conscious. The cause of 
 this distinction is easily seen. When 
 several men are employed in lifting 
 the same weight, or pulling the same 
 rope, at the same time, and in the 
 same place, there can be no sort of 
 doubt that they co-operate with each 
 other ; the fact is impressed on the 
 mind by the mere sense of eight; but
 
 COMBINATION OF LABOUR. 
 
 73 
 
 when several men, or bodies of men, 
 are employed at different times and 
 places, and in different pursuits, their 
 co-operation with each other, though 
 it may be quite as certain, is not so 
 readily perceived as in the other case : 
 in order to perceive it, a complex ope- 
 ration of the mind is required." 
 
 In the present state of society the 
 breeding and feeding of sheep is the 
 occupation of one set of people, dress- 
 ing the wool to prepare it for the 
 spinner is that of another, spinning it 
 into thread of a third, weaving the 
 thread into broadcloth of a fourth, 
 dyeing the cloth of a fifth, making it 
 into a coat of a sixth, without counting 
 the multitude of carriers, merchants, 
 factors, and retailers put in requisition 
 at the successive stages of this progress. 
 All these persons, without knowledge of 
 one another or previous understanding, 
 co-operate in the production of the 
 ultimate result, a coat. But these are 
 far from being all who co-operate in it ; 
 for each of these persons requires food, 
 and many other articles of consump- 
 tion, and unless he could have relied 
 that other people would produce these 
 for him, he could not Lava devoted his 
 whole time to one step in the succes- 
 sion of operations which produces one 
 single commodity, a coat. Every 
 person who took part in producing 
 food or erecting houses for this series 
 of producers, has, however uncon- 
 sciously on his part, combined his 
 labour with theirs. It is by a real, 
 though unexpressed, concert, "that 
 the body who raise more food than 
 they want, can exchange with the 
 body who raise more clothes than they 
 want ; and if the two bodies were sepa- 
 rated, either by distance or disincli- 
 nation unless the two bodies should 
 Virtually form themselves into one, for 
 the common object of raising enough 
 food and clothes for the whole they 
 could not divide into two distinct parts 
 the whole operation of producing a 
 sufficient quantity of food and clothes." 
 
 2. The influence exercised on 
 reduction by the separation of em- 
 ployments, is more fundamental than, 
 from the mode in which the subject is 
 
 usually treated, a reader might be in- 
 duced to suppose. It is not merely 
 that when the production of different 
 things becomes the sole or principal 
 occupation of different persons, a much 
 greater quantity of each kind of article 
 is produced. The truth is much be- 
 yond this. Without some separation 
 of employments, very few things would 
 be produced at all. 
 
 Suppose a set of persons, or a 
 number of families, all employed 
 precisely in the same manner ; each 
 family settled on a piece of its own 
 land, on which it grows by its labour 
 the food required for its o\fn suste- 
 nance, and as there are no persons to 
 buy any surplus produce where all are 
 producers, each family has to produce 
 within itself whatever other articles 
 it consumes. In such circumstances, 
 if the soil was tolerably fertile, and 
 population did not tread too closely on 
 the heels of subsistence, there would 
 be, no doubt, some kind of domestic 
 manufactures ; clothing for the family 
 might perhaps be spun and woven 
 within it, by the labour probably of the 
 women (a first step in the separation 
 of employments) ; and a dwelling of 
 some sort would be erected and kept 
 in repair by their united labour. But 
 beyond simple food (precarious, too, 
 from the variations of the seasons), 
 coarse clothing, and very imperfect 
 lodging, it would be scarcely possible 
 that the family should produce any- 
 thing more. They would, in general, 
 require their utmost exertions to ac- 
 complish so much. Their power even 
 of extracting food from the soil would 
 be kept within narrow limits by the 
 quality of their tools, which would 
 necessarily be of the most wretched 
 description. To do almost anything 
 in the way of producing for themselves 
 articles of convenience or luxury, would 
 require too much time, and, in many 
 cases, their presence in a different 
 place. Very few kinds of industry, 
 therefore, would exist ; and that which 
 did exist, namely the production of 
 necessaries, would be extremely in- 
 efficient, not solely from imperfect 
 implements, but because, when the 
 ground and the domestic industry fed
 
 74 
 
 BOOK I. CHAPTER VIII. 8. 
 
 by it bad been made to supply tbe 
 necessaries of a single family in tole- 
 rable abundance, tbere would be little 
 motive, while the numbers of the 
 family remained the same, to make 
 either the land or tbe labour produce 
 more. 
 
 But suppose an event to occur, which 
 would amount to a revolution in the 
 circumstances of this little settlement. 
 Suppose that a company of artificers, 
 provided with tools, and with food 
 sufficient to maintain them for a year, 
 arrive in the country and establish 
 themselves in the midst of the popu- 
 lation. These new settlers occupy 
 themselves in producing articles of use 
 or ornament adapted to the taste of a 
 simple people ; and before their food is 
 exhausted they have produced these in 
 considerable quantity, and are ready 
 to exchange them for more food. The 
 economical position of the landed popu- 
 lation is now most materially altered. 
 They have an opportunity given them 
 of acquiring comforts and luxuries. 
 Things which, while they depended 
 solely on their own labour, they never 
 could have obtained, because they 
 could not have produced, are now ac- 
 cessible to them if they can succeed 
 in producing an additional quantity 
 of food and necessaries. They are 
 thus incited to increase the produc- 
 tiveness of their industry. Among 
 the conveniences for the first time 
 made accessible to them, better tools 
 are probably one ; and apart from this, 
 they have a motive to labour more 
 assiduously, and to adopt contrivances 
 for making their labour more effectual. 
 By these means they will generally 
 succeed in compelling their land to 
 produce, not only food for themselves, 
 but a surplus for the new comers, 
 wherewith to buy from them the pro- 
 ducts of their industry. The new 
 settlers constitute what is called a 
 market for surplus agricultural pro- 
 duce : and their arrival has enriched 
 the settlement not only by the manu- 
 factured articles which they produce, 
 but by the food which would not have 
 been produced unless they had been 
 there to consume it. 
 
 There is no inconsistency between 
 
 this doctrine, and the proposition Te 
 before maintained, that a market for 
 commodities does not constitute em- 
 ployment for labour.* The labour of 
 the agriculturists was already pro- 
 vided with employment ; they are not 
 indebted to the demand of the new 
 comers for being able to maintain 
 themselves. What that demand does 
 for them is, to call their labour into 
 increased vigour and efficiency ; to 
 stimulate them, by new motives, to 
 new exertions. Neither do the new 
 comers owe their maintenance and 
 employment to the demand of the agri- 
 culturists : with a year's subsistence in 
 store, they could have settled side by 
 side with the former inhabitants, and 
 produced a similar scanty stock of 
 food and necessaries. Nevertheless, we 
 see of what supreme importance to the 
 productiveness of the labour of pro- 
 ducers, is the existence of other pro- j 
 ducers within reach, employed in a 
 different kind of industry. The power ' 
 of exchanging the products of one kind 
 of labour for those of another, is a 
 condition, but for which, there would 
 almost always be a smaller quantity of 
 labour altogether. When a new mar- 
 ket is opened for any product of in- 
 dustry, and a greater quantity of the 
 article is consequently produced, the 
 increased production is not always ob- 
 tained at the expense of some other 
 product ; it is often a new creation, the 
 result of labour which would otherwise 
 have remained unexerted ; or of assist- 
 ance rendered to labour by improve- 
 ments or by modes of co-operation to 
 which recourse would not have been 
 had if an inducement had not been 
 offered for raising a larger produce. 
 
 3. From these considerations it 
 appears that a country will seldom 
 have a productive agriculture, unless it 
 has a large town population, or the 
 only available substitute, a largo ex- 
 port trade in agricultural produce to 
 supply a population elsewhere. I use 
 the phrase town population for short- 
 ness, to imply a population non-agri- 
 cultural ; which will generally be 
 collected in towns or large villages, for 
 * Supra, pp. 43 55.
 
 COMBINATION OF LABOUK. 
 
 75 
 
 the sake of combination of labour. 
 The application of this truth by Mr. 
 AVakefidd to the theory of colonization, 
 has excited much attention, and is 
 doubtless destined to excite much 
 more. It is one of those great practical 
 discoveries, which, once made, appear 
 BO obvious that the merit of making 
 them seems less than it is. Mr. 
 Wakefield was the first to point out 
 that the mode of planting new settle- 
 ments, then commonly practised 
 Betting down a number of families side 
 by side, each on its piece of land, all 
 employing themselves in exactly the 
 same manner, though in favourable 
 circumstances it may assure to those 
 families a rude abundance of mere 
 necessaries, can never be other than 
 unfavourable to great production or 
 rapid growth : aud his system con- 
 sists of arrangements for securing that 
 every colony shall have from the first 
 a town population, hearing due propor- 
 tion to its agricultural, and that the 
 cultivators of the soil shall not be so 
 widely scattered as to be deprived by 
 distance, ol the benefit of that town 
 population as a market for their pro- 
 duce. The principle on which the 
 scheme is founded, does not depend on 
 any theory respecting the superior pro- 
 ductiveness of land held in large 
 portions, and cultivated by hired la- 
 bour. Supposing it true that land 
 yields the greatest produce when 
 divided into small properties and cul- 
 tivated by peasant proprietors, a town 
 population would be just as necessary 
 to induce those proprietors to raise 
 that larger produce : and if they were 
 too far from the nearest seat of non- 
 agricultural industry to use it as a 
 market for disposing of their surplus, 
 and thereby supplying their other 
 wants, neither that surplus nor any 
 equivalent for it would, generally 
 speaking, be produced. 
 
 It is, above all, the deficiency of 
 town population which limits the pro- 
 ductiveness of the industry of a country 
 ake India. The agriculture of India is 
 /mducted entirely on the system of 
 rfmall holdings. There is, however, a 
 considerable amount of combination of 
 labour. The village institutions and 
 
 customs, which are the real framework 
 of Indian society, make provision for 
 joint action in the cases in which it is 
 seen to be necessary; or where they 
 fail to do so, the government (when 
 tolerably well administered) steps in, 
 and by an outlay from the revenue, 
 executes by combined labour the tanks, 
 embankments, and works of irrigation, 
 which are indispensable. The imple- 
 ments and processes of agriculture are 
 however so wretched, that the produce 
 of the soil, in spite of great natural 
 fertility and a climate highly favourable 
 to vegetation, is miserably small : and 
 the land might be made to yield food 
 in abundance for many more than the 
 present number of inhabitants, without 
 departing from the system of small 
 holdings. But to this the stimulus is 
 wanting, which a large town popula- 
 tion, connected with the rural districts 
 by easy and unexpensive means of 
 communication, would afford. That 
 town population, again, does not grow 
 up, because the few wants and unas- 
 piring spirit of the cultivators (.joined 
 until lately with great insecurity of 
 property, from military and fiscal ra- 
 pacity) prevent them from attempting 
 to become consumers of town produce. 
 In these circumstances the best chance 
 of an early development of the produc- 
 tive resources of India, consists in the 
 rapid growth of its export of agricul- 
 tural produce (cotton, indigo, sugar, 
 coffee, &c.) to the markets of Europe. 
 The producers of these articles are 
 consumers of food supplied by their 
 fellow-agriculturists in India ; and the 
 market thus opened for surplus food 
 will, if accompanied by good govern- 
 ment, raise up by degrees more ex- 
 tended wants and desires, directed 
 either towards European commodities, 
 or towards things which will require 
 for their production in India a larger 
 manufacturing population. 
 
 4. Thus far of the separation of 
 employments, a form of the combina- 
 tion of labour without which there can- 
 not be the first rudiments of industrial 
 civilization. But when this separation 
 is thoroughly established ; when it has 
 become the general practice for cash
 
 76 BOOK L 
 
 producer to supply many others with 
 one commodity, and to be supplied by 
 others with most of the things which 
 he consumes ; reasons not less real, 
 though less imperative, invite to a 
 further extension of the same principle. 
 It is found that the productive power 
 of labour is increased by carrying the 
 separation further and further; by 
 breaking down more and more every 
 process of industry into parts, so that 
 each labourer shall confine himself to 
 an ever smaller number of simple ope- 
 rations. And thus, in time, arise those 
 remarkable cases of what is called the 
 division of labour, with which all 
 readers on subjects of this nature are 
 familiar. Adam Smith's illustration 
 from pin-making, though so well 
 known, is so much to the point, that I 
 will venture once more to transcribe it. 
 "The business of making a pin is 
 divided into about eighteen distinct 
 operations. One man draws out the 
 wire, another straights it, a third cuts 
 it, a fourth points it, a fifth grinds it at 
 the top for receiving the head ; to 
 make the head requires two or three 
 distinct operations ; to put it on, is a 
 peculiar business ; to whiten the pins 
 is another ; it is even a trade by itself 
 
 to put them into the paper 
 
 I have seen a small manufactory where 
 ten men only were employed, and 
 where some of them, consequently, per- 
 formed two or three distinct operations. 
 But though they were very poor, and 
 therefore but indifferently accommo- 
 dated with the necessary machinery, 
 they could, when they exerted them- 
 selves, make among them about twelve 
 pounds of pins in a day. There are in 
 a pound upwards of four thousand pins 
 of a middling size. Those ten persons, 
 therefore, could make among them up- 
 wards of forty-eight thousand pins in a 
 day. Each person, therefore, making 
 a tenth part of forty-eight thousand 
 pins, might be considered as making 
 four thousand eight hundred pins in a 
 day. But if they had all wrought 
 separately and independently, and with- 
 out any of them having been educated 
 to this peculiar business, they cer- 
 tainly could not each of them have made 
 twenty, perhaps not one pin in a day." 
 
 CHAPTER VITT. 4. 
 
 M. Say furnishes a still strongef 
 example of the effects of division 
 of labour from a not very important 
 branch of industry certainly, the manu- 
 facture of playing cards. "It is said 
 by those engaged in the business, that 
 each card, that is, a piece of paste- 
 board of the size of the hand, before 
 being ready for sale, does not undergo 
 fewer than seventy operations, every 
 one of which might be the occupation 
 of a distinct class of workmen. And 
 if there are not seventy classes of work- 
 people in each card manufactory, it is 
 because the division of labour is not 
 earned so far as it might be ; because 
 the same workman is charged with 
 two, three, or four distinct operations. 
 The influence of this distribution of 
 employments is immense. I have seen 
 a card manufactory where thirty work- 
 men produced daily fifteen thousand 
 five hundred cards, being above five 
 hundred cards for each labourer ; and 
 it may be presumed that if each of 
 these workmen were obliged to perform 
 all the operations himself, even suppo- 
 sing him a practised hand, he would 
 not perhaps complete two cards in a 
 day : and the thirty workmen, instead 
 of fifteen thousand five hundred cards, 
 would make only sixty."* 
 
 In watchmaking, as Mr. Babbage 
 observes, "it was stated in evidence 
 before a Committee of the House of 
 Commons, that there are a hundred 
 and two distinct branches of this art, 
 to each of which a boy may be put ap- 
 prentice ; and that he only learns his 
 master's department, and is unable, 
 after his apprenticeship has expired, 
 without subsequent instruction, to 
 work at any other branch. The watch- 
 finisher, whose business it is to put 
 together the scattered parts, is the only 
 one, out of the one hundred and two 
 persons, who can work in any other de- 
 partment than his own."f 
 
 * SAT, Court d'Economie Polilique Pra- 
 tique, vol. i. p. 340. 
 
 It is a remarkable proof of the economy of 
 labour occasioned by this minute division of 
 occupations, that an article, the production 
 of which is the result of such a multitude of 
 manual operations, can be sold for a trifling 
 sum. 
 
 t Economy of Machinery and Manufac- 
 tures, 3rd ICdition, p. 201.
 
 5. The causes of the increased 
 efficiency given to labour by the divi- 
 sion of employments are some of them 
 too familiar to require specification ; 
 but it is worth while to attempt a com- 
 plete enumeration of them. 15y Adam 
 Smith they are reduced to three. 
 " First, the increase of dexterity in 
 every particular workman ; secondly, 
 the saving of the time which is com- 
 monly lost in passing from one species 
 of work to another ; and lastly, the in- 
 vention of a great number of machines 
 which facilitate and abridge labour, 
 and enable one man to do the work of 
 many.' 1 
 
 Of these, the increase of dexterity of 
 the individual workman is the most ob- 
 vious and universal. It does not fol- 
 low that because a thing has been done 
 oftener it will be done better. That 
 depends on the intelligence of the 
 workman, and on the degree in which 
 his mind works along with his hands. 
 But it will be done more easily. The 
 organs themselves acquire greater 
 power : the muscles employed grow 
 stronger by frequent exercise, the 
 sinews more pliant, and the mental 
 powers more efficient, and less sensible 
 of fatigue. What can be done easily 
 has at least a better chance of being 
 done well, and is sure to be done more 
 expeditiously. What was at first done 
 slowly comes to be done quickly ; what 
 was at first done slowly with accuracy 
 is at last done quickly with equal ac- 
 curacy. This is as true of mental opera- 
 tions as of bodily. Even a child, after 
 much practice, sums up a column of 
 figures with a rapidity which resembles 
 intuition. The act of speaking any 
 language, of reading fluently, of play- 
 ing music at sight, are cases as remark- 
 able as they are familiar. Among 
 bodily acts, dancing, gymnastic exer- 
 cises, ease and brilliancy of execution 
 on a musical instrument, are examples 
 of the rapidity and facility acquired by 
 repetition. In simpler manual opera- 
 tions, the effect is of course still sooner 
 produced. " The rapidity," Adam 
 iSmith observes, " with which some of 
 the operations of certain manufactures 
 are performed, exceeds what the human 
 hand could, by those who have never seen 
 
 COMBINATION OF LABOUR. 
 
 them, be supposed capable of acquir- 
 ing."* This skill is, naturally, at- 
 tained after shorter practice, in propor- 
 tion as the division of labour is more 
 minute ; and will not be attained in 
 the same degree at all, if the workman 
 has a greater variety of operations to 
 execute than allows of a sufficiently 
 frequent repetition of each. The ad- 
 vantage is not confined to the greater 
 efficiency ultimately attained, but in- 
 cludes also the diminished loss of time, 
 and waste of material, in learning the 
 art. " A certain quantity of material," 
 says Mr. Babbage,f " will in all cases 
 be consumed unprofitably, or spoiled, 
 by every person who learns an art ; 
 and as he applies himself to each new 
 process, he will waste some of the raw 
 material, or of the partly manufactured 
 commodity. But if each man commits 
 this waste in acquiring successively 
 every process, the quantity of waste 
 will be much greater than if each per- 
 son confine his attention to one process.' ' 
 And in general each will be much 
 sooner qualified to execute his one pro- 
 cess, if he be not distracted while learn- 
 ing it, by the necessity of learning 
 others. 
 
 The second advantage enumerated 
 by Adam Smith as arising from the 
 division of labour, is one on which I 
 cannot help thinking that more stress 
 is laid by him and others than it 
 deserves. To do full justice to 
 his opinion, I will quote his own 
 exposition of it. " The advantage 
 which is gained by saving the time 
 
 * " In astronomical observations, the 
 senses of the operator are rendered so acute 
 by habit, that he can estimate differences of 
 time to the tenth of a second ; and adjust his 
 measuring instrument to graduations of 
 which five thousand occupy only an inch. 
 It is the aanie throughout the commonest 
 processes of manufacture. A child who 
 fastens on the heads of pins will repeat an 
 operation requiring several distinct motions 
 of the muscles one hundred times a minute 
 for several successive hours. In a recent 
 Manchester paper it was stated that a 
 peculiar sort of twist or 'gimp,' which cost 
 three shillings making when first introduced, 
 was now manufactured for one penny; and 
 this not, as usually, by the invention of a 
 now machine, but solely through the in- 
 creased dexterity of the workman. '' J^lin- 
 burgh Revieu for January 18 19, p 81. 
 t Page 171.
 
 BOOK I. CHAPTER Vill. 5. 
 
 commonly lost in passing from one 
 son, of work to another, is much 
 greater than we should at first view be 
 pt to imagine it. It is impossible to 
 >ass very quickly from one kd of 
 work to another, that is carried on in 
 A different place, and with quite differ- 
 ent tools. A country weaver, who 
 cultivates a small farm, must lose a 
 good deal of time in passing from his 
 loom to the field, and from the field to 
 his loom. When the two trades can 
 be carried on in the same workhouse, 
 the loss of time is no doubt much less. 
 It is even in this case, however, very 
 considerable. A man commonly saun- 
 ters a little in turning his hand from 
 one sort of employment to another. 
 When he first begins the new work, 
 he is seldom very keen and hearty ; 
 his mind, as they say, does not go to 
 it, and for some time he rather trifles 
 than applies to good purpose. The 
 habit of sauntering and of indolent 
 careless application, which is naturally, 
 or rather necessarily acquired by every 
 country workman who is obliged to 
 change his work and his tools every 
 half hour, and to apply his hand in 
 twenty different ways almost every 
 day of his life, renders him almost 
 always slothful and lazy, and incapable 
 of any vigorous application even on the 
 most pressing occasions." This is 
 surely a most exaggerated description 
 of the inefficiency of country labour, 
 where it has any adequate motive to 
 exertion. Few workmen change their 
 work and their tools oftener than a 
 gardener; is he usually incapable of 
 vigorous application? Many of the 
 higher description of artisans have to 
 perform a great multiplicity of opera- 
 tions with a variety of tools. They do 
 not execute each of these with the 
 rapidity with which a factory work- 
 man performs his single operation ; 
 but they are, except in a merely 
 manual sense, more skilful labourers, 
 and in all senses whatever more ener- 
 getic. 
 
 Mr. Babbage, following in the track 
 of Adam Smith, says, " When the 
 human hand, or the human head, has 
 been for some time occupied in any 
 kind of work, it cannot instantly 
 
 change its employment with full effect. 
 The muscles of the limbs employed 
 have acquired a flexibility during their 
 exertion, and those not in action a 
 stiffness during rest, which renders 
 every change slow and unequal in the 
 commencement. Long habit also pro- 
 duces in the muscles exercised a capa- 
 city for enduring fatigue to a much 
 greater degree than they could support 
 under other circumstances. A similar 
 result seems to take place in any change 
 of mental exertion ; the attention 
 bestowed on the new subject not being 
 so perfect at first as it becomes after 
 some exercise. The employment of 
 different tools in the successive pro- 
 cesses, is another cause of the loss of 
 time in changing from one operation 
 to another. If these tools are simple, 
 and the change is not frequent, the 
 loss of time is not considerable ; but 
 in many processes of the arts, the tools 
 are of great delicacy, requiring accu- 
 rate adjustment every time they are 
 used ; and in many cases, the time 
 employed in adjusting bears a large 
 proportion to that employed in using 
 the tool. The sliding-rest, the divi- 
 ding and the drilling engine are of this 
 kind : and hence, in manufactories of 
 sufficient extent, it is found to be good 
 economy to keep one machine con- 
 stantly employed in one kind of work : 
 one lathe, for example, having a screw 
 motion to its sliding-rest along the 
 whole length of its bed, is kept con- 
 stantly making cylinders ; another, 
 having a motion for equalizing the 
 velocity of the wovk at the point at 
 which it passes tho tool, is kept for 
 facing surfaces ; whilst a third is con- 
 stantly employed in cutting wheels." 
 
 I am very far from implying that 
 these different considerations are of no 
 weight ; but I think there are counter- 
 considerations which are overlooked. 
 If one kind of muscular or mental la- 
 bour is different from another, for that 
 very reason it is to some extent a rest 
 from that other ; and if the greatest 
 vigour is not at once obtained in the 
 second occupation, neither could the 
 first have been indefinitely prolonged 
 without some relaxation of energy. 
 It is a matter of common experience
 
 COMBINATION OF LABOUfc. 
 
 that s change of occupation will often i 
 afford relief where complete repose 
 would otherwise be necessary, and that 
 A person can work many more hours 
 without fatigue at a succession of oc- 
 cupatu-:s, than if confined during the 
 whole time to one. Different occupa- 
 tions employ different muscles, or 
 different energies of the mind, some 
 of which rest and are refreshed while 
 others work. Bodily labour itself restg 
 from mental, and conversely. The 
 variety itself has an invigorating 
 effect on what, for want of a more phi- 
 losophical appellation, we must term 
 the animal spirits ; so important to 
 the efficiency of all work not mechani- 
 cal, and not unimportant even to that. 
 The comparative weight due to these 
 considerations is different with differ- 
 ent individuals ; some are more fitted 
 than others for persistency in one 
 occupation, and less fit for change ; 
 they require longer to get the steam 
 Dp (to use a metaphor now common) ; 
 the irksomeness of setting to work lasts 
 longer, and it requires more tune to 
 bring their faculties into full play, and 
 therefore when this is once done, they 
 do not like to leave off, but go on long 
 without intermission, even to the in- 
 jury of their health. Temperament 
 has something to do with these differ- 
 ences. There are people whose facul- 
 ties seem by nature to come slowly 
 into action, and to accomplish little 
 until they have been a long time 
 employed. Others, again, get into 
 action rapidly, but cannot, without 
 exhaustion, continue long. In this, 
 however, as in most other things, 
 though natural differences are some- 
 thing, habit is much more. The habit 
 of passing rapidly from one occupation 
 to another may be acquired, like other 
 habits, by early cultivation ; and when 
 it is acquired, there is none of the 
 sauntering which Adam Smith speaks 
 cf, after each change; no want of 
 energy and interest, but the workman 
 comes to each part of his occupation 
 with a freshness and a spirit which he 
 does not retain if he persists in any 
 one part (unless in case of unusual 
 excitement) beyond the length of time 
 to which he is accustomed. Women j 
 
 are usually (at least in their present 
 social circumstances) of far greater 
 versatility than men ; and the present 
 topic is an instance among multitudes, 
 how little the ideas and experience oi 
 women have yet counted for, in form- 
 ing the opinions of mankind. There 
 are few women who would not reject the 
 idea that work is made vigorous by being 
 protracted, and is inefficient for some 
 time after changing to a new thing. 
 Even in this case, habit, I believe, 
 much more than nature, is the cause 
 of the difference. The occupations of 
 nine out of every ten men are special, 
 those of nine out of every ten women 
 general, embracing a multitude of 
 details, each of which requires very 
 little time. Women are in the con- 
 stant practice of passing quickly from 
 one manual, and still more from one 
 mental operation to another, which 
 therefore rarely costs them either effort 
 or loss of time, while a man's occupation 
 generally consists in working steadily 
 for a long time at one thing, or one 
 very limited class of things. But the 
 situations are sometimes reversed, and 
 with them the characters. Women 
 are not found less efficient than men 
 for the uniformity of factory work, or 
 they would not so generally be em- 
 ployed for it ; and a man who has 
 cultivated the habit of turning his 
 hand to many things, far from being 
 the slothful and lazy person described 
 by Adam Smith, is usually remarkably 
 lively and active. It is true, however, 
 that change of occupation may be too 
 frequent even for the most versatile. 
 Incessant variety is even more fa- 
 tiguing than perpetual sameness. 
 
 The third advantage attributed bj 
 Adam Smith to the division of labour, 
 is, to a certain extent, real. Inven- 
 tions tending to save labour in a par- 
 ticular operation, are more likely to 
 occur to any one in proportion as his 
 thoughts are intensely directed to that 
 occupation, and continually employed 
 upon it. A person is not BO likely to 
 make practical improvements in ona 
 department of things, whose attention 
 is very much diverted to others. But, 
 in this, much more depends on general 
 intelligence and habitual activity cf
 
 BOOK I. CHAPTER VIH. 6. 
 
 mind, than on exclusiveness of occupa- 
 tion ; and if that exclusiveness is 
 carried to a degree unfavourable to the 
 cultivation of intelligence, there will be 
 more lost in this kind of advantage 
 than gained. We may add, that what- 
 ever may be the cause of making 
 inventions, when they are once made, 
 the increased efficiency of labour is 
 owing to the invention itself, and not 
 to the division of labour. 
 
 The greatest advantage (next to the 
 dexterity of the workmen) derived from 
 the minute division of labour which 
 takes place in modern manufacturing 
 industry, is one not mentioned by 
 Adam Smith, but to which attention 
 has been drawn by Mr. Babbage ; the 
 more economical distribution of labour, 
 by classing the work-people according 
 to their capacity. Different parts of 
 the same series of operations require 
 unequal degrees of skill and bodily 
 strength ; and those who have skill 
 enough for the most difficult, or 
 strength enough for the hardest parts 
 of the labour, are made much more 
 useful by being employed solely in 
 them ; the operations which every- 
 body is capable of, being left to those 
 who are fit for no others. Production 
 is most efficient when the precise 
 quantity of skill and strength, which is 
 required for each part of the process, 
 's employed in it, and no more. The 
 operation of pin-making requires, it 
 seems, in its different parts, such 
 different degrees of skill, that the wages 
 earned by the persons employed vary 
 from fourpence halfpenny a day to six 
 shillings ; and if the workman who is 
 paid at that highest rate had to perform 
 the whole process, he would be working 
 a. part of his time with a waste per 
 day equivalent to the difference be- 
 tween six shillings and fourpence half- 
 penny. Without reference to the loss 
 sustained in quantity of work done, and 
 supposing even that he could make a 
 pound of pins in the same time in 
 which ten workmen combining their 
 labour can make ten pounds, Mr. Bab- 
 bage computes that they would cost, in 
 making, three times and three-quarters 
 88 mucli as they now do by means of 
 Uie division of labour. In needle- 
 
 making, he adds, the difference would 
 be still greater, for in that, the scale 
 of remuneration for different parts of 
 the process varies from sixpence to 
 twenty shillings a day. 
 
 To the advantage which consists in 
 extracting the greatest possible amount 
 of utility from skill, may be added the 
 analogous one, of extracting the utmost 
 possible utility from tools. "If any 
 man," says an able writer,* " had all 
 the tools which many different occupa- 
 tions require, at least three-fourths of 
 them would constantly be idle and 
 useless. It were clearly then better, 
 were any society to exist where each 
 man had all these tools, and alternately 
 carried on each of these occupations, 
 that the members of it should, if 
 possible, divide them amongst them, 
 each restricting himself to some par- 
 ticular employment. The advantages 
 of the change to the whole community, 
 and therefore to every individual in it, 
 are great. In the first place, the va- 
 rious implements, being in constant 
 employment, yield a better return for 
 what has been laid out in procuring 
 them. In consequence their owners 
 can afford to have them of better 
 quality and more complete construc- 
 tion. The result of both events is, that 
 a larger provision is made for the 
 future wants of the whole society." 
 
 6. The division of labour, as all 
 writers on the subject have remarked, 
 is limited by the extent of the market. 
 If, by the separation of pin-making 
 into ten distinct employments, forty- 
 eight thousand pins can be made in a 
 day, this separation will only be ad- 
 visable if the number of accessible 
 consumers is such as to require, every 
 day, something like forty-eight thou- 
 sand pins. If there is only a demand' 
 for twenty-four thousand, the division 
 of labour can only bj advantageously 
 carried to the extent which will every 
 day produce that smaller number. 
 This, therefore, is a further mode in 
 which an accession of demand for 
 a commodity tends to increase the 
 
 * Statement of some New Principles on tht 
 tub/ret of Political Eco'to.ni/, b\ John Rae^ 
 (Boston, U.S.) p. 164,
 
 PRODUCTION ON A LARGE AND ON A SMALL SCALE. 81 
 
 efficiency of the labour employed in its 
 production. The extent of the market 
 may be limited by several causes : too 
 small a population ; the population too 
 scattered and distant to be easily ac- 
 cessible ; deficiency of roads and water 
 carriage ; or, finally, tlie population too 
 poor, that is, their collective labour 
 too little effective, to admit of their 
 being large consumers. In'VJence, 
 want of skill, and want of combination 
 of labour, among those who would 
 otherwise be buyers of a commodity, 
 limit, therefore, the practicable amount 
 of combination of labour among its pro- 
 ducers. In an early stage of civiliza- 
 tion, when the demand of any par- 
 ticular locality was necessarily small, 
 industry only flourished among those 
 who by their command of the sea-coast 
 or of a navigable river, could have the 
 whole world, or all that part of it 
 which lay on coasts or navigable rivers, 
 as a market for their productions. 
 The increase of the general riches of 
 the world, when accompanied with 
 freedom of commercial intercourse, im- 
 provements in navigation, and inland 
 communication by roads, canals, or 
 railways, tends to give increased pro- 
 ductiveness to the labour of every 
 
 nation in particular, by enabling each 
 locality to supply with its special 
 products so much larger a market, that 
 a great extension of the division of 
 labour in their production is an ordi- 
 nary consequence. 
 
 The division of laibour is also limited, 
 in many cases, by the nature of the 
 employment. Agriculture, for example, 
 is not susceptible of so great a division 
 of occupation as many branches of 
 manufactures, because its different 
 operations cannot possibly be simul- 
 taneous. One man cannot be always 
 ploughing, another sowing, and another 
 reaping. A workman who only prac- 
 tised one agricultural operation would 
 be idle eleven months of the year. The 
 same person may perform them all in 
 succession, and have, in most climates, 
 a considerable amount of unoccupied 
 time. To execute a great agricultural 
 improvement, it is often necessary that 
 many labourers should work together ; 
 but in general, except the few whose 
 business is superintendence, they all 
 work in the same manner. A canal or 
 a railway embankment cannot be 
 made without a combination of many 
 labourers ; but they are all excavators, 
 except the engineer and a few clerks. 
 
 CHAPTER IX. 
 
 OP PRODUCTION OK A LARGE, AND PRODUCTION OR A SMALL SCALB. 
 
 1. FROM the importance of com- 
 l.iiuvtion of labour, it is an obvious con- 
 clusion, that there are many cases in 
 which production is made much more 
 effective by being conducted on a large 
 scale. Whenever it is essential to the 
 greatest efficiency of labour that many 
 labourers should combine, even though 
 only in the way of Simple Co-operation, 
 the scale of the enterprise must be 
 such as to bring many labourers to- 
 gether, and the capital must be large 
 enough to maintain them. Still more 
 needful is this when the nature of the 
 employment allows, and the extent of 
 the possible market encourages, a 
 F.E. 
 
 considerable division of labour. The 
 larger the enterprise, the farther tho 
 division of labour may be carried. This 
 is one of the principal causes of large 
 manufactories. Even when no addi- 
 tional subdivision of the work would 
 follow an enlargement of the opera- 
 tions, there will be good economy it 
 enlarging them to the point at which 
 every person to whom it is convenient 
 to assign a special occupation, will 
 have full employment in that occupa- 
 tion. This point is well illustrated by 
 Mr. Babbage.* 
 
 " If machinesbe kept working through 
 * Page 214, et seqq.
 
 82 
 
 BOOK I. CHAPTER IX. 1. 
 
 the twenty-four hours," (which is evi- 
 dently the only economical mode of 
 employing them,) "it is necessary that 
 some person shall attend to admit the 
 workmen at the time they relieve each 
 other ; and whether the porter or other 
 servant so employed admit one person 
 or twenty, his rest will he equally dis- 
 turhed. It will also be necessary occa- 
 sionally to adjust or repair the machine; 
 and this can be done much better by 
 a workman accustomed to machine- 
 making, than by the person who uses 
 it. Now, since the good performance 
 and the duration of machines depend, 
 to a very great extent, upon correcting 
 every shake or imperfection in their 
 parts as soon as they appear, the 
 prompt attention of a workman resi- 
 dent on the spot will considerably re- 
 duce the expenditure arising from the 
 wear and tear of the machinery. But 
 in the case of a single lace-frame, or a 
 single loom, this would be too expensive 
 a plan. Here then arises another 
 circumstance which tends to enlarge 
 the extent of a factory. It ought to 
 consist of such a number of machines 
 as shall occupy the whole time of one 
 workman in keeping them in order : if 
 extended beyond that number, the 
 same principle of economy would point 
 out the necessity of doubling or tripling 
 the number of machines, in order to 
 employ the whole time of two or three 
 skilful workmen. 
 
 " When one portion of the workman's 
 labour consists in the exertion of mere 
 physical force, as in weaving, and in 
 many similar arts, it will soon occur to 
 the manufacturer, that if that part 
 were executed by a steam-engine, the 
 same man might, in the case of weav- 
 ing, attend to two or more looms at 
 once : and, since we already suppose 
 that one or more operative engineers 
 have been employed, the number of 
 looms may be so arranged that their 
 time shall be fully occupied in keeping 
 the steam-engine and the looms in 
 order. 
 
 " Pursuing the same principles, the 
 manufactory becomes gradually so en- 
 larged, that the expense of lighting 
 during the night amounts to a con- 
 nderable sum : and as there are 
 
 already attached to the establishment 
 persons who are up all night, and can 
 therefore constantly attend to it, and 
 also engineers to make and keep in re- 
 pair any machinery, the addition of an 
 apparatus for making gas to light the 
 factory leads to a new extension, at the 
 same time that it contributes, by di- 
 minishing the expense of lighting, and 
 the risk of accidents from fire, to re- 
 duce the cost of manufacturing. 
 
 " Long before a factory has reached 
 this extent, it will have been found 
 necessary to establish an accountant's 
 department, with clerks to pay the 
 workmen, and to see that they arrive 
 at their stated times ; and this de- 
 partment must be in communication 
 with the agents who purchase the raw 
 produce, and with those who sell the 
 manufactured article." It will cost 
 these clerks and accountants little more 
 time and trouble to pay a large number 
 of workmen than a small number : 
 to check the accounts of large transac- 
 tions, than of small. If the business 
 doubled itself, it would probably be 
 necessary to increase, but certainly not 
 to double, the number either of ac- 
 countants, or of buying and selling 
 agents. Every increase of business 
 would enable the whole to be carried on 
 with a proportionally smaller amount 
 of labour. 
 
 As a general rule, the expenses of a 
 business do not increase by any means 
 proportionally to the quantity of busi- 
 ness. Let us take as an example, a 
 set of operations which we are ac- 
 customed to see carried on by one great 
 establishment, that of the Post Office. 
 Suppose that the business, let us say 
 only of the London letter-post, instead 
 of being centralized in a single concern, 
 were divided among five or six com- 
 peting companies. Each of these would 
 be obliged to maintain almost as large 
 an establishment as is now sufficient 
 for the whole. Since each must arrange 
 for receiving and delivering letters in 
 all parts of the town, each must send 
 letter-carriers into every street, and 
 almost every alley, and this too as 
 many times in the day as is now done 
 by the Post Office, if the service is to 
 be as well performed. Each must have
 
 PRODUCTION ON A LARGE AND ON A SMALL SCALE. 83 
 
 an office for receiving letters in every 
 neighbourhood, with all subsidiary 
 arrangements for collecting the letters 
 i'roin the different offices and re-dis- 
 tributing them. To this must be added 
 the much greater number of superior 
 officers who would be required to check 
 and control the subordinates, implying 
 not only a greater cost in salaries for 
 such responsible officers, but the neces- 
 sity, perhaps, of being satisfied in many 
 instances with an inferior standard of 
 qualification, and so failing in the 
 object. 
 
 Whether or not the advantages ob- 
 tained by operating on a large scale 
 preponderate in any particular case 
 over the more watchful attention, and 
 greater regard to minor gains and 
 losses, usually found in small establish- 
 ments, can be ascertained, in a state 
 of free competition, by an unfailing 
 test. Wherever there are large 
 and small establishments in the same 
 business, that one of the two which in 
 existing circumstances carries on the 
 production at greatest advantage, will 
 be able to undersell the other. The 
 power of permanently underselling can 
 only, generally speaking, be derived 
 from increased effectiveness of labour ; 
 and this, when obtained by a more ex- 
 tended division of employment, or by 
 a classification tending to a better 
 economy of skill, always implies a 
 greater produce from the same labour, 
 and not merely the same produce from 
 less labour : it increases not the sur- 
 plus only, but the gross produce of 
 industry. If an increased quantity of 
 the particular article is not required, 
 and part of the labourers in conse- 
 quence lose their employment, the 
 capital which maintained and employed 
 them is also set at liberty ; and the 
 general produce of the country is in- 
 creased, by some other application of | 
 their labour. 
 
 Another of the causes of large manu- 
 factories, however, is the introduction 
 of processes requiring expensive ma- 
 chinery. Expensive machinery sup- 
 poses a large capital ; and is not re- 
 sorted to except with the intention of 
 producing, and the hope of selling, as 
 much of the article aa comes up to the 
 
 full powers of the machine. For both 
 these reasons, wherever costly ma- 
 chinery is used, the large system of 
 production is inevitable. But the 
 power of underselling is not in this 
 case so unerring a test as in the former, 
 of the beneficial effect on the total 
 production of the community. The 
 power of underselling does not depend 
 on the absolute increase of produce, 
 but on its bearing an increased propor- 
 tion to the expenses : which, as was 
 shown in a former chapter,* it may 
 do, consistently with even a diminution 
 of the gross annual produce. By the 
 adoption of machinery, a circulating 
 capital, which was perpetually con- 
 sumed and reproduced, has been con- 
 verted into a fixed capital, requiring 
 only a small annual expense to keep it 
 up : and a much smaller produce \vill 
 suffice for merely covering that ex- 
 pense, and replacing the remaining 
 circulating capital of the producer. 
 The machinery therefore might answer 
 perfectly well to the manufacturer, and 
 enable him to undersell his competitors, 
 though the effect on the production of 
 the country might be not an increase 
 but a diminution. It is true, the 
 article will be sold cheaper, and there- 
 fore, of that single article, there will 
 probably be not a smaller, but a greater 
 quantity sold ; since the loss to the 
 community collectively has fallen upon 
 the work-people, and they are not the 
 principal customers, if customers at 
 all, of most branches of manufacture. 
 But though that particular branch of 
 industry may extend itself, it will be 
 by replenishing its diminished circu- 
 lating capital from that of the com- 
 munity generally ; and if the labourers 
 employed in that department escape 
 loss of employment, it is because the 
 less will spread itself over the labouring 
 people at large. If any of them are 
 reduced to the condition of unproduc 
 tive labourers, supported by voluntary 
 of legal charity, the gross produce of 
 the country is to that extent perma- 
 nently diminished, until the ordinary 
 progress of accumulation makes it up : 
 but if the condition of the labouring 
 classes enable them to bear a tempo- 
 Supra, chap. vi. p. 59. 
 G 2
 
 84 
 
 BOOK i. CHAPTER IX. 2. 
 
 rary reduction of wages, and the super- 
 seded labourers become absorbed in 
 other employments, their labour is 
 etill productive, and the breach in the 
 gross produce of the community is re- 
 paired, though not the detriment to 
 ., the labourers. I have restated thie 
 exposition, which has already been 
 made in a former place, to impress 
 more strongly the truth, that a 
 mode of production does not of neces- 
 sity increase the productive effect of 
 the collective labour of a community, 
 because it enables a particular com- 
 modity to be sold cheaper. The one 
 consequence generally accompanies the 
 other, but not necessarily. I will not 
 here repeat the reasons I formerly 
 gave, nor anticipate those which will 
 be given more fully hereafter, for deem- 
 ing the exception to be rather a case 
 abstractedly possible, than one which 
 is frequently realized in fact. 
 
 A considerable part of the saving of 
 labour effected by substituting the 
 large system of production for the 
 small, is the saving in the labour of 
 the capitalists themselves. If a hun- 
 dred producers with small capitals 
 carry on separately the same business, 
 the superintendence of each concern 
 will probably require the whole atten- 
 tion of the person conducting it, suffi- 
 ciently at least to hinder his time or 
 thoughts from being disposable for any- 
 thing else : while a single manufac- 
 turer possessing a capital equal to the 
 sum of theirs, with ten or a dozen 
 clerks, could conduct the whole of their 
 amount of business, and have leisure 
 too for other occupations. The small 
 capitalist, it is true, generally com- 
 bines with the business of direction 
 eome portion of the details, which the 
 other leaves to his subordinates : the 
 small farmer follows his own plough, 
 the small tradesman serves in his own 
 shop, the small weaver plies his own 
 jboin. But in this very union of func- 
 tions there is, in a great proportion of 
 cases, a want of economy. The prin- 
 cipal in the concern is either wasting, 
 in the routine of a business, qualities 
 suitable for the direction of it, or he is 
 only fit for the former, and then the 
 latter will be ill done. I must observe 
 
 however that I do not attach, to this 
 saving of labour, the importance often 
 ascribed to it. There is undoubtedly 
 much more labour expended in the 
 superintendence of many small capitals 
 than in that of one large capital. For 
 this labour however the small pro- 
 ducers have generally a full compensa- 
 tion, in the feeling of being their own 
 masters, and not servants of an em- 
 ployer. It may be said, that if they 
 value this independence they will sub- 
 mit to pay a price for it, and to sell at 
 the reduced rates occasioned by the 
 competition of the great dealer or ma- 
 nufacturer. But they cannot always 
 do this and continue to gain a living. 
 They thus gradually disappear from 
 society. After having consumed their 
 little capital in prolonging the unsuc- 
 cessful struggle, they either sink into 
 the condition of hired labourers, or be- 
 come dependent on others for support. 
 
 2. Production on a large scale is 
 greatly promoted by the practice of 
 forming a large capital by the combi- 
 nation of many small contributions ; or, 
 in other words, by the formation of 
 joint stock companies. The advan- 
 tages of the joint stock principle are 
 numerous and important. 
 
 In the first place, many undertakings 
 require an amount of capital beyond 
 the means of the richest individual or 
 private partnership. No individual 
 could have made a railway from Lon- 
 don to Liverpool ; it is doubtful if any 
 individual could even work the traffic 
 on it, now when it is made. The go- 
 vernment indeed could have done both ; 
 and in countries where the practice of 
 co-operation is only in the earlier 
 stages of its growth, the government 
 can alone be looked to for any of the 
 works for which a great combination 
 of means is requisite ; because it can 
 obtain those means by compulsory 
 taxation, and is already accustomed to 
 the conduct of large operations. For 
 reasons, however, which are tolerably 
 well known, and of which we shall treat 
 fully hereafter, government agency for 
 the conduct of industrial operations is 
 generally one of the least eligible re- 
 sources, when any other is available.
 
 PRODUCTION ON A LARGE AND ON A SMALL SCALE. 65 
 
 Next, there are undertakings which 
 individuals are not absolutely inca- 
 pable of performing, but which they 
 cannot perform on the scale and with 
 the continuity which are ever more 
 and more required by the exigencies of 
 n. society in an advancing state. In- 
 dividuals are quite capable of despatch- 
 ing ships from England to any or every 
 partTof the world, to carry passengers 
 nnd letters ; the thing was done before 
 joint stock companies for the purpose 
 were heard of. But when, from the 
 increase of population and transactions, 
 as well as of means of payment, the 
 public will no longer content them- 
 selves with occasional opportunities, 
 but require the certainty that packets 
 shall start regularly, for some places 
 once or even twice a day, for others 
 once a week, for others that a steam 
 ship of great size and expensive con- 
 struction shall depart on fixed days 
 twice in each month, it is evident that 
 to afford an assurance of keeping up 
 with punctuality such a circle of costly 
 operations, requires a much larger 
 capital and a much larger staff of 
 qualified subordinates than can be 
 commanded by an individual capitalist. 
 There are other cases, again, in which 
 though the business might be perfectly 
 well transacted with small or mode- 
 rate capitals, the guarantee of a great 
 subscribed stock is necessary or desir- 
 able as a security to the public for the 
 fulfilment of pecuniary engagements. 
 This is especially the case when the 
 nature of the business requires that 
 numbers of persons should be willing 
 to trust the concern with their money : 
 as in the business of banking, and 
 that of insurance : to both of which 
 the joint stock principle is eminently 
 adapted. It is an instance of the folly 
 and jobbery of the rulers of mankind, 
 that until a late period the joint stock 
 principle, as a general resort, was in 
 this country interdicted by law to these 
 two modes of business ; to banking 
 altogether, and to insurance in the 
 department of sea risks ; in order to 
 bestow a lucrative monopoly on par- 
 ticular establishments which the go- 
 vernment was pleased exceptionally to 
 license, namely the Bank of England, 
 
 and two insurance companies, the Lon- 
 don and the Royal Exchange. 
 
 Another advantage of joint stock, or 
 associated management, is its incident 
 of publicity. This is not an invariable, 
 but It is a natural, consequence of the 
 joint stock principle, and might be, as 
 in some important cases it already is, 
 compulsory. In banking, insurance, 
 and other businesses which depend 
 wholly on confidence, publicity is a still 
 more important element of success than 
 a large subscribed capital. A heavy 
 loss occurring in a private bank may be 
 kept secret ; even though it were of 
 such magnitude as to cause the ruin of 
 the concern, the banker may still carry 
 it on for years, trying to retrieve its po- 
 sition, only to fall in the end with a 
 greater crash: but this cannot so easilj 
 happen in the case of a joint stock com 
 pany whose accounts are publisher 
 periodically. The accounts, even if 
 cooked, still exercise some check ; and 
 the suspicions of shareholders, breaking 
 out at the general meetings, put the 
 public on their guard. 
 
 These are some of the advantages of 
 joint stock over individual manage- 
 ment. But if we look to the other side 
 of the question, we shall find that indi- 
 vidual management has also very great 
 advantages over joint stock. The chief 
 of these is the much keener interest of 
 the managers in the success of the 
 undertaking. 
 
 The administration of A joint stock 
 association is, in the main, adminis- 
 tration by hired servants. Even the 
 committee, or board of directors, who 
 are supposed to superintend the manage- 
 ment, and who do really appoint and 
 remove the managers, have no pecu- 
 niary interest in the good working of 
 the concern beyond the shares they in- 
 dividually hold, which are always a 
 very small part of the capital of the 
 association, and in general but a small 
 part of the fortunes of the directors 
 themselves ; and the part they take in 
 the management usually divides their 
 time with many other occupations, of 
 as great or greater importance to their 
 own interest; the business beinj the 
 principal concern of no one except those 
 who are hired to carry it 011. Bui
 
 BOOK 1. CHAPTER IX. 2. 
 
 experience shows, arid proverbs, the ex- 
 pression of popular experience, attest, 
 how inferior is the quality of hired 
 servants, compared with the ministra- 
 tion of those personally interested in 
 the work, and how indispensable, when 
 hired service must be employed, is 
 " the master's eye" to watch over it. 
 
 The successful conduct of an indus- 
 trial enterprise requires two quite dis- 
 tinct qualifications : fidelity, and zeal. 
 The fidelity of the hired managers of a 
 concern it is possible to secure. When 
 their work admits of being reduced to 
 a definite set of rules, the violation of 
 these is a matter on which conscience 
 cannot easily blind itself, and on which 
 responsibility may be enforced by the 
 loss of employment. But to carry on a 
 great business successfully, requires a 
 hundred things which, as they cannot 
 be defined beforehand, it is impossible 
 to convert into distinct and positive 
 obligations. First and principally, it 
 requires that the directing mind should 
 be incessantly occupied with the sub- 
 ject ; should be continually laying 
 schemes by which greater profit may 
 be obtained, or expense saved. This 
 intensity of interest in the subject it is 
 seldom to be expected that any one 
 should feel, who is conducting a busi- 
 ness as the hired servant and for the 
 profit of another. There are experi- 
 ments in human affairs which are con- 
 clusive on the point. Look at the 
 whole class of rulers, and ministers of 
 state. The work they are entrusted 
 with, is among the most interesting 
 and exciting of all occupations; the per- 
 sonal share which they themselves reap 
 of the national benefits or misfortunes 
 which befal the state under their rule, 
 is far from trifling, and the rewards 
 and punishments which they may ex- 
 pect from public estimation are of the 
 plain and palpable kind which are 
 most keenly felt and most widely ap- 
 preciated. Yet how rare a thing is it 
 to find a statesman in whom mental 
 indolence is not stronger than all these 
 inducements. How infinitesimal is the 
 proportion who trouble themselves to 
 form, or even to attend to, plans of 
 public improvement, unless when it is 
 made etill more troublesome to them 
 
 to remain inactive ; or who have any 
 other real desire than that of rubbing 
 on, so as to escape general blame. On 
 a smaller scale, all who have ever em- 
 ployed hired labour have had ample 
 experience of the efforts made to give 
 as little labour in exchange for the 
 wages, as is compatible with not being 
 turned off. The universal neglect by 
 domestic servants of their employer's 
 interests, wherever these are not pro- 
 tected by some fixed rule, is matter of 
 common remark ; unless where long 
 continuance in the same service, and 
 reciprocal good offices, have produced 
 either personal attachment, or some 
 feeling of a common interest. 
 
 Another of the disadvantages of joint 
 stock concerns, which is in some degree 
 common to all concerns on a large scale, 
 is disregard of small gains and small 
 savings. In the management of a great 
 capital and great transactions, espe- 
 cially when the managers have not 
 much interest in it of their own, small 
 sums are apt to be counted for next to 
 nothing ; they never seem worth the 
 care and trouble which it costs to attend 
 to them, and the credit of liberality and 
 openhandedness is cheaply bought by 
 a disregard of such trifling considera- 
 tions. But small profits and small ex- 
 penses, often repeated, amount to great 
 gains and losses : and of this a large 
 capitalist is often a sufficiently good 
 calculator to be practically aware ; and 
 to arrange his business on a system, 
 which if enforced by a sufficiently vigi- 
 lant superintendence, precludes thepos- 
 sibility of the habitual waste, otherwise 
 incident to a great business. But the 
 managers of a joint stock concern sel- 
 dom devote themselves sufficiently to 
 the work, to enforce unremittingly, 
 even if introduced, through every detail 
 of the business, a really economical 
 
 From considerations of this nature, 
 Adam Smith was led to enunciate as a 
 principle, that joint stock companies 
 could never be expected to maintain 
 themselves without an exclusive privi- 
 lege, except in branches of business 
 which like banking, insurance, and 
 some others, admit of being, in a con- 
 siderable degree, reduced to fixed rules.
 
 PRODUCTION ON A LARGE AND ON A SMALL SCALE. 87 
 
 This however is one of those over-state- 
 ments of a tme principle, often met 
 with in Adam Smith. In his days there 
 were few instances of joint stock com- 
 panies which had been permanently 
 successful without a monopoly, except 
 the class of cases which he referred to ; 
 but since his time there have been 
 many ; and the regular increase both 
 of the spirit of combination and of the 
 ability to combine, will doubtless pro- 
 duce many more. Adam Smith fixed 
 his observation too exclusively on the 
 superior energy and more unremitting 
 attention brought to a business in which 
 the whole stake and the whole gain be- 
 long to the persons conducting it ; and 
 he overlooked various countervailing 
 considerations which go a great way 
 towards neutralizing even that great 
 point of superiority. 
 
 Of these one of the most important 
 is that which relates to the intellectual 
 and active qualifications of the direct- 
 ing head. The stimulus of individual 
 interest is some security for exertion, 
 but exertion is of little avail if the in- 
 telligence exerted is of an inferior order, 
 which it must necessarily be in the 
 majority of concerns carried on by the 
 persons chiefly interested in them. 
 Where the concern is large, and can 
 afford a remuneration sufficient to at- 
 tract a class of candidates superior to 
 the common average, it is possible to 
 select for the general management, and 
 for all the skilled employments of a 
 subordinate kind, persons of a degree 
 of acquirement and cultivated intelli- 
 gence which more than compensates 
 for their inferior interest in the result. 
 Their greater perspicacity enables 
 them, with even a part of their minds, 
 to see probabilities of advantage which 
 never occur to the ordinary run of men 
 by the continued exertion of the whole 
 of theirs ; and their superior knowledge, 
 and habitual rectitude of perception 
 and of judgment, guard them against 
 blunders, the fear of which would pre- 
 vent the others from hazarding their 
 interests in any attempt out of the 
 ordinary routine. 
 
 It must be further remarked, that it 
 is not a necessary consequence of joint 
 stock management, that the persons 
 
 employed, whsther in superior or in 
 subordinate offices, should be paid 
 wholly by fixed salaries. There are 
 modes of connecting more or less inti- 
 mately the interest of the employe* 
 with the pecuniary success of the con- 
 cern. There is a long series of inter- 
 mediate positions, between working 
 wholly on one's own account, and work- 
 ing by the day, week, or year for an 
 invariable payment. Even in the case 
 of ordinary unskilled labour, there is 
 such a thing as task-work, or working 
 by the piece : and the superior effi- 
 ciency of this is so well known, that 
 judicious employers always resort to it 
 when the work admits of being put out 
 in definite portions, without the neces- 
 sity of too troublesome a surveillance to 
 guard against inferiority in the execu- 
 tion. In the case of the managers of 
 joint stock companies, and of the super- 
 intending and controlling officers in 
 many private establishments, it is a 
 common enough practice to connect 
 their pecuniary interest with the inte- 
 rest of their employers, by giving them 
 part of their remuneration in the form 
 of a percentage on the profits. The 
 personal interest thus given to hired 
 servants is not comparable in intensity 
 to that of the owner of the capital ; but 
 it is sufficient to be a very material 
 stimulus to zeal and carefulness, and, 
 when added to the advantage of supe- 
 rior intelligence, often raises the quality 
 of the service much above that which 
 the generality of masters are capable of 
 rendering to themselves. The ulterior 
 extensions of which this principle of 
 remuneration is susceptible, being of 
 great social as well as economical im- 
 portance, will be more particularly ad- 
 verted to in a subsequent stage of the 
 present inquiry. 
 
 As I have already remarked of large 
 establishments generally, when com- 
 pared with small ones, whenever com- 
 petition is free its results will show 
 whether individual orjoint stock agency 
 is best adapted to the particular case, 
 since that which is most efficient and 
 most economical will always in the end 
 succeed in underselling the other. 
 
 3 The possibilitv of substituting
 
 88 
 
 the large system of production for the 
 small, depends, of course, in the first 
 place, on the extent of the market. The 
 large system can only be advantageous 
 when a large amount of business is to 
 be done : it implies, therefore, either a 
 populous and flourishing community, 
 or a great opening for exportation. 
 Again, tbis as well as every other 
 change in the system of production is 
 greatly favoured by a progressive con- 
 dition of capital. It is chiefly when 
 the capital of a country is receiving a 
 great annual increase, that there is a 
 large amount of capital seeking for 
 investment : and a new enterprise is 
 much sooner and more easily entered 
 upon by new capital, than by with- 
 drawing capital from existing employ- 
 ments. The change is also much faci- 
 litated by the existence of large capitals 
 in few hands. It is true that the same 
 amount of capital can be raised by 
 bringing together many small sums. 
 But this (besides that it is not equally 
 well suited to all branches of industry), 
 supposes a much greater degree of com- 
 mercial confidence and enterprise dif- 
 fused through the community, and 
 belongs altogether to a more advanced 
 stage of industrial progress. 
 
 In the countries in which there are 
 the largest markets, the widest diffu- 
 sion of commercial confidence and en- 
 terprise, the greatest annual increase 
 of capital, and the greatest number of 
 large capitals owned by individuals, 
 there is a tendency to substitute more 
 and more, in one branch of industry 
 after another, large establishments for 
 small ones. In England, the chief 
 type of all these characteristics, there 
 is a perpetual growth not only of large 
 manufacturing establishments, but also, 
 wherever a sufficient number of pur- 
 chasers are assembled, of shops and 
 warehouses for conducting retail busi- 
 ness on a large scale. These are almost 
 always able to undersell the smaller 
 tradesmen, partly, it is understood, by 
 means of division of labour, and the 
 economy occasioned by limiting the 
 employment of skilled agency to cases 
 where skill is required ; and partly, no 
 doubt, by the saving of labour arising 
 from the great scale of the transactions : 
 
 BOOK I. CHAPTER IX. 3. 
 
 as it costs no more time, and not much 
 more exertion of mind, to make a large 
 purchase, for example, than a small 
 one, and very much less than to make 
 a number of small ones. 
 
 With a view merely to production, 
 and to the greatest efficiency of labour, 
 this change is wholly beneficial. In 
 some cases it is attended with draw- 
 backs, rather social than economical, 
 the nature of which has been already 
 hinted at. But whatever disadvan- 
 tages may be supposed to attend on the 
 change from a small to a large system 
 of production, they are not applicable 
 to the change from a large to a still 
 larger. \Vhen. in any employment, 
 the regime of independent small pro- 
 ducers has either never been possible, 
 or has been superseded, and the sys- 
 tem of many work-people under one 
 management has become fully es- 
 tablished, from that time any further 
 enlargement in the scale of production 
 is generally an unqualified benefit. It 
 is obvious, for example, how great an 
 economy of labour would be obtained 
 if London were supplied by a single 
 gas or water company instead of the 
 existing plurality. While there are 
 even as many as two, this implies 
 double establishments of all sorts, when 
 one only, with a small increase, could 
 probably perform the whole operation 
 equally well ; double sets of machinery 
 and works, when the whole of the gas 
 or water required could generally be 
 produced by one set only ; even double 
 sets of pipes, if the companies did not 
 prevent this needless expense by agree- 
 ing upon a division of the territory. 
 Were there only one establishment, 
 it could make lower charges, consist- 
 ently with obtaining the rate of pro- 
 fit now realized. But would it do so ? 
 Even if it did not, the community in 
 the aggregate would still be a gaine r 
 since the shareholders are a part of 
 the community, and they would obtain 
 higher profits while the consumers 
 paid only the same. It is, however, an 
 error to suppose that the prices are 
 ever permanently kept down by the 
 competition of these companies. Where 
 competitors are so few, they always 
 end by agreeing not to compete. They
 
 PRODUCTION ON A LAftGE AND ON A SMALL SCALK 89 
 
 may run a race of cheapness to ruin a 
 new candidate, but as soon as he has 
 established his footing they come to 
 terms with him. When, therefore, a 
 business of real public importance can 
 only be carried on advantageously upon 
 so large a scale as to render the liberty 
 of competition almost illusory, it is an 
 unthrifty ciispensation of the public re- 
 Tources that several costly sets of ar- 
 rangements should bo kept up for the 
 purpose of rendering to the community 
 this one service. It is much better to 
 treat it at once as a public function ; 
 and if it be not such as the government 
 itself could beneficially undertake, it 
 should be made over entire to the com- 
 pany or association which will perform 
 it on the best terms for the public. In 
 the case of railways, for example, no 
 one can desire to see the enormous 
 waste of capital and land (not to speak 
 of increased nuisance) involved in the 
 construction of a second railway to 
 connect the same places already united 
 by an existing one ; while the two 
 would not do the work better than it 
 could be done by one, and after a short 
 time would probably be amalgamated. 
 Only one such line ought to be permitted, 
 but the control over that line never 
 ought to be parted with by the State, 
 unless on a temporary concession, as 
 in France ; and the vested right which 
 Parliament has allowed to be acquired 
 by the existing companies, like all 
 other proprietary rights which are op- 
 posed to public utility, is morally valid 
 only as a claim to compensation. 
 
 4. The question between the 
 large and the small sj'stems of pro- 
 duction as applied to agriculture be- 
 tween large and small farming, the 
 arande and the petite culture stands, 
 in many respects, on different grounds 
 from the general question between 
 great and small industrial establish- 
 ments. In its social aspects, and as 
 an element in the Distribution of 
 Wealth, this question will occupy us 
 hereafter: but even as a question of 
 production, the superiority of the large 
 system in agriculture is by no means 
 BO clearly established as in manufac- 
 tures. 
 
 I have already remarked, that tho 
 operations of agriculture are little sus- 
 ceptible of benefit from the division of 
 labour. There is but little separation 
 of employments even on the largest 
 farms. The same persons may not in 
 general attend to the live stock, to the 
 marketing, and to the cultivation of 
 the soil ; but much beyond that pri- 
 mary and simple classification the 
 subdivision is not carried. The com- 
 bination of labour of which agriculture 
 is susceptible, is chiefly that which 
 Mr. Wakefield terms Simple Co-opera- 
 tion ; several persons nelping one 
 another in the same work, at the same 
 time and place. But I confess it 
 seems to me that this able writer at- 
 tributes more importance to that kind 
 of co-operation, in reference to agricul- 
 ture properly so called, than it de- 
 serves. None of the common farming 
 operations require much of it. There 
 is no particular advantage in setting a 
 great number of people to work to- 
 gether in ploughing or digging or sow- 
 ing the same field, or even in mowing 
 or reaping it unless time presses. A 
 single family can generally supply all 
 the combination of labour necessary 
 for these purposes. And in the works 
 in which an union of many efforts is 
 really needed, there is seldom found 
 any impracticability in obtaining it 
 where farms are small. 
 
 The waste of productive power by sub- 
 division of the land often amounts to a 
 great evil, but this applies chiefly to a 
 subdivision so minute, that the cultiva- 
 tors have not enough land to occupy 
 their time. Up to that point the same 
 principles which recommend large 
 manufactories are applicable to agri- 
 culture. For the greatest productive 
 efficiency, it is generally desirable 
 (though even this proposition must be 
 received with qualifications) that no 
 family who have any land, should have 
 less than they could cultivate, or than 
 will fully employ their cattle and tools. 
 These, however, are not the dimensions 
 of large farms, but of what are reckoned 
 in England very small ones. Th 
 large farmer has some advantage it 
 the article of buildings. It does not 
 cost BO much to house a great numbet
 
 90 
 
 BOOK I. CHAPTER IX. - 4. 
 
 of cattle 5n one building, as to lodgi 
 them equally well in several buildings 
 There is also some advantage in im 
 plements. A small farmer is not so 
 likely to possess expensive instru 
 ments. But the principal agricultural 
 implements, even when of the best 
 construction, are not expensive. It may 
 not answer to a small farmer to own a 
 threshing machine, for the small quan- 
 tity of corn he has to thresh ; bul 
 there is no reason why such a machine 
 should not in every neighbourhood be 
 owned in common, or provided by some 
 person to whom the others pay a con- 
 sideration for its use ; especially as, 
 when worked by steam, they are so 
 constructed as to be moveable.* The 
 large fanner can make some saving in 
 cost of carriage. There is nearly as 
 much trouble in carrying a small por- 
 tion of produce to market, as a much 
 greater produce ; in bringing home a 
 small, as a much larger quantity of 
 manures, and articles of daily con- 
 sumption. There is also the greater 
 cheapness of buying things in large 
 quantities. These various advantages 
 must count for something, but it does 
 not seem that they ought to count for 
 very much. In England for some 
 generations, there has been little 
 experience of small farms ; but in Ire- 
 land the experience has been ample, 
 not merely under the worst but under 
 the best management : and the highest 
 Irish authorities may be cited in oppo- 
 sition to the opinion which on this 
 subject commonly prevails in England. 
 Mr. Blacker, for example, one of the 
 most experienced agriculturists and 
 successful improvers in the North of 
 Ireland, whose experience was chiefly 
 in the best cultivated, which are also 
 the most minutely divided parts of the 
 country, was of opinion, that tenants 
 holding farms not exceeding from five 
 
 * The observations in the text may here- 
 after require some degree of modification 
 from inventions such as the steam plough 
 and the reaping machine. The effect, how- 
 ever, of these improvements on the relative 
 advantages of large and small farms, will not 
 depend on the efficiency of the instruments, 
 but on their costliness. I see no reason to 
 expect that this will be such as to make 
 them inaccessible to small farmers, or com- 
 binations of small farmers. 
 
 to eight or ten acres, could live corn- 
 fortably, and pay as high a rent as any 
 large farmer whatever. " I am firmly 
 persuaded" (he says,*) " that the small 
 farmer who holds his own plough and 
 digs his own ground, if he follows a 
 proper rotation of crops, and feeds his 
 cattle in the house, can undersell the 
 large farmer, or in other words can pay 
 a rent which the other cannot afford : 
 and in this I am confirmed by the 
 opinion of many practical men who 
 have well considered the subject. . . . 
 The English farmer of 700 to 800 
 acres is a kind of man approaching to 
 what is known by the namts of a gentle- 
 man farmer. He must have his horse to 
 ride, and hi s gig, and perhaps an overseer 
 to attend to his labourers ; he certainly 
 cannot superintend himself the labour 
 going on in a farm of 800 acres." 
 After a few other remarks, he adds, 
 " Besides all these drawbacks, which 
 the small farmer knows little about, 
 there is the great expense of carting 
 out the manure from the homestead to 
 such a great distance, and again cart- 
 ing home the crop. A single horse 
 will consume the produce of more land 
 than would feed a small farmer and 
 his wife and two children. And what 
 is more than all, the large farmer says 
 to his labourers, go to your work ; but 
 when the small farmer has occasion to 
 hire them, he says, come ; the intelli- 
 gent reader will, I dare say, understand 
 the difference." 
 
 One of the objections most urged 
 against small farms is, that they do not 
 and cannot maintain, proportionally to 
 their extent, so great a number of cattle 
 as large farms, and that this occasions 
 such a deficiency of manure, that a soil 
 much subdivided must always be im- 
 poverished. It will be found, however, 
 that subdivision only produces this 
 effect when it throws the land into the 
 hands of cultivators so poor as not to 
 possess the amount of live stock suit- 
 ible to the size of their farms. A small 
 'arm and a badly stocked farm are not 
 synonymous. To make the comparison 
 "airly, we must suppose the same 
 
 * Prize Essay on the Management of Landed 
 ^roperty in Ireland, by "William Blacker, 
 *isq. (1837,) p. 23.
 
 PRODUCTION ON A LARGE AND OK A SMALL SCALE. 
 
 amount of capital which is possessed 
 by the large farmers to be disseminated 
 among the small ones. When this 
 condition, or even any approach to it, 
 exists, and when stall feeding is prac- 
 tised (and stall feeding now begins to 
 be considered good economy even on 
 large farms), experience, far from bear- 
 ing out the assertion that small farm- 
 ing is unfavourable to the multiplica- 
 tion of cattle, conclusively establishes 
 the very reverse. The abundance of 
 cattle, and copious use of manure, on 
 the small farms of Flanders, are the 
 most striking features in that Flemish 
 agriculture which is the admiration of 
 all competent judges, whether in Eng- 
 land or on the Continent.* 
 
 * " The number of beasts fed on a farm 
 of which the whole Is arable land," (says the 
 elaborate and intelligent treatise on Flemish 
 Husbandry, from personal observation and 
 the best sources, published in the Library of 
 the Society for the Diffusion of Useful 
 Knowledge,) "is surprising to those who are 
 not acquainted with the mode in which the 
 food is prepared for the cattle. A beast for 
 every three acres of land is a common pro- 
 portion, and in very small occupations where 
 much spade husbandry .9 used, the propor- 
 tion is still greater. After comparing the 
 accounts given >n a variety of places and 
 situations of the average quantity of milk 
 which a eow gives when fed in the stall, the 
 result is, that it greatly exceeds that of our 
 best dairy farms, and the quantity of butter 
 made from a given quantity of milk is 
 also greater. It appears astonishing that the 
 occupier of only ten or twelve acres of light 
 arable land should be able to maintain four 
 or five cows, but the fact is notorious in the 
 Waes country." (pp. 59, GO.) 
 
 This subject is treated very intelligently 
 in the work of M. Passy, On Systems of Cul- 
 tivation and their Influence on Social Economy, 
 ona of the most impartial discussions, as be- 
 tween the two systems, which has yet ap- 
 peared in France. 
 
 " Without doubt it ii England that, on an 
 equal surface, feeds the greatest number of 
 animals ; Holland and some parts of Lom- 
 bardy can alone vie with her in this respect : 
 but is this a consequence of the mode of cul- 
 tivation, and have not climate and local 
 situation a share in producing it ? Of this 
 I think there can be no doubt. In fact, what- 
 ever may have been said, wherever large and 
 tmall cultivation meet in the same place, the 
 latter, though it cannot support as many sheep, 
 possesses, all things considered, the greatest 
 quantity of manure-producing animals. 
 
 " In Belgium, for example, the two pro- 
 vinces of smallest farms are Antwerp and 
 East Flanders, and they possess on an average 
 for every 100 hectares (250 acres) of culti- 
 vated land, 74 horned cattle and 14 sheep. 
 
 The disadvantage, when disadvan- 
 tage there is, of BUI all, or rather of pea- 
 sant farming, as compared with capi- 
 talist fanning, must chiefly consist in 
 inferiority of skill and knowledge ; but 
 it is not true, as a general fact, that 
 such inferiority exists. Countries of 
 small farms and peasant farming, Flan- 
 ders and Italy, had a good agriculture 
 many generations before England, and 
 theirs is still, as a whole, probably the 
 best agriculture in the world. The 
 empirical skill, which is the effect of 
 daily and close observation, peasant 
 farmers often possess in an eminent 
 degree. The traditional knowledge, 
 for example, of the culture of the vine, 
 by the peasantry of the 
 
 The two provinces where we find the large 
 farms are Namur and Hainaut, and they 
 average, for every 100 hectares of cultivated 
 ground, only 30 horned cattle and 45 sheep. 
 Reckoning, as is the custom, ten sheep a. 
 equal to one head of horned cattle, we find 
 in the first case, the equivalent of 76 I <M st. 
 to maintain the fecundity of the soil ; in the 
 latter case less than 35, a difference which 
 must be called enormous. (See the statisti- 
 cal documents published by the Minister of 
 the Interior.) The abundance of animals, in 
 the parts of Belgium which are most sub- 
 divided, is nearly as great as in England. 
 Calculating the number in England in pro- 
 portion only to the cultivated ground, there 
 are for each 100 hectares, 65 horned cattle 
 and nearly 260 sheep, together equal to 91 
 of the former, being only an excess of 15. 
 It should besides be remembered, that in 
 Belgium stall feeding being continued nearly 
 the whole year, hardly any of the manure is 
 lost, while in England, grazing in the open 
 fields diminishes considerably the quantity 
 which can be completely utilized. 
 
 " Again, in the Department of the Nord, 
 the arrondissements which have the smallest 
 farms support the greatest quantity of 
 animals. While the arrondissements of Lille 
 and Hazebrouck, besides a greater number 
 of horses, maintain the equivalent of 52 and 
 46 head of horned cattle, those of Dunkirk 
 and Avesnes, where the farms are larger, 
 produce the equivalent of only 44 and 40 
 head. (See the statistics of France published 
 by the Minister of Commerce.) 
 
 " A similar examination extended to other 
 portions of France would yield similar re- 
 sults. In the immediate neighbourhood ot 
 towns, no doubt, the small farmers, having 
 no difficulty in purchasing manure, do not 
 maintain animals : but, as a general rule, the 
 kind of cultivation which takes most out of 
 the ground must be that which isobligedtobe 
 most active in renewing its fertility. Assur- 
 edly the small farms cannot have numerous 
 flocks of sheep, and this is an inconvenieltBB"; 
 but they support more horned cattle than the
 
 BOOK 1. CHAPTER Lt. 4. 
 
 countries where the best wines are 
 produced, is extraordinary. There is 
 no doubt an absence of science, or at 
 least of theory ; and to some extent a 
 deficiency of the spirit of improvement, 
 BO far as relates to the introduction of 
 new processes. There is also a want 
 of means to make experiments, which 
 .ran seldom be made with advantage 
 except by rich proprietors or capitalists. 
 As for those systematic improvements 
 which operate on a large tract of coun- 
 try at once (such as great works of 
 draining or irrigation) or which for 
 any other reason do really require large 
 numbers of workmen combining their 
 labour, these are not in general to be 
 expected from small farmers, or even 
 small proprietors ; though combination 
 among them for such purposes is by no 
 means unexampled, and will become 
 more common as their intelligence is 
 more developed. 
 
 Against these disadvantages is to be 
 placed, where the tenure of land is of 
 the requisite kind, an ardour of indus- 
 try absolutely unexampled in any other 
 condition of agriculture. This is a 
 subject on which the testimony of com- 
 petent witnesses is unanimous. The 
 working of the petite culture cannot 
 be fairly judged where the small culti- 
 vator is merely a tenant, and not even 
 a tenant on fixed conditions, but (as 
 
 large farms. To do so is a necessity they 
 cannot escape from, in any country where 
 the demands of consumers require their ex- 
 istence : if they could not fulfil this condi- 
 tion, they must perish. 
 
 " The following are particulars, the exact- 
 ness of which is lully attested by the excel- 
 lence of the work from which I extract 
 them, the statistics of thecommuneo r Vensat 
 (department of Puy de Dome), lately pub- 
 lished by Dr. Jusseraud, mayor of the com- 
 mune. They are the more valuable, as they 
 throw full light on the nature of the changes 
 which the extension of small farming has, in 
 that district, produced in the number and 
 kind of animals by whose manure the pro- 
 ductiveness of the soil is kept up and in- 
 creased. The commune consists of 1612 
 hectares, d;vided into 4600 parcelles, owned 
 by 591 proprietors, and of this extent 14C6 
 hectares are under cultivation. In 1790, 
 seventeen farms occupied two-thirds of the 
 whole, and twenty others the remainder. 
 Since then the land has been much divided, 
 and the subdivision is now extreme. What 
 has been the effect on the quantity of cattle ? 
 A considerable increase. In 1790 there were 
 
 until lately in Ireland) at a nominal 
 rent greater than can be paid, and 
 therefore practically at a varying rent 
 always amounting to the utmost that 
 can be paid. To understand the sub- 
 ject, it must be studied where the cul- 
 tivator is the proprietor, or at least a 
 mttayer with a permanent tenure; 
 where the labour he exerts to increase 
 the produce and value of the land 
 avails wholly, or at least partly, to his 
 own benefit and that of his descend- 
 ants. In another division of our sub- 
 ject, we shall discuss at some length 
 the important subject of tenures of 
 land, and I defer till then any citation 
 of evidence on the marvellous industry 
 of peasant proprietors. It may suffice 
 here to appeal to the immense amount 
 of gross produce which, even without a 
 permanent tenure, English labourers 
 generally obtain from their little 
 allotments; a produce beyond com- 
 parison greater than a large farmer 
 extracts, or would find it his interest 
 to extract, from the same piece of 
 land. 
 
 And this I take to be the true rea- 
 son why large cultivation is generally 
 most advantageous as a mere invest- 
 ment for profit. Land occupied by a 
 large farmer is not, in one sense of the 
 word, farmed so highly. There is not 
 nearly so much labour expended on it. 
 
 only about 300 horned cattle, and from 1SOO 
 to 2000 sheep ; there are now 676 of the 
 former and only 533 of the latter. Thus 
 1300 sheep have been replaced by 376 oxen 
 and cows, and (all things taken into ac- 
 count) the quantity of manure has increased 
 in the ratio of 490 to 729, or more than 48 
 per cent, not to mention that the animals 
 being now stronger and better fed, yield a 
 much greater contribution than formerly to 
 the fertilization of the ground. 
 
 " Such is the testimony of facts on the 
 point. It is not true, then, that small farm- 
 ing feeds fewer animals than large ; on the 
 contrary, local circumstances being the 
 same, it feeds a greater number : and this is 
 only what might have been presumed ; for, 
 requiring more from the soil, it is obliged to 
 take greater pains for keeping up its pro- 
 ductiveness. All the other reproaches cast 
 upon small farming, when collated one by 
 one with facts justly appreciated, will be 
 seen to be no better founded, and to have 
 been made only because the countries com- 
 pared with one another were differently 
 situated in respect to the general causes of 
 agricultural prosperity." (pp. 116-120.)
 
 PRODUCTION ON A LARGE AND ON A SMALL SCALE. 93 
 
 This is not on account of any economy 
 arising from combination of labour, but 
 because, by employing less, a greater 
 return is obtained in proportion to the 
 outlay. It does not answer to any one 
 to pay others for exerting all the la- 
 bour which the peasant, or even the 
 allotment holder, gladly undergoes 
 \vlu-n the fruits are to be wholly reaped 
 by himself. This labour, however, is 
 not unproductive ; it all adds to the 
 gross produce. With anything like 
 equality of skill and knowledge, the 
 large farmer does not obtain nearly so 
 much from the soil as the small pro- 
 prietor, or the small farmer with ade- 
 quate motives to exertion : but though 
 his returns are less, the labour is less 
 in a still greater degree, and as what- 
 ever labour he employs must be paid 
 for, it does not suit his purpose to em- 
 ploy more. 
 
 But although the gross produce of 
 the land is greatest, other tilings being 
 the same, under small cultivation, and 
 although, therefore, a country is able 
 on that system to support a larger 
 aggregate population, it is generally 
 assumed by English writers that what 
 is termed the net produce, that is, the 
 eurplus after feeding the cultivators, 
 must be smaller; that therefore, the 
 population disposable for all other pur- 
 poses, for manufactures, for commerce 
 and navigation, for national defence, 
 for the promotion of knowledge, for the 
 liberal professions, for the various 
 functions of government, for the arts 
 and literature, all of which are depen- 
 dent on this surplus for their existence 
 as occupations, must be less numerous ; 
 and that the nation, therefore, (waving 
 all question as to the condition of the 
 actual cultivators,) must be inferior in 
 the principal elements of national 
 power, and in many of those of general 
 well-being. This, however, has been 
 iaken for granted much too readily. 
 Undoubtedly, the non-agricultural po- 
 pulation will bear a less ratio to the 
 agricultural, under small than under 
 .arge cultivation. But that it will be 
 vess numerous absolutely, is by no 
 means a consequence. If the total 
 population, agricultural and non-ugri- 
 wultural, is greater, the non-agricultural 
 
 portion may be more numerous in itself, 
 and may yet be a smaller proportion of 
 the whole. If the gross produce i.s 
 larger, the net produce may be larger, 
 and yet bear a smaller ratio to tho 
 gross produce. Yet even Mr. Wake- 
 field sometimes appears to confound 
 these distinct ideas. In France it is 
 computed that two-thirds of the whole 
 population are agricultural In Eng- 
 land, at most, one-third. Hence Mr. 
 Wakefield infers, that "as in France 
 only three people are supported by the 
 labour of two cultivators, while in Eng- 
 land the labour of two cultivators sup 
 ports six people, English agriculture 
 is twice as productive as French agri- 
 culture," owing to the superior effi- 
 ciency of large farming through com- 
 bination of labour. But in the first 
 place the facts themselves are over- 
 stated. The labour of two persons in 
 England does not quite support six 
 people, for there is not a little food 
 imported from foreign countries, and 
 from Ireland. In France, too, the 
 labour of two cultivators does much 
 more than supply the food of three per- 
 sons. It provides the three persons, 
 and occasionally foreigners, with flax, 
 hemp, and to a certain extent with 
 silk, oils, tobacco, and latterly sugar, 
 which in England are wholly obtained 
 from abroad ; nearly all the timber 
 used in France is of home growth, 
 nearly all which is used in England is 
 imported ; the principal fuel of France 
 is procured and brought to market by 
 persons reckoned among agriculturists, 
 in England by persons not so reckoned. 
 I do not take into calculation hides 
 and wool, these products being com- 
 mon to both countries, nor wine or 
 brandy produced for home consumption, 
 since England has a corresponding 
 production of beer and spirits ; but 
 England has no material export of 
 either article, and a groat importation 
 of the last, while France supplies wines 
 and spirits to the whole world. I say 
 nothing of fruit, eggs, and such minor 
 articles of agricultural produce, in 
 which the export trade of France is 
 enormous. But, not to lay undue stress 
 on these abatements, we will take the 
 statement as it stands. Suppose that
 
 BOOK I. CHAPTER IX. 4. 
 
 two persons, in England, do bond fide 
 produce the food of six, while in France, 
 for the same purpose, the labour of four 
 is requisite. Does it follow that Eng- 
 land must have a larger surplus for the 
 support of a non-agricultural popula- 
 tion ? No ; hut merely that she can 
 devote two-thirds of her whole produce 
 to the purpose, instead of one-third. 
 Suppose the produce to be twice as 
 great, and the one-third will amount to 
 as much as the two-thirds. The fact 
 might be, that owing to the greater 
 quantity of labour employed on the 
 trench system, the same land would 
 produce food for twelve persons which 
 on the English system would only pro- 
 duce it for six : and if this were so, 
 which would be quite consistent with 
 the conditions of the hypothesis, then 
 although the food for twelve was pro- 
 duced by the labour of eight, while the 
 six were fed by the labour of only two, 
 there would be the same number of 
 hands disposable for other employment 
 in the one country as in the other. I 
 am not contending that the fact is so. 
 I know that the gross produce per acre 
 in France as a whole (though not in 
 its most improved districts) averages 
 \iuch less than in England, and that, 
 in proportion to the extent and fertility 
 of the two countries, England has, in 
 the sense we are now speaking of, 
 much the largest disposable popula- 
 tion. But the disproportion certainly 
 is not to be measured by Mr. Wake- 
 field's simple criterion. As well might 
 it be said that agricultural labour 
 in the United States, where, by a 
 late census, four families in every five 
 appeared to be engaged in agricul- 
 ture, must be still more inefficient than 
 in France. 
 
 The inferiority of French cultivation 
 (which, taking the country as a whole, 
 must be allowed to be real, though 
 much exaggerated,) is probably more 
 owing to the lower general average of 
 industrial skill and energy in that 
 country, than to any special cause : 
 and even if partly the effect of minute 
 subdivision, it does not prove that 
 small farming is disadvantageous, but 
 only (what is undoubtedly the fact) 
 that farms in France are very fre- 
 
 quently too small, and, what is worte, 
 broken up into an almost incredible 
 number of patches or parcelled, most in- 
 conveniently dispersed and parted from 
 one another. 
 
 As a question, not of gross, but of 
 net produce, the comparative merits of 
 the grande and the petite culture, 
 especially when the small farmer is 
 also the proprietor, cannot be looked 
 upon as decided. It is a question 
 on which good judges at present 
 differ. The current of English opinion 
 is in favour of large farms : on the 
 Continent, the weight of authority 
 seems to be on the other side. Profes- 
 sor Eau, of Heidelberg, the author of 
 one of the most comprehensive and 
 elaborate of extant treatises on politi- 
 cal economy, and who has that large 
 acquaintance with facts and authorities 
 on his own subject, which generally 
 characterises his countrymen, lays it 
 down as a settled truth, that small or 
 moderate-sized farms yield not only a 
 larger gross but a larger net produce: 
 though, he adds, it is desirable there 
 should be some great proprietors, to 
 lead the way in new improvements.* 
 The most apparently impartial and 
 discriminating judgment that I have 
 met with is that of M. Passy, who 
 (always speaking with reference to 
 net produce) gives his verdict in favour 
 of large farms for grain and forage : 
 but, for the kinds of culture which 
 require much labour and attention, 
 places the advantage wholly on the 
 side of small cultivation ; including in 
 this description, not only the vine and 
 the olive, where a considerable amount 
 of care and labour must be bestowed on 
 each individual plant, but also roots, 
 leguminous plants, and those which 
 furnish the materials of manufactures. 
 The small size, and consequent multi- 
 plication, of farms, according to all 
 authorities, are extremely favourable 
 to the abundance of many minor pro- 
 ducts of agriculture.f 
 
 * See pp. 352 and 353 of a French transla- 
 tion published at Brussels in 1839, by M. 
 Fred, de Kemmeter, of Ghent. 
 
 t " In the department of the Nord," says 
 M. Passy, " a farm of 20 hectares (50 acres) 
 produces in calves, dairy produce, poultry, 
 and eggs, a value of sometimes 1000 franc*
 
 PRODUCTION ON A LARGE AND ON A SMALL SCALE. 95 
 
 Impressed with the conviction that, 
 of all faults which can he committed 
 by a scientific writer on political and 
 social subjects, exaggeration, and asser- 
 tions beyond the evidence, most require 
 to be guarded against, I limited myself 
 in the early editions of this work to the 
 foregoing very moderate statements. 
 I little knew how much stronger my 
 language might have been without 
 exceeding the truth, and how much 
 the actual progress of French agricul- 
 ture surpassed anything which I had 
 at that time sufficient grounds to 
 affirm. The investigations of that 
 eminent authority on agricultural sta- 
 tistics, M. Leonce de Lavergne, under- 
 taken by desire of the Academy of 
 Moral and Political Sciences of the 
 Institute of France, have led to the 
 conclusion that since the Revolution of 
 1789, the total produce of French agri- 
 culture has doubled ; profits and wages 
 having both increased in about the 
 same, and rent in a still greater ratio. 
 M. de Lavergne, whose impartiality is 
 one of his greatest merits, is, moreover, 
 so far in this instance from the sus- 
 picion of having a case to make out, 
 that he is labouring to show, not how 
 much French agriculture has accom- 
 plished, but how much still remains for 
 it to do. "We have required" (he 
 says) " no less than seventy years to 
 bring into cultivation two million hec- 
 tares" (five million English acres) " of 
 waste land, to suppress half our fallows, 
 double our agricultural products, in- 
 crease our population by 30 per cent, 
 our wages by 100 per cent, our rent by 
 150 per cent. At this rate we shall 
 require three quarters of a century 
 more to arrive at the point which 
 England has already attained."* 
 
 After this evidence, we have surely 
 now heard the last of the incompati- 
 bility of small properties and small 
 farms with agricultural improvement. 
 The only question which remains open 
 is one of degree ; the comparative 
 rapidity of agricultural improvement 
 under the two systems ; and it is the 
 
 * Economic Rurale de la, France depuit 
 1789. Par M. Leonce de Lavergne, Membre 
 de 1'Institut et de la Societ6 Centrale d'AgrU 
 culture d France. 2me ed. p. 69. 
 
 It is evident that every labourer who 
 extracts from the land more than his 
 own food, and that of any family he 
 may have, increases the means of sup- 
 porting a non-agricultural population. 
 Even if his surplus is no more than 
 enough to buy clothes, the labourers 
 who make the clothes are a non- 
 agricultural population, enabled to 
 exist by food which he produces. 
 Every agricultural family, therefore, 
 which produces its own necessaries, 
 adds to the net produce of agriculture ; 
 and so does every person born on the 
 land, who by employing himself on it, 
 adds more to its gross produce than 
 the mere food which he eats. It is 
 questionable whether, even in the most 
 subdivided districts of Europe which 
 are cultivated by the proprietors, the 
 multiplication of hands on the soil has 
 approached, or tends to approach, 
 within a great distance of this limit. 
 In France, though the subdivision is 
 confessedly too great, there is proof 
 positive that it is far from having 
 reached the point at which it would 
 begin to diminish the power of sup- 
 porting a non-agncultural population. 
 This is demonstrated by the great in- 
 crease of the towns ; which have of 
 late increased in a much greater ratio 
 *han the population generally,* show- 
 ing (unless the condition of the town 
 labourers is becoming rapidly de- 
 teriorated, which there is no reason to 
 believe) that even by the unfair and 
 inapplicable test of proportions, the 
 productiveness of agriculture must be 
 on the increase. This, too, concur- 
 rently with the amplest evidence that 
 in the more improved districts of 
 France, and in some which, until 
 lately, were among the unimproved, 
 there is a considerably increased con- 
 sumption of country produce by the 
 country population itself. 
 
 (.40) a year : which, deducting expenses, is 
 an addition to the net produce of 15 to 20 
 francs per hectare." On Syitemt of Cultiva- 
 tion, p. 114. 
 
 * During the interval between the census 
 of 1851 and that of 1856, the increase of the 
 population of Paris alone, exceeded the ag- 
 fregate increase of all France : while nearly 
 11 the other large towns likewise showed an 
 increase.
 
 BOOK I. CHAPTER X. 1. 
 
 general opinion of those who are equally | of the efficiency of labour. We shall 
 
 \\cll acquainted with both, that im- 
 provement is greatest under a due ad- 
 mixture between them. 
 
 In the present chapter, I do not enter 
 on the question between great ami 
 small cultivation in any other respect 
 than as a question of production, and 
 
 return to it hereafter as affecting the 
 distribution of the produce, and the 
 physical and social well-being of the 
 cultivators themselves ; in which aspects 
 it deserves, and requires, a still more 
 particular examination. 
 
 CHAFIER X. 
 
 OP THE LAW OF THE INX'REASE OF LABOUR. 
 
 1 . WE have now successively 
 considered each of the agents or condi- 
 tions of production, and of the means 
 by which the efficacy of these various 
 agents is promoted. In order to 
 come to an end of the questions 
 which relate exclusively to produc- 
 tion, one more, of primary importance, 
 remains. 
 
 Production is not a fixed, but an in- 
 creasing thing. When not kept back 
 by bad institutions, or a low state of 
 the arts of life, the produce of industry 
 has usually tended to increase ; stimu- 
 *ated not only by the desire of the pro- 
 ducers to augment their means of 
 consumption, but by the increasing 
 number of the consumers. Nothing in 
 political economy can be of more im- 
 portance than to ascertain the law of 
 this increase of production ; the condi- 
 tions to which it is subject ; whether it 
 has practically any limits, and what 
 these are. There is also no subject in 
 political economy which is popularly 
 less understood, or on which the errors 
 committed are of a character to pro- 
 duce, and do produce, greater mis- 
 chief. 
 
 We have seen that the essential re- 
 quisites of production are three labour, 
 capital, and natural agents ; the term 
 capital including all external and phy- 
 sical requisites which are products of 
 Jabour, the term natural agents all those 
 which are uot. But among natural 
 agents we need not take into account 
 vlioae which, existing in unlimited 
 
 quantity, being incapable of appropria- 
 tion, and never altering in their quali- 
 ties, are always ready to lend an equal 
 degree of assistance to production, 
 whatever may be its extent ; as air, 
 and the light of the sun. Being now 
 about to consider the impediments to 
 production, not the facilities for it, 
 we need advert to no other natural 
 agents than those which are liable to 
 be deficient, either in quantity or in 
 productive power. These may be all 
 represented by the term land. Land, 
 in the narrowest acceptation, as the 
 source of agricultural produce, is the 
 chief of them ; and if we extend the 
 term to mines and fisheries to what 
 is found in the earth itself, or in the 
 waters which partly cover it, as well as 
 to what is grown or fed on its surface, 
 it embraces everything with which we 
 need at present concern ourselves. 
 
 We may say, then, without a greater 
 stretch of language than under the 
 necessary explanations is permissible, 
 that the requisites of production are 
 Labour, Capital, and Land. The in- ' 
 crease of production, therefore, depends 
 on the properties of these elements. It 
 is a result of the increase either of the 
 elements themselves, or of their pro- 
 ductiveness. The law of the incrcaso 
 of production must be a consequence^of 
 the laws of these elements ; the limits 
 to the increase of production must I 
 the limits, whatever they are, set_ Lj 
 those laws. We proceed to consider 
 the three elements successively, with
 
 LAW OF THE INCREASE OF LABOUR. 
 
 reference to this effect ; or in other 
 words, the law of the increase of pro- 
 duction, viewed in respect of its de- 
 pendence, first on Labour, secondly on 
 Capital, and lastly on Land. 
 
 2. The increase of labour is the 
 increase of mankind ; of population. 
 Un this subject the discussions excited 
 by the Essay of Mr. Malthus have 
 made the truth, though by no means 
 universally admitted, yet so fully 
 known, that a briefer examination of 
 the question than would otherwise have 
 been necessary will probably on the 
 present occasion suffice. 
 
 The power of multiplication inherent 
 in all organic life may be regarded as 
 infinite. There is no one species of 
 vegetable or animal, which, if the earth 
 were entirely abandoned to it, and to 
 the things on which it feeds, would not 
 in a small number of years overspread 
 every region of the globe, of which the 
 climate was compatible with its ex- 
 istence. The degree of possible rapidity 
 is different in different orders of beings ; 
 but in all it is sufficient, for the earth 
 to be very speedily filled up. There 
 are many species of vegetables of which 
 a single plant will produce in one year 
 the germs of a thousand ; if only two 
 come to maturity, in fourteen years the 
 two will have multiplied to sixteen 
 thousand and more. It is but a mode- 
 rate case of fecundity in animals to be 
 capable of quadrupling their numbers 
 in a single year ; if they only do as 
 much in half a century, ten thousand 
 will have swelled within two centuries 
 to upwards of two millions and a half. 
 The capacity of increase is necessarily 
 in a geometrical progression : the nume- 
 rical ratio alone is different. 
 
 To this property of organized beings, 
 the human species forms no exception. 
 Its power of increase is indefinite, and 
 the actual multiplication would be 
 extraordinarily rapid, if the power were 
 exercised to the utmost. It never is 
 exercised to the utmost, and yet, in 
 the most favourable circumstances 
 known to exist, which are those of a 
 fertile region colonized from an in- 
 dustrious and civilized community, 
 population has continued, for several 
 r.E. 
 
 generations, independently of fresh i:u- 
 migration, to double itself in not much 
 more than twenty years.* That tho 
 capacity of multiplication in the human 
 species exceeds even this, is evident 
 if we consider how great is the ordinary 
 number of children to a family, where 
 the climate is good and early mar- 
 riages usual ; and how small a propor- 
 tion of them die before the age of 
 maturity, in the present state of 
 hygienic knowledge, where the locality 
 is healthy, and the family adequately 
 provided with the means of living. It 
 is a very low estimate of the capacity 
 of increase, if we only assume, that in 
 a good sanitary condition of the people, 
 each generation may be double the 
 number of the generation which pre- 
 ceded it. 
 
 Twenty or thirty years ago, theso 
 propositions might still have required 
 considerable enforcement and illustra- 
 tion ; but the evidence of them is so 
 ample and incontestable, that they 
 have made their way against all kinds 
 of opposition, and may now be re- 
 garded as axiomatic : though the 
 extreme reluctance felt to admitting 
 them, every now and then gives birth 
 to some ephemeral theory, speedily 
 forgotten, of a different law of increase 
 in different circumstances, through a 
 providential adaptation of the fecundity 
 of the human species to the exigencies 
 of society.f The obstacle to a just 
 
 * This has been disputed ; but the highest 
 estimate I have seen of the term which 
 population requires for doubling itself in the 
 United States, independently of immigrants 
 and of their progeny that of Mr. Carey 
 does not exceed thirty years. 
 
 t Ons of these theories, that of Mr. Double- 
 day, may be thought to require a passing 
 notice, because it has of late obtained some 
 followers, and because it derives a semblance 
 of support from the general analogies of 
 organic life. This theory maintains that tha 
 fecundity of the human animal, and of all 
 other living beings, a in inverse proportion 
 to the quantity of nutriment : that an under- 
 fed population multiplies rapidly, hut that 
 all classes in comfortable circumstances are, 
 by a physiological law, so unproiinc, as sel- 
 dom to keep up their numbers without being 
 recruited from a poorer class. There is no 
 doubt that a positive excess of notriincnt, 
 in animals as well as in fruit trees, is un- 
 favourable to reproduction ; and it is quits 
 possible, though by no means proved, that 
 the physiological conditions of fecundity maj
 
 BOOK I. CHAPTER X. 3. 
 
 understanding of the subject docs not 
 arise from these theories, but from too 
 confused a notion of the causes which, 
 at most times and places, keep the 
 actual increase of mankind so far 
 behind the capacity. 
 
 3. Those causes, nevertheless, are 
 in no way mysterious. What pre- 
 vents the population of hares and 
 rabbits from overstocking the earth ? 
 Not want of fecundity, but causes 
 very different : many enemies, and in- 
 sufficient subsistence; not enough to 
 eat, and liability to being eaten. In 
 the human race, which is not generally 
 subject to the latter inconvenience, 
 the equivalents for it are war and 
 disease. If the multiplication of man- 
 kind proceeded only, like that of the 
 other animals, from a blind instinct, it 
 would be limited in the same manner 
 with theirs; the births would be as 
 numerous M the physical constitution 
 of the species admitted of, and the 
 population would be kept down by 
 
 exist in the greatest degree when the supply 
 of food is somewhat stinted. But any one 
 who might be inclined to draw from this, 
 even if admitted, conclusions at variance 
 with the principle of Mr. Malthus, needs 
 only be invited to look through a volume of 
 the Peerage, and observe the enormous fami- 
 lies almost universal in that class; or call 
 to mind the large families of the English 
 clergy, and generally of the middle classes of 
 England. It is, besides, well remarked by 
 Mr. Carey, that, to be consistent with Mr. 
 Doubleday's theory, the increase of the popu- 
 lation of the United States, apart from im- 
 migration, ought to be one of the slowest on 
 record. 
 
 Mr. Carey has a theory of his own, also 
 grounded on a physiological truth, that the 
 total sum of nutriment received by an or- 
 ganiied body directs itself, in largest propor- 
 tion, to the parts of the system which are 
 most used ; from which he anticipates a 
 diminution in the fecundity of human beings, 
 not through more abundant feeding, but 
 through the greater use of their brains inci- 
 dent to an advanced civilization. There is 
 considerable plausibility in this speculation, 
 and experience may hereafter confirm it. 
 But the change in the human constitution 
 Which it supposes, if ever realized, will con- 
 duce to the expected effect rather by ren- 
 dering physical self-restraint easier, than by 
 dispensing with its necessity ; since the most 
 rapid known rate of multiplication is quite 
 compatible with a very sparing employment 
 f tb* multiplying power. 
 
 deaths.* Cut the conduct of human 
 creatures is more or less influenced by 
 foresight of consequences, and by im- 
 pulses superior to mere animal in- 
 stincts : and they do not, therefore, 
 propagate like swine, but are capable, 
 though in very unequal degrees, of 
 being withheld by prudence, or by the 
 social affections, from giving existence 
 to beings born only to misery and pre- 
 mature death. In proportion as man- 
 kind rise above the condition of the 
 beasts, population is restrained by the 
 fear of want, rather than by want 
 itself. Even where there is no question 
 of starvation, many are similarly acted 
 upon by the apprehension of losing 
 what have come to be regarded as the 
 decencies of their situation in life. 
 Hitherto no other motives than these 
 two have been found strong enough, in 
 the generality of mankind, to counter- 
 act the tendency to increase. It has 
 been the practice of a great majority 
 of the middle and the poorer classes, 
 whenever free from external control, 
 to marry as early, and in most coun- 
 tries to have as many children, as was 
 consistent with maintaining themselves 
 in the condition of life which they were 
 born to, or were accustomed to consider 
 as theirs. Among the middle classes, 
 in many individual instances, there is 
 an additional restraint exercised from 
 the desire of doing more than main- 
 
 * Mr. Carey expatiates on the absurdity ot 
 supposing that matter tends to assume the 
 highest form of organization, the human, at 
 a more rapid rate than it assumes the lower 
 forms which compose human food; that 
 human beings mulliply faster than turnips 
 and cabbages. But the limit to the increase 
 of mankind, according to the doctrine of Mr. 
 Malthus, does not depend on the power of 
 increase of turnips and cabbages, but on the 
 limited quantity of the land on which they 
 can be grown. So long as the quantity of 
 land is practically unlimited, which it is in 
 the United States, and food, consequently, 
 can be increased at the highest rate which 
 is natural to it, mankind also may, without 
 augmented difficulty in obtaining subsistence, 
 increase at their highest rate. When Mr. 
 Carey can show, not that turnips and cab- 
 sages but that the soil itself, or the nutritive 
 elements contained in it, tend naturally to 
 multiply, and that, too, at a rate exceeding 
 ;he most rapid possible increase of mankind, 
 le will have said something to the purpose. 
 Till then, this part, at least, of his argument 
 may be considered as non-existent.
 
 \ 
 
 LAW OF THE INCREASE OF LABOUR. 
 
 taining their circumstances of im- 
 proving them ; but such a desire is 
 rarely found, or rarely has that effect, 
 in the labouring classes. If they can 
 bring up a family as they were them- 
 selves brought up, even the prudent 
 among them are usually satisfied. Too 
 often they do not think even of that, 
 but rely on fortune, or on the resources 
 to be found in legal or voluntary 
 charity. 
 
 In a very backward state of society, 
 like that of Europe in the Middle Ages, 
 and many parts of Asia at present, 
 population is kept down by actual 
 starvation. The starvation does not 
 take place in ordinary years, but in 
 seasons of scarcity, which in those 
 states of society are much more fre- 
 quent and more extreme than Europe 
 is now accustomed to. In these seasons 
 actual want, or the maladies conse- 
 quent on it, carry off numbers of the 
 population, which in a succession of 
 favourable years again expands, to be 
 again cruelly decimated. In a more 
 improved state, few, even among the 
 poorest of the people, are limited to 
 actual necessaries, and to a bare 
 sufficiency of those : and the increase 
 is kept within bounds, not by excess 
 of deaths, but by limitation of births. 
 The limitation is brought about in 
 various ways. In some countries, it is 
 the result of prudent or conscientious 
 self-restraint. There is a condition to 
 which the labouring people are ha- 
 bituated; they perceive that by having 
 too numerous families, they must sink 
 below that condition, or fail to trans- 
 mit it to their children ; and this they 
 do not choose to submit to. The 
 countries in which, so far as is known, 
 a great degree of voluntary prudence 
 has been longest practised on this 
 subject, are Norway and parts of 
 Switzerland. Concerning both, there 
 happens to be unusually authentic in- 
 formation ; many facts were carefully 
 brought together by Mr. Malthus, and 
 much additional evidence has been 
 obtained since his time. In both these 
 countries the increase of population is 
 very slow ; and what checks it, is not 
 multitude of deaths, but fewness of 
 births. Both the births and the 
 
 deaths are remarkably few in propor- 
 tion to the population ; the average 
 duration of life is the longest in 
 Europe ; the population contains fewer 
 children, and a greater proportional 
 number of persons in the vigour of life, 
 than is known to be the case in any 
 other part of the world. The paucity 
 of births tends directly to prolong life, 
 by keeping the people in comfortable 
 circumstances ; and the same prudence 
 is doubtless exercised in avoiding 
 causes of disease, as in keeping clear 
 of the principal cause of poverty. 
 It is worthy of remark that the 
 two countries thus honourably distin- 
 guished, are countries of small landed 
 proprietors. 
 
 There are other cases in which the 
 prudence and forethought, which per- 
 haps might not be exercised by the 
 people themselves, are exercised by the 
 state for their benefit ; marriage not 
 being permitted until the contracting 
 parties can show that they have tho 
 prospect of a comfortable support, 
 under these laws, of which I shall 
 speak more fully hereafter, the condi- 
 tion of the people is reported to bo 
 good, and the illegitimate births not 
 so numerous as might be expected. 
 There are places, again, in which the 
 restraining cause seems to be not so 
 much individual prudence, as some 
 general and perhaps even accidental 
 habit of the country. In the rural 
 districts of England, during the last 
 century, the growth of population was 
 very effectually repressed by the diffi- 
 culty of obtaining a cottage to live in. 
 It was the custom for unmarried la- 
 bourers to lodge and board with their 
 employers ; it was the custom for mar- 
 ried labourers to have a cottage : and 
 the rule of the English poor laws by 
 which a parish was charged with the 
 support of its unemployed poor, ren- 
 dered landowners averse to promote 
 marriage. About the end of the cen- 
 tury, the great demand for men in war 
 and manufactures, made it be thought 
 a patriotic thing to encourage popula- 
 tion: and about the same time tho 
 growing inclination of farmers to live 
 like rich people, favoured as it was by 
 a long period of high prices, made 
 H2
 
 100 
 
 BOOK I. CHAPTER XI. 1. 
 
 them desirous of keeping inferiors at 
 a greater distance, and pecuniary 
 motives arising from abuses of the 
 poor laws being superadded, they 
 gradually drove their labourers into 
 cottages, which the landlords now no 
 longer refused permission to build. In 
 some countries an old standing custom 
 that a girl should not marry until she 
 had spun and woven for herself an 
 ample trousseau (destined for the 
 supply of her whole subsequent life), is 
 said to have acted as a substantial 
 check to population. In England, at 
 present, the influence of prudence in 
 keeping down multiplication is seen by 
 the diminished number of marriages 
 in the manufacturing districts in years 
 when trade is bad. 
 
 But whatever be the causes \ty 
 which the population is anywhere 
 limited to a comparatively slow rate of 
 increase, an acceleration of the rate 
 very speedily follows any diminution of 
 the motives to restraint. It is but 
 rarely that improvements in the con- 
 dition of the labouring classes do any- 
 thing more than give a temporary 
 margin, speedily filled up by an in- 
 crease of their numbers. The use they 
 commonly choose to make of any ad- 
 vantageous change in their circum- 
 stances, is to take it out in the form 
 which, by augmenting the population, 
 deprives the succeeding generation of 
 the benefit. Unless, either by their 
 general improvement in intellectual 
 and moral culture, or at least by 
 raising their habitual standard of com- 
 fortable living, they can be taught to 
 make a better use of favourable cir- 
 
 cumstances, nothing permanent fun bf 
 done for them ; the most promising 
 schemes end only in having a more 
 numerous, but not a happier people. 
 By their habitual standard, 1 mean 
 that (when any such there is) down to 
 which they will multiply, but not 
 lower. Every advance they make in 
 education, civilization, and social im- 
 provement, tends to raise this standard; 
 and there is no doubt that it is gra- 
 dually, though slowly, rising in I ho 
 more advanced countries of Western 
 Europe. Subsistence and employment 
 in England have never increased more 
 rapidly than in the last forty years, 
 but every census since 1821 showed a 
 smaller proportional increase of popula- 
 tion than that of the period preceding; 
 and the produce of French agriculture 
 and industry is increasing in a pro- 
 gressive ratio, while the population 
 exhibits, in every quinquennial census, 
 a smaller proportion of births to the 
 population. 
 
 The subject, however, of population, 
 in its connexion with the condition of 
 the labouring classes, will be con- 
 sidered in another place : in the 
 present, we have to do with it solely as 
 one of the elements of Production : and 
 in that character we could not dis- 
 pense with pointing out the unlimited 
 extent of its natural powers of increase, 
 and the causes owing to which so 
 small a portion of that unlimited 
 power is for the most part actually 
 exercised. After this brief indica- 
 tion, we shall proceed to the other 
 elements. 
 
 CHAPTER XL 
 
 OP THE LAW OP THE INCREASE OF CAPITAL. 
 
 1. THE requisites of production 
 being labour, capital, and land, it has 
 been seen from the preceding chapter 
 that the impediments to the increase 
 of production do not arise from the 
 first of these elements. On the side 
 
 of labour there is no obstacle to an 
 increase of production, indefinite in 
 extent and of unslackening rapidity 
 Population has the power of increasing 
 in an uniform and rapid geometrical 
 ratio. If the only essential rendition
 
 LA W OP THE INCREASE OF CAPITAL. 
 
 of production were i.ilxrar, the produce 
 might, and natunilly would, increase 
 in the same ratio ; and there would be 
 no limit, until the numbers of mankind 
 were brought to a stand from actual 
 want of space. 
 
 But production has other requisites, 
 and of these, the one which we shall 
 next consider is Capital. There cannot 
 be more people in any country, or in 
 the world, than can bo supported from 
 the produce of past labour until that 
 of present labour comes in. There 
 will be no greater number of productive 
 labourers in any country, or in the 
 world, than can be supported from that 
 portion of the produce of past labour, 
 which is spared from the enjoyments 
 of its possessor for purposes of repro- 
 duction, and is termed Capital. "We 
 have next, therefore, to inquire into 
 the conditions of the increase of capi- 
 tal ; the causes by which the rapidity 
 of its increase is determined, and 
 the necessary limitations of that in- 
 crease. 
 
 Since all capital is the product of 
 saving, that is, of abstinence from 
 present consumption for the sake of a 
 future good, the increase of capital 
 must depend upon two things the 
 amount of the fund from which saving 
 can be made, and the strength of the 
 dispositions which prompt to it. 
 
 The fund from which saving can be 
 made, is the surplus of the produce of 
 labour, after supplying the necessaries 
 of life to all concerned in the produc- 
 tion: (including those employed in 
 replacing the materials, and keeping 
 the fixed capital in repair.) More 
 than this surplus cannot be saved 
 nnder any circumstances. As much 
 as this, though it never is saved, 
 always might be. This surplus is the 
 fund from which the enjoyments, as 
 distinguished from the necessaries of 
 the producers, are provided ; it is the 
 lund from which all are subsisted, who 
 are not themselves engaged in produc- 
 tion ; and from which all additions are 
 made to capital. It is the real net 
 produce of the country. The phrase, 
 net produce, is often taken in a more 
 limited sense, to denote only the profits 
 of the caoitalist and the rent of the 
 
 101 
 
 ; landlord, under the idea that nothing 
 can be included in the net produce of 
 capital, but what is returned to the 
 owner of the capital after replacing 
 his expenses. But this is too narrow 
 an acceptation of the term. Tha 
 capital of the employer forms the 
 revenue of the labourers, and if this 
 exceeds the necessaries of life, it gives 
 them a surplus which they may either 
 expend in enjoyments or save. For 
 every purpose for which there can be 
 occasion to speak of the net produce of 
 industry, this surplus ought to be in- 
 cluded in it. When this is included, 
 and not otherwise, the net produce of 
 the country is the measure of its 
 effective power ; of what it can spare 
 for any purposes of public utility, or 
 private indulgence ; the portion of 
 its produce of which it can dispose at 
 pleasure ; which can be drawn upon 
 to attain any ends, or gratify any 
 wishes, either of the government or 
 of individuals ; which it can either 
 spend for its satisfaction, or save for 
 future advantage. 
 
 The amount of this fund, this net 
 produce, this excess of production 
 above the physical necessaries of the 
 producers, is one of the elements that 
 determine the amount of saving. The 
 greater the produce of labour after 
 supporting the labourers, the mjre 
 there is which can be saved. The 
 same thing also partly contributes to 
 determine how much mil be saved. 
 A part of the motive to saving consists 
 in the prospect of deriving an income 
 from savings ; in the fact that capital, 
 employed in production, is capable of 
 not only reproducing itself but yielding 
 an increase. The greater the profit 
 that can be made from capital, the 
 : stronger is the motive to its accumu- 
 I lation. That indeed which forms the 
 inducement to save, is not the whole 
 of the fund which supplies the mea7is 
 of saving, not the whole net produce of 
 the land, capital, and labour of the 
 country, but only a part of it, the part 
 which forms the remuneration of the 
 capitalist, and is called profit of stock. 
 It will however be readily enough 
 understood, even previously to the ex- 
 planations which will be given here-
 
 BOOK I. CHAPTER XI. 2. 
 
 102 
 
 a ft IT, that when tHe general produc- 
 tiveness of labour and capital is great, 
 the returns to the capitalist are likely 
 to be large, and that some proportion, 
 though not an uniform one, will com- 
 monly obtain between the two. 
 
 2. But the disposition to save 
 does not wholly depend on the external 
 inducement to it ; on the amount of 
 profit to be made from savings. With 
 the same pecuniary inducement, the 
 inclination is very different, in differ- 
 ent persons, and in different commu- 
 nities. The effective desire of accumu- 
 lation is of unequal strength, not only 
 according to the varieties of individual 
 character, but to the general state of 
 society and civilization. Like all 
 other moral attributes, it is one in 
 which the human race exhibits great 
 differences, conformably to the diver- 
 sity of its circumstances and the stage 
 of its progress. 
 
 On topics which if they were to be 
 fully investigated would exceed the 
 bounds that can be allotted to them 
 in this treatise, it is satisfactory to be 
 able to refer to other works in which 
 the necessary developments have been 
 presented more at length. On the 
 subject of Population this valuable 
 service has been rendered by the 
 celebrated Essay of Mr. Malthus ; 
 and on the point which now occupies 
 us 1 can refer with equal confidence to 
 another, though a less known work, 
 "New Principles of Political Eco- 
 nomy," by Dr. Rae.* In no other 
 
 * This treatise is an example, such as not 
 unfrequently presents itself, how much more 
 depends on accident, than on the qualities 
 of a book, in determining its reception. Had 
 it appeared at a suitable time, and been fa- 
 voured by circumstances, it would have had 
 every requisite for great success. The author, 
 a Scotchman settled in the United States, 
 unites much knowledge, an original vein of 
 thought, a considerable turn for philosophic 
 generalities, and a manner of exposition and 
 illustration calculated to make ideas tell not 
 only for what they are worth, but for more 
 than they are worth, and which sometimes, 
 I think, has that effect in the writer's own 
 mind. The principal fault of the book ia 
 the position of antagonism in which, with 
 the controversial spirit apt to be found in 
 those who have new thoughts on old subjects, 
 he has placed himself towards Adam Smith. 
 I call this a fault, (though I think many of 
 
 book known to me is so much light 
 thrown, both from principle and 
 history, on the causes which deter- 
 mine the accumulation of capital. 
 
 All accumulation involves the sacri- 
 fice of a present, for the sake of a 
 future good. But the expediency of such 
 a sacrifice varies very much in different 
 states of circumstances ; and the wil- 
 lingness to make it, varies still more. 
 
 In weighing the future against the 
 present, the uncertainty of all things 
 future is a leading element ; and that 
 uncertainty is of very different degrees. 
 "All circumstances,'' therefore, "in- 
 creasing the probability of the provi- 
 sion we make for futurity being en- 
 joyed by ourselves or others, tend" 
 justly and reasonably " to give 
 strength to the effective desire of 
 accumulation. Thus a healthy climate 
 or occupation, by increasing the pro- 
 bability of life, has a tendency to add 
 to this desire. When engaged in 
 safe occupations, and living in healthy 
 countries, men are much more apt to 
 be frugal than in unhealthy or hazard- 
 ous occupations, and in climates per- 
 nicious to human life. Sailors and 
 soldiers are prodigals. In the West 
 Indies, New Orleans, the East Indies, 
 the expenditure of the inhabitants is 
 profuse. The same people, coming to 
 reside in the healthy parts of Europe, 
 and not getting into the vortex of 
 extravagant fashion, live economically. 
 War and pestilence have always waste 
 and luxury among the other evils that 
 follow in their train. For similar 
 reasons, whatever gives security to the 
 affairs of the community is favourable 
 to the strength of this principle. In 
 this respect the general prevalence of 
 law and order, and the prospect of the 
 continuance of peace and tranquillity, 
 have considerable influence."t The 
 more perfect the security, the greater 
 
 the criticisms just, and some of them far- 
 seeing), because there is much less real dif- 
 ference of opinion than might be supposed 
 from Dr. Rae's animadversions ; and because 
 what he has found vulnerable in his great 
 predecessor is chiefly the " human too much" 
 in his premises ; the portion of them that is 
 over and above what was either required or 
 is actually used for the establishment of his 
 conclusions. 
 
 t Rae, p. 123.
 
 LAW OF THE INCREASE OF CAPITAL. 
 
 103 
 
 will be the effective strength of the 
 desire of accumulation. Where pro- 
 perty is less safe, or the vicissitudes 
 ruinous to fortunes are more frequent 
 and severe, fewer persons will save at 
 all, and of those who do, many will 
 require the inducement of a higher 
 rate of profit on capital, to make them 
 prefer a doubtful future to the tempta- 
 tion of present enjoyment. 
 
 These are considerations which affect 
 the expediency, in the eye of reason, 
 of consulting future interests at the 
 expense of present. But the inclination 
 to make this sacrifice does not solely 
 depend upon its expediency. The dis- 
 position to save is often far short of 
 what reason would dictate: and at 
 other times is liable to be in excess of it. 
 
 Deficient strength of the desire of 
 accumulation may arise from improvi- 
 dence, or from want of interest in 
 others. Improvidence may be con- 
 nected with intellectual as well as 
 moral causes. Individuals and com- 
 munities of a very low state of intelli- 
 gence are always improvident. A 
 certain measure of intellectual develop- 
 ment seems necessary to enable absent 
 things, and especially things future, to 
 act with any force on the imagination 
 and will. The effect of want of interest 
 in others in diminishing accumulation, 
 will be admitted, if we consider how 
 much saving at present takes place, 
 which has for its object the interest of 
 others rather than of ourselves; the 
 education of children, their advance- 
 ment in life, the future interests of 
 other personal connexions, the power 
 of promoting by the bestowal of money 
 or time, objects of public or private 
 usefulness. If mankind were generally 
 in the state of mind to which some 
 approach was seen in the declining 
 period of the Roman empire caring 
 nothing for their heirs, as well as 
 nothing for friends, the public, or any 
 object which survived them they 
 would seldom deny themselves any in- 
 dulgence for the sake of saving, beyond 
 what was necessary for their own future 
 years ; which they would place in life 
 annuities, or in some other form which 
 would make its existence and their 
 lives terminate together. 
 
 3. From these various causes, in- 
 tellectual and moral, there is, in differ- 
 ent portions of the human race, a 
 greater diversity than is usually ad- 
 verted to, in the strength of the effective 
 desire of accumulation. A backward 
 state of general civilization is often 
 more the effect of deficiency in this 
 particular than in many others which 
 attract more attention. In the cir- 
 cumstances, for example, of a hunting 
 tribe, " man may be said to he neces- 
 sarily improvident, and regardless of 
 futurity, because, in this state, the 
 future presents nothing which can be 
 with certainty either foreseen or go- 
 verned Besides a want of the 
 
 motives exciting to provide for the 
 needs of futurity through means of the 
 abilities of the present, there is a want 
 of the habits of perception and action, 
 leading to a constant connexion in the 
 mind of those distant points, and of the 
 series of events serving to unite them. 
 Even, therefore, if motives he awakened 
 capable of producing the exertion na- 
 cessary to effect this connexion, there 
 remains the task of training the mind 
 to think and act so as to establish it." 
 
 For instance: "Upon the banks of 
 the St. Lawrence there are several 
 little Indian villages. They are sur- 
 rounded, in general, by a good deal of 
 land, from which the wood seems to 
 have been long extirpated, and have, 
 besides, attached to them, extensive 
 tracts of forest. The cleared land is 
 rarely, I may almost say never, culti- 
 vated, nor are any inroads made in the 
 forest for such a purpose. The soil is, 
 nevertheless, fertile, and were it not, 
 manure lies in heaps by their houses. 
 Were every family to inclose half an 
 acre of ground, till it, and plant it in 
 potatoes and maize, it would yield a 
 sufficiency to support them one-half 
 the year. They suffer, too, every now 
 and then, extreme want, insomuch 
 that, joined to occasional intemperance, 
 it is rapidly reducing their numbers. 
 This, to us, so strange apathy proceeds 
 not, in any great degree, from repug- 
 nance to labour ; on the contrary, they 
 apply very diligently to it when its 
 reward is immediate. Thus, besides 
 their peculiar occupations of huntiug
 
 104 
 
 BOOK I. CHAPTER XI. 3. 
 
 and fishing, in which they are ever 
 leadv to engage, they are much em- 
 ployed in the navigation of the St. 
 Lawrence, and may be seen labouring 
 at the oar, or setting with the pole, in 
 the large boats used for the purpose, 
 and .always furnish the greater part of 
 (he additional hands necessary to con- 
 duct rafts through some of the rapids. 
 Nor is the obstacle aversion to agri- 
 cultural labour. This is no doubt a 
 prejudice of theirs ; but mere prejudices 
 always yield, principles of action cannot 
 be created. When the returns from 
 agricultural labour are speedy and 
 great, they are also agriculturists. 
 Thus, some of the little islands on 
 Lake St. Francis, near the Indian 
 village of St. Regis, are favourable to 
 'the growth of maize, a plant yielding 
 a return of a hundredfold, and forming, 
 even when half ripe, a pleasant and 
 substantial repast. Patches of the 
 best land on these islands are, there- 
 fore, every year cultivated by them for 
 this purpose. As their situation renders 
 them inaccessible to cattle, no fence is 
 required ; were this additional outlay 
 necessary, I suspect they would be 
 neglected, like the commons adjoining 
 their village. These had apparently, 
 at one time, been under crop. The 
 cattle of the neighbouring settlers 
 would now, however, destroy any crop 
 not securely fenced, aud this additional 
 necessary outlay consequently bars 
 their culture. It removes them to an 
 order of instruments of slower return 
 than that which corresponds to the 
 strength of the effective desire of accu- 
 mulation.in this little society. 
 
 " It is here deserving of notice, that 
 what instruments of this kind they do 
 form, are completely formed. The 
 small spots of corn they cultivate are 
 thoroughly weeded and hoed. A little 
 neglect in this part would indeed re- 
 duce the crop very much ; of this ex- 
 perience has made them perfectly 
 aware, and they act accordingly. It is 
 evidently not the necessary labour that 
 is the obstacle to more extended cul- 
 ture, but the distant return from that 
 labour. I am assured, indeed, that 
 among some of the more remote tribes, 
 the labour tbuxpended much exceeds 
 
 that given by the whites. The Rntna 
 portions of ground being cropped with- 
 out remission, and manure not being 
 used, they would scarcely yield any 
 return, were not the .soil most^carefully 
 broken and pulverized, both with tho 
 hoe and the hand. In such a situation 
 a white man would clear a fresh piece 
 of ground. It would perhaps scarce 
 repay his labour the first year, and he 
 would have to look for his reward in 
 succeeding years. On the Indian, suc- 
 ceeding years are too distant to make 
 sufficient impression ; though, to obtain 
 what labour may bring about in the 
 course of a few months, he toils even 
 more assiduously than the white man .''* 
 This view of things is confirmed by 
 the experience of the Jesuits, in their in- 
 teresting efforts to civilize the Indians 
 of Paraguay. They gained the confi- 
 dence of these savages in a most 
 extraordinary degree. They acquired 
 influence over them sufficient to make 
 them change their whole manner of 
 life. They obtained their absolute sub- 
 mission and obedience. They estab- 
 lished pea'ce. They taught them all 
 the operations of European agricul- 
 ture, and many of the more difficult 
 arts. There were everywhere to bo 
 seen, according to Charlevoix, " work- 
 shops of gilders, painters, sculptors, 
 goldsmiths, watchmakers, carpenters, 
 joiners, dyers,' ' &c. These occupations 
 were not practised for the personal 
 gain of the artificers : the produce was 
 at the absolute disposal of the mis- 
 sionaries, who ruled the people by a 
 voluntary despotism. The obstacles 
 arising from aversion to labour were 
 therefore very completely overcome. 
 The real difficulty was the improvi- 
 dence of the people ; their inability to 
 think for the future ; and the necessity 
 accordingly of the most unremitting 
 and minute superintendence on the 
 part of their instructors. "Thus at 
 first, if these gave up to them the caro 
 of the oxen with which they ploughed, 
 their indolent thoughtlessness would 
 probably leave them at evening still 
 yoked to the implement. Worse than 
 this, instances occurred where they cut 
 them up for supper, thiukinp, when re- 
 * Bae, p. 130.
 
 LAW OF THE INCREASE OF CAPITAL. 
 
 105 
 
 prelicnded, that they sufficiently ex- 
 cuscil themselves by saying they were 
 hungry. . . . These fathers, says Ul- 
 loa, have to visit the houses, to examine 
 what is really wanted : for, without this 
 care, the Indians would never look after 
 anything. They must be present, too, 
 when animals are slaughtered, not only 
 that the meat may be equally divided, 
 but that nothing may be lost." " But 
 notwithstanding all this care and su- 
 perintendence," says Charlevoix, " and 
 all the precautions which are taken to 
 prevent any want of the necessaries of 
 life, the missionaries are sometimes 
 much embarrassed. It often happens 
 that they" (the Indians) "do not reserve 
 to themselves a sufficiency of grain, 
 even for seed. As for their other pro- 
 visions, were they not well looked alter, 
 they would soon be without where- 
 withal to support life."* 
 
 As an example intermediate, in the 
 strength of the effective desire of accu- 
 mulation, between the state of things 
 thus depicted and that of modern 
 Europe, the case of the Chinese de- 
 serves attention. From various cir- 
 cumstances in their personal habits 
 and social condition, it might be an- 
 ticipated that they would possess a 
 degree of prudence and self-control 
 greater than other Asiatics, but inferior 
 to most European nations ; and the fol- 
 lowing evidence is adduced of the fact. 
 
 " Durability is one of the chief 
 qualities, marking a high degree of 
 the effective desire of accumulation. 
 The testimony of travellers ascribes to 
 the instruments formed by the Chinese, 
 a very inferior durability to similar 
 instruments constmcted by Europeans. 
 The houses, we are told, unless of the 
 higher ranks, are in general of unburnt 
 bricks, of clay, or of hurdles plastered 
 with earth ; the roofs, of reeds fastened 
 to laths. We can scarcely conceive 
 more unsubstantial ortemporary fabrics. 
 Their partitions are of paper, requiring 
 to be renewed every year. A similar 
 observation may be made concerning 
 their implements of husbandry, and 
 other utensils. They are almost en- 
 tirely of wood, the metals entering 
 but very sparingly into their construc- 
 Rac, D. HO. 
 
 tion ; consequently they soon wear out, 
 and require frequent renewals. A 
 greater degree of strength in the effec- 
 tive desire of accumulation, would 
 cause them to be constructed of mate- 
 rials requiring a greater present ex- 
 penditure, but being far more durable. 
 From the same cause, much land, that 
 in other countries would be cultivated, 
 lies waste. All travellers take notice 
 of large tracts of lands, chiefly swamps, 
 which continue in a state of nature. 
 To bring a swamp into tillage is gene- 
 rally a process, to complete which, 
 requires several years. It must be 
 previously drained, the surface long 
 exposed to the sun, and many opera- 
 tions performed, before it can be made 
 capable of bearing a crop. Though 
 yielding, probably, a very considerable 
 return for the labour bestowed on it, 
 that return is not made until a long 
 time has elapsed. The cultivation of 
 such land implies a greater strength of 
 the effective desire of accumulation 
 than exists in the empire. 
 
 " The produce of the harvest is, as 
 we have remarked, always an instru- 
 ment of some order or another ; it is a 
 provision for future want, and regulated 
 by the same laws as those to which 
 other means of attaining a similar end 
 conform. It is there chiefly rice, of 
 which there are two harvests, the one 
 in June, the other in October. The 
 period then of eight months between 
 October and June, is that for which 
 provision is made each year, and the 
 different estimate they make of to-day 
 and this day eight months will appear 
 in the self-denial they practise now, in 
 order to guard against want then. 
 The amount of this self-denial would 
 seem to be small. The father Parennin, 
 indeed, (who seems to have been one 
 of the most intelligent of the Jesuits, 
 and spent a long life among the 
 Chinese of all classes,) asserts, that 
 it is their great deficiency in fore- 
 thought and frugality in this respect, 
 which is the cause of the scarcities 
 and famines that frequently occur." 
 
 That it is defect of providence, not de- 
 fect of industry, that limits production 
 among the Chinese, is still more ob- 
 vious than in the case of tho somi-agri-
 
 106 
 
 BOOK I. CHAPTER XL 3. 
 
 culturalised Indians. " Where the re- 
 turns are quick, where the instruments 
 formed require but little time to bring 
 the events for which they were formed 
 to an issue,'' it is well known that 
 "the great progress which has been 
 made in the knowledge of the arts 
 suited to the nature of the country and 
 the wants of its inhabitants" makes 
 industry energetic and effective. " The 
 warmth of the climate, the natural fer- 
 tility of the country, the knowledge 
 which the inhabitants have acquired 
 of the arts of agriculture, and the dis- 
 covery and gradual adaptation to every 
 soil of the most useful vegetable pro- 
 ductions, enable them very speedily to 
 draw from almost any part of the sur- 
 face, what is there esteemed an equiva- 
 lent to much more than the labour be- 
 stowed in tilling and cropping it. 
 They have commonly double, some- 
 times treble harvests. These, when 
 they consist of a grain so productive 
 as rice, the usual crop, can scarce fail 
 to yield to their skill, from almost any 
 portion of soil that can be at once 
 Drought into culture, very ample re- 
 turns. Accordingly there is no spot 
 that labour can immediately bring 
 under cultivation that is not made to 
 yield to it. Hills, even mountains are 
 ascended and formed into terraces; 
 and water, in that country the great 
 productive agent, is led to every part 
 by drains, or carried up to it by the in- 
 genious and simple hydraulic machines 
 which have been in use from time im- 
 memorial among this singular people. 
 They effect this the more easily, frem 
 the soil, even in these situations, being 
 very deep and covered with much vege- 
 table mould. But what yet more than 
 this marks the readiness with which 
 labour is forced to form the most diffi- 
 cult materials into instruments, where 
 these instruments soon bring to an 
 issue the events for which they are 
 formed, is the frequent occurrence on 
 many of their lakes and rivers, of struc- 
 tures resembling the floating gardens 
 of the Peruvians, rafts covered with 
 vegetable soil and cultivated. Labour 
 in this way draws from the materials 
 on which it acts very speedy returns. 
 Nothing can exceed the luxuriance of 
 
 vegetation when the quickening powers 
 of a genial sun are ministered to by a 
 rich soil and abundant moisture. It is 
 otherwise, as we have seen, in cases 
 where the return, though copious, is 
 distant. European travellers are sur- 
 prised at meeting these little floating 
 farms by the side of swamps which 
 only require draining to render them 
 tillable. It seems to them strange 
 that labour should not rather be be- 
 stowed on the solid earth, where its 
 fruits might endure, than on structures 
 that must decay and perish in a few 
 years. The people they are among 
 think not so much of future years, as 
 of the present time. The effective de- 
 sire of accumulation is of very different 
 strength in the one, from what it is in 
 the other. The views of the European 
 extend to a distant futurity, and he is 
 surprised at the Chinese, condemned, 
 through improvidence, and want of 
 sufficient prospective care, to incessant 
 toil, and as he thinks, insufferable 
 wretchedness. The views of the 
 Chinese are confined to narrower 
 bounds ; he is content to live from day 
 to day, and has learnt to conceive even 
 a life of toil a blessing."* 
 
 When a country has carried produc- 
 tion as far as in the existing state of 
 knowledge it can be carried with an 
 amount of return corresponding to the 
 average strength of the effective desire 
 of accumulation in that country, it has 
 reached what is called the stationary 
 state ; the state in which no further ad- 
 dition will be made to capital unless 
 there takes place either some improve- 
 ment in the arts of production, or 
 an increase in the strength of the de- 
 sire to accumulate. In the stationary 
 state, though capital does not on the 
 whole increase, some persons grow 
 richer and others poorer. Those whose 
 degree of providence is below the usual 
 standard, become impoverished, their 
 capital perishes, and makes room for 
 the savings of those whose effective de- 
 sire of accumulation exceeds the ave- 
 rage. These become the natural pur- 
 chasers of the land, manufactories, and 
 other instruments of production owned 
 by their less provident countrymen. 
 * Rae, pp. 1516,
 
 LAW OF THE INCREASE OF CAPITAL. 
 
 107 
 
 What the causes arc which make the 
 return to capital greater in one country 
 than in another, and which, in certain 
 circumstances, make it impossible for 
 any additional capital to find invest- 
 ment unless at diminished returns, will 
 appear clearly hereafter. In China, 
 if that country has really attained, as 
 it is supposed to have done, the sta- 
 tionary state, accumulation has stopped 
 when the returns to capital are still as 
 high as is indicated by a rate of inte- 
 rest legally twelve per cent, and prac- 
 tically varying (it is said) between 
 eighteen and thirty-six. It is to be 
 presumed therefore that no greater 
 amount of capital than the country 
 already possesses, can find employment 
 at this high rate of profit, and that any 
 lower rate does not hold out to a 
 Chinese sufficient temptation to induce 
 him to abstain from present enjoyment. 
 What a contrast with Holland, where, 
 during the most flourishing period of 
 its history, the government was able 
 habitually to borrow at two per cent, 
 and private individuals, on good secu- 
 rity, at three. Since China is not a 
 country like Burmah, or the native 
 states of India, where an enormous in- 
 terest is but an indispensable compen- 
 sation for the risk incurred from the 
 bad faith or poverty of the state, and 
 of almost all private borrowers; the 
 fact, if fact it be, that the increase of 
 capital has come to a stand while the 
 returns to it are still so large, denotes 
 a much less degree of the effective de- 
 sire of accumulation, in other words a 
 much lower estimate of the future rela- 
 tively to the present, than that of most 
 European nations. 
 
 4. We have hitherto spoken of 
 countries in which the average strength 
 of the desire to accumulate is short of 
 that which, in circumstances of any 
 tolerable security, reason and sober 
 calculation would approve. We have 
 now to speak of others in which it deci- 
 dedly surpasses that standard. In the 
 more prosperous countries of Europe, 
 there are to be found abundance of 
 prodigals ; in some of them (and in 
 none more than England) the ordinary 
 degre of economy and providence 
 
 among those who live by manual la- 
 bour cannot be considered high ; still, 
 in a very numerous portion of the com- 
 munity, the professional, manufactu- 
 ring, and trading classes, being those 
 who, generally speaking, unite more of 
 the means with more of the motives for 
 saving than any other class, the spirit 
 of accumulation is so strong, that the 
 signs of rapidly increasing wealth 
 meet every eye : and the great amount 
 of capital seeking investment excites 
 astonishment, whenever peculiar cir- 
 cumstances turning much of it.intosome 
 one channel, such as railway construc- 
 tion or foreign speculative adventure, 
 bring the largeness of the total amount 
 into evidence. 
 
 There are many circumstances, 
 which, in England, give a peculiar 
 force to the accumulating propensity. 
 The long exemption of the country from 
 the ravages of war, and the far earlier 
 period than elsewhere at which pro- 
 perty was secure from military violence 
 or arbitrary spoliation, have produced a 
 long-standing and hereditary confidence 
 in the safety of funds when trusted out 
 of the owner's hands, which in most 
 other countries is of much more re- 
 cent origin, and less firmly established. 
 The geographical causes which have 
 made industry rather than war the 
 natural source of power and importance 
 to Great Britain, have turned an un- 
 usual proportion of the most enter- 
 prising and energetic characters into 
 the direction of manufactures and com- 
 merce ; into supplying their wants and 
 gratifying their ambition by producing 
 and saving, rather than by appropria- 
 ting what has been produced and 
 saved. Much also depended on the 
 better political institutions of this 
 country, which by the scope they have 
 allowed to individual freedom of action, 
 have encouraged personal activity and 
 self-reliance, while by the liberty they 
 confer of association and combination, 
 they facilitate industrial enterprise on 
 a large scale. The same institutions 
 in another of their aspects, give a most 
 direct and potent stimulus to the desire 
 of acquiring wealth. The earlier de- 
 cline of feudalism having removed or 
 much weakened invidious distinction!
 
 t08 
 
 between tho originally trading classes 
 and those who had been accustomed to 
 despise them ; and a polity having 
 grown up which made wealth the real 
 source of political influence ; its acqui- 
 sition was invested with a factitious 
 value, independent of its intrinsic uti- 
 lity. It became synonymous wi th power ; 
 and since power with the common herd 
 of mankind gives power, wealth became 
 the chief source of personal considera- 
 tion, and the measure and stamp of 
 success in life. To get out of one rank 
 in society into the next above it, is the 
 great aim of English middle-class life, 
 and the acquisition of wealth the 
 means. And inasmuch as to be rich 
 without industry, has always hitherto 
 constituted a step in the social scale 
 above those who are rich by means of 
 industry, it becomes the object of am- 
 bition to save not merely as much as 
 will afford a large income while in busi- 
 ness, but enough to retire from business 
 and live in affluence on realized gains. 
 These causes have in England been 
 greatly aided by that extreme incapa- 
 city oi the people for personal enjoy- 
 ment, whicn is a characteristic of 
 countries over which puritanism has 
 passed. But if accumulation is, on one 
 hand, rendered easier by the absence 
 of a taste for pleasure, it is, on the 
 other, made more difficult by the pre- 
 sence of a very real taste for expense. 
 So strong is the association between 
 personal consequence and the signs of 
 wealth, that the silly desire for the 
 appearance of a large expenditure has 
 the force of a passion, among large 
 classes of a nation which derives less 
 pleasure than perhaps any other in the 
 world from what it spends. Owing to this 
 circumstance, the effective desire of ac- 
 
 BOOK L CHAPTER XII. 1. 
 
 cumulation has never reached so hi^h 
 a pitch in England as it did in Hol- 
 land, where, there being no rich idle 
 class to set the example of a reckless 
 expenditure, and the mercantile classes, 
 who possessed the substantial power on 
 which social influence always waits, 
 being left to establish their own scale 
 of Jiving and standard of propriety, 
 their habits remained frugal and unos 
 tentatious. 
 
 In England and Holland, then, for 
 a long time past, and now in most 
 other countries in Europe (which are 
 rapidly following England in the same 
 race), the desire of accumulation does 
 not require, to make it effective, the 
 copious returns which it requires in 
 Asia, but is sufficiently called into 
 action by a rate of profit so low, that 
 instead of slackening, accumulation 
 seems now to proceed more rapidly 
 than ever ; and the second requisite of 
 increased production, increase of capi- 
 tal, shows no tendency to become 
 deficient. So far as that element is con- 
 cerned, production is susceptible of an 
 increase without any assignable bounds. 
 
 The progress of accumulation would 
 no doubt be considerably checked, if the 
 returns to capital were to be reduced 
 still lower than at present. But why 
 should any possible increase of capital 
 have that effect? This question 
 carries the mind forward to the re- 
 maining one of the three requisites of 
 production. The limitation to produc- 
 tion, not consisting in any necessary 
 limit to the increase of the other two 
 elements, labour and capital, must turn 
 upon the properties of the only element 
 which is inherently, and in itself, 
 limited in quantity. It must depend 
 on the properties of land. 
 
 CHAPTER XIL 
 
 OF THE LAW OP THE INCREASE OP PRODUCTION PROM LAND. 
 
 1. LAND differs from the other | definite increase. Its extent is limited, 
 elements of production, labour and and the extent of the more pi-oductive 
 capital, \n not being susceptible of in- kinds of it more limited still. It is
 
 LAW OF INCREASE OF PRODUCTION FROM LAND. 1M 
 
 of agricultural skill and knowledge, bj 
 increasing tho labour, the produce i 
 not increased iu an equal degree, 
 doubling the labour does not double 
 the produce ; or, to express the same 
 thing in other words, every increase ol 
 produce is obtained by a more than 
 proportional increase in the applica- 
 tion of labour to the land. 
 
 This general law of agricultural 
 industry is the most important propo- 
 sition in political economy. Were the 
 law diflerent, nearly all the phenomena 
 of the production and distribution of 
 wealth would be other than they are. 
 The most fundamental errors which 
 still prevail on our subject, result from 
 not perceiving this law at work under- 
 neath the more superficial agencies 
 on which attention fixes itself; but 
 mistaking those agencies for the ulti- 
 mate causes of effects of which they 
 may influence the form and mode, but 
 of which it alone determines the 
 
 also evident that the quantity of pro- 
 duce capable of being raised on any 
 given piece of land is not indefinite. 
 This limited quantity of land, and li- 
 mited productiveness of it, are the real 
 limits to the increase of production. 
 
 That they are the ultimate limits, 
 roust always have been clearly seen. 
 But since the final barrier has never 
 in any instance been reached ; since 
 tliere is no country in which all the 
 land, capable of yielding food, is so 
 highly cultivated that a larger produce 
 could not (even without supposing any 
 fresh advance in agricultural know- 
 ledge) be obtained from it, and since 
 a large portion of the earth's surface 
 still remains entirely uncultivated ; it 
 is commonly thought, and is very 
 natural at first to suppose, that for the 
 present all limitation of production or 
 population from this source is at an 
 indefinite distance, and that ages must 
 elapse before any practical necessity 
 arises for taking the limiting principle 
 into serious consideration. 
 
 I apprehend this to be not only an 
 error, but the most serious one, to be 
 found in the whole field of political 
 economy. The question is more im- 
 portant and fundamental than any 
 other ; it involves the whole subject of 
 the causes of poverty, in a rich and 
 industrious community; and unless 
 this one matter be thoroughly under- 
 stood, it is to no purpose proceeding 
 any further in our inquiry. 
 
 2. The limitation to production 
 Trom the properties of the soil, ia 
 not like the obstacle opposed by a 
 wall, which stands immovable in one 
 particular spot, and offers no hindrance 
 to motion short of stopping it entirely. 
 "We may rather compare it to a highly 
 elastic and extensible band, which is 
 hardly ever so violently stretched that 
 it could not possibly be stretched any 
 more, yet the pressure of which is felt 
 long before the final limit is reached, 
 and felt more severely the nearer that 
 limit is approached. 
 
 After a certain, and not very ad- 
 vanced, stage in 'the progress of agri- 
 culture, it is the law of production 
 from the land, that in any given state 
 
 essence. 
 
 When, for the purpose of raising an 
 increase of produce, recourse is had to 
 inferior land, it is evident that, so far, 
 the produce does not increase in the 
 same proportion with the labour. The 
 very meaning of inferior land, is land 
 which with equal labour returns a 
 smaller amount of produce. Land 
 may be inferior either in fertility or in 
 situation. The one requires a greater 
 proportional amount of labour for grow- 
 ing the produce, the other for carrying 
 it to market. If the land A yields a 
 thousand quarters of wheat, to a given 
 outlay in wages, manure, &c., and in 
 order to raise another thousand re- 
 course must be had to the land B, 
 which is either less fertile or more 
 distant from the market, the two 
 thousand quarters will cost more 
 than twice as much labour as tho 
 original thousand, and the produce of 
 agriculture will be increased in a less 
 ratio than the labour employed in pro- 
 curing it. 
 
 Instead of cultivating the land B, 
 it would be possible, by higher culti- 
 vation, to make the land A produce 
 more. It might be ploughed or har- 
 rowed twice instead of once, or three 
 times instead of twice ; it might b
 
 110 
 
 BOOK I. CHAPTER XIL f 2. 
 
 lug instead of being ploughed ; after 
 ploughing, it might be gone over with a 
 toe instead of a harrow, and the soil 
 more completely pulverized; it might be 
 oftener or more thoroughly weeded; 
 the implements used might be of 
 higher finish, or more elaborate con- 
 struction ; a greater quantity or more 
 expensive kinds of manure might be 
 applied, or when applied, they might 
 be more carefully mixed and incor- 
 porated with the soil. These are some 
 of the modes by which the same land 
 may be made to yield a greater pro- 
 duce ; and when a greater produce 
 must be had, some of these are among 
 the means usually employed for obtain- 
 ing it. But, that it is obtained at a 
 more than proportional increase of 
 expense, is evident from the fact that 
 inferior lands are cultivated. Inferior 
 lands, or lands at a greater distance 
 from the market, of course yield an 
 inferior return, and an increasing 
 demand cannot be supplied from them 
 unless at an augmentation of cost, and 
 therefore of price. If the additional 
 demand could continue to be supplied 
 from the superior lands, by applying 
 additional labour and capital, at no 
 greater proportional cost than that 
 at which they yield the quantity first 
 demanded of them, the owners or 
 farmers of those lands could undersell 
 all others, and engross the whole 
 market. Lands of a lower degree of 
 fertility or in a more remote situation, 
 might indeed be cultivated by their 
 proprietors, for the sake of subsistence 
 or independence ; but it never could be 
 the interest of any one to farm them 
 for profit. That a profit can be made 
 from them, sufficient to attract capital 
 to such an investment, is a proof that 
 cultivation on the more eligible lands 
 has reached a point, beyond which any 
 greater application of labour and capi- 
 tal would yield, at the best, no greater 
 return than can be obtained at the 
 same expense from less fertile or less 
 favourably situated lands. 
 
 The careful cultivation of a well- 
 farined district of England or Scotland 
 is a symptom and an effect of the more 
 unfavourable terms which the land has 
 begun to exact for any increase of its 
 
 fruits. Such elaborate cultivation costs 
 much more in proportion, and requires 
 a higher price to render it profitable, 
 than farming on a more superficial 
 system ; and would not be adopted if 
 access could be had to land of equal 
 fertility, previously unoccupied. Where 
 there is the choice of raising the in- 
 creasing supply which society requires, 
 from fresh land of as good quality as 
 that already cultivated, no attempt is 
 made to extract from land anything 
 approaching to what it will yield on 
 what are esteemed the best European 
 modes of cultivating. The land is 
 tasked up to the point at which the 
 greatest return is obtained in proportion 
 to the labour employed, but no further : 
 any additional labour is carried else- 
 where. " It is long," says an intelligent 
 traveller in the United States,* "before 
 an English eye becomes reconciled to 
 the lightness of the crops and the care- 
 less farming (as we should call it) which 
 is apparent. One forgets that where 
 land is so plentiful and labour so dear 
 as it is here, a totally different prin- 
 ciple must be pursued to that which 
 prevails in populous countries, and that 
 the consequence will of course be a 
 want of tidiness, as it were, and finish, 
 about everything which requires la- 
 bour." Of the two causes mentioned, 
 the plentifulness of land seems to me 
 the true explanation, rather than the 
 dearness of labour ; for, however dear 
 labour may be, when food is wanted, 
 labour will always be applied to pro- 
 ducing it in preference to anything 
 else. But this labour is more effective 
 for its end by being applied to fresh 
 soil, than if it were employed in bring- 
 ing the soil already occupied into 
 higher cultivation. Only when no soils 
 remain to be broken up but such as 
 either from distance or inferior quality 
 require a considerable rise of price to 
 render their cultivation profitable, can 
 it become advantageous to apply the 
 high farming of Europe to any American 
 lands ; except, perhaps, in the imme- 
 diate vicinity of towns, where saving 
 in cost of carriage may compensate fot 
 
 * Letters from America, by John Robert 
 Godley, vol. i. p. 42. See also Lyell's Traotlt 
 in America, vol. ii. p. 83.
 
 LAW OF INCREASE OF PRODUCTION FROM LAND. Ill 
 
 great inferiority in the return from the 
 soil itself. As American farming is to 
 English, so is the ordinary English to 
 that of Flanders, Tuscany, or the Terra 
 di Lavoro ; where by the application of 
 a far greater quantity of labour there 
 is obtained a considerably larger gross 
 produce, but on such terms as would 
 never be advantageous to a mere spe- 
 culator for profit, unless made so by 
 much higher prices of agricultural 
 produce. 
 
 The principle which has now been 
 stated must be received, no doubt, with 
 certain explanations and limitations. 
 Even after the land is so highly culti- 
 vated that the mere application of ad- 
 ditional labour, or of an additional 
 amount of ordinary dressing, would 
 yield no return proportioned to the ex- 
 pense, it may still happen that the 
 application of a much greater additional 
 labour and capital to improving the 
 soil itself, by draining or permanent 
 manures, would be as liberally remu- 
 nerated by the produce, as any portion 
 of the labour and capital already em- 
 ployed. It would sometimes be much 
 more amply remunerated. This could 
 not be, if capital always sought and 
 found the most advantageous employ- 
 ment; but if the most advantageous 
 employment has to wait longest for its 
 remuneration, it is only in a rather ad- 
 vanced stage of industrial development 
 that the preference will be given to it ; 
 and even in that advanced stage, the 
 laws or usages connected with property 
 in land and the tenure of farms, are 
 often such as to prevent the disposable 
 capital of the country from flowing 
 freely into the channel of agricultural 
 improvement : and hence the increased 
 supply, required by increasing popula- 
 tion, is sometimes raised at an aug- 
 menting cost by higher cultivation, 
 when the means of producing it without 
 increase of cost are known and acces- 
 sible. There can be no doubt, that if 
 capital were forthcoming to execute, 
 within the next year, all known and 
 recognised improvements in the land 
 of the United Kingdom which would 
 pay at the existing prices, that is, 
 which would increase the produce in 
 as great or a greater ratio than the 
 
 expense ; the result would be such 
 (especially if we include Ireland in the 
 supposition) that inferior land would 
 not for a long time require to be brought 
 under tillage : probably a considerable 
 part of the less productive lands now 
 cultivated, which are not particularly 
 favoured by situation, would go out of 
 culture ; or (as the improvements in 
 question are not so much applicable to 
 good land, but operate rather by con- 
 verting bad land into good) the con- 
 traction of cultivation might principally 
 take place by a less high dressing and 
 less elaborate tilling of land generally ; 
 a falling back to something nearer the 
 character of American farming; such 
 only of the poor lands being altogether 
 abandoned as were not found suscep- 
 tible of improvement. And thus tho 
 aggregate produce of the whole culti- 
 vated land would bear a larger propor- 
 tion than before to the labour expended 
 on it ; and the general law of diminish- 
 ing return from land would have un- 
 dergone, to that extent, a temporary 
 supersession. No one, however, can 
 suppose that even in these circum- 
 stances, the whole produce required for 
 the country could be raised exclusively 
 from the best lands, together with those 
 possessing advantages of situation to 
 place them on a par with the best. 
 Much would undoubtedly continue to 
 be produced under less advantageous 
 conditions, and with a smaller propor- 
 tional return, than that obtained from 
 the best soils and situations. And in 
 proportion as the further increase of 
 population required a still, greater ad- 
 dition to the supply, the general law 
 would resume its a urse, and the further 
 augmentation would be obtained at a 
 more than proportionate expense of 
 labour and capital. 
 
 3. That the produce of land in- 
 creases, cceteris paribus, in a diminish- 
 ing ratio to the increase in the labour 
 employed, is a truth more often ignored 
 or disregarded than actually denied. 
 It has, however, met with a direct im- 
 pugner in the well-known American 
 political economist, Mr. H. C. Carey, 
 who maintains, that the real law of 
 agricultural industry is the very reverse ;
 
 112 BOOK I. CHARIER XII. 
 
 the pitxlrice increasing in a greater 
 ratio than the labour, or in other words, 
 affording to labour a perpetually in- 
 creasing return. To substantiate this 
 assertion, he argues, that cultivation 
 does not begin with the better soils, 
 and extend from them, as the demand 
 increases, to the poorer, but begins 
 with the poorer, and does not, till long 
 after, extend itself to the more fertile. 
 Settlers in a new country invariably 
 commence on the high and thin lands ; 
 the rich but swampy soils of the river 
 bottoms cannot at first be brought into 
 cultivation, by reason of their un- 
 healthiness, and of the great and pro- 
 longed labour required for clearing and 
 draining them. As population and 
 wealth increase, cultivation travels 
 down the hill sides, clearing them as 
 it goes, and the most fertile soils, those 
 of the low grounds, are generally (he 
 even says universally) the latest culti- 
 vated. These propositions, with the 
 inferences which Mr. Carey draws 
 from them, are set forth at. much 
 
 length in his latest and most elaborate 
 treatise, "Principles of Social Science ;" 
 and he considers them as subverting 
 the very foundation of what he calls 
 the English political economy, with all 
 its practical consequences, especially 
 the doctrine of free trade. 
 
 As far as words go, Mr. Carey has 
 a good case against several of the 
 highest authorities in political economy, 
 who certainly did enunciate in too 
 universal a manner the law which they 
 laid down, not remarking that it is not 
 true of the first cultivation in a newly- 
 settled country. Where population is 
 thin and capital scanty, land which 
 requires a large outlay to render it 
 fit for tillage must remain untilled; 
 though such lands, when their time 
 has come, often yield a greater pro- 
 duce than those earlier cultivated, not 
 only absolutely, but proportionally to 
 the labour employed, even if we include 
 that which had been expended in 
 originally fitting them for culture. 
 But it is not pretended that the 
 law cf diminishing return was opera- 
 tive from the veiy beginning of society ; 
 and though some political economists 
 may have believed it to come into 
 
 8- 
 
 operation earlier than it does, it begini 
 quite early enough to support the 
 conclusions they founded on it. Mr. 
 Carey will hardly assert that in any 
 old country in England and France, 
 for example the lands left waste are, 
 or have for centuries been, more 
 naturally fertile than those under 
 tillage. Judging even by his own im- 
 perfect test, that of local situation 
 now imperfect, I need not stop to point 
 out is it true that in England or 
 France at the present day, the uncul- 
 tivated part of the soil consists of the 
 plains and valleys, and the cultivated 
 of the hills I Every one knows, on the 
 contrary, that it is the high lands and 
 thin soils which are left to nature ; ami 
 when the progress of population de- 
 mands an increase of cultivation, the 
 extension is from the plains to the hills. 
 Once in a century, perhaps, a Bedford 
 Level may be drained, or a Lake of 
 Harlem pumped out ; but these are 
 slight and transient exceptions to the 
 normal progress of things ; and in old 
 
 countries which are at all advanced in 
 civilization, little of this sort remains 
 to be done.* 
 
 Mr. Carey himself unconsciously 
 bears the strongest testimony to the 
 reality of the law he contends against; 
 for one of the propositions most strenu- 
 ously maintained by him is, that the 
 raw products of the soil, in an advanc- 
 ing community, steadily tend to rise in 
 price. Now, the most elementary 
 truths of political economy show that 
 this could not happen, unless the cost of 
 production, measured in labour, of those 
 products, tended to rise. If the appli- 
 cation of additional labour to the land 
 was, as a general rule, attended with an 
 increase in the proportional return, the 
 price of produce, insteal of rising, must 
 necessarily fall as society advances, 
 unless the cost of production of gold 
 
 * Ireland may be alleged as an exception; 
 a large fraction of the entire soil of that 
 country being still incapable of cultivation 
 for want of drainage. But, though Ireland 
 is an old country, unfortunate social and 
 political circumstances have kept it a poor 
 and backward one. Neither is it at all cer- 
 tain that the bogs of Ireland, if drained and 
 brought under tillage, would take thoir place 
 alonx with Mr. Carey's fertile river bottoms, 
 or among any but the poorer soiU.
 
 LAW OF INCREASE 05' PRODUCTION VkOM LAND. in 
 
 turnip husbandry, is spoken of as 
 amounting to a revolution. These im- 
 provements operate not only by enabling 
 the land to produce a crop every year, 
 instead of remaining idle one year in 
 every two or three to renovate its 
 powers, but also by direct increase of 
 its productiveness ; since the great ad- 
 dition made to the number of cattle 
 by the increase of their food, affords 
 more abundant manure to fertilize the 
 corn lands. Next in order comes the 
 introduction of new articles of food 
 containing a greater amount of sus- 
 tenance, like the potato, or more pro- 
 ductive species or varieties of the same 
 plant, such as the Swedish turnip. In 
 the same class of improvements must 
 be placed a better knowledge of the 
 properties of manures, and of the most 
 effectual modes of applying them ; the 
 introduction of new and more powerful 
 fertilizing agents, such as guano, and 
 the conversion to the same purpose, of 
 substances previously wasted; inven- 
 tions like subsoil-ploughing or tile- 
 draining ; improvements in the breed 
 or feeding of labouring cattle ; aug- 
 mented stock of the animals which con- 
 sume and convert into human food 
 what weuld otherwise be wasted ; and 
 the like. The other sort of improve- 
 ments, those which diminish labour, 
 but without increasing the capacity of 
 the land to produce, are such as the 
 improved construction of tools ; the in- 
 troduction of new instruments which 
 spare manual labour, as the winnow- 
 ing and threshing machines ; a more 
 skilful and economical application of 
 muscular exertion, such as the intro- 
 duction, so slowly accomplished in 
 England, of Scotch ploughing, with 
 two horses abreast and one man, in- 
 stead of three or four horses in a team 
 and two men, &c. These improve- 
 ments do not add to the productiveness 
 of the land, but they are equally ca'cu- 
 lated with the former to counteract the 
 tendency in the cost of production of 
 agricultural produce, to rise with the 
 progress of population and demand. 
 
 Analogous in effect to this second 
 class of agricultural improvements, nre 
 improved means of communication. 
 Good roads are equrrftlent to good tools. 
 
 and silver fell still more : a case so 
 rare, that there are only two periods in 
 all history when it is known to have 
 taken place : the one, that which fol- 
 lowed the opening of the Mexican and 
 Peruvian mines ; the other, that ii 
 which we now live. At all known 
 periods except these two, the cost of 
 production of the precious metals has 
 been either stationary or rising. If, 
 therefore, it be true that the tendency of 
 agricultural produce is to rise in money 
 price as wealth and population increase, 
 there needs no other evidence that the 
 labour required for raising it from the 
 soil tends to augment when a greater 
 quantity is demanded. 
 
 I do not go so far as Mr. Carey : I 
 do not assert that the cost of production 
 and consequently the price, of agricul- 
 tural produce, always and necessarily 
 rises as population increases. It tends 
 to do so, but the tendency may be, 
 and sometimes is, even during long 
 periods, held in check. The effect 
 does not depend on a single principle, 
 but on two antagonizing principles. 
 There is another agency, in habitual 
 antagonism to the law of diminishing 
 return from land ; and to the considera- 
 tion of this we shall now proceed. It 
 is no other than the progress of civili- 
 zation. I use this general and some- 
 what vague expression, because the 
 things to be included are so various, 
 tbat hardly any term of a more re- 
 stricted signification would comprehend 
 them all. 
 
 Of these, the most obvious is the 
 progress of agricultural knowledge, 
 skill, and invention. Improved pro- 
 cesses of agriculture are of two kinds : 
 some enable the land to yield a greater 
 absolute produce, without an equivalent 
 increase of labour ; others have not the 
 power of increasing the produce, but 
 nave that of diminishing the labour and 
 expense by which it is obtained. 
 Among the first are to be reckoned the 
 disuse of fallows, by means of the rota- 
 tion of crops ; and the introduction of 
 new articles of cultivation capable of 
 entering advantageously into the rota- 
 tion. The change made in British 
 agriculture towards the close of the 
 last century, by the introduction of 
 
 f. B.
 
 114 
 
 It is of no consequence whether the 
 economy of labour takes place in ex- 
 tracting the produce from the soil, or 
 in conveying it to the place where it is 
 to be consumed. Not to say in addi- 
 tion, that the labour of cultivation 
 itself is diminished by whatever lessens 
 the cost of bringing manure from a 
 distance, or facilitates the many opera- 
 tions of transport from place to place 
 which occur within the bounds of the 
 farm. .Railways and canals are virtu- 
 ally a diminution of the cost of produc- 
 tion of all things sent to market by 
 them ; and literally so of all those, the 
 appliances and aids for producing 
 which, they serve to transmit. By 
 their means land can be cultivated, 
 which would not otherwise have re- 
 munerated the cultivators without a 
 rise of price. Improvements in naviga- 
 tion have, with respect to food or 
 materials brought from beyond sea, 
 a corresponding effect. 
 
 From similar considerations, it ap- 
 pears that many purely mechanical 
 improvements, which have, apparently 
 at least, no peculiar connexion with 
 agriculture, nevertheless enable a given 
 amount of food to be obtained with a 
 smaller expenditure of labour. A great 
 improvement in the process of melting 
 iron, would tend to cheapen agricultural 
 implements, diminish the cost of rail- 
 roads, of waggons and carts, ships, and 
 perhaps buildings, and many other 
 things to which iron is not at present 
 applied, because it is too costly ; and 
 would thence diminish the cost of pro- 
 duction of food. The same effect would 
 follow from an improvement in those 
 processes of what may be termed 
 manufacture, to which the material of 
 food is subjected after it is separated 
 from the ground. The first applica- 
 tion of wind or water power to grind 
 corn, tended to cheapen bread as much 
 as a very important discovery in agri- 
 culture would have done ; and any 
 great improvement in the construction 
 of corn-mills, would have, in proportion, 
 ft similar influence. The effects of 
 cheapening locomotion have been al- 
 ready considered. There are also 
 engineering inventions which facilitate 
 all great operations on the earth's 
 
 BOOK I CHAPTER XII. 3. 
 
 surface. An improvement in tho art 
 of taking levels is of importance to 
 draining, not to mention canal and 
 railway making. The fens of Holland, 
 and of some parts of England, are 
 drained by pumps worked by the wind 
 or by steam. ^Vhere canals of irriga- 
 tion, or where tanks or embankments 
 are necessary, mechanical skill is a 
 great resource for cheapening pro- 
 duction. 
 
 Those manufacturing improvements 
 which cannot be made instrumental to 
 facilitate, in any of its stages, the 
 actual production of food, and there- 
 fore do not help to counteract or retard 
 the diminution of the proportional re- 
 turn to labour from the soil, have, 
 however, another effect, which is practi- 
 cally equivalent. What they do not 
 prevent, they yet, in some degree, 
 compensate for. 
 
 The materials of manufactures being 
 all drawn from the land, and many of 
 them from agriculture, which supplies 
 in particular the entire material of 
 clothing ; the general law of produc- 
 tion from the land, the law of diminish- 
 ing return, must in the last resort be 
 applicable to manufacturing as well as 
 to agricultural industry. As population 
 increases, and the power of the land to 
 yield increased produce is strained 
 harder and harder, any additional 
 supply of material, as woll as of food, 
 must be obtained by a more than pro- 
 portionally increasing expenditure of 
 labour. But the cost of the material 
 forming generally a very small portion 
 of the entire cost of the manufacture, 
 the agricultural labour concerned in 
 the production of manufactured goods 
 is but a small fraction of the whole 
 labour worked up in the commodity. 
 All the rest of the labour tends con- 
 stantly and strongly towards diminu- 
 tion, as the amount of production in- 
 creases. Manufactures are vastly more 
 susceptible than agriculture, of me- 
 chanical improvements, and contri- 
 vances for saving labour ; and it haa 
 already been seen how greatly tho 
 division of labour, and its skilful and 
 economical distribution, depend on th 
 extent of the market, and on the possi 
 bility of production in large masses.
 
 f;AW OF INCREASE OF PRODUCTION FROM LAND. 115 
 
 In inanufactures, accordingly, the 
 causes tending to increase the product- 
 iveness of industry, preponderate 
 greatly over the one cause which tends 
 .o diminish it: and the increase of 
 production, called forth by the progress 
 of society, takes place, not at an in- 
 creasing, but at a continually diminish- 
 ing proportional cost. This fact has 
 manifested itself in the progressive fall 
 of the prices and values of almost every 
 kind of manufactured goods during two 
 centuries past ; a fall accelerated by 
 the mechanical inventions of the last 
 seventy or eighty years, and susceptible 
 of being prolonged and extended beyond 
 any limit which it would be safe to 
 specify. 
 
 Now it is quite conceivable that the 
 efficiency of agricultural labour might 
 be undergoing, with the increase of 
 produce, a gradual diminution ; that 
 the price of food, in consequence, might 
 be progressively rising, and an ever 
 growing proportion of the population 
 might be needed to raise food for the 
 whole ; while yet the productive power 
 of labour in all other branches of in- 
 dustry might be so rapidly augmented, 
 that the required amount of labour could 
 be spared from manufactures, and 
 nevertheless a greater produce be ob- 
 tained, and the aggregate wants of 
 the community be on the whole better 
 supplied, than before. The benefit 
 might even extend to the poorest class. 
 The increased cheapness of clothing and 
 lodging might make up to them for 
 the augmented cost of their food. 
 
 There is, thus, no possible improve- 
 ment in the arts of production which 
 does not in one or another mode exer- 
 cise an antagonist influence to the 
 law of diminishing return to agricultu- 
 ral labour. Nor is it only industrial 
 improvements which have this effect. 
 Improvements in government, and al- 
 most every kind of moral and social 
 advancement, operate in the same 
 manner. Suppose a country in the 
 condition of France before the Revolu- 
 tion : taxation imposed almost exclu- 
 sively on the industrious classes, and 
 on such a principle as to be an actual 
 penalty on production ; and no redress 
 obtainable for any injury to property or 
 
 person, when inflicted by people oi 
 rank or court influence. Was not 
 the hurricane which swept away this 
 system of things, even if we look no 
 further than to its effect in augment- 
 ing the productiveness of labour, equiva- 
 lent to many industrial inventions? The 
 removal of a fiscal burthen on agricul- 
 ture, such as tithe, has the same effect 
 as if the labour necessary for obtaining 
 the existing produce were suddenly 
 reduced one-tenth. The abolition of 
 corn laws, or of any other restrictions 
 which prevent commodities from being 
 produced where the cost of their pro- 
 duction is lowest, amounts to a vast 
 improvement in production. When 
 fertile land, previously reserved as 
 hunting ground, or for any other pur- 
 pose of amusement, is set free for cul- 
 ture, the aggregate productiveness 
 of agricultural industry is increased. 
 It is well known what has been the 
 effect iii England of badly administered 
 
 foor laws, and the still worse effect in 
 reland of a bad system of tenancy, in 
 rendering agricultural labour slack and 
 ineffective. No improvements operate 
 more directly upon the productiveness 
 of labour than those in the tenure of 
 farms, and in the laws relating to 
 landed property. The breaking up of 
 entails, the cheapening of the transfer 
 of property, and whatever else pro- 
 motes the natural tendency of land in 
 a system of freedom, to pass out of 
 hands which can make little of it into 
 those which can make more ; the sub- 
 stitution of long leases for tenancy at 
 will, and of any tolerable system of 
 tenancy whatever for the wretched 
 cottier system ; above all, the acqui- 
 sition of a permanent interest in tho 
 soil by the cultivators of.it; all these 
 things are as real, and some of them 
 as great, improvements in production, 
 as the invention of the spinning jenny 
 or the steam engine. 
 
 We may say the same of improve- 
 ment in education. The intelligence 
 of the workman is a most important 
 element in the productiveness of labour. 
 So low, in some of the most civilized 
 countries, is the present standard of in- 
 telligence, that there is hardly any 
 source from which a more indefinite 
 12
 
 lie 
 
 BOOK I. CHAPTER XII. 3. 
 
 amount of improvement may bo looked 
 for in productive power, than by en- 
 dowing with brains those who now 
 have only hands. The carefulness, 
 economy, and general trustworthiness 
 of labourers are as important as their 
 intelligence. Friendly relations, and 
 a community of interest and feeling 
 between labourers and employers, are 
 eminently so: I should rather say, 
 would be ; for I know not where any 
 such sentiment of friendly alliance now 
 exists. Nor is it only in the labouring 
 class that improvement of mind and 
 character operates with beneficial 
 effect even on industry. In the rich 
 and idle classes, increased mental 
 energy, more solid instruction, and 
 stronger feelings of conscience, public 
 spirit, or philanthropy, would qualify 
 them to originate and promote the 
 most valuable improvements, both in 
 the economical resources of their coun- 
 try, and in its institutions and customs. 
 To look no further than the most ob- 
 vious phenomena ; the backwardness 
 of French agriculture in the precise 
 points in which benefit might be ex- 
 pected from the influence of an edu- 
 cated class, is partly accounted for by 
 the exclusive devotion of the richer 
 landed proprietors to town interests 
 and town pleasures. There is scarcely 
 any possible amelioration of human 
 affairs which would not, among its 
 other benefits, have a favourable 
 operation, direct or indirect, upon the 
 productiveness of industry. The in- 
 tensity of devotion to industrial occu- 
 pations would indeed in many cases be 
 moderated by a more liberal and genial 
 mental culture, but the labour actually 
 bestowed on those occupations would 
 almost always be rendered more effec- 
 tive. 
 
 Before pointing out the principal 
 inferences to b drawn from the nature 
 of the two antagonist forces by which 
 the productiveness of agricultural in- 
 dustry is determined, we must observe 
 that what we have said of agriculture 
 is true, with little variation, of the 
 other occupationi which it represents ; 
 
 of all the arts which extract materials 
 from the globe. Mining industry, for 
 example, usually yields an increase of 
 produce at a more than proportional 
 increase of expense. It does worse, 
 for even its customary annual produce 
 requires to be extracted by a greater 
 and greater expenditure of labour and 
 capital. As a mine does not repro- 
 duce the coal or ore taken from it, not 
 only are all mines at last exhausted, 
 but even when they as yet show no 
 signs of exhaustion, they must be 
 worked at a continually increasing 
 cost; shafts must be sunk deeper, 
 galleries driven farther, greater power 
 applied to keep them clear of water ; 
 the produce must be lifted from a 
 greater depth, or conveyed a greater 
 distance. The law of diminishing 
 return applies therefore to mining, in 
 a still more unqualified sense than to 
 agriculture : but the antagonizing 
 agency, that of improvements in pro- 
 duction, also applies in a still greater 
 degree. Mining operations are more 
 susceptible of mechanical improve- 
 ments than agricultural : the first 
 great application of the steam engine 
 was to mining ; and there are un- 
 limited possibilities of improvement in 
 the chemical processes by which the 
 metals are extracted. There is an- 
 other contingency, of no unfrequent oc- 
 currence, which avails to counterba- 
 lance the progress of all existing mines 
 towards exhaustion : this is, the dis- 
 covery of new ones, equal or superior 
 in richness. 
 
 To resume ; all natural agents 
 which are limited in quantity, are not 
 only limited in their ultimate produc- 
 tive power, but, long before that power 
 is stretched to the utmost, they yield 
 to any additional demands on pro- 
 gressively harder terms. This law 
 may however be suspended, or tempo- 
 rarily controlled, by whatever adds to 
 the general power of mankind over na- 
 ture ; and especially by any extension 
 of their knowledge, and their conse- 
 quent command, of the properties and 
 powers of natural agents.
 
 CONSEQUENCES OF THE FOREGOING LAWS. 
 
 H7 
 
 CHAPTER Xni. 
 
 CONSEQUENCES OF THE FOREGOING LAWS. 
 
 1. FROM the preceding exposition 
 It appears that the limit to the increase 
 ot production is twofold ; from defi- 
 ciency of capital, or of land. Production 
 conies to a pause, either because the 
 effective desire of accumulation is not 
 sufficient to gis T e rise to any further in- 
 crease of capital, or because, however 
 disposed the possessors of surplus in- 
 come may be to save a portion of it, 
 the limited land at the disposal of the 
 community does not permit additional 
 capital to be employed with such a re- 
 turn, as would be an equivalent to them 
 for their abstinence. 
 
 In countries where the principle of 
 accumulation is as weak as it is in the 
 various nations of Asia ; where people 
 will neither save, nor work to obtain 
 the means of saving, unless under the 
 inducement of enormously high profits, 
 nor even then if it is necessary to wait 
 a considerable time for them ; where 
 either productions remain scanty, or 
 drudgery great, because there is neither 
 capital forthcoming nor forethought 
 sufficient for the adoption of the con- 
 trivances by which natural agents are 
 made to do the work of human labour ; 
 the desideratum for such a country, 
 economically considered, is an increase 
 of industry, and of the effective desire 
 of accumulation. The means are, first, 
 a better government; more complete 
 security of property ; moderate taxes, 
 \ and freedom from arbitrary exaction 
 under the name of taxes ; a more per- 
 manent and more advantageous tenure 
 of land, securing to the cultivator as 
 far as possible the undivided benefits 
 of the industry, skill, and economy he 
 may exert. Secondly, improvement of 
 the public intelligence ; the decay of 
 usages or superstitions which interfere 
 with the effective employment of in- 
 dustry ; and the growth of mental ac- 
 tivity, making the people alive to new 
 objects of desire. Thirdly, the intro- 
 duction of foreigc arts, which raise the 
 returns derivable from additional capi- 
 
 tal, to a rate corresponding to the low 
 strength of the desire of accumulation ; 
 and the importation of foreign capital, 
 which renders the increase of produc- 
 tion no longer exclusively dependent 
 on the thrift or providence of the in- 
 habitants themselves, while it places 
 before them a stimulating example, 
 and by instilling new ideas and break- 
 ing the chains of habit, if not by im- 
 proving the actual condition of the 
 population, tends to create in them 
 new wants, increased ambition, and 
 greater thought for the future. These 
 considerations apply more or less to 
 all the Asiatic populations, and to the 
 less civilized and industrious part of 
 Europe, as Russia, Turkey, Spain, and 
 Ireland. 
 
 2. But there are other countries, 
 and England is at the head of them, in 
 which neither the spirit of industry nor 
 the effective desire of accumulation 
 need any encouragement ; where the 
 people will toil hard for a small remu- 
 neration, and save much for a small 
 profit ; where, though the general 
 thriftiness of the labouring class ia 
 much below what is desirable, the 
 spirit of accumulation in the more 
 prosperous part of the community re- 
 quires abatement rather than increase. 
 La these countries there would never 
 be any deficiency of capital, if its in- 
 crease were never checked or brought 
 to a stand by too great a diminution 
 of its returns. It is the tendency of 
 the returns to a progressive diminution, 
 which causes the increase of produc- 
 tion to be often attended with a dete- 
 rioration in the condition of the 
 producers ; and this tendency, which 
 would in time put an end to increase 
 of production altogether, is a result of 
 the necessary and inherent conditions 
 of production from the land. 
 
 In Jill countries which have passed 
 beyond a rather early stage in the pro- 
 gress of agriculture, every increase in
 
 118 
 
 BOOK I. CHAFFER XIII. 2. 
 
 the demand for food, occasioned by 
 increased population, will always, un- 
 less there is a simultaneous improve- 
 ment in production, diminish the share 
 which on a fair division would fall to 
 each individual. An increased pro- 
 duction, in default of unoccupied tracts 
 of fertile land, or of fresh improve- 
 ments tending to cheapen commo- 
 dities, can never be obtained but by 
 increasing the labour in more than the 
 same proportion. The population must 
 either work harder, or eat less, or ob- 
 tain their usual food by sacrificing a 
 part of their other customary comforts. 
 Whenever this necessity is postponed, 
 notwithstanding an increase of popula- 
 tion, it is because the improvements 
 which facilitate production continue 
 progressive ; because the contrivances 
 of mankind for making their labour 
 more effective, keep up an equal 
 struggle with nature, and extort fresh 
 resources from her reluctant powers as 
 fast as human necessities occupy and 
 engross the old. 
 
 From this, results the important 
 corollary, that the necessity of restrain- 
 ing population is not, as many persons 
 believe, peculiar to a condition of great 
 inequality of property. A greater num- 
 ber of people cannot, in any given 
 state of civilization, be collectively so 
 well provided for as a smaller The 
 niggardliness of nature, not the injus- 
 tice of society, is the cause of the 
 penalty attached to over-population. 
 An unjust distribution of wealth does 
 not even aggravate the evil, but, at 
 most, causes it to be somewhat earlier 
 felt. It is in vain to say, that all 
 mouths which the increase of mankind 
 calls into existence, bring with them 
 hands. The new mouths require as 
 much food as the old ones, and the 
 hands do not produce as much. If all 
 instruments of production were held in 
 joint property by the whole people, 
 and the produce divided with perfect 
 equality among them, and if in a 
 society thus constituted, industry were 
 as energetic and the produce as ample 
 as at present, there would be enough 
 to make all the existing population ex- 
 tremely comfortable ; but when that 
 population had doubled itself, as, with 
 
 the existing habits of the people, under 
 such an encouragement, it undoubtedly 
 would in little more than twenty years, 
 what would then be their condition ? 
 Unless the arts of production were in 
 the same time improved in an almost 
 unexampled degree, the inferior soils 
 which must be resorted to, and the 
 more laborious and scantily remunera- 
 tive cultivation which must be em- 
 ployed on the superior soils, to procure 
 food for so much larger a population, 
 would, by an insuperable necessity, 
 render every individual in the com- 
 munity poorer than before. If the 
 population continued to increase at the 
 same rate, a time would soon arrive 
 when no one would have more than 
 mere necessaries, and, soon after, a 
 time when no one would have a suffi- 
 ciency of those, and the further in- 
 crease of population would be arrested 
 by death. 
 
 Whether, at the present or any 
 ether time, the produce of industry, 
 proportionally to the labour employed, 
 is increasing or diminishing, and the 
 average condition of the people im- 
 proving or deteriorating, depends upon 
 whether population is advancing faster 
 than improvement, or improvement 
 than population. After a degree of 
 density has been attained, sufficient 
 to allow the principal benefits of 
 combination of labour, all further 
 increase tends in itself to mischief, 
 so far as regards the average con- 
 dition of the people ; but the progress 
 of improvement has a counteracting 
 operation, and allows of increased 
 numbers without any deterioration, 
 and even consistently with a higher 
 average of comfort. Improvement 
 must here be understood in a wide 
 sense, including not only new in- 
 dustrial inventions, or an extended 
 use of those already known, but im- 
 provements in institutions, education, 
 opinions, and human affairs generally, 
 provided they tend, as almost all im- 
 provements do, to give new motives or 
 new facilities to production. If the 
 productive powers of the country in- 
 crease as rapidly as advancing num- 
 bers call for an augmentation of pro- 
 duce, it is not necessary to obtain that
 
 CONSEQUENCES OF THE FOREGOING LAWS. 
 
 119 
 
 augmentation by the cultivation of 
 Boils more sterile than the worst 
 already under culture, or by applying 
 additional labour to the old soils at a 
 diminished advantage ; or at all events 
 this loss of power is compensated by 
 the increased efficiency with which, in 
 the progress of improvement, labour is 
 employed in manufactures. In one 
 way or the other, the increased popula- 
 tion is provided for, and all are as well 
 off as before. But if the growth of 
 human power over nature is suspended 
 or slackened, and population does not 
 slacken its increase ; if, with only 
 the existing command over natural 
 agencies, those agencies are called 
 upon for an increased produce ; this 
 greater produce will not be afforded 
 to the increased population, without 
 either demanding on the average a 
 greater effort from each, or on the 
 average reducing each to a smaller 
 ration out of the aggregate produce. 
 
 As a matter of fact, at some periods 
 the progress of population has been the 
 more rapid of the two, at others that 
 of improvement. In England during 
 a long interval preceding the French 
 Devolution, population increased slowly; 
 but the progress of improvement, at 
 least in agriculture, would seem to have 
 been still slower, since though nothing 
 occurred to lower the value of the 
 precious metals, the price of corn rose 
 considerably, and England, from an 
 exporting, became an importing coun- 
 try. This evidence, however, is short 
 of conclusive, inasmuch as the extra- 
 ordinary number of abundant seasons 
 during the first half of the century, not 
 continuing during the last, was a 
 cause of increased price in the later 
 period, extrinsic to the ordinary pro- 
 gress of society. Whether during the 
 same period improvements in manufac- 
 tures, or diminished cost of imported 
 commodities, made amends for the 
 diminished productiveness of labour on 
 the land, is uncertain. But ever since 
 the great mechanical inventions of 
 Watt, Arkwright, and their cotempc- 
 raries, the return to labour has pro- 
 bably increased as fast as the popula- 
 tion ; and would have outstripped it, if 
 that very augmentation of return had 
 
 not called forth an alditional por- 
 tion of the inherent power of multipli- 
 cation in the human species. During 
 the twenty or thirty years last elapsed, 
 so rapid has been the extension of 
 improved processes of agriculture, that 
 even the land yields a greater produce 
 in proportion to the labour employed ; 
 the average price of corn had become 
 decidedly lower, even before the repeal 
 of the corn laws had so materially 
 lightened, for the time being, the pres- 
 sure of population upon production. 
 But though improvement may during 
 a certain space of time keep up with, 
 or even surpass, the actual increase of 
 population, it assuredly never comes 
 up to the rate of increase of which 
 population is capable : and nothing 
 could have prevented a general dete- 
 rioration in the condition of the human 
 race, were it not that population has 
 in fact been restrained. Had it been 
 restrained still more, and the same im- 
 provements taken place, there would 
 have been a larger dividend than thera 
 now is, for the nation or the species at 
 large. The new ground wrung from 
 nature by the improvements would not 
 have been all used up in the support of 
 mere numbers. Though the gross 
 produce would not have been so great, 
 there would have been a greater pro- 
 duce per head of the population. 
 
 3. When the growth of numbers 
 outstrips the progress of improvement, 
 and a country is driven to obtain the 
 means of subsistence on terms more 
 and more unfavourable, by the inability 
 of its land to meet additional demands 
 except on more onerous conditicr.B ; 
 there are two expedients by which it 
 may hope to mitigate that disagreeable 
 necessity, even though no change 
 should take place in the habits of the 
 people with respect to their rate of in- 
 crease. One of these expedients is the 
 importation of food from abroad. The 
 other is emigration. 
 
 The admission of cheaper food from 
 a foreign country, is equivalent to an 
 agricultural invention by which food 
 could be raised at a similarly dimi- 
 nished cost at home. It equally in- 
 creases the productive power of labour.
 
 120 
 
 BOOK I. CHAPTER XITL 3. 
 
 The return was, before, so much food 
 for so much labour employed in the 
 growth of food: the return is now, a 
 greater quantity of food, for the same 
 labour employed in producing cottons 
 or hardware, or some other commodity 
 to be given in exchange for food. The 
 one improvement, like the other, throws 
 back the decline of the productive 
 power of labour by a certain distance : 
 but in the one case as in the other, it 
 immediately resumes its course ; the 
 tide which has receded, instantly be- 
 gins to re-advance. It might seem, 
 indeed, that when a country draws its 
 supply of food from so wide a surface 
 as the whole habitable globe, so little 
 impression can be produced on that 
 great expanse by any increase of mouths 
 in one small corner of it, that the in- 
 habitants of the country may double 
 and treble their numbers, without feel- 
 ing the effect in any increased tension 
 of the springs of production, or any en- 
 hancement of the price of food through- 
 out the world. But in this calculation 
 several things are overlooked. 
 
 In the first place, the foreign regions 
 from which corn can be imported do 
 not comprise the whole globe, but those 
 parts of it almost alone, which are in 
 the immediate neighbourhood of coasts 
 or navigable rivers. The coast is the 
 part of most countries which is earliest 
 and most thickly peopled, and has sel- 
 dom any food to spare. The chief 
 source of supply, therefore, is the strip 
 of country along the banks of some 
 navigable river, as the Nile, the Vis- 
 tula, or the Mississippi ; and of such 
 there is not, in the productive regions 
 of the earth, so great a multitude, as 
 to suffice during an indefinite time for 
 a rapidly growing demand, without an 
 increasing strain on the productive 
 powers of the soil. To obtain auxiliary 
 supplies of corn from the interior in 
 any abundance, would, in the existing 
 state of the communications, be hope- 
 less. By improved roads, and eventu- 
 ally by canals and railways, the obstacle 
 will be so reduced as not to be insuper- 
 able : but this is a slow progress ; in 
 all the food-exporting countries except 
 America, a very slow progress ; and 
 one which cannot keep peace with popu- 
 
 lation, unless the increase of the last is 
 very effectually restrained. 
 
 In the next place, even if the supply 
 were drawn from the whole instead of 
 a small part of the surface of the ex- 
 porting countries, the quantity of food 
 would still be limited, which could be 
 obtained from them without an increase 
 of the proportional cost. The countries 
 which export food may be divided into 
 two classes ; those in which the effec- 
 tive desire of accumulation is strong, 
 and those in which it is weak. In 
 Australia and the United States of 
 America, the effective desire of accu- 
 mulation is strong; capital increases 
 fast, and the production of food might 
 be very rapidly extended. But in such 
 countries population also increases with 
 extraordinary rapidity. Their agricul- 
 ture has to provide for their own ex- 
 panding numbers, as well as for those 
 of the importing countries. They must, 
 therefore, from the nature of the case, 
 be rapidly driven, if not to less fertile, 
 at least what is equivalent, to remoter 
 and less accessible lands, and to modes 
 of cultivation like those of old countries, 
 less productive in proportion to the 
 labour and expense. 
 
 But the countries which have at tho 
 same time cheap food and great indus- 
 trial prosperity are few, being only 
 those in which the arts of civilized life 
 have been transferred full grown to a 
 rich and uncultivated soil. Among old 
 countries, those which are able to ex- 
 port food, are able only because their 
 industry is in a very backward state ; 
 because capital, and hence population, 
 have never increased sufficiently to 
 make food rise to a higher price. Such 
 countries are Eussia, Poland, and tho 
 plains of the Danube. In those regions 
 the effective desire of accumulation is 
 weak, the arts of production most im- 
 perfect, capital scanty, and its increase, 
 especially from domestic sources, slow. 
 When an increased demand arose for 
 food to be exported to other countries, 
 it would only be very gradually that 
 food could be produced to meet it. The 
 capital needed could not be obtained 
 by transfer from other employments, 
 for such do not exist. The cottons or 
 hardware which would be received f'ron
 
 CONSEQUENCES OF THE FOREGOING LAWS. 121 
 
 England in exchange for corn, the 
 Russians and Poles do not now produce 
 in the country : they go without them. 
 Something might in time be expected 
 from the increased exertions to which 
 producers would be stimulated by the 
 market opened for their produce ; but 
 *o such increase of exertion, the habits 
 of countries whose agricultural popula- 
 tion consists of serfs, or of peasants 
 \vlio have but just emerged from a ser- 
 vile condition, are the reverse of favour- 
 able, and even in this age of movement 
 these habits do not rapidly change. If 
 a greater outlay of capital is relied on 
 as the source from which the produce 
 is to be increased, the means must 
 either be obtained by the slow process 
 of saving, under the impulse given by 
 new commodities and more extended 
 intercourse (and in that case the popu- 
 lation would most likely increase as 
 fast), or must be brought in from foreign 
 countries. If England is to obtain a 
 rapidly increasing supply of corn from 
 Russia or Poland, English capital must 
 go there to produce it. This, how- 
 ever, is attended with so many dif- 
 ficulties, as are equivalent to great 
 positive disadvantages. It is opposed 
 by differences of language, differences 
 of manners, and a thousand obstacles 
 arising from the institutions and social 
 relations of the country : and after all 
 it would inevitably so stimulate popu- 
 lation on the spot, that nearly all the 
 increase of food produced by its means, 
 would probably be consumed without 
 leaving the country : so that if it were 
 not the almost only mode of introducing 
 foreign arts and ideas, and giving an 
 effectual spur to the backward 
 
 The law, therefore, of diminishing 
 return to industry, whenever population 
 makes a more rapid progress than im- 
 provement, is not solely applicable to 
 countries which are fed from their own 
 soil, but in substance applies quite as 
 much to those which are willing to 
 draw their food from any accessible 
 quarter that can afford it cheapest. A 
 sudden and great cheapening of food, 
 indeed, in whatever manner produced, 
 would, like any other sudden improve- 
 ment in the arts of life, throw the na- 
 tural tendency of affairs a stage or two 
 further back, though without altering 
 its course. There is one contingency 
 connected with freedom of importation, 
 which may yet produce temporary ef- 
 fects greater than were ever contem- 
 plated either by the bitterest enemies 
 or the most ardent adherents of free- 
 trade in food. Maize, or Indian corn, 
 is a product capable of being supplied 
 in quantity sufficient to feed the whole 
 country, at a cost, allowing for differ- 
 ence of nutritive quality, cheaper even 
 than the potato. If maize should ever 
 substitute itself for wheat as the staple 
 food of the poor, the productive power 
 of labour in obtaining food would be so 
 enormously increased, and the expense 
 of maintaining a family so diminished, 
 that it would require perhaps some 
 generations for population, even if it 
 started forward at an American pace, 
 to overtake this great accession to the 
 facilities of its support. 
 
 4. Besides the importation of com, 
 there is another resource which can be 
 invoked by a nation whose increasing 
 numbers press hard, not against their 
 
 tion of those countries, little reliance 1 capital, out against the productive 
 
 could be placed on it for increasing the 
 exports, and supplying other countries 
 with a progressive and indefinite in- 
 crease of lood. But to improve the 
 civilization of a country is a slow pro- 
 cess, and gives time for so great an in- 
 crease of population both in the country 
 itself, and in those supplied from it, 
 that its effect in keeping down the 
 price of food against the increase of 
 demand, is not likely to be more de- 
 cisive on the scale of all Europe, than on 
 the smaller one of a particular nation. 
 
 capacity of their land : I mean Emigra- 
 tion, especially in the form of Coloniza- 
 tion. Of this remedy the efficacy as 
 far as it goes is real, since it consists 
 in seeking elsewhere those unoccupied 
 tracts of fertile land, which if they ex- 
 isted at home would enable the demand 
 of an increasing population to be met 
 without any falling off in the pro- 
 ductiveness of labour. Accordingly, 
 when the region to be colonized is near 
 at hand, and the habits and tastes 
 of the people sufficiently migratory,
 
 122 
 
 this remedy is completely effectual. 
 The migration from the older parts of 
 the American Confederation to the new 
 territories, which is to all intents and 
 purposes colonization, is what enables 
 population to go on unchecked through- 
 out the Union without having yet 
 diminished the return to industry, or 
 increased the difficulty of earning a 
 subsistence. If Australia or the in- 
 terior of Canada were as near to Great 
 Britain as Wisconsin and Iowa to New 
 York ; if the superfluous people could 
 remove to it without crossing the sea, 
 and were of as adventurous and restless 
 a character, and as little addicted to 
 staying at home, as their kinsfolk of 
 New England, those unpeopled conti- 
 nents would render the same service to 
 the United Kingdom which the old 
 states of America derive from the new. 
 But these things being as they are 
 though a judiciously conducted emigra- 
 tion is a most important resource for 
 suddenly lightening the pressure of 
 population by a single effort and 
 though in such an extraordinary case 
 as that of Ireland under the threefold 
 operation of the potato failure, the 
 
 BOOK I. CHAPTER XIII. 4. 
 
 poor law, and the general turning out 
 of tenantry throughout the country, 
 spontaneous emigration may at a par- 
 ticular crisis remove greater multitudes 
 than it was ever proposed to remove at 
 once by any national scheme ; it still 
 remains to be shown by experience 
 whether a permanent stream of emigra- 
 tion can be kept up, sufficient to take 
 off, as in America, all that portion of 
 the annual increase (when proceeding 
 at its greatest rapidity) which being 
 in excess of the progress made during 
 the same short period in the arts of 
 life, tends to render living more difficult 
 for every averagely-situated individual 
 in the community. And unless this 
 can be done, emigration cannot, even 
 in an economical point of view, dispense 
 with the necessity of checks to popula- 
 tion. Further than this we have not 
 to speak of it in this place. The gene- 
 ral subject of colonization as a practi- 
 cal question, its importance to old 
 countries, and the principles on which 
 it should be conducted, will be dis- 
 cussed at some length in a subsequent 
 portion of this Treatise.
 
 BOOK IL 
 
 DISTRIBUTION. 
 
 CHAPTER I. 
 
 OP PROPERTY 
 
 1. TUB principles \vlik-h have 
 been set forth in the first part of this 
 Treatise, are, in certain respects, 
 strongly distinguished from those, on 
 the consideration of which we are now 
 about to enter. The laws and condi- 
 tions of the production of wealth, par- 
 take of the character of physical 
 truths. There is nothing optional, or 
 arbitrary in them. Whatever man- 
 kind produce, must be produced in the 
 modes, and under the conditions, im- 
 posed by the constitution of external 
 things, and by the inherent properties 
 of their own bodily and mental struc- 
 ture. Whether they like it or not, their 
 productions will be limited by the 
 amount of their previous accumulation, 
 and, that being given, it will be pro- 
 portional to their energy, their skill, 
 the perfection of their machinery, and 
 their judicious use of the advantages 
 of combined labour. Whether they 
 like it or not, a double quantity of 
 labour will not raise, on the same land, 
 a double quantity of food, unless some im- 
 provement takes place in the processes 
 of cultivation. Whether they liKe it 
 or not, the unproductive expenditure of 
 individuals will pro tanto tend to im- 
 poverish the community, and only their 
 productive expenditure will enrich it. 
 The opinions, or the wishes, which 
 may exist on these different matters, 
 do not control the things themselves. 
 We cannot, indeed, foresee to what ex- 
 tent the modes of production may be 
 altered, or the productiveness of labour 
 increased, by future extensions of 
 otir knowledge of the laws of nature, 
 
 suggesting new processes of industry 
 of which we have at present no con- 
 ception. But howsoever we may suc- 
 ceed in making for ourselves mora 
 space within the limits set by the 
 constitution of things, we know that 
 there must be limits. We cannot alter 
 the ultimate properties either of matter 
 or mind, but can only employ those 
 properties more or less successfully, to 
 bring about the events in which we 
 are interested. 
 
 It is not so with the Distribution of 
 Wealth. That is a matter of human 
 institution solely. The things once 
 there, mankind, individually or col- 
 lectively, can do with them as they 
 like. They can place them at the dis- 
 posal of whomsoever they please, and 
 on whatever terms. Further, in the 
 social state, in every state except total 
 solitude, any disposal whatever of them 
 can only take place by the consent of 
 society, or rather of those who dispose 
 of its active force. Even what a person 
 has produced by his individual toil, un- 
 aided by any one, he cannot keep, un- 
 less by the permission of society. Not 
 only can society take it from him, but 
 individuals could and would take it 
 from him, if society only remained 
 passive ; if it did not either interfere 
 en masse, or employ and pay people 
 for the purpose of preventing him from 
 being disturbed in the possession. The 
 distribution of wealth, therefore, de- 
 pends on the laws and customs of so- 
 ciety. The rules by which it is de- 
 termined, are what the opinions and 
 feelings of the ruling portion of the
 
 124 
 
 BOOK II. CHAPTER I. . 
 
 community make them, and are very 
 different in different ages and countries; 
 and might be still more different, if 
 mankind so chose. 
 
 The opinions and feelings of man- 
 kind, doubtless, are not a matter of 
 chance. They are consequences of the 
 fundamental laws of human nature, 
 combined with the existing state of 
 knowledge and experience, and the 
 existing condition of social institutions 
 and intellectual and moral culture. 
 But the laws of the generation of 
 human opinions are not within our 
 present subject. They are part of the 
 general theory of human progress, a 
 far larger and more difficult subject 
 of inquiry than political economy. We 
 have here to consider, not the causes, 
 but the consequences of the rules ac- 
 cording to which wealth may be dis- 
 tributed. Those, at least, arc as little 
 arbitrary, and have as much the 
 character of physical laws, as the laws 
 of production. Human beings can 
 control their own acts, but not the 
 consequences of their acts either to 
 themselves or to others. Society can 
 subject the distribution of wealth to 
 whatever rules it thinks best ; but what 
 practical results will flow from the opera- 
 tion of those rules, must be discovered, 
 like any other physical ormental truths, 
 by observation and reasoning. 
 
 We proceed, then, to the considera- 
 tion of the different modes of distri- 
 buting the produce of land and labour, 
 which have been adopted in practice, 
 or may be conceived in theory. Among 
 these, our attention is first claimed by 
 that primary and fundamental institu- 
 tion, on which, unless in some excep- 
 tional and very limited cases, the 
 economical arrangements of society 
 have always rested, though in its se- 
 condary features it has varied, and is 
 liable to vary. I mean, of course, the 
 institution of individual property. 
 
 2. Private property, as an institu- 
 tion, did not owe its origin to any of 
 those considerations of utility, which 
 plead for the maintenance of it when 
 established. Enough is known of rude 
 ages, both from history and from analo- 
 gous states of society in our own time, to 
 
 show, that tribunals (which always pre- 
 cede laws) were originally established, 
 not to determine rights, but to repress 
 violence and terminate quarrels. With 
 this object chiefly in view, they natuK 
 ally enough gave legal effect to first 
 occupancy, by treating as the aggressor 
 the person who first commenced vio- 
 lence, by turning, or attempting to turn, 
 another out of possession. The pre- 
 servation of the peace, which was the 
 original object of civil government, was 
 thus attained ; while by confirming, to 
 those who already possessed it, even 
 what was not the fruit of personal ex- 
 ertion, a guarantee was incidentally 
 given to them and others that they 
 would be protected in what was so. 
 
 In considering the institution of pro- 
 perty as a question in social philosophy, 
 we must leave out of consideration its 
 actual origin in any of the existing na- 
 tions of Europe. We may suppose a 
 community unhampered by any pre- 
 vious possession ; a body of 'colonists, 
 occupying for the first time an uninha- 
 bited country ; bringing nothing with 
 them but what belonged to them in 
 common, and having a clear field for 
 the adoption of the institutions and 
 
 Solity which they judged most expe- 
 ient ; required, therefore, to choose 
 whether they would conduct the work 
 of production on the principle of indi- 
 vidual property, or on some system 
 of common ownership and collective 
 agency. 
 
 If private property were adopted, we 
 must presume that it would be accom- 
 panied by none of the initial inequa- 
 lities and injustices which obstruct the 
 beneficial operation of the principle in 
 old societies. Every full-grown man or 
 woman, we must suppose, would be 
 secured in the unfettered use and dis- 
 posal of his or her bodily and mental 
 faculties ; and the instruments of pro- 
 duction, the land and tools, would be 
 divided fairly among them, so that all 
 might start, in respect to outward ap- 
 pliances, on equal terms. It is possible 
 also to conceive that in this original 
 apportionment, compensation might be 
 made for the injuries of nature, and the 
 balance redressed by assigning to the 
 less robust members of the community
 
 PROPERTY. 
 
 125 
 
 Advantages in the distribution, sufficient 
 to put them on a par with the rest. But 
 the division, once made, would not again 
 be interfered with ; individuals would 
 be left to their own exertions and to the 
 ordinary chances, for making an ad- 
 vantageous use of what was assigned 
 to them. If individual property, on the 
 contrary, were excluded, the plan which 
 must b adopted would be to hold the 
 land and all instruments of production 
 as the joint property of the community, 
 and to carry on the operations of in- 
 dustry on the common account. The 
 direction of the labour of the commu- 
 nity would devolve upon a magistrate 
 or magistrates, whom we may suppose 
 elected by the suffrages of the commu- 
 nity, and whom we must assume to be 
 voluntarily obeyed by them. The di- 
 vision of the produce would in like 
 manner be a public act. The principle 
 might either be that of complete equa- 
 lity, or of apportionment to the neces- 
 sities or deserts of individuals, in what- 
 ever manner might be conformable to 
 the ideas of justice or policy prevailing 
 in the community. 
 
 Examples of such associations, on a 
 small scale, are the monastic orders, 
 the Moravians, the followers of Rapp, 
 and others : and from the hopes which 
 they hold out of relief from the miseries 
 and iniquities of a state of much in- 
 equality of wealth, schemes for a larger 
 application of the same idea have re- 
 appeared and become popular at all 
 periods of active speculation on the first 
 principles of society. In an age like 
 the present, when a general reconside- 
 ration of all first principles is felt to be 
 inevitable, and when more than at any 
 former period of history the suffering 
 portions of the community have a voice 
 in the discussion, it was impossible but 
 that ideas of this nature should spread 
 far" and wide. The late revolutions in 
 Europe have thrown up a great amount 
 of speculation of this character, and an 
 unusual share of attention has conse- 
 quently been drawn to the various forms 
 which these ideas have assumed : nor 
 is this attention likely to diminish, but 
 on the contrary, to increase more and 
 more. 
 
 The assailants of the principle of in- 
 
 dividual property may be divided into 
 two classes : those whose scheme im- 
 plies absolute equality in the distribu 
 tion of the physical means of life and 
 enjoyment, and those who admit in- 
 equality, but grounded on some prin- 
 ciple, or supposed principle, of justice 
 or general expediency, and not, like so 
 many of the existing social inequalities, 
 dependent on accident alone. At the 
 head of the first class, as the earliest 
 of those belonging to the present gene- 
 ration, must be placed Mr. Owen and 
 his followers. M. Louis Blanc and M. 
 Cabet have more recently become con- 
 spicuous as apostles of similar doctrines 
 (though the former advocates equality 
 of distribution only as a transition to a 
 still higher standard of justice, that al! 
 should work according to their capa- 
 city, and receive according to their 
 wants). The characteristic name for 
 this economical system is Communism, 
 a word of continental origin, only of late 
 introduced into this country. The word 
 Socialism, which originated among the 
 English Communists, and was assumed 
 by them as a name to designate their 
 own doctrine, is now, on the Continent, 
 employed in a larger sense ; not neces- 
 sarily implying Communism, or the en- 
 tire abolition of private property, but 
 applied to any system which requires 
 that the land and the instruments of 
 production should be the property, not 
 of individuals, but of communities or 
 associations, or of the government. 
 Among such systems, the two of highest 
 intellectual pretension are those w-nich, 
 from the names of their real or reputed 
 authors, have been called St. Simonism 
 and Fourierism ; the former, defunct aa 
 a system, but which during the few 
 years of its public promulgation, sowed 
 the seeds of nearly all the Socialist 
 tendencies which have since spread so 
 widely in France : the second, still 
 flourishing in the number, talent, and 
 zeal of its adherents. 
 
 3. Whatever may be the merits or 
 defects of these various schemes, they 
 cannot be truly said to be impractica- 
 ble. No reasonable person can doubt 
 that a village community, composed of 
 a few thousand inhabitants cultivating
 
 126 
 
 BOOK II. CHAPTER I. S. 
 
 in joint ownership the same extent oJ 
 laud which at present feeds that number 
 of people, and producing by combined 
 labour and the most improved processes 
 the manufactured articles which they 
 required, could raise an amount of pro- 
 ductions sufficient to maintain them in 
 comfort ; and would find the means of 
 obtaining, and if need be, exacting, the 
 quantity of labour necessary for this 
 purpose, from every member of the 
 association who was capable of work. 
 
 The objection ordinarily made to a 
 system of community of property and 
 equal distribution of the produce, that 
 each person would be incessantly occu- 
 pied in evading his fair share of the 
 work, points, undoubtedly, to a real 
 difficulty. But those who urge this 
 objection, forget to how great an extent 
 the same difficulty exists under the 
 system on which nine-tenths of the 
 business of society is now conducted. 
 The objection supposes, that honest and 
 efficient labour is only to be had from 
 those who are themselves individually 
 to reap the benefit of their own exer- 
 tions. But how small a part of all the 
 labour performed in England, from the 
 lowest paid to the highest, is done by 
 persons working for their own benefit. 
 From the Irish reaper or hodman to 
 the chief justice or the minister of 
 state, nearly all the work of society is 
 remunerated by day wages or fixed 
 salaries. A factory operative has less 
 personal interest in his work than a 
 member of a Communist association, 
 since he is not, like him, working for a 
 partnership of which he is himself a 
 member. It will no doubt be said, 
 that though the labourers themselves 
 have not, in most cases, a personal in- 
 terest in their work, they are watched 
 and superintended, and their labour 
 directed, and the mental part of the 
 labour performed, by persons who have. 
 Even this, however, is far from being 
 universally the fact. In all public, 
 and many of the largest and most 
 successful private undertakings, not 
 only the labours of detail, but the 
 control and superintendence are en- 
 trusted to salaried officers. And 
 though the "master's eye," when the 
 master is vigilant and intelligent, is of 
 
 proverbial value, it must be remem- 
 bered that in a Socialist farm or manu- 
 factory, each labourer would be under 
 the eye not of one master, but of the 
 whole community. In the extreme 
 case of obstinate perseverance in not 
 performing the due share of work, the 
 community would have the same re- 
 sources which society now has for com- 
 pelling conformity to the necessary 
 conditions of the association. Dis- 
 missal, the only remedy at present, is 
 no remedy when any other labourer 
 who may be engaged, does no better 
 than his predecessor : the power of 
 dismissal only enables an employer to 
 obtain from his workmen the customary 
 amount of labour, but that customary 
 labour may be of any degree of ineffi- 
 ciency. Even the labourer who loses 
 his employment by idleness or negli- 
 gence, has nothing worse to suffer, in 
 the most unfavourable case, than the 
 discipline of a workhouse, and if the 
 desire to avoid this be a sufficient mo- 
 tive in the one system, it would be 
 sufficient in the other. I am not 
 undervaluing the strength of the in- 
 citement given to labour when the 
 whole or a large share of the benefit of 
 extra exertion belongs to the labourer. 
 But under the present system of in- 
 dustry this incitement, in the great 
 majority of cases, does not exist. If 
 Communistic labour might be lesa 
 vigorous than that of a peasant pro- 
 prietor, or a workman labouring on his 
 own account,, it would probably be 
 more energetic than that of a labourer 
 for hire, who has no personal interest 
 in the matter at all. The neglect by 
 the uneducated classes of labourers for 
 hire, of the duties which they engage 
 to perform, is in the present state of 
 society most flagrant. Now it is as 
 admitted condition of the Communist 
 scheme that all shall be educated : and 
 this being supposed, the duties of the 
 members of the association would 
 doubtless be as diligently performed a 
 those of the generality of salaried offi 
 cers in the middle or higher classes 
 who are not supposed to be neces 
 sarily unfaithful to their trust, because 
 so long as they are not dismissed, thej 
 is the same in however lax
 
 COMMUNISM. 
 
 127 
 
 manner their duty is fulfilled. Un- 
 ( doubtedly, as a general rale, remunera- 
 tion by fixed salaries does not in any 
 class of functionaries produce the 
 maximum of zeal : and this is as much 
 as can be reasonably alleged against 
 Communistic labour. 
 
 That even this inferiority would 
 necessarily exist, is by no means so 
 certain as is assumed by those who are 
 little used to carry their minds beyond 
 the state of things with which they are 
 familiar. Mankind are capable of a 
 far greater amount of public spirit than 
 the present age is accustomed to sup- 
 pose possible. History bears witness 
 to the success with which large bodies 
 of human beings may be trained to 
 feel the public interest their own. And 
 no soil could be more favourable to the 
 growth of such a feeling, than a Com- 
 munist association, since all the am- 
 bition, and the bodily and mental 
 activity, which are now exerted in the 
 pursuit of separate and self-regarding 
 interests, would require another sphere 
 of employment, and would naturally 
 find it in the pursuit of the general 
 benefit of the community. The same 
 cause, so often assigned in explanation 
 of the devotion of the Catholic priest 
 or monk to the interest of his order 
 that he has no interest apart from it 
 would, under Communism, attach the 
 citizen to the community. And inde- 
 pendently of the public motive, eveiy 
 member of the association would be 
 amenable to the most universal, and 
 one of the strongest of personal mo- 
 tives, that of public opinion. The 
 force of this motive in deterring from 
 any act or omission positively reproved 
 by the community, no one is likely to 
 deny ; but the power also of emulation, 
 in exciting to the most strenuous 
 exertions for the sake of the approba- 
 tion and admiration of others, is borne 
 witness to by experience in every 
 situation in which numan beings pub- 
 licly compete with one another, even 
 if it be in things frivolous, or from 
 which the public derive no benefit. A 
 contest, who can do most for the com- 
 mon good, is not the kind of competi- 
 tion which Socialists repudiate. To 
 \vhat extent, therefore, the energy of 
 
 labour would be diminished by Com- 
 munism, or whether in the long run it 
 would be diminished at all, must be 
 considered for the present an undecided 
 question. - 
 
 Another of the objections to Com- 
 munism is similar to that, so often 
 urged against poor-laws : that if every 
 member of the community were as- 
 sured of subsistence for himself and 
 any number of children, on the sole 
 condition of willingness to work, pru- 
 dential restraint on the multiplication 
 of mankind would be at an end, and 
 population would start forward at a 
 rate which would reduce the com- 
 munity through successive stages of 
 increasing discomfort to actual starva- 
 tion. There would certainly be much 
 ground for this apprehension if Com- 
 munism provided no motives to re- 
 straint, equivalent to those which it 
 would take away. But Communism is 
 precisely the state of things in which 
 opinion might be expected to declare 
 itself with greatest intensity against 
 this kind of selfish intemperance. Any 
 augmentation of numbers which di- 
 minished the comfort or increased the 
 toil of the mass, would then cause 
 (which now it does not) immediate and 
 unmistakeable inconvenience to every 
 individual in the association ; incon- 
 venience which could not then be im- 
 puted to the avarice of employers, or 
 the unjust privileges of the rich. In 
 such altered circumstances opinion 
 could not fail to reprobate, and if repro- 
 bation did not suffice, to repress by 
 penalties of some description, this or 
 any other culpable self-indulgence at 
 the expense of the community. Tho 
 Communistic scheme, instead of being 
 peculiarly open to the objection drawn 
 from danger of over-population, has 
 the recommendation of tending in an 
 especial degree to the prevention of 
 that evil. 
 
 A more real difficulty is that of fairly 
 apportioning the labour of the commu- 
 nity among its members. There are 
 many kinds of work, and by what 
 standard are they to be measured 
 one against another? Who is to 
 judge how much cotton spinning, or 
 distributing goods from the stores, of
 
 12* 
 
 BOOK H. CHAPTER J. S. 
 
 bricklaying, 01 chimney sweeping, is 
 equivalent to so much ploughing? 
 The difficulty of making the adjust- 
 ment between different qualities of 
 labour is so strongly felt by Com- 
 munist writers, that they have usually 
 thought it necessary to provide that 
 all should work by turns at every de- 
 scription of useful labour : an arrange- 
 ment which by putting an end to the 
 division of employments, would sacri- 
 fice so much of the advantage of co- 
 operative production as greatly to 
 diminish the productiveness of labour. 
 Besides, even in the same kind of 
 work, nominal equality of labour would 
 be so great a real inequality, that the 
 feeling of justice would revolt against 
 its being enforced. All persons are 
 not equally fit for all labour ; and 
 the same quantity of labour is an un- 
 equal burthen on the weak and the 
 strong, the hardy and the delicate, the 
 quick and the slow, the dull and the 
 intelligent. 
 
 But these difficulties, though real, 
 are not necessarily insuperable. The 
 apportionment of work to the strength 
 and capacities of individuals, the miti- 
 gation of a general rule to provide for 
 cases in which it would operate harshly, 
 are not problems to which human in- 
 telligence, guided by a sense of justice, 
 would be inadequate. And the worst 
 and most unjust arrangement which 
 could be made of these points, under a 
 system aiming at equality, would be 
 so far short of the inequality and in- 
 justice with which labour (not to speak 
 of remuneration) is now apportioned, 
 as to be scarcely worth counting in the 
 comparison. We must remember too 
 that Communism, as a system of 
 society, exists only in idea ; that its 
 difficulties, at present, are much better 
 understood than its resources ; and 
 that the intellect of mankind is only 
 beginning to contrive the means of 
 organizing it in detail, so as to over- 
 come the one and derive the greatest 
 advantage from the other. 
 
 If, therefore, the choice were to be 
 made between Communism with all its 
 chances, and the present state of 
 society with all its sufferings and in- 
 justices; if the institution of private 
 
 property necessarily carried with it as a 
 consequence, that the produce of labour 
 should be apportioned as we now see 
 it, almost in an inverse ratio to the 
 labour the largest portions to those 
 who have never worked at all, the next 
 largest to those whose work is almost 
 nominal, and so in a descending scale, 
 the remuneration dwindling as the 
 work grows harder and more disagree- 
 able, until the most fatiguing and ex- 
 hausting bodily labour cannot count 
 with certainty on being able to earn 
 even the necessaries of life ; if this, or 
 Communism, were the alternative, all 
 the difficulties, great or small, of Com- 
 munism would be but as dust in the 
 balance. But to make the comparison 
 applicable, we must compare Com- 
 munism at its best, with the regime of 
 individual property, not as it is, but as 
 it might be made. The principle of 
 private property has never yet had a 
 fair trial in any country ; and less so, f 
 perhaps, in this country than in some 
 others. The social arrangements of 
 modern Europe commenced from a 
 distribution of property which was the 
 result, not of just partition, or acqui- 
 sition by industry, but of conquest and 
 violence : and notwithstanding what 
 industry has been doing for many 
 centuries to modify the work of force, 
 the system still retains many and large 
 traces of its origin. The laws of pro- 
 perty have never yet conformed to the 
 principles on which the justification of 
 private property rests. They have 
 made property of things which never 
 ought to be property, and absolute 
 property where only a qualified pro- 
 perty ought to exist. They have not 
 held the balance fairly between human 
 beings, but have heaped impediments 
 upon some, to give advantage to 
 others ; they have purposely fostered 
 inequalities, and prevented all from 
 starting fair in the race. That all / 
 should indeed start on perfectly equal 
 terms, is inconsistent with any law off 
 private property : but if as much pains 
 as has been taken to aggravate the 
 inequality of chances arising from the 
 natural working of the principle, had 
 been taken to temper that inequality 
 by every means not subversive of tht
 
 COMMUNISM. 
 
 principle itself; if the tendency of 
 ( legislation bad been to favour tbe dif- 
 fusion, instead of the concentration of 
 wealth to encourage the subdivision 
 of the large masses, instead of striving 
 to keep them together ; the principle 
 of individual property would have been 
 found to have no necessary connexion 
 ; with the physical and social evils 
 which almost all Socialist writers 
 assume to be inseparable from it. 
 
 Private property, in every defence 
 made of it, is supposed to mean, the 
 guarantee to individuals, of the fruits 
 of their own labour and abstinence. 
 The guarantee to them of the fruits of 
 the labour and abstinence of others, 
 transmitted to them without any merit 
 or exertion of their own, is not of the 
 essence of the institution, but a mere 
 incidental consequence, which when it 
 reaches a certain height, does not pro- 
 mote, but conflicts with the ends which 
 render private property legitimate. To 
 judge of the final destination of the in- 
 stitution of property, we must suppose 
 everything rectified, which causes the 
 institution to work in a manner op- 
 posed to that equitable principle, of 
 proportion between remuneration and 
 exertion, on which in every vindication 
 of it that will bear the light, it is as- 
 sumed to be grounded. We must also 
 suppose two conditions realized, with- 
 out which neither Communism nor any 
 other laws or institutions could make 
 the condition of the mass of mankind 
 other than degraded and miserable. 
 One of these conditions is, universal 
 education ; the other, a due limitation 
 of the numbers of the community. 
 With these, there could be no poverty 
 even under the present social institu- 
 tions : and these being supposed, the 
 question of Socialism is not, as gener- 
 ally stated by Socialists, a question of 
 flying to the sole refuge against the 
 
 evils which now bear down humanity ; 
 but a mere question of comparative 
 advantages, which futurity must deter- 
 mine. We are too ignorant either of 
 what individual agency in its best 
 form, or Socialism in its best form, can 
 accomplish, to be qualified to decide 
 which of the two will be the ultimate 
 form of human society. 
 M, 
 
 129 
 
 If a conjecture may be hazarded, tho 
 decision will probably depend mainly 
 on one consideration, viz. which of the 
 two systems is consistent with tho 
 greatest amount of human liberty and 
 spontaneity. After the means of sub 
 sistence are assured, the next in strength 
 of the personal wants of human beings 
 is liberty ; and (unlike the physical 
 wants, which as civilization advances 
 become more moderate and more ame- 
 nable to control) it increases instead of 
 diminishing in intensity, as the intel- 
 ligence and the moral faculties are more 
 developed. The perfection both of social 
 arrangements and of practical morality 
 would be, to secure to all persons com- 
 plete independence and freedom of ac- 
 tion, subject to no restriction but that 
 of not doing injury to others : and the 
 education which taught or the social 
 institutions which required them to 
 exchange the control of their own ac- 
 tions for any amount of comfort or 
 affluence, or to renounce liberty for the 
 sake of equality, would deprive them 
 of one of the most elevated characte- 
 ristics of human nature. It remains to 
 be discovered how far the preservation 
 of this characteristic would be found 
 compatible with the communistic or- 
 ganization of society. No doubt, this, 
 like all the other objections to the 
 Socialist schemes, is vastly exagge- 
 rated. The members of the association 
 need not be required to live together 
 more than they do now, nor need they 
 be controlled in the disposal of their 
 individual share of the produce, and of 
 the probably large amount of leisure 
 which, if they limited their production 
 to things really worth producing, they 
 would possess. Individuals need not 
 be chained to an occupation, or to a 
 particular locality. The restraints of 
 Communism would be freedom in com- 
 parison with the present condition of 
 
 "the majority of the human race. Tha 
 generality of labourers in this and most 
 other countries, have as little choice of 
 occupation or freedom of locomotion, 
 are practically as dependent on fixed 
 rules and on the will of others, as they 
 could be on any system short of actual 
 slavery ; to say nothing of the entire 
 domestic subjection of one half the
 
 /30 
 
 BOOK II. CHAPTER I. 4 
 
 species, to which it is the signal 
 honour of Owenism and most other 
 forms of Socialism that they assign 
 equal rights, iu all respects, with those 
 of the hitherto dominant sex. But it 
 is not by comparison with the present 
 bad state of society that the claims of 
 Communism can be estimated ; nor is 
 it sufficient that it should promise 
 greater personal and mental freedom 
 than is now enjoyed by those who 
 have not enough of either to deserve 
 the name. The question is whether 
 there would be any asylum left for 
 Jndividuality of character ; whether 
 public opinion would not be a tyran- 
 nical yoke ; whether the absolute de- 
 pendence of each on all, and surveil- 
 lance of each by all, would not grind 
 all down into a tame uniformity of 
 thoughts, feelings, and actions. This 
 is already one of the glaring evils of 
 the existing state of society, notwith- 
 standing a much greater diversity of 
 education and pursuits, and a much 
 less absolute dependence of the 
 individual on the mass, than would 
 Qxist in the Communistic regime. No 
 lociety in which eccentricity is a 
 matter of reproach, can be in a whole- 
 some state. It is yet to be ascertained 
 whether the Communistic scheme 
 would be consistent with that multi- 
 form development of human nature, 
 those manifold unlikenesses, that diver- 
 sity of tastes and talents, and variety 
 of intellectual points of view, which 
 not only form a great part of the inte- 
 rest of human life, but by bringing in- 
 tellects into a stimulating collision, 
 and by presenting to each innumerable 
 notions that he would not have con- 
 ceived of himself, are the mainspring 
 of mental and moral progression. 
 
 4. I have thus far confined my 
 observations to the Communistic doc- 
 trine, which forms the extreme limit 
 of Socialism ; according to which not 
 only the instruments of production, the 
 laud and capital, are the joint pro- 
 perty of the community, but the pro- 
 duce is divided and the labour appor- 
 tioned, as far as possible, equally. The 
 objections, whether well or ill grounded, 
 to which Socialism is liable, apply to 
 
 this form of it M their greatest force. 
 The other varieties of Socialism mainly 
 differ from Communism, in not relying 
 solely on what M. Louis Blanc calls 
 the point of honour of industry, but 
 retaining more or less of the incentive* 
 to labour derived from private pecu 
 niary interest. Thus it is already a 
 modification of the strict theory of 
 Communism, when the principle is pro- 
 fessed of proportioning remuneration 
 to labour. The attempts which have 
 been made in France to carry Social- 
 ism into practical eifect, by associa 
 tions of workmen manufacturing on 
 their own account, mostly began by 
 sharing the remuneration equally, 
 without regard to the quantity of 
 work done by the individual: but in 
 almost every case this plan was after 
 a short time abandoned, and recourse 
 was had to working by the piece. The 
 original principle appeals to a higher 
 standard of justice, and is adapted to a 
 much higher moral condition of human 
 nature. The proportioning of remu- 
 neration to work done, is really just, 
 only in so far as the more or less of the 
 work is a matter of choice : when it 
 depends on natural difference of strength 
 or capacity, this principle of remune- 
 ration is in itself an injustice : it ia 
 giving to those who have ; assigning 
 most to those who are already most 
 favoured by nature. Considered, how- 
 ever, as a compromise with the selfish 
 type of character formed by the present 
 standard of morality, and fostered by 
 the existing social institutions, it is 
 highly expedient ; and until education 
 shall have been entirely regenerated, 
 is far more likely to prove immediately 
 successful, than an attempt at a higher 
 ideal. 
 
 The two elaborate forms of non- 
 communistic Socialism known as St. 
 Simonism and Fourierism, are totally 
 free from the objections usually urged 
 against Communism ; and though 
 they are open to others of their own, 
 yet by the great intellectual power 
 which in many respects distinguishes 
 them, and by their large and philoso- 
 phic treatment of some of the funda- 
 mental problems of society and mora- 
 lity, they may justly be counted among
 
 FOUKIERISM 
 
 131 
 
 the most remarkable productions of the 
 past and present age. 
 
 The St. Siinonian scheme does not 
 contemplate an equal, but an unequal 
 division of the produce; it does not 
 that all should he occupied 
 alike, but differently, according to their 
 vocation or capacity; the function of 
 caeh being assigned, like grades in a 
 regiment, by tho choice of the direct- 
 ing authority, and the remuneration 
 being by salary, proportioned to the 
 importance, in the eyes of that autho- 
 rity, of the function itself, and the 
 merits of the person who fulfils it. For 
 the constitution of the ruling body, 
 different plans might be adopted, con- 
 sistently with the essentials of the 
 system. It might be appointed by 
 popular suffrage. In the idea of the 
 original authors, the rulers were sup- 
 posed to be persons of genius and vir- 
 tue, who obtained the voluntary adhe- 
 sion of the rest by the force of mental 
 superiority. That the scheme might 
 in some peculiar states of society work 
 with advantage, is not improbahle. 
 There is indeed a successful experi- 
 ment, of a somewhat similar kind, on 
 record, to which I have once alluded ; 
 that of the Jesuits in Paraguay. A 
 race of savages, belonging to a por- 
 tion of mankind more averse to conse- 
 cutive exertion for a distant object 
 than any other authentically known to 
 us, was brought under the mental do- 
 minion of civilized and instructed men 
 who were united among themselves by 
 a system of community of goods. To 
 the absolute authority of these men 
 they reverentially submitted them- 
 selves, and were induced by them to 
 learn the arts of civilized life, and to 
 practice labours for the community, 
 which no inducement that could have 
 been offered would have prevailed on 
 them to practise for themselves. This 
 social system was of short duration, 
 being prematurely destroyed by diplo- 
 matic arrangements and foreign force. 
 That it could be brought into action 
 at all was probably owing to the im- 
 mense distance in point of knowledge 
 and intellect which separated the few 
 rulers from the whole body of tho 
 ruled, without any intermediate orders, 
 
 either social or intellectual. In any 
 other circumstances it would probably 
 have been a complete failure. It sup- 
 poses an absolute despotism in the 
 Leads of the association ; which woulf 
 probably not be much improved if tl* 
 depositaries of the despotism (contrary 
 to the views of the authors of the sys- 
 tem) were varied from time to time 
 according to the result of a popular 
 canvass. But to suppose that one or 
 a few human beings, howsoever se- 
 lected, could, by whatever machinery 
 of subordinate agency, be qualified to 
 adapt each person's work to his capa- 
 city, and proportion each person's re- 
 muneration to his merits to be, in 
 fact, the dispensers of distributive jus- 
 tice to every member of a community ; 
 or that any use which they could 
 make of this power would give general 
 satisfaction, or would be submitted to 
 without the aid of force is a supposi- 
 tion almost too chimerical to be rea- 
 soned against. A fixed rule, like that 
 of equality, might be acquiesced in, 
 and so might chance, or an external 
 necessity ; but that a handful of human 
 beings should weigh everybody in the 
 balance, and give more to one and less 
 to another at their sole pleasure aud 
 judgment, would not be borne, unless 
 from persons believed to be more than 
 men, and backed by supernatural 
 terrors. 
 
 The most skilfully combined, and 
 with the greatest foresight of objec- 
 tions, of all the forms of Socialism, is 
 that commonly known as Fourierism. 
 This system does not contemplate the 
 abolition of private property, nor even 
 of inheritance : on the contrary, it 
 avowedly takes into consideration, aa 
 an element in the distribution of the 
 produce, capital as well as labour. It 
 proposes that the operations of indus- 
 try should be carried on by associations 
 of about two thousand members, com- 
 bining their labour on a district of 
 about a square league in extent, under 
 the guidance of chiefs selected by 
 themselves. In the distribution, a 
 certain minimum is first assigned for 
 the subsistence of every member of the 
 community, whether capable or not of 
 labour. The remainder of the produce 
 K 2
 
 132 
 
 COOK. II. CHAPTER I. 4. 
 
 18 shared in certain proportions, to be 
 determined beforehand, among the 
 three elements, Labour, Capital, and 
 Talent. The capital of the commu- 
 nity may be owned in unequal shares 
 by different members, who would in 
 that case receive, as in any other joint- 
 stock company, proportional dividends. 
 The claim of each person on the share 
 of the produce apportioned to talent 
 is estimated by the grade or rank 
 which the individual occupies in the 
 several groups of labourers to which he 
 or she belongs ; these grades being in 
 all cases conferred by the choice of his 
 or her companions. The remunera- 
 tion, when received, would not of 
 necessity be expended or enjoyed in 
 common; there would be separate 
 menages for all who preferred them, 
 and no other community of living is 
 contemplated, than that -all the mem- 
 bers of the association should reside in 
 the same pile of buildings ; for saving 
 of labour and expense, not only in 
 building, but in every branch of do- 
 mestic economy ; and in order that, 
 the whole of the buying and selling 
 operations of the community being 
 performed by a single agent, the enor- 
 mous portion of the produce of industry 
 now carried off by the profits of mere 
 distributors might be reduced to the 
 smallest amount possible. 
 
 This system, unlike Communism, 
 does not, in theory at least, withdraw 
 any of the motives to exertion which 
 exist in the present state of society. 
 On the contrary, if the arrangement 
 worked according to the intentions of 
 its contrivers, it would even strengthen 
 those motives , since each person 
 would have much more certainty of 
 reaping individually the fruits of 
 increased skill or energy, bodily or 
 mental, than under the present social 
 arrangements can be felt by any but 
 those who are in the most advan- 
 tageous positions, or to whom the 
 chapter of accidents is more than ordi- 
 narily favourable. The Fourierists, 
 however, have still another resource. 
 They believe that they have solved 
 the great and fundamental problem of 
 rendering labour attractive. That this 
 U not imoracticable, they contend by 
 
 very strong arguments ; in particular 
 by one which they have in common 
 with the Owenites, viz., that scarcely 
 any labour, however severe, undergone 
 by human beings for the sake of sub- 
 sistence, exceeds in intensity that 
 which other human beings, whose sub- 
 sistence is already provided for, are 
 found ready and even eager to undergo 
 for pleasure. This certainly is a most 
 significant fact, and one from which 
 the student in social philosophy may 
 draw important instruction. But the 
 argument founded on it may easily be 
 stretched too far. If occupations full 
 of discomfort and fatigue are freely 
 pursued by many persons as amuse- 
 ments, who does not see that they are 
 amusements exactly because they are 
 pursued freely, and may be discon- 
 tinued at pleasure ? The liberty of 
 quitting a position often makes the 
 whole difference between its being 
 painful and pleasurable. Many a per- 
 son remains in the same town, street, 
 or house from January to December, 
 without a wish or a thought tending 
 towards removal, who, if confined to 
 that same place by the mandate of 
 authority, would find the imprisonment 
 absolutely intolerable. 
 
 According to the Fourierists, scarcely 
 any kind of useful labour is naturally 
 and necessarily disagreeable, unless it 
 is either regarded as dishonourable, or 
 is immoderate in degree, or destitute 
 of the stimulus of sympathy and emu- 
 lation. Excessive toil needs not, they 
 contend, be undergone by any one, in 
 a society in which there would be no 
 idle class, and no labour wasted, as so 
 enormous an amount of labour is now 
 wasted, in useless things ; and where 
 full advantage would be taken of the 
 power of association, both in increasing 
 the efficiency of production, and in 
 economizing consumption. The other 
 requisites for rendering labour at- 
 tractive would, they think, be found 
 in the execution of all labour by social 
 groups, to any number of which the 
 same individual might simultaneously 
 belong, at his or her own choice ; their 
 grade in each being determined by the 
 degree of service which they were 
 found capable of rendering, as appra-
 
 PROPERTY. 
 
 133 
 
 elated by the suffrages of their com- 
 rades. It is inferred from the diver- 
 sity of tastes and talents, that every 
 member of the community would be 
 attached to several groups, employing 
 themselves in various kinds of occupa- 
 tion, some bodily, others mental, and 
 would be capable of occupying a high 
 place in some one or more ; so that a 
 .oal equality, or something more nearly 
 approaching to it than might at first 
 be supposed, would practically result : 
 not from the compression, but, on the 
 contrary, from the largest possible de- 
 velopment, of the various natural supe- 
 riorities residing in each individual. 
 
 Even from so brief an outline, it 
 must be evident that this system does 
 no violence to any of the general laws 
 by which human action, even in the 
 present imperfect state of moral and 
 intellectual cultivation, is influenced ; 
 and that it would be extremely rash to 
 pronounce it incapable of success, or 
 unfitted to realize a great part of the 
 hopes founded oil it by its partisans. 
 With regard to this, as to all other 
 varieties of Socialism, the thing to be 
 
 desired, and to which they have a just 
 claim, is opportunity of trial. They 
 are all capable of being tried on a 
 moderate scale, and at no risk, either 
 personal or pecuniary, to any except 
 those who try them. It is for expe- 
 rience to determine how far or how 
 soon any one or more of the possible 
 systems of community of property will 
 be fitted to substitute itself for the 
 " organization of industry" based on 
 private ownership of land and capital. 
 In the meantime we may, without at- 
 tempting to limit the ultimate capabi- 
 lities of human nature, affirm, that the 
 political economist, for a considerable 
 time to come, will be chiefly concerned 
 with the conditions of existence and 
 progress belonging to a society founded 
 on private property and individual 
 competition ; and that the object to be 
 principally aimed at in the present 
 stage of human improvement, is not 
 the subversion of the system of indi- 
 vidual property, but the improvement 
 of it, and the full participation of 
 every member of the community in ita 
 benefits. 
 
 CHAPTER IT. 
 
 THE SAME SUBJECT CONTINUED. 
 
 I. IT is next to be considered, 
 what is included in the idea of private 
 property, and by what considerations 
 the application of the principle should 
 be bounded. 
 
 The institution of property, when 
 limited to its essential elements, con- 
 sists in the recognition, in each person, 
 of a right to the exclusive disposal of 
 what he or she have produced by their 
 own exertions, or received either by 
 gift or by fair agreement, without force 
 or fraud, from those who produced it. 
 The foundation of the whole is, the 
 right of producers to what they them- 
 selves have produced. It may be ob- 
 jected, therefore, to the institution as 
 it now exists, that it recognises rights 
 of property in individuals over things 
 
 which they have not produced. FOT 
 example (it may be said) the opera- 
 tives in a manufactory create, by their 
 labour and skill, the whole produce ; 
 yet, instead of its belonging to them, 
 the law gives them only their stipu- 
 lated hire, and transfers the produce 
 to some one who has merely supplied 
 the funds, without perhaps contribu- 
 ting anything to the work itself, even 
 in the form of superintendence. The 
 answer to this is, that the labour of 
 manufacture is only one of the condi- 
 tions which must combine for the pro- 
 duction of the commodity. The 
 labour cannot be carried on without 
 materials and machinery, nor without 
 a stock of necessaries provided in 
 advance, to maintain the labourers
 
 134 
 
 BOOK II. CHAPTER n. 2. 
 
 dining the production. All these 
 tilings are the fruits of previous labour. 
 If the labourers were possessed of 
 them, they would not need to divide 
 the produce with any one ; but while 
 they have them not, an equivalent 
 must be given to those who have, both 
 for the antecedent labour, and for the 
 abstinence by which the produce of 
 that labour, instead of being expended 
 on indulgences, has been reserved for 
 this use. The capital may not have 
 been, and in most cases was not, crea- 
 ted by the labour and abstinence of 
 the present possessor ; but it was 
 created by the labour and abstinence 
 of some former person, who may in- 
 deed have been wrongfully dispossessed 
 of it, but who, in the present age of 
 the world, much more probably trans- 
 ferred his claims to the present capi- 
 talist by gift or voluntary contract : 
 and the abstinence at least must have 
 been continued by each successive 
 owner, down to the present. If it be 
 said, as it may with truth, that those 
 who have inherited the savings of 
 others have an advantage which they 
 may have in no way deserved, over 
 the industrious whose predecessors 
 have not left them anything; I not 
 only admit, but strenuously contend, 
 that this unearned advantage should 
 be curtailed, as much as is consistent 
 with justice to those who thought fit 
 to dispose of their savings by giving 
 them to their descendants. But while 
 it is true that the labourers are at a 
 disadvantage compared with those 
 whose predecessors have saved, it is 
 also true that the labourers are far 
 better off than if those predecessors 
 had not saved. They share in the ad- 
 vantage, though not to an equal extent 
 with the inheritors. The terms of co- 
 operation between present labour and 
 the fruits of past labour and saving, 
 are a subject for adjustment between 
 the two parties. Each is necessary to 
 the other. The capitalists can do 
 nothing without labourers, nor the 
 labourers without capital. If the 
 labourers compete for employment, the 
 capitalists on their part compete for 
 labour, to the full extent of the circu- 
 lating capital of the country. Cora- 
 
 petition is often spoken of as if it were 
 necessarily a cause of misery and 
 degradation to the labouring class ; as 
 if high wages were not precisely as 
 much a product of competition as low 
 wages. The remuneration of labour 
 is as much the result of the law of 
 competition in the United States, as it 
 is in Ireland, and much more com- 
 pletely so than in England. 
 
 The right of property includes, then, 
 the freedom of acquiring by contract. 
 The right of each to what he has pro- 
 duced, implies a right to what has been 
 produced by others, if obtained by 
 their free consent; since the pro- 
 ducers must either have given it from . 
 good will, or exchanged it for what/ 
 they esteemed an equivalent, and to 
 prevent them from doing so would 
 be to infringe their right of pro- 1 
 perty in the product of their own in- J 
 dustry. 
 
 2. Before proceeding to consider 
 the things which the principle of indi- 
 vidual property does not include, we 
 must specify one more thing which it 
 docs include : and this is, that a title, f 
 after a certain period, should be given ( 
 by prescription. According to the fun- 
 damental idea of property, indeed, 
 nothing ought to be treated as such, 
 which has been acquired by force or 
 fraud, or appropriated in ignorance of 
 a prior title vested in some other per- 
 son ; but it is necessary to the security 
 of rightful possessors, that they should 
 not be molested by charges of wrong- 
 ful acquisition, when by the lapse of 
 time witnesses must have perished or 
 been lost sight of, and the real cha- 
 racter of the transaction can no longer 
 be cleared up. Possession which has 
 not been legally questioned within a 
 moderate number of years, ought to 
 be, as by the laws of all nations it is, 
 a complete title. Even when the acqui- 
 sition was wrongful, the dispossession, 
 after a generation has elapsed, of the 
 probably bond fide possessors, by tha 
 revival of a claim which had been long 
 dormant, would generally be a greater 
 injustice, and almost always a greater 
 private and public mischief, than 
 leaving the original wrong without
 
 1NHEBITANCE. 
 
 135 
 
 atonement. It may seem Lard, that 
 a claim, originally just, should be de- 
 feated by mere lapse of time ; but 
 there is a time after which, (even look- 
 ing at the individual case, and without 
 regard to the general effect on the 
 security of possessors,) the balance of 
 hardship turns the other way. With 
 the injustices of men, as with the con- 
 vulsions and disasters of nature, the 
 longer they remain unrepaired, the 
 greater become the obstacles to re- 
 pairing them, arising from the after- 
 growths which would have to be torn 
 up or broken through. In no human 
 transactions, not even in the simplest 
 and clearest, does it follow that a thing 
 ; is fit to be done now, because it was 
 fit to be done sixty years ago. It is 
 scarcely needful to remark, that these 
 reasons for not disturbing acts of in- 
 justice of old date, cannot apply to 
 unjust systems or institutions ; since 
 a bad law or usage is not one bad act, 
 in the remote past, but a perpetual re- 
 petition of bad acts, as long as the law 
 or usage lasts. 
 
 Such, then, being the essentials of 
 private property, it is now to be con- 
 sidered, to what extent the forms in 
 which the institution has existed in 
 different states of society, or still ex- 
 ists, are necessary consequences of its 
 principle, or are recommended by the 
 reasons on which it is grounded. 
 
 3. Nothing is implied in pro- 
 perty but the right of each to his (or 
 her) own faculties, to what he can 
 produce by them, and to whatever he 
 can get for them in a fair market : to- 
 gether with his right to give this to 
 any other person if he chooses, and 
 the right of that other to receive and 
 enjoy it. 
 
 It follows, therefore, that although 
 the right of bequest, or gift after death, 
 forms part of the idea of private pro- 
 perty, the right of inheritance, as 
 distinguished from bequest, does not. 
 \ That the property of persons who have 
 made no disposition of it during their 
 lifetime, should pass first to their chil- 
 dren, and failing them, to the nearest 
 relations, may be a proper arrange- 
 ment or not but is no conseouence of 
 
 lii'- principle of private property, 
 Although there belong to the decisii^i 
 of such questions many considerations 
 besides those of political economy, 
 it is not foreign to the plan of this 
 work to suggest, for the judgment ot 
 thinkers, the view of them which most 
 recommends itself to the writer's 
 mind. 
 
 No presumption in favour of existing 
 ideas on this subject is to be derived 
 from their antiquity. In early ages, 
 the property of a deceased person 
 passed to his children and nearest rela- 
 tives by so natural and obvious an 
 arrangement, that no other was likely 
 to be even thought of in competition 
 with it. In the first place, they were 
 usually present on the spot : they were 
 in possession, and if they had no other 
 title, had that, so important in an early 
 state of society, of first occupancy. 
 Secondly, they were already, in a man- 
 ner, joint owners of his property during 
 his life. If the property was in land, 
 it had generally been conferred by the 
 State on a family rather than on an 
 individual : if it consisted of cattle or 
 moveable goods, it had probably been 
 acquired, and was certainly protected 
 and defended, by the united efforts of 
 all members of the family who were of 
 an age to work or fight. Exclusive 
 individual property, in the modern 
 sense, scarcely entered into the ideas 
 of the time ; and when the first magis- 
 trate of the association died, he really 
 left nothing vacant but his own share 
 in the division, which devolved on the 
 member of the family who succeeded to 
 his authority. To have disposed of the 
 property otherwise, would have been 
 to break up a little commonwealth, 
 united by ideas, interest, and habits, 
 and to cast them adrift on the world. 
 These considerations, though rather 
 felt than reasoned about, had so great 
 an influence on the minds of mankind, 
 as to create the idea of an inherent 
 right in the children to the possessions 
 of their ancestor ; a right which it was 
 not competent to himself to defeat. 
 Bequest, in a primitive state of so- 
 ciety, was seldom recognised ; a clear 
 proof, were there no other, that pro- 
 perty was conceived in a manner to-
 
 136 
 
 COOK II. CHAPTER II. 3. 
 
 tally different from the conception of it 
 in the present time.* 
 
 But the feudal family, the last histo- 
 -ical form of patriarchal life, has long 
 perished, and the unit of society is not 
 now the family or clan, composed of all 
 the reputed descendants of a common 
 ancestor, but the individual ; or at 
 most a pair of individuals, with their 
 unemancipated children. Property is 
 now inherent in individuals, not in 
 famines : the children when grown up 
 do not follow the occupations or for- 
 tunes of the parent : if they partici- 
 pate in the parent's pecuniary means 
 it is at his or her pleasure, and not by 
 a voice in the ownership and govern- 
 ment of the whole, but generally by 
 the exclusive enjoyment of a part: 
 and in this country at least (except as 
 far as entails or settlements are an ob- 
 stacle) it is in the power of parents to 
 disinherit even their children, and 
 leave their fortune to strangers. More 
 distant relatives are in general almost 
 as completely detached from the family 
 and its interests as if they were ia no 
 way connected with it. The only 
 claim they are supposed to have on 
 their richer relations, is to a preference, 
 cteteris paribus, in good offices, and 
 some aid in case of actual necessity. 
 
 So great a change in the constitu- 
 tion of society must make a consider- 
 able difference in the grounds on which 
 the disposal of property by inheritance 
 should rest. The reasons usually 
 assigned by modem writers for giving 
 the property of a person who dies in- 
 testate, to the children, or nearest 
 relatives, are first, the supposition that 
 in so disposing of it, the law is more 
 likely than in any other mode to do 
 ' what the proprietor would have done, 
 I if he had done any thing; and secondly, 
 1 the hardship, to those who lived with 
 their parents and partook in their 
 opulence, of being cast down from 
 the enjoyments of wealth into poverty 
 and privation. 
 
 There is some force in both these 
 arguments. The law ought, no doubt, 
 
 * See, for admirable illustrations of this 
 and many kindred points, Mr. Maine's pro- 
 found work on Ancient Law and its relation 
 to Modern Ideas. 
 
 to do for the children or dependents of 
 an intestate, whatever it was the duty 
 of the parent or protector to have done, 
 BO far as this can be known by any 
 one besides himself. Since, however, 
 the law cannot decide on individual 
 claims, but must proceed by general 
 rules, it is next to be considered what 
 these rules should be. 
 
 We may first remark, that in regard 
 to collateral relatives, it is not, unless 
 on grounds personal to the particular 
 individual, the duty of any one to make 
 a pecuniary provision for them. No 
 one now expects it, unless there happens 
 to be no direct heirs ; nor would it be 
 expected even then, if the expectation 
 were not created by the provisions of 
 the law in case of intestacy. I sec, 
 therefore, no reason why collateral 
 inheritance should exist at all. Mr. 
 Bentham long ago proposed, and other 
 high authorities have agreed in ihe 
 opinion, that if there are no heirs 
 either in the descending or in the 
 ascending line, the property, in case 
 of intestacy, should escheat to the 
 State. With respect to the more 
 remote degrees of collateral relation- 
 ship, the point is not very likely to be 
 disputed. Few will maintain that 
 there is any good reason why the 
 accumulations of some childless miser 
 should on his death (as every now and 
 then happens) go to enrich a distant 
 relative who never saw him, who per- 
 haps never knew himself to be related j 
 to him until there was something to be 
 gained by it, and who had no moral 
 claim upon him of any kind, more than 
 the most entire stranger. But the \ 
 reason of the case applies alike to all 
 collaterals, even in the nearest degree- 
 Collaterals have no real claims, but 
 such as may be equally strong in the 
 case of non-relatives ; and in the one 
 case as in the other, where valid claims 
 exist, the proper mode of paying regaid 
 to them is by bequest. 
 
 The claims of children are of a 
 different nature : they are real, and in- 
 defeasible. But even of these, I venture 
 to think that the measure usually taken 
 is an erroneous one : what is due to 
 children is in some respects under- 
 rated, in others, as it appears to me f
 
 INHERITANCE. 
 
 137 
 
 exacrger.-.tc'.l. One of the most binding 
 of all obligations, that of not bringing 
 children into the world unless they can 
 be maintained in comfort during child- 
 hood, and brought up with a likelihood 
 of supporting themselves when of full 
 vge, is both disregarded in practice 
 and made light of in theory in a manner 
 disgraceful to human intelligence. On 
 the other hand, when the parent pos- 
 sesses property, the claims of the 
 children upon it seem to me to be the 
 subject of an opposite error, \\hat- 
 ever fortune a parent may have in- 
 herited, or still more, may have ac- 
 quired, I cannot admit that he owes 
 to his children, merely because they 
 ore his children, to leave them rich, 
 without the necessity of any exertion. 
 I could not admit it, even if to be so 
 left were always, and certainly, for the 
 good of the children themselves. But 
 this is in the highest degree uncertain. 
 It depends on individual character. 
 Without supposing extreme cases, it 
 may be affirmed that in a majority of 
 instances the good not only of society 
 but of the individuals would be better 
 consulted by bequeathing to them a 
 moderate, than a large provision. This, 
 which is a common-place of moralists 
 ancient and modern, is felt to be true 
 by many intelligent parents, and would 
 be acted upon much more frequently, 
 if they did not allow themselves to 
 consider less what really is, than what 
 will be thought by others to be, ad- 
 vantageous to the children. 
 
 The duties of parents to their 
 children are those which are indis- 
 solubly attached to the fact of causing 
 the existence of a human being. The 
 parent owes to society to endeavour to 
 make the child a good and valuable 
 member of it, and owes to the children 
 to provide, so i'ar as depends on him, 
 such education, and such appliances 
 and means, as will enable them to start 
 with a fair chance of achieving by 
 their own exertions a successful life. 
 To this every child has a claim ; and 
 I cannot admit, that as a child he 
 has a claim to more. There is a case 
 in which these obligations present 
 themselves in their true light, without 
 ny extrinsic circumstances to disguise 
 
 or confuse them : it is that of an illegi- 
 timate child. To such a child it is 
 generally felt that there is due from 
 the parent, the amount of provision 
 for his welfare which will enable him 
 to make his life on the whole a desir- 
 able one. I hold that to no child, 
 merely as such, anything more is due, 
 than what is admitted to be due to an 
 illegitimate child : and that no child 
 for whom thus much has been done, 
 has, unless on the score of previously 
 raised expectations, any grievance, jf 
 the remainder of the parent's fortune 
 is devoted to public uses, or to the 
 benefit of individuals on whom in the 
 parent's opinion it is better bestowed. 
 In order to give the children that 
 fair chanco of a desirable existence, 
 to which they are entitled, it is gene- 
 rally necessary that they should not 
 be brought up from childhood in habits 
 of luxury which they will not have the 
 means of indulging in after life. This, 
 again, is a duty often flagrantly vio- 
 lated by possessors of terminable in- 
 comes, who have little property to 
 leave. When the children of rich\ 
 parents have lived, as it is natural 
 they should do, in habits correspond- ! 
 ing to the scale of expenditure in 
 which the parents indulge, it is gene- ; 
 rally the duty of the parents to make ; 
 a greater provision for them, than 
 would suffice for children otherwise 
 brought up. I say generally, because 
 even here there is another side to the 
 question. It is a proposition quite 
 capable of being maintained, that to a 
 strong nature which has to make its 
 way against narrow circumstances, to 
 have known early some of the feelings 
 and experiences of wealth, is an ad- 
 vantage both in the formation of cha- 
 racter and in the happiness of life. 
 But allowing that children have a just 
 ground of complaint, who have been 
 brought up to require luxuries which 
 they are not afterwards likely to obtain, 
 and that their claim, therefore, is good 
 to a provision bearing some relation to 
 the mode of their bringing up ; this, too, 
 is a claim which i? particularly liable 
 to be stretched further than its reasons 
 warrant. The case is exactly that of 
 the younger children of the nobility
 
 J38 
 
 BOOK Ii. CHAPTER II. 4. 
 
 and landed gentry, the bulk of whose 
 Jurtune passes to the eldest son. The 
 other sons, who are usually numerous, 
 are brought up in the same habits of 
 luxury as the future heir, and they 
 receive, AS a younger brother's portion, 
 generally what the reason of the case 
 dictates, namely, enough to support, 
 in the habits of life to which they are 
 accustomed, themselves, but not a wife 
 or children. It really is no grievance 
 to any man, that for the means of 
 marrying and of supporting a family, 
 he has to depend on his own exertions . 
 A provision, then, such as is ad- 
 mitted to be reasonable in the case 
 of illegitimate children, of younger 
 children, wherever in short the justice 
 of the case, and the re"al interests of 
 the individuals and of society, are the 
 only things considered, is, I conceive, 
 all that parents owe to their children, 
 and all, therefore, which the state 
 owes to the children of those who 
 die intestate. The surplus, if any, 
 I hold that it may rightfully appro- 
 priate to the general purposes of the 
 community. I would not, however, be 
 supposed to recommend that parents 
 should never do more for their children 
 than what, merely as children, they 
 have a moral right to. In some cases 
 it is imperative, in many laudable, and 
 in all allowable, to do much more. 
 For this, however, the means are 
 afforded by the liberty of bequest. It 
 is due, not to the children but to the 
 parents, that they should have the 
 power of showing marks of affection, 
 of requiting services and sacrifices, 
 and of bestowing their wealth according 
 to their own preferences, or their own 
 judgment of iitness. 
 
 4. Whether the power of bequest 
 should itself be subject to limitation, is 
 an ulterior question of great import- 
 ance. Unlike inheritance ab intestato, 
 bequest is one of the attributes of pro- 
 perty : the ownership of a thing can- 
 not be looked upon as complete with- 
 out the power of bestowing it, at death 
 or during life, at the owner's pleasure : 
 and all the reasons, which recommend 
 that private property should exist, 
 recommend pro tanto this extension of 
 
 it. But property is only a means to 
 an end, not itself the rnd. Like all 
 other proprietary rights, and even in a 
 greater degree than most, the power 
 of bequest may be so exercised as to 
 conflict with the permanent interests 
 of the human race. It does so, when, 
 not content with bequeathing an es- 
 tate to A, the testator prescribes that 
 on A's death it shall pass to his 
 eldest son, and to that son's son, and 
 so on for ever. No doubt, person? 
 have occasionally exerted themselves 
 more strenuously to acquire a fortune 
 from the .hope of founding a family in 
 perpetuity; but the mischiefs to society 
 of such perpetuities outweigh the 
 value of this incentive to exertion, and 
 the incentives in the case of those 
 who have the opportunity of making 
 large fortunes are strong enough with- 
 out it. A similar abuse of the power 
 of bequest is committed when a person 
 who does the meritorious act of leaving 
 property for public uses, attempts to 
 prescribe the details of its application 
 in perpetuity ; when in founding a 
 place of education, (for instance) he 
 dictates, for ever, what doctrines shall 
 be taught. It being impossible that 
 any one should know what doctrines 
 will be fit to be taught after he has 
 been dead for centuries, the law ought 
 not to give effect to such dispositions 
 of property, unless subject to the per- 
 petual revision (after a certain interval 
 has elapsed) of a fitting authority. 
 
 These are obvious limitations. But 
 even the simplest exercise of the right 
 of bequest, that of determining the 
 person to whom property shall pass 
 immediately on the de.ath of the tes- 
 tator, has always been reckoned among 
 the privileges which might be limited 
 or varied, according to views of es 
 pediency. The limitations, hitherto, 
 have been almost solely in favour of 
 children. In England the right is 
 in principle unlimited, almost the only 
 impediment being that arising from a 
 settlement by a former proprietor, in 
 which case the holder for the time 
 being cannot indeed bequeath his pos- 
 sessions, but only because there is 
 nothing to bequeath, he having merely 
 a life interest. By the Roman law,
 
 BfcQUESTS. 
 
 139 
 
 on which the civil legislation of the 
 Continent of Europe is principally 
 founded, bequest originally was not 
 permitted at all, and even after it was 
 introduced, a legitima portio was cora- 
 pulsorily reserved for each child ; and 
 such is still the law in some of the 
 Continental nations. By the French 
 law since the Revolution, the parent 
 can only dispose by will, of a portion 
 equal to the share of one child, each of 
 the children taking an equal portion. 
 This entail, as it may be called, of the 
 bulk of every one's property upon the 
 children collectively, seems to me as 
 little defensible in principle as an en- 
 tail in favour of one child, though it 
 does not shock so directly the idea of 
 justice. I cannot admit that parents 
 should be compelled to leave to their 
 children even that provision whicn, as 
 children, I have contended that they 
 have a moral claim to. Children may 
 forfeit that claim- by general un- 
 worthiness, or particular ill-conduct to 
 the parents : they may have other 
 resources or prospects : what has been 
 previously done for them, in the way 
 of education and advancement in life, 
 may fully satisfy their moral claim ; or 
 others may have claims superior to 
 theirs. 
 
 The extreme restriction of the power 
 of bequest in French law was adopted 
 as a democratic expedient, to break 
 down the custom of primogeniture, and 
 counteract the tendency of inherited 
 property to collect in large masses. I 
 agree in thinking these objects emi- 
 nently desirable ; but the means used 
 are not, I think, the most judicious. 
 Were I framing a code of laws accord- 
 ing to what seems to me best in itself, 
 without regard to existing opinions and 
 sentiments, I should prefer to restrict, 
 not what any one might bequeath, but 
 what any one should be permitted to 
 acquire, by bequest or inheritance. 
 Each person should have power to dis- 
 pose by will of his or her whole pro- 
 perty ; but not to lavish it in enriching 
 iome one individual, beyond a certain 
 maximum, which should be fixed suffi- 
 ciently high to aflbrd the means of 
 comfortable independence. The in- 
 equalities of property which arise from 
 
 unequal industry, frugality, perse- 
 verance, talents, and to a certain extent 
 even opportunities, are inseparable from 
 the principle of private property, and 
 if we accept the principle, we must bear 
 with these consequences of it : but 1 
 see nothing objectionable in fixing a 
 limit to what any one may acquire by 
 the mere favour of others, without any 
 exercise of his faculties, and in requiring 
 that if he desires any furthur accession 
 of fortune, he shall work for it.* I 
 do not conceive that the degree of 
 limitation which this would impose 
 on the right of bequest, would be 
 felt as a burthensome restraint by 
 any testator who estimated a largo 
 fortune at its true value, that of the 
 pleasures and advantages that can be 
 purchased with it : on even the most? 
 extravagant estimate of which, it mus". 
 be apparent to every one, that the dif- 
 ference to the happiness of the possessor 
 between a moderate independence and 
 five times as much, is insignificant 
 when weighed against the enjoyment 
 that might be given, and the perma- 
 nent benefits diffused, by Borne other 
 disposal of the four-fifths. So long 
 indeed as the opinion practically pre- 
 vails, that the best thing which can be 
 done for objects of affection is to heap 
 on them to satiety those intrinsically 
 worthless things on which large fortunes 
 are mostly expended, there might be 
 little use in enacting such a law, even 
 if it were possible to get it passed, 
 since if there were the inclination, 
 there would generally be the power of 
 
 * In the case of capital employed in the 
 hands of the owner himself, in carrying on 
 any of the operations of industry, there are 
 strong grounds for leaving to him the power 
 of bequeathing to one person the whole of 
 the funds actually engaged in a single enter- 
 prise. It is well that he should be enabled 
 to leave the enterprise under the control of 
 whichever of his heirs he regards as best fit- 
 ted to conduct it virtuously and efficiently ; 
 and the necessity (very frequent and incon- 
 venient under the French law) would be 
 obviated, of breaking up a manufacturing 
 or commercial establishment at the death of 
 its chief. In like manner it should be al- 
 lowed to a proprietor who leaves to one of 
 his successors the moral burthen of keeping 
 up an ancestral mansion and park or plea- 
 sure-ground, to bestow along with them as 
 much other property as is required for their 
 sufficient maintenance.
 
 140 
 
 V.OOK II. CHAPITER IT. g 5. 
 
 evading it. The law would be unavail- 
 ing unless the popular sentiment went 
 energetically along with it; which 
 (judging from the tenacious adherence 
 of public opinion in France to the law 
 of compulsory division) it would in 
 some states of society and government 
 be very likely to do, however much the 
 contrary may be the fact in England 
 and at the present time. If the re- 
 striction could be made practically ef- 
 fectual, the benefit would be great. 
 Wealth which could no longer be em- 
 ployed in over-enriching a few, would 
 either be devoted to objects of public 
 usefulness, or if bestowedon individuals, 
 would be distributed among a larger 
 number. While those enormous for- 
 tunes which no one needs for any per- 
 sonal purpose but ostentation or im- 
 proper power, would become much less 
 numerous, there would be a great mul- 
 tiplication of persons in easy circum- 
 stances, with the advantages of leisure, 
 and all the real enjoyments which 
 wealth can give, except those of vanity ; 
 a class by whom the services which a 
 nation having leisured classes is enti- 
 tled to expect from them, either by 
 their direct exertions or by the tone 
 they give to the feelings and tastes of 
 the public, would be rendered in a much 
 more beneficial manner than at present. 
 A large portion also of the accumula- 
 tions of successful industry would pro- 
 bably be devoted to public uses, either 
 by direct bequests to the State, or by 
 the endowment of institutions; as is 
 already done very largely in the United 
 States, where the ideas and practice in 
 the matter of inheritance seem to be 
 unusually rational and beneficial.* 
 
 * " Munificent bequests and donations for 
 public purposes, whether charitable or edu- 
 cational, form a striking feature in the 
 modern history of the United States, and 
 especially of New England. Not only is it 
 common for rich capitalists to leave by will 
 a portion of their fortune towards the en- 
 dowment of national institutions, but indi- 
 viduals during their lifetime make magni- 
 ficent grants of money for the same objects. 
 There is here no compulsory law for the 
 equal partition of property among children, 
 as in France, and on the other hand, no 
 custom of entail or primogeniture, as in 
 England, so that the affluent leel themselves 
 at liberty to share their wealth between 
 their 'tindred and the public ; it being im- 
 
 5. The next point to be- consi- 
 dered is, whether the reasons on which 
 the institution of property rests, are 
 applicable to all things in which a right 
 of exclusive ownership is at present 
 recognised ; and if not, on what other 
 grounds the recognition is defensible. 
 
 The essential principle of property 
 being to assure to all persons what 
 they have produced by their labour and 
 accumulated by their abstinence, this 
 principle cannot apply to what is not 
 the produce of labour, the raw material 
 of the earth. If the land derived its 
 productive power wholly from nature, 
 and not at all from industry, or if there 
 were any means of discriminating what 
 is derived from each source, it not only 
 would not be necessary, but it would 
 be the heighiof injustice, to let the gift 
 of nature be engrossed by individuals. 
 The use of the land in agriculture 
 must indeed, for the time being, be of 
 necessity exclusive ; the same persoc 
 who has ploughed and sown must be 
 permitted to reap : but the land might 
 be occupied for one season only, as 
 among the ancient Germans ; or might 
 be periodically redivided as population 
 increased : or the State might be the 
 universal landlord, and the cultivators 
 tenants underit,eitheron lease or at will. 
 
 But though land is not the produce 
 of industry, most of its valuable quali- 
 ties are so. Labour is not only requi- 
 site for using, but almost equally so for 
 fashioning the instrument. Consider- 
 able labour is often required at the com- 
 mencement, to clear the land for cul- 
 tivation. In many cases, even when 
 
 possible to found a family, and parents hav- 
 ing frequently the happiness of seeing all 
 their children well provided for and inde- 
 pendent long before their death. I have 
 seen a list of bequests and donations made 
 during the last thirty years for the benefit 
 of religious, charitable, and literary institu- 
 tions in the State of Massachusetts alone, 
 and they amounted to no less a sum than six 
 millions of dollars, or more than a million 
 sterling." Lyell's Travel* in America,vQ\. i. 
 p. 2G3. 
 
 In England, whoever leaves anything, be- 
 yond trifling legacies, for public or benefi- 
 cent objects, when he has any near relatives 
 living, does so at the risk of being declared 
 insane by a jury after his death, or at the 
 least, of having the property wasted in * 
 Chancery suit to set aside the will.
 
 PROPERTY IN LAND. 
 
 cleared, its productiveness is wholly, 
 the effect of labour and art. The 
 Bedford Level produced little or no- 
 thing until artiiicially drained. The 
 bogs of Ireland, until the same thing 
 is done to them, can produce little 
 besides fuel. One of the barrennest 
 soils in the world, composed of the ma- 
 terial of the (!oodwin Sands, the Pays 
 cle Waes in Flanders, has been so fer- 
 tilized by industry, as to have become 
 one of the most productive in Europe. 
 Cultivation also requires buildings 
 and fences, which are wholly the pro- 
 duce of labour. The fruits of this in- 
 dustry cannot ba reaped in a short 
 period. The labour and outlay are 
 immediate, the benefit is spread over 
 many years, perhaps over all future 
 time. A holder will not incur this 
 labour and outlay when strangers and 
 not himself will be benefited by it. If 
 he undertakes such improvements, he 
 must have a sufficient period before 
 him in which to profit by them ; and 
 he is in no way so sure of having al- 
 ways a sufficient period as when his 
 tenure is perpetual.* 
 
 6. These are the reasons which 
 form the justification, in an economical 
 point of view, of property in land. It 
 is seen that they are only valid, in so 
 far as the proprietor of land is its im- 
 prover. Whenever, in any country, 
 the proprietor, generally" ;-jK-uluiig, 
 
 * " What endowed man with intelligence 
 and perseverance in labour, what made him 
 direct all his efforts towards an end useful 
 to his race, was the sentiment ,if perpetuity. 
 The lands which the streams have deposited 
 along their course are always the most fer- 
 tile, but are also those which they menace 
 with their inundations or corrupt by 
 marshes. Under the guarantee of perpe- 
 tuity men undertook long and painful la- 
 bours to give the marshes an outlet, to erect 
 embankments against inundations, to dis- 
 tribute by irrigation-channels fertilizing 
 waters over the same fields which the same 
 waters had condemned to sterility. Under 
 the same guarantee, man, no longer con- 
 tenting himself with the annual products of 
 the earth, distinguished among the wild ve- 
 getation the perennial plants, shrubs, and 
 trees whicli would be useful to him, im- 
 proved them by culture, changed, it may 
 almost be said, their very nature, and multi- 
 plied their amount. There are fruits which 
 it required centuries of cultivation to bring 
 \u their present perfection, and others which 
 
 141 
 
 ceases to be the improver, political 
 
 economy luu nothing to say m 
 
 , as thnv etabished. 
 in no sound theory of private property 
 was it ever contemplated that the pro- 
 prietor of land should be merely a 
 sinecurist quartered on it. 
 
 In Great Britain, the landed pro- 
 prietor is not unfrequently an improver. 
 But it cannot be said that he is gene- 
 rally so. And in the majority of cases 
 he grants the liberty of cultivation on 
 such terms, as to prevent improvements 
 from being made by any one else. In 
 the southern parts of the island, as 
 there are usually no leases, permanent 
 improvements can scarcely be made 
 except by the landlord's capital ; ac- 
 cordingly the South, compared with 
 the North of England, and with the 
 Lowlands of Scotland, is still extremely 
 backward in agricultural improvement. 
 The truth is, that any very general 
 improvement of land by the landlords, 
 is hardly compatible with a law or 
 custom of primogeniture. When the 
 land goes wholly to the heir, it gene- 
 rally goes to him severed from the 
 pecuniary resources which would ena- 
 ble him to improve it, the personal 
 property being absorbed by the provi- 
 sion for younger children, and the land 
 itself often heavily burthened for the 
 same purpose. There is therefore but 
 a small proportion of landlords who 
 have the means of making expensive 
 
 have been introduced from the most remote 
 regions. Men have opened the earth to a 
 great depth to renew the soil, and fertilize 
 it by the mixture of its parts and by contact 
 with the air; they have fixed on the hill- 
 sides the soil which would have slid off, 
 and have covered the face of the country 
 with a vegetation everywhere abundant, anil 
 everywhere useful to the human race. 
 Among their labours there are some of 
 wiiich the fruits can only be reaped at the 
 end of ten or of twenty years; there are 
 others by which their posterity will still 
 benefit after several centuries. All have 
 concurred in augmenting the productive 
 force of nature, in giving to mankind a re- 
 venue infinitely more abundant, a revenue 
 of which a considerable part is consumed by 
 those who have no share in the ownership 
 of the land, but who would not have found 
 a maintenance but for that appropriation of 
 the soil by which they seem, at first sight, to 
 have been disinher.ted." Sismundi, Studitt 
 in Political Economy, Third Essay, OT Ter- 
 ritorial Wealth.
 
 142 
 
 improvements, unless they do it with 
 borrowed money, and by adding to the 
 mortgages with which in most cases 
 the land was already bnrthened when 
 they received it. But the position of 
 the owner of a deeply mortgaged estate 
 is so precarious ; economy is so unwel- 
 come to one whose apparent fortune 
 greatly exceeds his real means, and 
 the vicissitudes of rent and price which 
 only trench upon the margin of his in- 
 come, are so formidable to one who can 
 call little more than the margin his 
 own ; that it is no wonder if few land- 
 lords find themselves in a condition to 
 make immediate sacrifices for the sake 
 of future profit. Were they ever so 
 much inclined, those alone can pru- 
 dently do it, who have seriously studied 
 the principles of scientific agriculture : 
 and great landlords have seldom seri- 
 ously studied anything. They might 
 at least hold out inducements to the 
 fanners to do what they will not or 
 cannot do themselves ; but even in 
 granting leases, it is in England a 
 general complaint that they tie up 
 their tenants by covenants grounded 
 on the practices of an obsolete and ex- 
 ploded agriculture : while most of them, 
 by withholding leases altogether, and 
 giving the farmer no guarantee of pos- 
 session beyond a single harvest, keep 
 the land on a footing little more favour- 
 able to improvement than in the time 
 of our barbarous ancestors, 
 
 immetata quibus jugera liberas 
 
 Fruges et Cererem ferunt, 
 
 Nee cultura placet longior annua. 
 
 Landed property in England is thus 
 very far from completely fulfilling the 
 conditions which render its existence 
 economically justifiable. But if insuffi- 
 ciently realized even in England, in 
 Ireland those conditions are not com- 
 plied with at all. With individual 
 exceptions (some of them very honour- 
 able ones), the owners of Irish estates 
 do nothing for the land but drain it 
 of its produce. What has been epi- 
 grammatically said in the discussions 
 oil "peculiar burthens" is literally 
 true when applied to them ; that the 
 greatest "burthen on land" is the 
 landlords. Returning nothing to the 
 soil, they consume its whole produce, 
 
 BOOK II. CHAPTER II. 6. 
 
 minus the potatoes strictly necessary 
 to keep the inhabitants from dying of 
 famine : and when they have any pur- 
 pose of improvement, the preparatory 
 step usually consists in not leaving 
 even this pittance, but turning out the 
 people to beggary if not to starvation.* 
 When landed properly has placed it- 
 self upon this footing it ceases to be 
 defensible, and the time has come for 
 making some new arrangement of the 
 matter. 
 
 When the " sacredness of property " 
 is talked of, it should always be remem- 
 bered, that any such sacredness does 
 not belong in the same degree to landed 
 
 froperty. No man made the land, 
 t is the original inheritance of the 
 whole species. Its appropriation is 
 wholly a question of general expe- 
 diency. When jmvate property in 
 land is not expedient, it is unjust. It 
 is no hardship to any one, to be ex- 
 cluded from what others have pro- 
 duced : they were not bound to produce 
 it for his use, and he loses nothing by 
 not sharing in what otherwise would 
 not have existed at all. But it is 
 some hardship to be born into the 
 world and to find all nature's gifts 
 previously engrossed, and no place left 
 for the new-comer. To reconcile peo- 
 ple to this, after they have once 
 admitted into their minds the idea that 
 any moral rights belong to them as 
 human beings, it will always be neces- 
 sary to convince them that the exclu- 
 sive appropriation is good for mankind 
 on the whole, themselves included. 
 But this is what no sane human being 
 could be persuaded of, if the relation 
 between the landowner and the cul- 
 tivator were the same everywhere as it 
 has been in Ireland. 
 
 Landed property is felt even by those 
 most tenacious of its rights, to be a 
 different thing from other property ; 
 and where the bulk of the community 
 have been disinherited of their share of 
 it, and it has become the exclusive 
 
 * I must beg the reader to bear in mind 
 that this paragraph was written eighteen 
 years ago. So wonderful are the changes, 
 both moral and economical, taking place in 
 our age, that, without perpetually re-writing 
 a work like the present, it is impossible to 
 keep up with thea&
 
 PHOPERTY IN LAND. 
 
 143 
 
 attribute of a small minority, men have 
 gpniTally tried to reconcile it, at least 
 in theory, to their sense of justice, by 
 endeavouring to attach duties to it, 
 and erecting it into a sort of magis- 
 tracy, either moral or legal. But if 
 the "state is at liberty to treat the 
 possessors of land as public func- 
 tionaries, it is only going one step 
 further to say, that it is at liberty to 
 them. The claim of the land- 
 owners to the land is altogether subor- 
 dinate to the general policy of the 
 state. The principle of property gives 
 them no right to the land, but only 
 a right to compensation for whatever 
 portion of their interest in the land it 
 may be the policy of the state to 
 deprive them of. To that, their claim 
 is indefeasible. It is due to land- 
 owners, and to owners of any property 
 whatever, recognised as such by the 
 state, that they should not be dis- 
 possessed of it without receiving its 
 pecuniary value, or an annual income 
 equal to what they derived from it. 
 This is due on the general principles 
 on which property rests. If the land 
 was bought with the produce of the 
 labour and abstinence of themselves or 
 their ancestors, compensation is due to 
 them on that ground ; even if other- 
 wise, it is still due on the ground of 
 prescription. Nor can it ever be neces- 
 sary for accomplishing an object by 
 which the community altogether will 
 gain, that a particular portion of the 
 community should be immolated. 
 When the property is of a kind to 
 which peculiar affections attach them- 
 selves, the compensation ought to 
 exceed a bare pecuniary equivalent. 
 But, subject to this proviso, the state 
 is at liberty to deal with landed pro- 
 perty a.s the creneral interests of the 
 community may require, even to the 
 extent, if it so happen, of doing with 
 the whole, what is done with a part 
 whenever a bill is passed for a railroad 
 or a new street. The community has 
 too much at stake in the proper cul- 
 tivation of the land, and in the condi- 
 tions annexed to the occupancy of it, 
 to leave these things to the discretion 
 of a class of persons called landlords, 
 when they have shown themselves 
 
 unfit for the (rust. The legislature, 
 which if it pleased might convert 
 the whole body of landlords into fund- 
 holders or pensioners, might, a fortiori, 
 commute the average receipts of Irish 
 landowners into a fixed rent charge, 
 and raise the tenants into proprietors ; 
 supposing always that the full market 
 value of the land was tendered to the 
 landlords, in case they preferred that 
 to accepting the conditions proposed. 
 
 There will be another place for dis- 
 cussing the various modes of landed 
 property and tenure, and the advan- 
 tages and inconveniences of each ; in 
 this chapter our concern is with tho 
 right itself, the grounds which justify 
 it, and (as a corollary from these) the 
 conditions by which it should be limited. 
 To me it seems almost an axiom that 
 property in land should be interpreted 
 strictly, and that the balance in all 
 cases of doubt should incline against 
 the proprietor. The reverse is the 
 case with property in moveables, and 
 in all things the product of labour:' 
 over these, the owner's power both of 
 use and of exclusion should be abso- 
 lute, except where positive evil to 
 others would result from it ; but in the 
 case of land, no exclusive right should 
 be permitted in any individual, which 
 cannot be shown to be productive of 
 positive good. To be allowed any ex- 
 clusive right at all, over a portion of 
 the common inheritance, while there 
 are others who have no portion, is 
 already a privilege. No quantity of 
 moveable goods which a person can 
 acquire by bis labour, prevents others 
 from acquiring the like by the same 
 means ; but from the very nature of 
 the case, whoever owns land, keepi 
 others out of the enjoyment of it. 
 The privilege, or monopoly, is only 
 defensible as a necessary evil ; it be- 
 comes an injustice when carried to any 
 point to which the compensating good 
 does not follow it. . 
 
 For instance, the exclusive right to 
 the land for purposes of cultivation 
 does not imply an exclusive right to it 
 for purposes of access; and no such 
 right ought to be recognized, except 
 to the extent necessary to protect the 
 produce against damage, and the
 
 144 
 
 owner's privacy against invasion. The 
 pretension of two Dukes to shut up 
 a part of the Highlands, and exclude 
 the rest of mankind from many spare 
 miles of mountain scenery to prevent 
 disturbance to wild animals, is an 
 abuse ; it exceeds the legitimate hounds 
 of the right of landed property. When 
 land is not intended to be cultivated, 
 . no good reason can in general be given 
 1 for its being private property at all; 
 and if any one is permitted to call it 
 his, he ought to know that he holds it 
 by sufferance of the community, and 
 on an implied condition that his owner- 
 ship, since it cannot possibly do them 
 any good, at least shall not deprive 
 them of any, which they could nave 
 derived from the land it it had been 
 unappropriated. Even in the case of 
 cultivated land, a man whom, though 
 only one among millions, the law permits 
 / to hold thousands of acres as his single 
 share, is not entitled to think that all 
 this is given to him to use and abuse, 
 and deal with as if it concerned nobody 
 but himself. The rents or profits which 
 he can obtain from it are at his sole 
 disposal ; but with regard to the land, 
 in everything which he does with it, 
 and in everything which he abstains 
 from doing, he is morally bound, and 
 should whenever the case admits be 
 legally compelled, to make his interest 
 and pleasure consistent with the public 
 good. The species at large still re- 
 tains, of its original claim to the soil 
 of the planet which it inhabits, as much 
 as is compatible with the purposes for 
 which it has parted with the remainder. 
 
 7. Besides property in the pro- 
 duce of labour, and property in land, 
 there are other things which are or 
 have been subjects of property, in 
 which no proprietary rights ought to 
 exist at all. But as the civilized world 
 ias in general made up its mind on 
 most of these, there is no necessity for 
 dwelling on them in this place. At 
 the head of them, is property in human 
 beings. It is almost superfluous to 
 observe, that this institution can have 
 no place in any society even pretending 
 to be founded on justice, or on fellow- 
 ship between human creatures. But, 
 
 BOOK II. CHAPTER II. f. 
 
 iniquitous as it is, yet when the state 
 has expressly legalized it, and human 
 beings, for generations, have been 
 bought, sold, and inherited under 
 sanction of law, it is another wrong, in 
 abolishing the property, not to make 
 full compensation. This wrong was 
 avoided by the great measure of justice 
 in 1833, one of the most virtuous acts, 
 as well as the most practically benefi- 
 cent, ever done collectively by a nation. 
 Other examples of property which 
 ought not to have been created, are 
 properties in public trusts ; such as 
 judicial offices under the old French 
 regime, and the heritable jurisdictions 
 which, in countries not wholly emerged 
 from feudality, pass with the land. 
 Our own country affords, as cases in 
 point, that of a commission in the 
 army, and of an advowson, or right of 
 nomination to an ecclesiastical bene- 
 fice. A property is also sometimes 
 created in a right of taxing the public ; 
 in a monopoly, for instance, or other 
 exclusive privilege. These abuses pre- 
 vail most in semibarbarous countries ; 
 but are not without example in the 
 most civilized. In France there are 
 several important trades and profes- 
 sions, including notaries, attorneys, 
 brokers, appraisers, printers, and (until 
 lately) bakers and butchers, of which 
 the numbers are limited by law. The 
 brevet or privilege of one of the per- 
 mitted number consequently brings a 
 high price in the market. "When this 
 is the case, compensation probably 
 could not with justice be refused, on 
 the abolition of the privilege. There 
 are other cases in which this would bo 
 more doubtful. The question would 
 turn upon what, in the peculiar cir- 
 cumstances, was sufficient to constitute 
 prescription; and whether the legal 
 recognition which the abuse had ob- 
 tained, was sufficient to constitute it 
 an institution, or amounted only to an 
 occasional licence. It would be absurd 
 to claim compensation for losses caused 
 by changes in a tariff, a thing confes- 
 sedly variable from year to year ; or for 
 monopolies like those granted to indivi- 
 duals by the Tudors, favours of a despo- 
 tic authority, which the power that gave 
 was competent at any time to recal.
 
 CLASSES WHO DIVIDE THE PRODUCE. 
 
 145 
 
 So much on the institution of pro- 
 perty, a subject of which, for the pur- 
 iMisi's of political economy, it was 
 indispensable to treat, but on which 
 we could not usefully confine ourselves 
 to economical considerations. We 
 
 have now to inquire on what principles 
 and with what results the distribution 
 of the produce of land and labour is 
 effected, under the relations which 
 this institution creates among the 
 different members of the commnaity. 
 
 CHAFFER HL 
 
 OF THE CLASSES AHOXO WHOM THE PRODUCE IS DISTRIBUTED. 
 
 1. PRIVATE property being as- 
 sumed as a fact, we have next to enu- 
 merate the different classes of persons 
 to whom it gives rise ; whose concur- 
 rence, or at least whose permission, is 
 necessary to production, and who are 
 therefore able to stipulate for a share 
 of the produce. We have to inquire, 
 according to what laws the produce 
 distributes itself among these classes, 
 by the spontaneous action of the inte- 
 rests of those concerned : after which, 
 a further question will be, what effects 
 are or might be produced by laws, in- 
 stitutions, and measures of government, 
 in superseding or modifying that spon- 
 taneous distribution. 
 
 The three requisites of production, 
 as has been so often repeated, are 
 labour, capital, and land : understand- 
 ing by ratfltel. -the means and np- 
 > wfncn are the accumulated 
 results of previous labour, and by land, 
 the materials and instruments suppliea 
 by nature, whether contained in the 
 interior of the earth or constituting its 
 surface. Since each of these elements 
 of production maybe separately appro- 
 priated, the industrial community may 
 be considered as divided into J,a^d- 
 capitalists, and productive 
 labourers. Each of these classes, as 
 RfBHJTfbTains a share of the produce : 
 no other person or class obtains any- 
 thing, except by concession from them. 
 The remainder of the community is, 
 in fact, supported at their expense, 
 giving, if any equivalent, one consist- 
 ing of unproductive services. These 
 three classes, therefore, are considered 
 
 in political economy as making up the 
 whole community. 
 
 2. But although these three 
 sometimes exist as separate classes, 
 dividing the produce among them, they 
 do not necessarily or always so exist. 
 The fact is so much otherwise, that 
 there are only one or two communities 
 in which the complete separation of 
 these classes is the general rule. Eng- 
 land and Scotland, with parts of Bel- 
 gium and Holland, are almost the only 
 countries in the world where the land, 
 capital, and labour employed in agri- 
 culture, are generally the property of 
 separate owners. The ordinary case 
 is, that the same person owns either 
 two of these requisites, or all three. 
 
 The case in which the same person 
 owns all three, embraces the two ex- 
 tremes of existing society, in respect 
 to the independence and dignity of the 
 labouring class. First, when the 
 labourer himself is the proprietor. 
 This is the commonest case in the 
 Northern States of the American 
 Union ; one of the commonest in 
 France, Switzerland, the three Scan- 
 dinavian kingdoms, and parts of Ger- 
 many ;* and a common case in parts 
 
 * " The Norwegian return" (fay the 
 Commissioners of Poor Law Enquiry, to 
 whom information was furnished from nearly 
 every country in Europe and America by 
 the ambassadors and consuls there) " states 
 that at the last census in 182.5, out of a popu- 
 lation of 1,051,313 persons, there wer 59,-lfU 
 freeholders. As by 59,464 freeholders must 
 be meant 59,404 heads of families, or about 
 300,000 individuals ; the freeholders must 
 form more Uwui one-fourth of the whole popu-
 
 145 
 
 BOOK II. CHAPTER III. 3. 
 
 of Italy and in Belgium. In all these 
 comntries there are, no doubt, large 
 landed properties, and a still greater 
 number which, without being large, 
 require the occasional or constant aid 
 of hired labourers. Much, however, 
 of the land is owned in portions too 
 small to require any other labour than 
 that of the peasant and his family, or 
 fully to occupy even that. The capital 
 employed is not always that of the 
 peasant proprietor, many of these small 
 properties being mortgaged to obtain 
 the means of cultivating ; but the 
 capital is invested at the peasant's 
 risk, and though he pays interest for 
 it, it gives to no one any right of inter- 
 ference, except perhaps eventually to 
 take possession of the land, if the in- 
 terest ceases to be paid. 
 
 The other case in which the land, 
 labour, and capital, belong to the same 
 person, is the case of slave countries, 
 in which the labourers themselves are 
 owned by the landowner. Our West 
 India colonies before emancipation, and 
 the sugar colonies of the nations by 
 whom a similar act of justice is still 
 unperformed, are examples of large 
 establishments for agricultural and 
 manufacturing labour (the production 
 of sugar and rum is a combination of 
 both) in which the land, the factories 
 
 lation. Mr. Macgregor states that in Den- 
 mark (by which Zealand and the adjoining 
 islands are probably meant) out of a popula- 
 tion of 926,110, the number of landed pro- 
 prietors and fanners is 415,110, or nearly 
 one-half. In Sleswick-Holstein, out of a 
 population of 604,085, it is 196,017, or about 
 one-third. The proportion of proprietors 
 and farmers to the whole population is not 
 given in Sweden ; but the Stockholm return 
 estimates the average quantity of land an- 
 nexed to a labourer's habitation at from one 
 to five acres; and though the Gottenburg 
 return gives a lower estimate, it adds, that 
 the peasants possess much of the land. In 
 Wurtemburg we are told that more than 
 two-thirds of the labouring population are 
 the proprietors of their own habitations, 
 and that almost all own at least a garden of 
 from th? tee-quarters of an acre to an acre 
 and a half." In some of these statements, 
 proprietors and farmers are not discrimi- 
 nated ; but " all the returns concur in stating 
 the number of day-labourers to be very 
 mall." (Preface toForeign Communicationi, 
 p, xxxviii.) As the general statin of the la- 
 bouring people, the condition of a work- 
 man for hire is almost peculiar to Great 
 Britain. 
 
 (if they may be so called), tfce ma- 
 chinery, and the degraded labourers, 
 are all the property of a capitalist. In 
 this case, as well as in its extreme 
 opposite, the case of the peasant pro- 
 prietor, there is no division of the 
 produce. 
 
 3. When the three requisites are 
 not all owned by the same person, it 
 often happens that two of them are so. 
 Sometimes the same person owns the 
 capital and the land, but not the labour. 
 The landlord makes his engagement 
 directly with the labourer, and supplies 
 the whole or part of the stock neces- 
 sary for cultivation. This system is 
 the usual one in those parts of Conti- 
 nental Europe, in which the labourers 
 are neither serfs on the one hand, nor 
 proprietors on the other. It was very 
 common in France before the Revolu- 
 tion, and is still much practised in 
 some parts of that country, when the 
 land is not the property of the culti- 
 vator. It prevails generally in the 
 level districts of Italy, except those 
 principally pastoral, such as the Ma- 
 remma of Tuscany and the Campagna 
 of Rome. On this system the division 
 of the produce is between two classes, 
 the landowner and the labourer. 
 
 In other cases again the labourer 
 does not own the land, but owns the 
 little stock employed on it, the land- 
 lord not being in the habit of supplying 
 any. This system generally prevails 
 in Ireland. It is nearly universal in 
 India, and in most countries of the 
 Esst ; whether the government retains, 
 as it generally does, the ownership of 
 the soil, or allows portions to become, 
 either absolutely or in a qualified sense, 
 the property of individuals. In India, 
 however, things are so far better than 
 in Ireland, that the owner of land is 
 in the habit of making advances to 
 the cultivators, if they cannot cultivate 
 without them. For these advances 
 the native landed proprietor usually 
 demands high interest ; but the prih- 
 cipal landowner, the government, 
 makes them gratuitously, recovering 
 the advance after the harvest, together 
 with the rent. The produce is here 
 divided, as before between the sam
 
 COMPETITION AND CUSTOM. 
 
 147 
 
 two classes, ths landowner and the 
 labourer. 
 
 These are the principal variations 
 in the classification of those among 
 whom the produce of agricultural 
 labour- is distributed. In the case of 
 manufacturing industry there never 
 are more than two classes, the 
 laliniirors and the capitalists. The 
 original artisans in all countries were 
 either slaves, or the women of the 
 family. In the manufacturing esta- 
 blishments of the ancients, whether 
 on a large or on a small scale, the 
 labourers were usually the property of 
 the capitalist. In general, if any 
 manual labour was thought compatible 
 with the dignity of a freeman, it was 
 only agricultural labour. The converse 
 system, in which the capital was owned 
 by the labourer, was coeval with free 
 labour, and under it the first great ad- 
 vances of manufacturing industry were 
 achieved. The artisan owned the 
 loom or the few tools he used, and 
 
 worked on his own account; or at least 
 ended by doing so, though he usually 
 worked for another, first as apprentice 
 and next as journeyman, for a certain 
 number of years before he could be 
 admitted a master. ^But the status 
 of a permanent journeyman, all his 
 life a hired labourer and nothing more, 
 had no place in the crafts and guilds 
 of the Middle Ages. In country vil- 
 lages, where a carpenter or a black- 
 smith cannot live and support hired 
 labourers on the returns of his business, 
 he is even now his own workman ; and 
 shopkeepers in similar circumstances 
 are their own shopmen, or shopwomen. 
 But wherever the extent of the market 
 admits of it, the distinction is now 
 fully established between the class of 
 capitalists, or employers of labour, and 
 the class of .labourers ; the capitalists, 
 in general, contributing no other labour 
 than that of direction and superin- 
 tendence. 
 
 CHAPTER IV. 
 
 OF COMPETITION AND CUSTOM. 
 
 1. UNDER the rule of individual 
 property, the division of the produce 
 is the result of two determining agen- 
 cies : Competition, and Custom. It is 
 important to ascertain the amount of 
 influence which belongs to each of these 
 causes, and in what manner the opera- 
 tion of one is modified by the other. 
 
 Political economists generally, and 
 English political economists above 
 others, have been accustomed to lay 
 almost exclusive stress upon the first 
 of these agencies ; to exaggerate the 
 effect of competition, and to take into 
 little account the other and conflicting 
 principle. They are apt to express 
 themselves as if they thought that 
 competition actually does, in all cases, 
 whatever it can be shown to be the 
 tendency of competition to do. This 
 is partly intelligible, if we consider 
 that only through the principle of com- 
 
 petition has political economy any 
 pretension to the character of a science. 
 So far as rents, profits, wages, prices, 
 are determined by competition, laws 
 may be assigned for them. Assume 
 competition to be their exclusive regu- 
 lator, and principles of broad generality 
 and scientific precision may be laid 
 down, according to which they will be 
 regulated. The political economist 
 justly deems this his proper business : 
 and, as an abstract or hypothetical sci- 
 ence, political economy cannot be re- 
 quired to do, and indeed cannot do, 
 anything more. But it would be a 
 great misconception of the actual course 
 of human affairs, to suppose that com- 
 petition exercises in fact this unlimited 
 sway. I am not speaking of monopo- 
 lies, either natural or artificial, or of 
 any interferences of authority with the 
 liberty of production or exchange. 
 L 2
 
 148 
 
 ROOK II. CHAPTER IV. 2. 
 
 Such disturbing en : cs have always 
 been allowed for by p 'iitical economists. 
 I speak of cases in which there is no- 
 thing to restrain competition : no hin- 
 drance to it either in the nature of the 
 -aso or in artificial obstacles ; yet in 
 which the result is not determined by 
 competition, but by custom or usage ; 
 competition either not taking place at 
 all, or producing its effect in quite a 
 different manner from that which is 
 ordinarily assumed to be natural to it. 
 
 2. Competition, in fact, has only 
 become in any considerable degree the 
 governing principle of contracts, at a 
 comparatively modern period. The 
 farther we look back into history, the 
 more we see all transactions and en- 
 gagements under the influence of fixed 
 customs. The reason is evident. Cus- 
 tom is the most powerful protector of 
 the weak against the strong ; their sole 
 protector where there are no laws or 
 government adequate to the purpose. 
 Custom is a barrier which, even in the 
 most oppressed condition of mankind, 
 tyranny is forced in some degree to 
 respect. To the industrious population 
 in a turbulent military community, 
 freedom of competition is a vain phrase ; 
 they are never in a condition to make 
 terms for themselves by it : there is 
 always a master who throws his sword 
 into the scale, and the terms are such 
 as ho imposes. But though the law 
 of the strongest decides, it is not the 
 interest nor in general the practice of 
 the strongest to strain that law to the 
 utmost, and every relaxation of it has 
 a tendency to become a custom, and 
 every custom to become a right. IJights 
 thus originating, and not competition 
 in any shape, determine, in a rude state 
 of society, the share of the produce en- 
 joyed by those who produce it. The 
 relations, more especially, between the 
 landowner and the cultivator, and the 
 payments made by the latter to the 
 former, are, in all states of society but 
 th most modern, determined by the 
 usage of the country. Never until late 
 times have the conditions of the occu- 
 pancy of land been (as a general rule) 
 an affair of competition. The occupier 
 fcr the time has very commonly been 
 
 considered to have a right to retain 
 his holding, while he fulfils the cus- 
 tomary requirements; and has thus 
 become, in a certain sense, a co-pro- 
 prietor of the soil. Even where the 
 holder has not acquired this fixity of 
 tenure, the terms of occupation have 
 often been fixed and invariable. 
 
 In India, for example, and other 
 Asiatic communities similarly consti- 
 tuted, the ryots, or peasant-farmers, 
 are not regarded as tenants at will, 
 nor even as tenants by virtue of a lease. 
 In most villages there are indeed some 
 ryots on this precarious footing, con- 
 sisting of those, or the descendants of 
 those, who have settled in the place at 
 a known and comparatively recent 
 period: but all who are looked upon 
 as descendants or representatives of 
 the original inhabitants, and even 
 many mere tenants of ancient date, 
 are thought entitled to retain their 
 land, as long as they pay the customary 
 rents. What these customary rents 
 are, or ought to be, has indeed, in most 
 cases, become a matter of obscurity ; 
 usurpation, tyranny, and foreign con- 
 quest having to a great degree obli- 
 terated the evidences of them. But 
 when an old and purely Hindoo prin- 
 cipality falls under the dominion of the 
 British Government, or the manage- 
 ment of its officers, and when the 
 details of the revenue system come to 
 be inquired into, it is usually found 
 that though the demands of the great 
 landholder, the State, have been swelled 
 by fiscal rapacity until all limit is 
 practically lost sight of, it has yet been 
 thought necessary to have a distinct 
 name and a separate pretext for each 
 increase of exaction ; so that the de- 
 mand has sometimes come to consist 
 of thirty or forty different items, in ad- 
 dition to the nominal rent. This cir- 
 cuitous mode of increasing the pay- 
 ments assuredly would not have been 
 resorted to, if there had been an ac- 
 knowledged right in the landlord to 
 increase the rent. Its adoption is a 
 proof that there was once an effective 
 limitation, a real customary rent ; and 
 that the understood right of the ryot 
 to the land, so long as he paid rent 
 according to custom, was at some tiros
 
 COMPETITION AND CUSTOM. 
 
 149 
 
 or other more than nominal.* The 
 British Government of India always 
 simplifies the tenure by consolidating 
 the various assessments into one, thus 
 making the rent nominally as welf'as 
 really an arbitrary thing;, or at least a 
 matter of specific agreement: but it 
 scrupulously respects the right of the 
 ryot to the land, though until the re- 
 forms of the present generation (reforms 
 j\vn now only partially carried into 
 elluct) it seldom left him much more 
 lhan a bare subsistence. 
 
 In modern Europe the cultivators 
 have gradually emerged from a state 
 of personal slavery. The barbarian 
 conquerors of the Western empire 
 found that the easiest mode of ma- 
 naging their conquests would be to 
 leave the occupation of the land in the 
 hands in which they found it, and to 
 save themselves a labour so uncongenial 
 as the superintendence of troops of 
 slaves, by allowing the slaves to retainin 
 a certain degree the control of their own 
 actions, under an obligation to furnish 
 the lord with provisions and labour. 
 A common expedient was to assign to 
 the serf, for his exclusive use, as much 
 land as was thought sufficient for his 
 support, and to make him work on the 
 other lands of his lord whenever re- 
 quired. By degrees these indefinite 
 obligations were transformed into a 
 definite one, of supplying a fixed quan- 
 tity of provisions or a fixed quantity of 
 labour : and as the lords, in time, be- 
 came inclined to employ their income 
 in the purchase of luxuries rather than 
 in the maintenance of retainers, the 
 payments in kind were commuted for 
 payments in money. Each concession, 
 at first voluntary and revocable at 
 pleasure, gradually acquired the force 
 of custom, and was at last recognised 
 and enforced by the tribunals. In this 
 manner the serfs progressively rose 
 into a free tenantry, who held their 
 land in perpetuity on fixed conditions. 
 The conditions were sometimes very 
 onerous, and the people very miserable. 
 
 The ancient law books of the Hindoos 
 mention in ?ome cases one-sixth, in others 
 one-fourth of the produce, as a proper rent ; 
 but there is no evidence that the rules laid 
 down in those books were, t a-.y period of 
 history, really acted upon. 
 
 But their obligations were determined 
 by the usage or law of the country, and 
 not by competition. 
 
 Where tne cultivators had never 
 been, strictly speaking, in personal 
 bondage, or after they had ceased to 
 be so, the exigencies of a poor and little 
 advanced society gave rise to another 
 arrangement, which in some parts of 
 Europe, even highly improved parts, 
 has been found sufficiently advan- 
 tageous to be continued to the present 
 day. I speak of the metayer system. 
 Under this, the land is divided, in small 
 farms, among single families, the land- 
 lord generally supplying the stock 
 which the agricultural system of the 
 country is considered to require, and 
 receiving, in lieu of rent and profit, a 
 fixed proportion of the produce. This 
 proportion, which is generally paid in 
 kind, is usually (as is implied in the 
 words metayer, mezzaiuolo, and me- 
 dietarius,) one-half. There are places, 
 however, such as the rich volcanic soil 
 of the province of Naples, where the 
 landlord takes two-thirds, and yet the 
 cultivator by means ol an excellent 
 agriculture contrives to live. But 
 whether the proportion is two-thirds or 
 one-half, it is a fixed proportion ; not 
 variable from farm to farm, or from 
 tenant to tenant. The custom of the 
 country is the universal rule ; nobody 
 thinks of raising or lowering rents, or 
 of letting land on other than the cus- 
 tomary conditions. Competition, as a 
 regulator of rent, has no existence, 
 
 3. Prices, whenever there was 
 no monopoly, came earlier under tho 
 influence of competition, and are much 
 more universally subject to it, than 
 rents: but that influence is by no 
 means, even in the present activity of 
 mercantile competition, so absolute as 
 is sometimes assumed. There is no 
 proposition which meets us in the field 
 of political economy oftener than this 
 that there cannot be two prices in 
 the same market. Such undoubtedly 
 is the natural eflect of unimpeded com- 
 petition ; yet every one knows that 
 there are, almost always, two prices in 
 the same market. Not only are there 
 in every large town, and in almost
 
 150 
 
 uvery trade, cheap shops and dear 
 shops, but the same shop often sells 
 the same article at different prices to 
 different customers : and, as a general 
 rule, each retailer adapts his scale of 
 prices to the class of customers whom 
 he expects. The wholesale trade, in 
 the great articles of commerce, is really 
 under the dominion of competition. 
 There, the buyers as well as sellers 
 are traders or manufacturers, and their 
 purchases are not influenced by indo- 
 lence or vulgar finery, nor depend on 
 the smaller motives of personal con- 
 venience, but are business transactions. 
 In the wholesale markets therefore it 
 is true as a general proposition, that 
 there are not two prices at one time 
 for the same thing : there is at each 
 time and place a market price, which 
 can be quoted in a price-current. But 
 re tail price, the price paid by the actual 
 consumer, seems to feel very slowly and 
 imperfectly the effect of Competition ; 
 and when competition does exist, it 
 often, instead of lowering prices, merely 
 divides the gains of the high price 
 among a greater number of dealers. 
 Hence it is that, of the price paid by 
 the consumer, so large a proportion is 
 absorbed by the gains of retailers ; and 
 any one who inquires into the amount 
 Which reaches the hands of those who 
 made the things he buys, will often be 
 astonished at its smallness. When 
 indeed the market, being that of a 
 great city, holds out a sufficient induce- 
 ment to large capitalists to engage in 
 retail operations, it is generally found 
 a better speculation to attract a large 
 business by underselling others, than 
 merely to divide the field of employ- 
 ment with them. This influence of 
 competition is making itself felt more 
 .and more through the principal 
 branches of retail trade in the large 
 towns ; and the rapidity and cheapness 
 of transport, by making consumers 
 less dependent on the dealers in their 
 immediate neighbourhood, are tending 
 to assimilate more and more the whole 
 country to a large town ; but hitherto 
 it is only in the gi eat centres of business 
 that retail transactions have been 
 chiefly, or even much, determined by 
 competition. Elsewhere it rather acts, 
 
 BOOK II. CHAPTER IV. 3. 
 
 when it acts at all, as an occasional 
 disturbing influence ; the habitual re- 
 gulator is Custom, modified from time 
 to time by notions existing in the 
 minds of purchasers and sellers, of 
 some kind of equity or justice. 
 
 In many trades the terms on which 
 business is done are a matter of posi- 
 tive arrangement among the trade, 
 who use the means they always pos- 
 sess of making the situation of any 
 member of the body who departs from 
 its fixed customs, inconvenient or dis- 
 agreeable. It is well known that the 
 bookselling trade was, until lately, one 
 of these, and that notwithstanding the 
 active spirit of rivalry in the trade, 
 competition did not produce its natural 
 effect in breaking down the trade rules. 
 All professional remuneration is regu- 
 lated by custom. The fees of physi- 
 cians, surgeons, and barristers, the 
 charges of attorneys, are nearly inva- 
 riable. Not certainly for want of 
 abundant competition in those profes- 
 sions, but because the competition ope- 
 rates by diminishing each competitor's 
 chance of fees, not by lowering the fees 
 themselves. 
 
 Since custom stands its ground 
 against competition to so considerable 
 an extent, even where, from the multi- 
 tude of competitors and the general 
 energy in the pursuit of gain, the spirit 
 of competition is strongest, we may bo 
 sure that this is much more the case 
 where people are content with smaller 
 gains, and estimate their pecuniary 
 interest at a lower rate when balanced 
 against their ease or their pleasure. 
 I believe it will often be found, in Con- 
 tinental Europe, that pricesand charges, 
 of some or of all sorts, are much higher 
 in some places than in others not far 
 distant, without its being possible to 
 assign any other cause than that it has 
 always been so : the customers are 
 used to it, and acquiesce in it. An 
 enterprising competitor, with sufficient 
 capital, might force down the charges, 
 and make his fortune during the pro- 
 cess ; but there are no enterprising 
 competitors ; those who have capital 
 prefer to leave it where it is, or to 
 make less profit by it in a more quiet 
 way.
 
 SLAVERY. 
 
 151 
 
 These observations must be r 
 as a general correction, to be applied 
 whenever relevant, whether expressly 
 mentioned or not, to the conclusions 
 contained in the subsequent portions 
 of this Treatise. Our reasonings must, 
 in general, proceed as if the known 
 Hiid natural effects of competition were 
 sctually produced by it, in all cases in 
 which it is not restrained by some 
 positive obstacle. Where competition, 
 though free to exist, does not exist, or 
 where it exists, but has its natural 
 consequences overruled by any other 
 agency, the conclusions will fail more 
 or less of being applicable. To escape 
 
 error, we aught, in applying tho con- 
 clusions of political economy to tha 
 actual affairs of life, to consider not 
 only what will happen supposing the 
 maximum of competition, but how far 
 the result will be affected if competi 
 tion falls short of the maximum. 
 
 The states of economical relation 
 which stand first in order, to bo dis- 
 cussed and appreciated, are those in 
 which competition has no part, the 
 arbiter of transactions being either 
 brute force or established usage. These 
 will be the subject of the next four 
 chapters. 
 
 CHAPTER V. 
 
 OP SLAVERY. 
 
 1. AMONG the forms which so- 
 ciety assumes under the influence of 
 the institution of property, there are, 
 as I have already remarked, two, 
 otherwise of a widely dissimilar cha- 
 racter, but resembling in this, that the 
 ownership of the land, tho labour, and 
 the capital, is in the same hands. One 
 of these cases is that of slavery, the 
 other is that of peasant proprietors. 
 In the one, the landowner owns the 
 labour, in the other the labourer owns 
 the land. We begin with the first. 
 
 In this system all the produce be- 
 longs to the landlord. The food and 
 other necessaries of his labourers are 
 part of his expenses. The labourers 
 possess nothing but what he thinks fit 
 to give them, and until he thinks fit to 
 take it back : and they work as hard 
 as he chooses, or is able, to compel 
 them. Their wretchedness is only 
 limited by his humanity, or his pecu- 
 niary interest. With the first conside- 
 ration, we have on the present occa- 
 sion nothing to do. What the second 
 in so detestable a constitution of so- 
 ciety may dictate, depends on the 
 facilities for importing fresh slaves. 
 If full-grown able-bodied slaves can be 
 procured in sufficient numbers, aad 
 
 imported at a moderate expense, self- 
 interest will recommend working the 
 slaves to death, and replacing them 
 by importation, in preference to the 
 slow and expensive process of breeding 
 them. Nor are the slave-owners gene- 
 rally backward in learning this lesson. 
 It is notorious that such was the prac- 
 tice in our slave colonies, while the 
 slave trade was legal; and it is said 
 to be so still in Cuba. 
 
 When, as among the ancients, the 
 slave-market could only be supplied 
 by captives either taken in war, or 
 kidnapped from thinly scattered tribes 
 on the remote confines of the known 
 world, it was generally more profitable 
 to keep up the number by breeding, 
 which necessitates a far better treat- 
 ment of them ; and for this reason, 
 joined with several others, the condi- 
 tion of slaves, notwithstanding occa- 
 sional enormities, was probably much 
 less bad in the ancient world than in 
 the colonies of modern nations. The 
 Helots are usually cited as the type of 
 the most hideous form of persona) 
 slavery, but with how little truth, ap. 
 pears from the fact that they were re- 
 gularly armed (though not with the 
 panoply of the hoplite) and formed an
 
 152 BOOK II. 
 
 integral part of the military strength 
 of the State. They were doubtless an 
 inferior and degraded caste, but their 
 slavery seems to have been one of the 
 least onerous varieties of serfdom. 
 Slavery appears in far more frightful 
 colours among the Romans, during the 
 period in which the Roman aristocracy 
 was gorging itself with the plunder of 
 a newly conquered world. The Romans 
 were a cruel people, and the worthless 
 nobles sported with the lives of their 
 myriads of slaves with the same reck- 
 less prodigality with which they squan 
 
 clered any other part of their ill-ac- 
 quired possessions. Yet, slavery is 
 divested of one of its worst features 
 when it is compatible with hope : en- 
 franchisement was easy and common : 
 enfranchised slaves obtained at once 
 the full rights of citizens, and instances 
 were frequent cf their acquiring not 
 only riches, but latterly even honours. 
 By the progress of milder legislation 
 under the Emperors, much of the pro- 
 tection of law was thrown round the 
 slave, he became capable of possessing 
 property, and the evil altogether as- 
 sumed a considerably gentler aspect. 
 Until, however, slavery assumes the 
 mitigated form of villenage, in which 
 not only the slaves have property and 
 legal rights, but their obligations are 
 more or less limited by usage, and 
 they partly labour for their own bene- 
 fit ; tneir condition is seldom such as 
 to produce a rapid growth either of 
 population or of production. 
 
 2. So long as slave countries are 
 nnderpeopled in proportion to their 
 cultivable land, the labour of the 
 slaves, under any tolerable manage- 
 ment, produces much more than is 
 eufficicnt for their support ; especially 
 as the great amount of superintendence 
 which their labour requires, preventing 
 the dispersion of the population, en- 
 sures some of the advantages of com- 
 bined labour. Hence, in a good soil 
 and climate, and with reasonable care 
 of his own interests, the owner of many 
 slaves has the means of being rich. 
 The influence, however, of such a state 
 of society on production, is perfectly 
 well understood. It is a truism to 
 
 CHAPTER V. 2. 
 
 assert, that labour extorted by fear ofr 
 punishment is inefficient and unpro- 
 ductive. It is true that in some cir- 
 cumstances, human beings can be 
 driven by the lash to attempt, and 
 even to accomplish, things which they 
 would not have undertaken for any 
 payment which it could have been 
 worth while to an employer to ofl'cr 
 them. And it is likely that productive 
 operations which require much com- 
 bination of labour, the production of 
 sugar for example, would not have 
 taken place so soon in the American 
 
 colonies, if slavery had not existed tc 
 keep masses of labour together. Then 
 are also savage tribes so averse from 
 regular industry, that industrial life is 
 scarcely able to introduce itself among 
 them until they are either conquered 
 and made slaves of, or become con- 
 querors and make others so. But 
 after allowing the full value of these 
 considerations, it remains certain that 
 slavery is incompatible with any high 
 state of the arts of life, and any great 
 efficiency of labour. For all products 
 which require much skill, slave coun- 
 tries are usually dependent on fo- 
 reigners. Hopeless slavery effectu- 
 ally brutifies the intellect ; and intel- 
 ligence in the slaves, though often 
 encouraged in the ancient world and 
 in the East, is in a more advanced 
 state of society a source of so much 
 danger and an object of so much dread 
 to the masters, that in some of the 
 States of America it is a highly penal 
 offence to teach a slave to read. All 
 processes carried on by slave labour 
 are conducted in the rudest and most 
 unimproved manner. And even the 
 animal strength of the slave is, on an 
 average, not half exerted. The unpro- 
 ductiveness and wastefulness of the in- 
 dustrial system in the Slave States is 
 instructively displayed in the valuable 
 writings of Mr. Olmsted. The mikk-st 
 form of slavery is certainly the condi- 
 tion of the serf, who is attached to the 
 soil, supports himself from his allot- 
 ment, and works a certain number of 
 days in the week for his lord. Yet 
 there is but one opinion on the ex- 
 treme inefficiency of serf labour. The 
 following passage is from Professor
 
 SLAVERY. 
 
 153 
 
 oones,* whose Essay on the Distribu- 
 tion of Wealth (or rather on Rent), is 
 a copious repertory of valuable facts 
 on the landed tenures of different 
 countries. 
 
 " The Russians, or rather those 
 German writers who have observed 
 the manners and habits of Russia, state 
 some strong facts on this point. Two 
 ^Middlesex mowers, they say, will mow 
 in a day as much grass as six Russian 
 serfs, and in spite of the clearness of pro- 
 visions in England and their cheapness 
 in Russia, the mowing a quantity of 
 bay which would cost an English 
 farmer half a copeck, will cost a Hus- 
 sion proprietor three or four copecks.f 
 The Prussian counsellor of state, Jacob, 
 is considered to have proved, that in 
 Russia, where everything is cheap, the 
 labour of a serf is doubly as expensive 
 as that of a labourer in England. M. 
 Schmalz gives a startling account of 
 the unproductiveness of serf labour in 
 Prussia, from his own knowledge and 
 observation.! In Austria, it is dis- 
 tinctly stated, that the labour of a serf 
 is equal to only one-third of that of a 
 free hired labourer. This calculation, 
 made in an able work on agriculture 
 (with some extracts from which I have 
 been favoured), is applied to the prac- 
 tical purpose of deciding on the 
 number of labourers necessary to cul- 
 tivate an estate of a given magnitude. 
 So palpable, indeed, are the ill effects 
 of labour rents on the industry of the 
 agricultural population, that in Austria 
 itself, where proposals of changes of 
 any kind do not readily make their 
 way, schemes and plans for the com- 
 mutation of labour rents are as popular 
 as in the more stirring German pro- 
 vinces of the North. " 
 
 What is wanting in the quality of 
 the labour itself, is not made up by 
 any excellence in the direction and 
 
 * Etiay on the D'utribuiion of Wealth and 
 on the Sources cf Taxation. By the Rev. 
 Richard Jones. Page 50. 
 
 t " Schmalz. Economie Politique, French 
 translation, vol. i. p. G6." 
 
 J Vol. ii. p. 107. 
 
 The Hungarian revolutionary govern- 
 ment, during its brief existence, bestowed on 
 that country one of the greatest benefits it 
 could receive, and one which the tyranny 
 that succeeded has not dared to take away : 
 
 superintendence. As the same writer* 
 remarks, the landed proprietors " are 
 necessarily, in their character of cul- 
 tivators of their own domains, the 
 only guides and directors of the in- 
 dustry of the agricultural population," 
 since there can bo no intermediate 
 class of capitalist fanners where the 
 labourers are the property of the lord. 
 Great landowners are everywhere an 
 idle class, or if they labour at all, addict 
 themselves only to tho more exciting 
 kinds of exertion ; that lion's share 
 which superiors always reserve for 
 themselves. " It would," as Mr. Jones 
 observes, "be hopeless and irrational 
 to expect, that a race of noble pro- 
 prietors, fenced round with privileges 
 and dignity, and attracted to military 
 and political pursuits by the advan- 
 tages and habits of their station, should 
 ever become attentive cultivators as a 
 body." Even in England, if the cul- 
 tivation of every estate depended upon 
 its proprietor, any one can judge what 
 would be the result. There would be 
 a few cases of great science and energy, 
 and numerous individual instances of 
 moderate success, but the general state 
 of agriculture would be contemptible. 
 
 3. Whether the proprietors them- 
 selves would lose by the emancipation 
 of their slaves, is a different question 
 from the comparative effectiveness of 
 free and slave labour to the community. 
 There has been much discussion of 
 this question as an abstract thesis ; as 
 if it could possibly admit of any uni- 
 versal solution. Whether slavery or 
 free labour is most profitable to the 
 employer, depends on the wages of tha 
 free labourer. These, again, depend 
 on the numbers of the labouring popu- 
 lation, compared with the capital and 
 the land. Hired labour is generally 
 so much more efficient than slave 
 labour, that the employer can pay a 
 considerably greater value in wages, 
 than the maintenance of his slaves 
 cost him before, and yet be a gainer 
 
 it freed the peasantry from what remained 
 of the bondage of serfdom, the labour rents ; 
 decreeing compensation to the landlords at 
 the expense of the state, and not at that of 
 the liberated peasants. 
 
 * Jones, pp. 53, 54,
 
 154 
 
 BOOK II. CHAPTER V. 9. 
 
 uy the change : but he cannot do this 
 without limit. The decline of serfdom 
 in Europe, and its extinction in the 
 Western nations, were doubtless has- 
 tened by the changes which the growth 
 f population must have made in the 
 pecuniary interests of the master. As 
 population pressed harder upon the 
 land, without any improvement in 
 agriculture, the maintenance of the 
 serfs necessarily became more costly, 
 md their labour less valuable. With 
 the rate of wages such as it is in Ire- 
 land, or in England (where, in propor- 
 tion to its efficiency, labour is quite as 
 cheap as in Ireland), no one can for a 
 moment imagine that slavery could 
 be profitable. If the Irish peasantry 
 were slaves, their masters would be as 
 willing, as their landlords now are, to 
 pay large sums merely to get rid of 
 them. In the rich and underpeopled 
 soil of the West India islands, there is 
 just as little doubt that the balance of 
 profits between free and slave labour 
 was greatly on the side of slavery, and 
 that the compensation granted to the 
 slaveowners for its abolition was not 
 more, perhaps even less, than an equi- 
 valent for their loss. 
 
 More needs not be said here on a 
 cause so completely judged and decided 
 as that of slavery. Its demerits are 
 no longer a question requiring argu- 
 ment ; though the temper of mind 
 manifested by the larger part of the 
 influential classes in Great Britain 
 respecting the struggle now taking 
 place in America, shows how grievously 
 the feelings of the present generation 
 of Englishmen, on this subject, have 
 fallen behind the positive acts of the 
 generation which preceded them. That 
 \ae sons of the deliverers of the West 
 
 Indian Negroes should see with com- 
 placency, and encourage by their sym- 
 pathies, the foundation of a great and 
 powerful military commonwealth, 
 pledged by its principles and driven 
 by its strongest interests to be the 
 armed propagator of slavery through 
 every region of the earth into which its 
 power can penetrate, discloses a men- 
 tal state in the leading portion of our 
 higher and middle classes, which it is 
 melancholy to see, and will be a lasting 
 blot in English history. Fortunately 
 they have stopped short of actually 
 aiding, otherwise than by words, the 
 nefaiious enterprise to which they have 
 not been ashamed of wishing success ; 
 and it is now probable that at the ex- 
 pense of the best blood of the Free 
 States, but to their immeasurable ele- 
 vation in mental and moral worth, the 
 curse of slavery will be cast out from 
 the great American republic, to find its 
 last temporary refuge in Brazil and 
 Cuba. No European country, except 
 Spain alone, any longer participates in 
 the enormity. Even serfage has now 
 ceased to have a legal existence in 
 Europe : Denmark has the honour of 
 being the first Continental nation which 
 imitated England in liberating its co- 
 lonial slaves ; and the abolition of 
 slavery was one of the earliest acts of 
 the heroic and calumniated Provisional 
 Government of France. The Dutch 
 Government was not long behind, and 
 its colonies and dependencies are now, 
 I believe, without exception, free from 
 actual slavery : though forced labour 
 for the public authorities is still a re- 
 cognised institution in Java, soon, wa 
 may hope, to be exchanged for complete 
 personal freedom.
 
 PEASANT PROPRIETORS. 
 
 155 
 
 CHAPTER VL 
 
 OF PEASANT FP.'H'UIETOBS. 
 
 1. IN the regime of peasant pro- 
 perties, as in that of slavery, the whole 
 I.P dace belongs to a single owner, and 
 tho distinction of rent, profit;*, and 
 wages, does not exist. In all other 
 respects, the two states of society are 
 the extreme opposites of each other. 
 The one is the state of greatest oppres- 
 sion and degradation to the labouring 
 class. The other is that in which they 
 are the most uncontrolled arbiters of 
 their own lot. 
 
 The advantage, however, of small 
 properties in land, is one of the most 
 disputed questions in the range of poli- 
 tical economy. On the Continent, 
 though there are some dissentients 
 from the prevailing opinion, the benefit 
 of having a numerous proprietary po- 
 pulation exists in the minds of most 
 people in the form of an axiom. But 
 English authorities are either unaware 
 of the judgment of Continental agricul- 
 turists, or are content to put it aside, 
 on the plea of their having no experi- 
 ence of large properties in favourable 
 circumstances : the advantage of large 
 properties being only felt where there 
 are also large farms ; and as this, in 
 arable districts, implies a greater accu- 
 mulation of capital than usually exists 
 on the Continent, the great Continental 
 estates, except in the case of grazing 
 farms, are mostly let out for cultivation 
 in small portions. There is some truth 
 in this ; but the argument admits of 
 being retorted ; for if the Continent 
 tnows little, by experience, of cultiva- 
 tion on a large scale and by large capi- 
 tal, the generality of English writers 
 are no better acquainted practically 
 with peasant proprietors, and have al- 
 most always the most erroneous ideas 
 of their social condition and mode of 
 life. Yet the old traditions even of 
 England are on the same side with the 
 general opinion of the Continent. The 
 " yeomanry" who were vaunted as the 
 glory of England while they existed, 
 
 and have been so much mourned over 
 since they disappeared, were either 
 small proprietors or small farmers, and 
 if they were mostly the last, the cha- 
 racter they bore for sturdy indepen- 
 dence is the more noticeable. Thero 
 is a part of England, unfortunately a 
 very small part, where peasant proprie 
 tors are s4ill common ; for such are the 
 " statesmen" of Cumberland and West- 
 moreland, though they pay, I believe, 
 generally if not universally, certain 
 customary dues, which, being fixed, no 
 more affect their character of proprie- 
 tors than the laud-tax does. There io 
 but one voice, among those acquainted 
 with the country, on the admirable ef- 
 fects of this tenure of land in those 
 counties. No other agricultural popu- 
 lation in England could have furnished 
 the originals of Wordsworth's pea- 
 santry.* 
 
 * In Mr. Wordsworth'g little descriptive 
 work on the scenery of the Lakes, he speaks 
 of the upper part of the dales as having been 
 for centuries " a perfect republic of shep- 
 herds and agriculturists, proprietors, for the 
 most part, of the lands which they occupied 
 and cultivated. The plough of each man 
 was confined to the maintenance of his own 
 family, or to the occasional accommodation 
 of his neighbour. Two or three cows fur- 
 nished each family with milk and cheese. 
 The chapel was the only edifice that pre- 
 sided over these dwellings, the supreme head 
 of this pure commonwealth ; the members 
 of which existed in the midst of a powerful 
 empire, like an ideal society, or an organized 
 community, whose constitution had been 
 imposed and regulated by the mountains 
 which protected it. Neither high-born 
 nobleman, knight, nor esquire was here; 
 but many of these humble sons of the hills 
 had a consciousness that the land which 
 they walked over and tilled had for more 
 than five hundred years been possessed by 
 men of their name and blood. . . . Corn 
 was grown in these vales sufficient upon 
 each estate to furnish bread for each family, 
 no more. The storms and moisture of the 
 climate induced them to sprinkle their up- 
 land property with outhouses of native stone, 
 as places of shelter for their sheep, where, 
 in tempestuous weather, food was distributed 
 to them. Every family spun from its own 
 flock the wool with whicn it was clothed ; a
 
 BOOK n. CHAFPER VI. 2. 
 
 The general system, however, of 
 English cultivation, affording no expe- 
 rience to render the nature and opera- 
 tion of peasant properties familiar, and 
 Englishmen being in general profoundly 
 ignorant of the agricultural economy of 
 other countries, the very idea of pea- 
 sant proprietors is strange to the Eng- 
 lish mind, and does not easily find 
 access to it. Even the forms of lan- 
 guage stand in the way: the familiar 
 designation for owners of land being 
 "landlords," a term to which " tenants" 
 is always understood as a correlative. 
 When, at the time of the famine, the 
 suggestion of peasant properties as a 
 means of Irish improvement found its 
 way into parliamentary and newspaper 
 discussions, there were writers of pre- 
 tension to whom the word "proprietor" 
 was so far from conveying any distinct 
 idea, that they mistook the small hold- 
 ings of Irish cottier tenants for peasant 
 properties. The subject being so little 
 understood, I think it important, before 
 entering into the theory of it, to do 
 something towards showing how the 
 case stands as to matter of fact ; by 
 exhibiting, at greater length than 
 would otherwise be admissible, some of 
 the testimony which exists respecting 
 the state of cultivation, and the com- 
 fort and happiness of the cultivators, in 
 those countries and parts of countries, 
 in which the greater part of the land 
 has neither landlord nor farmer, other 
 than the labourer who tills the soil. 
 
 2. I lay no stress on the condi- 
 tion of North America, where, as is 
 well known, the land, wherever free 
 from the curse of slavery, is almost 
 universally owned by the same person 
 who holds the plough. A country 
 combining the natural fertility of 
 America with the knowledge and arts 
 
 weaver was here and there found among 
 them, and the rest of their wants was sup- 
 plied by the produce of the yarn, which they 
 larded and spun in their own houses, and 
 rarried to market either under their arms, 
 or more frequently on pack horses, a small 
 train taking their way weekly down the 
 ralley, or over the mountains, to the most 
 commodious town." A Detcription of the 
 Scenery of the Lake in the A'orth of England, 
 3rd edit, pp 50 to 53 and 63 to 65. 
 
 of modern Europe, is so peculiarly 
 circumstanced, that scarcely anything, 
 except insecurity of property or a ty- 
 rannical government, could materially 
 impair the prosperity of the industrious 
 classes. I might, with Sismondi, in- 
 sist more strongly on the case of an- 
 cient Italy, i especially Latiuin, that 
 Campagna which then swarmed with 
 inhabitants in the very regions which 
 under a contrary regime have become 
 uninhabitable from malaria. But I 
 prefer taking the evidence of the same 
 writer on things known to him by per- 
 sonal observation. 
 
 " It is especially Switzerland," says 
 M. de Sismondi, " which should be tra- 
 versed and studied to judge of the 
 happiness of peasant proprietors. It 
 is from Switzerland we learn that 
 agriculture practised by the very per- 
 sons who enjoy its fruits, suffices to 
 procure great comfort for a very nu- 
 merous population ; a great indepen- 
 dence of character, arising from inde- 
 pendence of position ; a great com- 
 merce of consumption, the result of the 
 easy circumstances of all the inhabi- 
 tants, even in a country whose climate is 
 rude, whose soil is but moderately fer- 
 tile, and where late frosts and incon- 
 stancy of seasons often blight the hopes 
 of the cultivator. It is impossible to 
 see without admiration those timber 
 houses of the poorest peasant, so vast, 
 so well closed in, so covered with 
 carvings. In the interior, spacious 
 corridors separate the different cham- 
 bers of the numerous family ; each 
 chamber has but one bed, which ia 
 abundantly furnished with curtains, 
 bedclothes, and the whitest linen ; 
 carefully kept furniture surrounds it ; 
 the wardrobes are filled with linen ; the 
 daily is vast, well aired, and of exqui- 
 site cleanness ; under the same roof 
 is a great provision of corn, salt meat, 
 cheese and wood; in the cow-honses 
 are the finest and most carefully tended 
 cattle in Europe ; the garden is planted 
 with flowers, both men and women 
 are cleanly and warmly clad, the wo- 
 men preserve with pride their ancient 
 costume ; all carry in their faces the 
 impress of health and strength. Let 
 other nations boast of their opulence,
 
 PEASANT PROPRIETORS. 
 
 197 
 
 Switzerland may always point with 
 pride to her peasants."* 
 
 The same eminent writer thus ex- 
 presses his opinions on peasant pro- 
 prietorship in general. 
 
 " Wherever we find peasant proprie- 
 tors, we also find the comfort, security, 
 confidence in the future, and indepen- 
 dence, which assure at once happiness 
 and virtue. The peasant who with 
 his children dues all the work of his 
 little inheritance, who pars no rent to 
 any one above him, nor wages to any 
 one below, who regulates his produc- 
 tion by his consumption, who eats his 
 own corn, drinks his own wine, is 
 clothed in his own hemp and wool, 
 cares little for the prices of the mar- 
 ket ; for he has little to sell and little 
 to buy, and is never ruined by revul- 
 sions of trade. Instead of fearing for 
 the future, he sees it in the colours of 
 hope ; for he employs every moment 
 not required by the labours of the year, 
 on something profitable to his chil- 
 dren and to future generations. A 
 few minutes' work suffices him to 
 plant the seed which in a hundred 
 years will be a large tree, to dig the 
 channel which will conduct to him a 
 spring of fresh water, to improve by 
 cares often repeated, but stolen from 
 odd times, all the species of animals 
 and vegetables which surround him. His 
 little patrimony is a true savings bank, 
 always ready to receive all his little 
 gains and utilize all his moments of 
 leisure. The ever-acting power of na- 
 ture returns them a hundred-fold. The 
 peasant has a lively sense of the hap- 
 piness attached to the condition of a 
 proprietor. Accordingly he is always 
 eager to buy land at any price. He 
 pays more for it than its value, more 
 perhaps than it will bring him in ; but 
 is he not right in estimating highly 
 the advantage of having always an 
 advantageous investment for his labour, 
 without underbidding in the wages- 
 market of being always able to find 
 bread, without the necessity of buying 
 it at a scarcity price ? 
 
 " The peasant proprietor is of all 
 cultivators the one who gets most from 
 the soil, for he is the one who thinks 
 * Studiet in folitical Economy. Essay III. 
 
 most of the future, and who has been 
 most instructed by experience. He ia 
 also the one who employs the human 
 powers to most advantage, because 
 dividing his occupations among all the 
 members of his family, he reserves 
 some for every day of the year, so that 
 nobody is ever out of work. Of all 
 cultivators he is the happiest, and at 
 the same time the land nowhere occu- 
 pies, and feeds amply without becom- 
 ing exhausted, so many inhabitants as 
 where they are proprietors. Finally, 
 of all cultivators the peasant proprietor 
 is the one who gives most encourage- 
 ment to commerce and manufactures, 
 because he is the richest."* 
 
 This picture of unwearied assiduity, 
 and what may be called affectionate 
 interest in the land, is borne out in 
 regard to the more intelligent Cantons 
 of Switzerland by English observers. 
 "In walking anywhere in the neigh- 
 bourhood of Zurich,'' says Mr. Inglis, 
 " in looking to the right or to the left, 
 one is struck with the extraordinary 
 industry of the inhabitants ; and if wo 
 learn that a proprietor here has a re. 
 turn of ten per cent, we are inclined 
 to say, ' ho deserves it.' I speak at 
 present of country labour, though I 
 
 * And in another work (JVew Principlei of 
 Folitical Economy, book iii. chap. 3) he says, 
 " When we traverse nearly the whole of 
 Switzerland, and several provinces of France, 
 Italy, and Germany, we need never ask, in 
 looking at any piece of land, if it belongs to 
 a peasant proprietor or to a farmer. The. 
 intelligent care, the enjoyments provided 
 for the labourer, the adornment which the 
 country has received from hU hands, are 
 clear indications of the former. It is true 
 an oppressive government may destroy the 
 comfort and brutify the intelligence which 
 should be the result of property; taxation 
 may abstract the best produce of the fields, 
 the insolence of government officers maj 
 disturb the security of the peasant, the im- 
 possibility of obtaining justice against a 
 powerful neighbour may sow discourage- 
 ment in his mind, and in the fine country 
 which has been given back to the adminis- 
 tration of the King of Sardinia, the pro- 
 prirtor, equally with the day-labourer, wears 
 th. livery of indigence." He was here 
 speaking of Savoy, where the peasants were 
 generally proprietors, and, according to au- 
 thentic accounts, extremely miserable. But, 
 as M. de Sismondi continues, " it is in vain 
 to observe only one of the rules of political 
 economy ; it cannot by itself suffice to pro. 
 duce good ; but at least it diminishes evil."
 
 BOOK II. CHAPTER VI. 2. 
 
 believe that in every kind of trade 
 also, the people of Zurich are remark- 
 able for their assiduity ; but in the 
 industry they show in the cultivation 
 f their land I may safely say they are 
 unrivalled. When I used to open my 
 casement between four and five in the 
 morning to look out upon the lake 
 and the distant Alps, I saw the 
 labourer in the fields ; and when I re- 
 turned from an evening walk, long 
 after sunset, as late, perhaps, as half- 
 past eight, there was the labourer, 
 mowing his grass, or tying up his 
 vines. ... It is impossible to look at 
 a field, a garden, a nedging, scarcely 
 even a tree, a flower, or a vegetable, 
 without perceiving proofs of the ex- 
 treme care and industry that are be- 
 stowed upon the cultivation of the soil. 
 If, for example, a path leads through 
 or by the side of a field of grain, the 
 corn is not, as in England, permitted 
 to hang over the' path, exposed to be 
 pulled or trodden down by every passer- 
 by; it is everywhere bounded by a 
 fence, stakes are placed at intervals of 
 about a yard, and, about two or three 
 feet from the ground, boughs of trees 
 are passed longitudinally along. If 
 you look into a field towards even- 
 ing, where there are large beds of 
 cauliflower or cabbage, you will find 
 that every single plant has been 
 watered. In the gardens, which around 
 Zurich are extremely large, the most 
 punctilious care is evinced in every 
 production that grows. The vege- 
 tables are planted with seemingly 
 mathematical accuracy ; not a single 
 weed is to be seen, not a single 
 stone. Plants are not earthed up as 
 with us, but are planted in a small 
 hollow, into each of which a little 
 manure is put, and each plant is 
 watered daily. Where seeds are sown, 
 the earth directly above is broken into 
 the finest powder ; every shrub, every 
 flower is tied to a stake, and where 
 there is wall-fruit, a trellice is erected 
 against the wall, to which the boughs 
 arc fastened, and there is not a single 
 thing that has not its appropriate rest- 
 ing place."* 
 
 * Stdtzerland, tJit South of France, and the 
 Pyrenet* in 1830. By H. D.Inglls. Vol. i. ch. 2. 
 
 Of one of the remote valleys of the 
 High Alps the same writer thus ex- 
 presses himself:* 
 
 " In the whole of the Engadine the 
 land belongs to the peasantry, who, 
 like the inhabitants of every other 
 place where this state of things exist, 
 vary greatly in the extent of their pos- 
 sessions. . . . Generally speaking, an 
 Engadine peasant lives entirely upon 
 the produce of his land, with the ex- 
 ception of the few articles of foreign 
 growth required in his family, such as 
 coffee, sugar, and wine. Flax is grown, 
 prepared, spun, and woven, without 
 ever leaving his house. He has alsr. 
 his own wool, which is converted into 
 a blue coat without passing through 
 the hands of either the dyer or the 
 tailor. The country is incapable of 
 greater cultivation than it has received. 
 All has been done for it that industry 
 and an extreme love of gain can de- 
 vise. There is not a foot of waste 
 land in the Engadine, the lowest part 
 of which is not much lower than the 
 top of Snowdon. Wherever grass will 
 grow, there it is ; wherever a rock will 
 bear a blade, verdure is seen upon it ; 
 wherever an ear of 3 rye will ripen, 
 there it is to be found. Barley and 
 oats have also their appropriate spots ; 
 and wherever it is possible to ripen a 
 little patch of wheat, the cultivation of 
 it is attempted. In no country in 
 Europe will be found so few poor as 
 in the Engadine. In the village of 
 Suss, which contains about six hun- 
 dred inhabitants, there is not a single 
 individual who has not wherewithal to 
 live comfortably, not a single indi- 
 vidual who is indebted to others for one 
 morsel that he eats." 
 
 Notwithstanding the general prospe- 
 rity of the Swiss peasantry, this total 
 absence of pauperism, and (it may al- 
 most be said) of poverty, cannot be 
 predicated of the whole country; the 
 largest and richest canton, that of 
 Berne, being an example of the con 
 trary ; for although, in the parts of it 
 which are occupied by peasant prtv 
 prietors, their industry is as remark- 
 able and their ease and comfort as con- 
 spicuous as elsewhere, the canton il 
 * Ibid. cb. 8 and 10.
 
 PEASANT PROPRIETORS. 
 
 159 
 
 btirthened with a numerous pauper 
 population, through the operation of 
 the worst regulated system of poor-law 
 administration in Europe, except that 
 of England before the new Poor Law.* 
 Nor is Switzerland in some other re- 
 spects a favourable example of all that 
 peasant properties might effect. There 
 exists a series of statistical accounts 
 of the Swiss cantons, drawn up mostly 
 with great care and intelligence, con- 
 taining detailed information, of tole- 
 rably recent date, respecting the con- 
 dition of the land and of the people. 
 From these, the subdivision appears 
 to be often so minute, that it can 
 hardly be supposed not to be excessive : 
 and the indebtedness of the proprietors 
 in the flourishing canton of Zurich 
 "borders,' 1 as the writer expresses it, 
 "on the incredible;" so that "only 
 the intensest industry, frugality, tem- 
 perance, and complete freedom of com- 
 merce enable them to stand their 
 ground. ''f Yet the general conclusion 
 deducible from these books is that since 
 the beginning of the century, and con- 
 currently with the subdivision of many 
 great estates whieh belonged to nobles 
 or to the cantonal governments, there 
 has been a striking and rapid improve- 
 ment in almost every department of 
 agriculture, as well as in the houses, 
 the habits, and the food of the people. 
 The writer of the account of Thiirgau 
 goes so far as to say, that since the 
 
 * There have been considerable changes 
 in the Poor Law administration and legisla- 
 tion of the Canton of Berne since the sen- 
 tence in the text was written. But I am 
 not sufficiently acquainted with the nature 
 ando peration of these changes, to speak more 
 particularly of them here. 
 
 t Historical, Geographical, and Statistical 
 Picture qf Switzerland. 1'art I. Canton of 
 Zurich. By Gerold Meyer Von Knonau, 
 1S34, pp. 80-1 . There are villages in Zurich, 
 he adds, in which there is not a single pro- 
 perty unmortgaged. It does not, however, 
 follow that each individual proprietor is 
 deeply involved because the aggregate mass 
 of incumbrances is large. In the Canton of 
 Schaffhausen, for instance, it is stated that 
 the landed properties are almost all mort- 
 gaged, but rarely for more than one-half 
 their registered value (Part XIL Canton 
 ffSdiaffhautfn, by Edward Im-Thurn, 1840, 
 p. 52), and the mortgages are often for the 
 improvement and enlargement of the estate. 
 (Part XVII. Canton of Thiirgau, by J. A. 
 Pupikofer, 1837, p. 209.) 
 
 subdivision of tha feudal estates into 
 peasant properties, it is not uncommon 
 for a third or a fourth part of an estate 
 to produce as much grain, and support 
 as many head of cattle, as the whole 
 estate did before.* 
 
 3. One of the countries in which 
 peasant proprietors are of oldest date, 
 and most numerous in proportion to 
 the population, is Norway. Of the 
 social and economical condition of that 
 country an interesting account has 
 been given by Mr. Laing. His testi- 
 mony in favour of small landed prcv 
 perties both there and elsewhere, is 
 given with great decision. I shall 
 quote a few passages. 
 
 " If small proprietors are not good 
 farmers, it is not from the same cause 
 here which we are told makes them so 
 in Scotland indolence and want of ex- 
 ertion. The extent to which irrigation 
 is carried on in these glens and valleys 
 shows a spirit of exertion and co- 
 operation " (I request particular atten- 
 tion to this point), "to which the latter 
 can show nothing similar. Hay being 
 the principal winter support of live 
 stock, and both it and corn, as well as 
 potatoes, liable, from the shallow soil 
 and powerful reflection of sunshine 
 from the rocks, to be burnt and withered 
 up, the greatest exertions are made to 
 bring water from the head of each glen, 
 along such a level as will give the 
 command of it to each farmer at 
 the head of his fields. This is done by 
 leading it in wooden troughs (the half 
 of a tree roughly scooped) from the 
 highest perennial stream among the 
 hills, through woods, across ravines, 
 along the rocky, often perpendicular, 
 sides of the glens, and from this main 
 trough giving a lateral one to each 
 farmer in passing the head of his farm. 
 He distributes this supply by moveable 
 troughs among his fields ; and at this 
 season waters each rig successively 
 with scoops like those used by bleachers 
 in watering cloth, laying his trough 
 between every two ngs. One would 
 not believe, without seeing it, how 
 very large an extent of land is tra- 
 versed expeditiously by these artificial 
 Thiirgau, p. 72.
 
 BOOK II. CHAPTER VI. 3. 
 
 suowcrs. Tho extent of the main 
 troughs is very great. In one glen I 
 walked ten miles, and found it troughcd 
 on both sides : on one, the chain is con- 
 tinued down the main valley for forty 
 miles.* Those may be bad farmers 
 who do such things ; but they are not 
 indolent, nor ignorant of the principle 
 of working in concert, and keeping up 
 establishments for common benefit. 
 They are undoubtedly, in these respects, 
 far in advance of any community of 
 cottars in our Highland glens. They 
 feel as proprietors, who receive the ad- 
 vantage of their own exertions. ^ The 
 excellent state of the roads and bridges 
 is another proof that the country is in- 
 habited by people who have a common 
 interest to keep them under repair. 
 There are no tolls."t 
 
 On the effects of peasant proprietor- 
 ship on the Continent generally, the 
 same writer expresses himself as fol- 
 
 " If we listen to the large farmer, the 
 scientific agriculturist, the " [English] 
 " political economist, good farming 
 must perish with large farms ; the 
 very idea that good farming can exist, 
 unless on large farms cultivated with 
 great capital, they hold to be _ absurd. 
 Draining, manuring, economical ar- 
 rangement, cleaning the land, regular 
 
 * Reichensperper (The Land Question) 
 quoted by Mr. Kay (Social Condition and 
 Educatinn of fhe People in England and 
 Europe,) observes, " that the parts of Europe 
 where the most extensive and costly plans 
 for watering the meadows and lands have 
 been carried out in the greatest perfection, 
 are those whore the lands are very much 
 subdivided, and are in the hands of small 
 proprietors. He instances the plain round 
 Valencia, several of the southern depart- 
 ments of France, particularly those of Vau- 
 cluse and Bouches du Rhone, Lombardy, 
 Tuscany, the districts of Sienna, Lucca, and 
 Bergamo, Piedmont, many parts of Germany, 
 &c., in all which parts of Europe the land is 
 very much subdivided among small proprie- 
 tors. In all these parts great and expensive 
 systems and plans of general irrigation have 
 been carried out , and are nowbeing supported, 
 by the small proprietors themselves ; thus 
 ihowing how they are able to accomplish, 
 by means of combination, work requiring 
 the expenditure of great quantities of capi- 
 tal." A'uy, i. 126. 
 
 t Laing, Journal of a Residence in Nortcay, 
 Dp. 36, 37. 
 
 t Kotet of a Traveller, pp. 299 ct soqq. 
 
 rotations, valuable stock and impla 
 ments, all belong exclusively to large 
 farms, worked by large capital, and by 
 hired labour. This reads very well; 
 but if we raise our eyes from their 
 books to their fields, and coolly compare 
 what we see in the best districts 
 farmed in large 1'arms, with what we 
 see in the best districts farmed in 
 small farms, we see, and there is no 
 blinking the fact, better crops on the 
 ground in Flanders, East Friesland, 
 Holstein, in short, on the whole line of 
 the arable land of equal quality on the 
 Continent, from the Sound to Calais, 
 than we see on the line of British coast 
 opposite to this line, and in the same 
 latitudes, from the Frith of Forth all 
 round to Dover. Minute labour on 
 small portions of arable ground gives 
 evidently, in equal soils and climate, a 
 superior productiveness, where these 
 small portions belong in property, as 
 in Flanders, Holland, Friesland, and 
 Ditmarsch in Holstein, to the farmer. 
 It is not pretended by our agricultural 
 writers, that our large farmers, even in 
 Berwickshire, Roxburghshire, or the 
 Lothians, approach to the garden-like 
 cultivation, attention to manures, drain- 
 age, and clean state of the land, or 
 in productiveness from a small space of 
 soil not originally rich, which distin- 
 guish the small farmers of Flanders, or 
 their system. In the best farmed parish 
 in Scotland or England, more land is 
 wasted in the corners and borders of 
 the fields of large farms, in the roads 
 through them, unnecessarily wide be- 
 cause they are bad, and bad because 
 they are wide, in neglected commons, 
 waste spots, useless belts and clumps 
 of sorry trees, and such unproductive 
 areas, than would maintain the poor 
 of the parish, if they were all laid to- 
 gether and cultivated. But large 
 capital applied to farming is of course 
 only applied to the very best of the soils 
 of a country. It cannot touch the sma il 
 unproductive spots which require more 
 time and labour to fertilize them than 
 is consistent with a quick return of 
 capital. But although hired time and 
 labour cannot be applied beneficially 
 t o such cultivation, the owner's own time 
 and labour may. He is working for
 
 PEASANT 1'RO'rRrtTORS. 
 
 161 
 
 no higher terms at fir.-;t from his land 
 than a bare living. But in the course 
 of generations fertility and value are 
 produced ; a better living, and even 
 very improved processes of husbandry, 
 arc attained. Furrow draining, stall 
 feeding all summer, liquid manures, are 
 universal in the husbandry of the small 
 farms of Flanders, Lombardy, Switzer- 
 land. Our most improving districts 
 under large farms are but beginning to 
 adopt them. Dairy husbandry even, 
 and the manufacture of the largest 
 cheeses by the co-operation of many 
 small farmers,* the mutual assurance 
 of property against fire and hail-storms, 
 by the co-operation of small farmers 
 the most scientific and expensive of 
 all agricultural operations in modern 
 times, the manufacture of beet-root 
 sugar the supply of the European 
 markets with flax and hemp, by the hus- 
 bandry of small farmers the abund- 
 ance of legumes, fruits, poultry, in the 
 usual diet even of the lowest classes 
 abroad, and the total want of such 
 variety at the tables even of our middle 
 classes, and this variety and abundance 
 
 * The manner in which the Swiss peasants 
 combine to carry on cheesemaking by their 
 united capital deserves to be noted. " Each 
 parish in Switzerland hires a man, generally 
 from the district of Gruyere in the canton of 
 Freyburg, to take care of the herd, and make 
 the cheese. One cheeseman, one pressman 
 or assistant, and one cowherd, are considered 
 necessary for every forty cows. The owners 
 of the cows get credit each of them, in a book 
 daily, for the quantity of milk given by each 
 cow. The cheeseman and his assistants milk 
 the cows, put the milk all together, and make 
 cheese of it, and at the end of the season each 
 owner receives the weight of cheese propor- 
 tionable to the quantity of milk his cows have 
 delivered. By this co-operative plan, instead 
 of the small-sized unmarketable cheeses only, 
 which each could produce out of his three or 
 four cows' milk, he has the same weight in 
 large marketable cheese superior in quality, 
 because made by people who attend to no 
 other business. The cheeseman and his as- 
 sistants are paid so much per head of the 
 cows, in money or in cheese, or sometimes 
 they hire the cows, and pay the owners in 
 money or cheese." Ifotet of a Traveller, p. 
 861. A similar system exists in the French 
 Jura. See, for full details, Lavergne, Mural 
 Economy of France, 2nd ed., pp. 139 et seqq. 
 One of the most remarkable points in this 
 Interesting case of combination of labour, is 
 the confidence which it supposes, and which 
 experience must justify iu the integrity of 
 tJe persons employe! 
 KB. 
 
 essentially connected with the has- 
 bandry of small fanners all these are 
 features in the occupation of a country 
 by small proprietor-farmers, which must 
 make the inquirer pause before he 
 admits the dogma of our land doctors 
 at home, that large farms worked by 
 hired labour and great capital can 
 alone bring out the greatest produc- 
 tiveness of the soil and furnish the 
 greatest supply of the necessaries and 
 conveniences of life to the inhabitants 
 of a country." 
 
 4. Among the many flourishing 
 regions of Germany in which peasant 
 properties prevail, I select the Palati- 
 nate, for the advantage of quoting, 
 from an English source, the results of 
 recent personal observation of its agri- 
 culture and its people. Mr. Howitt, 
 a writer whose habit it is to see all 
 English objects and English socialities 
 on their brightest side, and who, in 
 treating of the Rhenish peasantry, 
 certainly does not underrate the rude- 
 ness of their implements, and the in- 
 feriority of their ploughing, neverthe- 
 less shows that under the invigorating 
 influence of the feelings of proprietor- 
 ship, they make up for the imperfec- 
 tions of their apparatus by the inten- 
 sity of their application. " The peasant 
 harrows and clears his land till it is in 
 the nicest order, and it is admirable to 
 see the crops which he obtains."* 
 "The peasants f are the great and 
 ever-present objects of country life. 
 They are the great population of tha 
 country, because they themselves are 
 the possessors. This country is, in 
 fact, for the most part, in the hands of 
 the people. It is parcelled out among 
 
 the multitude The peasants are 
 
 not, as with us, for the most part, 
 totally cut off from property in the soil 
 they cultivate, totally dependent on 
 the labour afforded by others they 
 are themselves the proprietors. It is, 
 perhaps, from this cause that they are 
 probably the most industrious pea- 
 santry in the world. They laboiu 
 busily, early and late, because they 
 
 Rural and Dotmtio Lift of Germa.iv, 
 p. 27. 
 t Ibid. p. 40. 
 
 M
 
 162 BOOK II. 
 
 feel that they are labouring for thern- 
 
 eclvcs The German peasants 
 
 work hard, but they have no actual 
 want. Every man lias his house, his 
 orchard, his roadside trees, commonly 
 BO heavy with fruit, that he is obliged 
 to prop and secure them all ways, or 
 they would be torn to pieces. lie has 
 his corn-plot, his plot for mangel- 
 wurzel, for hemp, and so on. He is 
 his own master ; and he, and every 
 member of his family, have the strongest 
 motives to labour. You see the effect 
 of this in that unremitting diligence 
 which is beyond that of the whole 
 world besides, and his economy, which 
 is still greater. The Germans, indeed, 
 are not so active and lively as the 
 English. You never see them in a 
 bustle, or as though they meant to 
 knock off a vast deal in a little time. 
 . . . They are, on the contrary, slow, 
 but for ever doing. They plod on from 
 day to day, and year to year the 
 most patient, untirable, and persever- 
 ing of animals. The English peasant 
 is so cut off from the idea of property, 
 that he comes habitually to look upon 
 it as a thing from which he is warned 
 by the laws cf the large proprietors, 
 and becomes, in consequence, spirit- 
 less, purposeless The German 
 
 bauer, on the contrary, looks on the 
 country as made for him and his 
 fellow-men. He feels himself a man; 
 he has a stake in the country, as good 
 as that of the bulk of his neighbours ; 
 no man can threaten him with ejec- 
 tion, or the workhouse, so long as he 
 is active and economical. He walks, 
 therefore, with a bold stop ; he looks 
 you in the face with the air of a free 
 man, but of a respectful one." 
 
 Of their industry, the same writer 
 thus further speaks : " There is not an 
 hour of the year in which they do not 
 find unceasing occupation. In the 
 depth of winter, when the weather 
 permits them by any means to get out 
 of doors, they are always finding some- 
 thing to do. They carry out their 
 manure to their lands while the frost 
 in in them. If there is not frost, they 
 are busy cleaning ditches and felling 
 old fruit trees, or such as do not bear 
 well. Such of them as are too poor to 
 
 Cli AFTER VI. 3. 
 
 lay in a sufficient stock of wood, find 
 plenty of work in ascending into the 
 mountainous woods, and bringing 
 thence fuel. It would astonish the 
 English common people to see the in- 
 tense labour with which the Germans 
 earn their firewood. In the depth of 
 frost and snow, go into any of their 
 hills and woods, and there you find 
 them hacking up stumps, cutting off 
 branches, and gathering, by all means 
 which the official wood-police will 
 allow, boughs, stakes, and pieces of 
 wood, which they convey home with 
 the most incredible toil and patience."* 
 After a description of their careful and 
 laborious vineyard culture, he con- 
 tinues, t " In England, with its great 
 quantity of grass lands, and its large 
 farms, so soon as the grain is in, and 
 the fields are shut up for hay grass, the 
 country seems in a comparative state 
 of rest and quiet. But here they are 
 everywhere, and for ever, hoeing and 
 mowing, planting and cutting, weed- 
 ing and gathering. They have a 
 succession of crops like a market- 
 gardener. They have their carrots, 
 poppies, hemp, flax, saintfoin, lucerne, 
 rape, colewort, cabbage, rotabaga, 
 black turnips, Swedish and white tur- 
 nips, teazles, Jerusalem artichokes, 
 mangel-wurzel, parsnips, kidney-beans, 
 field-beans and peas, vetches, Indian 
 corn, buckwheat, madder for the manu- 
 facturer, potatoes, their great crop of 
 tobacco, millet all, or the greater part, 
 under the family management, in their 
 own family allotments. They have 
 had these things first to sow, many of 
 them to transplant, to hoe, to weed, to 
 clear off insects, to top ; many of them 
 to mow and gather in successive crops. 
 They have their water-meadows, of 
 which kind almost all their meadows 
 are, to flood, to mow, and reflood ; 
 watercourses to reopen and to maka 
 anew ; their early fruits to gather, to 
 bring to market with their green crops 
 of vegetables ; their cattle, sheep, 
 calves, foals, most of them prisoners, 
 and poultry to look after ; their vines, 
 as they shoot rampantly in the sum- 
 
 * Sural and Domeitic I4fe qf Germany* 
 p. 44. 
 + Tbid. o. 60.
 
 PEASANT PROPRIETORS. 
 
 161 
 
 mer hc.it, to prune, and thin out tho 
 leaves when they are too thick : and 
 any one may imagine what a scene of 
 incessant labour it is." 
 
 This interesting sketch, to the 
 general truth of which any observant 
 traveller in that highly cultivated and 
 populous region can bear witness, 
 accords with the more elaborate de- 
 lineation by a distinguished inhabitant, 
 Professor Rau, in his little treatise 
 " On the Agriculture of the Palati- 
 nate."* Dr. Rau bears testimony not 
 only to the industry, but to the skill 
 ind intelligence of the peasantry; 
 their judicious employment of manures, 
 and excellent rotation of crops ; the 
 progressive improvement of their agri- 
 culture for generations past, and the 
 spirit of further improvement which is 
 still active. " The indefatigableness 
 of the country people, who may be seen 
 in activity all the day and all the year, 
 and are never idle, because they make 
 a good distribution of their labours, 
 and find for every interval of time a 
 suitable occupation, is as well known 
 as their zeal is praiseworthy in turning 
 to use every circumstance which pre- 
 sents itself, in seizing upon every use- 
 ful novelty which offers, and even in 
 searching out new and advantageous 
 methods. One easily perceives that 
 the peasant of this district has reflected 
 much on his occupation : he can give 
 reasons for his modes of proceeding, 
 even if those reasons are not always 
 tenable ; he is as exact an observer of 
 proportions as it is possible to be from 
 memory, without the aid of figures : he 
 attends to such general signs of the 
 times as appear to augur him either 
 benefit or harm."f 
 
 The experience of all other parts of 
 Germany is similar. " In Saxony," 
 pays Mr. Kay, " it is a notorious fact, 
 that during the last thirty years, and 
 since the peasants became the pro- 
 prietors of the land, there has been a 
 rapid and continual improvement in the 
 condition of the houses, in the manner 
 of living, in the dress of the peasants, 
 
 * On the Agriculture of the Palatinate, and 
 particularly in the territory of Heidelberg. 
 By Dr. Karl Heinrich Rau. Heidelberg, 
 1830. 
 
 t Rau, pp. 19, 16. 
 
 and particularly in tho culture of the 
 land. I have twice walked through that 
 part of Saxony called Saxon Switzer- 
 land, in company with a German guid^ 
 and on purpose to see the state of tha 
 villages and of the farming, and I can 
 safely challenge contradiction when I 
 affirm that there is no farming in all 
 Europe superior to the laboriously care- 
 ful cultivation of tho valleys of that 
 part of Saxony. There, as in the can- 
 tons of Berne, Vaud, and Zurich, and 
 in the Rhine provinces, the farms are 
 singularly flourishing. They are kept 
 in beautiful condition, and are always 
 neat and well managed. The ground 
 is cleared as if it were a garden. No 
 hedges or brushwood encumber it. 
 Scarcely a rush or thistle or a bit of 
 rank grass is to be seen. The meadows 
 are well watered every spring with 
 liquid manure, saved from the drain- 
 ings of the farm yards. The grass is 
 so free from weeds that the Saxon 
 meadows reminded me more of English 
 lawns than of anything else I had seen. 
 The peasants endeavour to outstrip one 
 another in the quantity and quality of 
 the produce, in the preparation of the 
 giound, and in the general cultivation 
 of their respective portions. All the 
 little proprietors are eager to find out 
 how to farm so as to produce the greatest 
 results ; they diligently seek after im- 
 provements ; they send their children 
 to the agricultural schools in order to 
 fit them to assist their fathers ; and 
 each proprietor soon adopts a new im- 
 provement introduced by any of his 
 neighbours."* If this be not over- 
 stated, it denotes a state of intelligence 
 very different not only from that of 
 English labourers but of English 
 farmers. 
 
 Mr. Kay's book, published in 1850, 
 contains a mass of evidence gathered 
 from observation and inquiries in many 
 different parts of Europe, together with 
 attestations from many distinguished 
 writers, to the beneficial effects of pea- 
 
 * The Social Condition and Education of 
 the People in England and Europe; thoving 
 the Iteult of the Primary School*, and of 
 the division of Landed Property in Foreign 
 Countriei, By Joseph Kay, Esq., M. A. Bar- 
 rister-at-Law, and late Travelling Bachelor 
 of the University of Cambridge. Vol. i. pp.
 
 16* 
 
 BOOK H. CHAPTER VI. 5. 
 
 earn pioperties. Among the testimonies 
 which he cites respecting their effect 
 on agriculture, I select the following. 
 
 " Edchensperger, himself an inhabi- 
 tant of that part of Prussia where theland 
 is the most subdivided, has published 
 a long and very elaborate work to show 
 the admirable consequences of a system 
 of freeholds in land. He expresses a 
 very decided opinion that not only are 
 the gross products of any given number 
 of acres held and cultivated by small 
 or peasant proprietors, greater tban the 
 gross products of an equal number of 
 acres held by a few great proprietors, 
 and cultivated by tenant farmers, but 
 that the net products of the former, 
 after deducting all the expenses of 
 cultivation, are also greater than the 
 net products of the latter. ... He 
 mentions one fact which seems to prove 
 that the fertility of the land in countries 
 where the properties are small, must be 
 rapidly increasing. He says that the 
 price of the land which is divided into 
 email properties in the Prussian Rhine 
 provinces, is much higher, and has been 
 rising much more rapidly, than the 
 price of land on the great estates. He 
 and Professor Eau both say that this 
 rise in the price of the small estates 
 would have ruined the more recent 
 purchasers, unless the productiveness 
 of the small estates had increased in 
 at least an equal proportion ; and as the 
 small proprietors have been gradually 
 becoming more and more prosperous 
 notwithstanding the increasing prices 
 they have paid for their land, he argues, 
 with apparent justness, that this would 
 eeem to show that not only the gross 
 profits of the small estates, but the njt 
 profits also, have been gradually in- 
 creasing, and that the net profits per 
 acre, of land, when farmed by small 
 proprietors, are greater than the net 
 profits per acre of land farmed by a 
 great proprietor. He says, with seem- 
 ing truth, that the increasing price of 
 land in the small estates cannot be the 
 mere effect of competition, or it would 
 have diminished the profits and the 
 prosperity of the small proprietors, and 
 that this result has not followed the 
 rise. 
 
 " Albrecht TLaer, another celebrated 
 
 German writer on the difTeient systems 
 of agriculture, in one of his later works 
 (Principles of Rational Agriculture) 
 expresses his decided conviction, that 
 the net produce of land is greater when 
 farmed by small proprietors than when 
 farmed by great proprietors or their 
 tenants. . . . This opinion of Thaer is 
 all the more remarkable, as, during the 
 early part of his life, he was verj 
 strongly in favour of the English systeir 
 of great estates and great farms." 
 
 Mr. Kay adds, from his own observa- 
 tion, " The peasant farming of Prussia, 
 Saxony, Holland, and Switzerland is 
 the most perfect and economical farm 
 ing I have ever witnessed in any 
 country."* 
 
 5. But the most decisive example 
 in opposition to the English prejudice 
 against cultivation by peasant pro- 
 prietors, is the case of Belgium. The 
 soil is originally one of the worst in 
 Europe. " The provinces," says Mr. 
 M'Culloch,t "of West and East 
 Flanders, and Hainault, form a far- 
 stretching plain, of which the luxuriant 
 vegetation indicates the indefatigable 
 care and labour bestowed upon its cul- 
 tivation ; for the natural soil consists 
 almost wholly of barren sand, and its 
 great fertility is entirely the result of 
 very skilful management and judicious 
 application of various manures.' ' There 
 exists a carefully prepared and compre- 
 hensive treatise on Flemish Husbandry, 
 in the Farmer's Series of the Society 
 for the Diffusion of Useful Knowledge. 
 The writer observes,! that the Flemish 
 agriculturists " seem to want nothing 
 but a space to work upon : whatever be 
 the quality or texture of the soil, in 
 time they will make it produce some 
 thing. The sand in the Campine can 
 be compared to nothing but the sands 
 on the sea-shore, which they probably 
 were originally. It is highly interest- 
 ing to follow step by step the progress 
 of improvement. Here you see a cot- 
 tage and rude cow-shed erected on a 
 spot of the most unpromising aspect. 
 The loose white sand blown into irre- 
 
 Kay, 1. 116-8. 
 
 t Geographical Dictionary, art. " Belgium," 
 
 J Pp. 11-14.
 
 PEASANT PROPRIETORS. 
 
 165 
 
 gular mounds is only kept together by 
 the roots of the heath : a small spot 
 only is levelled and surrounded by a 
 ditch: part of this is covered with 
 young broom, part is planted with po- 
 tatoes, and perhaps a small patch of 
 diminutive clover may show itself:" but 
 manures, botli solid and liquid, are col- 
 lecting, " and this is the nucleus from 
 which, in a few years, a little farm will 
 spread around. ... If there is no 
 manure at hand, the only thing that 
 can be sown, on pure sand, at first, is 
 broom : this grows in the most barren 
 soils ; in three years it is fit to cut, and 
 produces some return in fagots for the 
 bakers and brickraakers. The leaves 
 which have fallen have somewhat en- 
 riched the soil, and the fibres of the 
 roots have given a certain degree of 
 compactness. It may now be ploughed 
 and sown with buckwheat, or even with 
 rye without manure. By the time this 
 is reaped, some manure may have been 
 collected, and a regular course of crop- 
 ping may begin. As soon as clover and 
 potatoes enable the farmer to keep cows 
 and make manure, the improvement 
 goes on rapidly ; in a few years the soil 
 undergoes a complete change : it be- 
 comes mellow and retentive of moisture, 
 and enriched by the vegetable matter 
 afforded by the decomposition of the 
 roots of clover and other plants. . . . 
 After the land has been gradually 
 brought into a good state, and is culti- 
 vated in a regular manner, there ap- 
 pears much less difference between the 
 soils which have been originally good, 
 and those which have been made so 
 by labour and industry. At least the 
 crops in both appear more nearly alike 
 at harvest, than is the case in soils of 
 different qualities in other countries. 
 This is a great proof of the excellency 
 of the Flemish system ; for it shows 
 that the land is in a constant state of 
 improvement, and that the deficiency 
 of the soil is compensated by greater 
 attention to tillage and manuring, 
 especially the latter." 
 
 The people who labour thus intensely, 
 because labouring for themselves, have 
 practised for centuries those principles 
 of rotation of crops and economy of 
 manures, wl ich in England are counted 
 
 among modern discoveries : and even 
 now the superiority of their agriculture, 
 as a whole, to that of England, is ad- 
 mitted by competent judges. "The 
 cultivation of a poor light soil, or a 
 moderate soil," says the writer last 
 quoted,* "is generally superior in 
 Flanders to that of the most improved 
 farms of the same kind in Britain. \Ve 
 surpass the Flemish farmer greatly in 
 capital, in varied implements of tillage, 
 in the choice and breeding of cattle and 
 sheep," (though, according to the same 
 authority ,f they are much " before us 
 in the feeding of their cows,") " and 
 the British fanner is in general a man 
 of superior education to the Flemish 
 peasant. But in the minute attention 
 to the qualities of the soil, in the ma- 
 nagement and application of manures 
 of different kinds, in the judirions suc- 
 cession of crops, and espccia.ly in the 
 economy of land, so that every part of 
 it shall be in a constant state of pro- 
 duction, we have still something to 
 learn from the Flemings," and not from 
 an instructed and enterprising Fleming 
 hero and there, but from the general 
 practice. 
 
 Much of the most highly cultivated 
 part of the country consists of peasant 
 properties, managed by the proprietors, 
 always either wholly or partly by spade 
 industry 4 "When the land is culti- 
 vated entirely by the spade, and no 
 horses are kept, a cow is kept for every 
 three acres of land, and entirely fed on 
 artificial grasses and roots. This mode 
 of cultivation is principally adopted in 
 the Waes district, where properties are 
 very small. All the labour is done by 
 the different members of the family;" 
 children soon beginning "to assist in 
 various minute operations, according to 
 their age and strength, such as weed- 
 ing, hoeing, feeding the cows. If they 
 can raise rye and wheat enough to 
 make their bread, and potatoes, tur- 
 nips, carrots, and clover, for the cows, 
 they do well ; and the produce of the 
 sale of their rape-seed, tneir flax, their 
 hemp, and their butter, after deducting 
 the expense of manure purchased, whicu 
 
 Flenith Huilandry, p. 3, 
 
 t Ibid. p. 13. 
 
 J Ibid., pp. 73 et seq.
 
 166 
 
 BOOK II. CHAPTER VI. 5. 
 
 5s always considerable, gives them a 
 very good profit. Suppose the whole 
 extent of the land to be six acres, which 
 is not an uncommon occupation, and 
 which one man can manage;" then 
 (after describing the cultivation), " if 
 a man with his wife and three young 
 children are considered as equal to 
 three and a half grown up men, the fa- 
 mily will require thirty-nine bushels of 
 grain, forty-nine bushels of potatoes, a 
 fat hog, and the butter and milk of one 
 cow : an acre and a half of land will 
 produce the grain and potatoes, and 
 allow some corn to finish the fattening 
 of the hog, which has the extra butter- 
 milk : another acre in clover, carrots, 
 and potatoes, together with the stubble 
 turnips, will more than feed the cow ; 
 consequently two and a half acres of 
 land is sufficient to feed this family, 
 and the produce of the other three and 
 a half may be sold to pay the rent or 
 the interest of purchase-money, wear 
 and tear of implements, extra manure, 
 and clothes for the family. But these 
 acres are the most profitable on the 
 farm, for the hemp, flax, and colza are 
 included ; and by having another acre 
 in clover and roots, a second cow can 
 be kept, and its produce sold. We 
 have, therefore, a solution of the prob- 
 lem, how a family can live and thrive 
 on six acres of moderate land." After 
 showing by calculation that this extent 
 of land can be cultivated in the most 
 perfect manner by the family without 
 any aid from hired labour, the writer 
 continues, " In a farm of ten acres en- 
 tirely cultivated by the spade, the addi- 
 tion of a man and a woman to the 
 members of the family will render all 
 the operations more easy ; and with a 
 horse and cart to carry out the manure, 
 and bring home the produce, and occa- 
 sionally draw the harrows, fifteen acres 
 may be veiy well cultivated. . . . Thus 
 it will be seen," (this is the result of 
 some pages of details and calculations,*) 
 " that by spade husbandry, an industri- 
 ous man with a small capital, occupying 
 only fifteen acres of good light land, 
 may not only live and bring up a fa- 
 mily, paying a 'good rent, but may accu- 
 mulate a considerable sum in the course 
 * Flemith Husbandry, p. 81. 
 
 of his life. 1 ' But the indefatigable in 
 dustry by which he accomplishes this, 
 and of which so large a portion is ex- 
 pended not in the mere cultivation, but 
 in the improvement, for a distant re- 
 turn, of the Boil itself has that indus- 
 try no connexion with not paving rent? 
 Could it exist, without presupposing, 
 at least, a virtually permanent tenure ? 
 
 As to their mode of living, "the 
 Flemish farmers and labourers live 
 much more economically than the same 
 class in England: they seldom eat 
 meat, except on Sundays and in har- 
 vest: buttermilk and potatoes with 
 brown bread is their daily food." It 
 is on this kind of evidence that English 
 travellers, as they hurry through Eu- 
 rope, pronounce the peasantry of every 
 Continental country poor and miserable, 
 its agricultural and social system a 
 failure, and the English the only regime 
 under which labourers are well off. It 
 is, truly enough, the only regime under 
 which labourers, whether well off or 
 not, never attempt to be better. So 
 little are English labourers accustomed 
 to consider it possible that a labourer 
 should not spend all he earns, that they 
 habitually mistake the signs of eco- 
 nomy for those of poverty. Observe 
 the true interpretation of the pheno- 
 mena. 
 
 " Accordingly they are gradually 
 acquiring capital, and their great am- 
 bition is to have land of their own. 
 They eagerly seize every opportunity 
 of purchasing a small farm, and the 
 price is so raised by competition, that 
 land pays little more than two per cent 
 interest for the purchase money. Large 
 
 Sroperties gradually disappear, and are 
 ivided into small portions, which sell 
 at a high rate. But the wealth and 
 industry of the population is continually 
 increasing, being rather diffused through 
 the masses than accumulated in indi- 
 viduals." 
 
 'With facts like these, known and 
 accessible, it is not a little surprising 
 to find the case of Flanders referred to 
 not in recommendation of peasant pro- 
 perties, but as a warning against them ; 
 on no better ground than a presumptive 
 excess of population, inferred from the 
 distress which existed among the pea-
 
 PEASANT PROPRIETORS. 
 
 167 
 
 Bantry of Brabant and East Flanders 
 in the disastrous year 1846 47. The 
 evidence which I have cited from a 
 writer conversant with the subject, and 
 having no economical theory to sup- 
 <>\vs that the distress, whatever 
 may have been its severity, arose from 
 no insufficiency in these little properties 
 to supply abun lantly, in any ordinary 
 circumstances, the wants of all whom 
 they have to maintain. It arose from 
 the essential condition to which those 
 are subject who employ land of their 
 own in growing their own food, namely, 
 that the vicissitudes of the seasons 
 must be borne by themselves, and can- 
 not, as in the case of large farmers, be 
 shifted from them to the consumer. 
 When we remember the season of 1846, 
 a partial failure of all kinds of grain, 
 and an almost total one of the potato, 
 it is no wonder that in so unusual a 
 calamity the produce of six acres, half 
 of them sown with flax, hemp, or oil 
 seeds, should fall short of a year's pro- 
 vision for a family. But we are not to 
 contrast the distressed Flemish peasant 
 with an English capitalist who farms 
 several hundred acres of land. If the 
 peasant were an Englishman, he would 
 not be that capitalist, but a day-la- 
 bourer under a capitalist. And is there 
 no distress, in times of dearth, among 
 day-labourers ? "Was there none, that 
 year, in countries where small proprie- 
 tors and small fanners are unknown ? 
 I am aware of no reason for believing 
 that the distress was greater in Bel- 
 gium, than corresponds to the propor- 
 tional extent of the failure of crops 
 compared with other countries.* 
 
 6. The evidence of the beneficial 
 operation of peasant properties in the 
 Channel Islands is of so decisive a cha- 
 racter, that I cannot help adding to 
 the numerous citations already made, 
 
 * As much of the distress latelycomplalned 
 of in Belgium, as partakes in any degree of a 
 permanent character, appears to be almost 
 confined to the portion of the population 
 who carry on manufacturing labour, either 
 by itself or in conjunction with agricultural ; 
 and to be occasioned by a diminished demand 
 for Belgic manufactures. 
 
 To the preceding testimonies respecting 
 Germany, Switzerland, and Belgium, may 
 
 part of a description of the economical 
 condition of those islands, by a writer 
 who combines personal observation 
 with an attentive study of the informa- 
 tion afforded by others. Mr. William 
 Thornton, in his "Plea for Peasant 
 Proprietors," a book which by the ex- 
 cellence both of its materials and of its 
 execution, deserves to be regarded as 
 the standard work on that side of the 
 question, speaks of the island of Guern- 
 sey in the following terms : " Not even 
 in England is nearly so large a quan- 
 tity of produce sent to market from a 
 tract of such limited extent. This of 
 itself might prove that the cultivators 
 must be far removed above poverty, for 
 being absolute owners of all the pro- 
 duce raised by them, they of course sell 
 only what they do not themselves re- 
 quire. But the satisfactoriness of their 
 condition is apparent to every observer. 
 'The happiest community,' says Mr. 
 Hill, ' which it has ever been my lot 
 to fall in with, is to be found in this 
 little island of Guernsey." ' No matter,' 
 says Sir George Head, 'to what point 
 the traveller may choose to bend his 
 way, comfort everywhere prevails.' 
 What most surprises the English vi- 
 sitor in his first walk or drive beyond 
 the bounds of St. Peter's Port, is the 
 appearance of the habitations with 
 which the landscape is thickly studded. 
 Many of them are such as in his own 
 country would belong to persons of 
 middle rank ; but he is puzzled to guess 
 what sort of people live in the others, 
 which, though in general not large 
 enough for farmers, are almost invari- 
 ably much too good in every respect for 
 
 day labourers Literally, in the 
 
 whole island, with the exception of a 
 few fishermen's huts, there is not one 
 so mean as to be likened to the ordinary 
 habitation of an English farm labourer. 
 'Look,' says a late Bailiff of 
 
 be added the following from Niebuhr, re 
 specting the Roman Campagna. In a letter 
 from Tivoli, he says, " Wherever you find 
 hereditary farmers, or Email proprietors, 
 there you also find industry and honesty. I 
 believe that a man who would employ a large 
 fortune in establishing small freeholds might 
 put an end to robbery in the mountain 
 districts." Life and Letttrt of Niebuhr, tol. 
 ii.p. 149.
 
 168 
 
 BOOK II. CHAPTER VI. 7. 
 
 Guernsey, Mr. De L'Isle Brock, 'at 
 the hovels of the English, and compare 
 them with the cottages of our pea- 
 santry.' .... Beggars are utterly un- 
 known Pauperism, able-bodied 
 
 pauperism at least, is nearly as rare as 
 mendicancy. The Savings Banks ac- 
 counts also bear witness to the general 
 abundance enjoyed by the labouring 
 classes of Guernsey. In the year 1841, 
 there were in England, out of a popu- 
 lation of nearly fifteen millions, less 
 than 700,000 depositors, or one in every 
 twenty persons, and the average 
 amount of the deposits was 301. In 
 Guernsey, in the same year, out of a 
 population of 2fi,000 the number of de- 
 positors was 1920, and the average 
 amount of the deposits 40?."* The 
 evidence as to Jersey and Aldemey is 
 of a similar character. 
 
 Of the efficiency and productiveness 
 of agriculture on the small properties 
 of the Channel Islands, Mr. Thornton 
 produces ample evidence, the result of 
 which he sums up as follows : " Thus 
 it appears that in the two principal 
 Channel Islands, the agricultural popu- 
 lation is, in the one twice, and in the 
 other, three times, as dense as in Bri- 
 tain, there being in the latter country 
 only one cultivator to twenty-two acres 
 of cultivated land, while in Jersey there 
 is one to eleven, and in Guernsey one 
 to seven acres. Yet the agriculture of 
 these islands maintains, besides culti- 
 vators, non-agricultural populations, 
 respectively four and five times as 
 dense as that of Britain. This differ- 
 ence does not arise from any superi- 
 ority of soil or climate possessed by the 
 Channel Islands, for the former is na- 
 turally rather poor, and the latter is 
 not better than in the southern coun- 
 ties of England. It is owing entirely 
 to the assiduous care of the farmers, 
 and to the abundant use of manure."f 
 " In the year 1837," he says in another 
 place,! " the average yield of wheat in 
 the large farms of England was only 
 twenty-one bushels, and the highest 
 average for any one county was no 
 more than twenty-six bushels. The 
 
 * A Plea for Peasant Proprietor. By 
 William Thomas Thornton, pp. 99104. 
 t Ibid. p. 38. 
 J Ibid. p. 0. 
 
 highest average since claimed for the 
 whole of England, is thirty bushels 
 In Jersey, where the average size of 
 farms is only sixteen acres, the average 
 produce of wheat per acre was stated 
 by Inglis in 1834 to be thidy-six 
 bushels ; but it is proved by official 
 tables to have been forty bushels in 
 the five years ending with 1833. In 
 Guernsey, where larms are still 
 smaller, four quarters per acre, ac- 
 cording to Inglis, is considered a pood, 
 but still a very common crop." "Thirty 
 shillings* an acre would be thought in 
 England a veiy fair rent for middling 
 land ; but in the Channel Islands, it is 
 only very inferior land that would not 
 let for at least 4Z." 
 
 7. It is from France, that im- 
 pressions unfavourable to peasant pro- 
 perties are generally drawn ; it is in 
 Erance that the system is so often as- 
 serted to have brought forth its fruit 
 in the most wretched possible agricul- 
 ture, and to be rapidly reducing, if not 
 to have already reduced, the peasantry, 
 by subdivision of land, to the verge of 
 starvation. It is difficult to account 
 for the general prevalence of impres- 
 sions so much the reverse of truth. 
 The agriculture of France was 
 wretched, and the peasantry in great 
 indigence, before the Devolution. At 
 that time they were not, so universally 
 as at present, landed proprietors. There 
 were, however, considerable districts of 
 France where the land, even then, waa 
 to a great extent the property of the 
 peasantry, and among these were 
 many of the most conspicuous excep- 
 tions to the general bad agriculture 
 and to the general poverty. An au- 
 thority, on this point, not to be dis- 
 puted, is Arthur Young, the inveterate 
 enemy of small farms, the coryphaeus 
 of the modern English school of agri- 
 culturists ; who yet, travelling over 
 nearly the whole of France in 1787, 
 1788, and 1789, when he finds remark- 
 able excellence of cultivation, never 
 hesitates to ascribe it to peasant pro- 
 perty. " Leaving Sauve," says he.-f 
 
 A Plea for Peasant Proprietor!, p. 32. 
 t Arthur Young's Tnirelg in Franoe, 
 vol. i. p. 10.
 
 ANT PROPRIETORS. 
 
 169 
 
 'I was much struck with a large 
 tract of land, seemingly nothing but 
 huge rocks; yet most of it enclosed 
 an 1 planted with the most industrious 
 attention. Every man has an olive, a 
 mulherry, an almond, or a peach tree, 
 mill vines scattered among them ; so 
 that the whole ground is covered with 
 the oddest mixture of these plants and 
 buLing rocks, that can he conceived. 
 The inhabitants of this village deserve 
 encouragement for their industry ; and 
 if I were a French minister they should 
 have it. They would soon turn all the 
 deserts around them into gardens. 
 Such a knot of active husbandmen, 
 who turn their rocks into scenes of 
 fertility, because I suppose their cncn, 
 would do the same by the wastes, if 
 animated by the same omnipotent 
 principle." Again:* " Walk to 15os- 
 Bendal," (near Dunkirk) " where M. 
 le Brun has an improvement on the 
 Dunes, which he very obligingly showed 
 me. Between the town and that place 
 is a great number of neat little houses, 
 built each with its garden, and one or 
 two fields enclosed, of most wretched 
 blowing dune sand, naturally as white 
 as snow, but improved by industry. 
 The magic of property turns sand to 
 gold." And again :f "Going out of 
 Uange, I was surprised to find by far 
 the greatest exertion in irrigation 
 which I had yet seen in France ; and 
 then passed by some steep mountains, 
 highly cultivated in terraces. Much 
 watering at St. Lawrence. The scenery 
 very interesting to a farmer. From 
 Gange, to tho mountain of rough 
 ground which I crossed, ths ride has 
 been the most interesting which I have 
 taken in France ; the efforts of in-- 
 dustry the most vigorous ; the anima- 
 tion the most lively. An activity has 
 been here, that has swept away all 
 difficulties before it, and has clothed 
 the very rocks with verdure. It would 
 be a disgrace to common sense to ask 
 the cause ; the enjoyment of property 
 mi'st have done it. Give a man the 
 secure possession of a bleak rock, and 
 he will turn it into a garden ; give him 
 
 Arthur Young's Tr:v*'t in France, 
 vol. i. p. 88. 
 
 t IbiJ.p. 61. 
 
 a nine years lease of a gaiden, and he 
 will convert it into a desert.'' 
 
 In his description of the country at 
 the foot of the Western Pyrenees, he 
 speaks no longer from surmise, but 
 from knowledge. " Take* the road to 
 Moneng, and come presently to a scene 
 which was so new to me in France, 
 that I could hardly believe my own 
 eyes. A succession of many well- 
 built, tight, and comfortable fanning 
 cottages built of stone and covered 
 with tiles ; each having its little gar- 
 den, enclosed by clipt thorn-hedge?, 
 with plenty of peach and other fruit- 
 trees, some fine oaks scattered in the 
 hedges, and young trees nursed up 
 with so much care, that nothing but 
 the fostering attention of the owner 
 could effect anything like it. To 
 every house belongs a farm, per- 
 fectly well enclosed, with grass bor- 
 ders mown and neatly kept around 
 the corn-fields, with gates to pass 
 from one enclosure to another. There 
 are some parts of England (where 
 small yeomen still remain) that re- 
 semble this country of Beam ; but 
 we have very little that is equal to 
 what I have seen in this ride of twelve 
 miles from Pau to Moneng. It is all 
 in the hands of little proprietors, with- 
 out the farms being so small as to 
 occasion a vicious and miserable popu- 
 lation. An air of neatness, warmth, 
 and comfort breathes over the whole. 
 It is visible in their new-built houses 
 and stables ; in their little gardens ; in 
 their hedges; in the courts before their 
 doors ; even in the coops for their 
 poultry, and the sties for their hogs. 
 A peasant does not think of rendering 
 his pig comfortable, if his own happi- 
 ness hang by the thread of a nine 
 years' lease. We are now in Be"arn, 
 within a few miles of the cradle of 
 Henry IV. Do they inherit these 
 blessings from that good prince ? The 
 benignant genius of that good monarch 
 seems to reign still over the country , 
 each peasant has the foid in the pot." 
 He frequently notices the excellence 
 of the agriculture of French Flanders, 
 where the farms " are all small, and 
 
 * Arthur Young's Tratels in francg, 
 vol. I.
 
 170 
 
 BOOK II. CHAPTER VI. 7. 
 
 much in the hands of little proprietors."* 
 In the Pays de Caux, also a country of 
 email properties, the agriculture was 
 miserable ; of which his explanation 
 was, that it " is a manufacturing 
 country, and fanning is but a secon- 
 dary pursuit to the cotton fabric, which 
 spreads over the whole of it."f The 
 same district is still a scat of manu- 
 factures, and a country of small pro- 
 prietors, and is now, whether we judge 
 from the appearance of the crops or 
 from the official returns, one of the 
 best cultivated in France. In " Flan- 
 ders, Alsace, and part of Artois, as 
 well as on the banks of the Garonne, 
 France possesses a husbandry equal to 
 our own.":): Those countries, and a 
 considerable part of Quercy, " are cul- 
 tivated more like gardens than farms. 
 Perhaps they are too much like gar- 
 dens, from the smallness of properties. " 
 In those districts the admirable rota- 
 tion of crops, so long practised in Italy, 
 but at that time generally neglected 
 in France, was already universal. 
 " The rapid succession of crops, the 
 harvest of one being but the signal of 
 sowing immediately for a second," (the 
 same fact which strikes all observers 
 in the valley of the Ehine,) " can 
 scarcely be carried to greater perfec- 
 tion : and this is a point, perhaps, of 
 all others the most essential to good 
 husbandry, when such crops are so 
 justly distributed as we generally find 
 them in these provinces ; cleaning and 
 ameliorating ones being made the 
 preparation for such as foul and ex- 
 haust." 
 
 It must not, however, be supposed 
 that Arthur i'oung's testimony on the 
 subject of peasant properties is uni- 
 formly favourable. In Lorraine, Cham- 
 pagne, and elsewhere, he finds the 
 agriculture bad, and the small pro- 
 prietors very miserable, in consequence, 
 as he says, of the extreme subdivision 
 of the land. His opinion is thus summed 
 m> :|| " Before I travelled, I conceived 
 that small farms, in property, were 
 very susceptible of good cultivation ; 
 and that the occupier of such, having 
 
 * Young, pp. 3224. 
 
 t Ibid. p. 325. t Ibid. vol. i. p. 357. 
 
 Ibid. p. 3d. U Ibid. p. 412. 
 
 no rent to pay, might be sufficiently at 
 his ease to work improvements, and 
 carry on a vigorous husbandry; but 
 what I have seen in France, has 
 greatly lessoned my good opinion of 
 them. In Flanders, I saw excellent 
 husbandry on properties of 30 to 100 
 acres ; but we seldom find here such 
 small patches of property as arc common 
 in other provinces. In Alt-ace, and 
 on the Garonne, that is, on soils of 
 such exuberant fertility as to demand 
 no exertions, some small properties 
 also are well cultivated. In Beam, I 
 passed through a region of little fanners, 
 whose appearance, neatness, ease, and 
 happiness charmed me ; it was what 
 property alone could, on a small scale, 
 effect ; but these were by no means 
 contemptibly small ; they are, as I 
 judged by the distance from house to 
 house, from 40 to 80 acres. Except 
 these, and a very few other instances, 
 I saw nothing respectable on small 
 properties, except a most unremitting 
 industry. Indeed, it is necessary to 
 impress on the reader's mind, that 
 though the husbandry I met with, in 
 a great variety of instances on little 
 properties, was as bad as can be well 
 conceived, yet the industry of the pos- 
 sessors was so conspicuous, and so 
 meritorious, that no commendations 
 would be too great for it. It was 
 sufficient to prove that property in 
 land is, of all others, the most active 
 instigator to severe and incessant 
 labour. And this truth is of such 
 force and extent, that I know no way 
 so sure of carrying tillage to a moun- 
 tain top, as by permitting the adjoin- 
 ing villagers to acquire it in property ; 
 in fact, we see that in the mountains 
 of Languecloc, &c., they -have con- 
 veyed earth in baskets, on their backs, 
 to form a soil where nature had denied 
 it." 
 
 The experience, therefore, of this 
 celebrated agriculturist, and apostle of 
 the grande culture, may be said to be, 
 that the effect of small properties, cul- 
 tivated by peasant proprietors, is ad- 
 mirable when they are not too small: 
 so small, namely, as not fully to occupy 
 the time and attention of the family ; 
 for he uft;n complains, with great
 
 PEASANT PROPlUi: . 
 
 171 
 
 apparent reason, of the quantity of 
 idle time which the peasantry had on 
 their hands when the lanil was in 
 very small portions, notwithstanding 
 the ardour with which they toiled to 
 improve their little patrimony, in every 
 way wbicktheir knowledge or ingenuity 
 could suggest. He recommends, ac- 
 cordingly, that a limit of subdivision 
 should be fixed by law ; and this is 
 by no means an indefensible proposi- 
 tion in countries, if such there are, 
 where division, having already gone 
 farther than the state of capital and 
 the nature of the staple articles of cul- 
 tivation render advisable, still con- 
 tinues progressive. That each peasant 
 should have a patch of land, even in 
 full property, if it is not sufficient to 
 Bupport him in comfort, is a system 
 wkh all the disadvantages, and scarcely 
 
 any of the benefits, of small properties; 
 since he must either live ir. indigence 
 on the produce of his land, or d ["nd 
 as habitually as if he had no landed 
 possessions, on the wages of hired 
 labour: which, besides, if all the hold- 
 ings surrounding him are of similar 
 dimensions, he has little prospect of 
 finding. The benefits of peasant pro- 
 perties are conditional on th'-ir not 
 being too much subdivided; that is, 
 on their not being required to main- 
 tain too many persons, in proportion 
 to the produce that can be raised from 
 them by those persons. The question 
 resolves itself, like most questions re- 
 specting the condition of the labouring 
 classes, into one of population. Are 
 small properties a stimulus to undue 
 multiplication, or a check to it ? 
 
 CHAPTER VII. 
 
 CONTINUATION OF THE SAME CUBJECT. 
 
 1. BEFORE examining the influ- 
 ence of peasant properties on the ulti- 
 mate economical interests of the 
 labouring class, as determined by the 
 increase of population, let us note the 
 points respecting the moral and social 
 influence of that territorial arrange- 
 ment, which may be looked upon as 
 established, either by the reason of the 
 case, or by the facts and authorities 
 cited in the preceding chapter. 
 
 The reader new to the subject must 
 have been struck with the powerful 
 impression made upon all the wit- 
 nesses to whom I have referred, by 
 what a Swiss statistical writer calls 
 the " almost superhuman industry'' of 
 peasant proprietors.* On this point, 
 at least, authorities are unanimous. 
 Those who have seen only one country 
 of peasant properties, always think the 
 inhabitants of that country the most 
 industrious in the world. There is as 
 little doubt among observers, with 
 
 The Canton SchaffJiausen (before quoted), 
 
 what feature in the condition of the 
 peasantry this pre-eminent industry is 
 connected. It is " the magic of pro- 
 perty," which, in the words of Arthur 
 Young, " turns sand into gold." The 
 idea of property does not, however, 
 necessarily imply that there should be 
 no rent, any more than that there 
 should be no taxes. It merely implies 
 that the rent should he a fixed charge, 
 not liable to be raised against the pos- 
 sessor by his own improvements, or by 
 the will of a landlord. A tenant at a 
 quit-rent is, to all intents and purposes, 
 a proprietor ; a copyholder is not less 
 so than a freeholder. What is wanted 
 is permanent possession on fixed terms. 
 " Give a man the secure possession of 
 a bleak rock, and he will turn it into 
 a garden ; give him a nine years' lease 
 of a garden, and he will convert it 
 into a desert." 
 
 The details which have been cited, 
 and those, still more minute, to b 
 found in the same authorities, con- 
 cerning the habitually elaborate BVB-
 
 172 
 
 COOK II. CHAPTER VII. 2. 
 
 tern of cultivation, and the thousand 
 devices of the peasant proprietor for 
 making every superfluous hour and 
 odd moment instrumental to some in- 
 crease in the future produce and value 
 of the land, will explain what has heen 
 said in a previous chapter* respecting 
 the far larger gross produce which, 
 with anything like parity of agricul- 
 tural knowledge, is obtained, from the 
 same quality of soil, on small farms, 
 at least when they are the property of 
 the cultivator. The treatise on "Flem- 
 ish Husbandly" is especially instruc- 
 tive respecting the means by which 
 untiring industry docs more than out- 
 weigh inferiority of resources, imper- 
 fection of implements, and ignorance 
 of scientific theories. The peasant 
 cultivation of Flanders and Italy is 
 affirmed to produce heavier crops, in 
 equal circumstances of soil, than the 
 best cultivated districts of Scotland 
 and England. It produces them, no 
 doubt, with an amount of labour 
 whick, if paid for by an employer, 
 would make the cost to him more than 
 equivalent to the benefit ; but to the 
 peasant it is not cost, it is the devotion 
 of time which he can spare, to a fa- 
 vourite pursuit, if we should not 
 rather say a ruling passion.f 
 
 * Supra, Book i. ch. ix. 4. 
 
 t Read the graphic description by the his- 
 torian Michelet, of the feelings of a peasant 
 proprietor towards his land. 
 
 "If we would know the inmost thought, 
 the passion, of the French peasant, it is very 
 easy. Let us walk out on Sunday into the 
 country and follow him. Behold him yonder, 
 walking in front of us. It is two o'clock ; 
 his wife is at vespers ; he has on his Sunday 
 clothes; I perceive that he is going to visit 
 his mistress. 
 
 " What mistress ? His land. 
 
 " I do not say he goes straight to it. No, he 
 is free to-day, and may either go or not. Does 
 he not go every day in the week ? Accord- 
 ingly, he turns aside, he goes another way, he 
 has business elsewhere. And yet he goes. 
 
 " It is true, he was passing close by ; it was 
 an opportunity. He looks, but apparently 
 he will not go in ; what for? And yet he 
 enters. 
 
 "At least it is probable that he will not 
 work ; he is in his Sunday dress : he has a 
 clean shirt and blouse. Still, there is no 
 harm in plucking up this weed and throwing 
 out that stone. There is a stump, too, which 
 is in the way ; but he has not his tools with 
 him, he will do it to-morrow. 
 
 " Then he folds his arms and gazes, serious 
 
 We have seen, too, that it is not 
 solely by superior exertion that the 
 Flemish cultivators succeed in ob- 
 taining these brilliant results. The 
 same motive which gives such inten- 
 sity to their industry, placed them 
 earlier in possession of an amount of 
 agricultural knowledge not attained 
 until much later in countries whore 
 agriculture was carried on solely by 
 hired labour. An equally high testi- 
 mony is borne by M. de Lavergne* 
 to the agricultural skill of the small 
 proprietors, in those parts of France 
 to which the petite culture is really 
 suitable. " In the rich plains of 
 Flanders, on the banks of the llhine, 
 the Garonne, the Charente, the llhone, 
 all the practices which fertilize the 
 land and increase the productiveness 
 of labour are known to the very 
 smallest cultivators, and practised by 
 them, however considerable may be the- 
 advances which they require. In their 
 hands, abundant manures, collected at 
 great cost, repair and incessantly in- 
 crease the fertility of the soil, in spite 
 of the activity of cultivation. The 
 races of cattle are superior, the crops 
 magnificent. Tobacco, flax, colza, 
 madder, beetroot, in some places ; in 
 others, the vine, the olive, the plum, 
 the mulberry, only yield their abun- 
 dant treasures to a population of in- 
 dustrious labourers. Is it not also to 
 the petite culture that we are indebted 
 for most of the garden produce ob- 
 tained by dint of great outlay in the 
 neighbourhood of Paris ?" 
 
 2. Another aspect of peasant 
 properties, in which it is essential that 
 they should be considered, is that of 
 an instrument of popular education. 
 Books and schooling are absolutely 
 necessary to education ; but not all- 
 sufficient. The mental faculties will 
 
 and careful. He gives a long, a very long 
 look, and seems lost in thought. At last, if 
 he thinks himself observed, if he sees a passer- 
 by, he moves slowly away. Thirty paces 
 off he stops, turns round, and casts on his 
 land a last look, sombre and profound, but 
 to those who can see it, the look is full of 
 passion, of heart, of devotion." The People, 
 by J. Michelet, Part i. ch. 1. 
 
 * Eesay on the literal Economy of England 
 Scotland, and Ireland, 3rd cd. p. 127.
 
 PEASANT PROPRIETORS. 
 
 173 
 
 be most developed where they are most 
 exercised ; and what gives more exer- 
 cise to them than the having a multi- 
 tude of interests, none of which can 
 be neglected, and which can bo pro- 
 vided for only by varied efforts of will 
 and intelligence ? Some of the dis- 
 paragers of small properties lay great 
 stress on the cares and anxieties which 
 beset the peasant proprietor of the 
 Rhineland or Flanders. It is precisely 
 those cares and anxieties which tend 
 to make him a superior being to an 
 English day-labourer. It is, to be sure, 
 rather abusing the privileges of fair 
 argument to represent the condition of 
 a day-labourer as not an anxious one. 
 I can conceive no circumstances in 
 which he is free from anxiety, where 
 there is a possibility of being out of 
 employment ; unless he has access to 
 a profuse dispensation of parish pay, 
 and no shame or reluctance in de- 
 manding it. The day-labourer has, in 
 the existing state of society and popu- 
 lation, many of the anxieties which 
 have not an invigorating effect on the 
 mind, and none of those which have. 
 The position of the peasant proprietor 
 of Flanders is the reverse. From the 
 anxiety which chills and paralyses 
 the uncertainty of having food to eat 
 few persons are more exempt: it 
 requires as rare a concurrence of cir- 
 cumstances as the potato failure com- 
 bined with, an universal bad harvest, to 
 bring him within reach of that danger. 
 His anxieties are the ordinary vicissi- 
 tudes of more and less ; his cares are 
 that he takes his fair share of the 
 business of life ; that he is a free 
 human being, and not perpetually a 
 child, which seems to be the approved 
 condition of the labouring classes ac- 
 cording to the prevailing philanthropy. 
 He is no longer a being of a different 
 order from the middle classes ; he has 
 pursuits and objects like those which 
 occupy them, and give to their intel- 
 lects the greatest part of such cultiva- 
 tion as they receive. If there is a 
 first principle in intellectual education, 
 it is this that the discipline which 
 does good to the mind is that in which 
 the mind is active, not that in which 
 it is passive. The secret for develop- 
 
 ing the faculties is to give them much 
 to do, and much inducement to do it. 
 This detracts nothing from the impor- 
 tance, and even necessity, of other 
 kinds of mental cultivation. The pos- 
 session of property will not prevent the 
 peasant from being coarse, selfish, and 
 narrow-minded. These things depend 
 on other influences, and other kinds ol 
 instruction. But this great stimulus 
 to one kind of mental activity, in no 
 way impedes any other means of in- 
 tellectual development. On the con- 
 trary, by cultivating the habit of 
 turning to practical use every frag- 
 ment of knowledge acquired, it helps 
 to render that schooling and reading 
 fruitful, which without some such aux- 
 iliary influence are in too many cases 
 like seed thrown on a rock. 
 
 3. It is not on the intelligence 
 alone that the situation of a peasant 
 proprietor exercises an improving in- 
 fluence. It is no less propitious to the 
 moral virtues of prudence, temperance, 
 and self-control. Day-labourers, where 
 the labouring class mainly consists of 
 them, are usually improvident ; they 
 spend carelessly to the full extent of 
 their means .and let the future shift 
 for itself. This is so notorious, that 
 many persons strongly interested in 
 the welfare of the labouring classes, 
 hold it as a fixed opinion that an in- 
 crease of wages would do them little 
 good, unless accompanied by at least 
 a corresponding improvement in their 
 tastes and habits. The tendency of 
 peasant proprietors, and of those who 
 hope to become proprietors, is to tho 
 contrary extreme ; to take even too 
 much thought for the morrow. They 
 are oftener accused of penuriousness 
 than of prodigality. They deny them- 
 selves reasonable indulgences, and live 
 wretchedly in order to economize. In 
 Switzerland almost everybody saves, 
 who has any means of saving ; the 
 case of the flemish fanners has been 
 already noticed : among the French, 
 though a pleasure-loving and reputed 
 to be a self-indulgent people, the spirit 
 of thrift is diffused through the rural 
 population in a manner most gratifying 
 aa a whole, and which in individual
 
 174 
 
 BOOK II. CHAPTER VII. 4. 
 
 instances errs rather on the side of ex- 
 cess than defect. Among those who, 
 from the hovels in which they live, and 
 the herbs and roots which constitute 
 their diet, are mistaken by travellers 
 for proofs and specimens of general 
 indigence, there are numbers who have 
 hoards in leathern bags, consisting of 
 sums in five-franc pieces, which they 
 keep by them perhaps for a whole gene- 
 ration, unless brought out to be expen- 
 ded in their mostcherished gratification 
 the purchase of land. If there is a 
 moral inconvenience attached to a 
 state of society in which the peasantry 
 have land, it is the danger of their 
 being too careful of their pecuniary 
 concerns ; of its making them crafty, 
 and "calculating'' in the objectionable 
 sense. The French peasant is no 
 simple countryman, no downright 
 "peasant of the Danube:"* both in 
 fact and in fiction he is now "the 
 crafty peasant." That is the stage 
 which he has reached in the progres- 
 sive development which the constitu- 
 tion of things has imposed on human 
 intelligence and human emancipation. 
 But some excess in this direction is a 
 small and a passing evil compared 
 with recklessness and improvidence in 
 the labouring classes, and a cheap price 
 to pay for the inestimable worth of the 
 virtue of self-dependence, as the gene- 
 ral characteristic of a people : a virtue 
 which is one of the first conditions of 
 excellence in a human character the 
 stock on which if the other virtues are 
 not grafted, they have seldom any firm 
 root ; a quality indispensable in the 
 case of a labouring class, even to any 
 tolerable degree of physical comfort ; 
 and by which the peasantry of France, 
 and of most European countries of 
 peasant proprietors, are distinguished 
 beyond any other labouring population. 
 
 4. Is it likely, that a state of eco- 
 nomical relations so conducive to fru- 
 gality and prudence in every other 
 respect, should be prejudicial to it in 
 the cardinal point of increase of popu- 
 lation ? That it is so, is the opinion 
 expressed by most of those English 
 political economists who have written 
 anything about the matter. Mr. 
 *8e the celebrated fable of La Fontaine. 
 
 M'Culloch's opinion is well known. 
 Mr. Jones affirms,* that a "peasant 
 population, raising their own wages 
 from the soil, and consuming them in 
 kind, are universally acted upon very 
 feebly by internal checks, or by mo- 
 tives disposing them to restraint. The 
 consequence is, that unless some ex- 
 ternal cause, quite independent of their 
 will, forces such peasant cultivators to 
 slacken their rate of increase, they 
 will, in a limited territory, very rapidly 
 approach a state of want and penury, 
 and will be stopped at last only by 
 the physical impossibility of procuring 
 subsistence." He elsewhere f speaks 
 of such a peasantry as " exactly in the 
 condition in which the animal dis- 
 position to increase their numbers is 
 checked by the fewest of those ba- 
 lancing motives and desires which 
 regulate the increase of superior ranks 
 or more civilized people.'' The 
 "causes of this peculiarity" Mr. 
 Jones promised to point out in a sub- 
 sequent work, which never made its 
 appearance. I am totally unable to 
 conjecture from what theory of human 
 nature, and of the motives which in- 
 fluence human conduct, he would have 
 derived them. Arthur Young assumes 
 the same "peculiarity" as a fact; 
 but, though not much in the habit 
 of qualifying his opinions, he does not 
 push his doctrine to so violent an 
 extreme as Mr. Jones ; having, as we 
 have seen, himself testified to various 
 instances in which peasant populations, 
 such as Mr. Jones speaks of, were not 
 tending to "a state of want and 
 penury," and were in no danger what- 
 ever of coming in contact with " phy- 
 sical impossibility of procuring sub- 
 sistence." 
 
 That there should be discrepancy of 
 experience on this matter, is easily to 
 be accounted for. Whether the labour- 
 ing people live by land or by wages, 
 they have always hitherto multiplied 
 up to the limit set by their habitual 
 standard of comfort. When that 
 standard was low, not exceeding a 
 scanty subsistence, the size of pro. 
 perties, as well as the rate of wages, 
 
 * Essay on tJie Distribution qf Wealffk, 
 p. 146. 
 
 t Ibid. p. 68.
 
 PEASANT PROPRIETORS. 
 
 178 
 
 lias been kept down to what would 
 barely support life. Extremely low 
 ideas of what is necessary _for sub- 
 sistence, are perfectly compatible with 
 peasant properties ; and if a people 
 nave always been used to poverty, 
 and habit has reconciled them to it, 
 there will be over-population, and ex- 
 cessive subdivision of land. But this 
 is not to the purpose. The true ques- 
 tion is, supposing a peasantry to pos- 
 
 >d not insufficient but sufficient 
 for their comfortable support, are they 
 more, or less, likely to fall from this 
 state of comfort through improvident 
 multiplication, than if they were living 
 in an equally comfortable manner as 
 hived labourers? All a priori con- 
 siderations are in favour of their being 
 less likely. The dependence of wages 
 on population is a matter of specu- 
 lation and discussion. That wages 
 would fall if population were much in- 
 civ;u"d is often a matter of real doubt, 
 and always a thing which requires 
 some exercise of the thinking faculty 
 for its intelligent recognition. B'it 
 every peasant can satisfy himself from 
 evidence which he can fully appre- 
 ciate, whether his piece of land can be 
 made to support several families in the 
 same comfort in which it supports one. 
 Few people like to leave to their 
 children a worse lot in life than their 
 ov.n. The parent who has land to 
 leave, is perfectly able to judge whether 
 the. children can live upon it or not : 
 but people who are supported by 
 wages, see no reason why their sons 
 should be unable to support themselves 
 in the same way, and trust accordingly 
 to chance. " In even the most useful 
 and necessary arts and manufactures," 
 says Mr. Laing,* " the demand for 
 labourers is not a seen, known, steady, 
 and appreciable demand : but it is so 
 in husbandry," under small properties. 
 "The labour to be done, the subsist- 
 ence that labour will produce out of 
 his portion of laud, are seen and known 
 elements in a man's calculation upon 
 his means of subsistence. Can his 
 square of land, or can it not, subsist a 
 family? Can he marry or not? are 
 questions which every man can answer 
 without delay, doubt, or speculation. 
 
 Ifotet <tfa Traveller, p. 46. 
 
 It is the depending on chance, where 
 judgment has nothing clearly set before 
 it, that causes reckless, improvident 
 marriages in the lower, as in the 
 higher classes, and produces among us 
 the evils of over-population ; and chance 
 necessarily enters into every man's 
 calculations, when certainty is removed 
 altogether ; as it is, where certain sub- 
 sistence is, by our distribution of pro- 
 perty, the lot of but a small portion 
 instead of about two-thirds of the 
 people." 
 
 There never has been a writer more 
 keenly sensible of the evils brought 
 upon the labouring classes by excess 
 of population, than Sismondi, and this 
 is one of the grounds of his earnest 
 advocacy of peasant properties. He 
 had ample opportunity, in more coun- 
 tries than one, for judging of their 
 effect on population. Let us see hia 
 testimony. " In the countries in which 
 cultivation by small proprietors still 
 continues, population increases regu- 
 larly and rapidly until it has attained 
 its natural limits ; that is to say, inhe- 
 ritances continue to be divided and 
 subivided among several sons, as long 
 as, by an increase of labour, each 
 family can extract an equal income 
 from a smaller portion of land. A 
 father who possessed a vast extent of 
 natural pasture, divides it among his 
 sons, and they turn it into fields and 
 meadows; his sons divide it among 
 their sons, who abolish fallows : each 
 improvement in agricultural knowledge 
 admits of another step in the sub- 
 division of property. But there is no 
 danger lest the proprietor should bring 
 up his children to make beggars of 
 them. He knows exactly what inhe- 
 ritance he has to leave them ; he 
 knows that the law will divide it 
 equally among them ; ho sees tho 
 limit beyond which this division would 
 make them descend from the rank 
 which he has himself filled, and a just 
 family pride, common to the peasant 
 and to the nobleman, makes him ab- 
 stain from summoning into life, children 
 for whom he cannot properly provide. 
 If more are born, at least they do not 
 marry, or they agree among themselves, 
 which of several brothers shall per- 
 petuate the family. It is not found
 
 176 
 
 BOOK II. CHAPTER VII. 4. 
 
 that in the Swiss Cantons, the patri- 
 monies of the peasants are ever so 
 divided as to reduce them below an 
 honourable competence ; though the 
 habit of foreign service, by opening to 
 the children a career indefinite and 
 [incalculable, sometimes calls forth a 
 superabundant population." * 
 
 There is similar testimony respect 
 ing Norway. Though there is no law 
 or custom of primogeniture, and no 
 manufactures to take off a surplus 
 population, the subdivision of property 
 is not carried to an injurious extent. 
 "The division of the land among 
 children," says Mr. Laing,f "appears 
 not, during the thousand years it has 
 been in operation, to have had the 
 effect of reducing the landed pro- 
 perties to the minimum size that will 
 barely support human existence. I 
 have counted from five-and-twenty to 
 forty cows upon farms, and that in 
 a country in which the farmer must, 
 for at least seven months in the year, 
 have winter provender and houses pro- 
 vided for all the cattle. It is evident 
 that some cause or other, operating on 
 aggregation of landed property, coun- 
 teracts the dividing effects of partition 
 among children. That cause can be 
 no other than what I have long con- 
 jectured would be effective in such 
 a social arrangement ; viz. that in 
 a country where land is held, not in 
 tenancy merely, as in Ireland, but 
 in full ownership, its aggregation by 
 the deaths of co-heirs, and by the 
 marriages of the female heirs among 
 the body of landholders, will balance 
 its subdivision by the equal succession 
 of children. The whole mass of pro- 
 perty will, I conceive, be found in such 
 a state of society to consist of as many 
 estates of the class of 1000?., as many 
 of 100Z., as many of Wl, a year, at 
 one period as at another.' 1 That this 
 should happen, supposes diffused 
 through society a very efficacious pru- 
 dential check to population : and it is 
 reasonable to give part of the credit 
 of this prudential restraint to the pecu- 
 liar adaptation of the peasant-proprie- 
 tary system for fostering it. 
 
 * Nonveaux Principee, Book iii. cb.l. 
 t Ketidence i Noneay, p. 18. 
 
 " In some parts of Switzerland," 
 says Mr. Kay,* " as in the canton of 
 Argovie for instance, a peasant never 
 marries before he attains the age of 
 twenty-five years, and generally much 
 later in life ; and in that canton the 
 women very seldom many before they 
 have attained the age of thirty. . . . 
 Nor do the division of land and the 
 cheapness of the mode of conveying it 
 from one man to another, encourage 
 the providence of the labourers of the 
 rural districts only. They act in the 
 same manner, though perhaps in a 
 less degree, upon the labourers of the 
 smaller towns. In the smaller pro- 
 vincial towns it is customary for a 
 labourer to own a small plot of ground 
 outside the town. This plot he cul- 
 tivates in the evening as his kitchen 
 garden. He raises in it vegetables 
 and fruits for the use of his family 
 during the winter. After his day's 
 work is over, he and his family repair 
 to the garden for a short time, which 
 they spend in planting, sowing, weed- 
 ing, or preparing for sowing, a harvest, 
 according to the season. The desire 
 to become possessed of one of these 
 gardens operates very strongly in 
 strengthening prudential habits and 
 in restraining improvident marriages. 
 Some of the manufacturers in the 
 canton of Argovie told me that a 
 townsman was seldom contented until 
 he had bought a garden, or a garden 
 and house, and that the town labourers 
 generally deferred their marriages for 
 some years, in order to save enough 
 to purchase either one or both of these 
 luxuries." 
 
 The same writer shows by statistical 
 evidence f that in Prussia the average 
 age of marriage is not only much later 
 than in England, but " is gradually 
 becoming later than it was formerly, ' 
 while at the same time " fewer illegiti- 
 mate children are born in Prussia than 
 in any other of the European coun- 
 tries." " Wherever I travelled," says 
 Mr. Kay,J "in North Germany and 
 Switzerland, I was assured by all that 
 the desire to obtain land, which was 
 felt by all the pensants, was acting aa 
 
 * Vol. i. pp. 67-9. 
 t Ibid. pp. 75-?. % Ibid. p. 90,
 
 PEASANT HIOPKIETOHS* 
 
 177 
 
 the strongest possible check upon 
 undue increase of population."* 
 
 Jn Flanders, according to Mr. 
 Fauche, the British Consul at Ostend.f 
 " farmer's sons and those who have the 
 means to become farmers will delay 
 their marriage until they get posses- 
 sion of a farm." Once a farmer, the 
 next object is to become a proprietor. 
 "The first thing a Dane does with his 
 savings," says Mr. Browne, the Consul 
 at Copenhagen, J " is to purchase a 
 clock, then a horse and cow, which he 
 hires out, and which pays a good 
 interest. Then his ambition is to 
 become a petty proprietor, and this 
 class of persons is better off than any 
 in Denmark. Indeed, I know of no 
 people in any country who have more 
 easily within their reach all that is 
 really necessary for life than this class, 
 which is very large in comparison with 
 that of labourers." 
 
 But the experience which most de- 
 cidedly contradicts the asserted ten- 
 dency of peasant proprietorship to 
 produce excess of population, is the 
 case of France. In that country the 
 experiment is not tried in the most 
 favourable circumstances, a large pro- 
 portion of the properties being too 
 small. The number of landed pro- 
 prietors in France is not exactly as- 
 certained, but on no estimate does it 
 fall much short of five millions ; which, 
 on the lowest calculation of the number 
 of persons of a family (and for France 
 
 The Prussian minister of statistics, in a 
 work (Condition of the People in Prussia) 
 which I am obliged to quote at second 
 hand from Mr. Kay, after proving by figures 
 the great and progressive increase of the 
 consumption of food and clothing per 
 head of the population, from which he justly 
 infers a corresponding increase of the pro- 
 ductiveness of agriculture, continues : " The 
 division of estates has, since 1831, proceeded 
 more and more throughout the country. 
 There are now many more small independent 
 proprietors than formerly. Yet, however 
 many complaints of pauperism are heard 
 among the dependent labourers, we never 
 hear it complained that pauperism is in- 
 creasing among the peasant proprietors." 
 Kay, i. 262-6. 
 
 t In a communication to the Commission- 
 ers of Poor Law Enquiry, p. 610 of their 
 Foreign Communications, Appendix F to 
 their First Report. 
 
 J Ibid. 263. 
 
 r. B. 
 
 it ought to be a low calculation), shows 
 much more than half the population 
 as either possessing, or entitled to in- 
 herit, landed property. A majority oi 
 the properties are so small as not to 
 afford a subsistence to the proprietors, 
 of whom, according to some compu- 
 tations, as many as three millions are 
 obliged to eke out their means of sup- 
 port either by working for hire, or by 
 taking additional land, generally on 
 metayer tenure. When the property 
 possessed is not sufficient to relieve 
 the possessor from dependence on 
 wages, the condition of a proprietor 
 loses much of its characteristic efficacy 
 as a check to over-population : and if 
 the prediction so often made in Eng 
 land had been realized, and Franco 
 had become a " pauper warren,'' the 
 experiment would have proved nothing 
 against the tendencies of the same 
 system of agricultural economy in 
 other circumstances. But what is the 
 fact? That the rate of increase of 
 the French population is the slowest 
 in Europe. During the generation 
 which the Revolution raised from the 
 extreme of hopeless wretchedness to 
 sudden abundance, a great increase of 
 population took place. But a gene.-' 
 ration has grown up, which, haMng 
 been born in improved circumstances, 
 has not learnt to be miserable; and 
 upon them the spirit of thri.1t operates 
 most conspicuously, in Beeping the 
 increase of population within the in- 
 crease of national wealth. In a table, 
 drawn up by Professor Eau,* of the 
 * The following i j the table (see p. 168 of 
 the Belgian transition of Mr. Rau's large 
 work) : 
 
 United States 1820-30 
 Hungary (ar >cor( u n g to Rohrer) . 
 England 1811-21 
 ,, 1821-31 
 
 Ji 
 
 2-92 
 2-40 
 1-78 
 1-60 
 1-30 
 1-54 
 1-37 
 1-27 
 1-23 
 1-30 
 1-15 
 1-13 
 1-08 
 0-83 
 0-63 
 ) 0-55 
 au da 
 
 Austria, (Rohrer) 
 
 
 N. etherlaiuls 
 Scotland 
 Saxony . 
 Baden . 
 
 
 . . 1821-31 
 . . 1821-28 
 . . 1821-31 
 . . 1815-30 
 1820-30 (Heuni* 
 
 Naples . 
 France . 
 and more rece 
 But the nu 
 
 itl 
 
 ml 
 
 . . 1814-24 
 1817-27 (Mathieu 
 Y (Morsau de Jonnds 
 er given by More
 
 178 
 
 It CHAPTER VII. 4. 
 
 rate of annual increase of the popula- 
 tions of various countries, that of 
 France, from 1817 to 1827, is stated at 
 T^nr P cr cen ^> *hat of England during 
 a similar decennial period being 1 T 6 7 
 annually, and that of the United States 
 nearly 3. According to the official 
 returns as analyzed by M. Legoyt,* 
 the increaae of the population, which 
 from 1801 to 1806 was at the rate of 
 1*28 per cent annually, averaged only 
 0-47 per cent from 1806 to 1831 ; from 
 1831 to 1836 it averaged 0'60 per 
 cent; from 1836 to 1841, 0'41 per 
 cent, and from 1841 to 1846, 0'68 per 
 
 Jonno?, he adds, is not entitled to implicit 
 .confidence. 
 
 The following table given by M. Q,ue- 
 tolet (On Man and the Development of hit 
 Faeultiet, vol. i. ch. 7), also on the au- 
 thority of Rau, contains additional matter, 
 .and differs in some items from the preced- 
 ing, probably from the author's having 
 'taken, in those cases, an average of dif- 
 ferent years : 
 
 Per cent. 
 
 Ireland 2'45 
 
 Hungary 2'40 
 
 Spain 1'66 
 
 England 1-65 
 
 Rhenish Prussia . . . . 1*33 
 
 \ Austria 1'30 
 
 Bavaria 1'08 
 
 Netherlands 0'94 
 
 Naples 0-83 
 
 France 0'63 
 
 e'weden , 0'58 
 
 0'45 
 
 cent.f At the censns of 1851 the 
 rate of annual increase shown was 
 only 1'08 per cent in the five years, 
 or 0'21 annually; and at the census 
 of 1856 only 0'71 per cent in fire 
 years, or 0'14 annually; so, that, in 
 the words of M. de Lavergne, " popu- 
 lation has almost ceased to increase 
 in France "| Even this slow increase 
 is wholly the effect of a diminution of 
 deaths ; the number of births not in- 
 creasing at all, while the proportion 
 of the births to the population is con- 
 stantly diminishing. This slow growth 
 of the numbers of the people, while 
 
 ceding year 1846, is summed up in the fol- 
 lowing table : 
 
 
 
 . 
 
 
 M> 
 
 III! 
 
 
 s| 
 
 JSS > 
 
 
 *S 
 
 *! o 
 
 
 Per cent. 
 
 Per cent. 
 
 Sweden 
 
 0-83 
 
 1-14 
 
 
 1-36 
 
 1-30 
 
 Denmark . . , . 
 
 
 0-95 
 
 
 
 0-61 
 
 
 : 85 
 
 0-90 
 
 
 1-84 
 
 1-18 
 
 Saxony 
 
 1-45 
 
 0-90 
 
 Hanover .... 
 
 
 0-85 
 
 
 
 071 
 
 Wurtemberg . . . 
 
 olo'l 
 
 1-00 
 
 Holland 
 
 0-90 
 
 1-03 
 
 Belgium .... 
 
 
 076 
 
 Sardinia . , . . 
 
 1 : 08 
 
 
 Great Britain (ex- 
 ' elusive of Ireland) 
 
 ] 1'95 
 
 1-00 
 
 
 0-68 
 
 0-50 
 
 United States . . 
 
 3-27 
 
 
 A very ci. rref I 1 ' ly P re P are(1 statement, 
 by M. Legoyt, . in . * he ^"f z . del -^ono- 
 mitte, for May I.** 7 ' wmch bnn S s U P the 
 result* for France I-** tfae censu of the P re ' 
 
 * Jo **r**l let Economittes for March and May 1847. 
 
 t M Leeovt is of opinio n **** ** le population was understated in 1841. and the inereasa 
 between that time and 18 '* eonsequently overstated, and that the real increase during 
 the whole period was someth.'?S iatwmediate between the last two averages, or not much 
 
 f^Tournal de Economittet fo y February 1847. In the Journal for January 1865, M. 
 
 T i i. .:...,_ snmf* e numb ^ re riightly altered, and, I presume, corrected. The 
 
 is 1-28 0-3J 0-69, O'0, 0-41, 0-68, .0-22, and 0'20. The last census, 
 " ' ' reaction, the percentage, independently of the newly acquired 
 
 ries o 
 that of 
 departments, being 0'32. 
 
 5 
 
 tn Ifm 
 ! 
 1839 to 84S 
 
 lOOy tO lO4d 
 
 1844 & 1845 
 
 965,444, 
 972,993, 
 970,617 
 
 -~*t 
 
 983,D<3, 
 
 ing 1 in m. of the population, 
 1 in 34'00 ,, ,, 
 
 1 in 34-39 
 1 in 35"27 
 
 1 or.=Q 
 
 1 m 35'58 
 
 , 
 
 In the last two years th births, according to M. Legoyt, were swelled by the effects of 
 considerable immigration. " This diminution of births "he observes, vjlethere is aco,,- 
 rtan though not a rapid increase both of population and of marriages, can only be attributed 
 to ?he process of prudence and forethought in families It was a foreseen consequence of 
 our civil and social institutions, which, producing a <UUj increasing subdms.on of fortunw,
 
 i ' [: A H ANT PROPRIETORS. 
 
 179 
 
 capital increases much morn rapidly, 
 has caused a noticeable improvement 
 in the condition of the labouring class. 
 The circumstances of that portion of 
 1hi> class who are landed proprietors 
 are not easily ascertained with preci- 
 sion, being of course extremely vari- 
 able : but the mere labourers, who 
 derived no direct benefit from the 
 changes in landed property which took 
 place at the Revolution, have unques- 
 tionably much improved in condition 
 since that period.* Dr. Rau testifies 
 
 both landed and moveable, call forth in our 
 people the instincts of conservation and of 
 comfort." 
 
 In four departments, nmong which 
 are two of the most thriving in Nor- 
 mandy, the deaths even then exceeded the 
 births. The census of 1856 exhibits the re- 
 markable fact of a positive diminution in the 
 population of 54 out of the 86 departments. 
 A significant comment on the pauper- warren 
 theory. See M. do Lavergne's analysis of 
 the returns. 
 
 * " The classes of our population which 
 have only wages, and are therefore the most 
 exposed to indigence, are now (1846) much 
 better provided with the necessaries of food, 
 lodging, and clothing, than they were at the 
 beginning of the century. This may be 
 proved by the testimony of all persons who 
 can remember the earlier of the two periods 
 compared. Were there any doubts on the 
 subject, they might easily be dissipated by 
 consulting old cultivators and workmen, as 
 I have myself done in various localities, with- 
 out meeting with a single contrary testimony; 
 we may also appeal to the facts collected by 
 an accurate observer, M. Villerme, in his 
 Picture of the Moral and Physical Condition 
 of the Working Classes* book ii. ch. 1." 
 (Researches on the Causes of Indigence, by A. 
 Cle'ment, pp. 84-5.) The same writer speaks 
 (p. 118) of " the considerable rise which has 
 taken place since 1789 in the wages of agri- 
 cultural day-labourers;" and adds the fol- 
 lowing evidence of a higher standard of 
 habitual requirements, even in that portion 
 of the town population, the state of which 
 is usually represented as most deplorable. 
 ' In the last fifteen or twenty years a con- 
 siderable change has taken place in the habits 
 of the operatives in our manufacturing 
 towns : they now expend'much more than for- 
 merly on clothing and ornament. . . . Certain 
 classes of workpeople, such as the canufs of 
 Lyons," (according to all representations, 
 like theircounterpart, our handloom weavers, 
 the very worst paid class of artizans,) " no 
 longer show themselves, as they did formerly, 
 covered with filthy rags." (Page 164.) 
 
 The preceding statements were given in 
 former editions of this work, being the best 
 to which I had at the time access ; but evi- 
 dence, both of a more recent, and of a more 
 minute and precise character, will now be 
 
 to n similar fact in the case of another 
 country in which the subdivision of 
 the land is probably excessiye, the 
 Palatinate.* 
 
 I am not aware of a single authentic 
 instance which supports the assertion 
 that rapid multiplication is promoted 
 by peasant properties. Instances may 
 undoubtedly be cited of its not being 
 prevented by them, and one of the 
 principal of these is Belgium ; th 
 prospects of which, in respect to popu- 
 lation, are at present a matter of con- 
 found in the important work of M. Leone 
 de Lavergne, Mural Economy of France sine* 
 1789. According to that painstaking, well* 
 informed, and most impartial enquirer, the 
 average daily wages of a French labourer 
 have risen, since the commencement of the 
 Revolution, in the ratio of 19 to 30, while, 
 owing to the more constant employment, the 
 total earnings have increased in a still greater 
 ratio, not short of double. The following 
 are the statements of M. de Lavergne (2nd 
 ed. p. 57) : 
 
 " Arthur Young estimates at 19 sous \9\d. ] 
 the average of a day's wages, which must 
 now be about 1 franc 50 centimes f_l. Sd.~], 
 and this increase only represents a part of 
 the improvement. Though the rural popu- 
 lation has remained about the same in num- 
 bers, the addition made to the population 
 since 1789 having centred in the towns, the 
 number of actual working diiyshas increased, 
 first because, the duration of life having 
 augmented, the number of able-bodied men 
 is greater, and next, because labour is better 
 organized, partly through the suppression of 
 several festival-holidays, partly by the mere 
 effect of a more active demand. When we 
 take into account the increased number of 
 his working days, the annual receipts of the 
 rural workman must have doubled. This 
 augmentation of wages answers to at least 
 an equal augmentation of comforts, since the 
 prices of the chief necessaries of life have 
 changed but little, and those of manufac- 
 tured, for example of woven, articles, have 
 materially diminished. The lodging of the 
 labourers has also improved, if not in all, 
 at least in most of our provinces." 
 
 M. de Lavergne's estimate of the average 
 amount of a day's wages is grounded on a 
 careful comparison, in this and all other 
 economical points of view, of all the different 
 provinces of France. 
 
 * In his little book on the Agriculture of 
 the Palatinate, already cited. He says that 
 the daily wages of labour, which during tha 
 last years of the war were unusually high, 
 and so continued until 1817, afterwards sank 
 to a lower money-rate, but that the prices 
 of many commodities having fallen in a still 
 greater proportion, the condition of the peo- 
 ple was unequivocally improved. The food 
 given to farm labourers by their employers 
 has also greatly improved in quantity and 
 N 2
 
 ISO 
 
 eiderable uncertainty. Belgium has 
 the most rapidly increasing population 
 on the Continent ; and when the cir- 
 cumstances of the country require, as 
 they must soon do, that this rapidity 
 should be checked, there will be a con- 
 siderable strength of existing habit to 
 be broken through. One of the un- 
 favourable circumstances is the great 
 power possessed over the minds of 
 the people by the Catholic priesthood, 
 whose influence is everywhere strongly 
 exerted against restraining population. 
 As yet, however, it must be remem- 
 bered that the indefatigable industry 
 and great agricultural skill of the 
 people have rendered the existing 
 rapidity of increase practically inno- 
 cuous ; the great number of large es- 
 tates still undivided affording by their 
 gradual dismemberment, a resource for 
 the necessary augmentation of the 
 gross produce ; and there are, besides, 
 many large manufacturing towns, and 
 mining and coal districts, which attract 
 *nd employ a considerable portion of 
 the annual increase of population. 
 
 5. But even where peasant pro- 
 perties are accompanied by an excess 
 of numbers, this evil is not necessarily 
 attended with the additional econo- 
 mical disadvantage of too great a sub- 
 division of the land. It does not follow 
 because landed property is minutely 
 divided, that farms will be so. As 
 large properties are perfectly com- 
 patible with Email farms, so are small 
 properties with farms of an adequate 
 size ; and a subdivision of occupancy is 
 not an inevitable consequence of even 
 undue multiplication among peasant 
 
 quality. " It is now considerably better than 
 about forty years ago, when the poorer class 
 obtained less flesh-meat and puddings, and 
 no cheese, butter, and the like." (p. 20.) 
 " Such an increase of wages" (adds the Pro- 
 fessor) "which must be estimated not in 
 money, but in the quantity of necessaries 
 and conveniences which the labourer is ena- 
 bled to procure, is, by universal admission, a 
 proof that the masa of capital must have in- 
 creased." It proves not only this, but also 
 that the labouring population has not in- 
 creased in an equal degree ; and that, in this 
 instance as well as in France, the division of 
 the land, even when excessive, lias been 
 compatible with a strengthening of the pru- 
 dential oVok o population. 
 
 BOOK II. CHAPTER VII. 5. 
 
 proprietors. As might be expected 
 from their admirable intelligence in 
 things relating to their occupation, the 
 Flemish peasantry have long learnt 
 this lesson. " The habit of not divid- 
 ing properties," says Dr. Ravi,* " and 
 the opinion that this is advantageous, 
 have been BO completely preserved in 
 Flanders, that even now, when a 
 peasant dies leaving several children, 
 they do not think of dividing his 
 patrimony, though it be neither en- 
 tailed nor settled in trust ; they prefer 
 selling it entire, and sharing the pro- 
 ceeds, considering it as a jewel which 
 loses its value when it is divided." 
 That the same feeling must prevail 
 widely even in France, is shown by 
 the great frequency of sales of land, 
 amounting in ten years to a fourth 
 port of the whole soil of the country ; 
 and M. Passy, in his tract " On the 
 Changes in the Agricultural Condition 
 of the Department of the Eure since 
 the year 1800,"f states other facts 
 tending to the same conclusion. " The 
 example," says he, " of this department 
 attests that there does not exist, as some 
 writers have imagined, between the 
 distribution of property and that of 
 cultivation, a connexion which tends 
 invincibly to assimilate them. In no 
 portion of it have changes of owner- 
 ship had a perceptible influence on 
 the size of holdings. While, in dis- 
 tricts of small farming, lands belong- 
 ing to the same owner are ordinarily 
 distributed among many tenants, so 
 neither is it uncommon, in places where 
 the grande culture prevails, for tho 
 same farmer to rent the lands of several 
 proprietors. In the plains of Vexin, 
 in particular, many active and rich 
 cultivators do not content themselves 
 with a single farm ; others add to the 
 lands of their principal holding, all 
 those in the neighbourhood which 
 
 * Page 33 1 of the Brussels translation. He 
 cites as an authority, Schwerz, Papert on 
 Agriculture, i. 185. 
 
 t One of the many important papers which 
 have appeared in the Journal dei i'eono- 
 mistes, the organ of the principal political 
 economists of Frances, and doing great and 
 increasing honour to their knowledge and 
 ability. AI. Passy's essay has been reprin'.ed 
 separately as a pamphlet.
 
 PEASANT PROPRIETORS. 
 
 131 
 
 they are able to hire, and in this 
 manner make up a total extent which 
 in Eomo cases reaches or exceeds two 
 hundred hectares" (five hundred Eng- 
 lish acres). "The more the estates 
 are dismemhered, the more frequent 
 do this sort of arrangements hecome ; 
 and as they conduce to the interest of 
 all conci/rned, it is probable that time 
 will confirm them." 
 
 " In some places," says M. de La- 
 vergne,* " in the neighbourhood of 
 Paris, for example, where the advan- 
 tages of the gramle culture become 
 ', the size of farms tends to in- 
 crease, several farms are thrown to- 
 gether into one, and farmers enlarge 
 their holdings by renting parodies 
 from a number of diflerent proprietors. 
 Elsewhere farms as well as properties 
 of too great extent, tend to division. 
 Cultivation spontaneously finds out the 
 organization which suits it best." It 
 is a striking fact, stated by the same 
 eminent writer, f that the departments 
 which have tho greatest number of 
 small separate accounts with the tax- 
 collector, are the Nord, the Somme, 
 the Pas de Calais, the Seine Infe- 
 rieure, the Aisne, and the Oise ; all 
 af l!;t-;ii among the richest and best 
 cultivated, and the first-mentioned of 
 them the very richest and best culti- 
 vated, in France. 
 
 Undue subdivision, and excessive 
 smallness of holdings, are undoubtedly 
 a prevalent evil in some countries of 
 peasant proprietors, and particularly 
 in parts of Germany and France. The 
 governments of Bavaria and Nassau 
 have thought it necessary to impose 
 a legal limit to subdivision, and the 
 Prussian Government unsuccessfully 
 proposed the same measure to the 
 Estates of its Rhenish Provinces. But 
 I do not think it will anywhere be 
 found that the petite culture is the 
 system of the peasants, and the ff ramie 
 culture that of the great landlords : 
 
 * Rural Economy of France, p. 455. 
 t P. 117. See, for facts of a similar ten- 
 dency, pp. 141, 250, an j other passages of the 
 same important treatise ; which, on the other 
 hand, equally abounds with evidence of the 
 mischievous effect of subdivision when too 
 minute, or when t':o :ia!uro of the soil ami 
 pf ill products is not suitable to it. 
 
 on the contrary, wherever the small 
 properties are divided among too many 
 proprietors, I believe it to bo true 
 that the large properties also are par- 
 celled out among too many farmers, 
 and that'the cause is the same in both 
 cases, a backward state of capital, 
 skill, and agricultural enterprise. Thera 
 is reason to believe that the subdivi- 
 sion in France is not more excessive 
 than is accounted for by this cause ; 
 that it is diminishing, not increasing ; 
 and that the terror expressed in some 
 quarters at the progress of the mor- 
 cellement, is one of the most ground- 
 less of real or pretended panics.* 
 
 If peasant properties have any effect 
 in promoting subdivision beyond tho 
 degree which corresponds to the agri- 
 
 * Mr. La'.ng, in his latest publication, 
 " Observations on the Social and Political 
 State of the European People in 1843 and 
 1849," a book devoted to the glorification of 
 England, and the disparagement of every- 
 thing elsewhere which others, or even he 
 himself in former works, had thought wortfc^ 
 of praise, argues that "although the lanX 
 itself is not divided and subdivided" on the 
 death of the proprietor, "the value of the 
 land i-, and with effects almost as prejudicial 
 to social progress. The value of each share 
 becomes a debt or burden upon the land." 
 Consequently the condition of the agricul- 
 tural population is retrograde ; " each gene- 
 ration is worse off than the preceding on, 
 although the land is neither less nor more 
 divided, nor worse cultivated." And this h 
 gives as the explanation of thegreat indebted- 
 ness of the small landed proprietors in 
 France (pp. 97-9). If these statements were 
 correct, they would invalidate all which Mr. 
 Lain? affirmed so positively in other writings, 
 and repeats in this, respecting the peculiar 
 efficacy of the possession of land in pre- 
 venting over-population. But he is entirely 
 mistaken as to the matter of fact. In the 
 only country of which ho speaks from actual 
 residence, Norway, be does not | retond that 
 the condition of the peasant proprietors i* 
 deteriorating. The facts already cited prove 
 that in respect to Belgium, Germany, and 
 Switzerland, the assertion is equally wide of 
 the mark ; and what has been shown re- 
 specting the slow increase of population in 
 France, demonstrates that if the condition 
 of the French peasantry was deteriorating, 
 it could not be from the cause supposed by 
 Mr. Laing. The truth I believe to be that 
 in every country without exception, in which 
 peasant properties prevail, the condition of 
 the people is improving, the produce of the 
 land and even its fertility increasing, and 
 from the larger surplus which remains after 
 feeding the agricultural classes, the towns 
 are augmenting both in population and i:> 
 the well-being of their inhabitants.
 
 ist 
 
 BOOK II. CHAPTER VII. 5. 
 
 cultural practices of the country, and 
 which is customary on its large estates, 
 the cause must lie in nne of the salu- 
 tary influences of the' system ; the 
 eminent degree in which it promotes 
 providence on the part of those who, 
 not being yet peasant proprietors, hope 
 to become so. In England, where the 
 agricultural labourer has no investment 
 for his savings but the savings bank, 
 and no position to which he can rise by 
 any exercise of economy, except per- 
 haps that of a petty shopkeeper, with its 
 chances of bankruptcy, there is nothing 
 at all resembling the intense spirit of 
 thrift which takes possession of one 
 who, from being a day labourer, oan 
 raise himself by saving to the condi- 
 tion of a landed proprietor. According 
 to almost all authorities, the real cause 
 of the morcellement is the higher price 
 which can be obtained for land by 
 selling it to the peasantiy, as an in- 
 vestment for their small accumulations, 
 than by disposing of it entire to some 
 rich purchaser who has no object but 
 to live on its income without improving 
 it. The hope of obtaining such an 
 investment is the most powerful of in- 
 ducements, to those who are without 
 land, to practise the industry, fru- 
 gality, and self-restraint, on which their 
 success in this object of ambition is 
 dependent. 
 
 As the result of this enquiry into 
 the direct operation and indirect in- 
 fluences of peasant properties, I con- 
 ceive it to be established, that there is 
 no necessary connexion between this 
 form of landed property and an im- 
 perfect state of the arts of production ; 
 that it is favourable in quite as many 
 respects as it is unfavourable, to the 
 most effective use of the powers of the 
 soil ; that no other existing state of 
 agricultural economy has EO beneficial 
 an effect on the industry, the intelli- 
 gence, the frugality, and prudence of 
 the population, nor tends on the whole 
 so much to discourage an improvident 
 increase of their numbers ; and that 
 no existing slate, therefore, is on the 
 whole eo favourable, both to their 
 
 moral and their physical welfare. 
 Compared with the English system of 
 cultivation by hired labour, it must be 
 regarded as eminently beneficial to the 
 labouring class.* We are not on the 
 present occasion called upon to com- 
 pare it with the joint ownership of the 
 land by associations of labourers. 
 
 * French history strikingly confirms these 
 conclusions. Three times during the course 
 of ages the peasantry have been purchasers 
 of land; and these times immediately pre- 
 ceded the three principal eras of French- 
 agricultural prosperity. 
 
 " In the worst times," lays the historian 
 Michelet (The People, Parti, ch. 1), "the 
 times of universal poverty^ when even the 
 rich are poor and obliged to sell, the poor are 
 enabled to buy : no other purchaser pre- 
 senting himself, the peasant in rags arrives 
 with his piece of gold, and acquires a little 
 bit of land. These moments of disaster in 
 which the peasant was able to buy land at a 
 low price, have always been followed by a 
 sudden gush of prosperity which people could 
 not account for. Towards 1500, loir example, 
 when France, exhausted by Louis XI., 
 seemed to be completing its ruin in Italy, the 
 noblesse who went to the wars were obliged 
 to sell: the land, passing into new hands, 
 suddenly began to flourish ; men began to 
 labour and to build. This happy moment, 
 in the style of courtly historians, was called 
 the good Louis XII. 
 
 " Unhappily it did not last long. Scarcely 
 had the land recovered itself when the tax- 
 collector fell upon it; the wars of religion 
 followed, and seemed to rase everything to 
 the ground ; with horrible miseries, dreadful 
 famines, in which mothers devoured tBeir 
 children. Who would believe that the coun- 
 try recovered from this? Scarcely is the war 
 ended, when from the devastated fields, and 
 the cottages still black with the flames, comes 
 forth the hoard of the peasant. He buys ; 
 in ten years, France wears a new face ; in 
 twenty or thirty, all possessions have doubled 
 and trebled in value. This moment, again 
 baptized by a royal name, is called the good 
 Benry IV. and the great Sichelicu." 
 
 Of the third era it is needless again to 
 speak ; it was that of the Revolution. 
 
 Whoever would study the reverse of the 
 picture, may compare these historic periods, 
 characterized by the dismemberment of 
 large and the construction of small proper- 
 ties, with the wide-spread national suffering 
 which accompanied, and the permanent de- 
 terioration of the condition of the labouring 
 jlasses which followed, the "clearing" away 
 of small yeomen to make room for large 
 grazing farms, which was the grand econo- 
 mical event of .English history during the 
 sixteenth ccnturv,
 
 METAYERS. 
 
 183 
 
 CHAPTER Ylll. 
 
 OF METAYERS. 
 
 1. FROM tho case in which the 
 produce of land and labour belongs 
 undividedly to the labourer, we proceed 
 to the cases in which it is divided, but 
 between two classes only, the labourers 
 and the landowners ; the character of 
 capitalists merging in the one or the 
 other, as the case may be. It is pos- 
 sible indeed to conceive that there 
 might be only two classes of persons 
 to share the produce, and that a class 
 of capitalists might be one of them ; 
 tho character of labourer and that of 
 landowner being united to form the 
 other. This might occur in two ways. 
 The labourers, though owning the 
 laud, might let it to a tenant, and 
 work under him as hired servants. 
 But this arrangement, even in the 
 very rare cases which could give rise 
 to if, would not require any particular 
 discussion, since it would not differ in 
 any material respect from the three- 
 fold system of labourers, capitalists, 
 and landlords. The other case is the 
 not uncommon one, in which a peasant 
 
 Eroprietor owns and cultivates the 
 md, but raises the little capital re- 
 quired, by a mortgage upon it. 
 Neither does this case present any 
 important peculiarity. Ihere is but 
 one person, the peasant himself, who 
 has any right or power of interference 
 in the management. He pays a fixed 
 annuity as interest to a capitalist, as 
 he pays another fixed sum in taxes 
 to the government. Without dwelling 
 further on these cases, we pass to those 
 which present marked features of pecu- 
 liarity. 
 
 "When the two parties sharing in 
 the produce are the labourer or 
 labourers and the landowner, it is not 
 n very material circumstance in the 
 case, which of the two furnishes the 
 stock, or whether, as sometimes hap- 
 pens, they furnish it, in a determinate 
 proportion, between them. The essen- 
 tial difference doep not lie in this, 
 
 but in another circumstance, namely, 
 whether the division of the produce 
 between the two is regulated by 
 custom or by competition. We will 
 begin with the former case ; of which 
 the metayer culture is the principal, 
 and in Europe almost the sole, example. 
 The principle of the metayer system 
 is that the labourer, or peasant, makes 
 his engagement directly with the land- 
 owner, and pays, not a fixed rent, 
 either in money or in kind, but a cer- 
 tain proportion of the produce, or 
 rather of what remains of the produce 
 after deducting what is considered ne- 
 cessary to keep up the stock. The 
 proportion is usually, as the name im- 
 ports, one-half; but in several districts 
 in Italy it is two-thirds. Respecting 
 the supply of stock, the custom varies 
 from place to place ; in some places 
 the landlord furnishes the whole, in 
 others half, in others some particular 
 part, as for instance the cattle and 
 seed, the labourer providing the im- 
 plements.* " This connexion," says 
 
 * In France, before the Revolution, ac- 
 cording to Arthur Young (i. 403) there was 
 great local diversity in this respect. In 
 Champagne, " the landlord commonly finds 
 half the cattle and half the seed, and the 
 metayer, labour, implements, and taxes; 
 but in some districts the landlord bears a 
 share of these. In Roussillon, the landlord 
 pays half the taxes ; and in Guienne, from 
 Auch to Fleuran, many landlords pay all. 
 Near Aguillon, on the Garonne, the metayers 
 furnish half the cattle. At Nangis, in the 
 Isle of France, I met with an agreement for 
 the landlord to furnish live stock, implements, 
 harness, and taxes ; the metayer found labour 
 and his own capitation tax : the landlord 
 repaired the house and gates ; the metayer 
 the windows : the landlord provided sued the 
 first year, the metayer the last; in the inter- 
 vening years they supply half and half. In 
 the Bourbonnois the landlord finds all sorts 
 of live stock, yet the metayer sells, changes, 
 and buys at his will; the steward keeping 
 an account of these mutations, for the land- 
 lord has half the product of sales, and pays 
 half the purchases." In Piedmont, he says, 
 " the landlord commonly pays the taxes and 
 repairs the buildings, and the tenant provides 
 cattle, implements; and seed." (II. 151 )
 
 184 
 
 BOOK II. CHAFIER VIII. 2. 
 
 Sismondi, speaking chiefly of Tus- 
 cany,* " is often the subject of a con- 
 tract, to define certain services and 
 certain occasional payments to which 
 the metayer binds himself; neverthe- 
 less the differences in the obligations 
 of one such contract and another are 
 inconsiderable ; usage governs alike all 
 these engagements, and supplies the 
 stipulations which have not been ex- 
 pressed : and the landlord who at- 
 tempted to depart from usage, who 
 exacted more than his neighbour, who 
 took for the basis of the agreement 
 anything but the equal division of the 
 crops, would render himself so odious, 
 be would be so sure of not obtaining a 
 metayer who was an honest man, that 
 the contract of all the metayers may 
 be considered as identical, at least in 
 each province, and never gives rise to 
 any competition among peasants in 
 search of employment, or any offer to 
 cultivate the soil on cheaper terms 
 than one another." To the same effect 
 Chateauvieux,f speaking of the me- 
 tayers of Piedmont. " They consider 
 it" (the farm) "as a patrimony, and 
 never think of renewing the lease, but 
 go on from generation to generation, on 
 the same terms, without writings or 
 registries."! 
 
 2. When the partition of the 
 produce is a matter of fixed usage, not 
 of varying convention, political eco- 
 nomy has no laws of distribution to 
 investigate. It has only to consider, 
 
 * Studiei in Political Economy, Essay VI. 
 On the Condition of the Cultivators in Tus- 
 cany. 
 
 t Letters from Italy. I quote from Dr. 
 Rigby's translation, (p. 22.) 
 
 J This virtual fixity of tenure is not how- 
 ever universal even in Italy ; and it is to its 
 absence that Sismondi attributes the inferior 
 condition of the metayers in some provinces 
 of Naples, in Lucca, and in the Kiviera of 
 Genoa ; where the landlords obtain a larger 
 (though still a fixed) share of the produce. 
 In those countries the cultivation is splendid, 
 but the people wretchedly poor. " The same 
 misfortune would probably have befallen the 
 people of Tuscany if public opinion did not 
 protect the cultivator; but a proprietor 
 would not dare to impose conditions unusual 
 in the country, and even in changing one 
 metayer for another, he alters nothing in the 
 terms of the engagement." JVeio Principle! 
 qffylitical Economy, book iii. ch. 5. 
 
 as in the case of peasant proprietors, 
 the effects of the system, first, on the 
 condition of the peasantry, morally 
 and physically, and secondly, on the 
 efficiency of the labour. In both these 
 particulars the metayer system has the 
 characteristic advantages of peasant 
 properties, but has them in a less de 
 gree. The metayer has less motive 
 to exertion than the peasant proprietor, 
 since only half the fruits of his indus- 
 try, instead of the whole, are his own 
 But he has a nruch stronger motive 
 than a day labourer, who has no other 
 interest in the result than not to be 
 dismissed. If the metayer cannot be 
 turned out except for some violation of 
 his contract, he has a stronger motive 
 to exertion than any tenant-farmer 
 who has not a lease. The metayer is 
 at least his landlord's partner, and a 
 half-sharer in their joint gains. Where, 
 too, the permanence of his tenure is 
 guaranteed by custom, he acquires 
 local attachments, and much of the 
 feelings of a proprietor. I am sup- 
 posing that this half produce is suffi- 
 cient to yield him a comfortable 
 support. Whether it is so, depends 
 (in any given state of agriculture) on 
 the degree of subdivision of the land ; 
 which depends on the operation of the 
 population principle. A multiplication 
 of people, beyond the number that can 
 be properly supported on the land or 
 taken off by manufactures, is indent 
 even to a peasant proprietary, and 'f 
 course not less but rather more incidcn. 
 to a metayer population. The ten- 
 dency, however, which we noticed Ii: 
 the proprietary system, to promote 
 prudence on this point, is in no small 
 degree common to it with the metayer 
 system. There, also, it is a matter of 
 easy and exact calculation whether a 
 family can be supported or not. If it 
 is easy to see whether the owner of the 
 whole produce can increase the pro- 
 duction so as to maintain a greater 
 number of persons equally well, it is a 
 not less simple problem whether the 
 owner of half the produce can do so.* 
 * HI. Hastiat affirms that even in 
 France, incontestably the least favourable 
 example of the metayer system, its effect 
 in repressing population is conspicuous. 
 "It is a well-ascertained fact that th.
 
 METAYERS. 
 
 185 
 
 There is ono check which this system 
 seems to offer, over and above those 
 held out even by the proprietary 
 system ; there is a landlord, who may 
 exert a controlling power, by refusing 
 his consent to a subdivision. I do not, 
 however, attach great importance to 
 this check, because the farm may be 
 loaded with superfluous hands without 
 being subdivided ; and because, so long 
 as the increase of hands increases the 
 gross produce, which is almost always 
 the case, the landlord, who receives 
 half the produce, is an immediate 
 gainer, the inconvenience falling only 
 on the labourers. The landlord is no 
 doubt liable in the end to suffer from 
 their poverty, by being forced to make 
 advances to them, especially in bad 
 seasons ; and a foresight of this ulti- 
 mate inconvenience may operate bene- 
 ficially on such landlords as prefer 
 future security to present profit. 
 
 The characteristic disadvantage of 
 the metayer system is very fairly stated 
 by Adam Smith. After pointing out 
 that metayers " have a plain interest 
 that the whole produce should be as 
 great as possible, in order that their 
 own proportion may be so," he con- 
 tinues,* " it could never, however, be 
 the interest of this species of culti- 
 vators to lay out, in the further im- 
 provement of the land, any part of the 
 little stock which they might save 
 
 tendency to excessive multiplication is 
 chiefly manifested in the class who live on 
 wages. Over these the forethought which 
 retards marriageshas little operation.because 
 the evils which flow from excessive compe- 
 tition appear to them only very confusedly, 
 and at a considerable distance. It is, there- 
 fore, the most advantageous condition of a 
 people to be so organized as to contain no 
 regular class of labourers for hire. In me- 
 tayer countries, marriages are principally 
 determined by the demands of cultivation ; 
 they increase when, from whatever cause, 
 the metairics ofler vacancies injurious to 
 production ; they diminish when the places 
 re filled up. A faet easily ascertained, the 
 proportion between the size of the farm and 
 the number of hands, operates like fore- 
 thought, and with greater effect. We find, 
 accordingly, that when nothing occurs to 
 make an opening for a superfluous population, 
 numbers remain stationary : as is seen in 
 our southern departments." Consideration* 
 on Metai/nye, in the Journal det Economistes 
 for February 1846. 
 
 Wt-Mh ofXationi. book iii. ch. 2. 
 
 from their own share of the produce, 
 because the lord, who laid out nothing, 
 was to get ono half of whatever it 
 produced. The tithe, which is but a 
 tenth of the produce, is found to be a 
 very great hindrance to improvement. 
 A tax, therefore, which amounted to 
 one-half, must have been an effectual 
 bar to it. It might be the interest of 
 a metayer to make the land produce 
 as much as could be brought out of it 
 by means of the stock furnished by the 
 proprietor ; but it could never be his 
 interest to mix any part of his own 
 with it. In France, where five parts 
 out of six of the whole kingdom are 
 said to be still occupied by this species 
 of cultivators, the proprietors complain 
 that their metayers take every oppor- 
 tunity of employing the master's cattle 
 rather in carriage than in cultivation ; 
 because in the one case they get the 
 whole profits to themselves, in the other 
 they share them with their landlord." 
 
 It is indeed implied in the very na- 
 ture of the tenure, that all improve- 
 ments which require expenditure of 
 capital, must be made with the capital 
 of the landlord. This, however, is es- 
 sentially the case even in England, 
 whenever the fanners are tenants-at- 
 will: or (if Arthur Young is right) 
 even on a "nine years lease." If the 
 landlord is willing to provide capital 
 for improvements, the metayer has the 
 strongest interest in promoting them, 
 since half the benefit of them will ac- 
 crue to himself. As however the per- 
 petuity of tenure which, in the case 
 we are discussing, he enjoys by custom, 
 renders his consent a necessary condi- 
 tion ; the spirit of routine, and dislike 
 of innovation, characteristic of an agri- 
 cultural people when not corrected by 
 education, are no doubt, as the advo- 
 cates of the system seem to admit, a 
 serious hindrance to improvement. 
 
 3. The metayer system has met 
 with no mercy from English authori- 
 ties. " There is not one word to be 
 said in favour of the practice," says 
 Arthur Young,* "and a thousand ar- 
 guments that might be used against 
 it. The hard plea of necessity can 
 Travelt, vol i. pp. 404-5.
 
 136 
 
 BOOK H. CHAPTER VIII. 3. 
 
 alone be urged in its favour; the po- 
 verty of the farmers being so great, 
 that the landlord must stock the farm, 
 or it could not be stocked at all : this 
 is a most cruel burthen to a proprietor, 
 who is thus obliged to run much of the 
 hazard of farming in the most dan- 
 gerous of all methods, that of trusting 
 his property absolutely in the hands 
 of people who are generally ignorant, 
 many careless, and some undoubtedly 
 wicked. ... In this most miserable 
 of all the modes of letting land, the 
 defrauded landlord receives a con- 
 temptible rent; the farmer is in the 
 lowest state of poverty ; the land is 
 miserably cultivated ; and the nation 
 sutlers as severely as the parties them- 
 selves. . . . Wherever* this system 
 prevails, it may be taken for granted 
 that a useless and miserable population 
 is found. . . . Wherever the country 
 (that I saw) is poor and unwatered, 
 in the Milanese, it is in the hands of 
 metayers:" they are almost always 
 in debt to their landlord for seed 
 or food, and "their condition is 
 more wretched than that of a day 
 labourer. . . . Theref are but few 
 districts'' (in Italy) " where lands 
 are let to the occupying tenant at 
 a money-rent ; but wherever it is 
 found, their crops are greater; a clear 
 proof of the imbecility of the metaying 
 system." " Wherever it" (the metayer 
 system) " has been adopted, 1 ' says 
 Mr. M'Culloch,! "it has put a stop 
 to all improvement, and has reduced 
 the cultivators to the most abject po- 
 verty." Mr. Jones shares the common 
 opinion, and quotes Turgot and Destutt- 
 1 racy in support of it. The impression, 
 however, of all these writers (notwith- 
 standing Arthur Young's occasional 
 references to Italy) seems to be chiefly 
 derived from France, and France before 
 the Revolution. || Now the situation of 
 French metayers under the old regime 
 
 * Travels, vol. ii. 151-3. 
 
 t Ibid. ii. 217. 
 
 t Principles of Political Economy, 3rd ed. 
 p. 471. 
 
 Estay on the Distribution of Wealth, pp. 
 102-4. ' 
 
 'I M. do Tracy is partially an exception, 
 Inasmuch as his experience reaches lower 
 down than the revolutionary period : but ho 
 
 by no means represents the typical 
 form of the contract. It is essential 
 to that form, that the proprietor pays 
 all the taxes. But in France the ex- 
 emption of the noblesse from direct 
 taxation had led the Government to 
 throw the whole burthen of their ever- 
 increasing fiscal exactions upon the 
 occupiers : and it is to these exactions 
 that Turgot ascribed the extreme 
 wretchedness of the metayers : a 
 wretchedness in some cases so exces- 
 sive, that in Limousin and An;v>u- 
 mois (the provinces which he admi- 
 nistered) they had seldom more, ac- 
 cording to him, after deducting all 
 burthens, than from twenty-five to 
 thirty livres (20 to 24 shillings) per 
 head for their whole annual consump- 
 tion : " I do not mean in money, but 
 including all that they consume in 
 kind from their own crops."* When 
 we add that they had not the virtual 
 fixity of tenure of the metayers of Italy, 
 (" in Limousin,'' says Arthur Young, f 
 " the metayers are considered as little 
 better than menial servants, removable 
 at pleasure, and obliged to conform in 
 all tilings to the will of the landlords,") 
 
 admits (as Mr. Jones has himself stated in 
 another place) that he is acquainted only 
 with a limited district, of great subdivision 
 and unfertile soil. 
 
 M. Passy is of opinion, that a French pea- 
 santry must be in indigence and the country 
 badly cultivated on a metayer system, be- 
 cause the proportion of the produce claim- 
 able by the landlord is too high ; it being 
 only in more favourable climates that any 
 land, not of the most exuberant fertility, 
 can pay half its gross produce in rent, and 
 leave enough to peasant farmers to enable 
 them to grow successfully the more expen- 
 sive and valuable products of agriculture. 
 (On System* of Culture, p. 35.) This is an 
 objection only to a particular numerical pro- 
 portion, which is indeed the common one, 
 but is not essential to the system. 
 
 * See the " Memoir on the Surcharge of 
 Taxes suffered by the Generality of Limoges, 
 addressed to the Council of State in 1786," 
 pp. 260-304 of the fourth volume of Turgot's 
 Works. The occasional engagements of 
 landlords (as mentioned by Arthur Young) 
 to pay a part of the taxes, were, according 
 to Turgot, of recent origin, under the com- 
 pulsion of actual necessity. " The proprietor 
 only consents to it when he can find no me- 
 tayer on other terms ; consequently, even in 
 that case, the metayer is always reduced to 
 what is barely sufficient to prevent him from 
 dying of hunger." (p. 27c), 
 
 t Vol, i. p,404.
 
 METAYERS. 
 
 187 
 
 It is evident that their case affords no 
 argument against the metayer system 
 in its better form. A population who 
 could call nothing their own who, like 
 tho Irish cottiers, could not in any 
 contingency be worse off had nothing 
 to restrain them from multiplying, and 
 subdividing the laud, until stopped by 
 actual starvation. 
 
 We shall find a very different pic- 
 ture, by the most accurate authorities, 
 of the metayer cultivation of Italy. In 
 the first place, as to subdivision. In 
 Lombardy,accordingtoChateauvieux*, 
 there are few farms which exceed sixty 
 acres, and few which have less than ten. 
 These farms are all occupied by metay- 
 ers at half profit. They invariably dis- 
 play " an extentf and arichness in build- 
 ings rarely known in any other country 
 in Europe." Their plan "affords the 
 greatest room with the least extent of 
 building; is best adapted to arrange 
 and secure the crop ; and is, at the 
 same time, the most economical, and 
 the least exposed to accidents by fire." 
 The court-yard " exhibits a whole so 
 regular and commodious, and a system 
 of such care and good order, that our 
 dirty and ill-arranged farms can con- 
 vey no adequate idea of." The same 
 description applies to Piedmont. The 
 rotation of crops is excellent. " I 
 should think} no country can bring so 
 large a portion of its produce to market 
 as Piedmont." Though the soil is not 
 naturally very fertile, " the number of 
 cities is prodigiously great." The 
 agriculture must, therefore, be emi- 
 nently favourable to the net as well 
 as to the gross produce of the land. 
 " Each plough works thirty-two acres 
 in the season. . . . Nothing can be 
 more perfect or neater than the hoeing 
 and moulding up the maize, when in 
 full growth, by a single plough, with 
 a pair of oxen, without injury to a 
 single plant, while all the weeds are 
 effectually destroyed/' So much for 
 agricultural skill. " Nothing can be 
 so excellent as the crop which prece/les 
 i'.nd that which follows it." The 
 A heat "is thrashed by a cylinder, 
 
 * Lelten front Italy, translated by Kigby, 
 P. 16. 
 t Jbi<3. pp. 19, 20. I Ibid. pp. 2*-31. 
 
 drawn by ahorse, and guided by a boy, 
 while the labourers turn over the straw 
 with forks. This process lasts nearly 
 a fortnight : it is quick and economical, 
 
 and completely gets out the grain 
 
 In no part of the world are the economy 
 and the management of the land better 
 understood than in Piedmont, and 
 this explains the phenomenon of its 
 great population and immense export 
 of provisions." All this under metayer 
 cultivation. 
 
 Of the valley of the Arno, in its 
 whole extent, both above and below 
 Florence, the same writer thus speaks ;* 
 "Forests of olive-trees covered the 
 lower parts of the mountains, and by 
 their foliage concealed an infinite 
 number of small farms, which peopled 
 these parts of the mountains : chest- 
 nut-trees raised their heads on the 
 higher slopes, their healthy verdure 
 contrasting with the pale tint of the 
 olive-trees, and spreading a brightness 
 over this amphitheatre. The road was 
 bordered on each side with village- 
 houses, not more than a hundred paces 
 
 from each other They are 
 
 placed at a little distance from tho 
 road, and separated from it by a wall, 
 and a ten-ace of some feet in extent. On 
 the wall are commonly placed many 
 vases of antique forms, in which 
 flowers, aloes, and young orange-trees 
 are growing. The house itself is com- 
 pletely covered with vines 
 
 Before these houses we saw groups of 
 peasant females dressed in white linen, 
 silk corsets, and straw hats ornamented 
 
 with flowers These houses 
 
 being so near each other, it is evident 
 that the land annexed to them must be 
 small, and that property, in these 
 valleys, must be very much divided ; 
 the extent of these domains being 
 from three to ten acres. The land lies 
 round the houses, and is divided into 
 fields by small canals, or rows of trees, 
 some of which are mulberry-trees, 
 but the greatest number poplars, the 
 leaves of which are eaten by the cattle. 
 
 Each tree supports a vine 
 
 These divisions, arrayed in oblong 
 squares, are large enough to be cul- 
 tivated by a plough without wheel?, 
 * Pp. 78-3.
 
 189 
 
 BOOK H. CHAPTER VIII. S 8- 
 
 and a pair of oxen. There is a pair of 
 oxen between ten or twelve of the 
 farmers; they employ them succes- 
 sively in the cultivation of all the farms. 
 .... Almost every farn/maintnins a 
 well-looking horse, which goes in a 
 small two-wheeled cart, neatly made, 
 and painted red ; they serve for all the 
 purposes of draught for the farm, and 
 and also to convey the farmer's daugh- 
 ters to mass and to balls. Thus, on 
 holidays, hundreds of these little carts 
 are seen flying in all directions, carry- 
 ing the young women, decorated with 
 flowers and ribbons.' 1 
 
 This is not a picture of poverty ; and 
 so far as agriculture is concerned, it 
 effectually redeems metayer cultiva- 
 tion, as existing in these countries, 
 from the reproaches of English writers ; 
 but with respect to the condition of 
 the cultivators, Chateauvieux's testi- 
 mony is, in some points, not so favour- 
 able. " It is* neither the natural ferti- 
 lity of the soil, nor the abundance 
 which strikes the eye of the traveller, 
 which constitute the well-being of its 
 inhabitants. It is the number of in- 
 dividuals among whom the total pro- 
 duce is divided, which fixes the portion 
 that each is enabled to enjoy. Here it 
 is very small. I have thus far, indeed, 
 exhibited a delightful country, well 
 watered, fertile, and covered with a 
 perpetual vegetation ; I have shown it 
 divided into countless inclosures, 
 which, like so many beds in a garden, 
 display a thousand varying produc- 
 tions ; I have shown, that to all these 
 inclosures are attached well-built 
 houses, clothed with vines, and deco- 
 rated with flowers ; but, on entering 
 them, we find a total want of all the 
 conveniences of life, a table more than 
 frugal, and a general appearance of 
 privation." Is not Chateauvieux here 
 unconsciously contrasting the condition 
 of the metayers with that of the 
 fanners of other countries, when the 
 proper standard with which to com- 
 pare it is that of the agricultural day- 
 labourers ? 
 
 Arthur Young says,f " I was assured 
 that these metayers are (especially near 
 
 * Pp. 73-G. 
 t Travel, vol. ii. p. 15$. 
 
 Florence) much at their ease ; that on 
 holidays they are dressed remarkably 
 well, and not without objects of luxury, 
 as silver, gold, and silk : and live well, 
 on plenty of bread, wine, and legumes. 
 In some instances this may possibly be 
 the case, but the general fact is con- 
 trary. It is absurd to think that me- 
 tayers, upon such a farm as is cul- 
 tivated by a pair of oxen, can live at 
 their ease ; and a clear proof of their 
 poverty is this, that the landlord, who 
 provides half the live stock, is often 
 obliged to lend the peasant money to 
 procure his half. The meta- 
 yers, not in the vicinity of the city, are 
 so poor, that landlords even lend them 
 corn to eat : their food is black bread, 
 made of a mixture with vetches ; and 
 their drink is very little wine, mixed 
 with water, and called aqiiarolle; meat 
 on Sundays only ; their dress very 
 ordinary." Mr. Jones admits the su- 
 perior comfort of the metayers near 
 Florence, and attributes it partly to 
 straw-plaiting, by which the women of 
 the peasantry can earn, according to 
 Chateauvieux,* from fifteen to twenty 
 pence a-day. But even this fact tells 
 in favour of the metayer system ; for 
 in those parts of England in which 
 either straw-plaiting or lace-making is 
 carried on by the \vomen and children 
 of the labouring class, as in Bedford- 
 shire and Buckinghamshire, the con- 
 dition of the class is not better, but 
 rather worse than elsewhere, the wages 
 of agricultural labour being depressed 
 by a full equivalent. 
 
 In spite of Chateauvieux's state- 
 ment respecting the poverty of the 
 metayers, his opinion, in respect to 
 Italy at least, is given in favour of the 
 system. " It occupiesf and constantly 
 interests the proprietors, which is never 
 the case with great proprietors who 
 lease their estates at fixed rents. It 
 establishes a community of interests, 
 and relations of kindness between the 
 proprietors and the metayers ; a kind- 
 ness which I have often witnessed, and 
 from which result great advantages in 
 the moral condition of society. The 
 proprietor, under this system, alwayi 
 
 * Itttersfrosn I/cJy, p. 75, 
 t Ibid. pp. 2W-6.
 
 METAYERS. 
 
 189 
 
 Interested in the success of the crop, 
 never refuses to make an advance 
 upon it, which the land promises to 
 repay with interest. It is by these 
 advances, and by the hope thus in- 
 spired, that the rich proprietors o 
 land have gradually perfected the 
 whole rural economy of Italy. It is 
 to them that it owes the numerous 
 systems of irrigation which water its 
 soil, as also the establishment of the 
 terrace culture on the hiils: gradual 
 but permanent improvements, which 
 common peasants, for want of means, 
 could never have effected, and which 
 could never have been accomplished 
 by the farmers, nor by the great 
 proprietors who let their estates at 
 fixed rents, because they are not 
 sufficiently interested. Thus the in- 
 terested system forms of itself that 
 alliance between the rich proprietor, 
 whose means provide for the improve- 
 ment of the culture, and the metayer, 
 whose care and labours are directed, 
 by a common interest, to make the 
 most of these advances." 
 
 But the testimony most favourable 
 to the system is that of Sismondi, 
 which has the advantage of being 
 specific, and from accurate knowledge ; 
 his information being not that of a 
 traveller, but that of a resident pro- 
 prietor, intimately acquainted with 
 rural life. His statements apply to 
 Tuscany generally, and more par- 
 ticularly to the Val di Nievole, in 
 which his own property lay, and which 
 is not within the supposed privileged 
 circle immediately round Florence. It 
 is one of the districts in which the 
 size of farms appears to be the smallest. 
 The following is his description of the 
 dwellings and mode of life of the me- 
 tayers of that district.* 
 
 " The house, built of good walls with 
 lime and mortar, has always at least 
 one story, sometimes two, above the 
 ground floor. On the ground floor are 
 generally the kitchen, a cowhouse for 
 twohomed cattle, and the storehouse, 
 which takes its name, tinaia, from the 
 large vats (tini) in which the wine is 
 put to ferment, without any pressing : 
 
 From his Sixth Essay, formerly re- 
 ferred to. 
 
 it is there also that the metayer locks 
 up his casks, his oil, and his grain. 
 Almost always there is also a shed 
 supported against the house, where he 
 can work under cover to mend his 
 tools, or chop forage for his cattle. On 
 the first and second stories are two, 
 three, and often four bedrooms. The 
 largest and most airy of these is 
 generally destined by the metayer, in 
 the months of May and June, tu the 
 bringing up of silkworms. Great 
 chests to contain clothes and linen, 
 and some wooden chairs, are the chief 
 furniture of the chambers ; but a 
 newly-married wife always brings with 
 her a wardrobe of walnut wood. The 
 beds are uncurtained and unroofed, but 
 on each of them, besides a good pail- 
 lasse filled with the elastic straw of 
 the maize plant, there are one or two 
 mattresses of wool, or, among the 
 poorest, of tow, a good blanket, sheets 
 of strong hempen cloth, and on the 
 best bed of the family a coverlet of silk 
 padding, which is spread on festival 
 days. The only fireplace is in the 
 kitchen ; and there also is the great 
 wooden table where the family dines, 
 and the benches ; the great chest 
 which serves at once for keeping the 
 bread and other provisions, and for 
 kneading ; a tolerably complete though 
 cheap assortment of pans, dishes, and 
 earthenware plates : one or two metal 
 lamps, a steelyard, and at least two 
 copper pitchers for drawing and hold- 
 ing water. The linen and the work- 
 ing clothes of the family have all bsen 
 spun by the women of the house. The 
 clothes, both of men and of women, 
 are of the stuff called mezza lana when 
 thick, mola when thin, and made of a 
 coarse thread of hemp or tow, filled up 
 with cotton or wool ; it is dried by the 
 same women by whom it was spun. It 
 would hardly be believed what a quan- 
 tity of cloth and of mezza lana the 
 peasant women are able to accumu- 
 late by assiduous industry ; how many 
 sheets there are in the store ; what a 
 number of shirts, jackets, trowsers, 
 petticoats, and gowns are possessed by 
 every member of the family. By way 
 of example I add in a note the inven- 
 tory of the peasant family best known
 
 190 
 
 to me : it is neither one of the richest 
 nor of the poorest, and lives happily by 
 its industry on half the produce of less 
 than ten arpents of land.* The young 
 women had a marriage portion of fifty 
 crowns, twenty paid down, and the rest 
 by instalments of two every year. The 
 Tuscan crown is worth six francs 
 [4s. lOdl. The commonest marriage 
 portion of a peasant girl in the other 
 parts of Tuscany, where the metairies 
 are larger, is 100 crowns, 600 francs." 
 Is this poverty, or consistent with 
 poverty? When a common, M. de 
 Sismondi even says the common, mar- 
 riage portion of a metayer's daughter 
 is 24Z. English money, equivalent to 
 at least bOl. in Italy and in that rank 
 of life ; when one whose dowry is only 
 half that amount, has the wardrobe 
 described, which is represented by 
 Sismondi as a fair average ; the class 
 must be fully comparable, in general 
 condition, to a large proportion even of 
 capitalist fanners in other countries ; 
 and incomparably above the day- 
 labourers of any country, except a new 
 colony, or the United States. Very 
 little can be inferred, against such evi- 
 dence, from a traveller's impression of 
 the poor quality of their food. Its in- 
 expensive character may be rather the 
 effect of economy than of necessity. 
 Costly feeding is not the favourite 
 luxury of a southern people ; their 
 diet in all classes is principally vege- 
 table, and no peasantry on the 
 Continent has the superstition of the 
 English labourer respecting white 
 
 * Inventory of the troutseau of Jane, 
 daughter of Valente Papini, on hermarriage 
 with Giovacchino Landi, the 29th of April 
 1835, at Porta Vecchla, near Pescia : 
 
 "28 shifts, 7 best dresses (of particular 
 fabrics of silk), 7 dresses of printed cotton, 
 2 winter working dresses (mezza tena), 3 
 summer working dresses and petticoats 
 (mola), 3 white petticoats, 5 aprons of printed 
 linen, 1 of black silk, 1 of black merinos, 9 
 coloured working aprons (mola), 4 white, 8 
 coloured, and 3 silk, handkerchiefs, 2 em- 
 broidered veils and one of tulle, 3 towels, 14 
 pairs of stockings, 2 hats (one of felt, the 
 other of fine straw) ; 2 cameos set in gold, 2 
 %lden earrings, 1 chaplet with two Roman 
 liver crowns, 1 coral necklace with its cross 
 jf gold. . . . All the richer married women 
 ftf the class have, besides, the i-este di seta, 
 the great holiday dress, which they only wear 
 Hour or five times in their lives." 
 
 BOOK II. CHAPTER V1I1. 8. 
 
 bread. But the nourishment of the 
 Tuscan peasants, according to Sis- 
 mondi, " is wholesome and various : 
 its basis is an excellent wheaten 
 bread, brown, but pure from bran and 
 from all mixture." In the bad 
 season, they take but two meals a 
 day: at ten in the morning they 
 eat their pollentn, at the beginning 
 of the night their soup, and after 
 it bread with a relish of some sort 
 (companatico). In summer they have 
 three meals, at eight, at one, and in 
 the evening ; but the fire is lighted 
 only once a day, for dinner, which 
 consists of sonp, and a dish of salt meat 
 or dried fish, or haricots, or greens, 
 which are eaten with bread. Salt 
 meat enters in a very email quantity 
 into this diet, for it is reckoned that 
 forty poninds of salt pork per head 
 suffice amply for a year's provision ; 
 twice a week a small piece of it is put 
 into the soup. On Sundays they have 
 always on the table a dish of fresh 
 meat, but a piece which weighs only a 
 pound or a pound and a half suffices 
 for the whole family, however numerous 
 it may be. It must not be forgotten 
 that the Tuscan peasants generally 
 produce olive oil for their own con- 
 sumption : they use it not only for 
 lamps, but as seasoning to all the 
 vegetables prepared for the table, 
 which it renders both more savoury 
 and more nutritive. At breakfast 
 their food is bread, and sometimes 
 cheese and fruit ; at supper, bread and 
 salad. Their drink is composed of the 
 inferior wine of the country, the vinella 
 or piquette made by fermenting in 
 water the pressed skins of the grapes. 
 They always, however, reserve a little 
 of their best wine for the day when 
 they thresh their corn, and for some 
 festivals which are kept in families. 
 About fifty bottles of vinella per annum, 
 and five sacks of wheat (about 1000 
 pounds of bread) are considered as the 
 supply necessary for a full grown man.'' 
 The remarks of Sismondi on the 
 moral influences of this state of so- 
 ciety are not less worthy of attention. 
 The rights and obligations of the 
 metayer being fixed by usage, and all 
 taxes and rates being paid by the pro-
 
 METAYERS. 
 
 191 
 
 prietor, "the metayer has the ml van- 
 tages of landed property without the 
 burthen of defending it. It is the 
 landlord to whom, with the land, lie- 
 long all its disputes : the tenant lives 
 in peace with all his neighbours ; be- 
 tween him and them there is no motive 
 tor rival! ty or distrust, he preserves a 
 good understanding with them, as well 
 as with his landlord, with the tax- 
 collector, and with the church : he 
 sells little, and buys little ; he touches 
 little money, but he seldom has any to 
 pay. The gentle and kindly character 
 of the Tuscans is often spoken of, but 
 without sufficiently remarking the 
 cause which has contributed most to 
 keep up that gentleness ; the tenure, 
 by which the entire class of farmers, 
 more than three-fourths of the popula- 
 tion, are kept free from almost every 
 occasion for quarrel.'' The fixity of 
 tenure which the metayer, so long as 
 he fulfils his own obligations, possesses 
 by usage, though not by law, gives 
 him the local attachments, and almost 
 the strong sense of personal interest, 
 characteristic of a proprietor. "The 
 metayer lives on his metairie as on his 
 inheritance, loving it with affection, 
 labouring incessantly to improve it, 
 confiding in the future, and making 
 sure that his land will be tilled after 
 him by his children and his children's 
 children. In fact, the majority of 
 metayers live from generation to gene- 
 ration on the same farm ; they know 
 it in its details with a minuteness 
 which the feeling of property can 
 alone give. The plots terrassed up, one 
 above the other, are often not above 
 four feet wide ; but there is not one of 
 them, the qualities of which the me- 
 tayer has not studied. This one is 
 dry, that other is cold and damp : 
 here the soil is deep, there it is a mere 
 crust which hardly covers the rock; 
 wheat thrives best on one, rye on ano- 
 ther: here it would bo labour wasted 
 to sow Indian corn, elsewhere the soil 
 is unfit for beans and lupins, further 
 off flax will grow admirably, the edge 
 of this brook will be suited for hemp. 
 In this way one learns with surprise 
 from the metayer, that in a space of 
 ten arpents, the soil, the aspect, and 
 
 the inclination of the ground 
 greater variety than a rich farmer is 
 generally able to distinguish in a farm 
 of five hundred acres. For the latter 
 knows that he is only a temporary 
 occupant ; and moreover, that he must 
 conduct his operations by general rules, 
 and neglect details. But the expe- 
 rienced metayer has had his intelli- 
 gence so awakened by interest and 
 affection, as to be the best of observers ; 
 and with the whole future before him, 
 he thinks not of himself alone, but of 
 his children and grandchildren. There- 
 fore, when he plants an olive, a tree 
 which lasts for centuries, and exca- 
 vates at the bottom of the hollow in 
 which he plants it, a channel to let out 
 the water by which it would be in- 
 jured, he studies all the strata of the 
 earth which he has to dig out."* 
 
 4. I do not offer these quota- 
 tions as evidence of the intrinsic 
 excellence of the metayer system ; but 
 they surely suffice to prove that 
 neither "land miserably cultivated" 
 nor a people in " the most abject po- 
 verty," have any necessary connexion 
 with it, and that the unmeasured vitu- 
 peration lavished upon the system by 
 English writers, is grounded on an 
 
 * Of the intelligence of this interesting 
 people, M. de Sismondi speaks in the most 
 favourable terms. Few of them can read ; 
 but there is often one member of the family 
 destined for the priesthood, who reads to 
 them on winter evenings. Their language 
 differs little from the purest Italian. The 
 taste for improvisation in verse is general. 
 " The peasants of the Vale of Nievole fre- 
 quent the theatre in summer on festival days, 
 from ninetn eleven at night: their admission 
 costs them little more than five French sous 
 [2|<i]. Their favourite author is Alfieri; 
 the whole history of the Atridse is familiar 
 to these people who cannot read, and who 
 seek from that austere poet a relaxatioR 
 from their rude labours." Unlike most 
 rustics, they find pleasure in the beauty of 
 their country. "In the hills of the vale of 
 Nievole there is in front of every house a 
 threshing-ground, seldom of more than 25 or 
 30 square fathoms ; it is often the only level 
 space in the whole farm : it is at the same 
 time a terrace which commands the plains 
 and the valley, and looksout upon a delight- 
 ful country, scarcely ever have I stood still 
 to admire it, without the metayer's coming 
 out to enjoy my admiration, and point out 
 with his finger the beauties which bethought 
 might have escaped my notice."
 
 id* 
 
 BOOK II. CHAPTEK Vlil. g 4. 
 
 extremely narrow view of the subject. 
 I look upon the rural economy of Italy 
 as simply so much additional evidence 
 iu favour of small occupations with 
 permanent tenure. It is an example 
 of what can be accomplished by those 
 two elements, even under the disad- 
 vantage of the peculiar nature of the 
 metayer contract, in which the motives 
 to exertion on the part of the tenant 
 are only half as strong as if he farmed 
 the land on the same footing of per- 
 petuity at a money-rent, either fixed, 
 or varying according to some rule 
 which would leave to the tenant the 
 whole benefit of his own exertions. 
 The metayer tenure is not one which 
 we should be anxious to introduce 
 where the exigencies of society had 
 not naturally given birth to it ; but 
 neither ought we to be eager to abolish 
 it on a mere a priori view of its dis- 
 advantages. If the system in Tus- 
 cany works as well in practice as it is 
 represented to do, with every appear- 
 ance of minute knowledge, by so com- 
 petent an authority as Sismondi ; if 
 the mode of living of the people, and 
 the size of farms, have for ages main- 
 tained and still maintain themselves* 
 such as they are said to be by him, it 
 were to be regretted that a state of 
 rural well-being so much beyond what 
 is realised in most European countries, 
 should be put to hazard by an attempt 
 to introduce, under the guise of agri- 
 cultural improvement, a system of 
 money-rents and capitalist farmers. 
 Even where the metayers are poor, 
 and the subdivision great, it is not to 
 be assumed as of course, that the 
 change would be for the better. The 
 enlargement of farms, and the intro- 
 duction of what are called agricultural 
 improvements, usually diminish the 
 
 * " We never," says Sismondi, " find a 
 family of metayers proposing to their land- 
 lord to divide the metairie, unless the work 
 is really more than they can do, and they 
 feel assured of retaining the same enjoyments 
 on a smaller piece of ground. We never 
 find several sons all marrying, and forming 
 as many new families: only one marries 
 and undertakes the charge of the household: 
 none of the others marry unless the first is 
 childless, or unless some one of them has the 
 offer of a new metairie." New Principle! 
 (if Political Economy, book iii. ch.S. 
 
 number of labourers employed on the 
 land ; and unless the growth of capital 
 in trade and manufactures affords an 
 opening for the displaced population, 
 or unless there are reclaimable wastes 
 on which they can be located, compe- 
 tition will so reduce wages, that thej 
 will probably be worse off as day. 
 labourers than they were as metayers. 
 Mr. Jones very properly objects 
 against the French Economists of the 
 last century, that in pursuing their 
 favourite object of introducing money- 
 rents, they turned their minds solely 
 to putting farmers in the place of 
 metayers, instead of transforming the 
 existing metayers into farmers ; which, 
 as he justly remai'ks, can scarcely be 
 effected, unless, to enable the metayers 
 to save and become owners of stock, 
 the proprietors submit for a conside- 
 rable time to a diminution of income, 
 instead of expecting an increase of it, 
 which has generally been their imme- 
 diate motive for making the attempt. 
 If this transformation were effected, 
 and no other change made in the me- 
 tayer's condition ; if, preserving all the 
 other rights which usage ensures to 
 him, he merely got rid of the land- 
 lord's claim to half the produce, paying 
 in lieu of it a moderate fixed rent ; he 
 would be so far in a better position 
 than at present, as the whole, instead 
 of only half the fruits of any improve- 
 ment he made, would now belong to 
 himself; but even so, the benefit would 
 not be without alloy ; for a metayer, 
 though not himself a capitalist, has a 
 capitalist for his partner, and has the 
 use, in Italy at least, of a considerable 
 capital, as is proved by the excellence 
 of the farm buildings : and it is not 
 probable that the landowners would 
 any longer consent to peril their move- 
 able property on the hazards of agri- 
 cultural enterprise, when assured of a 
 fixed money income without it. Thus 
 would the question stand, even if the 
 change left undisturbed the metayer's 
 virtual fixity of tenure, and converted 
 him, in fact, into a peasant proprietor 
 at a quit rent. But if we suppose him 
 converted into a mere tenant, displace- 
 able at the landlord's will, and liable 
 to have his reiit raised by competition
 
 COTTlEES. 
 
 103 
 
 to any amount which any unfortunate 
 bcintr in search of subsistence can be 
 found to offer or promise for it; he 
 would lose all the features in his con- 
 dition which preserve it from being 
 
 deteriorated : he would be cast down 
 from his present position of a kind of 
 half proprietor of the land, and would 
 sink into a cottier tenant. 
 
 CHAPTER IX. 
 
 OF COTTIERS. 
 
 1. BY the general appellation of 
 cottier tenure, 1 shall designate all 
 cases without exception, in which the 
 labourer makes his contract for land 
 without the intervention of a capitalist 
 farmer, and in which the conditions of 
 the contract, especially the amctmt of 
 rent, are determined not by custom but 
 by competition. The principal European 
 example of this tenure is Ireland, and 
 it is from that country that the term 
 cottier is derived.* By far the greater 
 part of the agricultural population 
 of Ireland might until very lately 
 have been said to be cottier-tenants ; 
 except so far as the Ulster tfjiant- 
 right constituted an exception. There 
 was, indeed, a numerous class of 
 labourers who (we may presume 
 through the refusal either of proprie- 
 tors or of tenants in possession to per- 
 mit any further subdivision) had been 
 unable to obtain even the smallest 
 patch of land as permanent tenants. 
 J5ut, from the deficiency of capital, 
 the custom of paying wages in land 
 was so universal, that even those who 
 worked as casual labourers for the 
 cottiers or for such larger farmers as 
 were found in the country, were 
 usually paid not in money, but by 
 permission to cultivate for the season 
 a piece of ground, which was gene.-ally 
 delivered to them by the farmer ready 
 manured, and was known by the name 
 
 * In its original acceptation, the word 
 "cottier" designated a class of sub- tenants, 
 who rent a cottage and an acre or two of land 
 from the small farmers. But the usage of 
 writers has long since stretched the term to 
 kiclude those small farmers themselves, and 
 generally all peasant farmers whose rents are 
 determined hy competition. 
 P.*. 
 
 of conacre. For this they agreed to 
 pay a money rent, often of several 
 pounds an acre, but no money actually 
 passed, the debt being worked out in 
 labour, at a money valuation. 
 
 The produce, on the cottier system, 
 being divided into two portions, rent, 
 and the remuneration of the labourer ; 
 the one is evidently determined by the 
 other. The labourer has whatever 
 the landlord does not take : the con- 
 dition of the labourer depends on the 
 amount of rent. But rent, being regu- 
 lated by competition, depends upon the 
 relation between the demand for land, 
 and the supply of it. The demand for 
 land depends on the number of com- 
 petitors, and the competitors are the 
 whole rural population. The effect, 
 therefore, of this tenure, is to bring the 
 principle of population to act directly 
 on the land, and not, as in England, 
 on capital. Rent, in this state of 
 things, depends on the proportion be- 
 tween population and land. As the 
 land is a fixed quantity, while popula- 
 tion has an unlimited power of in- 
 crease ; unless something checks that 
 increase, the competition for land 
 soon forces up rent to the highest 
 point consistent with keeping the 
 population alive. The effects, there- 
 fore, of cottier tenure depend on the 
 extent to which the capacity of popu- 
 lation to increase is controlled, either 
 by custom, by individual prudence, or 
 by starvation and disease. 
 
 It would be an exaggeration to 
 affirm, that cottier tenancy is gabso- 
 lutely incompatible with a prosperous 
 condition of the labouring class. If 
 we could suppose it to exist among a
 
 194 
 
 BOOK H. CHAPTER IX. 1. 
 
 people tc whom a high standard of 
 comfort was habitual ; whose require- 
 ments were such, that they would not 
 offer a higher rent for land than would 
 leave them an ample subsistence, and 
 whose moderate increase of numbers 
 left no unemployed population to force 
 up rents by competition, save when 
 the increasing produce of the land 
 from increase of skill would enable a 
 higher rent to be paid without incon- 
 venience ; the cultivating class might 
 be as well remunerated, might have as 
 large a share of the necessaries and 
 Comforts of life, on this system of tenure 
 as on any other. They would not, 
 however, while their rents were arbi- 
 trary, enjoy any of the peculiar ad- 
 vantages which metayers on the Tuscan 
 system derive from their connexion 
 with the land. They would neither 
 have the use of a capital belonging to 
 their landlords, nor would the want of 
 this be made up by the intense motives 
 to bodily and mental exertion which 
 act upon the peasant who has a per- 
 manent tenure. On the contrary, any 
 increased value given to the land by 
 the exertions of the tenant, would have 
 no effect but to raise the rent against 
 himself, either the next year, or at 
 farthest when his lease expired. The 
 landlords might have justice or good 
 sense enough not to avail themselves 
 of the advantage which competition 
 would give them ; and different land- 
 lords would do so in different degrees. 
 But it is never safe to expect that a 
 class or body of men will act in opposi- 
 tion to their immediate pecuniary in- 
 terest; and even a doubt on the 
 subject would be almost as fatal as a 
 certainty, for when a person is con- 
 sidering whether or not to undergo a 
 present exertion or sacrifice for a com- 
 paratively remote future, the scale is 
 turned by a very small probability 
 that the fruits of the exertion or 
 of the sacrifice would be taken from 
 him. The only safeguard against 
 these uncertainties would be the 
 grc jrth of a custom, insuring a perma- 
 nence of tenure in the same occupant, 
 without liability to any other increase 
 of rent than might happen to be sanc- 
 tioned by the general sentiments o f the 
 
 community. The Ulster tenant-right 
 is such a custom. The very consider- 
 able sums which outgoing tenants ob- 
 tain from their successors, for the good- 
 will of their farms,* in the first placo 
 actually limit the competition for land 
 to persons who have such sums to 
 ofier : while the same fact also proves 
 that full advantage is not taken by the 
 landlord of even that more limited 
 competition, since the landlord's rent 
 does not amount to the whole of what 
 the incoming tenant not only offers but 
 actually pays. He does so in the full 
 confidence that the rent will not be 
 raised ; and for this he has the guaran- 
 tee of a custom, not recognised by law, 
 but deriving its binding force from 
 another sanction, perfectly well under- 
 stood in Ireland/}- Without one or 
 other of these supports, a custom limit- 
 ing the rent of land is not likely to grow 
 up in any progressive community. If 
 wealth and population were stationary, 
 rent also would generally be station- 
 ary, and after remaining a long time 
 unaltered, would probably come to bo 
 considered unalterable. But all pro- 
 gress in wealth and population tends toa 
 rise of rents. Under a metayer system 
 there is an established mode in which 
 the owner of land is sure of partici- 
 pating in the increased produce drawn 
 from it. But on the cottier system he 
 can only do so by a readjustment of the 
 
 * " It is not uncommon for a tenant with- 
 out a lease to sell the bare privilege of occu- 
 pancy or possession of his farm, without any 
 visible sign of improvement having been made 
 by him, at from ten to sixteen, up to twenty 
 and even forty years purchase of the rent." 
 (Digett of Evidence taken by lord Devon'$ 
 Commitiion, Introductory Chapter.) The 
 compiler adds, " the comparative tranquillity 
 of that district" (Ulster) " may perhaps be 
 mainly attributable to this fai t." 
 
 f " It is in the great majority of cases not 
 a reimbursement for outlay incurred, or im- 
 provements effected on the land, but a mere 
 life insurance or purchase of immunity from 
 outrage." (Digest, ut tupra.) " The present 
 tenant-right of Ulster" (the writer judiciously 
 remarks) "is an embryo copyhold." " Kveii 
 there, if the tenant-right be disregarded, and 
 a tenant be ejected w ithout having received 
 the price of his good-will, outrages are gene- 
 rally the consequence." (Ch. viii.) " The 
 disorganized state of Tipperary, and the 
 agrarian combination throughout Ireland, 
 are but a methodized war to obtain th 
 Ulster tenant-right."
 
 COTTIERS. 
 
 19f. 
 
 contract, while that readjustment, in a 
 progressive community, would almost 
 always be to his advantage. His 
 interest, therefore, is decfdedly opposed 
 to the growth of any custom commuting 
 rent into a fixed demand. 
 
 2. Where the amount of rent is 
 not limited, either by law or custom, a 
 cottier system has the disadvantages 
 of the worst metayer system, with 
 scarcely any of the advantages by 
 which, in the best forms of that 
 tenure, they are compensated. It is 
 scarcely possible that cottier agricul- 
 ture should be other than miserable. 
 There is not the same necessity that 
 the condition of the cultivators should 
 be so. Since by a sufficient restraint 
 on population competition for land 
 could be kept down, and extreme 
 poverty prevented ; habits of prudence 
 and a high standard of comfort, once 
 established, would have a fair chance of 
 maintaining themselves : though even 
 in these favourable circumstances the 
 motives to prudence would be consider- 
 ably weaker than in the case of metay- 
 ers, protected by custom (like those of 
 Tuscany) from being deprived of their 
 farms : since a metayer family, thus 
 protected, could not be impoverished by 
 any other improvident multiplication 
 than their own, but a cottier family, 
 however prudent and self-restraining, 
 may have the rent raised against it by 
 the consequences of the multiplication 
 of other families. Any protection to 
 the cottiers against this evil could only 
 be derived from a salutary sentiment of 
 duty or dignity, pervading the class. 
 Fr< 'in this source, however, they might 
 derive considerable protection. If the 
 habitual standard of requirement 
 among the class were high, a young 
 man might not choose to offer a rent 
 which would leave him in a worse 
 condition than the preceding tenant ; 
 or it might be the general custom, as 
 it actually is in some countries, not to 
 marry until a farm is vacant. 
 
 But it is not where a high standard 
 of comfort has rooted itself in the habits 
 of the labouring classes, that we are 
 ever called upon to consider the effects 
 of a cottier system. That system is 
 
 found only where the habitual require- 
 ments of the rural labourers are the 
 lowest possible ; where, as long as 
 they are not actually starving, they 
 will multiply : and population is only 
 checked by the diseases, and the short- 
 ness of life, consequent on insufficiency 
 of merely physical necessaries. This 
 was the state of the largest portion of 
 the Irish peasantry. When a people 
 have sunk into this state, and still 
 more when they have been in it from 
 time immemorial, the cottier system is 
 an almost insuperable obstacle to their 
 emerging from it. When the habits of 
 the people are such that their increase 
 is never checked but by the impossi- 
 bility of obtaining a bare support, and 
 when this support can only be obtained 
 from land, all stipulations and agree- 
 ments respecting amount of rent are 
 merely nominal ; the competition for 
 land makes the tenants undertake to pay 
 more than it is possible they should pay, 
 and when they have paid all they can, 
 more almost always remains due. 
 
 " As it may fairly be said of the 
 Irish peasantry," said Mr. Revans, the 
 Secretary to the Irish Poor Law En- 
 quiry Commission,* "that every family 
 which has not sufficient land to yield 
 its food has one or more of its members 
 supported by begging, it will easily be 
 conceived that every endeavour is made 
 by the peasantry to obtain small hold- 
 ings, and that they are not influenced 
 in their biddings by the fertility of the 
 land, or by their ability to pay the 
 rent, but solely by the offer which in 
 most likely to gain them possession. 
 The rents which they promise, they 
 are almost invariably incapable of pay- 
 ing; and consequently they become 
 indebted to those under whom they 
 hold, almost as soon as they take 
 possession. They give up, in the shape 
 of rent, the whole produce of the land 
 with the exception of a sufficiency of 
 potatoes for a subsistence ; but as this 
 is rarely equal to the promised rent, 
 
 Evils qffJie State of Ireland, their Cantet 
 and their Remedy. Page 10. A pamphlet, 
 containing, among other things, an excellent 
 digest and selection of evidence from the mass 
 collected by the Commission presided over by 
 Archbishop 'VVhately. 
 
 2
 
 196 
 
 BOOK II. CHAPTER IX. 3. 
 
 they constantly Lave against them an 
 increasing balance. In some cases, 
 llie largest quantity of produce which 
 their holdings ever yielded, or which, 
 under their system of tillage, they 
 miild in the most favourable seasons 
 be made to yield, would not be equal 
 to the rent bid ; consequently, if the 
 peasant fulfilled his engagement with 
 his landlord, which he is rarely able to 
 accomplish, he would till the ground 
 for nothing, and give his landlord a 
 premium tor being allowed to till it. 
 On the sea-coast, fishermen, and in 
 tlie northern counties those who have 
 looms, frequently pay more in rent 
 than the market value of the whole 
 produce of the land they hold. It 
 might be supposed that they would be 
 better without land under such circum- 
 stances. But fishing might fail during 
 a week or two, and so might the de- 
 mand for the produce of the loom, 
 M-hen, did they not possess the land 
 upon which their food is grown, they 
 might starve. The full amount of the 
 rent bid, however, is rarely paid. The 
 peasant remains constantly in debt to 
 his landlord ; his miserable posses- 
 sionsthe wretched clothing of him- 
 self and of his family, the two or three 
 stools, and the few pieces of crockery, 
 which his wretched hovel contains, 
 would not, if sold, liquidate the stand- 
 ing and generally accumulating debt. 
 The peasantiy are mostly a year in 
 arrear, and their excuse for not paying 
 more is destitution. Should the pro- 
 duce of the holding, in any year, be 
 more than usually abundant, or should 
 the peasant by any accident become 
 possessed of any property, his comforts 
 cannot be increased ; he cannot indulge 
 in better food, nor in a greater quantity 
 of it. His furniture cannot be increased, 
 neithercanhiswife or children be better 
 clothed. The acquisition must go to 
 the person under whom he holds. The 
 accidental addition will enable him to 
 reduce his arrear of rent, and thus to 
 defer ejectment. But this must be the 
 bound of his expectation." 
 
 As an extreme instance of the in- 
 tensity of competition for land, and of 
 tho monstrous height to which it occa- 
 sionally forced up the nominal rent; 
 
 we may cite from the evidence taken 
 by Lord Devon's Commission,* a fact 
 attested by Mr. Ilurly, Clerk of the 
 Crown for Kerry : " 1 have known a 
 tenant bid for a farm that I was per- 
 fectly well acquainted with, worth 501. 
 a-year : I saw the competition get up 
 to such an extent, that he was declared 
 the tenant at 450Z." 
 
 3. In such a condition, what can 
 a tenant gain by any amount of in- 
 dustry or prudence, and what lose by 
 any recklessness ? If the landlord at 
 any time exerted his full legal rights, 
 the cottier would not be able even to 
 live. If by extra exertion he doubled 
 the produce of his bit of land, or if lie 
 prudently abstained from producing 
 mouths to eat it up, his only gain would 
 be to have more left to pay to his land- 
 lord ; while, if he had twenty children, 
 they would still be fed first, and the 
 landlord could only take what was left. 
 Almost alone amongst mankind the 
 cottier is in this condition, that he can 
 scarcely be either better or worse off 
 by any act of his own. If he were 
 industrious or prudent, nobody but his 
 landlord would gain ; if he is lazy or 
 intemperate, it is at his landlord's ex- 
 pense. A situation more devoid of 
 motives to either labour or self-com- 
 mand, imagination itself cannot con- 
 ceive. The inducements of free human 
 beings are taken away, and those of a 
 slave not substituted. He has nothing 
 to_ hope, and nothing to fear, except 
 being dispossessed of his holding, and 
 against this he protects himself by the 
 idtima ratio of a defensive civil war. 
 Rockism and Whiteboyism were the 
 determination of a people who had 
 nothing that could be called theirs but 
 a daily meal of the lowest description 
 of food, not to submit to being deprived 
 of that for other people's convenience. 
 
 Is it not, then, a bitter satire on the 
 mode in which opinions are formed on 
 the most important problems of human 
 nature and life, to find public instruc- 
 tors of the greatest pretension, imput- 
 ing the backwardness of Irish industry, 
 and the want of energy of the Irish 
 people in improving their condition, to 
 * Evidence, p. 851.
 
 COTTIERS. 
 
 197 
 
 a peculiar indolence and recklessness 
 in the Celtic race? Of all vulgar 
 yiodes of escaping from the considera- 
 tion of the effect of social and moral 
 influences on the human mind, the 
 most vulgar is that of attributing the 
 (liviTsities of conduct and character to 
 inherent natural differences. What 
 race would not be indolent and in- 
 Mim-iant when things are so arranged, 
 that they derive no advantage from 
 forethought or exertion? If such are 
 the arrangements in the midst of which 
 tlit.-y live and work, what wonder if 
 the listlessness and indifference so en- 
 gendered are not shaken off the first 
 moment an opportunity offers when ex- 
 ertion would really be of use ? It is 
 very natural that a pleasure-loving and 
 sensitively organized people like the 
 Irish, should be less addicted to steady 
 routine labour than the English, because 
 life has more excitements for them inde- 
 pendent of it ; but they are not less 
 lit t< J for it than theirCeltic brethren the 
 French, nor less so than the Tuscans, 
 or the ancient Greeks. An excitable 
 organization is precisely that in which, 
 by adequate inducements, it is easiest 
 to kindle a spirit of animated exertion. 
 It speaks nothing against the capaci- 
 ties of industry in human beings, that 
 they will not exert themselves without 
 motive. No labourers work harder, in 
 England or America, than the Irish ; 
 but not under a cottier system. 
 
 4. The multitudes who till the 
 soil of India, are in a condition suffi- 
 ciently analogous to the cottier system, 
 and at the same time sufficiently dif- 
 ferent from it, to render the compari- 
 son of the two a source of some in- 
 struction. In most parts of India 
 there are, and perhaps have always 
 been, only two contracting parties, the 
 landlord and the peasant : tne landlord 
 being generally the sovereign, except 
 where Be has, by a special instrument, 
 conceded his rights to an individual, 
 who becomes his representative. The 
 payments, however, of the peasants, or 
 ryots, as they are termed, nave seldom 
 if ever been regulated, as in Ireland, 
 by competition. Though the customs 
 locally obtaining were infinitely va- 
 
 rious, and though practically no cus- 
 tom could be maintained against the 
 sovereign's will, there was always a 
 rule of some sort common to a neigh- 
 bourhood : the collector did not make 
 his separate bargain with the peasanr, 
 but assessed each according to tho 
 rule adopted for the rest. The idea 
 was thus kept up of a right of property 
 in the tenant, or at all events, of a 
 right to permanent possession ; and the 
 anomaly arose of a fixity of tenure in 
 the peasant-farmer, co-existing with an 
 arbitrary power of increasing the rent. 
 
 When the Mogul government sub- 
 stituted itself throughout the greater 
 part of India for the Hindoo rulers, it 
 proceeded on a different principle. A 
 minute survey was made of the land, 
 and upon that survey an assessment 
 was founded, fixing the specific pay- 
 ment due to the government from each 
 field. If this assessment had never 
 been exceeded, the ryots would have 
 been in the comparatively advantage- 
 ous position of peasant-proprietors, sub- 
 ject to a heavy, but a fixed quit-rent. 
 The absence, however, of any real pro- 
 tection against illegal extortions, ren- 
 dered this improvement in their condi- 
 tion rather nominal than real ; and, 
 except during the occasional accident 
 of a humane and vigorous local admin- 
 istrator, the exactions had no practical 
 limit but the inability of the ryot to 
 pay more. 
 
 It was to this state of things that 
 the English rulers of India succeeded ; 
 and they were, at an early period, 
 struck with the importance of putting 
 an end to this arbitrary character of 
 the land-revenue, and imposing a fixed 
 limit to the government demand. They 
 did not attempt to go back to the 
 Mogul valuation. It has been in gene- 
 ral the very rational practice of the 
 English Government in India, to pay 
 little regard to what was laid down as 
 the theory of the native institutions, 
 but to inquire into the rights which 
 existed and were respected in practice, 
 and to protect and enlarge those. For 
 a long time, however, it blundered 
 grievously about matters of fact, and 
 grossly misunderstood the usages and 
 rights which it found existing. Its
 
 198 
 
 BOOK II. CHAPTER IX. 4. 
 
 mistakes arose from the inability of 
 ordinary minds to imagine a state of so- 
 cial relations fundamentally different 
 from those with which they are practi- 
 tally familiar. England being accus- 
 tomed to great estates and great land- 
 lords, the English rulers took it for 
 granted that India must possess the 
 like ; and looking round for some set 
 of people who might Le taken for the 
 objects of their search, they pitched 
 upon a sort of tax-gatherers called 
 zemindars. " The zemindar, "says the 
 philosophical historian of India,* " had 
 some of the attributes which belong to 
 a landowner ; he collected the rents of 
 a particular district, he governed the 
 cultivators of that district, lived in 
 comparative splendour, and his son 
 succeeded him when he died. The 
 zemindars, therefore, it was inferred 
 without delay, were the proprietors of 
 the soil, the landed nobility and gentry 
 of India. It was not considered that 
 the zemindars, though they collected 
 the rents, did not keep them ; but paid 
 them all away, with a small deduction, 
 to the government. It was not con- 
 bidered that if they governed the ryots, 
 and in many respects exercised over 
 them despotic power, they did not 
 govern them as tenants of theirs, hold- 
 ing their lands either at will or by con- 
 tract under them. The possession of 
 the ryot was an hereditary possession ; 
 from which it was unlawful for the 
 zemindar to displace him : for every 
 farthing which the zemindar drew from 
 the ryot, he was bound to account; 
 and it was only by fraud, if, out of all 
 that he collected, he retained an ana 
 more than the small proportion which, 
 as pay for the collection, he was per- 
 mitted to receive." 
 
 ' There was an opportunity in India," 
 continues the historian,. " to which the 
 history of the world presents not a 
 parallel. Next after the sovereign, 
 the immediate cultivators had, by far, 
 the greatest portion of interest in the 
 soil. For the rights '.(such as they 
 were) of the zemindars, a complete 
 compensation might have easily Leen 
 made. The generous resolution was 
 
 * Mill's HMory of British India, book vi. 
 1>. 8, 
 
 adopted, of sacrificing to the ii 
 ment of the country, tlje proprietary 
 rights of the sovereign. The motives 
 to improvement which property gives, 
 and ot which the power was so justly 
 appreciated, might have been bestowed 
 upon those upon whom they would have 
 operated with a force incomparably 
 greater than that with which they 
 could operate upon any other class of 
 men : they might have been bestowed 
 upon those from whom alone, in every 
 country, the principal improvements 
 in agriculture must be derived, the 
 Immediate cultivators of the soil. And 
 a measure worthy to be ranked among 
 the noblest that ever were taken for 
 the, improvement of any country, miirht 
 have helped to compensate thi- 
 ef India for the miseries of that mis- 
 government which they had so lung 
 endured. But the legislators were 
 English .aristocrats ; and aristocratical 
 prejudices prevailed." 
 
 The measure proved a total failure, 
 as to the main effects which its well- 
 meaning promoters expected from it. 
 Unaccustomed to estimate the mode in 
 which the operation of any given insti- 
 tution is modified even by such variety 
 of circumstances as exists within a 
 single kingdom, they flattered them- 
 selves that they had created, through- 
 out the Bengal provinces, English 
 landlords, and it proved that they had 
 only created Irish ones. The new 
 landed aristocracy disappointed every 
 expectation built upon them. They 
 did nothing for the improvement of 
 their estates, but everything for their 
 own ruin. The same pains not being 
 taken, as had been taken in Ireland, to 
 enable the landlords to defy the conse- 
 quences of their improvidence, nearly 
 the whole land of Bengal had to be 
 sequestrated and sold, for debts or 
 arrears of revenue, and in one genera- 
 tion most of the ancient zemindars had 
 ceased to exist. Other families, mostly 
 the descendants of Calcutta money 
 dealers, or of native officials who had 
 enriched themselves under the British 
 government, now occupy their place ; 
 and live as useless drones on the soil 
 which has been given up to them 4 . 
 Whatever the government has sacri-
 
 MEANS OF ABOLISHING COTTIER TENANCY. 
 
 ficed of its pecuniary claims, for the 
 creation of such a class, has at the best 
 been wasted. 
 
 In the parts of India into which the 
 British rule has been more recently 
 introduced, the blunder has been avoided 
 of endowing a useless body of great 
 landlords with gifts from the public 
 revenue. In most parts of the Madras 
 and in part of the Bombay Presidency, 
 the rent is paid directly to the govern- 
 ment by the immediate cultivator. 
 In the North- Western Provinces, the 
 government makes its engagement 
 with the village community collec- 
 tively, determining the share to be paid 
 by each individual, but holding them 
 jointly responsible for each other's de- 
 fault. But in the greater part of India, 
 the immediate cultivators have not ob- 
 tained a perpetuity of tenure at a fixed 
 rent. The government manages the 
 land on the principle on which a good 
 Irish landlord manages his estate : 
 not putting it up to competition, not 
 asking the cultivators what they 
 will promise to pay, but determining 
 for itself what they can afford to pay, 
 and defining its demand accordingly. 
 In many districts a portion of the 
 
 cultivators are considered as tenants of 
 the rest, the government making its 
 demand from those only (often a 
 numerous body) who are looked upon 
 as the successors of the original settlers 
 or conquerors of the village. Some- 
 times the rent is fixed only for one 
 year, sometimes for three or five ; but 
 the uniform tendency of present policy 
 is towards long leases, extending, in 
 the northern provinces of India, to a 
 term of thirty years. This arrange- 
 ment has not existed for a sufficient 
 time to have shown by experience, 
 how far the motives to improvement 
 which the long lease creates in the 
 minds of the cultivators, fall short of 
 the influence of a perpetual settle- 
 ment.* But the two plans, of annual 
 settlements and of short leases, ara 
 irrevocably condemned. They can only 
 be said to have succeeded, in compari- 
 son with the unlimited oppression which 
 existed before. They are approved by 
 nobody, and were never looked upon in 
 any other light than as temporary ar- 
 rangements, to be abandoned when a 
 more complete knowledge of the capa- 
 bilities of the country should afford 
 | data for something more permanent. 
 
 CHAPTER X. 
 
 MEANS OF ABOLISHING COTTIER TENANCY. 
 
 1. WHEN the first edition of this 
 work was written and published, the 
 question, what is to be done with a 
 cottier population, was to the English 
 Government the most urgent of prac- 
 tical questions. The majority of a 
 population of eight millions, having 
 long grovelled in helpless inertness and 
 abject poverty under the cottier sys- 
 tem, reduced by its operation to mere 
 food of the cheapest description, and to 
 an incapacity of either doing or will- 
 ing anything for the improvement of 
 their lot, had at last, by the failure 
 of that lowest quality of food, been 
 plunged into a state in which the 
 
 alternative seemed to be either death, 
 or to be permanently supported by 
 other people, or a radical change in the 
 economical arrangements under which 
 it had hitherto been their misfortune 
 to live. Such an emergency had com- 
 pelled attention to the subject from 
 the legislature and from the nation, but 
 it could hardly be said with much re- 
 sult ; for, the evil having originated in 
 a system of land tenancy which with- 
 drew from the people every motive t 
 * Since this was written, the resolution has 
 been adopted by the Indian Government of 
 converting the long leases of the Northern 
 Provinces into perpetual tenures at fixed 
 rents,
 
 200 
 
 BOOK II. CHAPTER X. 1. 
 
 industry or thrift except the fear of 
 starvation, the remedy provided by 
 Parliament was to take away even 
 that by conferring on them a legal 
 claim to eleemosynary support : while, 
 towards correcting the cause of the 
 mischief, nothing was done, beyond 
 vain complaints, though at the price 
 to the national treasury of ten millions 
 sterling for the delay. 
 
 " It is needless," (I observed) " to 
 expend any argument in proving that 
 the very foundation of the economical 
 evils of Ireland is the cottier system ; 
 that while peasant rents fixed by com- 
 petition are the practice of the country, 
 to expect industry, useful activity, any 
 restraint on population but death, or 
 any the smallest diminution of poverty, 
 is to look for figs on thistles and grapes 
 on thorns. If our practical statesmen 
 are not ripe for the recognition of this 
 fact ; or if while they acknowledge it 
 in theory, they have not a sufficient 
 feeling of its reality, to be capable of 
 founding upon it any course of con- 
 duct ; there is still another, and a 
 purely physical consideration, from 
 which they will find it impossible to 
 escape. If the one crop on which the 
 people have hitherto supported them- 
 selves continues to be precarious, either 
 some new and great impulse must be 
 given to agricultural skill and industry, 
 or the soil of Ireland can no longer feed 
 anything like its present population. 
 The whole produce of the western half 
 of the island, leaving nothing for rent, 
 will not now keep permanently in ex- 
 istence the whole of its people : and 
 they will necessarily remain an annual 
 charge on the taxation of the empire, 
 until they are reduced either by emi- 
 gration or by starvation to a number 
 corresponding with the low state of 
 their industry, or unless the means are 
 found of making that industry much 
 more productive." 
 
 Since these words were written, 
 events unforeseen by any one have 
 saved the English rulers of Ireland from 
 the embarrassments which would have 
 been the just penalty of their indiffer- 
 ence and want of foresight. Ireland, 
 under cottier agriculture, could no 
 longer supply food to its population : 
 
 Parliament, by way of remedy, ap- 
 plied a stimulus to population, but 
 none at all to production ; the help, 
 however, which had not been provided 
 for the people of Ireland by political 
 wisdom, came from an unexpected 
 source. Self-supporting emigration 
 the Wakefield system, brought into 
 effect on the voluntary principle and 
 on a gigantic scale (the expenses of 
 those who followed being paid from the 
 earnings of those who went before) 
 has, for the present, reduced the popu- 
 lation down to the number for which 
 the existing agricultural system can 
 find employment and support. The 
 census of 1851, compared with that of 
 1841, showed in round numbers a 
 diminution of population of a million 
 and a half. The subsequent census (of 
 1861) shows a further diminution of 
 about half a million. The Irish hav- 
 ing thus found the way to that 
 flourishing continent which for genera- 
 tions will be capable of supporting in 
 undiminished comfort the increase of 
 the population of the whole world ; the 
 peasantry of Ireland having learnt to 
 fix their eyes on a terrestrial paradise 
 beyond the ocean, as a sure refuge 
 both from the oppression of the Saxon 
 and from the tyranny of nature ; there 
 can be little doubt that however much 
 the employment for agricultural labour 
 may hereafter be diminished by the 
 general introduction throughout Ire- 
 land of English farming, or even if like 
 the county of Sutherland all Ireland 
 should be turned into a grazing farm, 
 the superseded people would migrate 
 to America with the same rapidity, and 
 as free of cost to the nation, as the 
 million of Irish who went thither during 
 the three years previous to 1851. 
 Those who think that the land of a 
 country exists for the sake of a few 
 thousand landowners, and that as long 
 as rents are paid, society and govern- 
 ment have fulfilled their function, may 
 see in this consummation a happy end 
 to Irish difficulties. 
 
 But this is not a time, nor is the 
 human mind now in a condition, in 
 which such insolent pretensions can be 
 maintained. The land of Ireland, the 
 land of every country, belongs to the
 
 MEANS OF ABOLISHING COTTIER TENANCY. 
 
 201 
 
 people of that country. The individuals 
 called landowners have no right, in 
 morality and justice, to anything hut 
 the rent, or compensation for its sale- 
 able value. "With regard to the land 
 itself, the paramount consideration is, 
 bv what mode of appropriation and of 
 cultivation it can be made most useful 
 to the collective body of its inhabitants. 
 To the owners of the rent it may be 
 very convenient that the bulk of the 
 inhabitants, despairing of justice in the 
 country where they and their ances- 
 tors have lived and suffered, should 
 seek on another continent that property 
 in land which is denied to them at 
 home. But the legislature of the em- 
 pire ought to regard -with other eyes 
 the forced expatriation of millions of 
 people. When the inhabitants of a 
 country quit the country en masse be- 
 cause its Government will not make it 
 a place fit for them to live in, the 
 Government is judged and condemned. 
 There is no necessity for depriving the 
 landlords of one farthing of the pecu- 
 niary value of their legal rights ; but 
 justice requires that the actual culti- 
 vators should be enabled to become in 
 Ireland what they will become in 
 America proprietors of the soil which 
 they cultivate. 
 
 Good policy requires it no less. Those 
 who, knowing neither Ireland nor any 
 foreign country, take as their sole 
 standard of social and economical ex- 
 cellence English practice, propose as 
 the single remedy for Irish wretched- 
 ness, the transformation of the cottiers 
 into hired labourers. But this is rather 
 a scheme for the improvement of Irish 
 agriculture, than of the condition of the 
 Irish people. The status of a day- 
 labourer has no charm for infusing fore- 
 thought, frugality, or self-restraint, into 
 a people devoid of them. If the Irish 
 peasantry could be universally changed 
 into receivers of wages, the old habits 
 and mental characteristics of the people 
 remaining, we should merely see four 
 or five millions of people living as day- 
 labourers in the same wretched manner 
 in which as cottiers they lived before ; 
 equally passive in the absence of every 
 comfort, equally reckless in multipli- 
 cation, and even, perhaps, equally list- 
 
 less at their work ; since they could not 
 be dismissed in a body, and if they could, 
 dismissal would now be simply remand- 
 ing them to the poor-rate. Far other 
 would be the effect of making them 
 peasant proprietors. A people who in 
 industry and providence have every- 
 thing to learn who are confessedly 
 among the most backward of European 
 populations in the industrial virtues 
 require for their regeneration the most 
 powerful incitements by which those 
 virtues can be stimulated : and there is 
 no stimulus as yet comparable to pro- 
 perty in land. A permanent interest 
 in the soil to those who till it, is almost 
 a guarantee for the most unwearied 
 laboriousness : against over-population, 
 though not infallible, it is the best 
 preservative yet known, and where it 
 failed, any other plan would probably 
 fail much more egregiously; the evil 
 would be beyond the reach of merely 
 economic remedies. 
 
 The case of Ireland is similar in its 
 requirements to that of India. In India, 
 though great errors have from time to 
 time been committed, no one ever pro- 
 posed, under the name of agricultural 
 improvement, to eject the ryots or pea- 
 sant farmers from their possession ; the 
 improvement that has been looked for, 
 has been through making their tenure 
 more secure to them, and the sole dif- 
 ference of opinion is between those who 
 contend for perpetuity, and those who 
 think that long leases will suffice. The 
 same question exists as to Ireland; and 
 it would be idle to deny that long leases, 
 under such landlords as are sometimes 
 to be found, do effect wonders, even in 
 Ireland. But then, they must be leases 
 at a low rent. Long leases are in no 
 way to be relied on for getting rid of 
 cottierism. During the existence of 
 cottier tenancy, leases have always been 
 long ; twenty-one years and three lives 
 concurrent, was a usual term. But the 
 rent being fixed by competition, at a 
 higher amount than could be paid, so 
 that the tenant neither had, nor could 
 by any exertion acquire, a beneficial 
 interest in the land, the advantage of 
 a lease was merely nominal. In India, 
 the government, where it has not im- 
 prudently made over its proprietaiy
 
 202 
 
 rights to the zemindars, is able to pre- 
 vent this evil, because, being itself the 
 landlord, it can fix the rent according 
 to its own judgment ; but under indi- 
 vidual landlords, while rents are fixed 
 by competition, and the competitors are 
 a peasantry struggling for subsistence, 
 nominal rents are inevitable, unless the 
 population is so thin, that the compe- 
 tition itself is only nominal. The ma- 
 jority of landlords will grasp at imme- 
 diate money and immediate power ; 
 and so long as they find cottiers eager 
 to offer them everything, it is useless to 
 rely on them for tempering the vicious 
 practice by a considerate self-denial. 
 
 A perpetuity is a stronger stimulus 
 to improvement than a long lease : not 
 only because the longest lease, before 
 coming to an end, passes through all 
 the varieties of short leases down to no 
 iease at all ; but for more fundamental 
 reasons. It is very shallow, even in 
 pure economics, to take no account of 
 the influence of imagination : there is 
 a virtue in "for ever" beyond the 
 longest term of years ; even if the term 
 is long enough to include children, and 
 all whom a person individually cares 
 for, yet until he has reached that high 
 degree of mental cultivation at which 
 the public good (which also includes 
 perpetuity) acquires a paramount as- 
 cendancy over his feelings and desires, 
 he will not exert himself with the same 
 ardour to increase the value of an es- 
 tate, his interest in which diminishes 
 in value every year. Besides, while 
 
 Eerpetual tenure is the general rule of 
 mded property, as it is in all the 
 countries of Europe, a tenure for a 
 limited period, however long, is sure to 
 be regarded as something of inferior 
 consideration and dignity, and inspires 
 less of ardour to obtain it, and of attach- 
 ment to it when obtained. But where 
 a country is under cottier tenure, the 
 question of perpetuity itiquite secondary 
 to the more important point, a limita- 
 tion of the rent. Rent paid by a capi- 
 talist who farms for profit, and not for 
 bread, may safely be abandoned to 
 competition ; rent paid by labourers 
 cannot, unless the labourers were in a 
 Btate of civilization and improvement 
 which labourers have nowhere yet 
 
 BOOK n. CHAPTER X. 1. 
 
 reached, and cannot easily reach under 
 such a tenure. Peasant rents ought 
 never to be arbitrary, never at the dis- 
 cretion of the landlord : either by cus- 
 tom or law, it is imperatively necessary 
 that they should be fixed ; and where 
 no mutually advantageous custom, such 
 as the metayer system of Tuscany, has 
 established itself, reason and experience 
 recommend that they should be fixed 
 by authority : thus changing the rent 
 into a quit-rent, and the farmer into a 
 peasant proprietor. 
 
 For carrying this change into effect 
 on a sufficiently large scale to accom- 
 plish the complete abolition of cottier 
 tenancy, the mode which most obvi- 
 ously suggests itself is the direct one, 
 of doing the thing outright by Act of 
 Parliament ; making the whole land of 
 Ireland the property of the tenants, 
 subject to the rents now really paid 
 (not the nominal rents), as a fixed rent 
 charge. This, under the name of 
 "fixity of tenure," was one of the de- 
 mands of the Repeal Association dur- 
 ing the most successful period of their 
 agitation ; and was better expressed by 
 Mr. Conner, its earliest, most enthusi- 
 astic, and most indefatigable apostle,* 
 by the words, " a valuation and a per- 
 petuity." In such a measure there 
 would not have been any injustice, pro- 
 vided the landlords were compensated 
 for the present value of the chances of 
 increase which they were prospectively 
 required to forego. The rupture of ex- 
 isting social relations would hardly have 
 been more violent than that effected by 
 the ministers Stein and Hardenberg, 
 when, by a series of edicts, in the early 
 part of the present century, they revo- 
 lutionized the state of landed property 
 in the Prussian monarchy, and lei't their 
 names to posterity among the greatest 
 benefactors of their country. To en- 
 lightened foreigners writing on Ireland, 
 Von Raumer and Gustavo de Beau- 
 mont, a remedy of this sort seemed so 
 exactly and obviously what the disease 
 required, that they had some difficulty 
 
 Author of numerous pamphlets, entitled 
 " True Political Economy of Ireland,' 
 'Letter to the Earl of Devon," " T\v 
 Letters on the RacUrent oppression of Iro 
 ;and," and others. Mr. Conner has been ae 
 agitator on the subject since 1832.
 
 MEANS OF ABOLISHING COTTIER 
 
 203 
 
 in comprehending how it was that the 
 thing was not yet done. 
 
 This, however, would have been, in 
 the first place, a complete expropriation 
 of the higher classes of Ireland: which, 
 if there is any truth in the principles 
 we have laid clown, would be perfectly 
 warrantable, but only if it were the sole 
 means of effecting a great public good. 
 In the second place, that there should 
 be none but peasant proprietors, is in 
 itsi'lt'far from desirable. Large farms, 
 cultivated by large capital, and owned 
 by persons of the best education which 
 the country can give, persons qualified 
 by instruction to appreciate scientific 
 : ics, and able to bear the delay 
 and risk of costly experiments, are an 
 important part of a good agricultural 
 system. Many such landlords there 
 are even in Ireland ; and it would be a 
 public misfortune to drive them from 
 their posts. A large proportion also of 
 the present holdings are probably still 
 too small to try the proprietary system 
 under the greatest advantages : nor are 
 the tenants always the persons one 
 would desire to select as the first occu- 
 pants of peasant-properties. There are 
 numbers of them on whom it would 
 have a more beneficial effect to give 
 them the hope of acquiring a landed 
 property by industry and frugality, 
 than the property itself in immediate 
 possession. 
 
 There are, however, much milder 
 measures, not open to similar objec- 
 tions, and which, if pushed to the 
 utmost extent of which they are sus- 
 ceptible, would realize in no incon- 
 siderable degree the object sought. 
 One of them would be, to enact that 
 whoever reclaims waste land becomes 
 the owner of it, at a fixed quit-rent 
 equal to a moderate interest on its 
 mere value as waste. It would of 
 course be a necessary part of this mea- 
 sure, to make compulsory on landlords 
 the surrender of waste lands (not of an 
 ornamental character) whenever re- 
 quired for reclamation. Another ex- 
 pedient, and one in which individuals 
 could co-operate, would be to buy as 
 much as possible of the land offered for 
 sale, and sell it again in small portions 
 as peasant -properties. A Society for 
 
 this purpose was at one time projected 
 (though the attempt to establish it 
 proved unsuccessful) on the principles, 
 so far as applicable, of the Freehold 
 Land Societies which have been so 
 successfully established in England, 
 not primarily for agricultural, but for 
 electoral purposes. 
 
 This is a mode in which private 
 capital may be employed in renovating 
 the social and agricultural economy of 
 Ireland, not only without sacrifice but 
 with considerable profit to its owners. 
 The remarkable success of the Wa^-to 
 Land Improvement Society, which 
 proceeded on a plan far less advan- 
 tageous to the tenant, is an instance 
 of what an Irish peasantry can be 
 stimulated to do, by a sufficient assur- 
 ance that what they do will be for 
 their own advantage. It is not even 
 indispensable to adopt perpetuity as 
 the rule ; long leases at moderate rents, 
 like those of the Waste Land Society, 
 would suffice, if a prospect were held 
 out to the farmers of being allowed to 
 purchase their farms with the capital 
 which they might acquire, as the 
 Society's tenants were so rapidly 
 acquiring under the influence of its 
 beneficent system.* When the lands 
 
 * Though this society, during the years 
 succeeding the famine, was forced to wind 
 up its affairs, the memory of what it accom- 
 plished ought to be preserved. The follow- 
 ing is an extract in the Proceedings of Lord 
 Devon's Commission (page 84), from the re- 
 port made to the society in 1845, by their 
 intelligent manager, Colonel Robinson : 
 
 " Two hundred and forty -five tenants, 
 many of whom were a few years since in a 
 state bordering on pauperism, the occupiers 
 of small holdings of from ten to twenty 
 plantation acres each, have, by their own 
 free labour, with the society's aid, improved 
 their farms to the value of 439Gi. ; 605A having 
 been added during the last year, being at the 
 rate of 17/. 18. per tenant for the whole 
 term, and 21. &. for the past year ; the benefit 
 of which improvements each tenant will 
 enjoy during the unexpired term of a thirty- 
 one years' lease. 
 
 " These 245 tenants and their families have, 
 by spade industry, reclaimed and brought 
 into cultivation 1032 plantation acres of land, 
 previously unproductive mountain waste, upon 
 which they grew, last year, crops valued by 
 competent practical persons at 3S96/., being 
 in the proportion of 157. 18*. each tenant; 
 and their live stock, consisting of cattle, 
 horses, sheep, and pigs, now actually upon 
 the estates, is valued, according to the pre- 
 sent prices of the neighbouring markets, at
 
 204 
 
 BOOK II. CHAPTER X. /. 
 
 were sold, the funds of the association 
 would be liberated, and it might re- 
 commence operations in some other 
 quarter. 
 
 2. Thus far I had written in 
 1856. Since that time the great crisis 
 of Irish industry has made further 
 progress, and it is necessary to con- 
 sider how its present state affects the 
 opinions, on prospects or on practical 
 measures, expressed in the previous 
 part of this chapter. 
 
 The principal change in the situa- 
 tion consists in the great diminution, 
 holding out a hope of the entire ex- 
 tinction, of cottier tenure. The enor- 
 mous decrease in the number of small 
 holdings, and increase in those of a 
 medium size, attested by the statistical 
 returns, sufficiently proves the general 
 fact, and all testimonies show that the 
 tendency still continues.* It is proba- 
 
 4162Z., of which 1304/. has been added since 
 February 1841, being at the rat* of 16/. 19*. 
 for the whole period, and f>l. 6s. for the last 
 year; during which time their stock has thus 
 increased in value a sura equal to their present 
 annual rent ; and by the statistical tables and 
 returns referred to in previous reports, it is 
 proved that the tenants, in general, improve 
 their little farms, and increase their cultiva- 
 tion and crops, in nearly direct proportion to 
 the number of available working persons of 
 both sexes, of which their families consist." 
 
 There cannot be a stronger testimony to 
 the superior amount of gross, and even of net 
 produce, raised by small farming under any 
 tolerable system of landed tenure ; and it 
 is worthy of attention that the industry 
 and zeal were greatest among the smaller 
 holders ; Colonel Robinson noticing, as ex- 
 ceptions to the remarkable and rapid pro- 
 gress of improvement, some tenants who 
 were " occupants of larger farms than twenty 
 acres, a class too often deficient in the endur- 
 ing industry indispensable for the successful 
 prosecution of mountain improvements." 
 
 * There is, however, a partial counter- 
 eurrent, of which I have not seen any public 
 notice. " A class of men, not very numerous, 
 but sufficiently so to do much mischief, have, 
 through the Landed Estates Court, got into 
 possession of land in Ireland, who, of all 
 classes, are least likely to recognise the 
 duties of a landlord's position. These are 
 f mall traders in towns, who by dint of sheer 
 parsimony, frequently combined with 
 money-lending at usurious rates, have suc- 
 ceeded, in the course of a long life, in scrap- 
 ing together as much money as will enable 
 them to buy fifty or a hundred awes of land. 
 These people never think of turning far- 
 mers, but, proud of their position as land- 
 lord*, proceed to turn it to the utmost 
 
 ble that the repeal of the com laws? 
 necessitating a change in the exports 
 of Ireland from the products of tillage 
 to those of pasturage, would of itself 
 have sufficed to bring about this revo- 
 lution in tenure. A grazing farm can 
 only be managed by a capitalist farmer, 
 
 account. An instance of this kind came 
 under my notice lately. The tenants on the 
 property were, at the time of the purchase, 
 seme twelve years ago, in a tolerably com- 
 fortable state. Within that period their 
 rent has been raised three several times; and 
 it is now, as I am informed by the priest of 
 the district, nearly double its amount at the 
 commencement of the present proprietor's 
 reign. The result is that the people, who 
 were formerly in tolerable comfort, are 
 now reduced to poverty : two of them hav 
 left the property and squatted near an adja- 
 cent turf bog, where they exist trusting for 
 support to occasional jobs. If this man is 
 not shot, he will injure himself through the 
 deterioration of his property, but meantime 
 he lias been getting eight or ten per cent on 
 his purchase-money. This is by no means a 
 rare case. The scandal which such occur- 
 rences! cause, casts its reflection on transac- 
 tions of a wholly different and perfectly 
 legitimate kind, where the removal of the 
 tenants is simply an act of mercy for all 
 parties. 
 
 " The anxiety of landlords to get rid of 
 cottiers is also to some extent neutralized by 
 the anxiety of middlemen to get them. About 
 one-fourth of the whole land of Ireland is 
 held under long leases ; the rent received 
 when the lease is of long standing, being 
 generally greatly under the real value of the 
 land. It rarely happens that land thus held 
 is cultivated by the owner of the lease ; in- 
 stead of this, lit sublets it at a rack rent to 
 Email men, and lives on the excess of the rent 
 which he receives over that which he pays. 
 Some of these leases are always running 
 out ; and as they draw towards their close, 
 the middleman has no other interest in the 
 land than, at any cost of permanent deterio- 
 ration, to get the utmost out of it during the 
 unexpired period of the term. For this pur- 
 pose the small cottier tenants precisely an- 
 swer his turn. Middlemen in this position 
 are as anxious to obtain cottiers as tenants, 
 as the landlords are to be rid of them ; and 
 the result is a transfer of this sort of tenant 
 from one class of estates to the other. The 
 movement is of limited dimensions, but it 
 does exist, and so far as it exists, neutralizes 
 the general tendency. Perhaps it may be 
 thought that this system will reproduce 
 itself; that the same motives which led to 
 the existence of middlemen will perpetuate 
 the class ; but there is no danger of this. 
 Landowners are now perfectly alive to the 
 ruinous consequences of this system, how- 
 ever convenient for a time ; and a chuiso 
 against sub-letting is now becoming a mattei 
 of course in every leae." (Private Commu- 
 nication frotn Profesior Cairnet,)
 
 MEANS OF ABOLISHING COTTIER TENANCY. 
 
 205 
 
 or by the landlord. But a change in- 
 volving so great a displacement of the 
 population, has been immensely facili- 
 tated and made more rapid by the vast 
 emigration, as well as by that greatest 
 boon ever conferred on Ireland by any 
 Government, the Encumbered Estates 
 Act; the best provisions of which have 
 since, through the Landed Estates 
 Court, been permanently incorporated 
 into the social system of the country. 
 The greatest part of the soil of Ireland, 
 there is reason to believe, is now farmed 
 either by- the landlords, or by small 
 capitalist farmers. That these far- 
 mers are improving in circumstances, 
 and accumulating capital, there is con- 
 siderable evidence, in particular the 
 great increase of deposits in the banks 
 of which they are the principal cus- 
 tomers. So far as that class is con- 
 cerned, the chief thing still wanted is 
 security of tenure, or assurance of 
 compensation for improvements. The 
 means of supplying these wants are 
 now engaging the attention of the 
 most competent minds ; Judge Long- 
 field's address, in the autumn of 1 864, 
 and the sensation created by it, are an 
 era in the subject, and a point has now 
 been reached when we may confidently 
 expect that within a very few years 
 something effectual will be done. 
 
 But what, meanwhile, is the con- 
 dition of the displaced cottiers, so far 
 as they have not emigrated ; and of the 
 whole class who subsist by agricultural 
 labour, without the occupation of any 
 land ? As yet, their state is one of 
 great poverty, with but slight prospect 
 of improvement. Money wages, in- 
 deed, have risen much above the 
 wretched level of a generation ago : but 
 the cost of subsistence has also risen 
 BO much above the old potato standard, 
 that the real improvement is not equal 
 to the nominal ; and according to the 
 best information to which I have access, 
 there is little appearance of an im- 
 proved standard of living among the 
 class. The population, in fact, reduced 
 though it be, is still iar beyond what 
 the country can support as a mere 
 grazing district of England. It may 
 not, perhaps, be strictly true that, if 
 ths present number of inhabitants are 
 
 to be maintained at home, it can only 
 be either on the old vicious system of 
 cottierism, or as small proprietors grow- 
 ing their own food. The lands which 
 will remain under tillage would, no 
 doubt, if sufficient security for outlay 
 were given, admit of a more extensive 
 employment of labourers by the small 
 capitalist farmers; and this, in the 
 opinion of some competent judges, 
 might enable the country to support the 
 present number of its population in 
 actual existence. But no one will pre- 
 tend that this resource is sufficient to 
 maintain them in any condition in 
 which it is fit that the great body of 
 the peasantry of a country should 
 exist. Accordingly the emigration, 
 which for a time had fallen off, has, 
 under the additional stimulus of bad 
 seasons, revived in all its strength. It 
 is calculated that within the year 1864 
 not less than 100,000 emigrants left 
 the Irish shores. As far as regards 
 the emigrants themselves and their 
 posterity, or the general interests of 
 the human race, it would be folly to 
 regret this result. The children of the 
 immigrant Irish receive the education 
 of Americans, and enter, more rapidly 
 and completely than would have been 
 possible in the country of their de- 
 scent, into the benefits of a higher 
 state of civilization. In twenty or 
 thirty years they are not mentally dis- 
 tinguishable from other Americans. 
 The loss, and the disgrace, are 
 England's : and it is the English 
 people and government whom it chiefly 
 concerns to ask themselves, how far 
 it will be to their honour and advan- 
 tage to retain the mere soil of Ire- 
 land, but to lose its inhabitants. With 
 the present feelings of the Irish people, 
 and the direction which their hope off 
 improving their condition seems to be 
 permanently taking, England, it is pro- 
 bable, has only the choice between the 
 depopulation of Ireland, and the con- 
 version of a part of the labouring 
 population into peasant proprietors. 
 The truly insular ignorance of her 
 public men respecting a form of agri- 
 cultural economy which predominates 
 in nearly every other civilized country, 
 makes it only too probable that sh
 
 206 
 
 BOOK II. CHAPTER X. 2. 
 
 will choose the worse side of the alter- 
 native. Yet there are germs of a ten- 
 dency to the formation of peasant pro- 
 prietors on Irish soil, which require 
 only the aid of a friendly legislator to 
 foster them ; as is shown in the follow- 
 ing extract from a private communica- 
 tion by my eminent and valued friend, 
 Professor Cairnes : 
 
 " On the sale, some eight or ten 
 years ago, of the Thomond, Portar- 
 lington, and Kingston estates, in the 
 Encumbered Estates Court, it was ob- 
 served that a considerable number of 
 occupying tenants purchased the fee 
 of their farms. I have not been able 
 to obtain any information as to what 
 followed that proceeding whether the 
 purchasers continued to farm their 
 small properties, or under the mania of 
 landlordism tried to escape from their 
 former mode of life. But there are 
 other facts which have a bearing on 
 this question. In those parts of the 
 country where tenant-right prevails, 
 the prices given for the goodwill of a 
 farm are enormous. The following 
 figures, taken from the schedule of an 
 estate in the neighbourhood of Newry, 
 now passing through the Landed 
 Estates Court, will give an idea, but 
 a very inadequate one, of the prices 
 which this mere customary right gene- 
 rally fetches. 
 
 " Statement showing the prices at 
 which the tenant-right of certain farms 
 near Newry was sold : 
 
 Lot 
 
 Acri>s Rpnt Purchase-money 
 Acres. itcnr. of tenant-right. 
 
 1 23 
 
 71 
 
 33 
 
 2 21 
 
 77 
 
 240 
 
 3 13 
 
 39 
 
 110 
 
 4 14 
 
 3J 
 
 85 
 
 S 10 
 
 33 
 
 172 
 
 G 5 
 
 . 13 
 
 75 
 
 7 8 
 
 . 2> 
 
 130 
 
 8 11 
 
 . 33 
 
 130 
 
 9 2 
 
 . 5 
 
 5 
 
 110 334 
 
 .980 
 
 " The prices here represent on the 
 whole about three years' purchase of 
 the rental : but this, as I have said, 
 gives but an inadequate idea of that 
 which is' frequently, indeed of that 
 which is ordinarily, paid. The right, 
 being purely customary, will vary in 
 value with the confidence generally re- 
 
 posed in the good faith of the land- 
 lord. In the present instance, circum- 
 stances have come to light in the course 
 of the proceedings connected with the 
 sale of the estate, which give reason to 
 believe that the confidence in this casa 
 was not high ; consequently, the rates 
 above given may be taken as consider- 
 ably under those which ordinarily pre- 
 vail. Cases, as I am informed on the 
 highest authority, have in other parts 
 of the country come to light, also in the 
 Landed Estates Court, in which the 
 price given for the tenant-right was 
 equal to that of the whole fee of the 
 land. It is a remarkable fact that 
 people should be found to give, say 
 twenty or twenty-five years' purchase, 
 for land which is still subject to a good 
 round rent. Why, it will be asked, do 
 they not purchase land out and out for 
 the same, or a slightly larger, sum ? 
 The answer to this question, I believe, 
 is to be found in the state of our land 
 laws. The cost of transferring land in 
 small portions is, relatively to the pur- 
 chase money, very considerable, even 
 in the Landed Estates Court ; while 
 the goodwill of a farm may be trans- 
 ferred without any cost ut all. The 
 cheapest conveyance that could be 
 drawn in that Court, where the utmost 
 economy, consistent with the present 
 mode of remunerating legal services, 
 is strictly enforced, would, irrespective 
 of stamp duties, cost 101. a very 
 sensible addition to the purchase of a 
 small peasant estate : a conveyance to 
 transfer a thousand acres might not 
 cost more, and would probably not cost 
 much more. But in truth, the mere 
 cost of conveyance represents but the 
 least part of the obstacles which exist 
 to obtaining land in small portions. A 
 far more serious impediment is tho 
 complicated state of the ownership of 
 land, which renders it frequently im- 
 practicable to subdivide a property into 
 such portions as would bring the land 
 within the reach of small bidders. The 
 remedy for this state of things, how- 
 ever, lies in measures of a more radical 
 sort than I fear it is at all probablo 
 that any House of Common!! we are 
 soon likely to see would even witfi 
 patience consider. A registry of titles
 
 WAGES. 
 
 207 
 
 toay succeed in reducing this complex 
 condition of ownership to its simplest 
 expression ; but where real complica- 
 tion exists, the difficulty is not to be 
 <>t rid of by mere simplicity of form ; 
 and a registry of titles while the 
 powers of disposition at present enjoyed 
 by landowners remirin undiminished, 
 while every settlor and testator has 
 on almost unbounded licence to multi- 
 ply interests in land, as pride, the 
 passion For dictation, or mere whim 
 may suggest will, in my opinion, fail 
 to reach the root of the evil. The 
 effect of these circumstances is to place 
 an immense premium upon large deal- 
 ings in land indeed in most cases 
 E ractically to preclude all other than 
 irge dealings ; and while this is the 
 state of the law, the experiment of 
 peasant proprietorship, it is plain, 
 
 cannot be fairly tried. The facts, how- 
 ever, which I have stated show, I 
 think, conclusively, that there is no 
 obstacle in the disposition of the people 
 to the introduction of this system." 
 
 I have concluded a discussion, which 
 has occupied a space almost dispro- 
 portioned to the dimensions of this 
 work ; and I here close the examina- 
 tion of those simpler forms of social 
 economy in which the produce of tho 
 land either belongs undividedly to ono 
 class, or is shared only between two 
 classes. We now proceed to the hypo- 
 thesis of a threefold division of the pro- 
 duce, among labourers, landlords, and 
 capitalists ; and in order to connect tho 
 coming discussion as closely as possible 
 with those which have now for some 
 time occupied us, I shall commence 
 with the subject of Wages. 
 
 CHAPTER XL 
 
 OF WAGES. 
 
 1. UNDER the head of Wages are 
 to be considered, first, the causes which 
 determine or influence the wages of 
 labour generally, and secondly, the 
 differences that exist between the 
 wages of different employments. It 
 is convenient to keep these two classes 
 of consideration separate ; and in dis- 
 cussing the law of wages, to proceed 
 in the first instance as if there were no 
 other kind of labour than common un- 
 skilled labour, of the average degree of 
 hardness and disagreeableness. 
 
 Wages, like other things, may be re- 
 gulated either by competition or by 
 custom. In this country there are few 
 kinds of labour of which the remunera- 
 tion would not be lower than it is, if the 
 employer took the full ad vantage of com- 
 petition. Competition, however, must be 
 regarded, in the present state of society, 
 as the principal regulator of wages, and 
 custom or individual character only as 
 a modifying circumstance, and that in 
 a comparatively slight degree. 
 
 Wages, then, depend mainly upon 
 
 the demand and supply of labour ; or 
 as it is often expressed, on the propor- 
 tion between population and capital. 
 By population is nere meant the num- 
 ber only of the labouring class, or 
 rather of those who work for hire ; and 
 by capital, only circulating capital, and 
 not even the whole of that, but the part 
 which is expended in the direct pur- 
 chase of labour. To this, however, 
 must be added all funds which, with- 
 out forming a part of capital, are paid 
 in exchange for labour, such as the 
 wages of soldiers, domestic servants, 
 and all other unproductive labourers. 
 There is unfortunately no mode if ex- 
 pressing by one familiar term, the ag- 
 gregate of what may be called the 
 wages-fund of a country : and as the 
 wages of productive labour form nearly 
 the whole of that fund, it is usual to 
 overlook the smaller and less important 
 part, and to say that wages depend on 
 population and capital. It will be con- 
 venient to employ this expression, re- 
 mrmbering, however, to consider it as
 
 !>03 
 
 BOOK II. CHAPTER XL 2. 
 
 elliptical, and not as a literal statement 
 of the entire truth. 
 
 With these limitations of the terms, 
 wages not only depend upon the relative 
 amount of capital and population, but 
 cannot, under the rule of competition, 
 be affected by anything else. Wages 
 (meaning, of course, the general rate) 
 cannot rise, but by an increase of the 
 aggregate funds employed in hiring 
 labourers, or a diminution in the num- 
 ber of the competitors for hire ; nor fall, 
 except either by a diminution of the 
 funds devoted to paying labour, or by 
 an increase in the number of labourers 
 to be paid. 
 
 2. There are, however, some 
 facts in apparent contradiction to this 
 doctrine, which it is incumbent on us 
 to consider and explain. 
 
 For instance, it is a common saying 
 that wages are high when trade is 
 good. The demand for labour in any 
 particular employment is more press- 
 ing, and higher wages are paid, when 
 there is a brisk demand for the com- 
 modity produced; and the contrary 
 when there is what is called a stagna- 
 tion: then workpeople are dismissed, 
 and those who are retained must sub- 
 mit to a reduction of wages : though in 
 these cases there is neither more nor 
 less capital than before. This is true ; 
 and is one of those complications in the 
 concrete phenomena, which obscure 
 and disguise, the operation of general 
 causes ; but it is not really inconsistent 
 with the principles laid down. Capi- 
 tal which the owner does not employ 
 in purchasing labour, but keeps idle 
 in his hands, is the same thing to the 
 labourers, for the time being, as if it 
 did not exist. All capital is, from the 
 variations of trade, occasionally in 
 this state. A manufacturer, finding 
 a slack demand for his commodity, 
 forbears to employ labourers in in- 
 creasing a stock which he finds it diffi- 
 cult to dispose of ; or if he goes on un- 
 til all his capital is locked up in unsold 
 goods, then at least he must of neces- 
 sity pause untii he can get paid for 
 eome of them. But no one expects 
 either of these states to be permanent ; 
 if he did. he would at the first oppor- 
 
 tunity remove his capital to some 
 other occupation, in which it woulJ 
 still continue to employ labour. The 
 capital remains unemployed for a 
 time, during which the labour market 
 is overstocked, and wages fall. After- 
 wards the demand revives, and per- 
 haps becomes unusually brisk, en- 
 abling the manufacturer to sell his 
 commodity even faster than he caa 
 produce it : his whole capital is then 
 brought into complete efficiency, and if 
 he is able, he borrows capital in addi- 
 tion, which would otherwise have gone 
 into some other employment. At such 
 times wages, in his particular occupa- 
 tion, rise. If we suppose, what in strict- 
 ness is not absolutely impossible, that 
 one of these fits of briskness or of stag- 
 nation should affect all occupations at 
 the same time, wages altogether might 
 undergo a rise or a fall. These, however, 
 are but temporary fluctuations : the 
 capital now lying idle will next year be 
 in active employment, that which is this 
 year unable to keep up with the de- 
 mand will in its turn be locked up in 
 crowded warehouses ; and wages in 
 these several departments will ebb and 
 flow accordingly : but nothing can per- 
 manently alter general wages, except 
 an increase or a diminution of capital 
 itself (always meaning by the term, the 
 funds of all sorts, destined for the pay- 
 ment of labour) compared with the quan- 
 tity of labour offering itself to be hired. 
 Again, it is another common notion 
 that high prices make high wages ; 
 because the producers and dealers, 
 being better off, can afford to pay more 
 to their labourers. 1 have already said 
 that a brisk demand, which causes 
 temporary high prices, causes also tem- 
 porary high wages. But high prices, 
 in themselves, can only raise wagea 
 if the dealers, receiving more, are 
 induced to save more, and make an 
 addition to their capital, or at least 
 to their purchases of labour. This 
 is indeed likely enough to be the 
 case ; and if the high prices came di- 
 rect from heaven, or even from abroad, 
 the labouring class might be benefited, 
 not by the high prices themselves, but 
 by the increase of capital occasioned 
 by them. The same effect, however,
 
 WAGES. 
 
 209 
 
 Is often attributed to a high price which 
 is the result of restrictive laws, or 
 which is in some way or o tiier to be 
 paid by the remaining mem\ers of the 
 community ; they having no greater 
 means than before to pay it with. 
 High prices of this sort, it' they beneh't 
 one class of labourers, can only do so 
 at the expense of others ; since if the 
 dealers by receiving high prices are 
 enabled to make greater savings, or 
 otherwise increase their purchases of 
 labour, all other people by paying those 
 high prices, have their means of saving, 
 or of purchasing labour, reduced in an 
 equal degree ; and it is a matter of 
 accident whether the one alteration or 
 the other will have the greatest effect 
 on the labour market. Wages will 
 probably be temporarily higher in the 
 employment in which prices have 
 risen, and somewhat lower in other 
 employments : in which case, while the 
 first half of the phenomenon excites 
 notice, the other is generally over- 
 looked, or if observed, is not ascribed 
 to the cause which really produced it. 
 Nor will the partial rise of wages last 
 long : for though the dealers in that 
 one employment gain more, it does not 
 follow that there is room to employ a 
 greater amount of savings in their own 
 business : their increasing capital will 
 probably flow over into other employ- 
 ments, and there counterbalance the 
 diminution previously made in the de- 
 mand for labour by the diminished 
 savings of other classes. 
 
 Another opinion often maintained is, 
 that wages (meaning of course money 
 wages) vary with the price of food; 
 rising when it rises, and falling when it 
 falls. This opinion is, I conceive, only 
 partially true : and in so far as true, 
 in no way affects the dependence of 
 wages on the proportion between 
 capital and labour : since the price of 
 food, when it affects wages at all, affects 
 them through that Taw. Dear or 
 cheap food caused by variety of seasons 
 does not affect wages (unless they are 
 artificially adjusted to it by law or 
 charity) : or rather, it has some ten- 
 dency to affect them in the contrary 
 way to that supposed ; since in times of 
 scarcity people generally compete more 
 
 violently for employment, and lower 
 the labour market against themselves. 
 But dearness or cheapness of food, 
 when of a permanent character, and 
 capable of being calculated on before- 
 hand, may afl'ect wages. In the first 
 place, if the labourers have, as is oftep 
 the case, no more than enough to keep 
 them in working condition, and enable 
 them barely to support the ordinary 
 number of children, it follows that if 
 food grows permanently dearer without 
 a rise of wages, a greater number of 
 the children will prematurely die ; and 
 thus wages will ultimately be higher, 
 but only because the number of people 
 will be smaller, than if food had re- 
 mained cheap. But, secondly, even 
 though wages were high enough to 
 admit of food's becoming more costly 
 without depriving the labourers and 
 their families of necessaries ; though 
 they could bear, physically speaking, 
 to be worse of perhapi they would 
 not consent to be so. They might 
 have habits of comfort which were to 
 them as necessaries, and sooner than 
 forego which, they would put an addi- 
 tional restraint on their power of multi- 
 plication ; so that wages would rise, 
 not by increase of deaths but by dimi- 
 nution of births. In these cases, then, 
 wages do adapt themselves to the price 
 of food, though after an interval of 
 almost a generation. Mr. Ricardo 
 considers these two cases to compre- 
 hend all cases. He assumes, that there 
 is everywhere a minimum rate of 
 wages : either the lowest with which 
 it is physically possible to keep up the 
 population, or the lowest with which 
 the people will choose to do so. To 
 this minimum he assumes that tho 
 general rate of wages always tends ; 
 that they can never be lower, beyond 
 the length of time required for a 
 diminished rate of increase to make 
 itself felt, and can never long continue 
 higher. This assumption contains 
 sufficient truth to render it admissible 
 for the purposes of abstract science; 
 and the conclusion which Mr. Kicardo 
 draws from it, namely, that wages in 
 the long run rise and fall with the per- 
 manent rise of food, is, like almost all 
 bis conclusions, true hypothetical!^.
 
 210 
 
 BOOK n. CHAPTER XI. 2. 
 
 that is, granting the suppositions from 
 which he sets out. But in the appli- 
 cation to practice, it is necessary to 
 consider that the minimum of which 
 he speaks, especially when it is not a 
 physical, but what may he termed a 
 moral minimum, is itself liable to vary. 
 If wages were previously so high that 
 they could bear reduction, to which the 
 obstacle was a high standard of com- 
 fort habitual among the labourers, a 
 rise of the price of food, or any other 
 disadvantageous change in their cir- 
 cvBstanc*, may operate in two ways : 
 it may correct itself by a rise of wages, 
 brought about through a gradual effect 
 on the prudtential check to population ; 
 or it may permanently lower the 
 etandard of living of the class, in case 
 their previous habits in respect of popu- 
 lation prove stronger than their pre- 
 vious habits in respect of comfort. In 
 that case the injury done to them will 
 be permanent, and their deteriorated 
 condition will become a new minimum, 
 tending to perpetuate itself as the more 
 ample minimum did before. It is to be 
 feared that of the two modes in which the 
 cause may operate, the last is the most 
 frequent, or at all events sufficiently 
 BO, to render all propositions ascribing a 
 self-repairing quality to the calamities 
 which befal the labouring classes, prac- 
 tically of no validity. There is con- 
 siderable evidence that the circum- 
 stances of the agricultural labourers in 
 England have more than once in our 
 history sustained great permanent de- 
 terioration, from causes which operated 
 by diminishing the demand for labour, 
 and which, if population had exercised 
 its power of self-adjustmeat in obedi- 
 ence to the previous standard of com- 
 fort, could only have had a temporary 
 effect : but unhappily the poverty in 
 which the class was plunged during a 
 long series of years, brought that pre- 
 vious standard into disuse ; and the 
 next generation, growing up without 
 having possessed those pristine com- 
 forts, multiplied in turn without any 
 attempt to retrieve them.* 
 
 * See the historical sketch of the condition 
 of the English peasantry, prepared from the 
 best authorities by Mr. William Thornton, 
 
 The converse case occurs when, by 
 improvements in agriculture, the repeal 
 of com laws, or other such causes, 
 the necessaries of the labourers are 
 cheapened, and they are enabled with 
 the same wages, to command greater 
 comforts than before. Wages will not 
 fall immediately; it is even possible 
 that they may rise : but they will fall 
 at last, so as to leave the labourers no 
 better off than before, unless, during 
 this interval of prosperity, the standard 
 of comfort regarded as indispensable by 
 the class, is permanently raised. Un- 
 fortunately this salutary effect is by no 
 means to be counted upon : it is a much 
 more difficult thing to raise, than to 
 lower, the scale of living which the 
 labourers will consider as more indis- 
 
 Eensable than marrying and having a 
 imily. If they content themselves 
 with enjoying the greater comfort while 
 it lasts, but do not learn to require it, 
 they will people down to their old scale 
 of living. If from poverty their children 
 had previously been insufficiently led 
 or improperly nursed, a greater number 
 will now b& reared, and the competi- 
 tion of thesev when they grow up, will 
 depress wages, probably in full pro- 
 portion to the greater cheapness of 
 food. If the effect is not produced in 
 ibis mode, it will be produced by earlier 
 Mid more numerous marriages, or by 
 an ''ncreased number of births to a 
 marriage. According to all experi- 
 ence, a great increase invariably takes 
 place in the number of marriages, in 
 seasons of cheap food and full employ- 
 ment. I cannot, therefore, agree in 
 the importance so often attached to the 
 repeal of the corn laws, considered 
 merely as a labourer's question, or to 
 any of' the schemes, of which some ono 
 or other is at all times in vogue, for 
 making the labourers a very little better 
 off. Things which only affect them a very 
 little, make no permanent impression 
 upon their habits and requirements, 
 and they soon slide back into their 
 
 in his work entitled Over-Population ad id 
 Remedy: a work honourably distinguished 
 from most others which have been published 
 in the present generation, by its rational 
 treatment of questions affecting the ecoiii> 
 micol condition of the labouring classes.
 
 WAGES. 
 
 211 
 
 former state. To produce permanent 
 advantage, the temporary cause operat- 
 ing upon them must be sufficient to 
 make a great change in their condi- 
 tion a change such as will he felt 
 for many years, notwithstanding any 
 stimulus which it may give during one 
 generation to the increase of people. 
 When, indeed, the improvement is of 
 this signal character, and a generation 
 grows up which has always been used 
 to an improved scale of comfort, the 
 habits of this new generation in respect 
 to population become formed upon a 
 higher minimum, and the improvement 
 in their condition becomes permanent. 
 Of cases in point, the most remark- 
 able is France after the Revolution. 
 The majority of the population being 
 suddenly raised from misery, to inde- 
 pendence and comparative comfort ; 
 the immediate effect was that popula- 
 tion, notwithstanding the destructive 
 wars of the period, started forward 
 with unexampled rapidity, partly be- 
 cause improved circumstances enabled 
 many children to be reared who would 
 otherwise have died, and partly from 
 increase of births. The succeeding 
 generation howevergrew up with habits 
 considerably altered ; and though the 
 country was never before in so pros- 
 perous a state, the annual number of 
 births is now nearly stationary,* and 
 the increase of population extremely 
 slow.f 
 
 Supra, pp. 177, 178. 
 
 t A similar, though not an equal improve- 
 ment in the standard of living took place 
 among the labourers of England during the 
 remarkable fifty years from 1715 to 1765, 
 which were distinguished by such an extra- 
 ordinary succession of fine harvests (the 
 years of decided deficiency not exceeding 
 five in all that period) that the average 
 price of wheat during those years was much 
 lower than during the previous half century. 
 Mr. Malthus computes that on the average 
 of sixty years preceding 1720, the labourer 
 could purchase with a day's earnings only 
 two-thirds of a peck of wheat, while from 
 1720 to 1750 he could purchase a whole peck. 
 The average price of wheat according to the 
 Kton tables, for fifty years ending with 17 IS, 
 was 41s. 7}d. the quarter, and for the last 
 twenty-three of these, 45s. 8d., while for the 
 fifty years following, it was no more than 
 &e. lid. So considerable an improvement 
 in the condition of the labouring class, 
 though arising from the accidents of seasons, 
 yet continuing for more than a generation, 
 
 3. Wages depend, then, on the 
 proportion between the number of the 
 labouring population, and the capita) 
 or other funds devoted to the purchase 
 of labour ; we will say, for shortness, 
 the capital. If wages are higher at 
 one time or place than at another, if 
 the subsistence and comfort of the class 
 of hired labourers are more ample, it 
 is for no other reason than because 
 capital bears a greater proportion to 
 population. It is not the absolute 
 amount of accumulation or of produc- 
 tion, that is of importance to the 
 labouring class ; it is not the amount 
 even of the funds destined for distri- 
 bution among the laborers : it is the 
 proportion between those funds and the 
 numbers among whom they arc shared. 
 The condition of the class can be bet- 
 tered in no other way than by altering 
 that proportion to their advantage : 
 and every scheme for their benefit, 
 which does not proceed on this as its 
 foundation, is, for all permanent pur- 
 poses, a delusion. 
 
 In countries like North America and 
 the Australian colonies, where the 
 knowledge and arts of civilized life, 
 and a high effective desire of accumu- 
 lation, co-exist with a boundless extent 
 of unoccupied land; the growth of 
 capital easily keeps pace with the 
 utmost possible increase of population, 
 and is chiefly retarded by the im- 
 practicability of obtaining labourers 
 enough. All, therefore, who can pos- 
 sibly be born, can find employment 
 without overstocking the market : 
 every labouring family enjoys in abun- 
 dance the necessaries, many of the 
 comforts, and some of the luxuries of 
 life ; and, unless in case of individual 
 misconduct, or actual inability to work, 
 poverty does not, and dependence needs 
 not, exist. A similar advantage, 
 though in a less degree, is occasionally 
 
 had time to work a change in the habitual 
 requirements of the labouring class; and 
 this period is always noted as the date of " a 
 marked improvement of the quality of the 
 food consumed, and a decided elevation in 
 the standard of their comforts and conve- 
 niences." (Malthus, Principle! of Political 
 Economy, p. 225.) For the character of the 
 period, see Mr. Tooke's excellent History of 
 Price*, vol. i. pp. 33 to 61, and for the price* 
 of corn, the Appendix to that work. 
 PZ
 
 212 
 
 BOOK n. CHAPTER XL S. 
 
 enjoyed by some special class of la- 
 bourers in old countries, from an extra- 
 ordinarily rapid growth, not of capital 
 generally, but of the capital employed 
 in a particular occupation. So gigantic 
 has been the progress of the cotton 
 manufacture since the inventions of 
 Watt and Arkwright, that the capital 
 engaged in it has probably quadrupled 
 in the time which population requires 
 for doubling. While, therefore, it has 
 attracted from other employments 
 nearly all the hands which geogra- 
 phical circumstances and the habits or 
 inclinations of the people rendered 
 available ; and while the demand it 
 created for infant labour has enlisted 
 the immediate pecuniary interest of 
 the operatives in favour of promoting, 
 instead of restraining, the increase of 
 population ; nevertheless wages in the 
 great seats of the manufacture are 
 generally so high, that the collective 
 earnings of a family amount, on an 
 average of years, to a very satisfactory 
 sum ; and there is, as yet, no sign of 
 permanent decrease, while the effect 
 nap ilso been felt in raising the general 
 standard of agricultural wages in the 
 counties adjoining. 
 
 fiiii those circumstances of a country, 
 or oi an occupation, in which popula- 
 tion can with impunity increase at its 
 utmost rate, are rare, and transitory. 
 Very few are the countries presenting 
 the needful union of conditions. Kither 
 the industrial arts are backward and 
 stationary, and capital therefore in- 
 creases slowly ; or the effective desire 
 of accumulation being low, the increase 
 soon reaches its limit ; or, even though 
 both these elements are at their highest 
 known degree, the increase of capital 
 is checked, because there is not fresh 
 Lui'l U be resorted to, of as good 
 quality as that already occupied. 
 Though capital should for a time 
 double itself simultaneously with popu- 
 lation, if all this capital and popula- 
 tion are to find employment on the 
 same land, they cannot without an un- 
 exampled succession of agricultural 
 inventions continue doubling the pro- 
 duce ; therefore, if wages do not fall, 
 p-ofits must ; and when profits fall, 
 Increase of capital is slackened. Be- 
 
 sides, even if wages did not fall, the 
 price of food (as will be shown more 
 fully hereafter) would in these circunv 
 stances necessarily rise ; which is equi- 
 valent to a fall of wages. 
 
 Except, therefore, in the very pecu- 
 liar cases which I have just noticed, 
 of which the only one of any practical 
 importance is that of a new colony, or 
 a country in circumstances equivalent 
 to it ; it is impossible that population 
 should increase at its utmost rate 
 without lowering wages. Nor will the 
 fall be stopped at any point, short of 
 that which either by its physical or its 
 moral operation, checks the increase of 
 population. In no old country, there- 
 fore, does population increase at any- 
 thing like its utmost rate ; in most, at 
 a very moderate rate : in some countries 
 not at all. These facts are only to be 
 accounted for in two ways. Either 
 the whole number of births which 
 nature admits of, and which happen 
 in some circumstances, do not take 
 place ; or if they do, a large proportion 
 of those who are born, die. The re- 
 tardation of increase results either from 
 mortality or prudence ; from Mr. Mal- 
 thus's positive, or from his preventive 
 check : and one or the other of these 
 must and does exist, and very power- 
 fully too, in all old societies. Wherever 
 population is not kept down by the pru- 
 dence either of individuals or of the state, 
 it is kept down by starvation or disease. 
 
 Mr. Malthus has taken great pains 
 to ascertain, for almost every country 
 in the world, which of these checks it 
 is that operates : and the evidence 
 which he collected on the subject, in 
 his Essay on Population, may ever 
 now be read with advantage. Through 
 out Asia, and formerly in most Euro 
 pean countries in which the labouring 
 classes were not in personal bondage, 
 there is, or was, no restrainer of popu- 
 lation but death. The mortality was 
 not always the result of poverty : much 
 of it proceeded from unskilful and care- 
 less management of children, from un- 
 cleanly and otherwise unhealthy habits 
 of life among the adult population, and 
 from the almost periodical occurrenca 
 of destructive epidemics. Throughout 
 Europe these causes of shortened life
 
 WAGES. 
 
 213 
 
 have much diminished, tut they have 
 not ceased to exist. Until a period 
 not very remote, hardly any of our 
 large towns kept up its population, in- 
 di-| rndently of the stream always 
 flowing into them from the rural dis- 
 tricts : this was still true of Liverpool 
 until very recently; and even in Lon- 
 don, the mortality is larger, and the 
 average duration of life shorter, than 
 in rural districts where there is much 
 creator poverty. In Ireland, epidemic 
 fevers, and deaths from the exhaustion 
 of the constitution by insufficient 
 nutriment, have always accompanied 
 even the most moderate deficiency of 
 the potato crop. Nevertheless, it cannot 
 now be said that in any part of Europe, 
 population is principally kept down by 
 disease, still less by starvation, either 
 in a direct or in an indirect form. The 
 agency by which it is limited is chiefly 
 
 Geventive, not (in the language of 
 r. Malthus) positive. But the pre- 
 ventive remedy seldom, I believe, con- 
 sists in the unaided operation of 
 prudential motives on a class wholly 
 or mainly composed of labourers for 
 hire, and looking forward to no other 
 lot. In England, for example, I much 
 doubt if the generality of agricultural 
 labourers practise any prudential re- 
 straint whatever. They generally 
 marry as early, and have as many 
 children to a marriage, as they would 
 or could do if they were settlers in the 
 United States. During the geneiation 
 which preceded the enactment of the 
 present Poor Law, they received the 
 most direct encouragement to this sort 
 of improvidence : being not only as- 
 sured of support, on easy terms, when- 
 ever out of employment, but even when 
 in employment, very commonly re- 
 ceiving from the parish a weekly allow- 
 ance proportioned to their number of 
 children ; and the married with large 
 families being always, from a short- 
 sighted economy, employed in prefe- 
 rence to the unmarried ; which last 
 premium on population still exists. 
 Under such prompting, the rural 
 labourers acquired habits of reckless- 
 ness, which are so congenial to the un- 
 cultivated mind, that in whatever 
 manner produced, they in general long 
 
 survive their immediate causes. There 
 are so many new elements at work in 
 society, even in those deeper strata 
 which are inaccessible to the mere 
 movements on the surface, that it is 
 hazardous to affirm anything positive 
 on the mental state or practical im- 
 pulses of classes and bodies of men, 
 when the same assertion may be true 
 to-day, and may require great modifi- 
 cation in a few years time. It docs, 
 however, seem, that if the rate of in- 
 crease of population depended solely 
 on the agricultural labourers, it would, 
 as far as dependent on births, and un- 
 less repressed by deaths, be as rapid 
 in the southern counties of England 
 as in America. The restraining prin- 
 ciple lies in the very great proportion 
 of the population composed of the 
 middle classes and the skilled artizans, 
 who in this country almost equal in 
 number the common labourers, and on 
 whom prudential motives do, in a con- 
 siderable degree, operate. 
 
 4. Where a labouring class who 
 have no property but their daily wages, 
 and no hope of acquiring it, refrain 
 from over-rapid multiplication, the 
 cause, I believe, has always hitherto 
 been, either actual legal restraint, or a 
 custom of some sort which, without 
 intention on their part, insensibly 
 moulds their conduct, or affords imme- 
 diate inducements not to marry. It is 
 not generally known in how many 
 countries of Europe direct legal ob- 
 stacles are opposed to improvident 
 marriages. The communications made 
 to the original Poor Law Commission 
 by our foreign ministers and consuls in 
 different parts of Europe, contain a 
 considerable amount of information on 
 this subject. Mr. Senior, in his pre- 
 face to those communications,* says 
 that in the countries which recognise a 
 legal right to relief, " marriage on the 
 part of persons in the actual receipt of 
 relief appears to be everywhere prohi- 
 bited, and the marriage of those who 
 are not likely to possess the means of 
 independent support is allowed by very 
 
 * Forming an Appendix (F) to the General 
 Report of the Commissioners, and also pub- 
 lished by authority as a separate volume.
 
 214 
 
 BOOK IL CHAPTER XI. 5. 
 
 fow. Thus we are told that in Norway 
 no one can many without ' showing, 
 to the satisfaction of the clergyman, 
 that he is permanently settled in such 
 a manner as to offer a fair prospect 
 that he can maintain a family.' 
 
 " In Mecklenburg, that ' marriages 
 lire delayed by conscription in the 
 twenty-second year, and military ser- 
 vice for six years ; besides, the parties 
 must have a dwelling, without which 
 a clergyman is not permitted to marry 
 them. The men marry at from twenty- 
 five to thirty, the women not much 
 earlier, as both must first gain by ser- 
 vice enough to establish themselves." 
 
 " In Saxony, that ' a man may not 
 marry before he is twenty-one years 
 old, if liable to serve in the army. In 
 Dresden, professionists (by which word 
 artizans are probably meant) may not 
 many until they become masters in 
 their trade.' 
 
 " In Wurtemberg, that ' no man is 
 allowed to marry till his twenty-fifth 
 year, on account of his military duties, 
 unless permission be especially ob- 
 tained or purchased: at that age he 
 must also obtain permission, which is 
 granted on proving that he and his 
 wife would have together sufficient to 
 maintain a family or to establish them- 
 selves ; in large towns, say from 800 
 to 1000 florins (from 661. IBs. 4d. to 
 Ml. 3*. 4d.) ; in smaller, from 400 to 
 500 florins : in villages, 200 florins 
 (IfiZ. 13s. 4d.y* 
 
 The minister at Munich says, " The 
 great cause why the number of the 
 poor is kept so low in this country 
 arises from the prevention by law of 
 marriages in cases in which it cannot 
 he proved that the parties have reason- 
 able means of subsistence ; and this 
 regulation is in all places and at all 
 times strictly adhered to. The effect 
 of a constant and firm observance of 
 this rule has, it is true, a considerable 
 influence in keeping down the popula- 
 tion of Bavaria, which is at present low 
 for the extent of country, but it has a 
 most salutary effect in averting extreme 
 poverty and consequent misery. "f 
 
 * Preface, p. xxxix. 
 
 t Preface, p. xxxiii., or p. 554 of the Ap- 
 pendix itself. 
 
 At Lubeck, " marriages among tho 
 poor are delayed by the necensity a 
 man is under, first, of previously prov- 
 ing that he is in a regular employ, 
 work, or profession, that will enable 
 him to maintain a wife : and secondly, 
 of becoming a burgher, and equipping 
 himself in the uniform of the burgher 
 guard, which together may cost him 
 nearly 41."* At Frankfort, " the go- 
 vernment prescribes no age for marry- 
 ing, but the permission to marry is 
 only granted on proving alivelihood."f 
 
 The allusion, in some of these state- 
 ments, to military duties, points out 
 an indirect obstacle to marriage, in- 
 terposed by the laws of some countries 
 in which there is no direct legal re- 
 straint. In Prussia, for instance, the 
 institutions which compel every able- 
 bodied man to serve for several years 
 in the army, at the time of life at 
 which imprudent marriages are most 
 likely to take place, are probably a full 
 equivalent, in effect on population, for 
 the legal restrictions of the smaller 
 German states. 
 
 "So strongly," says Mr. Kay, "do 
 the people of Switzerland understand 
 from experience the expediency of their 
 sons and daughters postponing the 
 time of their marriages, that the coun- 
 cils of state of four or five of the most 
 democratic of the cantons, elected, be 
 it remembered, by universal suffrage, 
 have passed laws by which all young 
 persons who marry before they have 
 proved to the magistrate of their dis- 
 trict that they are able to support a 
 family, are rendered liable to a heavy 
 fine. In Lucerne, Argovie, Unterwal- 
 den, and I believe, St. Gall, Schweitz, 
 and Uri, laws of this character have 
 been in force for many years."| 
 
 5. Where there is no general law 
 restrictive of marriage, there are often 
 customs equivalent to it. When the 
 
 fnilds or trade corporations of the 
 liddle Ages were in vigour, their bye- 
 laws or regulations were conceived 
 with a very vigilant eye to the advan- 
 tage which the trade derived from 
 limiting competition : and they made 
 
 Appendix, p. 419. t Ibid. p. 567. 
 
 t Kay, as before cited, i. 68.
 
 WAGES. 
 
 216 
 
 It very effectually the interest of arti- 
 xans not to marry until after passing 
 through the two stages of apprentice 
 and journeyman, and attaining the 
 rank of master.* In'. Norway, where 
 the labour is chiefly agricultural, it is 
 forbidden to engage a farm-servant for 
 less than a year ; which was the 
 general English practice until the 
 poor laws destroyed it, by enabling 
 the farmer to cast his labourers on 
 parish pay whenever he did not imme- 
 diately require their labour. In con- 
 sequence of this custom, and of its 
 enforcement by law, the whole of the 
 rather limited class of agricultural 
 labourers in Norway have an engage- 
 ment for a year at least, which if the 
 parties are content with one another, 
 naturally becomes a permanent engage- 
 ment : hence it is known in every 
 neighbourhood whether there is, or is 
 likely to be, a vacancy, and unless 
 there is, a young man does not many, 
 knowing that he could not obtain em- 
 ployment. The custom still exists in 
 
 * " In general," says Sismondi, " the num- 
 ber of masters in each corporation was fixed, 
 and no one but a master could keep a shop, 
 or buy and sell on his own account. Each 
 master could only train a certain number of 
 apprentices, whom he instructed in his trade ; 
 in some corporations he was only allowed 
 one. Each master could also employ only a 
 limited number of workmen, who were called 
 companions, or journeymen ; and in the 
 trades in which he could only take one ap- 
 prentice, he was only allowed to have one, or 
 at most two journeymen. No one was al- 
 lowed to buy, sell, or work at a trade, unless 
 he was either an apprentice, a journeyman, 
 or a master ; no one could become a journey- 
 man without having served a given number 
 of years as an apprentice, nor a master, un- 
 less he had served the same number of years 
 as a journeyman, and unless he had also 
 executed what was called his chefd'aeuvre, 
 (masterpiece) a piece of work appointed in 
 liis trade, and which was to be judged of by 
 the corporation. It is seen that this organi- 
 zation threw entirely into the hands of the 
 masters the recruiting of the trade. They 
 alone could take apprentices ; but they were 
 not ;ompelled to take any; accordingly they 
 required to be paid, often at a very high 
 rate, for the favour ; and a young man could 
 not enter into a trade if he had not, at start- 
 ing, the sum required to be paid for his ap- 
 prenticeship, and the means necessary for his 
 support during that apprenticeship; since 
 for four, five, or seven years, all his work 
 Delonged to his master. His dependence on 
 the master during that time was complete ; 
 for the master's will, or even caprice, could 
 
 Cumberland and WeatniO.-eland, except 
 that the term is half a year instead of 
 a year ; and seems to be still attended 
 with the same consequences. The 
 farm-servants are " lodged and boarded 
 in their masters' houses, which thel 
 seldom leave until, through the death 
 of some relation or neighbour, they 
 succeed to the ownership or lease of a 
 cottage farm. What is called surplus 
 labour does not here exist."* I have 
 mentioned in another chapter the 
 check to population in England during 
 the last century, from the difficulty of 
 obtaining a separate dwelling place.f 
 Other customs restrictive of popula- 
 tion might be specified : in some parts 
 of Italy, it is the practice, according to 
 Sismondi, among the poor, as it is well 
 known to be in the higher ranks, that 
 all but one of the sons remain unmar 
 ried. But such family arrangements are 
 not likely to exist among day-labourers. 
 They are the resource of small proprie- 
 tors and metayers, for preventing too 
 minute a subdivision of the land. 
 
 close the door of a lucrative profession upon 
 .him. After the apprentice became a journey- 
 man he had a little more freedom ; he could 
 engage with any master he chose, or pass 
 from one to another ; and as the condition of 
 a journeyman was only accessible through 
 apprenticeship, he now began to profit by the 
 monopoly from which he had previously suf- 
 fered, and was almost sure of getting well 
 paid for a work which no one else was 
 allowed to .perform. He depended, however, 
 on the corporation for becoming a master, 
 and did not, therefore, regard himself as 
 being yet assured of his lot, or as having 
 a permanent position. In general he did 
 not marry until he had passed as a mas- 
 ter. 
 
 " It is certain both in fact and in theory 
 that the existence of trade corporations hin- 
 dered, and could not but hinder, the birth of 
 a superabundant population. By the sta- 
 tutes of almost all the guilds, a man could not 
 pass as amaster before the ageof twenty-five : 
 but if he had no capital of his own, if he had 
 not made sufficient savings, he continued to 
 work as a journeyman much longer ; some, 
 perhaps the majority of artisans, remained 
 journeymen all their lives. There was, 
 however, scarcely an instance of their marry- 
 ing before they were received as masters : 
 had they been so imprudent as to desire it, 
 no father would have given' his daughter to a 
 man without a position." -Nete Priacipltt of 
 Political Economy, book iv.^ch. 10. See also 
 Adam Smith, book i., ch. 10, part 2. 
 
 * See Thornton on Over-Population, pa(f 
 18, and the authorities there cited. 
 t Supra, p. 99.
 
 218 
 
 BOOK IL CHAPTER XI. 6. 
 
 Jn England generally there is now 
 scarcely a relic of these indirect checks 
 to population ; except that in parishes 
 owned by one or a very small number 
 of landowners, the increase of resident 
 labourers is still occasionally obstructed, 
 by preventing cottages from being 
 built, or by pulling down those which 
 exist ; thus restraining the population 
 liable to become locally chargeable, 
 without any material effect on popula- 
 tion generally, the work required in 
 those parishes being performed by 
 labourers settled elsewhere. The sur- 
 rounding districts always feel them- 
 selves much aggrieved by this practice, 
 against which they cannot defend 
 themselves by similar means, since a 
 single acre of land owned by any one 
 who does not enter into the combina- 
 tion, enables him to defeat the attempt, 
 very profitably to himself, by covering 
 that acre with cottages. To meet 
 these complaints it has already been 
 under the consideration of Parliament 
 to abolish parochial settlements, and 
 make the poor rate a charge not on 
 the parish, but on the whole union. 
 If this proposition be adopted, which 
 for other reasons is very desirable, 
 it will remove the small remnant of 
 what was once a check to population : 
 the value of which, however, from the 
 narrow limits of its operation, must 
 now be considered very trifling. 
 
 6. In the case, therefore, of the 
 common agricultural labourer, the 
 checks to population may almost be 
 considered as non-existent. If the 
 growth of the towns, and of the capital 
 there employed, by which the factory 
 operatives are maintained at their 
 present average rate of wages notwith- 
 standing their rapid increase, did not 
 also absorb a great part of the annual 
 addition to the rural population, there 
 seems no reason in the present habits 
 of the people why they should not fall 
 into as miserable a condition as the 
 Irish previous to 1846; and if the 
 market for our manufactures should, I 
 do not say fall off, but even cease to 
 expand at the rapid rate of the last 
 fifty yeais, there is no certainty that 
 tbis fate may not be reserved for us. 
 
 Without carrying our anticipations 
 forward to such a calamity, which tho 
 great and growing intelligence of the 
 factory population would, it may be 
 hoped, avert, by an adaptation of their 
 habits to their circumstances ; the 
 existing condition of the labourers of 
 some of the most exclusively agricul- 
 tural comities, Wiltshire, Somerset- 
 shire, Dorsetshire, Bedfordshire, Buck- 
 inghamshire, is sufficiently painful to 
 contemplate. The labourers of these 
 counties, with large families, and eight 
 or perhaps nine shillings for their 
 weekly wages when in full employment, 
 have for some time been one of the 
 stock objects of popular compassion : 
 it is time that they had the benefit 
 also of some application of common 
 sense. 
 
 Unhappily, sentimentality rather 
 than common sense usually presides 
 over the discussion of these subjects ; 
 and while there is a growing sensitive- 
 ness to the hardships of the poor, and 
 a ready disposition to admit claims in 
 them upon the good offices of other 
 people, there is an all but universal 
 unwillingness to face the real difficulty 
 of their position, or advert at all to the 
 conditions which nature has made in- 
 dispensable to the improvement of 
 their physical lot. Discussions on the 
 condition of 'the labourers, lamenta- 
 tions over its wretchedness, denuncia- 
 tions of all who are supposed to be in- 
 different to it, projects of one kind or 
 another for improving it, were in no 
 country and in no time of the world so 
 rife as in the present generation ; but 
 there is a tacit agreement to ignore 
 totally the law of wages, or to dismiss 
 it in a parenthesis, with such terms as 
 " hard-hearted Malthusianism ;" as if 
 it were not a thousand times more 
 hard-hearted to tell human beings that 
 they may, than that they may not, call 
 into existence swarms of creatures who 
 are sure to be miserable, and most 
 likely to be depraved ; and forgetting 
 that the conduct, which it is reckoned 
 so cruel to disapprove, is a degrading 
 slavery to a brute instinct in one of 
 the persons concerned, and most com- 
 monly, in the other, helpless submis- 
 sion to a revolting abuse of power.
 
 WAGES. 
 
 217 
 
 So long as mankind remained in a 
 semi-barbarous state, with the indolence 
 and the few wants of the savage, it 
 
 |>robably was not desirable that popu- 
 ation should be restrained : the pres- 
 sure of physical want may have been a 
 necefisary stimulus, in that stage of 
 the human mind, to the exertion of 
 labour and ingenuity required for ac- 
 complishing that greatest of all past 
 changes in human modes of existence, 
 by which industrial life attained pre- 
 dominance over the hunting, the pas- 
 toral, and the military or predatory 
 state. Want, in that age of the world, 
 had its uses, as even slavery had ; and 
 there may be corners of the earth 
 where those uses are not yet super- 
 seded, though they might easily be so 
 were a helping hand held out by more 
 civilized communities. But in Europe 
 the time, if it ever existed, is long 
 past, when a life of privation had the 
 smallest tendency to make men either 
 better workmen or more civilized beings. 
 It is, on the contrary, evident, that if 
 the agricultural labourers were better 
 oft', they would both work more effi- 
 ciently, and be better citizens. I ask, 
 then, is it true, or not, that if their 
 numbers were fewer they would obtain 
 higher wages ? This is the question, 
 and no other : and it is idle to divert 
 attention from it, by attacking any 
 incidental position of Malthus or some 
 other writer, and pretending that to 
 refute that, is to disprove the prin- 
 ciple of population. Some, for instance, 
 have achieved an easy victory over a 
 passing remark of Mr. Malthus, ha- 
 zarded chiefly by way of illustration, 
 that the increase of food may perhaps 
 be assumed to take place in an arith- 
 metical ratio, while population in- 
 creases in a geometrical : when every 
 candid reader knows that Mr. Malthus 
 laid no stress on this unlucky attempt 
 to give numerical precision to things 
 which do not admit of it, aiid every 
 person capable of reasoning must see 
 that it is wholly superfluous to his 
 argument. Others have attached im- 
 mense importance to a correction which 
 more recent political economists have 
 made in the mere language of the 
 earlier followers of Mr. Malthus. Seve- 
 
 ral writers have said that it is the 
 tendency of population to increase 
 faster than the means of subsistence. 
 The assertion was true in the sense in 
 which they meant it, namely that 
 population would in most circumstances 
 increase faster than the means of sub- 
 sistence, if it were not checked either 
 by mortality or by prudence. But in- 
 asmuch as these checks act with un- 
 equal force at different times and 
 places, it was possible to interpret the 
 language of these writers as if they 
 had meant that population is usually 
 gaining ground upon subsistence, and 
 the poverty of the people becoming 
 greater. Under this interpretation of 
 their meaning, it was urged that the 
 reverse is the truth : that as civiliza- 
 tion advances, the prudential check 
 tends to become stronger, and popula- 
 tion to slacken its rate of increase, 
 relatively to subsistence; and that 
 it is an error to maintain that popula- 
 tion, in any improving community, 
 tends to increase faster than, or even 
 so fast as, subsistence. The word 
 tendency is here used in a totally dif- 
 ferent sense from that of the writers 
 who affirmed the proposition: but 
 waving the verbal question, is it not 
 allowed on both sides, that in old 
 countries, population presses too closely 
 upon the means of subsistence ? And 
 though its pressure diminishes, the 
 more the id ^as and habits of the poorest 
 class of labourers can be improved, to 
 which it is to be hoped that there is 
 always some tendency in a progressive 
 country, yet since that tendency has 
 hitherto been, and still is, extremely 
 faint, and (to descend to particulars) 
 has not yet extended to giving to 
 the Wiltshire labourers higher wages 
 than eight shillings a week, the only 
 thing which it is necessary to consider 
 is, whether that is a sufficient and 
 suitable provision for a labourer ? for if 
 not, population does, as an existing 
 fact, bear too great a proportion to the 
 wages fund ; and whether it pressed 
 still harder or not quite so hard at 
 some former period, is practically of 
 no moment, except that, if the ratio 
 is an improving one, there is the better 
 hope that by proper aida aivj eu
 
 218 
 
 BOOK II. CHAPTER XII. 1. 
 
 courage-mania it ma}- bo made to im- 
 prove more and fester. 
 
 It is not, however, against reason, 
 that the argument on this subject has 
 to struggle ; but against a feeling of 
 dislike, which will only reconcile itself 
 to the unwelcome truth, when every 
 device is exhausted by which the 
 recognition of that truth can be evaded. 
 1 1 is necessary, therefore, to enter into 
 a detailed examination of these devices, 
 
 and to force every position which is 
 taken up by the enemies of the popula- 
 tion principle, in their determination 
 to find some refuge for the labourers, 
 some plausible means of improving 
 their condition, without requiring the 
 exercise, either enforced or voluntary, 
 of any self-restraint, or any greater 
 control than at present over the animal 
 power of multiplication. This will be 
 the object of the next chapter. 
 
 CHAPTEE XII. 
 
 OP POPULAR REMEDIES FOB LOW WAGES. 
 
 1. THE simplest expedient which 
 can be imagined for keeping the wages 
 of labour up to the desirable point, 
 would be to fix them by law : and this 
 is virtually the object aimed at in a 
 variety of plans which have at different 
 times been, or still are, current, for 
 remodelling the relation between la- 
 bourers and employers. No one pro- 
 bably ever suggested that wages should 
 be absolutely fixed ; since the interests 
 of all concerned, often require that they 
 should be variable ; but some have 
 proposed to fix a minimum of wages, 
 leaving the variations above that point 
 to be adjusted by competition. Another 
 plan, which has found many advocates 
 among the leaders of the operatives, is 
 that councils should be formed, which 
 in Englandhave been calledlocal boards 
 of trade, in France " conseils de prud'- 
 hommes," and of her names ; consisting 
 of delegates from the workpeople and 
 from the employers, who, meeting in 
 conference, should agree upon a rate 
 of wages, and promulgate it from 
 authority, to be binding generally on 
 employers and workmen ; the ground 
 of decision being, not the state of the 
 labour-market, but natural equity ; to 
 provide that the workmen shall have 
 reasonable wages, and the capitalist 
 reasonable profits. 
 
 Others again (but these are rather 
 philanthropists interesting themselves 
 for the labouring classes, than the 
 
 labouring people themselves) are shy 
 of admitting the interference of au- 
 thority in contracts for labour: they 
 fear that if law intervened, it would 
 intervene rashly and ignorantly ; they 
 are convinced that two parties, with 
 opposite interests, attempting to adjust 
 those interests by negotiation through 
 their representatives on principles of 
 equity, when no rule could be laid 
 down to determine what was equitable, 
 would merely exasperate their dif- 
 ferences instead of healing them ; but 
 what it is useless to attempt by the 
 legal sanction, these persons desire to 
 compass by the moral. Every em- 
 ployer, they think, ought to give suffi- 
 cient wages ; and if he does it not wil- 
 lingly, should be compelled to it by 
 general opinion ; the test of sufficient 
 wages being their own feelings, or what 
 they suppose to be those of the public. 
 This is, I think, a fair representation 
 of a considerable body of existing opi. 
 nion on the subject. 
 
 I desire to confine my remarks iff 
 the principle involved in all these sug- 
 gestions, without taking into accoun', 
 practical difficulties, serious as these 
 must at once be seen to be. I shall 
 suppose that by one or other of these 
 contrivances, wages could be kept 
 above the point to whi<'h they wouM 
 be brought by competition. This is 
 as much as to say, above the highest 
 rate which can be afforded by thi
 
 POPULAR REMEDIES FOR LOW WAGES. 
 
 219 
 
 existing capital consistently with em- 
 ploying all the labourers. For it, is a 
 mistake to suppose that competition 
 merely keeps down wages. It is 
 equally the means by which they are 
 kept up. When there are any labour- 
 ers unemployed, these, unless main- 
 tained by charity, become competitors 
 for hire, and wages fall ; but when all 
 who were out of work have found em- 
 ployment, wages will not, under the 
 freest system of competition, fall lower. 
 There are strange notions afloat con- 
 cerning the nature of competition. 
 Some people seem to imagine that 
 its effect is something indefinite ; 
 that the competition of sellers may 
 lower prices, and the competition of la- 
 bourers may lower wages, down to 
 zero, or some unassignable minimum. 
 Nothing can be more unfounded. 
 Goods can only be lowered in price by 
 competition, to the point which calls 
 forth buyers sufficient to take them 
 off; and wages can only be lowered 
 by competition until room is made 
 to admit all the labourers to a share 
 in the distribution of the wages- 
 fund. If they fell below this point, a 
 portion of capital would remain un- 
 employed for want of labourers ; a 
 counter-competition would commence 
 on the side of capitalists, and wages 
 would rise. 
 
 Since, therefore, the rate of wages 
 which results from competition distri- 
 butes the whole wages-fund among the 
 whole labouring population ; if law or 
 opinion succeeds in fixing wages above 
 this rate, some labourers are kept out 
 of employment ; and as it is not the 
 intention of the philanthropists that 
 these should starve, they must be pro- 
 vided for by a forced increase of the 
 wages-fund ; by a compulsory saving. 
 It is nothing to fix a minimum of 
 wages, unless there b a provision that 
 work, or wages at least, be found for 
 all who apply for it. This, accordingly, 
 is always part of the scheme ; and is 
 consistent with the ideas of more people 
 than would approve of either a legal 
 or a moral minimum of wages. Popular 
 sentiment looks upon it as the duty of 
 the rich, or of the state, to find employ- 
 ment for all the poor. If the moral 
 
 influence of opinion does not induce 
 the rich to spare fiom their consump- 
 tion enough to set all the poor to work 
 at " reasonable wages," it is supposed 
 to be incumbent on the state to lay on 
 taxes for the purpose, either by local 
 rates or votes of public money. The 
 proportion between labour and the 
 wages-fund would thus be modified to 
 the advantage of the labourers, not by 
 restriction of population, but by an 
 increase of capital. 
 
 2. If this claim on society could 
 be limited to the existing generation ; 
 if nothing more were necessary than a 
 compulsory accumulation, sufficient to 
 provide permanent employment at am- 
 ple wages for the existing numbers of 
 the people ; such a proposition would 
 have no more strenuous supporter than 
 myself. Society mainly consists of 
 those who live by bodily labour ; and 
 if society, that is, if the labourers, lend 
 their physical force to protect indivi- 
 duals in the enjoyment of superfluities, 
 they are entitled to do so, and have 
 always done so, with the reservation 
 of a power to tax those superfluities 
 for purposes of public utility ; among 
 whii.-h purposes the subsistence of the 
 people is the foremost. Since no one 
 is responsible for having been born, 
 no pecuniary sacrifice is too great to 
 be made by those who have more than 
 enough, for the purpose of securing 
 enough to all persons already in ex- 
 istence. 
 
 But it is another thing altogether, 
 when those who have produced and 
 accumulated are called upon to abstain 
 from consuming, until they have given 
 food and clothing, not only to all who 
 now exist, but to all whom these or 
 their descendants may think fit to call 
 into existence. Such an obligation ac- 
 knowledged and acted upon, would sus- 
 pend all checks, both positive and pre- 
 ventive ; there would be nothing to 
 hinder population from starting for- 
 ward at its rapidest rate ; and as the 
 natural increase of capital would, at 
 the best, not be more rapid than before, 
 taxation, to make up the growing de- 
 ficiency, must advance with the same 
 gigantic strides. The attempt would
 
 220 
 
 of coarse be made to exact labour in 
 exchange for support. But experience 
 lias shown the sort of work to be ex- 
 pected from recipients of public charity. 
 When the pay is not given for the sake 
 of the work, but the work found for the 
 sake of the pay, inefficiency is a matter 
 of certainty : to extract real work from 
 day-labourers Avithout the power of 
 dismissal, is only practicable l>y the 
 power of the lash. It is conceivable, 
 doubtless, that this objection might 
 be got over. The fund raised by tax- 
 ation might be spread over the labour- 
 market generally, as seems to be in- 
 tended by the supporters of the "right 
 to employment" in France ; without giv- 
 ing to any unemployed labourer a right 
 to demand support in a particular place 
 or from a particular functionary. The 
 power of dismissal, as regards indi- 
 vidual labourers, would then remain ; 
 the government only undertaking to 
 create additional employment when 
 there was a deficiency, and reserving, 
 like other employers, the choice of its 
 own workpeople. But let them -work 
 ever so efficiently, the increasing po- 
 pulation could not, as we have so often 
 shown, increase the produce propor- 
 tionally : the surplus, after all were 
 fed, would bear a less and less propor- 
 tion to the whole produce and to the 
 population : and the increase of people 
 going on in a constant ratio, while the 
 Increase of produce went on in a di- 
 minishing ratio, the surplus would in 
 time be wholly absorbed ; taxation for 
 the support of the poor would engross 
 the whole income of the country ; the 
 payers and the receivers would be 
 melted down into one mass. The 
 check to population either by death or 
 prudence, could not then be staved off 
 any longer, but must come into opera- 
 tion suddenly and at once ; everything 
 which places mankind above a nest of 
 ants or a colony of beavers, having 
 perished in the interval. 
 
 These consequences have been so 
 often and so clearly pointed out by au- 
 thors of reputation, in writings known 
 and accessible, that ignorance of them 
 on the part of educated persons is no 
 longer pardonable. It is doubly dis- 
 creditable in any person setting up for 
 
 BOOK II. CHAPTER XII. g 2. 
 
 a public teacher, to ignore these con- 
 siderations; to dismiss them silently, 
 and discuss or declaim on wages and 
 poor-laws, not as if these arguments 
 could be refuted, but as if they did not 
 exist. 
 
 Every one has a right to live. We 
 will suppose this granted. But no one 
 has a right to bring creatures into life, 
 to be supported by other people. Who- 
 ever means to stand upon the first of 
 these rights must renounce all preten- 
 sion to the last. If a man cannot sup- 
 port even himself unless others help 
 him, those others are entitled to say 
 that they do not also undertake the 
 support of any offspring which it is 
 physically possible for him to summon 
 into the world. Yet there are abun- 
 dance of writers and public speakers, 
 including many of most ostentatious 
 pretensions to high feeling, whose views 
 of life are so truly brutish, that they 
 see hardship in preventing paupers 
 from breeding hereditary paupers in 
 the workhouse itself. Posterity will 
 one day ask with astonishment, what 
 sort of people it could be among whom 
 such preachers could find proselytes. 
 
 It would be possible for the state to 
 guarantee employment at ample wages 
 to all who are born. But if it does 
 this, it is bound in self-protection, and 
 for the sake of every purpose for which 
 government exists, to provide that no 
 person shall be born without its consent. 
 If the ordinary and spontaneous mo- 
 tives to self-restraint are removed, 
 others must be substituted. Kestric- 
 tions on marriage, at least equivalent 
 to those existing in some of the German 
 States, or severe penalties on those 
 who have children when unable to sup- 
 port them, would then be indispensable. 
 Society can feed the necessitous, if it 
 takes their multiplication under its 
 control ; or (if destitute of all moral 
 feeling for the wretched offspring) it 
 can leave the last to their discretion, 
 abandoning the first to their own care. 
 But it cannot with impunity take the 
 feeding upon itself, and leave the mul- 
 tiplying free. 
 
 To give profusely to the people, whe- 
 ther under the name of charity or of 
 employment, without placing them
 
 POPULAR REMEDIES FOR LOW WAGES. 
 
 221 
 
 under such influences that prudential 
 motives shall act powerfully upon them, 
 is to lavish the means of benefiting 
 mankind, without attaining the object. 
 Leave the people in a situation in 
 which their condition manifestly de- 
 pends upon their numbers, and the 
 greatest permanent benefit may be 
 derived from any sacrifice made to im- 
 prove the physical well-being of the 
 present generation, and raise, by that 
 means, the habits of their children. 
 But remove the regulation of their 
 wages from their own control; gua- 
 rantee to them a certain payment, 
 either by law, cr by the feeling of the 
 community ; and no amount of comfort 
 that you can give them will make 
 either them or their descendants look 
 to their own self-restraint as the proper 
 means for preserving them in that 
 state. You will only make them in- 
 dignantly claim the continuance of your 
 guarantee, to themselves and their full 
 complement of possible posterity. 
 
 On these grounds some writers have 
 altogether condemned the English 
 poor-Law, and any system of relief to 
 the able-bodied, at least when uncom- 
 bined with systematic legalprecautions 
 against over-population. The famous 
 Act of the 43d of Elizabeth undertook, 
 on the part of the public, to provide 
 work and wages for all the destitute 
 able-bodied : and there is little doubt 
 that if the intent of that Act had been 
 fully carried out, and no means had 
 been adopted by the administrators of 
 relief to neutralize its natural tenden- 
 cies, the poor-rate would by this time 
 have absorbed the whole net produce 
 of the land and labour of the country. 
 It is not at all surprising, therefore, 
 that Mr. Malthus and otheis should at 
 first have concluded against all poor- 
 laws whatever. It required much ex- 
 perience, and careful examination of 
 different modes of poor-law manage- 
 ment, to give assurance that the ad- 
 mission of an absolute right to be sup- 
 ported at the cost of other people, could 
 exist in law and in fact, without fatally 
 relaxing the springs of industry and 
 the restraints of prudence. This, how- 
 ever, was fully substantiated, by the 
 investigations of the oritjinal Poor Law 
 
 Commissioners. Hostile as they are 
 unjustly accused of being to the 
 principle of legal relief, they are tho 
 first who fully proved the compatibility 
 of any Poor Law in which a right to 
 relief was recognised, with the perma- 
 nent interests of the labouring class 
 and of posterity. By a collection of 
 facts, experimentally ascertained in 
 parishes scattered throughout England, 
 it was shown that the guarantee of 
 support could be freed from its injurious 
 effects upon the minds and habits of 
 the people, if the relief, though ample 
 in respect to necessaries, was accom- 
 panied with conditions which they dis- 
 liked, consisting of some restraints on 
 their freedom, and the privation of some 
 indulgences. Under this proviso, it 
 may be regarded as irrevocably esta- 
 blished, that the fate of no member of 
 the community needs be abandoned to 
 chance ; that society can, and therefore 
 ought to ensure every individual be- 
 longing to it against the extreme of 
 want ; that the condition even of those 
 who are unable to find their own sup- 
 port, needs not be one of physical suf- 
 fering, or the dread of it, but only of 
 restricted indulgence, and enforced 
 rigidity of discipline. This is surely 
 something gained for humanity, impor- 
 tant in itself, and still more so as a 
 step to something beyond; and hu- 
 manity has no worse enemies than 
 those who lend themselves, either 
 knowingly or unintentionally, to bring 
 odium on this law, or on the principles 
 in which it originated. 
 
 3. Next to the attempts to regu- 
 late wages, and provide artificially 
 that all who are willing to work shall 
 receive an adequate price for their 
 labour, we have to consider another 
 class of popular remedies, which do 
 not profess to interfere with freedom of 
 contract ; which leave wages to be 
 fixed by the competition of the market, 
 but, when they are considered insuffi- 
 cient, endeavour by some subsidiary 
 resource to make up to the labourers 
 for the insufficiency. Of this nature 
 was the expedient resorted to by 
 parish authorities during thirty or 
 forty years previous to 1834, generally
 
 222 
 
 BOOK II. CHAPTER XII. 8. 
 
 known as the Allowance System. This 
 was first introduced, when, through a 
 succession of bad seasons, and conse- 
 quent high prices of food, the wages of 
 labour had become inadequate to afford 
 to the families of the agricultural 
 labourers the amount of support to 
 which they had been accustomed. 
 Sentiments of humanity, joined with 
 the idea then inculcated in high 
 quarters, that people ought not to be 
 allowed to suffer for having enriched 
 their country with a multitude of inha- 
 bitants, induced the magistrates of the 
 rural districts to commence giving 
 parish relief to persons already in 
 private employment ; and when the 
 practice had once been sanctioned, the 
 immediate interest of the farmers, 
 whom it enabled to throw part of the 
 support of their labourers upon the 
 other inhabitants of the parish, led to a 
 great and rapid extension of it. The 
 principle of this scheme being avowedly 
 that of adapting the means of every 
 family to its necessities, it was a natu- 
 ral consequence that more should be 
 given to the married than to the single, 
 and to those who had large families 
 than to those who had not: in fact, 
 an allowance was usually granted for 
 every child. So direct and positive an 
 encouragement to population is not, 
 however, inseparable from the scheme : 
 the allowance in aid of wages might 
 be a fixed thing, given to all labourers 
 alike, and as this is the least objec- 
 tionable form which the system can 
 assume, we will give it the benefit of 
 the supposition. 
 
 It is obvious that this is merely 
 another mode of fixing a minimum of 
 wages ; no otherwise differing from 
 the direct mode, than in allowing the 
 employer to buy the labour at its 
 market price, the difference being 
 made up to the labourer from a public 
 fund. The one kind of guarantee is 
 open to all the objections which have 
 been urged against the other. It pro- 
 mises to the labourers that they shall 
 all have a certain amount of wages, 
 however numerous they may be : and 
 removes, therefore, alike the positive 
 and the prudential obstacles to an un- 
 limited increase. But besides the 
 
 objections common to all attempts to 
 regulate wages without regulating 
 population, the allowance system has 
 a peculiar absurdity of its own. This 
 is, that it inevitably takes from wages 
 with one hand what it adds to them 
 with the other. There is a rate of 
 wages, either the lowest on which the 
 people can, or the lowest on which they 
 will consent, to live. \\ r e will suppose 
 this to be seven shillings a-week. 
 Shocked at the wretchedness of this 
 pittance, the parish authorities hu- 
 manely make it up to ten. But the 
 labourers are accustomed to seven, and 
 though they would gladly have more, 
 will live on that (as the fact proves) 
 rather than restrain the instinct of 
 multiplication. Their habits will not 
 be altered for the better by giving 
 them parish pay. Keceiving three 
 shillings from the parish, they will be 
 as well off as before though they 
 should increase sufficiently to bring 
 down wages to four shillings. They 
 will accordingly people down to that 
 point ; or perhaps, without waiting for 
 an increase of numbers, there are un- 
 employed labourers enough in the 
 workhouse to produce the effect at 
 once. It is well known that the allow- 
 ance system did practically operate in 
 the mode described, and that under 
 its influence wages sank to a lower 
 rate than had been known in England 
 before. During the last century, under 
 a rather rigid administration of the 
 poor-laws, population increased slowly, 
 and agricultural wages were conside- 
 rably above the starvation point. 
 Under the allowance system the 
 people increased so fast, and \vagvg 
 sank so low, that with wages and 
 allowance together, families were 
 worse off than they had been before 
 with wages alone. When the labourer 
 depends solely on wages, there is a 
 virtual minimum. If wages fall below 
 the lowest rate which will enable th* 
 population to be kept up, depopulation 
 at least restores them to that lowest 
 rate. But if the deficiency is to be 
 made up by a forced contribution from 
 all who have anything to give, wages 
 may fall below starvation point ; they 
 may fall almost to zero. This deplor-
 
 POPULAR REMEDIES FOR LOW WAGES. 
 
 223 
 
 able system, worse than any other 
 form of poor-law abuse yet invented, 
 inasmuch as it pauperizes not merely 
 the unemployed part of the population 
 but the whole, has been abolished, and 
 of this one abuse at least it may be 
 said that nobody professes to wish for 
 ite revival. 
 
 4. But while this is (it is to be 
 hoped) exploded, there is another mode 
 of relief in aid of wages, which is still 
 highly popular ; a mode greatly pre- 
 ferable, morally and socially, to parish 
 allowance, but tending, it is to be 
 feared, to a very similar economical 
 result : I mean the much - boasted 
 Allotment System. This, too, is a con- 
 trivance to compensate the labourer 
 tot the insufficiency of his wages, by 
 giving him something else as a supple- 
 ment to them : but instead of having 
 them made up from the poor-rate, he is 
 enabled to make them up for himself, 
 by renting a small piece of ground, 
 which he cultivates like a garden by 
 spade labour, raising potatoes and 
 other vegetables for home consump- 
 tion, with perhaps some additional 
 quantity for sale. If he hires the 
 ground ready manured, he sometimes 
 pays for it at as high a rate as eight 
 pounds an acre : but getting his own 
 labour and that of his family for no- 
 thing, he is able to gain several pounds 
 by it even at so high a rent.* The 
 patrons of the system make it a great 
 point that the allotment shall be in aid 
 of wages, and not a substitute for 
 them ; that it shall not be such as a 
 labourer can live on, but only sufficient 
 to occupy the spare hours and days of 
 a man in tolerably regular agricultural 
 employment, with assistance from his 
 wife and children. They usually limit 
 the extent of a single allotment to a 
 quarter, or something between a quar- 
 ter and half an acre. If it exceeds 
 this, without being enough to occupy 
 him entirely, it will make him, they 
 Bay, a bad and uncertain workman for 
 hire : if it is sufficient to take him 
 entirely out of the class of hired 
 
 * Bee the Evidence on the subject of 
 Allotments, collected by the Commissioners 
 of Poor Law Enquiry. 
 
 labourers, and to become Iris sole 
 means of subsistence, it will make him 
 an Irish cottier : for which assertion, 
 at the enormous rents usually de- 
 manded, there is some foundation. 
 But in their precautions against cot- 
 tierism, these well-meaning persons df 
 not perceive, that if the system thc3 
 patronize is not a cottier system, it is, 
 in essentials, neither more nor less 
 than a system of conacre. 
 
 There is no doubt a material diffe- 
 rence between eking out insufficient 
 wages by a fund raised by taxation, 
 and doing the same thing by means 
 which make a clear addition to the 
 gross produce of the country. There 
 is also a difference between helping a 
 labourer by means of his own industry, 
 and subsidizing him in a mode which 
 tends to make him careless and idle. 
 On both these points, allotments have 
 an unquestionable advantage over 
 parish allowances. But in their effect 
 on wages and population, I see no 
 reason why the two plans should sub- 
 stantially differ. All subsidies in aid 
 of wages enable the labourer to do 
 with less remuneration, and therefore 
 ultimately bring down the price of 
 labour by the full amount, unless a 
 change bo wrought in the ideas and 
 requirements of the labouring class ; 
 an alteration in the relative value 
 which they set upon the gratification 
 of their instincts, and upon the increase 
 ot their comforts and the comforts of 
 those connected with them. That any 
 such change in their character should 
 be produced by the allotment system, 
 appears to me a thing not to be 
 expected. The possession of land, we 
 are sometimes told, renders the la- 
 bourer provident. Property in land 
 does so; or what is equivalent to pro- 
 perty, occupation on fixed terms ami 
 on a permanent tenure. But mere 
 hiring from year to year was never 
 found to have any such effect. Did 
 possession of land render the Irishman 
 provident ? Testimonies, it is true, 
 abound, and I do not seek to discredit 
 them, of the beneficial change pro- 
 duced in the conduct and condition of 
 labourers, by receiving allotments. 
 Such an effect is to be expected whii*
 
 BOOK H. CHAPTER XII. 4. 
 
 those who hold them are a small num- 
 ber ; a privileged class, having a status 
 above the common level, which they 
 are unwilling to lose. They are also, 
 no doubt, almost always, originally a 
 select class, composed of the most 
 favourable specimens of the labouring 
 people : which, however, is attended 
 with the inconvenience, that the per- 
 sons to whom the system facilitates 
 marrying and having children, are pre- 
 cisely those who would otherwise be 
 the most likely to practise prudential 
 restraint. As affecting the general 
 condition of the labouring class, the 
 scheme, as it seems to me, must be 
 either nugatory or mischievous. If only 
 a few labourers have allotments, they 
 are naturally those who could do best 
 without them, and no good is done to 
 the class : while, if the system were 
 general, and every or almost every 
 labourer had an allotment, I believe the 
 effect would be much the same as when 
 every or almost every labourer had an 
 allowance in aid of wages. I think 
 there can be no doubt that if, at the 
 end of the last century, the Allotment 
 instead of the Allowance system had 
 been generally adopted in England, it 
 would equally have broken down the 
 practical restraints on population which 
 at that time did really exist ; popula- 
 tion would have started forward ex- 
 actly as in fact it did ; and in twenty 
 years, wages plus the allotment would 
 have been, as wages plus the allow- 
 ance actually were, no more than equal 
 to the former wages without any allot- 
 ment. The only difference in favour 
 of allotments would have been, that 
 they make the people grow their own 
 poor-rates. 
 
 I am at the same time quite ready 
 to allow, that in some circumstances, 
 the possession of land at a fair rent, 
 even without ownership, by the gene- 
 rality of labourers for hire, operates as 
 a cause not of low, but of high wages. 
 This, however, is when their land ren- 
 ders them, to the extent of actual 
 necessaries, independent of the market 
 for labour. There is the greatest diffe- 
 rence between the position of people 
 who live by wages, with land as an 
 extra resource, and of people who can. 
 
 in case of necessity, subsist entirely 
 on their land, and only work for hire 
 to add to their comforts. Wages are 
 likely to be high where none are com- 
 pelled by necessity to sell their labour. 
 " People who have at home some kind 
 of property to apply their labour to, 
 will not sell their labour for wages 
 that do not afford them a better diet 
 than potatoes and maize, although in 
 saving for themselves, they may live 
 veiy much on potatoes and maize. We 
 are often surprised in travelling on 
 the Continent, to hear of a rate of 
 day's wages very high, considering the 
 abundance and cheapness of food. It 
 is want of the necessity or inclina- 
 tion to take work, that makes day- 
 labour scarce, and, considering the 
 price of provisions, dear, in many parts 
 of the Continent, where property in 
 land is widely diffused among the 
 people."* There are parts of the Con- 
 tinent where, even of the inhabitants 
 of the towns, scarcely one seems to be 
 exclusively dependent on his ostensible 
 employment ; and nothing else can ex- 
 plain the high price they put on their 
 services, and the carelessness they 
 evince as to whether they are em- 
 ployed at all. But the effect would be 
 far different if their land or other 
 resources gave them only a fraction of 
 a subsistence, leaving them under an 
 undiminished necessity of selling their 
 labour for wages in an overstocked 
 market. Their land would then merely 
 enable them to exist on smaller wages, 
 and to carry their multiplication so 
 much the further before reaching the 
 point below which they either could 
 not, or would not, descend. 
 
 To the view I have taken of tho 
 effect of allotments, I see no argument 
 which can be opposed, but that em- 
 ployed by Mr. Thornton,-f- with whom 
 on this subject I am at issue. His 
 defence of allotments is grounded on 
 the general doctrine, that it is only the 
 very poor who multiply without regard 
 to consequences, and that if the con- 
 dition of the existing generation could 
 be greatly improved, which he thinks 
 
 * Laing's Note* of a Traveller, p. 456. 
 t See Thornton on Over-Populatio,f&\. 
 viii
 
 REMEDIES FOR LOW WAGES. 
 
 225 
 
 might be done by the allotment system, 
 their successors would grownup with 
 an increased standard of requirements, 
 ami would not have families until they 
 could keep them in as much comfort as 
 that in which they had been brought 
 up themselves. I agree in as much of 
 this argument as goes to prove that a 
 Biiddeu and very great improvement in 
 the condition of the poor, has always, 
 through its effect on their habits of 
 life, a chance of becoming permanent. 
 What happened at the time of the 
 French Revolution is an example. But 
 I cannot think that the addition of a 
 quarter or even half an acre to every 
 labourer's cottage, and that too at a 
 rack rent, would (after the fall of wages 
 which would be necessary to absorb 
 the already existing mass of pauper 
 labour) make so great a difference in 
 the comforts of the family for a gene- 
 ration to come, as to raise up from 
 childhood a labouring population with 
 a really higher permanent standard of 
 requirements and habits. So small a 
 portion of land could only be made a 
 permanent benefit, by holding out en- 
 couragement to acquire by industry 
 nnd saving, the means of buying it out- 
 right : a permission which, if exten- 
 sively made use of, would be a kind of 
 
 education in forethought and frugality 
 to the entire class, the effects of which 
 might not cease with the occasion . 
 The benefit would however arise, not 
 from what was given them, but from 
 what they were stimulated to acquire 
 No remedies for low wages have the 
 smallest chance of being efficacious, 
 which do not operate on and through 
 the minds and habits of the people. 
 While these are unaffected, any con- 
 trivance, even if successful, for terupo- 
 rarily improving the condition of tlio 
 very poor, would but let slip the reins 
 by which population was previously 
 curbed ; and could only, therefore, con 
 tinue to produce its effect, if, by the 
 whip and spur of taxation, capital 
 were compelled to follow at an equally 
 accelerated pace. But this process 
 could not possibly continue for long 
 together, and whenever it stopped, it 
 would leave the country with an in- 
 creased number of the poorest class, 
 and a diminished proportion of all ex- 
 cept the poorest, or, if it continued 
 long enough, with none at all. For 
 "to this complexion must come at 
 last" all social arrangements, which 
 remove the natural checks to popula- 
 tion without substituting any others. 
 
 CHAPTER XIII. 
 
 THE REMEDIES FOR LOW WAGES FURTHER CONSIDERED. 
 
 1. BY what means, then, is po- 
 verty to be contended against? How 
 is the evil of low wages to be reme- 
 died ? It' the expedients usually 
 recommended for the purpose are not 
 adapted to it, can no others be thought 
 of y Is the problem incapable of solu- 
 tion? Can political economy do 
 nothing, but only object to everything, 
 and demonstrate that nothing can be 
 dm ie y 
 
 It' tli is were so, political economy 
 might have a needful, but would have 
 a melancholy, and a thankless task. 
 If the bulk of the human race are 
 
 always to remain as at present, slaves 
 to toil in which they have no interest, 
 and therefore feel no interest d nidg- 
 ing from early morning till late at 
 night for bare necessaries, and with all 
 the intellectual and moral deficiencies 
 which that implies without resources 
 either in mind or feelings untaught, 
 for they cannot be better taught than 
 fed ; selfish, for all their thoughts are 
 required for themselves ; without inte- 
 rests or sentiments as citizens and 
 members of society, and with a sense 
 of injustice rankling in their minds, 
 equally for what they have not, and
 
 226 
 
 BOOK II. CHAPTER XHI. 1. 
 
 for what others have ; I know not 
 what there is which should make a 
 person with any capacity of reason, 
 concern himself about the destinies of 
 the human race. There would be no 
 wisdom for any one but in extracting 
 from life, with Epicurean indifference, 
 as much personal satisfaction to him- 
 self and those with whom he sympa- 
 thizes, as it can yield without injury 
 to any one, and letting the unmeaning 
 bustle of so-called civilized existence 
 roll by unheeded. But there is no 
 ground for such a view of human 
 affairs. Poverty, like most social evils, 
 exists because men follow their brute 
 instincts .without due consideration. 
 But society is possible, precisely be- 
 cause man is not necessarily a brute. 
 Civilization in every one of its aspects 
 is a struggle against the animal in- 
 stincts. Over some even of the strongest 
 of them, it has shown itself capable of 
 acquiring abundant control. It has 
 artificiulized large portions of mankind 
 to such an extent, that of many of 
 their most natural inclinations they 
 have scarcely a vestige or a remem- 
 brance left. If it has not brought the 
 instinct of population under as much 
 restraint as is needful, we must 
 remember that it has never seriously 
 tried. What efforts it has made, have 
 mostly been in the contrary direction. 
 Religion, morality, and statesmanship 
 have vied with one another in incite- 
 ments to marriage, and to the multi- 
 plication of the species, so it be but in 
 wedlock. Religion has not even yet 
 discontinued its encouragements. The 
 Roman Catholic clergy (of any other 
 clergy it is unnecessary to speak, since 
 no other have any considerable influ- 
 ence over the poorer classes) every- 
 where think it their duty to promote 
 marriage, in order to prevent fornica- 
 tion. There is still in many minds a 
 strong religious prejudice against the 
 true doctrine. The rich, provided the 
 consequences do not touch themselves, 
 think it impugns the wisdom of Provi- 
 dence to suppose that misery can result 
 from the operation of a natural pro- 
 pensity : the poor think that " God 
 never sends mouths but he sends meat." 
 No one would guess from the language 
 
 of either, that man had any voice or 
 choice in the matter. So complete is 
 the confusion of ideas on the whole 
 subject : owing in a great degree to 
 the mystery in which it is shrouded by 
 a spurious delicacy, which prefers that 
 right and wrong should be mismea- 
 sured and confounded on one of the 
 subjects most momentous to human 
 welfare, rather than that the subject 
 should be freely spoken of and dis- 
 cussed. People are little aware of the 
 cost to mankind of this scrupulosity of 
 speech. The diseases of society can, 
 no more than corporal maladies, be 
 prevented or cured without being 
 spoken about in plain language. All 
 experience shows that the mass of 
 mankind never judge of moral ques- 
 tions for themselves, never see any- 
 thing to be right or wrong until they 
 have been frequently told it ; and who 
 tells them that they have any duties 
 in the matter in question, while they 
 keep within matrimonial limits ? Who 
 meets with the smallest condemnation, 
 or rather, who does not meet with sym- 
 pathy and benevolence, for any amount 
 of evil which he may have brought 
 upon himself and those dependent on 
 him, by this species of incontinence ? 
 While a man who is intemperate in 
 drink, is discountenanced and despised 
 by all who profess to be moral people, 
 it is one of the chief grounds mado 
 use of in appeals to the benevolent, 
 that the applicant has a large family 
 and is unable to maintain them.* 
 
 One cannot wonder that silence on 
 this great department of human duty 
 should produce unconsciousness of moral 
 obligations, when it produces oblivion 
 of physical facts. That it is possible 
 to delay marriage, and to live in ab- 
 stinence while unmarried, most people 
 are willing to allow : but when persons 
 are once married, the idea, in this 
 country, never seems to enter any one's 
 mind that having or not having a 
 family, or the number of which it shall 
 
 * Little improvement can be expected in 
 morality until the producing large families 
 is regarded with the same feelings as drunken- 
 ness or any other physical excess. But while 
 the aristocracy and clergy are foremost to set 
 the example of this kind of incontinence, 
 what can be expected from the poor ?
 
 RKMKDIES FOR LOW WAGES. 
 
 227 
 
 consist, is amenable to their own control. 
 One would imagine that children were 
 rained down upon married people, 
 direct from heaven, without their being 
 art or part in the matter ; that it was 
 really, as the common phrases have it, 
 God's will, and not their own, which 
 decided the numbers of their offspring. 
 Let us see what is a Continental philo- 
 sopher's opinion on this point ; a man 
 among the most benevolent of his time, 
 and the happiness of whose married 
 life has been celebrated. 
 
 " NVhen dangerous prejudices," says 
 Sismondi,* " have not become accre- 
 dited, when a morality contrary to our 
 true duties towards others,and especially 
 towards those to whom we have given 
 life, is not inculcated in the name of 
 the most sacred authority ; no prudent 
 man contracts matrimony before he is 
 in a condition which gives him an 
 assured means of living, and no married 
 man has a greater number of children 
 than he can properly bring up. The 
 head of a family thinks, with reason, 
 that his children may be contented 
 with the condition in which he himself 
 has lived ; and his desire will be that 
 the rising generation should represent 
 exactly the departing one: that one 
 son and one daughter arrived at the 
 marriageable age should replace his 
 own father and mother ; that the 
 children of his children should in their 
 turn replace himself and his wife ; that 
 his daughter should find in another 
 family the precise equivalent of the lot 
 which will be given in his own family 
 to the daughter of another, and that 
 the income which sufficed for the 
 parents will suffice for the children." 
 In a country increasing in wealth, 
 some increase of numbers would be 
 admissible, but that is a question of 
 detail, not of principle. "Whenever 
 this family has been formed, justice and 
 humanity require that he should im- 
 pose on himself the same restraint 
 which is submitted to by the unmarried. 
 When we consider how small, in every 
 country, is the number of natural 
 children, we must admit that this re- 
 straint is on the whole sufficiently efiec- 
 
 * NtK Prineiflet <jf Political Economy, 
 book vii., ch. 5. 
 
 tual. In a country where population 
 has no room to increase, or in which 
 its progress must be so slow as to be 
 hardly perceptible, when there are no 
 places vacant for new establishments, 
 a father who has eight children must 
 expect, either that six of them will die 
 in childhood, or that three men and 
 three women among his cotemporaries, 
 and in the next generation three of 
 his sons and three of his daughters, 
 will remain unmarried on his account." 
 
 2. Those who think it hopeless 
 that the labouring classes should be 
 Induced to practise a sufficient degree 
 of prudence in regard to the increase 
 of their families, because they have 
 hitherto stopt short of that point, show 
 an inability to estimate the ordinary 
 principles of human action. Nothing 
 more would probably be necessary to 
 secure that result, than an opinion 
 generally diffused that it was desir- 
 able. As a moral principle, such an 
 opinion has never yet existed in any 
 country : it is curious that it does not 
 so exist in countries in which, from the 
 spontaneous operation of individual 
 forethought, population is, compara- 
 tively speaking, efficiently repressed. 
 W r hat is practised as prudence, is still 
 not recognised as duty ; the talkers 
 and writers are mostly on the other 
 side, even in France, where a senti- 
 mental horror of Malthus is almost as 
 rife as in this country. Many causes 
 may be assigned, besides the modern 
 date of the doctrine, for its not having 
 yet gained possession of the general 
 mind. Its truth has, in some respects, 
 been its detriment. One may be per- 
 mitted to doubt whether, except among 
 the poor themselves (for whose pre- 
 judices on this subject there is no diffi- 
 culty in accounting) there has ever 
 yet been, in any class of society, a 
 sincere and earnest desire that wages 
 should be high. There has been plenty 
 of desire to keep down the poor-rate 
 but, that done, people have been very 
 willing that the working classes should 
 be ill off. Nearly all who are not 
 labourers themselves, are employers 
 of labour, and are not sorry to get tho 
 commodity cheap. It is a fact, that 
 Q2
 
 228 
 
 BOOK II. CHAPTER XIII. 2. 
 
 even Boards of Guardians, who are sup- 
 posed to be official apostles of anti- 
 population doctrines, will seldom hear 
 patiently of anything which they are 
 pleased to designate as Malthusianism. 
 Boards of Guardians in rural districts, 
 principally consist of farmers, and 
 farmers, it is well known, in general 
 dislike even allotments, as making 
 the labourers " too independent." From 
 the gentry, who are in less immediate 
 contact and collision of interest with 
 the labourers, better things might be 
 expected, and the gentry of England 
 are usually charitable. But charitable 
 people have human infirmities, and 
 would, very often, be secretly not a 
 little dissatisfied if no one needed their 
 charity : it is from them one oftenest 
 hears the base doctrine, that God has 
 decreed there shall always be poor. 
 When one adds to this, that nearly 
 every person who has had in him any 
 active spring of exertion for a social 
 object, has had some favourite reform 
 to effect, which he thought the admis- 
 sion of this great principle would throw 
 into the shade ; has had corn laws to 
 repeal, or taxation to reduce, or small 
 notes to issue, or the charter to carry, 
 or the church to revive or abolish, or 
 the aristocracy to pull down , and looked 
 upon every one as an enemy who 
 thought anything important except 
 his object ; it is scarcely wonderful 
 that since the population doctrine was 
 first promulgated, nine-tenths of the 
 talk has always been against it, and 
 the remaining tenth only audible at 
 intervals ; and that it has not yet 
 penetrated far among those who might 
 be expected to be the least willing re- 
 cipients of it, the labourers themselves. 
 But let us try to imagine what 
 would happen if the idea became 
 general among the labouring class, 
 that the competition of too great 
 numbers was the principal cause of 
 their poverty; so that every labourer 
 looked (with Sismondi) upon every 
 other who had more than the number 
 of children which the circumstances of 
 society allowed to each, as doing him 
 a wrong as filling up the place which 
 he was entitled to share. Any one 
 who supposes that this state of opinion 
 
 would not have a great effect on con- 
 duct, must be profoundly ignorant of 
 human nature ; can never have con- 
 sidered how large a portion of tlio 
 motives which induce the generality 
 of men to take care even of their own 
 interests, is derived from regard for 
 opinion from the expectation of being 
 disliked or despised for not doing it. 
 In the particular case in question, it is 
 not too much to say that over-indul- 
 gence is as much caused by the sti- 
 mulus of opinion as by the mere animal 
 propensity ; since opinion universally, 
 and especially among the most un- 
 educated classes, has connected ideas 
 of spirit and power with the strength 
 of the instinct, and of inferiority with 
 its moderation or absence ; a perver- 
 sion of sentiment caused by its being 
 the means, and the stamp, of a do- 
 minion exercised over other human 
 beings. The effect would be great 
 of merely removing this factitious 
 stimulus ; and when once opinion shall 
 have turned itself into an adverse 
 direction, a revolution will soon take 
 place in this department of human 
 conduct. We are often told that the 
 most thorough perception of the depen- 
 dence of wages on population will not 
 influence the conduct of a labouring 
 man, because it is not the children he 
 himself can have that will produce any 
 effect in generally depressing the 
 labour market. True : and it is also 
 true, that one soldier's running away 
 will not lose the battle ; accordingly it 
 is not that consideration which keeps 
 each soldier in his rank : it is the dis- 
 grace which naturally and inevitably 
 attends on conduct by any one indi- 
 vidual, which if pursued by a majority, 
 everybody can see would be fatal. 
 Men are seldom found to brave the 
 general opinion of their class, unless 
 supported either by some principle 
 higher than regard for opinion, or by 
 some strong body of opinion elsewhere. 
 It must be borne in mind also, that 
 the opinion here in question, as soon as 
 it attained any prevalence, would have 
 powerful auxiliaries in the great ma- 
 jority of women. It is seldom by the 
 choice of the wife that families are too 
 numerous ; on her devolves (along
 
 REMEDIES FOR LOW WAGES. 
 
 229 
 
 urith all the physical suffering and at 
 lra>t a. full share of the privations) the 
 whole of the intolerahle domestic drud- 
 gery resulting from the excess. To be 
 relieved from it would be hailed as a 
 blessing by multitudes of women who 
 now never venture to urge such a 
 claim, but who would urge it, if sup- 
 ported by the moral feelings of the 
 community. Among the barbarisms 
 which law and morals have not yet 
 ceased to sanction, the most disgusting 
 Burcly is, that any human being should 
 be permitted to consider himself as 
 having a riyht to the person of another. 
 
 If the opinion were once generally 
 established among the labouring class 
 that their welfare required a due regu- 
 lation of the numbers of families, the 
 respectable and well-conducted of the 
 body would conform to the prescrip- 
 tion, and only those would exempt 
 themselves from it, who were in the 
 habit of making light of social obliga- 
 tions generally ; and there would be 
 then an evident justification for con- 
 verting the moral obligation against 
 bringing children into the world who 
 are a burthen to the community, into 
 a legal one; just as in many other 
 cases of the progress of opinion, the 
 law ends by enforcing against recal- 
 citrant minorities, obligations which to 
 be useful must be general, and which, 
 from a sense of their utility, a large 
 majority have voluntarily consented 
 to take upon themselves. There would 
 be no need, however, of legal sanctions, 
 if women were admitted, as on all 
 other grounds they have the clearest 
 title to be, to the same rights of 
 citizenship with men. Let them cease 
 to be confined by custom to one phy- 
 sical function as their means of living 
 and their source of influence, and they 
 would have for the first time an equal 
 voice with men in .what concerns that 
 function : and of all the improvements 
 in reserve for mankind whicn it is now 
 possible to foresee, none might be 
 expected to be so fertile as this in 
 almost every kind of moral and social 
 benefit. 
 
 It remains to consider what chance 
 there is that opinions and feelings, 
 grounded on the law of the dependence 
 
 of wages on population, will arise 
 among the labouring classes ; and by 
 what means such opinions and feelings 
 can be called forth. Before consider- 
 ing the grounds of hope on this subject, 
 a hope which many persons, no doubt, 
 will be ready, without consideration, to 
 pronounce chimerical, I will remark, 
 that unless a satisfactory answer can 
 be made to these two questions, the 
 industrial system prevailing in this 
 country, and regarded by many writers 
 as the ne plus ultra of civilization 
 the dependence of the whole labouring 
 class of the community on the wages 
 of hired labour is irrevocably con- 
 demned. The question we are con- 
 sidering is, whether, of this state of 
 things, over-population and a degraded 
 condition of the labouring class arc 
 the inevitable consequence. If a 
 prudent regulation of population be 
 not reconcilable with the system of 
 hired labour, the system is a nuisance, 
 and the grand object of economical 
 statesmanship should be (by whatever 
 arrangements of property, and altera- 
 tions in the modes of applying industry), 
 to bring the labouring people under the 
 influence of stronger and more obvious 
 inducements to this kind of prudence, 
 than the relation of workmen and 
 employers can afford. 
 
 But there exists no such incom- 
 patibility. The causes of poverty are 
 not so obvious at first sight to a popu- 
 lation of hired labourers, as they are 
 to one of proprietors, or as they would 
 be to a socialist community. They 
 are, however, in no way mysterious. 
 The dependence of wages on the num- 
 ber of the competitors for employment, 
 is so far from hard of comprehension, or 
 unintelligible to the labouring classes, 
 that by great bodies of them it is 
 already recognised and habitually acted 
 on. It is familiar to all Trades Unions ; 
 every successful combination to keep 
 up wages, owes its success to contri- 
 vances for restricting the number of 
 the competitors ; all skilled trades are 
 anxious to keep down their own num- 
 bers, and many impose, or endeavour 
 to impose, as a condition upon em- 
 ployers, that they shall not take more 
 than a prescribed number of appreo
 
 230 
 
 BOOK II. CHAPTER XIII. 3. 
 
 tices. There is, of course, a great 
 difference between limiting their num- 
 bers by excluding other people, and 
 doing the same thing by a restraint 
 imposed on themselves : but the one 
 as much as the other shows a clear 
 perception of the relation between 
 their numbers and their remuneration. 
 The principle is understood in its ap- 
 plication to any one employment, but 
 not to the general mass of employment. 
 For this there are several reasons : 
 first, the operation of causes is more 
 easily and distinctly seen in the more 
 circumscribed field: secondly, skilled 
 utizana are a more intelligent class 
 than ordinary manual labourers ; and 
 the habit of concert, and of passing in 
 review their general condition as a 
 trade, keeps up a better understanding 
 of their collective interests : thirdly and 
 lastly, they are the most provident, 
 because they are the best off, and have 
 the most to preserve. What, how- 
 ever, is clearly perceived and admitted 
 in particular instances, it cannot be 
 hopeless to see understood and acknow- 
 ledged as a general truth. Its recog- 
 nition, at least in theory,' seems a 
 thing which must necessarily and 
 immediately come to pass, when the 
 minds of the labouring classes become 
 capable of taking any rational view of 
 their own aggregate condition. Of 
 this the great majority of them have 
 until now been incapable, either from 
 the uncultivated state of their intelli- 
 gence, or from poverty, which leaving 
 them neither the fear of worse, nor the 
 smallest hope of better, makes them 
 careless of the consequences of their 
 actions, and without thought for the 
 future. 
 
 3. For the purpose therefore of 
 altering the habits of the labouring 
 people, there is need of a twofold action, 
 directed simultaneously upon their in- 
 telligence and their poverty. An effec- 
 tive national education of the children 
 of the labouring class, is the first thing 
 needful: and, coincidently with this, 
 a system of measures which shall (as 
 the Revolution did in France) ex- 
 tinguish extreme poverty for one whole 
 generation. 
 
 This is not the place for discussing, 
 even in the most general manner, 
 either the principles or the machinery 
 of national education. But it is to be 
 hoped that opinion on the subject is 
 advancing, and that an education of 
 mere words would not now be deemed 
 sufficient, slow as our progress is to- 
 wards providing anything better even 
 for the classes to whom society pro- 
 fesses to give the very best education 
 it can devise. Without entering into 
 disputable points, it may be asserted 
 witnout scruple, that the aim of all in- 
 tellectual training for the mass of the 
 people, should be to cultivate common 
 sense ; to qualify them for forming a 
 sound practical judgment of the cir- 
 cumstances by which they are sur- 
 rounded. Whatever, in the intellectual 
 department, can be superadded to 
 this, is chiefly ornamental ; while this 
 is the indispensable groundwork on 
 which education must rest. Let this 
 object be acknowledged and kept in 
 view as the thing to be first aimed at, 
 and there will be little difficulty in de- 
 ciding either what to teach, or in what 
 manner to teach it. 
 
 An education directed to diffuse good 
 sense among the people, with such 
 knowledge as would qualify them to 
 judge of the tendencies of their actions, 
 would be certain, even without any 
 direct inculcation, to raise up a public 
 opinion by which intemperance and 
 improvidence of every kind would be 
 held discreditable, and the improvi- 
 dence which overstocks the labour 
 market would be severely condemned, 
 as an offence against the commou 
 weal. But though the sufficiency oi 
 such a state of opinion, supposing it 
 formed, to keep the increase of popu- 
 lation within proper limits, cannot, I 
 think, be doubted ; yet, for the forma- 
 tion of the opinion, it would not do to 
 trust to education alone. Education 
 is not compatible with extreme poverty. 
 It is impossible effectually to teach an 
 indigent population. And it is diffi- 
 cult to make those feel the value of 
 comfort who have never enjoyed it, or 
 those appreciate the wretchedness of 
 a precarious subsistence, who have 
 be'n made reckless by alwaya living
 
 REMEDIES FOR LOW WAGES. 
 
 231 
 
 from hand to mouth. Individuals often 
 struggle upwards into a condition of 
 ease ; but the utmost that can be ex- 
 pected from a whole people is to main- 
 tain themselves in it ; and improvement 
 in the habits and requirements of the 
 mass of unskilled day-labourers will 
 be difficult and tardy, unless means 
 can be contrived of raising the entire 
 b< nly to a state of tolerable comfort, and 
 maintaining them in it until a new 
 generation grows up. 
 
 Towards effecting this object there 
 are two resources available, without 
 wrong to any one, without any of the 
 liabilities of mischief attendant on 
 voluntary or legal charity, and not 
 only without weakening, but on the 
 contrary strengthening, every incen- 
 tive to industry, and every motive to 
 forethought. 
 
 4. The first is, a great national 
 measure of colonization. I mean, a 
 grant of public money, sufficient to 
 remove at once, and establish in the 
 colonies, a considerable fraction of the 
 youthful agricultural population. By 
 giving the preference, as Mr. Wake- 
 tipld proposes, to young couples, or 
 when these cannot be obtained, to 
 families with children nearly grown 
 up, the expenditure would be made to 
 go the farthest possible towards accom- 
 plishing the end, while the colonies 
 would be supplied with the greatest 
 amount of what is there in deficiency 
 and here in superfluity, present and 
 prospective labour. It has been shown 
 by others, and the grounds of the opi- 
 nion will be exhibited in a subsequent 
 part of the present work, that coloni- 
 zation on an adequate scale might be 
 so conducted as to cost the country 
 nothing, or nothing that would not 
 be certainly repaid ; and that the funds 
 required, even by way of advance, 
 would not be drawn from the capital 
 employed in maintaining labour, but 
 from that surplus which cannot find 
 employment at such profit as consti- 
 tutes an adequate remuneration for 
 the abstinence of the possessor, and 
 which is therefore sent abroad for in- 
 vestment, or wasted at home in reck- 
 less speculations. That portion of the 
 
 income of the country which is habi- 
 tually ineffective for any purpose of 
 benefit to the labouring class, would 
 bear any draught which it could ba 
 necessary to make on it for the amount 
 of emigration which is here in view. 
 
 The second resource would be, to 
 devote all common land, hereafter 
 brought into cultivation, to raising a 
 class of small proprietors. It has long 
 enough been the practice to take these 
 lands from public use, for the mere 
 purpose of adding to the domains of 
 the rich. It is time that what is left 
 of them should be retained as an estate 
 sacred to the benefit of the poor. The 
 machinery for administering it already 
 exists, having been created by the 
 General Inclosure Act. What I would 
 propose (though, I confess, with small 
 hope of its being soon adopted) is, that 
 in all future cases in which common 
 land is permitted to be enclosed, such 
 portion should first be sold or assigned 
 as is sufficient to compensate the 
 owners of manorial or common rights, 
 and that the remainder should be 
 divided into sections of five acres or 
 thereabouts, to be conferred in abso- 
 lute property on individuals of the 
 labouring class who would reclaim and 
 bring them into cultivation by their 
 own labour. The preference should 
 be given to such labourers, and there 
 are many of them, as had saved enough 
 to maintain them until their first crop 
 was got in, or whose character was 
 such as to induce some responsible 
 person to advance to them the requisite 
 amount on their personal security. 
 The tools, the manure, and in some 
 cases the subsistence also, might be 
 supplied by the parish, or by the state ; 
 interest for the advance, at the rate 
 yielded by the public funds, being laid 
 on as a perpetual quit-rent, with power 
 to the peasant to redeem it at any time 
 for a moderate number of years pur- 
 chase. These little landed estates 
 might, if it were thought necessary, be 
 made indirisible by law ; though, if tha 
 
 ?lan worked in the manner designed, 
 should not apprehend any objection- 
 able degree of subdivision. In case of 
 intestacy, and in default of amicable 
 arrangement among the heirs, they
 
 232 BOOK II. 
 
 might be bought by government at 
 their value, and regranted to some 
 other labourer who could give security 
 for the price. The desire to possess 
 one of these small properties would 
 probably become, as on the Continent, 
 ;in inducement to prudence and eco- 
 ii:>my pervading the whole labouring 
 population ; and that great desideratum 
 among a people of hired labourers 
 would be provided, an intermediate 
 class between them and their em- 
 ployers ; affording them the double 
 advantage, of an object for their hopes, 
 and, as there would be good reason to 
 anticipate, an example for their imi- 
 tation. 
 
 It would, however, be of little avail 
 that either or both of these measures 
 of relief should be adopted, unless on 
 such a scale, as would enable the 
 whole body of hired labourers remain- 
 ing on the soil to obtain not merely 
 employment, but a large addition to 
 the present wages such an addition 
 as would enable them to live and bring 
 up their children in a degree of com- 
 fort and independence to which they 
 have hitherto been strangers. When 
 the object is to raise the permanent 
 condition of a people, small means do 
 not merely produce small effects, they 
 produce no effect at all. Unless com- 
 fort can be made as habitual to a 
 whole generation as indigence is now, 
 nothing is accomplished; and feeble 
 half-measures do but fritter away re- 
 sources, far better reserved until the 
 improvement of public opinion and of 
 education shall raise up politicians 
 who will not think that merely because 
 a scheme promises much, the part of 
 statesmanship is to have nothing to do 
 with it. 
 
 I have left the preceding paragraphs 
 RS they were written, since they remain 
 true in principle, though it is no 
 longer urgent to apply their specific 
 recommendations to the present state 
 of tliis country. The extraordinary 
 
 CHAPTER XIII. 4. 
 
 cheapening of the means of transport, 
 which is one of the great scientific 
 achievements of the age, and the know- 
 ledge which nearly all classes of tho 
 people have now acquired, or are in the 
 way of acquiring, of the condition of 
 the labour market in remote parts of 
 the world, have opened up a spon- 
 taneous emigration from these islands 
 to the new countries beyond the ocean, 
 which does not tend to diminish, but 
 to increase ; and which, without any 
 national measure of systematic colo- 
 nization, may prove sufficient to 
 effect a material rise of wages in 
 Great Britain, as it has already done 
 in Ireland, and to maintain that rise 
 unimpaired for one or more generations. 
 Emigration, instead of an occasional 
 vent, is becoming a steady outlet for 
 superfluous numbers ; and this new 
 fact in modern history, together with 
 the flush of prosperity occasioned by 
 free trade, have granted to this over- 
 crowded country a temporary breathing 
 time, capable of being employed in 
 accomplishing those moral and intel- 
 lectual improvements in all classes of 
 the people, the very poorest included, 
 which would render improbable any 
 relapse into the overpeopled state. 
 'Whether this golden opportunity will 
 be properly used, depends on the 
 wisdom of our councils ; and whatever 
 depends on that, is always in a high 
 degree precarious. The grounds of 
 hope are, that there has been no time 
 in our history when mental progress 
 has depended so little on governments, 
 and so much on the general disposition 
 of the people ; none in which the spirit 
 of improvement has extended to so 
 many branches of human affairs at 
 once, nor in which all kinds of sugges- 
 tions tending to the public good, in 
 every department, from the humblest 
 physical to the highest moral or intel- 
 lectual, were heard with so little pre- 
 judice, and had so good a chance of 
 becoming known and being fairly con 
 sidered.
 
 CES OF WAGES. 
 
 283 
 
 CHAPTER XIV. 
 
 OF THE DIFFERENCES OP WAGES IN DIFFERENT EMPLOYMENTS. 
 
 5 1. IN treating of wages, wo have 
 liithcrto confined ourselves to the 
 causes wbicli operate on them gene- 
 rally, and en masse; the laws which 
 govern the remuneration of ordinary 
 or average labour: without reference 
 to the existence of different kinds of 
 work which are habitually paid at 
 different rates, depending in some de- 
 gree on different laws. We will now 
 take into consideration these diffe- 
 rences, and examine in what manner 
 they affect or are affected by the con- 
 clusions already established. 
 
 A well-known and very popular 
 chapter of Adam Smith* contains the 
 best exposition yet given of this por- 
 tion of the subject. I cannot indeed 
 think his treatment so complete and 
 exhaustive as it has sometimes been 
 considered; but as far as it goes, his 
 analysis is tolerably successful. 
 
 The differences, he says, arise partly 
 from the policy of Europe, which no- 
 where leaves things at perfect liberty, 
 and partly " from certain circumstances 
 in the employments themselves, which 
 either really, or at least in the imagi- 
 nations of men, make up for a small 
 pecuniary gain in some, and counter- 
 balance a great one in others." These 
 circumstances he considers to be : 
 " First, the agreeableness or disagree- 
 ableness of the employments them- 
 selves ; secondly, the "easiness and 
 cheapness, or the difficulty and expense 
 of learning them ; thirdly, the con- 
 stancy or inconstancy of employment 
 in them ; fourthly, the small or great 
 trust which must be reposed in those 
 who exercise them ; and fifthly, the 
 probability or improbability of success 
 in them." 
 
 Several of these points he has very 
 copiously illustrated : though his exam- 
 ples are sometimes drawn from a state 
 of facts now no longer existing. " The 
 wages of labour vary with the ease or 
 
 Wealth of Nation*, book i. ch. 10. 
 
 hardship, the cleanliness or dirtiness, 
 the honourableness or dishonourable- 
 ness of the employment. Thus, in 
 most places, tako the year round, a 
 journeyman tailor earns less than 
 journeyman weaver. His work v 
 much easier." Things have muclv 
 altered, as to a weaver's remuneration, 
 since Adam Smith's time ; and the 
 artizan whose work was more difficult 
 than that of a tailor, can never, I 
 think, have been the common weaver. 
 " A journeyman weaver earns less 
 than a journeyman smith. His work 
 is not always easier, but it is much 
 cleanlier. 1 ' A more probable explana- 
 tion is, that it requires less bodily 
 strength. "A journeyman black- 
 smith, though an artificer, seldom earns 
 so much in twelve hours as a collier, 
 who is only a labourer, does in eight. 
 His work is not quite so dirty, is less 
 dangerous, and is carried on in day- 
 light, and above ground. Honour 
 makes a great part of the reward of 
 all honourable professions. In point 
 of pecuniary gain, all things consi- 
 dered," their recompense is, in his opi- 
 nion, below the average. "Disgrace 
 has the contrary effect. The trade of 
 a butcher is a brutal and an odious 
 business ; but it is in most places more 
 profitable than the greater part of 
 common trades. The most detestable 
 of all employments, that of public exe- 
 cutioner, is, in proportion to the quan- 
 tity of work done, better paid than any 
 common trade whatever. 1 ' 
 
 One of the causes which make 
 hand-loom weavers cb'ng to their occu- 
 pation in spite of the scanty remunera- 
 tion which it now yields, is said to be 
 a peculiar attractiveness, arising from 
 the freedom of action which it allows 
 to the workman. "He can play or 
 idle," says a recent authority,* "as 
 feeling or inclination lead him ; rise 
 
 * Mr. Muggeridge's Report to the Hand- 
 loom Weavers Inquiry Commission.
 
 234 
 
 BOOK II. CHAPTER XIV. 1. 
 
 early or late, apply himself assiduously 
 or carelessly, as be pleases, and work 
 up at any time, by increased exertion, 
 hours previously sacrificed to indul- 
 gence or recreation. Tbere is scarcely 
 another condition of any portion of 
 our working population thus free from 
 external control. The factory opera- 
 tive is not only mulcted of his wages 
 for absence, but, if of frequent occur- 
 rence, discharged altogether from his 
 employment. The bricklayer, the car- 
 penter, the painter, the joiner, the 
 stonemason, the outdoor labourer, have 
 each their appointed daily hours of 
 labour, a disregard of which would lead 
 to the same result." Accordingly, 
 " the weaver will stand by his loom 
 while it will enable him to exist, how- 
 ever miserably ; and many, induced 
 temporarily to quit it, have returned 
 to it again, when work was to be 
 had." 
 
 "Employment is much more con- 
 stant," continues Adam Smith, "in 
 some trades than in others. In the 
 greater part of manufactures, a jour- 
 neyman may be pretty sure of employ- 
 ment almost every day in the year 
 that he is able to work" (the interrup- 
 tions of business arising from over- 
 stocked markets, or from a suspension 
 of demand, or from a commercial crisis, 
 must be excepted). " A mason or 
 bricklayer, on the contrary, can work 
 neither in hard frost nor in foul weather, 
 and his employment at all other times 
 depends upon the occasional calls of 
 his customers. He is liable, in conse- 
 quence, to be frequently without any. 
 What he earns, therefore, while he is 
 employed, must not only maintain him 
 while he is idle, but make him some 
 compensation for those anxious and 
 desponding moments which the thought 
 of so precarious a situation must some- 
 times occasion. When the computed 
 earnings of the greater part of manu- 
 facturers, accordingly, are nearly upon 
 a level with the day wages of common 
 labourers, those of masons and brick- 
 layers are generally from one-half 
 more to double those wages. No 
 species of skilled labour, however, 
 seems more easy to learn than that of 
 masons and bricklayers. The high 
 
 wages of those workmen, tlicrefore, 
 are not so much the recompense of 
 their skill, as the compensation 
 for the inconstancy of their employ- 
 ment. 
 
 " When the inconstancy of the 
 employment is combined with the 
 hardship, disagreeableness, and dirti- 
 ness of the work, it sometimes raises 
 the wages of the most common labour 
 above those of the most skilful artificers. 
 A collier working by the piece is 
 supposed, at Newcastle, to earn com- 
 monly about double, and in m.iny 
 parts of Scotland about three times, 
 the wages of common labour. His 
 high wages arise altogether from the 
 hardship, disagreeablcness, and dirti- 
 ness of his work. His employment 
 may, upon most occasions, be as con- 
 stant as he pleases. The coal-heavere 
 in London exercise a trade which in 
 hardship, dirtiness, and disagreeable- 
 ness, almost equals that of colliers ; 
 and from the unavoidable irregularity 
 in the arrivals of coalships, the employ- 
 ment of the greater part of them is 
 necessarily very inconstant. If col- 
 liers, therefore, commonly earn double 
 and triple the wages of common labour, 
 it ought not to seem unreasonable that 
 coal-heavers should sometimes earn 
 four or five times those wages. In the 
 inquiry made into their condition a few 
 years ago, it was found that at the 
 rate at which they were then paid, 
 they could earn about four times the 
 wages of common labour in London. 
 How extravagant soever these earn- 
 ings may appear, if they were more 
 than sufficient to compensate all the 
 disagreeable circumstances of the 
 business, there would soon be so great 
 a number of competitors as, in a trade 
 which has no exclusive privilege, would 
 quickly reduce them to a lower rate." 
 
 These inequalities of remuneration, 
 which are supposed to compensate for 
 the disagreeable circumstances of par- 
 ticular employments, would, under cer- 
 tain conditions, be natural conse- 
 quences of perfectly free competition : 
 and as between employments of about 
 the same grade, and filled by nearly 
 the same description of people, they 
 are, no doubt, for the most part,
 
 DIFFERENCES OP WAGES. 
 
 235 
 
 reali'/ed in practice. But it is alto- 
 gether a false view of the state of 
 facts, to present this as the relation 
 which generally exists between agree- 
 able and disagreeable employments. 
 The really exhausting and the really 
 repulsive labours, instead of being 
 better paid than others, are almost in- 
 variably paid the worst of all, because 
 ferformed by those who have no choice. 
 t would be otherwise in a favourable 
 state of the general labour market. If 
 the labourers in the aggregate, instead 
 of exceeding, fell short of the amount 
 of employment, work which was gene- 
 rally disliked would not be undertaken, 
 except for more than ordinary wages. 
 But when the supply of labour so far 
 exceeds the demand that to find em- 
 ployment at all is an uncertainty, and 
 to be offered it on any terms a favour, 
 the case is totally the reverse. Desi- 
 rable labourers, those whom every one 
 is anxious to have, can still exercise a 
 chnia'. The undesirable must take 
 what they can get. The more revolt- 
 ing the occupation, the more certain it 
 is to receive the minimum of remunera- 
 tion, because it devolves on the most 
 helpless and degraded, on those who 
 from squalid poverty, or from want of 
 skill and education, are rejected from 
 all other employments. Partly from 
 this cause, and partly from the natural 
 and artificial monopolies which will be 
 spoken of presently, the inequalities of 
 wages are generally in an opposite 
 direction to the equitable principle of 
 compensation erroneously represented 
 by Adam Smith as the general law of 
 the remuneration of labour. The hard- 
 ships and the earnings, instead of being 
 directly proportional, as in any just 
 arrangements of society they would be, 
 are generally in an inverse ratio to one 
 another. 
 
 One of the points best illustrated by 
 Adam Smith, is the influence exercised 
 on the remuneration of an employment 
 by the uncertainty of success in it. If 
 the chances are great of total failure, 
 the reward in case of success must be 
 sufficient to make up, in the general 
 estimation, for those adverse chances. 
 But, owing to another principle of 
 human nature, if the reward comes in 
 
 the shape of a few great prizs, it 
 usually attracts competitors in such 
 numbers, that the average remunera- 
 tion may be reduced not only to zero, 
 but even to a negative quantity. The 
 success of lotteries proves that this is 
 possible : since the aggregate body of 
 adventurers in lotteries necessarily 
 lose, otherwise the undertakers could 
 not gain. The case of certain pro- 
 fessions is considered by Adam Smith 
 to be similar. " The probability that 
 any particular person shall ever be 
 qualified for the employment to which 
 He is educated, is very different in 
 different occupations. In the greater 
 part of mechanic trades, success is 
 almost certain, but very uncertain in 
 the liberal professions. Put your son 
 apprentice to a shoemaker, there is 
 little doubt of his learning to mak* 
 a pair of shoes ; but send him tc 
 study the law, it is at least twenty to 
 one if ever he makes such proficiency 
 as will enable him to live by the busi- 
 ness. In a perfectly fair lottery, those 
 who draw the prizes ought to gain all 
 that is lost by those who draw the 
 blanks. In a profession where twenty 
 fail for one that succeeds, that one 
 ought to gain all that should have 
 been gained by the unsuccessful twenty. 
 The counsellor-at-law, who, perhaps, at 
 near forty years of age, begins to make 
 something by his profession, ought to 
 receive the retribution, not only of his 
 own so tedious and expensive educa- 
 tion, but of that of more than twenty 
 others who are never likely to make 
 anything by it. How extravagant 
 soever the fees of counsellors-at-law 
 may sometimes appear, their real retri- 
 bution is never equal to this. Com- 
 pute in any particular place what is 
 likely to be annually gained, and what 
 is likely to be annually spent, by all 
 the different workmen in any common 
 trade, such as that of shoemakers or 
 weavers, and you will find that th 
 former sum will generally exceed the 
 latter. But make the same computf.- 
 tion with regard to all the counsellor 
 and students of law, in all the different 
 inns of court, and you will find that 
 their annual gains bear but a small 
 proportion to their annual expense,
 
 fcOOK 11. CHAPTER XIV. 2. 
 
 even though you rate the former as 
 high, and the latter as low, as can 
 well be done." 
 
 Whether this is true in our own day, 
 when the gains of the few are incom- 
 parably greater than in the time of 
 Adam Smith, but also the unsuccessful 
 aspirants much more numerous, those 
 who have the appropriate information 
 must decide. It does not, however, 
 seem to be sufficiently considered by 
 Adam Smith, that the prizes which he 
 speaks of comprise not the fees of 
 counsel only, but the places of emolu- 
 ment and honour to which their pro- 
 fession gives access, together with the 
 coveted distinction of a conspicuous 
 position in the public eye. 
 
 Even where there are no great 
 prizes, the mere love of excitement is 
 sometimes enough to cause an adven- 
 turous employment to be overstocked. 
 This is apparent " in the readiness of 
 the common people to enlist as soldiers, 
 or to go to sea. . . . The dangers and 
 hair-breadth escapes of a life of adven- 
 tures, instead of disheartening young 
 people, seem frequently to recommend 
 a trade to them. A tender mother, 
 among the inferior ranks of people, is 
 often afraid to send her son to school 
 at a sea-port town, lest the sight of the 
 ships and the conversation and adven- 
 tures of the sailors should entice him 
 to go to sea. The distant prospect of 
 hazards, from which we can hope to 
 extricate ourselves by courage and 
 address, is not disagreeable to us, and 
 does not raise the wages of labour 
 in any employment. It is otherwise 
 with those in which courage and 
 address can be of no avail. In trades 
 which are known to be very unwhole- 
 some, the wages of labour are always 
 remarkably high. Unwholesomeness 
 is a species of disagreeableness, and 
 its effects upon the wages of labour 
 are to be ranked under that general 
 head." 
 
 2. The preceding are cases in 
 which inequality of remuneration is 
 necessary to produce equality of attrac- 
 tiveness, and are examples of the 
 equalizing effect of free competition. 
 The following are cases of real in- 
 
 equality, and arise from a different 
 principle. "The wages of labour 
 vary according to the small or great 
 trust which must be reposed in the 
 workmen. The wages of goldsmiths 
 and jewellers are everywhere superior 
 to those of many other workmen, not 
 only of equal, but of much superior 
 ingenuity ; on account of the precious 
 materials with which they arc intrusted. 
 We trust our health to the physician, 
 our fortune and sometimes our life and 
 reputation to the lawyer and attorney. 
 Such confidence could not safely be 
 reposed in people of a very mean or 
 low condition. Their reward must be 
 such, therefore, as may give them that 
 rank in society which so important 
 a trust requires." 
 
 The superiority of reward is not 
 here the consequence of competition, 
 but of its absence; not a compensation 
 for disadvantages inherent in the em- 
 
 Eloyment, but an extra advantage ; a 
 ind of monopoly price, the effect not 
 of a legal, but of what has been termed 
 a natural monopoly. If all labourers 
 were trustworthy it would not be 
 necessary to give extra pay to working 
 goldsmiths on account of the trust. 
 The degree of integrity required being 
 supposed to be uncommon, those who 
 can make it appear that they possess it 
 are able to take advantage of the 
 peculiarity, and obtain higher pay in 
 proportion to its rarity. This opens a 
 class of considerations which Adam 
 Smith, and most other political econo- 
 mists, have taken into far too little 
 account, and from inattention to which, 
 he has given a most imperfect exposi- 
 tion of the wide difference between the 
 remuneration of common labour and 
 that of skilled employments. 
 
 Some employments require a much 
 longer time to learn, and a much more 
 expensive course of instruction thau 
 others ; and to this extent there is, as 
 explained by Adam Smith, an inherent 
 reason for their being more highly 
 remunerated. If an artizan must 
 work several years at learning his trade 
 before he can earn anything, and seve- 
 ral years more before becoming suffi- 
 ciently skilful for its finer operations, 
 he must have a prospect of at last
 
 DIFFERENCES OF WAGES. 
 
 23; 
 
 earning enough to pay the wages of all 
 this past labour, with compensation 
 for the delay of payment, and an 
 indemnity for the expenses of his 
 education. His wages, consequently, 
 must yield, over and above the ordi- 
 nary amount, an annuity sufficient to 
 repay these sums, with the common 
 rate of profit, within the number of 
 years he can expect to live and be in 
 working condition. This, which is 
 necessary to place the skilled employ- 
 ments, all circumstances taken to- 
 gether, on the same level of advantage 
 with the unskilled, is the smallest 
 difference which can exist for any 
 length of time between the two remu- 
 nerations, since otherwise no one would 
 learn the skilled employments. And 
 this amount of difference is all which 
 Adam Smith's principles account for. 
 When the disparity is greater, he 
 seems to think that it must be ex- 
 plained by apprentice laws, and the 
 rules of corporations, which restrict 
 admission into many of the skilled 
 employments. But, independently of 
 these or any other artificial monopolies, 
 there is a natural monopoly in favour 
 c*f skilled labourers against the un- 
 skilled, which makes the difference of 
 reward exceed, sometimes in a manifold 
 proportion, what is sufficient merely to 
 equalize their advantages. If un- 
 skilled labourers had it in their power 
 to compete with skilled, by merely 
 taking the trouble of learning the 
 trade, the difference of wages might not 
 exceed what would compensate them 
 for that trouble, at the ordinary rate at 
 which labour is remunerated. But the 
 fact that a course of instruction is 
 required, of even a low degree of cost- 
 liness, or that the labourer must be 
 maintained for a considerable time 
 from other sources, suffices everywhere 
 to exclude the great body of the labour- 
 ing people from the possibility of any 
 such competition. Until lately, all 
 employments which required even the 
 humble education of reading and 
 writing, could be recruited only from_a 
 select class, the majority having had 
 no opportunity of acquiring those 
 attainments. All such employments, 
 accordingly, wore immensely overpaid, 
 
 as measured by the ordinary remune- 
 ration of labour. Since reading and 
 writing have been brought within the 
 reach of a multitude, the monopoly 
 price of the lower grade of educated 
 employments has greatly fallen, the 
 competition for them having increased 
 in an almost incredible degree. There 
 is still, however, a much greater dis- 
 parity than can be accounted for on 
 the principle of competition. A clerk 
 from whom nothing is required but the 
 mechanical labour of copying, gains 
 more than an equivalent for his mere 
 exertion if he receives the wages of a 
 bricklayer's labourer. His work is not 
 a tenth part as hard, it is quite as easy 
 to learn, and his condition is less pre- 
 carious, a clerk's place being generally 
 a place for life. The higher rate of 
 his remuneration, therefore, must be 
 partly ascribed to monopoly, the small 
 degree of education required being not 
 even yet so generally diffused as to 
 call forth the natural number of com- 
 petitors ; and partly to the remaining 
 influence of an ancient custom, which 
 requires that clerks should maintain 
 the dress and appearance of a more 
 highly paid class. In some manual 
 employments, requiring a nicety of 
 hand which can only be acquired by 
 long practice, it is difficult to obtain at 
 any cost workmen in sufficient num- 
 bers, who are capable of the most 
 delicate kind of work ; and the wages 
 paid to them are only limited by the 
 price which purchasers are willing to 
 give for the commodity they produce. 
 This is the case with some working 
 watchmakers, and with the makers of 
 some astronomical and optical instru- 
 ments. If workmen competent to such 
 employments were ten times as nume- 
 rous as they are, there would be pur- 
 chasers for all which they could make, 
 not indeed at the present prices, but at 
 those lower prices which would be tha 
 natural consequence of lower wages. 
 Similar considerations apply in a still 
 greater degree to employments which 
 it is attempted to confine to persons of 
 a certain social rank, such as what are 
 called the liberal professions ; into 
 which a person of what is considered 
 too low a class, of society, is not easily
 
 238 
 
 BOOK H. CHAPTER XIV. 3. 
 
 admitted, and if admitted, does not 
 easily succeed. 
 
 So complete, indeed, has hitherto 
 been the separation, so strongly marked 
 the line of demarcation, between the 
 different grades of labourers, as to be 
 almost equivalent to an hereditary dis- 
 tinction of caste ; each employment 
 being chiefly recruited from the chil- 
 dren of those already employed in it, 
 or in employments of the same rank 
 with it in social estimation, or from 
 the children of persons who, if origi- 
 nally of a lower rank, have succeeded 
 in raising themselvesby their exertions. 
 The liberal professions are mostly sup- 
 plied by the sons of either the profes- 
 sional, or the idle classes : the more 
 highly .skilled manual employments are 
 filled up from the sons of skilled arti- 
 zans, or the claes of tradesmen who 
 rank with them : the lower classes of 
 skilled employments are in a similar 
 case ; and unskilled labourers, with 
 occasional exceptions, remain from 
 father to son in their pristine condition. 
 Consequently the wages of each class 
 have hitherto been regulated by the 
 increase of its own population, rather 
 than of the general population of the 
 country. If the professions are over- 
 stocked, it is because the class of so- 
 ciety from which they have always 
 mainly been supplied, has greatly in- 
 creased in number, and because most 
 of that class have numerous families, 
 and bring up some at least of their sons 
 to professions. If the wages of artizans 
 remain so much higher than those of 
 common labourers, it is because arti- 
 zans are a more prudent class, and do 
 not marry so early or so inconsiderately. 
 The changes, however, now so rapidly 
 taking place in usages and ideas, are 
 undermining all these distinctions ; the 
 habits or disabilities which chained 
 people to their hereditary condition are 
 fast wearing away, and every class is 
 exposed to increased and increasing 
 competition from at least the class im- 
 mediately below it. The general re- 
 laxation of conventional barriers, and 
 the increased facilities of education 
 which already are, and will be in a 
 much greater degree, brought within 
 the reach of all, ien d to produce, among 
 
 many excellent effects, one which is 
 the reverse ; they tend to bring down 
 the wages of skilled labour. The in- 
 equality of remuneration between the 
 skilled and the unskilled is, without 
 doubt, very much greater than is justi- 
 fiable ; but it is desirable that this 
 should be corrected by raising the un- 
 skilled, not by lowering the skilled. If, 
 however, the other changes taking 
 place in society are not accompanied 
 by a strengthening of the checks to 
 population on the part of labourers 
 generally, there will be a tendency to 
 bring the lower grades of skilled la- 
 bourers under the influence of a rate of 
 increase regulated by a lower standard 
 of living than their own, and thus to de- 
 teriorate their condition without raising 
 that of the general mass ; the stimulus 
 given to the multiplication of the lowest 
 class being sufficient to fill up without 
 difficulty the additional space gained 
 by them from those immediately above. 
 
 3. A modifying circumstance still 
 remains to be noticed, which interferes 
 to some extent with the operation of 
 the principles thus far brought to view. 
 While it is true, as a general rule, that 
 the earnings of skilled labour, and es- 
 pecially of any labour which requires 
 school education, are at a monopoly 
 rate, from the impossibility, to the mass 
 of the people, of obtaining that educa- 
 tion ; it is also true that the policy of 
 nations, or the bounty of individuals, 
 formerly did much to counteract the 
 effect of this limitation of competition, 
 by offering eleemosynary instruction 
 to a much larger class of persons than 
 could have obtained the same advan- 
 tages by paying their price. Adam 
 Smith has pointed out the operation 
 of this cause in keeping down the re- 
 muneration of scholarly or bookish oc- 
 cupations generally, and in particular 
 of clergymen, literary men, and school- 
 masters, or other teachers of youth. I 
 cannot better set forth this part of tho 
 subject than in his words. 
 
 " It has been considered as of so 
 much importance that a proper number 
 of young people should be educated for 
 certain professions, that sometimes the 
 public, and sometimes the piety 01
 
 DIFFERENCES OF WAGES. 
 
 239 
 
 private founders, have established 
 many pensions, scholarships, exhibi- 
 tions, bursaries, &c. for this purpose, 
 which draw many more people into 
 those trades than could otherwise pre- 
 tend to follow them. In all Christian 
 countries, I believe, the education of the 
 part of churchmen is paid for in 
 this manner. Very few of them are edu- 
 cated altogether at their own expense. 
 The long, tedious, and expensive edu- 
 cation, therefore, of those who are, will 
 not always procure them a suitable re- 
 ward, the church beingcrowded with peo- 
 ple who, in order to get employment, are 
 willing to accept of a much smaller re- 
 compense than what such an education 
 would otherwise have entitled them to ; 
 and in this manner the competition of 
 the poor takes away the reward of the 
 rich. It would be indecent, no doubt, 
 to compare either a curate or a chap- 
 lain with a journeyman in any common 
 trade. The pay of a curate or a chap- 
 lain, however, may very properly be 
 considered as of the same nature with 
 the wages of a journeyman. They 
 are, all three, paid for their work ac- 
 cording to the contract which they may 
 happen to make with their respective 
 superiors. Till after the middle of the 
 fourteenth century, five marks, con- 
 taining as much silver as ten pounds 
 of our present money, was in England 
 the usual pay of a curate or a stipen- 
 diary parish priest, as we find it regu- 
 lated by the decrees of several different 
 national councils. At the same period 
 fourpence a day, containing the same 
 quantity of silver as a shilling of our 
 present money, was declared to be the 
 pay of a master-mason, and threepence 
 a day, equal to ninepence of our present 
 money, that of a journeyman mason.* 
 The wages of both these labourers, 
 therefore, supposing them to have been 
 constantly employed, were much supe- 
 rior to those of the curate. The wages 
 of the master-mason, supposing him to 
 have been without employment one- 
 third of the year, would have fully 
 equalled them. By the 12th of Queen 
 Arme, c. 1 2, it is declared ' That 
 wiuereaa for want of sufficient mainte- 
 
 * " 8e<i the Statute of Labourers, 25 Edw. 
 IU." 
 
 nance and encouragement to curates, 
 the cures have in several places been 
 meanly supplied, the bishop is there- 
 fore empowered to appoint by writing 
 under his hand and seal a sufficient 
 certain stipend or allowance, not ex- 
 ceeding fifty, and not less than twenty 
 pounds a year.' Forty pounds a year 
 is reckoned at present very good pay 
 for a curate, and notwithstanding this 
 act of parliament, there are many cura- 
 cies under twenty pounds a year. This 
 last sum does not exceed what is fre- 
 quently earned by common labourers 
 in many country parishes. Whenever 
 the law has attempted to regulate the 
 wages of workmen, it has always been 
 rather to lower them than to raise 
 them. But the law has upon many 
 occasions attempted to raise the wages 
 of curates, and for the dignity of the 
 Church, to oblige the rectors of parishes 
 to give them more than the wretched 
 maintenance which they themselves 
 might be willing to accept of. And 
 in both cases the law seems to have 
 been equally ineffectual, and has never 
 been either able to raise the wages of 
 curates or to sink those of labourers 
 to the degree that was intended, be- 
 cause it has never been able to hinder 
 either the one from being willing to 
 accept of less than the legal allowance, 
 on account of the indigence of their 
 situation and the multitude of their 
 competitors ; or the other from re- 
 ceiving more, on account of the con- 
 trary competition of those who expected 
 to derive either profit or pleasure from 
 employing them." 
 
 " In professions in which there are 
 no benefices, such as law (?) and physic, 
 if an equal proportion of people were 
 educated at the public expense, the 
 competition would soon be so great as 
 to sink very much their pecuniary 
 reward. It might then not be worth 
 any man's while to educate his son to 
 either of those professions at his own 
 expense. They would be entirely 
 abandoned to such as had been edu- 
 cated by those public charities ; whoso 
 numbers and necessities would oblige 
 them in general to content them- 
 selves with a very miserable recom- 
 pense.
 
 240 
 
 BOOK II. CHAPTER XIV. 4. 
 
 " That unprosperous race of men, 
 commonly called men of letters, are 
 pretty much in the situation which 
 lawyers and physicians probably would 
 be in upon the foregoing supposition. 
 In every part of Europe, the greater 
 part of them have been educated for 
 the church, but have been hindered 
 by different reasons from entering into 
 holy orders. They have generally, 
 therefore, been educated at the public 
 expense, and their numbers are every- 
 where so great as to reduce the price 
 of their labour to a very paltry recom- 
 pense. 
 
 " Before the invention of the art of 
 printing, the only employment by 
 which a man of letters could make 
 anything by his talents, was that of a 
 public or private teacher, or by com- 
 municating to other people the curious 
 and useful knowledge which he had 
 acquired himself: and this is still 
 surely a more honourable, a more use- 
 ful, and in general even a more pro- 
 fitable employment than that other of 
 writing for a bookseller, to which the 
 art of printing has given occasion. 
 The time and study, the genius, know- 
 ledge, and application requisite to 
 ([ualify an eminent teacher of the 
 sciences, are at least equal to what is 
 necessary for the greatest practitioners 
 in law and physic. But the usual re- 
 ward of the eminent teacher bears no 
 proportion to that of the lawyer or 
 physician ; because the trade of the 
 one is crowded with indigent people 
 who have been brought up to it at 
 the public expense, whereas those of 
 the other two are encumbered with 
 very few who have not been educated 
 at their own. The usual recompense, 
 however, of public and private teachers, 
 small as it may appear, would un- 
 doubtedly be less than it is, if the 
 competition of those yet more indigent 
 men of letters who write for bread was 
 not taken out of the market. Before 
 the invention of the art of printing, a 
 scholar and a beggar seem to have 
 been terms very nearly synonymous. 
 The different governors of the univer- 
 sities before that time appear to have 
 often granted licenses to their scholars 
 to beg." 
 
 4. The demand for literary la- 
 hour has so greatly increased since 
 Adam Smith wrote, while the provi- 
 sions for eleemosynary education have 
 nowhere been much added to, and in 
 the countries which have undergone 
 revolutions have been much dimi- 
 nished, that little effect in keeping 
 down the recompense of literary labour 
 can now be ascribed to the influence of 
 those institutions. But an effect nearly 
 equivalent is now produced by a cause 
 somewhat similar the competition of 
 persons who, by analogy with other 
 arts, may be called amateurs. Lite- 
 rary occupation is one of those pursuits 
 in which success may be attained by 
 persons the greater part of whose time 
 is taken up by other employments ; and 
 the education necessary for it, is the 
 common education of all cultivated 
 persons. The inducements to it, inde- 
 pendently of money, in the present 
 state of the world, to all who have 
 either vanity to gratify, or personal of 
 public objects to promote, are strong. 
 These motives now attract into this 
 career a great and increasing number 
 of persons who do not need its pecu- 
 niary fruits, and who would equally re- 
 sort to it if it afforded no remuneration 
 at all. In our own country (to cite 
 known examples), the most influential, 
 and on the whole most eminent philo- 
 sophical writer of recent times (Ben- 
 tham), the greatest political economist 
 (Ricardo), the most ephemerally cele- 
 brated, and the really greatest poets 
 (Byron and Shelley), and the most suc- 
 cessful writer of prose fiction (Scott), 
 were none of them authors by profes- 
 sion ; and only two of the five, Scott 
 and Byron, could have supported them- 
 selves by the works which they wrote. 
 Nearly all the high departments of 
 authorship are, to a great extent, simi- 
 larly filled. In consequence, although 
 the highest pecuniary prizes of suc- 
 cessful authorship are incomparably 
 greater than at any former period, yet 
 on any rational calculation of the 
 chances, in the existing competition, 
 scarcely any writer can hope to gain a 
 living by books, and to do so by maga- 
 zines and reviews becomes daily more 
 difficult. It is only the more trouble-
 
 DIFFERENCES OF WAGES. 
 
 241 
 
 some and disagreeable kinds of literary 
 labour, and those which confer no per- 
 sonal celebrity, such as most of those 
 connected with newspapers, or with the 
 smaller periodicals, on which an edu- 
 cated person can now rely for subsist- 
 ence. Of these, the remuneration is, 
 on the whole, decidedly high ; because, 
 though exposed to the competition of 
 what used to be called " poor scholars" 
 (persons who have received a learned 
 education from some public or private 
 charity), they are exempt from that of 
 amateurs, those who have other means 
 of support being seldom candidates for 
 such employments. Whether these 
 considerations are not connected with 
 something radically amiss in the idea 
 of authorship as a profession, and whe- 
 ther any social arrangement under 
 which the teachers of mankind consist 
 of persons giving out doctrines for 
 bread, is suited to be, or can possibly 
 be, a permanent thing would be a 
 subject well worthy of the attention of 
 thinkers. 
 
 The clerical, like the literary profes- 
 nion, is frequently adopted by persons 
 of independent means, either from reli- 
 gious zeal, or for the sake of the honour 
 or usefulness which may belong to it, 
 or for a chance of the high prizes which 
 it holds out ; and it is now principally 
 for this reason that the salaries of 
 curates are so low ; those salaries, 
 though considerably raised by the in- 
 fluence of public opinion, being still 
 generally insufficient as the sole means 
 of support for one who has to maintain 
 the externals expected from a clergy 
 man of the established church. 
 
 When an occupation is carried on 
 chiefly by persons who derive the main 
 portion of their subsistence from other 
 sources, its remuneration may be lower 
 almost to any extent, than the wages 
 of equally severe labour in other em- 
 ployments. The principal example of 
 the kind is domestic manufactures. 
 When spinning and knitting were car- 
 ried on in every cottage, by families 
 deriving their principal support from 
 agriculture, the price at which their 
 produce was sold (which constituted 
 the remuneration of the labour) was 
 often so low, that there would have 
 
 been required great perfection of ma- 
 chinery to undersell it. The amount 
 of the remuneration in such a case, 
 depends chiefly upon whether the quan- 
 tity of the commodity, produced by this 
 description of labour, suffices to supply 
 the whole of the demand. If it does 
 not, and there is consequently a neces- 
 sity for some labourers who devote 
 themselves entirely to the employment, 
 the price of the article must be suffi- 
 cient to pay those labourers at the 
 ordinary rate, and to reward therefore 
 very handsomely the domestic pro- 
 ducers. But if the demand is so h'mited 
 that the domestic manufacture can do 
 more than satisfy it, the price is natu- 
 rally kept down to the lowest rate at 
 which peasant families think it worth 
 while to continue the production. It 
 is, no doubt, because the Swiss artizans 
 do not depend for the whole of their 
 subsistence upon their looms, that Zu- 
 rich is able to maintain a competition 
 in the European market with English 
 capital, and English fuel and ma- 
 chinery.* Thus far, as to the remu- 
 neration of the subsidiary employment ; 
 but the effect to the labourers of hav- 
 ing this additional resource, is almost 
 certain to be (unless peculiar counter- 
 acting causes intervene) a propor- 
 tional diminution of the wages of their 
 main occupation. The habits of the 
 people (as has already been so often 
 remarked) everywhere require some 
 particular scale of living, and no more, 
 as the condition without which they 
 will not bring up a family. Whether 
 the income which maintains them in 
 this condition comes from one source 
 or from two, makes no difference : if 
 there is a second source of income, they 
 require less from the first ; and multi- 
 ply (at least this has always hitherto 
 been the case) to a point which leaves 
 them no more from both employments, 
 
 * Four-fifths of the manufacturers of the 
 Canton of Zurich are small farmers, gene- 
 rally proprietors of their farms. The cotton 
 manufacture occupies either wholly or par- 
 tially 23,000 people, nearly a tenth part of the 
 population; and they consume greater 
 quantity of cotton per inhabitant than either 
 France or England. See the Statistical Ac- 
 count of Zurich, formerly cited, pp. 105, 103, 
 110. 
 
 B
 
 242 
 
 BOOK IT. CHAPTER XIV. 5. 
 
 thaii they would probably have had 
 from either if it had been their sole 
 occupation. 
 
 For the same reason it is found that, 
 cceteris paribus, those trades are gene- 
 rally the worst paid, in which the 
 wife and children of the artizan aid in 
 the work. The income which the 
 habits of the class demand, and down 
 to which they are almost sure to mul- 
 tiply, is made up, in those trades, by 
 the earnings of the whole family, while 
 in others the same income must be ob- 
 tained by the labour of the man alone. 
 It is even probable that their collective 
 earnings will amount to a smaller sum 
 than those of the man alone in other 
 trade < ; because the prudential re- 
 straint on marriage is unusually weak 
 when the only consequence imme- 
 diately felt is an improvement of cir- 
 cumstances, the joint earnings of the 
 two going further in their domestic 
 economy after marriage than before. 
 Such accordingly is the fact, in the 
 case of hand-loom weavers. In most 
 kinds of weaving, women can and do 
 earn as much as men, and children are 
 employed at a very early age ; but the 
 aggregate earnings of a family are 
 lower than in almost any other kind of 
 industry, and the marriages earlier. It 
 is noticeable also that there are cer- 
 tain branches of hand-loom weaving in 
 which wages are much above the rate 
 common in the trade, and that these 
 are the branches in which neither 
 women nor young persons are em- 
 ployed. These facts were authenti- 
 cated by the inquiries of the Hand- 
 loom Weavers Commission, which made 
 its report in 1841. No argument can 
 be hence derived for the exclusion of 
 women from the liberty of competing 
 in the labour market ; since even 
 when no more is earned by the labour 
 of a man and a woman than would 
 have been earned by the man alone, 
 the advantage to the woman of not de- 
 pending on a master for subsistence 
 may be more than an equivalent. It 
 cannot, however, be considered desir- 
 able as a permanent element in the 
 condition of a labouring class, that the 
 mother of the family (the case of sin- 
 gle women is totally different) should 
 
 be under the necessity of working for 
 subsistence, at least elsewhere than in 
 their place of abode. In the case of 
 children, who are necessarily depend- 
 ent, the influence of their competition 
 in depressing the labour market is an 
 important element in the question of 
 limiting their labour, in order to pro- 
 vide better for their education. 
 
 5. It deserves consideration, why 
 the wages of women are generally 
 lower, and very much lower, than those 
 of men. They are not universally so. 
 Where men and women work at the 
 same employment, if it be one for 
 which they are equally fitted in point 
 of physical power, they are not always 
 unequally paid. Women, in factories, 
 sometimes earn as much as men ; and 
 so they do in hand-loom weaving, 
 which, being paid by the piece, brings 
 their efficiency to a sure test. When 
 the efficiency is equal, "but the pay un- 
 equal, the only explanation that can 
 be given is custom ; grounded either 
 in a prejudice, or in the present con- 
 stitution of society, which, making 
 almost every woman, socially speak- 
 ing, an appendage of some man, en- 
 ables men to take systematically the 
 lion's share of whatever belongs to 
 both. But the principal question re- 
 lates to the peculiar employments of 
 women. The remuneration of these is 
 always, I believe, greatly below that of 
 employments of equal skill and equal 
 disagreeableness, carried on by men. 
 In some of these cases the explanation 
 is evidently that already given : as in 
 the case of domestic servants, whoso 
 wages, speaking generally, are not 
 determined by competition, but. are 
 greatly in excess of the market value 
 of the labour, and in this excess, as in 
 almost all things which are regulated 
 by custom, the male sex obtains by faf 
 the largest share. In the occupations 
 in which employers take full advantage 
 of competition, the low wages of women 
 as compared with the ordinary earn- 
 ings of men, are a proof that the em- 
 ployments are overstocked: that al- 
 though so much smaller a number of 
 women, than of men, support them- 
 selves by wages, the occupations which
 
 DIFFERENCES OF WAGES. 
 
 243 
 
 id usage make accessible to them 
 are comparatively so few, that the field 
 of their employment is still more over- 
 crowded. It must be observed, that as 
 manors now stand, a sufficient degree 
 of overcrowding may depress the wages 
 of women to a much lower minimum 
 than those of men. The wages, at 
 least of single women, must fce equal 
 to their support ; but need not be more 
 than equal to it ; the minimum, in their 
 case, is the pittance absolutely requi- 
 site fur the sustenance of one human 
 being. Now the lowest point to which 
 the most superabundant competition 
 can permanently depress the wages of 
 a man, is always somewhat more than 
 this. Where the wife of a labouring 
 man does not by general custom con- 
 tribute to his earnings, the man's wages 
 must be at least sufficient to support 
 himself, a wife, and a number of chil- 
 dren adequate to keep up the popula- 
 tion, since if it were less, the population 
 would not be kept up. And even if 
 the wife earns something, their joint 
 wages must be sufficient to support, 
 not only themselves, but (at least for 
 some years) their children also. The 
 ne plus ultra of low wages, therefore, 
 (except during some transitory crisis, 
 or in some decaying employment,) can 
 hardly occur in any occupation which 
 the person employed has to live by, 
 except the occupations of women. 
 
 6. Thus far, we have, through 
 this discussion, proceeded on the sup- 
 position that competition is free, so far 
 as regards human interference ; being 
 limited only by natural causes, or by 
 the unintended effect of general social 
 circumstances. But law or custom 
 may interfere to limit competition. 
 If apprentice laws, or the regulations 
 of corporate bodies, make the access 
 to a particular employment slow, 
 costly, or difficult, the wages of that 
 employment may be kept much above 
 their natural proportion to the wages 
 of common labour. They might be so 
 kept without any assignable limit, 
 were it not that wages which exceed 
 the usual rate require corresponding 
 prices, and that there is a limit to the 
 price at which even a restricted num- 
 
 ber of producers can dispose of all they 
 produce. In most civilized countries, 
 the restrictions of this kind which, 
 once existed have been either abo- 
 lished or very much relaxed, and will, 
 no doubt, soon disappear entirely. In 
 some trades, however, and to some ex- 
 tent, the combinations of workmen 
 produce a similar effect. Those com- 
 binations always fail to uphold wages 
 at an artificial rate, unless they also 
 limit the number of competitors. But 
 they do occasionally succeed in accom- 
 plishing this. In several trades the 
 workmen have been able to make it 
 almost impracticable for strangers to ob- 
 tain admission either as journeymen or 
 as apprentices, except in limited num- 
 bers, and under such restrictions as 
 they choose to impose. It was given 
 in evidence to the Hand-loom Weavers 
 Commission, that this is one of the 
 hardships which aggravate the grievous 
 condition of that depressed class. Their 
 own employment is overstocked and 
 almost ruined ; but there are many 
 other trades which it would not be dif- 
 ficult for them to learn : to this, how- 
 ever, the combinations of workmen in 
 those other trades are said to interpose 
 an obstacle hitherto insurmountable. 
 
 Notwithstanding, however, the cruel 
 manner in which the exclusive prin- 
 ciple of these combinations operates in 
 a case of this peculiar nature, the 
 question, whether they are on the 
 whole more useful or mischievous, re- 
 quires to be decided on an enlarged 
 consideration of consequences, among 
 which such a fact as this is not one of 
 the most important items. Putting 
 aside the atrocities sometimes com- 
 mitted by workmen in the way of per- 
 sonal outrage or intimidation, which 
 cannot be too rigidly repressed ; if the 
 present state of the general habits of 
 the people were to remain for ever un- 
 improved, these partial combinations, 
 in so far as they do succeed in keeping 
 up the wages of any trade by limiting 
 its numbers, might be looked upon aa 
 simply intrenching'- round a particular 
 spot against the inroads of over-popu- 
 lation, and making the wages of the 
 class depend upon their own rate of 
 increase, instead of depending on that 
 
 Ba
 
 244 
 
 of a more reckless and improvident 
 class than themselves. What at first 
 eight seems the injustice of excluding 
 the more numerous body from sharing 
 ihe gains of a comparatively few, dis- 
 appears when we consider that by 
 being admitted, they would not be 
 made better off, for more than a short 
 time ; the only permanent effect which 
 their admission would produce, would 
 be to lower the others to their own 
 level. To what extent the force of 
 this consideration is annulled when a 
 tendency commences towards dimi- 
 nished over-crowding in the labouring 
 classes generally, and what grounds of 
 a different nature there may be for re- 
 garding the existence of trade combi- 
 nations as rather to be desired than 
 deprecated, will be considered in a 
 subsequent chapter of this work, with 
 the subject of Combination Laws. 
 
 7. To conclude this subject, I 
 must repeat an observation already 
 made, that there are kinds of labour of 
 which the wages are fixed by custom, 
 and not by competition. Such are the 
 fees or charges of professional persons : 
 of physicians, surgeons, barristers, and 
 even attorneys. These, as a general 
 rule, do not vary, and though competi- 
 tion operates upon those classes as 
 much as upon any others, it is by di- 
 viding the business, not, in general, by 
 diminishing the rate at which it is 
 paid. The cause of this, perhaps, has 
 been the prevalence of an opinion that 
 such persons are more trustworthy if 
 paid highly in proportion to the work 
 they perform ; insomuch that if a lawyer 
 or a physician offered his services at 
 less than the ordinary rate, instead of 
 gaining more practice, he would pro- 
 luibly lose that which he already had. 
 For analogous reasons it is usual to 
 
 BOOK II. CHAPTER XIV. 7. 
 
 pay greatly beyond the market price of 
 their labour, all persons in whom the 
 employer wishes to place peculiar trust, 
 or from whom he requires something 
 besides their mere services. For ex- 
 ample, most persons who can afford it, 
 pay to their domestic servants higher 
 wages than would purchase in tho 
 market the labour of persons fully aa 
 competent to the work required. They 
 do this, not merely from ostentation, 
 but also from more reasonable motives ; 
 either because they desire that those 
 they employ should serve them cheer- 
 fully, and be anxious to remain in their 
 service ; or because they do not like to 
 drive a hard bargain with people whom 
 they are in constant intercourse with ; 
 or because they dislike to have near 
 their persons, and continually in their 
 sight, people with the appearance and 
 habits which are the usual accompani- 
 ments of a mean remuneration. Simi- 
 lar feelings operate in the minds of 
 persons in business, with respect to 
 their clerks and other employes. Li- 
 berality, generosity, and the credit of 
 the employer, are motives which, to 
 whatever extent they operate, preclude 
 taking the utmost advantage of compe- 
 tition : and doubtless such motives 
 might, and even now do, operate on 
 employers of labour in all the great 
 departments of industry ; and most de- 
 sirable is it that they should. But 
 they can never raise the average wages 
 of labour beyond the ratio of population 
 to capital. By giving more to each 
 person employed, they limit the power 
 of giving employment to numbers; and 
 however excellent their moral effect, 
 they do little good economically, unless 
 the pauperism of those who are shut 
 out, leads indirectly to a readjustment 
 by means of an increased restraint on 
 population.
 
 PROFITS. 
 
 245 
 
 CHAPTER XV. 
 
 OP PROFITS. 
 
 1. HAVING treated of the la- 
 bourer's share of the produce, we next 
 proceed to the share of the capitalist ; 
 the profits of capital or stock ; the gains 
 of the person who advances the ex- 
 penses of production who, from funds 
 in his possession, pays the wages of 
 the labourers, or supports them during 
 the work ; who supplies the requisite 
 buildings, materials, and tools or ma- 
 chinery; and to whom, by the usual 
 terms of the contract, the produce be- 
 longs, to be disposed of at his pleasure. 
 After indemnifying him for his outlay, 
 there commonly remains a surplus, 
 which is his profit ; the net income 
 from his capital: the amount which 
 he can afford to expend in necessaries 
 or pleasures, or from which by further 
 saving he can add to his wealth. 
 
 As the wages of the labourer are the 
 remuneration of labour, so the profits 
 of the capitalist are properly, according 
 to Mr. Senior's well-chosen expression, 
 the remuneration of abstinence. They 
 ure what he gains by forbearing to 
 consume his capital for hia own uses, 
 and allowing it to be consumed by 
 productive labourers for their uses. 
 For this forbearance he requires a 
 recompense. Very often in personal 
 enjoyment he would be a gainer by 
 squandering his capital, the capital 
 amounting to more than the sum of the 
 profits which it will yield during the 
 years he can expect to live. But while 
 he retains it undiminished, he has al- 
 ways the power of consuming it if he 
 wishes or needs ; he can bestow it upon 
 others at his death ; and in the mean- 
 time he derives from it an income, 
 which he can without impoverishment 
 apply to the satisfaction of his own 
 wants or inclinations. 
 
 Of the gains, however, which the 
 possession of a capital enables a person 
 to make, a part only is properly an 
 equivalent for the use of the capital 
 itself; namely, as much as a solvent 
 
 person would be willing to pay fur the 
 loan of it. This, which as everybody 
 knows is called interest, is all that a 
 person is enabled to get by merely ab- 
 staining from the immediate consump- 
 tion of his capital, and allowing it to 
 be used for productive purposes by 
 others. The remuneration which is 
 obtained in any country for mere ab- 
 stinence, is measured by the current 
 rate of interest on the best security; 
 such security as precludes any appre- 
 ciable chance of losing the principal. 
 What a person expects to gain, who 
 superintends the employment of his 
 own capital, is always more, and gene- 
 rally much more, than this. The rate 
 of profit greatly exceeds the rate of in- 
 terest. The surplus is partly compensa- 
 tion for risk. By lending his capital, on 
 unexceptionable security, he runs little 
 or no risk. But if he embarks in busi- 
 ness on his own account, he always 
 exposes his capital to some, and in 
 many cases to very great, danger of 
 partial or total loss. For this danger 
 he must be compensated, otherwise he 
 will not incur it. He must likewise be 
 remunerated for the devotion of his 
 time and labour. The control of the 
 operations of industry usually belongs 
 to the person who supplies the whole 
 or the greatest part of the funds by 
 which they are carried on, and who, 
 according to the ordinary arrangement, 
 is either alone interested, or is the per- 
 son most interested (at least directly), 
 in the result. To exercise this control 
 with efficiency, if the concern is large 
 and complicated, requires great assi- 
 duity, and often, no ordinary skill. This 
 assiduity and skill must be remune- 
 rated. 
 
 The gross profits from capital, the 
 gains returned to those who supply the 
 funds for production, must suffice for 
 these three purposes. They must 
 afford a sufficient equivalent for absti- 
 nence, indemnity for risk, and retnu-
 
 240 
 
 BOOK II. CHAPTER XV. * 2. 
 
 Deration for the labour and skill re- 
 quired for superintendence. These 
 different compensations may be either 
 paid to the same, or to different per- 
 sons. The capital, or some part of it, 
 may be borrowed : may belong to some 
 one who does not undertake the risks 
 or the trouble of business. In that 
 case, the lender, or owner, is the pei- 
 son who practises the abstinence ; and 
 is remunerated for it by the interest 
 paid to him, while the difference be- 
 tween the interest and the gross profit 
 remunerates the exertions and risks of 
 the undertaker.* Sometimes, again, 
 the capital, or a part of it, is supplied 
 by what is called a sleeping partner ; 
 who shares the risks of the employ- 
 ment, but not the trouble, and who, in 
 consideration of those risks, receives 
 not a mere interest, but a stipulated 
 share of the gross profits. Sometimes 
 the capital is supplied and the risk 
 incurred by one person, and the busi- 
 ness carried on exclusively in his name, 
 while the trouble of management is 
 made over to another, who is engaged 
 for that purpose at a fixed salary. 
 Management, however, by hired ser- 
 vants, who have no interest in the 
 result but that of preserving their 
 salaries, is proverbially inefficient, un- 
 iess they act under the inspecting eye, 
 if not the controlling hand, of the per- 
 pott chiefly interested : and prudence 
 almost always recommends giving to 
 a manager not thus controlled, a re- 
 muneration partly dependent on the 
 profits ; which virtually reduces the 
 case to that of a sleeping partner. Or 
 finally, the same person may own the 
 capital, and conduct the business; 
 adding, if he will and can, to the man- 
 agement of his own capital, that of as 
 much more as the owners may be will- 
 ing to trust him with. But under 
 any and all of these arrangements, the 
 same three things require their remu- 
 neration, and must obtain it from the 
 gross profit : abstinence, risk, exertion. 
 And the three parts into which profit 
 may be considered as resolving itself, 
 * It is to be regretted that this word, in 
 this sense, is not familiar to an English ear. 
 French political economists enjoy a great 
 advantage in being able to speak currently 
 Of let prnfitt de I' entrepreneur. 
 
 may be described respectively as inte- 
 rest, insurance, and wages of superin- 
 tendence. 
 
 2. The lowest rate of profit which 
 can permanently exist, is that which 
 is barely adequate, at the given place 
 and time, to afford an equivalent for 
 the abstinence, risk, and exertion im- 
 plied in the employment of capital. 
 From the gross profit, has first to be 
 deducted as much as will form a fund 
 sufficient on the average to cover all 
 losses incident to the employment. 
 Next, it must afford such an equivalent 
 to the owner of the capital for forbear- 
 ing to consume it, as is then and 
 there a sufficient motive to him to per- 
 sist in his abstinence. How much 
 will be required to form this equiva- 
 lent, depends on the comparative value 
 placed, in the given society, upon the 
 present and the future : (in the words 
 formerly used) on the strength of the 
 effective desire of accumulation. Fur- 
 ther, after covering all losses, and re- 
 munerating the owner for forbearing to 
 consume, there must be something left 
 to recompense the labour and skill of 
 the person who devotes his time to the 
 business. This recompense too must 
 be sufficient to enable at least the 
 owners of the larger capitals to receive 
 for their trouble, or to pay to some 
 manager for his, what to them or him 
 will be a sufficient inducement for un- 
 dergoing it. If the surplus is no more 
 than this, none but large masses of 
 capital will be employed productively , 
 and if it did not even amount to this, 
 capital would be withdrawn from pro- 
 duction, and unproductively consumed, 
 until, by an indirect consequence of its 
 diminished amount, to be explained 
 hereafter, the rate of profit was raised. 
 
 Such, then, is the minimum of 
 profits : but that minimum is exceed- 
 ingly variable, and at some times and 
 places extremely low; on account of 
 the great variableness of two out of 
 its three elements. That the rate of 
 necessary remuneration for abstinence, 
 or in other words the effective desire 
 of accumulation, differs widely in dif- 
 ferent states of society and civilization, 
 lias been seen in a former chapter.
 
 PROFITS. 
 
 247 
 
 There is a still vrider difference in the 
 element which consists in compensa- 
 tion for risk. I am not now speaking 
 of the differences in point of risk be- 
 tween different employments of capital 
 in the same society, but of the very 
 diflerent degrees of security of property 
 in diflerent states of society. Wnere, 
 as in many of the governments of 
 Asia, property is in perpetual danger 
 of spoliation from a tyrannical govern- 
 ment, or from its rapacious and ill- 
 controlled officers ; where to possess or 
 to be suspected of possessing wealth, is 
 to be a mark not only for plunder, but 
 perhaps for personal ill-treatment to 
 extort the disclosure and surrender of 
 hidden valuables ; or where, as in the 
 European middle ages, the weakness 
 of the government, even when not it- 
 self inclined to oppress, leaves its sub- 
 jects exposed without protection or 
 redress to active spoliation, or auda- 
 cious withholding of just rights, by any 
 powerful individual ; the rate of profit 
 which persons of average dispositions 
 will require, to make them forego the 
 immediate enjoyment of what they 
 happen to possess, for the purpose of 
 exposing it and themselves to these 
 perils, must be something very con- 
 siderable. And these contingencies 
 affect those who live on the mere inte- 
 rest of their capital, in common with 
 those who personally engage in pro- 
 duction. In a generally secure state 
 of society, the risks which may be 
 attendant on the nature of particular 
 employments seldom fall on the person 
 who lends his capital, if he lends on 
 good security ; but in a state of society 
 like that of many parts of Asia, no 
 security (except perhaps the actual 
 pledge of gold or jewels) is good : and 
 the mere possession of a hoard, when 
 known or suspected, exposes it and the 
 possessor to risks, for which scarcely 
 any profit he could expect to obtain 
 would be an equivalent ; so that there 
 would be still less accumulation than 
 there is, if a state of insecurity did not 
 also multiply the occasions on which 
 the possession of a treasure may be the 
 means of saving life, or averting serious 
 calamities. Those who lend, under 
 these wretched gOTernments, do it at 
 
 the utmost peril of never being paid. 
 In most of the native states of India, 
 the lowest terms on which any one 
 will lend money, even to the govern- 
 ment, are such, that if the interest ia 
 paid only for a few years, and the 
 principal not at all, the lender is toler. 
 ably well indemnified. If the accumu- 
 lation of principal and compound inte- 
 rest is ultimately compromised at a 
 few shillings in the pound, he has 
 generally made an advantageous bar- 
 gain. 
 
 3. The remuneration of capital in 
 diflerent employments, much more than 
 tie remuneration of labour, varies ac- 
 cording to the circumstances which 
 render one employment more attrac- 
 tive, or more repulsive, than another. 
 The profits, for example, of retail 
 trade, in proportion to the capital em- 
 ployed, exceed those of wholesale 
 dealers or manufacturers, for this rea- 
 son among others, that there is less 
 consideration attached to the employ- 
 ment. The greatest, however, of these 
 differences, is that caused by difference 
 of risk. The profits of a gunpowder 
 manufacturer must be considerably 
 greater than the average, to make up 
 for the peculiar risks to which he and 
 his property are constantly exposed. 
 When, however, as in the case of 
 marine adventure, the peculiar risks 
 are capable of being, and commonly 
 are, commuted for a fixed payment, 
 the premium of insurance takes its 
 regular place among the charges of 
 production ; and the compensation 
 which the owner of the ship or cargo 
 receives for that payment, does not ap- 
 pear in the estimate of his profits, but 
 is included in the replacement of his 
 capital. 
 
 The portion, too, of the gross profit, 
 which forms the remuneration for the 
 labour and skill of the dealer or pro- 
 ducer, is very different in different em- 
 ployments. This is the explanation 
 always given of the extraordinary rate 
 of apothecaries' profit ; the greatest 
 part, as Adam Smith observes, being 
 frequently no more than the reasonable 
 wages of professional attendance ; for 
 which, until a late alteration of thn
 
 248 
 
 BOOK II. CHAFFER XV. 4. 
 
 law, the apothecary could not demand 
 any remuneration, except in the prices 
 of his drugs. Some occupations require 
 a considerable amount of scientific or 
 technical education, and can only be 
 carried on by persons who combine with 
 that education a considerable capital. 
 Such is the business of an engineer, 
 both in the original sense of the term, 
 a machine-maker, and in its popular 
 or derivative sense, an undertaker of 
 public works. These are always the 
 most profitable employments. There 
 are cases, again, in which a consider- 
 able amount of labour and skill is re- 
 quired to conduct a business necessarily 
 of limited extent. In such cases a 
 higher than common rate of profit is 
 necessary to yield only the common 
 rate of remuneration. " In a small sea- 
 port town," says Adam Smith, " a 
 little grocer will make forty or fifty per 
 cent upon a stock of a single hundred 
 pounds, while a considerable wholesale 
 merchant in the same place will scarce 
 make eight or ten per cent upon a stock 
 of ten thousand. The trade of the 
 grocer may be necessary for the con- 
 veniency of the inhabitants, and the 
 narrowness of the market may not 
 admit the employment of a larger 
 capital in the business. The man, 
 however, must not only live by his 
 trade, but live by it suitably to 
 the qualifications which it requires. 
 Besides possessing a little capital, he 
 must be able to read, write, and ac- 
 count, and must be a tolerable judge, 
 too, of perhaps fifty or sixty different 
 sorts of goods, their prices, qualities, 
 and the markets where they are to 
 be had cheapest. Thirty or forty 
 pounds a year cannot be considered as 
 too great a recompense for the labour 
 of a person so accomplished. Deduct 
 this from the seemingly great profits of 
 his capital, and little more will remain, 
 perhaps, than the ordinary profits of 
 stock. The greater part of the apparent 
 profit is, in this case, too, real wages." 
 All the natural monopolies (meaning 
 thereby those which are created by 
 circumstances, and not by law) which 
 produce or aggravate the disparities in 
 the remuneration of different kinds of 
 labour, operate similarly between dif- 
 
 ferent employments of capital. If & 
 business can only be advantageously 
 carried on by a large capital, this in 
 most countries limits so narrowly the 
 class of persons who can enter into the 
 employment, that they are enabled to 
 keep their rate of profit above the 
 general level. A trade may also, from 
 the nature of the case, be confined to 
 so few hands, that profits may admit 
 of being kept up by a combination 
 among the dealers. It is well known 
 that even among so numerous a body 
 as the London booksellers, this sort of 
 combination long continued to exist. 
 I have already mentioned the case of 
 the gas and water companies. 
 
 4. After due allowance is made 
 for these various causes of inequality, 
 namely, differences in the risk or 
 agreeableness of different employments, 
 and natural or artificial monopolies; 
 the rate of profit on capital in all em- 
 ployments tends to an equality. Such 
 is the proposition usually laid down by 
 political economists, and under proper 
 explanations it is true. 
 
 That portion of profit which is 
 properly interest, and which forms the 
 real remuneration for abstinence, is 
 strictly the same, at the same time and 
 place, whatever be the employment. 
 The rate of interest on equally good 
 security, does not vary according to 
 the destination of the principal, though 
 it does vary from time to time very 
 much, according to the circumstances 
 of the market. There is no employ- 
 ment in which, in the present state of 
 industry, competition is so active and 
 incessant as in the lending and borrow- 
 ing of money. All persons in business 
 are occasionally, and most of them 
 constantly, borrowers: while all persons 
 not in business, who possess monied 
 property, are lenders. Between these 
 two great bodies, there is a numerous, 
 keen, and intelligent class of middle- 
 men, composed of bankers, stockbrokers, 
 discount brokers, and others, alive to 
 the slightest breath of probable gain. 
 The smallest circumstance, or the most 
 transient impression on the public 
 mind, which tends to an increase or 
 diminution of the demand for leant;
 
 run FITS. 
 
 249 
 
 either at the time or prospectively, 
 operates immediately on the rate of 
 interest : and circumstances in the 
 general state of trade, really tending 
 to cause this difference of demand, are 
 continually occurring, sometimes to 
 such an extent, that the rate of inte- 
 rest on the best mercantile bills has 
 been known to vary in little more than 
 a year (even without the occurrence of 
 the great derangement called a com- 
 mercial crisis) from four or less, to eight 
 or nine per cent. But, at the same 
 time and place, the rate of interest is 
 the same, to all who can give equally 
 good security. The market rate of 
 interest is at all times a known and 
 definite thing. 
 
 It is far otherwise with gross profit ; 
 which, though (as will presently be seen) 
 it tl< ii s not vary much from employ- 
 ment to employment, varies very greatly 
 from individual to individual, and can 
 scarcely be in any two cases the same. 
 It depends on the knowledge, talents, 
 economy, and energy of the capitalist 
 himself, or of the agents whom ne em- 
 ploys ; on the accidents of personal con- 
 nexion ; and even on chance. Hardly 
 any two dealers in the same trade, 
 even if their commodities are equally 
 good and equally cheap, carry on their 
 business at the same expense, or turn 
 over their capital in the same time. 
 That equal capitals give equal profits, 
 as a general maxim of trade, would be 
 as false as that equal age or size gives 
 equal bodily strength, or that equal 
 reading or experience gives equal 
 knowledge. The effect depends as 
 much upon twenty other things, as 
 upon the single cause specified. 
 
 But though profits thus vary, the 
 parity, on the whole, of different modes 
 of employing capital (in the absence 
 of any natural or artificial monopoly) 
 is, in a certain, and a very important 
 sense, maintained. On an average 
 (whatever may be the occasional 
 fluctuations) the various employments 
 of capital are on such a footing, as to 
 hold out, not equal profits, but equal 
 expectations of profit, to persons of 
 average abilities and advantages. By 
 equal, I mean after making compensa- 
 tion for any inferiority iu the agree- 
 
 ableness or safety of an employment. 
 If the case were not so ; if there were 
 evidently, and to common experience, 
 more favourable chances of pecuniary 
 success in one business than in others, 
 more persons would engage their capi- 
 tal in the business, or would bring up 
 their sons to it ; which in fact always 
 happens when a business, like that of 
 an engineer at present, or like any 
 newly established and prosperous manu- 
 facture, is seen to be a growing and 
 thriving one. If, on the contrary, a 
 business is not considered thriving ; if 
 the chances of profit in it are thought 
 to be inferior to those in other employ- 
 ments ; capital gradually leaves it, or 
 at least new capital is not attracted to 
 it ; and by this change in the distribu- 
 tion of capital between the less profit- 
 able and the more profitable employ- 
 ments, a sort of balance is restored. 
 The expectations of profit, therefore, in 
 different employments, cannot long con- 
 tinue very different: they tend to a 
 common average, though they are 
 generally oscillating from one side to 
 the other side of the medium. 
 
 This equalizing process, commonly 
 described as the transfer of capital from 
 one employment to another, is not 
 necessarily the onerous, slow, and 
 almost impracticable operation which 
 it is very often represented to be. In 
 the first place, it does not always im- 
 ply the actual removal of capital 
 already embarked in an employment. 
 In a rapidly progressive state of capital, 
 the adjustment often takes place by 
 means of the new accumulations of each 
 year, which direct themselves in prefer- 
 ence towards the more thriving trades. 
 Even when a real transfer of capital is 
 necessary, it is by no means implied 
 that any of those who are engaged in 
 the unprofitable employment, relinquish 
 business and break up their establish- 
 ments. The numerous and multifarious 
 channels of credit, through which, iu 
 commercial nations, unemployed capital 
 diffuses itself over the field of employ- 
 ment, flowing over in greater abund- 
 ance to the lower levels, are the means 
 by which the equalization is accom- 
 plished. The process consists in a 
 limitation by one class of dealers or
 
 250 
 
 BOOK II. CHAPTER XV. $ 4. 
 
 producers, and an extension by the 
 other, of that portion of their business 
 which is carried on with borrowed 
 capital. There is scarcely any dealer 
 or producer on a considerable scale, 
 who confines his business to what can 
 be carried on by his own funds. When 
 trade is good, he not only uses to the 
 utmost his own capital, but employs, 
 in addition, much of the credit which 
 that capital obtains for him. When, 
 either from over-supply or from some 
 slackening in the demand for his com- 
 modity, he finds that it sells more 
 slowly or obtains a lower price, he con- 
 tracts his operations, and does not 
 apply to bankers or other money 
 dealers for a renewal of their advances 
 to the same extent as before. A busi- 
 ness which is increasing holds out, on 
 the contrary, a prospect of profitable 
 employment for a larger amount of this 
 floating capital than previously, and 
 those engaged in it become applicants 
 to the money dealers for larger ad- 
 vances, which, from their improving 
 circumstances, they have no difficulty 
 in obtaining. A different distribution 
 of floating capital between two em- 
 ployments has as much effect in re- 
 storing their profits to an equilibrium, 
 as if the owners of an equal amount of 
 capital were to abandon the one trade 
 and carry their capital into the other. 
 This easy, and as it were spontaneous, 
 method of accommodating production 
 to demand, is quite sufficient to correct 
 any inequalities arising from the fluc- 
 tuations of trade, or other causes of 
 ordinary occurrence. In the case of 
 a r altogether declining trade, in which 
 i . is necessary that the production 
 should be, not occasionally varied, but 
 greatly and permanently diminished, 
 or perhaps stopped altogether, the pro- 
 cess of extricating the capital is, no 
 doubt, tardy and difficult, and almost 
 always attended with considerable 
 loss ; much of the capital fixed in ma- 
 chinery, buildings, permanent works, 
 &c. being either not applicable to any 
 other purpose, or only applicable after 
 expensive alterations ; and time being 
 seldom given for effecting the change 
 in the mode in which it would be 
 effected with least loss, namely, by 
 
 not replacing the fixed capital as it 
 wears out. There is besides, in totally 
 changing the destination of a capital, 
 so great a sacrifice of established con- 
 nexion, and of acquired skill and ex- 
 perience, that people are always very 
 slow in resolving upon it, and hardly 
 ever do so until long after a change of 
 fortune has become hopeless. These, 
 however, are distinctly exceptional 
 cases, and even in these the equaliza- 
 tion is at last effected. It may also 
 happen that the return to equilibrium 
 is considerably protracted, when, before 
 one inequality has been corrected, 
 another cause of inequality arises ; 
 which is said to have been continually 
 the case during a long series of years, 
 with the production of cotton in the 
 Southern States of North America ; the 
 commodity having been upheld at 
 what was virtually a monopoly price, 
 because the increase of demand, from 
 successive improvements in the manu- 
 facture, went on with a rapidity so 
 much beyond expectation, that for many 
 years the supply never completely 
 overtook it. But it is not often that a 
 succession of disturbing causes, all 
 acting in the same direction, are known 
 to follow one another with hardly any 
 interval. Where there is no monopoly, 
 the profits of a trade are likely to range 
 sometimes above and sometimes below 
 the general level, but tending always to 
 return to it ; like the oscillations of the 
 pendulum. 
 
 In general, then, although profits are 
 very different to different individuals, 
 and to the same individual in different 
 years, there cannot be much diversity 
 at the same time and place in the 
 average profits of different employ- 
 ments, (other than the standing differ- 
 ences necessary to compensate for 
 difference of attractiveness), except for 
 short periods, or when some great per- 
 manent revulsion has overtaken a par- 
 ticular trade. If any popular impres- 
 sion exists that some trades are more 
 profitable than others, independently of 
 monopoly, or of such rare accidents as 
 have been noticed in regard to the 
 cotton trade, the impression is in all 
 probability fallacious, since if it were 
 shared by those who have greatest
 
 PROFITS. 
 
 251 
 
 means of knowledge and motives to 
 accurate examination, there would take 
 place such an influx of capital as would 
 soon lower the profits to the common 
 level. It is true that, to persons with 
 the same amount of original means, 
 there ia more chance of making a large 
 fortune in some employments than in 
 oilirrs. But it would be found that in 
 those same employments bankruptcies 
 also are more frequent, and that the 
 chance of greater success is balanced 
 by a greater probability of complete 
 failure. Very often it is more than 
 balanced : for. as was remarked in 
 another case, the chance of great prizes 
 operates with a greater degree of 
 strength than arithmetic will warrant, 
 in attracting competitors ; and I doubt 
 not that the average gains, in a trade 
 in which large fortunes may be made, 
 are lower than in those in which gains 
 are slow, though comparatively sure, 
 and in which nothing is to be ulti- 
 mately hoped for beyond a competency. 
 The timber trade of Canada is one ex- 
 ample of an employment of capital, 
 partaking so much of the nature of a 
 lottery, as to make it an accredited 
 opinion that, taking the adventurers in 
 the aggregate, there is more money 
 lost by the trade than gained by it ; in 
 other words, that the average rate of 
 profit is less than nothing. In such 
 points as this, much depends on the 
 characters of nations, according as they 
 partake more or less of the adventur- 
 ous, or, as it is called when the inten- 
 tion is to blame it, the gambling spirit. 
 This spirit is much stronger in the 
 United States than in Great Britain ; 
 and in Great Britain than in any 
 country of the Continent. In some 
 Continental countries the tendency is 
 so much the reverse, that safe and quiet 
 employments probably yield a less 
 average profit to the capital engaged 
 in them, than those which offer greater 
 gains at the price of greater hazards. 
 
 It must not however be forgotten, 
 that even in the countries of most 
 active competition, custom also has a 
 considerable share in determining the 
 profits of trade. There is sometimes 
 an idea afloat as to what the profit of 
 an employment should be, which though 
 
 not adhered to by all the dealer, nor 
 perhaps rigidly by any, still exercises a 
 certain influence over their operations. 
 There has been in England a kind of 
 notion, how widely prevailing 1 1 now 
 not, that fifty per cent is a proper am\ 
 suitable rate of profit in retail trans- 
 actions : understand, not fifty per cent 
 on the whole capital, but an advance 
 of fifty per cent on the wholesale 
 prices ; from which have to be defrayed 
 bad debts, shop rent, the pay of clerks, 
 shopmen, and agents of all descrip- 
 tions, in short all the expenses of the 
 retail business. If this custom were 
 universal, and strictly adhered to, com- 
 petition indeed would still operate, but 
 the consumer would not derive any 
 benefit from it, at least as to price ; the 
 way in which it would diminish the ad- 
 vantages of those engaged in retail 
 trade, would be by a greater subdivision 
 of the business. In some parts of the 
 Continent the standard is as high as a 
 hundred per cent. The increase of 
 competition however, in England at 
 least, is rapidly tending to break down 
 customs of this description. In the 
 majority of trades, (at least in the great 
 emporia of trade,) there are numerous 
 dealers whose motto is "small gains 
 and frequent" a great business at low 
 prices, rather than high prices and few 
 transactions ; and by turning over. their 
 capital more rapidly, and adding to 
 it by borrowed capital when needed, 
 the dealers often obtain individually 
 higher profits ; though they necessarily 
 lower the profits of those among their 
 competitors, who do not adopt the 
 same principle. Nevertheless, com 
 petition, as remarked* in a previous 
 chapter, has, as yet, but a limited 
 dominion over retail prices; and con- 
 sequently the share of the whole pro- 
 duce of land and labour which is ab- 
 sorbed in the remuneration of mere 
 distributors, continues exorbitant ; and 
 there is no function in the economy of 
 society which supports a number of 
 persons so disproportionate to the 
 amount of work to be performed. 
 
 5. The preceding remarks have, 
 I hope, sufficiently elucidated what ia 
 * Vide supra, book ii. ch. iv. 3,
 
 252 
 
 BOOK II. CHAPTER XV. 6. 
 
 meant by the common phrase, " the 
 ordinary rate of profit ;'' and the sense 
 in which, and the limitations under 
 which, this ordinary rate has a real 
 existence. It now remains to con- 
 sider, what causes determine its 
 amount. 
 
 To popular apprehension it seems as 
 if the profits of business depended upon 
 prices. A producer or dealer seems to 
 obtain his profits by selling his com- 
 modity for more than it cost him. 
 Profit altogether, people are apt to 
 think, is a consequence of purchase and 
 sale. It is only (they suppose) because 
 there are purchasers for a commodity, 
 that the producer of it is able to make 
 any profit. Demand customers a 
 market for the commodity, are the 
 cause of the gains of capitalists. It is 
 by the sale of their goods, that they 
 replace their capital, and add to its 
 amount. 
 
 This, however, is looking only at the 
 outside surface of the economical ma- 
 chinery of society. In no case, we find, 
 is the mere money which passes from 
 one person to another, the fundamental 
 matter in any economical phenomenon. 
 If we look more narrowly into the 
 operations of the producer, we shall 
 perceive that the money he obtains for 
 his commodity is not the cause of his 
 having a profit, but only the mode in 
 which his profit is paid to him. 
 
 The cause of profit is, that labour 
 produces more than is required for its 
 support. The reason why agricultural 
 capital yields a profit, is because 
 human beings can grow more food, 
 than is necessary to feed them while it 
 is being grown, including the time oc- 
 cupied in constructing the tools, and 
 making all other needful preparations ; 
 from which it is a consequence, that if 
 a capitalist undertakes to feed the la- 
 bourers on condition of receiving the 
 produce, he has some of it remaining 
 ibr himself after replacing his advances. 
 To vary the form of the theorem : the 
 reason why capital yields a profit, is 
 because food, clothing, materials and 
 tools, last longer than the time which 
 was required to produce them ; so that 
 if a capitalist supplies a party of la- 
 bourers with these things, on con- 
 
 dition of receiving all they produce, 
 they will, in addition to reproducing 
 their own necessaries and instruments, 
 have a portion of their time remaining, 
 to work for the capitalist. AVe thus 
 see that profit arises, not from the in- 
 cident of exchange, but from the pro- 
 ductive power of labour ; and the gene- 
 ral profit of the country is always what 
 the productive power of labour makes 
 it, whether any exchange takes place 
 or not. If there were no division of 
 employments, there would be no buy- 
 ing or selling, but there would still be 
 profit. If the labourers of the conntry 
 collectively produce twenty per cent 
 more than their wages, profits will be 
 twenty per cent, whatever prices 
 may or may not be. The accidents of 
 price may for a time make one set of 
 producers get more than twenty per 
 cent, and another less, the one commo- 
 dity being rated above its natural value 
 in relation to other commodities, and 
 the other below, until prices have again 
 adjusted themselves ; but there will 
 always be just twenty per cent divided 
 among them all. 
 
 I proceed, in expansion of the consi- 
 derations thus briefly indicated, to ex- 
 hibit more minutely the mode in which 
 the rate of profit is determined. 
 
 3. I assume, throughout, the 
 state of things, which, where the la- 
 bourers and capitalists are separata 
 classes, prevails, with few exceptions, 
 universally ; namely, that the capitalist 
 advances the whole expenses, including 
 the entire remuneration of the labourer. 
 That he should do so, is not a matter 
 of inherent necessity; the labourer 
 might wait until the production ia 
 complete, for all that part of his wages 
 which exceeds mere necessaries ; and 
 even for the whole, if he has funds in 
 hand, sufficient for his temporary sup- 
 port. But in the latter case, the la- 
 bourer is to that extent really a capi- 
 talist, investing capital in the concern, 
 by supplyingaportionof the funds neces- 
 sary for carrying, it on ; and even in the 
 former case he may be looked upon in 
 the same light, since, contributing his 
 labour at less than the market price, 
 he may be regarded as lending the dif-
 
 PROFITS. 
 
 258 
 
 ference to his employer, and receiving 
 it back with interest (on whatever 
 principle computed) from the proceeds 
 of the enterprise. 
 
 The capitalist, then, may he assumed 
 to make all the advances, and receive 
 nil the produce. His profit consists of 
 the excess of the produce ahove the 
 advances ; his rate of profit is the ratio 
 which that excess hears to the amount 
 advanced. But what do the advances 
 consist of? 
 
 It is, for the present, necessary to 
 suppose, that the capitalist does not 
 pay any rent ; has not to purchase the 
 use of any appropriated natural agent. 
 This indeed is scarcely ever the exact 
 truth. The agricultural capitalist, 
 except when he is the owner of the 
 soil he cultivates, always, or almost 
 always, pays rent : and even in manu- 
 factures, (not to mention ground-rent,) 
 the materials of the manufacture have 
 generally paid rent, in some stage of 
 their production. The nature of rent 
 however, we have not yet taken into 
 consideration ; and it will hereafter 
 appear, that no practical error, on the 
 question we are now examining, is 
 produced hy disregarding it. 
 
 If, then, leaving rent out of the 
 question, we inquire in what it is that 
 the advances of the capitalists, for pur- 
 poses of production, consists, we shall 
 find that they consist of wages of 
 labour. 
 
 A large portion of the expenditure of 
 every capitalist consists in the direct 
 payment of wages. What does not 
 consist of this, is composed of materials 
 and implements, including buildings. 
 But materials and implements are pro- 
 duced by labour ; and as our supposed 
 capitalist is not meant to represent 
 a single employment, but to be a type 
 of the productive industry of the whole 
 country, we may suppose that he 
 makes his own tools, and raises his 
 own materials. He does this by means 
 of previous advances, which, again, 
 consist wholly of wages. If we sup- 
 pose him to buy the materials and 
 tools instead of producing them, the 
 case is not altered : he then repays to 
 a previous producer the wages which 
 that previous producer has paid. It is 
 
 true, he repays it to him with a profit ; 
 and if he had produced the things 
 himself, he himself must have had that 
 profit, on this part of his outlay, as 
 well as on every other part. The fact, 
 however, remains, that in the whole 
 process of production, beginning with 
 the materials and tools, and ending 
 with the finished product, all the ad- 
 vances have consisted of nothing but 
 wages ; except that certain of the capi- 
 talists concerned have, for the sake of 
 general convenience, had their share 
 of profit paid to them before the opera- 
 tion was completed. Whatever, of the 
 ultimate product, is not profit, is re- 
 payment of wages. 
 
 7. It thus appears that the two 
 elements on which, and which alone, 
 the gains of the capitalists depend, are, 
 first, the magnitude of the produce, in 
 other words, the productive power of 
 labour ; and secondly, the proportion of 
 that produce obtained by the labourers 
 themselves ; the ratio, which the remu- 
 neration of the labourers bears to the 
 amount they produce. These two things 
 form the data for determining the 
 gross amount divided as profit among 
 all the capitalists of the country ; but 
 the rate of profit, the percentage on the 
 capital, depends only on the second of 
 the two elements, the labourer's pro- 
 portional share, and not on the amount 
 to be shared. If the produce of labour 
 were doubled, and the labourers ob- 
 tained the same proportional share as 
 before, that is, if their remuneration 
 was also doubled, the capitalists, it 
 is true, would gain twice as much; 
 but as they would also have had to ad- 
 vance twice as much, the rate of their 
 profit would be only the same as be- 
 fore. 
 
 We thus arrive at the conclusion of 
 Eicardo and others, that the rate of 
 profits depends on wages ; rising as 
 wages fall, and falling as wages rise. 
 In adopting, however, this doctrine, 
 I must insist upon making a most ne- 
 cessary alteration in its wording. In- 
 stead of saying that profits depend on 
 wages, let us say (what Ilicardo really 
 meant) that they depend on the cost of 
 labour.
 
 BOOK II. CHAPTER XV. 7. 
 
 Wages, and the cost of labour; what 
 labour brings in to the labourer, and 
 what it costs to the capitalist ; are 
 ideas quite distinct, and which it is of 
 the utmost importance to keep so. For 
 this purpose it is essential not to desig- 
 nate them, as is almost always done, by 
 Ihe same name. Wages, in public dis- 
 cussions, both oral and printed, being 
 looked upon from the point of view of 
 the payers, much oftener than from that 
 of the receivers, nothing is more com- 
 mon than to say that wages are high 
 or low, meaning only that the cost of 
 labour is high or low. The reverse of 
 this would be oftener the truth : the 
 cost of labour is frequently at its highest 
 where wages are lowest. This may 
 arise from two causes. In the first 
 place, the labour, though cheap, may be 
 inefficient. In no European country 
 are wages so low as they are (or at 
 least were) in Ireland ; the remunera- 
 tion of an agricultural labourer in the 
 west of Ireland not being more than 
 half the wages of even the lowest-paid 
 Englishman, the Dorsetshire labourer. 
 But if, from inferior skill and industry, 
 two days' labour of an Irishman accom- 
 plished no more work than an English 
 labourer performed in one, the Irish- 
 man's labour cost as much as the 
 Englishman's, though it brought in so 
 much less to himself. The capitalist's 
 profit is determined by the former of 
 these two things, not by the latter. 
 That a difference to this extent really 
 existed in the efficiency of the labour, 
 is proved not only by abundant testi- 
 mony, but by the fact, that notwith- 
 standing the lowness of wages, profits 
 of capital are not understood to have 
 been higher in Ireland than in Eng- 
 land. 
 
 The other cause which renders wages, 
 and the cost of labour, no real criteria 
 of one another, is the varying costliness 
 of the articles which the labourer con- 
 sumes. If these are cheap, wages, in 
 the sense which is of importance to the 
 labourer, maybe high, and yet the cost 
 of labour may be low ; if dear, the la- 
 bourer may bo wretchedly off, though 
 his labour may cost much to the capi- 
 talist. This last is the condition of a 
 country over-peopled in relation to its 
 
 land ; in which, food being dear, tho 
 
 Soorness of the labourer's real reward 
 oes not prevent labour from costing 
 much to the purchaser, and low wages 
 and low profits co-exist. The opposite 
 case is exemplified in the United States 
 of America. The labourer there enjoys 
 a greater abundance of comforts than 
 in any other country of the world, ex- 
 cept some of the newest colonies ; but, 
 owing to the cheap price at which 
 these comforts can be obtained (com- 
 bined with the great efficiency of the 
 labour,) the cost of labour is at least 
 not higher, nor the rate of profit lower, 
 than in Europe. 
 
 The cost of labour, then, is, in the 
 language of mathematics, a function of 
 three variables : the efficiency of la- 
 bour ; the wages of labour (meaning 
 thereby the real reward of the labourer) ; 
 and the greater or less cost at which 
 the articles composing that real reward 
 can be produced or procured. It is 
 plain that the cost of labour to the 
 capitalist must be influenced by each of 
 these three circumstances, and by no 
 others. These, therefore, are also the 
 circumstances which determine the rate 
 of profit ; and it cannot be in any way 
 affected except through one or other of 
 them. If labour generally became more 
 efficient, without being more highly re- 
 warded ; if, without its becoming less 
 efficient, its remuneration fell, no in- 
 crease taking nlace in the cost of the 
 articles composing that remuneration ; 
 or if those articles became less costly, 
 without the labourer's obtaining more 
 of them ; in any one of these three 
 cases, profits would rise. If, on the 
 contrary, labour became less efficient 
 (as it might do from diminished bodily 
 vigour in the people, destruction of fixed ' 
 capital, or deteriorated education) ; or 
 if the labourer obtained a higher remu- 
 neration, without any increased cheap- 
 ness in the things composing it ; or if, 
 without his obtaining more, that which 
 he did obtain became more costly; pro- 
 fits, in all these cases, would suffer a 
 diminution. And there is no other 
 combination of circumstances, in which 
 the general rate of profit of a country, 
 in all employments indifferently, can 
 either fall or rise.
 
 KENT. 
 
 255 
 
 The evidence of these propositions 
 can only be stated generally, though, 
 it is hoped, conclusively, in this stage 
 of our suhject. It will come out m 
 greater fulness and force when, having 
 taken into consideration the theory Q 
 Value and Price, we shall be enabled 
 to exhibit the law of profits in the con- 
 crete in the complex entanglement 
 
 of circumstances in which it actually 
 works. This can only be done in the 
 ensuing Book. One topic still remains 
 to be discussed in the present one, so 
 far as it admits of being treated inde- 
 pendently of considerations of Value ; 
 the subject of Rent ; to which we now 
 proceed. 
 
 CHAPTER XVL 
 
 
 OP BENT. 
 
 1. THE rcquisitesof production being 
 labour, capital, and natural agents ; 
 the only person, besides the labourer 
 and the capitalist, whose consent is 
 necessary to production, and who can 
 claim a share of the produce as the 
 price of that consent, is the person who, 
 by the arrangements of society, pos- 
 sesses exclusive power over some na- 
 tural agcut. The land is the principal 
 of the natural agents which are capable 
 of being appropriated, and the consi- 
 deration paid for its use is called rent. 
 Landed proprietors are the only class, 
 of any numbers or importance, who have 
 a claim to a share in the distribution 
 of the produce, through their ownership 
 of something which neither they nor 
 any one else have produced. If there 
 be any other cases of a similar nature, 
 they will be easily understood, when 
 the nature and laws of rent are com- 
 prehended. 
 
 It is at once evident, that rent is the 
 effect of a monopoly ; though the mono- 
 poly is a natural one, which may be 
 regulated, which may even be held as 
 a trust for the community generally, 
 but which cannot be prevented from 
 existing. The reason why landowners 
 are able to require rent for their land, 
 is that it is a commodity which many 
 want, and which no one can obtain 
 but from them. If all the land of the 
 country belonged to one person, he 
 could fix the rent at his pleasure. The 
 whole people would be dependent on 
 bis will for the necessaries of life, and 
 
 he might make what conditions he 
 chose. This is the actual state of things 
 in those Oriental kingdoms in which 
 the land is considered the property of 
 the state. Rent is then confounded 
 with taxation, and the despot may exact 
 the utmost which the unfortunate cul- 
 tivators have to give. Indeed, the ex- 
 clusive possessor of the land of a country 
 could not well be other than despot of 
 it. The effect would be much the same 
 if the land belonged to so few people 
 that they could, and did, act together 
 as one man, and fix the rent by agree- 
 ment among themselves. This case, 
 however, is nowhere known to exist : 
 and the only remaining supposition is 
 that of free competition ; the land- 
 owners being supposed to be, as in fact 
 they are, too numerous to combine. 
 
 2. A thing which is limited in 
 quantity, even though its possessors do 
 not act in concert, is still a monopo- 
 lized article. But even when monopo- 
 lized, a thing which is the gift of 
 nature, and requires no labour or out- 
 lay as the condition of its existence, 
 will, if there be competition among the 
 holders of it, command a price, only if 
 it exists in less quantity than the de- 
 mand. If the whole land of a country 
 were required for cultivation, all of it 
 might "yield a rent. But in no country 
 of any extent do the wants of the 
 population require that all the land, 
 which is capable of cultivation, should 
 be cultivated. The food and othet
 
 25S 
 
 agricultural produce which the people 
 need, and which they are willing and 
 able to pay for at a price which re- 
 munerates the grower, may always be 
 obtained without cultivating all the 
 laud; sometimes without cultivating 
 more than a small part of it ; the 
 lands most easily cultivated being pre- 
 ferred in a very early stage of society, 
 the more fertile, or those in the more 
 convenient situations, in a more ad- 
 vanced state. There is always, there- 
 fore, some land which cannot, in exist- 
 ing circumstances, pay any rent ; and 
 no land ever pays rent, unless, in point 
 of fertility or situation, it belongs to 
 those superior kinds which exist in 
 less quantity than the demand which 
 cannot be made to yield all the pro- 
 luce required for the community, un- 
 ess on terms still less advantageous 
 han the resort to less favoured soils. 
 
 There is land, such as the deserts of 
 Arabia, which will yield nothing to any 
 amount of labour ; and there is land, 
 like some of our hard sandy heaths, 
 which would produce something, but, in 
 ihe present state of the soil, not enough 
 to defray the expenses of production. 
 Such lands, unless by some application 
 of chemistry to agriculture still remain- 
 ing to be invented, cannot be cultivated 
 for profit, nnless some one actually 
 creates a soil, by spreading new in- 
 gredients over the surface, or mixing 
 them with the existing materials. If 
 ingredients fitted for this purpose exist 
 in the subsoil, or close at hand, the 
 improvement even of the most unpromis- 
 ing spots may answer as a speculation : 
 but if those ingredients are costly, and 
 must be brought from a distance, it 
 will seldom answer to do this for the 
 sake of profit, though the " magic of 
 property " will sometimes effect it. 
 Land which cannot possibly yield a 
 profit, is sometimes cultivated at a loss, 
 the cultivators having their wants 
 partially supplied from other sources ; 
 as in the case of paupers, and some 
 monasteries or charitable institutions, 
 among which may be reckoned the 
 Poor Colonies of Belgium. The worst 
 land which can be cultivated as a 
 means of subsistence, is that which 
 will just replace the seed, and the food 
 
 BOOK II. CHAPTER XVI. 2. 
 
 of the labourers employed on it 
 together with what Dr. Chalmers 
 calls their secondaries ; that is, tbe 
 labonrers required for supplying them 
 with tools, and with the remaining 
 necessaries of life. Whether any given 
 land is capable of doing more than this, 
 is not a question of political economy, 
 but of physical fact. The supposition 
 leaves nothing for profits, nor anything 
 for the labourers except necessaries : the 
 land, therefore, can only be cultivated 
 by the labourers themselves, or else 
 at a pecuniary loss : and a fortiori, 
 cannot in any contingency afford a 
 rent. The worst land which can be 
 cultivated as an investment for capital, 
 is that which, after replacing the seed, 
 not only feeds the agricultural labourers 
 and their secondaries, but affords them 
 the current rate of wages, which may 
 extend to much more than mere neces- 
 saries; and leaves for those who have 
 advanced the wages of these two classes 
 of labourers, a surplus equal to the 
 profit they could have expected from 
 any other employment of their capital. 
 Whether any given land can do more 
 than this, is not merely a physical 
 question, but depends partly on the 
 market value of agricultural produce. 
 What the land can do for the labourers 
 and for the capitalist, beyond feeding 
 all whom it directly or indirectly em- 
 ploys, of course depends upon what the 
 remainder of the produce can be sold 
 for. The higher the market value of 
 produce, the lower are the soils tc 
 which cultivation can descend, con- 
 sistently with affording to the capital 
 employed, the ordinary rate of profit. 
 
 As, however, differences of fertility 
 slide into one another by insensible 
 gradations; and differences of accessi- 
 bility, that is, of distance from markets, 
 do the same ; and since there is land 
 so barren that it could not pay for its 
 cultivation at any price ; it is evident 
 that, whatever the price may be, there 
 must in any extensive region be some 
 land which at that price will just pay 
 the wages of the cultivators, and yield 
 to the capital employed the ordinary 
 profit, and no more. Until, therefore, 
 the price rises higher, or until some 
 improvement raises that particular
 
 KENT. 
 
 157 
 
 land to a higher place in the scale of 
 fertility, it cannot pay any rent. It is 
 evident, however, that the community 
 needs the produce of this quality of 
 land : since if the lands more fertile or 
 better situated than it, could have 
 sufficed to supply the wants of society, 
 the price would not have risen so high 
 as to render its cultivation profitahle. 
 This land, therefore, will be cultivated ; 
 and we may lay it down as a principle, 
 that so long as any of the land of a 
 country which is fit for cultivation, and 
 not withheld from it by legal or other 
 factitious obstacles, is not cultivated, the 
 worst land in actual cultivation (in 
 point of fertility and situation together) 
 pays no rent. 
 
 3. If, then, of the land in culti- 
 vation, the part which yields least re- 
 turn to the labour and capital employed 
 on it gives only the ordinary profit of 
 capital, without leaving anything for 
 rent ; a standard is afforded for esti- 
 mating the amount of rent which will 
 be yielded by all other land. Any 
 land yields just as much more than 
 the ordinary profits of stock, as it 
 yields more than what is returned by 
 the worst land in cultivation. The 
 surplus is what the farmer can aflord 
 to pay as rent to the landlord ; and 
 since, if he did not so pay it, he would 
 receive more than the ordinary rate 
 of profit, the competition of other 
 capitalists, that competition which 
 equalizes the profits of different capi- 
 tals, will enable the landlord to appro- 
 priate it. The rent, therefore, which 
 any land will yield, is the excess of its 
 produce, beyond what would be re- 
 turned to the same capital if employed 
 on the worst land in cultivation. T? his 
 is not, and never was pretended to be, 
 the limit of metayer rents, or of cottier 
 rents; but it is the limit of farmers' 
 rents. No land rented to a capitalist 
 farmer will permanently yield more 
 than this ; and when it yields less, it 
 is because the landlord foregoes a part 
 of what, if he chose, he could obtain. 
 
 This is the theory of rent, first pro- 
 pounded at the end of the last century 
 by Dr. Anderson, and which, neglected 
 At the time, was alow^t simultaneously 
 
 rediscovered, twenty years later, by 
 Sir Edward West, Mr. Malthus, and 
 Mr. Ricardo. It is one of the cardinal 
 doctrines of political economy ; and 
 until it was understood, no consistent 
 explanation could be given of many ol 
 the more complicated industrial pheno 
 mena. The evidence of its truth wih 
 be manifested with a great increase of 
 clearness, when we come to trace th 
 laws of the phenomena of Value and 
 Price. Until that is done, it is not 
 possible to free the doctrine from every 
 difficulty which may present itself, nor 
 perhaps to convey, to those previously 
 unacquainted with the subject, more 
 than a general apprehension of the 
 reasoning by which the theorem is 
 arrived at. Some, however, of the ob 
 jections commonly made to it, admit 
 of a complete answer even in the pre- 
 sent stage of our inquiries. 
 
 It has been denied that there can be 
 any land in cultivation which pays no 
 rent ; because landlords (it is con- 
 tended) would not allow their land to 
 be occupied without payment. Those 
 who lay any stress on this as an objec- 
 tion, must think that land of the 
 quality which can but just pay for its 
 cultivation, lies together in large 
 masses, detached from any land of 
 better quality. If an estate consisted 
 wholly of this land, or of this and still 
 worse, it is likely enough that the 
 owner would not give the use of it for 
 nothing ; he would probably (if a rich 
 man) prefer keeping it for other pur- 
 poses, as for exercise, or ornament, or 
 perhaps as a game preserve. No 
 farmer could afford to offer him any- 
 thing for it, for purposes of culture , 
 though something would probably be 
 obtained for the use of its natural pas- 
 ture, or other spontaneous produce. 
 Even such land, however, would not 
 necessarily remain uncultivated. It 
 might be farmed by the proprietor ; no 
 unfrequent case even in England. Por- 
 tions of it might be granted as tem- 
 porary allotments to labouring families, 
 either from philanthropic motives, or 
 to save the poor-rate; or occupation 
 might be allowed to squatters, free of 
 rent, in the hope that their labour 
 might give it alue at some future 

 
 258 
 
 BOOK II. CHAPTER XVI. 4. 
 
 period. Both these cases are of quite 
 ordinary occurrence. So that even if an 
 estate were wholly composed of the worst 
 land capahle of profitable cultivation, it 
 would not necessarily lie uncultivated 
 because it could pay no rent. Inferior 
 land, however, does not usually occupy, 
 without interruption, many square 
 miles of ground ; it is dispersed here 
 and there, with patches of better land 
 intermixed, and the same person who 
 rents the better land, obtains along 
 with it the inferior soils which alter- 
 nate with it. He pays a rent, nomi- 
 nally for the whole farm, but calculated 
 on the produce of those parts alone 
 (however small a portion of the whole) 
 which are capable of returning more 
 than the common rate of profit. It is 
 thus scientifically true, that the re- 
 maining parts pay no rent. 
 
 4. Lt us, however, suppose that 
 there were a validity in this objection, 
 which can by no means be conceded to 
 it ; that when the demand of the com- 
 munity had forced up food to such a 
 price as would remunerate the expense 
 of producing it from a certain quality 
 of soil, it happened nevertheless that 
 all the soil of that quality was with- 
 held from cultivation, by the obstinacy 
 of the owners in demanding a rent for 
 it, not nominal, nor trifling, but suffi- 
 ciently onerous to be a material item 
 in the calculations of a farmer. What 
 would then happen ? Merely that the 
 increase of produce, which the wants 
 of society required, would for the time 
 be obtained wholly (as it always is par- 
 tially), not by an extension of cultiva- 
 tion, but by an increased application 
 of labour and capital to land already 
 cultivated. 
 
 Now we have already seen that this 
 increased application of capital, other 
 things being unaltered, is always at- 
 tended with a smaller proportional re- 
 turn. We are not to suppose some new 
 agricultural invention made precisely 
 *t this juncture ; nor a sudden exten- 
 sion of agricultural skill and knowledge, 
 bringing into more general practice, 
 just then, inventions already in partial 
 me. We are to suppose no change, 
 txcept a demand for more corn, and a 
 
 consequent rise of its price. The rise 
 of price enables measures to be taken 
 for increasing the produce, which could 
 not have been taken with profit at the 
 previous price. The farmer uses more 
 expensive manures; or manures land 
 which he formerly left to natsre ; or 
 procures lime or marl from a distance, 
 as a dressing for the soil ; or pulverizes 
 or weeds it more thoroughly ; or drains, 
 irrigates, or subsoils portions of it, 
 which at former prices would not have 
 paid the cost of the operation ; and so 
 forth. These things, or some of them, 
 are done, when, more food being wanted, 
 cultivation has no means of expanding 
 itself upon new lands. And when the 
 impulse is given to extract an increased 
 amount of produce from the soil, the 
 farmer or improver will only consider 
 whether the outlay he makes for the 
 purpose will be returned to him with 
 the ordinary profit, and not whether 
 any surplus will remain for rent. Even, 
 therefore, if it were the fact, that there 
 is never any land taken into cultivation, 
 for which rent, and that too of an 
 amount worth taking into considera- 
 tion, was not paid ; it would be true, 
 nevertheless, that there is always some 
 agricultural capital which pays no 
 rent, because it returns nothing beyond 
 the ordinary rate of profit : this capital 
 being the portion of capital last applied 
 that to which the last addition to the 
 produce was due ; or (to express the es- 
 sentials of the case in one phrase), that 
 which is applied in the least favourable 
 circumstances. But the same amount 
 of demand, and the same price, which 
 enable this least productive portion of 
 capital barely to replace itself with the 
 ordinary profit, enable every other por- 
 tion to yield a surplus proportioned to 
 the advantage it possesses. And this 
 surplus it is, which competition enables 
 the landlord to appropriate. The rent 
 of all land is measured by the excess of 
 the return to the whole capital em- 
 ployed on it, above what is necessary 
 to replace the capital with the ordinary 
 rate of profit, or in other words, above 
 what the same capital would yield if it 
 were all employed in as disadvan- 
 tageous circumstances as the least pro- 
 ductive portion of it : whether that least
 
 KENT. 
 
 259 
 
 productive portion of capital is rendered 
 so by being employed on the worst soil, 
 or by being expended in extorting more 
 produce from land which already yielded 
 as much as it could be made to part 
 with on easier terms. 
 
 It is not pretended that the facts of 
 any concrete case conform with abso- 
 lute precision to this or any other sci- 
 entific principle. We must never forget 
 that the truths of political economy 
 are truths only in the rough. They 
 have the certainty, but not the pre- 
 cision of exact science. It is not 
 for example, strictly true that a farmer 
 will cultivate no land, and apply no 
 capital, which returns less than the or- 
 dinary profit. He will expect the ordi- 
 nary profit on the bulk of his capital. 
 But when he has cast in his lot 
 with his farm, and bartered his skill 
 and exertions, once for all, against what 
 the farm will yield to him, he will pro- 
 bably be willing to expend capital on it 
 (for an immediate return) in any man 
 ner which will afford him a surplus 
 profit, however small, beyond the value 
 of the risk, and the interest which he 
 must pay for the capital if borrowed, or 
 can get for it elsewhere if it is his own. 
 But a new farmer, entering on the land, 
 would make his calculations differently, 
 and would not commence unless he 
 could expect the full rate of ordinary 
 profit on all the capital which he in- 
 tended embarking in the enterprise. 
 Again, prices may range higher or 
 lower during the currency of a lease, 
 than was expected when the contract 
 was made, and the land, therefore, may 
 be over or under-rented : and even 
 when the lease expires, the landlord 
 may be unwilling to grant a necessary 
 diminution of rent, and the farmer, 
 rather than relinquish his occupation, 
 or seek a farm elsewhere when all are 
 occupied, may consent to go on paying 
 too high a rent. Irregularities like 
 these we must always expect ; it is im- 
 possible in political economy to obtain 
 general theorems embracing the com- 
 plications of circumstances which may 
 affect the result in an individual case. 
 \Vhen, too, the farmer class, having 
 but little capital, cultivate for subsis- 
 tence rather than for profit, and do not 
 
 think of quitting their farm while they 
 are able to live by it, their rents ap- 
 proximate to the character of cottier 
 rents, and may be forced up by compe- 
 tition (if the number of competitors 
 exceeds the number of farms) beyond 
 the amount which will leave to the 
 farmer the ordinary rate of profit. The 
 laws which we are enabled to lay down 
 respecting rents, profits, wages, prices, 
 are only true in so far as the persons 
 concerned are free from the influence of 
 any other motives than those arising 
 from the general circumstances of the 
 case, and are guided, as to those, by 
 the ordinary mercantile estimate of 
 profit and loss. Applying this twofold 
 supposition to the case of farmers and 
 landlords, it will be true that the far- 
 mer requires the ordinary rate of profit 
 on the whole of his capital ; that what- 
 ever it returns to him beyond this he is 
 obliged to pay to the landlord, but will 
 not consent to pay more ; that there is 
 a portion of capital applied to agricul- 
 ture in such circumstances of produc- 
 tiveness as to yield only the ordinary 
 profits ; and that the difference between 
 the produce of this, and of any other 
 capital of similar amount, is the mea- 
 sure of the tribute which that other 
 capital can and will pay, under the 
 name of rent, to the landlord. This 
 constitutes a law of rent, as near the 
 truth as such a law can possibly be : 
 though of course modified or disturbed 
 in individual cases, by pending con- 
 tracts, individual miscalculations, the 
 influence of habit, and even the parti- 
 cular feelings and dispositions of the 
 persons concerned. 
 
 5. A remark is often made, which 
 must not hero be omitted, thoug'j, I 
 think, more importance has been at- 
 tached to it than it merits. Under the 
 name of rent, many payments are com- 
 monly included, which are not a remu- 
 neration for the original powers of the 
 land itself, but for capital expended on 
 it. The additional rent which land 
 yields in consequence of this outlay of 
 capital, should, in the opinion of some 
 writers, be regarded as profit, not rent. 
 But before this can be admitted, a dis- 
 tinction must be made. The annual 
 S ?
 
 260 
 
 BOOK II. CHAPTER XVI. 5. 
 
 payment by a tenant almost always 
 includes a consideration for the use of 
 the buildings on the farm; not only 
 barns, stables, and other outhouses, 
 but a house to live in, not to speak of 
 fences and the like. The landlord will 
 ask, and the tenant give, for these, 
 whatever is considered sufficient to 
 yield the ordinary profit, or rather 
 (risk and trouble being here out of the 
 question) the ordinary interest, on the 
 vnlue of the buildings ; that is, not on 
 what it has cost to erect them, but on 
 what it would now cost to erect others 
 as good: the tenant being bound, in 
 addition, to leave them in as good re- 
 pair as he found them, for otherwise a 
 much larger payment than simple in- 
 terest would of course be required 
 from him. These buildings are as 
 distinct a thing from the farm, as the 
 stock or the timber on it ; and what is 
 paid for them can no more be called 
 rent of land, than a payment for cattle 
 would be, if it were the custom that 
 the landlord should stock the farm for 
 the tenant. The buildings, like the 
 cattle, are not land, but capital, regu- 
 larly consumed and reproduced ; and 
 all payments made in consideration for 
 them are properly interest. 
 
 But with regard to capital actually 
 sunk in improvements, and not requir- 
 ing periodical renewal, but spent once 
 for all in giving the land a permanent 
 increase of productiveness, it appears 
 to me that the return made to such 
 capital loses altogether the character 
 of profits, and is governed by the prin- 
 ciples of rent. It is true that a land- 
 lord will not expend capital in improv- 
 ing his estate, unless he expects from 
 the improvement an increase of income, 
 surpassing the interest of his outlay. 
 Prospectively, this increase of income 
 may be regarded as profit ; but when 
 the expense has been incurred, and 
 the improvement made, the rent of 
 the improved land is governed by the 
 same rules as that of the unimproved. 
 Equally fertile land commands an equal 
 rent, whether its fertility is natural or 
 acquired ; and I cannot think that the 
 incomes of those who own the Bedford 
 I^evel or the Lincolnshire wolds, ought 
 to be called profit and not rent, because 
 
 j those lands would have been worth 
 next to nothing unless capital had been 
 expended on them. The owners are 
 not capitalists, but landlords ; they 
 have parted with their capital ; it is 
 consumed, destroyed ; and neither is, 
 nor is to be, returned to them, like the 
 capital of a fanner or manufacturer, 
 from what it produces. In lieu of it 
 they now have land, of a certain rich- 
 ness, which yields the same rent, and 
 by the operation of the same causes, 
 as if it had possessed from the begin- 
 ning the degree of fertility which has 
 been artificially given to it. 
 
 Some writers, in particular Mr. H. 
 C. Carey, take away, still more com- 
 pletely than I have attempted to do, 
 the distinction between these two 
 sources of rent, by rejecting one of 
 them altogether, and considering all 
 rent as the effect of capital expended. 
 In proof of this, Mr. Carey contends 
 that the whole pecuniary value of all 
 the land in any country, in England 
 for instance, or in the United States, 
 does not amount to anything approach- 
 ing to the sum which has been laid 
 out, or which it would even now bo 
 necessary to lay out, in order to bring 
 the country to its present condition 
 from a state of primaeval forest. This 
 startling statement has been seized on 
 by M. Bastiat and others, as a means 
 of making out a stronger case than 
 could otherwise be made in defence of 
 property in land. Mr. Carey's proposi- 
 tion, in its most obvious meaning, 
 is equivalent to saying, that if there 
 were suddenly added to the lands of 
 England an unreclaimed territory of 
 equal natural fertility, it would not bo 
 worth the while of the inhabitants of 
 England to reclaim it : because the 
 profits of the operation would not be 
 equal to the ordinary interest on the 
 capital expended. To which assertion 
 if any answer could be supposed to ba 
 required, it would suffice to remark, 
 that land not of equal but of greatly 
 inferior quality to that previously cul- 
 tivated, is continually reclaimed in 
 England, at an expense which the 
 subsequently accruing rent is sufficient 
 to replace completely in a small number 
 of years. The doctrine, moreover, is
 
 RENT. 
 
 261 
 
 totally opposed to Mr. Carey's own 
 economical opinions. No one main- 
 tains more strenuously than Mr. Carey 
 the undoubted truth, that as society 
 advances in population, wealth, and 
 combination of labour, land constantly 
 rises in value and price. This, how- 
 ever, could not possibly be true ii' the 
 present value of land were less than 
 the expense of clearing it and making 
 it fit for cultivation ; for it must have 
 been worth this immediately after it 
 was cleared, and according to Mr. 
 Carey it has been rising in value ever 
 since. When, however, Mr. Carey as- 
 serts that the whole land of any 
 country is not now worth the capital 
 which has been expended on it, he does 
 not mean that ach particular estate is 
 worth less than what has been laid 
 out in improving it, and that, to the 
 proprietors, the improvement of the 
 laud has been, on the final result, a mis- 
 calculation. He means, not that the 
 land of Great Britain would not now 
 sell for what has been laid out upon it, 
 but that it would not sell for that 
 amount, plus the expense of making 
 all the roads, canals, and railways. 
 This is probably true, but is no more 
 to the purpose, and no more important 
 in political economy, than if the state- 
 ment had been that it would not sell 
 for the sums laid out upon it plus the 
 national debt, or plus the cost of the 
 French Revolutionary war, or any 
 other expense incurred for a real or 
 imaginary public advantage. The 
 roads, railways, and canals, were not 
 constructed to give value to land: on 
 the contrary, their natural effect was 
 to lower its value, by rendering other 
 and rival lands accessible : and the 
 landholders of the southern counties 
 actually petitioned Parliament against 
 the turnpike roads on this very ac- 
 count. The tendency of improved com- 
 munications is to lower existing rents, 
 by trenching on the monopoly of the 
 land nearest to the places where large 
 numbers of consumers are assembled. 
 Roads and canals are not intended to 
 raise the value of the land which 
 already supplies the markets, but 
 (among other purposes) to cheapen the 
 supply, by letting in the produce of 
 
 other and more distant lands : and the 
 more effectually this purpose is at- 
 tained, the lower rent will be. If wo 
 could imagine that the railways and 
 canals of the United States, instead of 
 only cheapening communication, did 
 their business so effectually as to 
 annihilate cost of carriage altogether, 
 and enable the produce of Michigan to 
 reach the market of New York as 
 quickly and as cheaply as the produce 
 of Long Island the whole value of 
 all the land of the United States 
 (except such as lies convenient for 
 building) would be annihilated ; or 
 rather, the best would only sell for tho 
 expense of clearing, and the govern- 
 ment tax of a dollar and a quarter per 
 acre ; since land in Michigan, equal to 
 the best in the United States, may bo 
 had in unlimited abundance by that 
 amount of outlay. But it is strange 
 that Mr. Carey should think this fact 
 inconsistent with the Ricardo theory 
 of rent. Admitting all that he as- 
 serts, it is still true that as long as 
 there is land which yields no rent, tho 
 land which does yield rent, does so 
 in consequence of some advantage 
 which it enjoys, in fertility or vicinity 
 to markets, over the other ; and the 
 measure of its advantage is also the 
 measure of its rent. And the cause of 
 its yielding rent, is that it possesses a 
 natural monopoly ; the quantity of 
 land, as favourably circumstanced as 
 itself, not being sufficient to supply 
 the market. These propositions con- 
 stitute the theory of rent, laid down 
 by Ricardo; and if they are true, 
 I cannot see that it signifies much 
 whether the rent which the land yields 
 at the present time, is greater or less 
 than the interest of the capital which 
 has been laid out to raise its value, 
 together with the interest of the capital 
 which has been laid out to lower its 
 value. 
 
 Mr. Carey's objection, however, has 
 somewhat more of ingenuity than the 
 arguments commonly met with against 
 the theory of rent : a theorem which 
 may be called the pons asinorum of 
 political economy, for there are, I am 
 inclined to think, few persons who 
 have refused their assent to it except
 
 262 
 
 BOOK II. CHAPTEJR XVI. 6. 
 
 from not having thoroughly under- 
 stood it. The loose and inaccurate 
 way in which it is often apprehended 
 by those who affect to refute it, is very 
 remarkable. Many, for instance, have 
 imputed absurdity to Mr. Ricardo's 
 theory, because it is absurd to say that 
 the cultivation of inferior land is the 
 cause of rent on the superior. Mr. 
 Kicardo docs not say that it is the cul- 
 tivation of inferior land, but the neces- 
 sity of cultivating it, from the insuffi- 
 ciency of the superior land to feed a 
 growing population : between which 
 and the proposition imputed to him 
 there is no less a difference than that 
 between demand and supply. Others 
 again allege as an objection against 
 Kicardo, that if all land were of equal 
 fertility, it might still yield a rent. 
 But Ricardo says precisely the same. 
 He says that if all lands were equally 
 fertile, those which are nearer to their 
 market than others, and are there- 
 fore less burthened with cost of car- 
 riage, would yield a rent equivalent to 
 the advantage ; and that the land 
 yielding no rent would then be, not 
 the least fertile, but the least advan- 
 tageously situated, which the wants of 
 the community required to be brought 
 into cultivation. It is also distinctly a 
 portion of Kicardo's doctrine, that even 
 apart from differences of situation, the 
 land of a country supposed to be. of 
 uniform fertility would, all of it, on a 
 certain supposition, pay rent : namely, 
 if the demand of the community re- 
 quired that it should all be cultivated, 
 and cultivated beyond the point at 
 which a further application of capital 
 begins to be attended with a smaller 
 proportional return. It would be im- 
 possible to show that, except by for- 
 cible exaction, the whole land of a 
 country can yield a rent on any other 
 supposition. 
 
 6. After this view of the nature 
 and causes of rent, let us turn back to 
 the subject of profits, and bring up for 
 reconsideration one of the propositions 
 laid down in the last chapter. We 
 there stated, that the advances of the 
 capitalist, or in other words, the ex- 
 penses of production, consist solely in 
 
 wages of labour ; that whatever por- 
 tion of the outlay is not wages, is pre- 
 vious profit, and whatever is not pre- 
 vious profit, is wages. Kent, however, 
 being an element which it is impossible 
 to resolve into either profit or wages, 
 we were obliged, for the moment, to 
 assume that the capitalist is not re- 
 quired to pay rent to give an equiva- 
 lent for the use of an appropriated 
 natural agent : and I undertook to 
 show in the proper place, that this is 
 an allowable supposition, and that rent 
 does not really form any part of the ex- 
 penses of production, or of the advances 
 of the capitalist. The grounds on which 
 this assertion was made are now appa- 
 rent. It is true that all tenant far- 
 mers, and many other classes of pro- 
 ducers, pay rent. But we have now 
 seen, that whoever cultivates land, 
 
 Eaying a rent for it, gets in return for 
 is rent an instrument of superior 
 power to other instruments of the 
 same kind for which no rent is paid. 
 The superiority of the instrument is 
 in exact proportion to the rent paid 
 for it. If a few persons had steam- 
 engines of superior power to all others 
 in existence, but limited by physical 
 laws to a number short of the demand, 
 the rent which a manufacturer would 
 be willing to pay for one of these 
 steam-engines could not be looked 
 upon as an addition to his outlay, 
 because by the use of it he would save 
 in his other expenses the equivalent of 
 what it cost him : without it he could 
 not do the same quantity of work, 
 unless at an additional expense equal 
 to the rent. The same thing is true 
 of land. The real expenses of pro- 
 duction are those incurred on the 
 worst land, or by the capital employed 
 in the least favourable circumstances. 
 This land or capital pays, as we have 
 seen, no rent : but the expenses to 
 which it is subject, cause all other land 
 or agricultural capital to be subjected 
 to an equivalent expense in the form 
 of rent. Whoever does pay rent, gets 
 back its full value in extra advantages, 
 and the rent which he pays dees 
 not place him in a worse position 
 than, but only in the same position as, 
 his fellow-producer who pays no rent,
 
 RENT. 
 
 263 
 
 but whose instrument is one of inferior 
 efficiency. 
 
 We have now completed the exposi- 
 tion of the laws which regulate the 
 distribution of the produce of land, 
 labour, and capital, as far as it is 
 possible to discuss those laws indepen- 
 dently of the instrumentality by which 
 in a civilized society the distribution is 
 affected ; the machinery of Exchange 
 
 and Price. The more complete eluci- 
 dation and final confirmation of the 
 laws which we have laid down, and the 
 deduction of their most important con- 
 sequences, must be preceded by an ex- 
 planation of the nature and working of 
 that machinery a subject so extensive 
 and complicated as to require a sepa- 
 rate BOOK.
 
 BOOK III. 
 
 EXCHANGE. 
 
 CHAPTER L 
 
 OF VALDE. 
 
 1. THE subject on which we are 
 now about to enter fills so important 
 and conspicuous a position in political 
 economy, that in the apprehension of 
 some thinkers its boundaries confound 
 themselves with those of the science 
 itself. One eminent writer has pro- 
 posed as a name for Political Economy, 
 
 Catallactics," or the science of ex- 
 changes : by others it has been called 
 the Science of Values. If these deno- 
 minations had appeared to me logically 
 correct, I must have placed the discus- 
 sion of the elementary laws of value at 
 the commencement of our enquiry, 
 instead of postponing it to the Third 
 Pail; and the possibility of so long 
 deferring it is alone a sufficient proof 
 that this view of the nature of Political 
 Economy is too confined. It is time 
 that in the preceding Books we have 
 not escaped the necessity of anticipat- 
 ing some small portion of the theory 
 of Value, especially as to the value of 
 labour and of land. It is nevertheless 
 evident, that of the two great depart- 
 ments of Political Economy, the pro- 
 duction of wealth and its distribution, 
 the consideration of Value has to do 
 with the latter alone ; and with that 
 only so far as competition, and not 
 usage or custom, is the distributing 
 agency. The conditions and laws of 
 Production would be the same as they 
 are, if the arrangements of society did 
 not depend on exchange, or did not 
 admit ef it. Even in the present 
 system of industrial life, in which em- 
 ployments are minutely subdivided, 
 and all concerned in production de- 
 
 pend for their remuneration on the 
 price of a particular commodity, ex- 
 change is not the fundamental law of 
 the distribution of the produce, no 
 more than roads and carriages are the 
 essential laws of motion, but merely a 
 part of the machinery for effecting it. 
 To confound these ideas, seems to me 
 not only a logical, but a practical 
 blunder. It is a case of the error too 
 I common in political economy, of not 
 distinguishing between necessities 
 arising from the nature of things, and 
 those created by social arrangements : 
 an error, which appears to me to be at all 
 times producing two opposite mischiefs ; 
 on the one hand, causing political 
 economists to class the merely tem- 
 porary truths of their subject among 
 its permanent and universal laws ; and 
 on the other, leading many persons to 
 mistake the permanent laws of Pro- 
 duction (such as those on which the 
 necessity is grounded of restraining 
 population) for temporary accidents 
 arising from the existing constitution 
 of society which those who would 
 frame a new system of social arrange- 
 ments, are at liberty to disregard. 
 
 In a state of society, however, in 
 which the industrial system is entirely 
 founded on purchase and sale, each 
 individual, for the most part, living 
 not on things in the production of 
 which he himself bears a part, but on 
 things obtained by a double exchange, 
 a sale followed by a purchase the 
 question of Value is fundamental. 
 Almost every speculation respecting 
 the economical interests of a society
 
 VALUE. 
 
 266 
 
 thus constituted, implies some theory 
 of Value : the smallest error on that 
 subject infects with corresponding 
 error all our other conclusions ; and 
 anything vague or misty in our con- 
 ception of it, creates confusion and 
 uncertainty in everything else. Hap- 
 pily, there is nothing in the laws of 
 Value which remains for the present or 
 any future writer to clear up ; the 
 theory of the subject is complete : the 
 only difficulty to be overcome is that 
 of so stating it as to solve by anticipa- 
 tion the chief perplexities which occur 
 in applying it : and to do this, some 
 minuteness of exposition, and consider- 
 able demands on the patience of the 
 reader, are unavoidable. He will be 
 amply repaid, however, (if a stranger to 
 these inquiries) by the ease and rapidity 
 with which a thorough understanding 
 of this subject will enable him to 
 fathom most of the remaining ques- 
 tions of political economy. 
 
 2. We must begin by settling our 
 phraseology. Adam Smith, in a pas- 
 sage often quoted, has touched upon 
 the most obvious ambiguity of the 
 word value ; which, in one of its senses, 
 signifies usefulness, in another, power 
 of purchasing ; in his own language, 
 value in use, and value in exchange. But 
 (as Mr. De Quincey has remarked) in 
 illustrating this double meaning, Adam 
 Smith has himself fallen into another 
 ambiguity. Things (he says) which 
 have the greatest value in use have 
 often little or no value in exchange ; 
 which is true, since that which can be 
 obtained without labour or sacrifice 
 will command no price, however useful 
 or needful it may be. But he proceeds 
 to add, that things which have the 
 un at- st value in exchange, as a dia- 
 mond for example, may have little or 
 no value in use. This is employing 
 the word use, not in the sense in which 
 political economy is concerned with it, 
 but in that other sense in which use is 
 opposed to pleasure. Political economy 
 has nothing to do with the comparative 
 estimation of different uses in the judg- 
 ment of a philosopher or of a moralist. 
 The use of a thing, in political economy, 
 means its capacity to satisfy a desire, 
 
 or serve a purpos*. Diamonds luivo 
 this capacity in a high degree, and 
 unless they had it, would not bear any 
 price. Value in use, or as Mr. De 
 Quincey calls it, teleologic value, is 
 the extreme limit of value in exchange. 
 The exchange value of a thing may 
 fall short, to any amount, of its value 
 in use ; but that it can ever exceed 
 the value in use, implies a contradic- 
 tion; it supposes that persons will 
 give, to possess a thing, moie than 
 the utmost value which they them- 
 selves put upon it, as a means of grati- 
 fying tneir inclinations. 
 
 The word Value, when used without 
 adjunct, always means, in political 
 economy, value in exchange ; or as it 
 has been called by Adam Smith and 
 his successors, exchangeable value, a 
 phrase which no amount of authority 
 that can be quoted for it can make 
 other than bad English. Mr. De 
 Quincey substitutes the term Exchange 
 Value, which is unexceptionable. 
 
 Exchange value requires to be dis. 
 tinguished from Price. The words 
 Value and Price were used as synony- 
 mous by the early political economists, 
 and are not always discriminated even 
 by Eicardo. But the most accurate 
 modern writers, to avoid the wasteful 
 expenditure of two good scientific 
 terms on a single idea, have employed 
 Price to express the value of a thing 
 in relation to money ; the quantity of 
 money for which it will exchange. By 
 the price of a thing, therefore, we shall 
 henceforth understand its value in 
 money ; by the value, or exchange 
 value of a thing, its general power of 
 purchasing; the command which its 
 possession gives over purchaseabie 
 commodities in general 
 
 3. But here a fresh demand for 
 explanation presents itself. What is 
 meant by command over commodities 
 in general ? The same thing exchanges 
 for a great quantity of some commo- 
 dities, and for a very small quantity of 
 others. A suit of clothes exchanges 
 for a great quantity of bread, and for a 
 very small quantity of precious stones. 
 The value of a thing in exchange for 
 some commodities may be rising, for
 
 266 
 
 BOOK III. CHAPTER I. 4. 
 
 others falling. A coat may exchange 
 for less bread this year than last, if the 
 harvest has been bad, but for more 
 glass or iron, if a tax has been taken 
 off those commodities, or an improve- 
 ment made in their manufacture. Has 
 the value of the coat, under these cir- 
 cumstances, fallen or risen ? It is im- 
 possible to say : all that can be said 
 is, that it has fallen in relation to one 
 thing, and risen in respect to another. 
 But there is another case, in which no 
 one would have any hesitation in 
 saying what sort of change had taken 
 place in the value of the coat : namely, 
 if the cause in which the disturbance 
 of exchange values originated, was 
 something directly affecting the coat 
 itself, and not the bread, or the glass. 
 Suppose, for example, that an inven- 
 tion had been made in machinery, by 
 which broadcloth could be woven at 
 half the former cost. The effect of 
 this would be to lower the value of a 
 coat, and if lowered by this cause, it 
 would be lowered not in relation to 
 bread only or to glass only, but to all 
 purchaseable things, except such as 
 happened to be affected at the very 
 time by a similar depressing cause. 
 AVe should therefore say, that there 
 i>ad been a fall in the exchange 
 value or general purchasing power 
 of a coat. The idea of general ex- 
 change value originates in the fact, 
 that there really are causes which 
 tend to alter the value of a thing in 
 exchange for things generally, that 
 is, for all things which are not them- 
 selves acted upon by causes of similar 
 tendency. 
 
 In considering exchange value scien- 
 tifically, it is expedient to abstract 
 from it all causes except those which 
 originate in the very commodity under 
 consideration. Those which originate 
 in the commodities with which we 
 compare it, affect its value in relation 
 to those commodities ; but those which 
 originate in itself, affect its value in 
 relation to all commodities. In order 
 the more completely to confine our 
 attention to these last, it is convenient 
 to assume that all commodities but 
 the one in question remain invariable 
 in their relative values. When we are 
 
 considering the causes which raise or 
 lower the value of corn, we suppose 
 that woollens, silks, cutlery, sugar, 
 timber, &c., while varying in their 
 power of purchasing corn, remain 
 constant in the proportions in which 
 they exchange for one another. On 
 this assumption, any one of them may 
 be taken as a representative of all the 
 rest : since in whatever manner corn 
 varies in value with respect to any one 
 commodity, it varies in the same 
 manner and degree with respect to 
 every other ; and the upward or down- 
 ward movement of its value estimated 
 in some one thing, is all that needs be 
 considered. Its money value, there- 
 fore, or price, will represent as well as 
 anything else its general exchange 
 value, or purchasing power ; and from 
 an obvious convenience, will often be 
 employed by us in that representative 
 character; with the proviso that money 
 itself do not vary in its general pur- 
 chasing power, but that the prices o" 
 all things, other than that which we 
 happen to be considering, remain un- 
 altered. 
 
 4. The distinction between Value 
 and Price, as we have now defined 
 them, is so obvious, as scarcely to seem 
 in need of any illustration. But in 
 political economy the greatest errors 
 arise from overlooking the most obvious 
 truths. Simple as this distinction is, 
 it has consequences with which a reader 
 unacquainted with the subject would 
 do well to begin early by making him- 
 self thoroughly familiar. The follow- 
 ing is one of the principal. There 
 is such a thing as a general rise of 
 prices. All commodities may rise in 
 their money price. But there cannot 
 be a general rise of values. It is a 
 contradiction in terms. A can only 
 rise in value by exchanging for a 
 greater quantity of B and C ; in which 
 case these must exchange for a smaller 
 quantity of A. All things cannot rise 
 relatively to one another. If one-half 
 of the commodities in the market rise 
 in exchange value, the very terms imply 
 a fall of the other half; and reciprocally, 
 the fall implies a rise. Things which 
 are exchanged for one another can no
 
 VALUE. 
 
 267 
 
 more all fall, or all rise, than a dozen 
 runners can each outran all the rest, 
 or a hundred trees all overtop one 
 another. Simple as this truth is, we 
 shall presently see that it is lost sight 
 of in some of the most accredited 
 doctrines hoth of theorists and of what 
 are called practical men. And as a 
 first specimen, we may instance the 
 great importance attached in the ima- 
 gination of most people to a rise or fall 
 of general prices. Because when the 
 price of any one commodity rises, the 
 circumstance usually indicates a rise 
 of its value, people have an indistinct 
 feeling when all prices rise, as if all 
 things simultaneously had risen in 
 value, and all the possessors had be- 
 come enriched. That the money prices 
 of all things should rise or fall, pro- 
 vided they all rise or fall equally, is, in 
 itself, and apart from existing con- 
 tracts, of no consequence. It affects 
 nobody's wages, profits, or rent. Every 
 one gets more money in the one case 
 and less in the other ; but of all that 
 is to be bought with money they get 
 neither more nor less than before. It 
 makes no other difference than that of 
 using more or fewer counters to reckon 
 by. The only thing which in this case 
 is really altered in value, is money ; 
 and the only persons who either gain 
 or lose are the holders of money, or 
 those who have to receive or to pay 
 fixed sums of it. There is a difference 
 to annuitants and to creditors the one 
 way, and to those who are burthened 
 with annuities, or with debts, the con- 
 trary way. There is a disturbance, in 
 short, of fixed money contracts ; and 
 this is an evil, whether it takes place 
 in the debtor's favour or in the cre- 
 ditor's. But as to future transactions 
 there is no difference to any one. Let 
 it therefore be remembered (and occa- 
 sions will often rise of calling it to 
 mind) that a general rise or a general 
 fall of values is a contradiction ; and 
 that a general rise or a general fall of 
 prices is merely tantamount to an 
 alteration in the value of money, and 
 is a matter of complete indifference, 
 save in so far as it affects existing 
 contracts for receiving and paying fixed 
 pecuniary amounts, and (it must be 
 
 added) as it affects *he interests of the 
 producers of money. 
 
 5. Before commencing the inquiry 
 into the laws of value and price, 1 have 
 one further observation to make. I 
 must give warning, once for all, that 
 the_ cases I contemplate are those in 
 which values and prices are determined 
 by competition alone. In so far only 
 as they are thus determined, can they 
 be reduced to any assignable law. The 
 buyers must be supposed as studious 
 to buy cheap, as the sellers to sell dear. 
 The values and prices, therefore, to 
 which our conclusions apply, are mer- 
 cantile values and prices ; such prices 
 as are quoted in price-currents ; prices 
 in the wholesale markets, in which 
 buying as well as selling is a matter of 
 business ; in which the buyers take 
 pains to know, and generally do know, 
 the lowest price at which an article of 
 a given quality can be obtained ; and 
 in which, therefore, the axiom is true, 
 that there cannot be for the same 
 article, of the same quality, two prices 
 in the same market. Our propositions 
 will be true in a much more qualified 
 sense, of retail prices ; the prices paid 
 in shops for articles of personal con- 
 sumption. For such things there often 
 are not merely two, but many prices, 
 in different shops, or even in the same 
 shop ; habit and accident having as 
 much to do i 4fhe matter as general 
 causes. Purchases for private use, 
 even by people in business, are not 
 always made on business principles : 
 the feelings which come into play in 
 the operation of getting, and in that of 
 spending their income, are often ex- 
 tremely different. Either from indo- 
 lence, or carelessness, or because people 
 think it fine to pay and ask no ques- 
 tions, three-fourths of those who can 
 afford it give much higher prices than 
 necessary for the things they consume ; 
 while the poor often do the same from 
 ignorance and defect of judgment, 
 want of time for searching and making 
 inquiry, and not unfrequently from 
 coercion, open or disguised. For these 
 reasons, retail prices do not follow with 
 all the regularity which might be ex- 
 pected, the action of the causes which
 
 2G8 
 
 BOOK III. CHAPTER II. 1. 
 
 determine wholesale prices. Tlio in- 
 fluence of those causes is ultimately 
 full in the retail markets, and is the 
 real source of such variations in retail 
 prices as are of a general and per- 
 manent character. But there is no 
 regular or exact correspondence. Shoes 
 of equally good quality are sold in 
 different shops at prices which differ 
 considerably ; and the price of leather 
 may fall without causing the richer 
 class of buyers to pay less for shoes. 
 Nevertheless, shoes do sometimes fall 
 in price ; and when they do, the cause 
 is always some such general circum- 
 stance as the cheapening of leather : 
 and when leather is cheapened, even if 
 no difference shows itself in shops 
 
 frequented by rich people, the artisan 
 and the labourer generally get their 
 shoes cheaper, and there is a visible 
 diminution in the contract prices at 
 which shoes are delivered for the 
 supply of a workhouse or of a regiment. 
 In all reasoning about prices, the pro- 
 viso must bo understood, " supposing 
 all parties to take care of their own 
 interest.'' Inattention to these distinc- 
 tions has led to improper applications 
 of the abstract principles of political 
 economy, and still oftener to an undue 
 discrediting of those principles, through 
 their being compared with a different 
 sort of facts from those which they 
 contemplate, or which can fairly be 
 expected to accord with them. 
 
 CHAPTER 
 
 OP DEMAND AND SUPPLY, IN THEIR RELATION TO VALUE. 
 
 1 . THAT a thing may have any 
 value in exchange, two conditions are 
 necessary. It must be of some use ; 
 that is (as already explained) it must 
 conduce to some purpose, satisfy some 
 desire. No one will pay a price, or 
 pail with anything which serves some 
 of his purposes, to obtain a thing which 
 serves none of them. But, secondly, 
 the thing must not only have some 
 utility, there must also be some diffi- 
 culty in its attainment. " Any article 
 whatever,'' says Mr. De Quincey,* " to 
 obtain that artificial sort of value 
 which is meant by exchange value, must 
 begin by offering itself as a means to 
 some desirable purpose ; and secondly, 
 even though possessing incontestably 
 this preliminary advantage, it will 
 never ascend to an exchange value in 
 cases where it can be obtained gra- 
 tuitously and without effort ; of which 
 last terms both are necessary as limi- 
 tations. For often it will happen that 
 some desirable object may be obtained 
 gratuitously ; stoop, and you gather it 
 at your feet ; but still, because the con- 
 tinued iteration of this stooping exacts 
 * Logic of Political Economy, p. 13. 
 
 a laborious effort, very soon it is found, 
 that to gather for yourself virtually is 
 not gratuitous. In the vast forests of 
 the Canadas, at intervals, wild straw- 
 berries may be gratuitously gathered 
 by shiploads : yet such is the exhaus- 
 tion of a stooping posture, and of a 
 labour so monotonous, that everybody 
 is soon glad to resign the service into 
 mercenary hands." 
 
 As was pointed out in the last chap- 
 ter, the utility of a thing in the esti- 
 mation of a purchaser, is the extreme 
 limit of its exchange value : higher 
 the value cannot ascend ; peculiar cir- 
 cumstances are required to raise it so 
 high. This topic is happily illustrated 
 by Mr. De Quincey. " Walk into 
 almost any possible shop, buy the first 
 article you see : what will determine 
 its price? In the ninety-nine cases 
 out of a hundred, simply the element 
 D difficulty of attainment. The other 
 element U, or intrinsic utility, will be 
 perfectly inoperative. Let the thing 
 (measured by its uses) be, for your 
 purposes, worth ten guineas, so that 
 you would rather give ten guineas 
 than lose it ; yet, if the difficulty of
 
 DEMAND AND SUPPLY. 
 
 269 
 
 producing it be only worth one guinea, 
 one guinea is the price which it will 
 bear. But still not the less, though 
 U is inoperative, can IT be supposed 
 absent? By no possibility; for, if it 
 hail been absent, assuredly you would 
 not have bought the article even at 
 the lowest price. U acts upon you, 
 though it does not act upon the price. 
 On the other hand, in the hundredth 
 case, we will suppose .the circumstances 
 reversed ; you are on Lake Superior in 
 a steam-boat, making your way to an 
 unsettled region 800 miles a-head of 
 civilization, and consciously with no 
 chance at all of purchasing any luxury 
 .vhatsoever, little luxury or big luxury, 
 for the space of ten years to come. 
 One fellow passenger, whom you will 
 part with before sunset, has a powerful 
 musical snuff-box ; knowing by experi- 
 ence the power of such a toy over your 
 own feelings, the magic with which at 
 times it lulls your agitations of mind, 
 you are vehemently desirous to pur- 
 chase it. In the hour of leaving Lon- 
 don you had forgot to do so ; here is a 
 final chance. But the owner, aware of 
 your situation not less than yourself, 
 is determined to operate by a strain 
 pushed to the very uttermost upon U, 
 upon the intrinsic worth of the article 
 in your individual estimate for your 
 individual purposes. He will not near 
 of D as any controlling power or 
 mitigating agency in the case ; and 
 finally, although at six guineas a-piece 
 in London or Paris you might have 
 loaded a waggon with such boxes, you 
 pay sixty rather than lose it when the 
 last knell of the clock has sounded, 
 which summons you to buy now or to 
 forfeit for ever. Here, as before, only 
 one element is operative : before it was 
 D, now it is U. But after all, D was 
 not absent, though inoperative. The 
 inertness of D allowed U to put forth 
 its total effect. The practical com- 
 pression of D being withdrawn, U 
 springs up like water in a pump when 
 jvl''u-d *'rom the pressure of air. Vet 
 still that D was present to your 
 thoughts, though the price was other- 
 wise regulated, is evident ; both be- 
 cause U and D must coexist in order to 
 found any case of exchange value what- 
 
 ever, and because undeniably you t;ike 
 into very particular consideration this 
 D, the extreme difficulty of attainment 
 (which here is the greatest possible, 
 viz. an impossibility) before you oon- 
 sent to have the price racked up to U. 
 The special D has vanished ; but it is 
 replaced in your thoughts by an un- 
 limited D. Undoubtedly you havo 
 submitted to U in extremity as the 
 regulating force of the price ; but it 
 was under a sense of D's latent pre- 
 sence. Yet D is so far from exerting 
 any positive force, that the retirement 
 of I > from all agency whatever on the 
 price this it is which creates as it 
 were a perfect vacuum, and through 
 that vacuum U rushes up to its highest 
 and ultimate gradation." 
 
 This case, in which the value is 
 wholly regulated by the necessities or 
 desires of the purchaser, is the case of 
 strict and absolute monopoly ; in 
 which, the article desired being only 
 obtainable from one person, he can 
 exact any equivalent, short of the 
 point at which no purchaser could 
 be found. But it is not a necessary 
 consequence, even of complete mono- 
 poly, that the value should be forced 
 up to this ultimate limit : as will be 
 seen when we have considered the lav 
 of value in so far as depending on the 
 other element, difficulty of attainment. 
 
 2. The difficulty of attainment 
 which determines value, is not always 
 the same kind of difficulty. It some- 
 times consists in an absolute limita- 
 tion of the supply. There are things 
 of which it is physically impossible to 
 increase the quantity beyond certain 
 narrow limits. Such are those wines 
 which can be grown only in peculiar 
 circumstances of soil, climate, and 
 exposure. Such also are ancient 
 sculptures ; pictures by old masters ; 
 rare books or coins, or other articles of 
 antiquarian curiosity. Among such 
 may also be reckoned houses and 
 building-ground, in a town of definite 
 extent (such as Venice, or any fortified 
 town where fortifications are necessary 
 to security) ; the most desirable sites 
 in any town whatever ; houses and 
 parks peculiarly favoured by natural
 
 270 
 
 BOOK III. CHAPTER II. 3. 
 
 beauty, in places where that advantage 
 is uncommon. Potentially, all land 
 whatever is a commodity of this class ; 
 and might be practically so, in coun- 
 tries fully occupied and cultivated. 
 
 But there is another category, (em- 
 bracing the majority of all things that 
 are bought and sold,) in which the 
 obstacle to attainment consists only in 
 the labour and expense requisite to 
 produce the commodity. Without a 
 certain labour and expense it cannot 
 be had : but when any one is willing 
 to incur these, there needs be no limit 
 to the multiplication of the product. 
 If there were labourers enough and 
 machinery enough, cottons, woollens, 
 or linens might be produced by thou- 
 sands of yards for every single yard 
 now manufactured. There would be a 
 point, no doubt, where further increase 
 would be stopped by the incapacity of 
 the earth to afford more of the ma- 
 terial. But there is no need, for any 
 purpose of political economy, to con- 
 template a time when this ideal limit 
 could become a practical one. 
 
 There is a third case, intermediate 
 between the two preceding, and rather 
 more complex, which I shall at present 
 merely indicate, but the importance of 
 which in political economy is extremely 
 great. There are commodities which 
 san be multiplied to an indefinite ex- 
 tent by labour and expenditure, but 
 not by a fixed amount of labour and 
 expenditure. Only a limited quantity 
 can be produced at a given cost ; if 
 more is wanted, it must be produced at 
 a greater cost. To this class, as has 
 been often repeated, agricultural pro- 
 duce belongs ; and generally all the 
 rude produce of the earth ; and this 
 peculiarity is a source of very import- 
 ant consequences ; one of which is the 
 necessity of a limit to population ; and 
 another, the payment of rent. 
 
 3. These being the three classes, 
 in one or other of which all things 
 that are bought and sold must take 
 their place, we shall consider them in 
 their order. And first, of things abso- 
 lutely limited in quantity, such as 
 ancient sculptures or pictures. 
 
 Of such things it is commonly said, 
 
 that their value depends upon their 
 scarcity : but the expression is not 
 sufficiently definite to serve our pur- 
 pose. Others say, with somewhat 
 greater precision, that the value de- 
 pends on the demand and the supply. 
 But even this statement requires much 
 explanation, to make it a clear expo- 
 nent of the relation between the value 
 of a tiling, and the causes of which 
 that value is an effect. 
 
 The supply of a commodity is an 
 intelligible expression : it means the 
 quantity offered for sale ; the quantity 
 that is to be had, at a given time and 
 place, by those who wish to purchase 
 it. But what is meant by the de- 
 mand ? Not the mere desire for the 
 commodity. A beggar may desire a 
 diamond ; but his desire, however 
 great, will have no influence on the 
 price. Writers have therefore given a 
 more limited sense to demand, and 
 have defined it, the wish to possess, 
 combined with the power of pur- 
 chasing. To distinguish demand in 
 this technical sense, from the demand 
 which is synonymous with desire, they 
 call the former effectual demand.* 
 After this explanation, it is usually 
 supposed that there remains no further 
 difficulty, and that the value depends 
 upon the ratio between the effectual 
 demand, as thus defined, and the 
 supply. 
 
 These phrases, however, fail to 
 satisfy any one who requires clear 
 ideas, and a perfectly precise expres- 
 sion of them. Some confusion must 
 always attach to a phrase so inappro- 
 priate as that of a ratio between two 
 things not of the same denomination. 
 What ratio can there be between a 
 quantity and a desire, or even a desire 
 combined with a power ? A ratio 
 between demand and supply is only 
 intelligible if by demand we mean 
 the quantity demanded, and if the 
 
 * Adam Smith, who introduced the ex- 
 pression " effectual demand," employed it to 
 denote the demand of those who are willing 
 and able to give for the commodity what he 
 calls its natural price, that is, the price 
 which will enable it to be permanently pro- 
 duced and brought to market. See his 
 chapter on Natural and Market Pric* 
 (book i. ch. 7.)
 
 DEMAND AND SUPPLY. 
 
 871 
 
 ratio intended is that between the 
 quantity demanded and the quantity 
 supplied. But again, the quantity 
 demanded is not a fixed quantity, even 
 at the same time and place ; it varies 
 according to the value : if the thing is 
 cheap, there is usually a demand for 
 more of it than when it is dear. The 
 demand, therefore, partly depends on 
 the value. But it was before laid 
 down that the value depends on the 
 demand. From this contradiction how 
 shall we extricate ourselves? How 
 solve the paradox, of two things, each 
 depending upon the other ? 
 
 Though the solution of these diffi- 
 culties is obvious enough, the diffi- 
 culties themselves are not fanciful ; and 
 I bring them forward thus prominently, 
 because I am certain that they ob- 
 scurely haunt every inquirer 'into the 
 subject who has not openly faced and 
 distinctly realized them. Undoubt- 
 edly the true solution must have been 
 frequently given, though I cannot call 
 to mind any one who had given it 
 before myself, except the eminently 
 clear thinker and skilful expositor, 
 J. B. Say. I should have imagined, 
 however, that it must be familiar to all 
 political economists, if the writings of 
 several did not give evidence of some 
 want of clearness on the point, and if 
 the instance of Mr. De Quincey did 
 not prove that the complete non- 
 recognition and implied denial of it are 
 compatible with great intellectual in- 
 genuity, and close intimacy with the 
 subject matter. 
 
 4. Meaning, by the word demand, 
 the quantity demanded, and remember- 
 ing that this is not a fixed quantity, 
 but in general varies according to the 
 value, let us suppose that the demand 
 at some particular time exceeds the 
 supply, that is, there are persons ready 
 to buy, at the market value, a greater 
 quantity than is offered for sale. Com- 
 petition takes place on the side of the 
 buyers, and the value rises : but how 
 much ? In the ratio (some may sup- 
 pose) of the deficiency : if the demand 
 exceeds the supply by one-third, the 
 value rises one-third. By no means : 
 fci when the value has risen one-third, 
 
 the demand may still exceed the sup 
 ply ; there may, even at that higher 
 value, bo a greater quantity wanted 
 than is to be had ; and the competi- 
 tion of buyers may still continue. If 
 the article is a necessary of life, which, 
 rather than resign, people are willing 
 to pay for at any price, a deficiency of 
 one-third may raise the price to double, 
 triple, or quadruple.* Or, on the con- 
 trary, the competition may cease before 
 the value has risen in even the pro- 
 portion of the deficiency. A rise, 
 short of one-third, may place the article 
 beyond the means, or beyond the in- 
 clinations, of purchasers to the full 
 amount. At what point, then, will 
 the rise be arrested? At the point, 
 whatever it be, which equalizes the 
 demand and the supply : at the price 
 which cuts off the extra third from the 
 demand, or brings forward additional 
 sellers sufficient to supply it. When, 
 in either of these ways, or by a com- 
 bination of both, the demand becomes 
 equal and no more than equal to the 
 supply, the rise of value will stop. 
 
 The converse case is equally simple. 
 Instead of a demand beyond the sup- 
 ply, let us suppose a supply exceeding 
 the demand. The competition will 
 now be on the side of the sellers : the 
 extra quantity can onlv find a market 
 by calling forth an additional demand 
 equal to. itself. This is accomplished 
 by means of cheapness ; the value 
 falls, and brings the article within the 
 reach of more numerous customers, or 
 induces those who were already con- 
 sumers to make increased purchases. 
 The fall of value required to re-estab- 
 lish equality, is different in different 
 cases. The kinds of things in which 
 it is commonly greatest are at the two 
 extremities of the scale ; absolute 
 
 * " The price of corn in this country has 
 risen from 100 to 200 per cent and upwards, 
 when the utmost computed deficiency of the 
 crops has not been more than between one- 
 sixth and one-third below an average, and 
 when that deficiency has been relieved by 
 foreign supplies. If there should be a defi- 
 ciency of the crops amounting to one-third, 
 without any surplus from a former year, and 
 without any chance of relief by importation, 
 the price might rise $ ve, six, or even ten- 
 fold." Tooke' Hittory of Prictt vol. i. 
 pp. 13 5.
 
 272 
 
 BOOK III. CHAPTER II. 5. 
 
 necessaries, or those peculiar luxuries, 
 the taste for which is confined to a 
 small class. In the case of food, as 
 those who have already enough do not 
 require more on account of its cheap- 
 ness, but rather expend in other things 
 what they save in food, the increased 
 consumption occasioned by cheapness, 
 carries off, as experience snows, only a 
 small part of the extra supply caused 
 by an abundant harvest ;* and the fall 
 is practically arrested only when the 
 farmers withdraw their corn, and hold 
 it back in hopes of ahigher price ; or by 
 the operations of speculators who buy 
 com when it is cheap, and store it up 
 to be brought out when more urgently 
 wanted. Whether the demand and 
 supply are equalized by an increased 
 demand, the result of cheapness, or by 
 withdrawing a part of the supply, 
 equalized they are in either case. 
 
 Thus we see that the idea of a ratio, 
 as between demand and supply, is out 
 of place, and has no concern in the 
 matter : the proper mathematical ana- 
 logy is that of an equation. Demand 
 and supply, the quantity demanded 
 and the quantity supplied, will be made 
 equal. If unequal at any moment, 
 competition equalizes them, and the 
 manner in which this is done is by an 
 adjustment of the value. If the de- 
 mand increases, the value rises ; if the 
 demand diminishes, the value falls : 
 again, if the supply falls off, the value 
 rises ; and falls, if the supply is in- 
 creased. The rise or the fall continues 
 until the demand and supply are again 
 equal to one another : and the value 
 which a commodity will bring in any 
 market, is no other than the value 
 which, in that market, gives a demand 
 just sufficient to carry off the existing 
 or expected supply. 
 
 This, then, is the Law of Value, 
 with respect to all commodities not 
 susceptible of being multiplied at plea- 
 sure. Such commodities, no doubt, 
 are exceptions. There is another law 
 for that much larger class of things, 
 which admit of indefinite multiplica- 
 tion. But it is not the less necessary 
 to conceive distinctly and grasp firmly 
 
 * See Tooke, and the Report of the Agri- 
 cultural Committee of 1821. 
 
 the theory of this exceptional case. 
 In the first place, it will be found to 
 be of great assistance in rendering the 
 more common case intelligible. And 
 in the next place, the principle of the 
 exception stretches wider, and embraces 
 more cases, than might at first be sup- 
 posed. 
 
 5. There are but few commodities 
 which are naturally and necessarily 
 limited in supply. But any commodity 
 whatever may be artificially so. Any 
 commodity may be the subject of a 
 monopoly: like tea, in this country, 
 up to 1834; tobacco in France, opium 
 in British India, at present. The price 
 of a monopolized commodity is com- 
 monly supposed to be arbitrary ; de- 
 pending on the will of the monopolist, 
 and limited only (asin Mr. De Quincey's 
 case of the musical box in the wilds of 
 America) by the buyer's extreme esti- 
 mate of its worth to himself. This is 
 in one sense true, but forms no excep- 
 tion, nevertheless, to the dependence 
 of the value on supply and demand. 
 The monopolist can fix the value as 
 high as he pleases, short of what the 
 consumer either could not or would not 
 pay ; but he can only do so by limiting 
 the supply. The Dutch East India Com- 
 pany obtained a monopoly price for 
 the produce of the Spice Islands, but 
 to do so they were obliged, in good 
 seasons, to destroy a portion of the 
 crop. Had they persisted in selling 
 all that they produced, they must have 
 forced a market by reducing the price, 
 so low, perhaps, that they would have 
 received for the larger quantity a less 
 total return than for the smaller : at 
 least they showed that such was their 
 opinion by destroying the surplus. 
 Even on Lake Superior, Mr. De 
 Quincey's huckster could not have sold 
 his box for sixty guineas, if ho had 
 possessed two musical boxes and de- 
 sired to sell them both. Supposing 
 the cost price of each to be six guineas, 
 he would have taken seventy for the 
 two in preference to sixty for one ; that 
 is, although his monopoly was the 
 closest possible, he would have sold 
 the boxes at thirty-five guineas each, 
 notwithstanding that sixty was not
 
 DEMAND AND SUPPLY. 
 
 273 
 
 beyond the buyer's .timate of the 
 article for his purposes. Monopoly 
 value, therefore, does not depend on any 
 peculiar principle, but is a mere variety 
 of the ordinary case of demand and 
 supply. 
 
 Again, though there are few commo- 
 dities which are at all times and for 
 ever unsusceptible of increase of supply, 
 any commodity whatever may be tem- 
 porarily KO ; and with some commo- 
 dities this is habitually the case. 
 Agricultural produce, for example, 
 cannot be increased in quantity before 
 the next harvest ; the quantity of corn 
 already existing in the world, is all 
 thai can be had for sometimes a year 
 to come. During that interval, corn 
 is practically assimilated to things of 
 which the quantity cannot be in- 
 creased. In the case of most commo- 
 dities, it requires a certain time to in- 
 crease their quantity ; and if the 
 demand increases, then until a corre- 
 sponding supply can be brought for- 
 ward, that is, until the supply can 
 accommodate itself to the demand, the 
 value will so rise as to accommodate 
 the demand to the supply. 
 
 There is another case, the exact 
 converse of this. There are some 
 articles of which the supply may be 
 indefinitely increased, but cannot be 
 rapidly diminished. There are things 
 BO durable that the quantity in exist- 
 ence is at all times very great in 
 comparison with the annual produce. 
 Gold, and the more durable metals, 
 are things of this sort ; and also 
 houses. The supply of such things 
 muht be at once diminished by de- 
 stroying them ; but to do this could 
 only be the interest of the possessor if 
 he had a monopoly of the article, and 
 c< ulil repay himself for the destruction 
 of a part by the increased value of the 
 
 remainder. The value, therefore, of 
 such things may continue for a long 
 time so low, either from excess of 
 supply or falling off in the demand, as 
 to put a complete stop to further pro- 
 duction : the diminution of supply by 
 wearing out being so slow a process, 
 that a long time is requisite, even 
 under a total suspension of production, 
 to restore the original value. During 
 that interval the value will be regu- 
 lated solely by supply and demand, 
 and will rise very gradually as the 
 existing stock wears out, until there is 
 again a remunerating value, and pro- 
 duction resumes its course. 
 
 Finally, there are commodities of 
 which, though capable of being in- 
 creased or diminished to a great, and 
 even an unlimited extent, the value 
 never depends upon anything but de- 
 mand and supply. This is the case, 
 in particular, with the commodity 
 Labour: of the value of which we 
 have treated copiously in the preceding 
 Book : and there are many cases be- 
 sides, in which we shall find it neces- 
 sary to call in this principle to solve 
 difficult questions of exchange value. 
 This will be particularly exemplified 
 when we treat of International Values ; 
 that is, of the terms of interchange 
 between things produced in different 
 countries, or, to speak more generally 
 in distant places. But into these 
 questions we cannot enter until we 
 shall have examined the case of com- 
 modities which can be increased in 
 quantity indefinitely and at pleasure ; 
 and shall have determined by what 
 law, other than that of Demand and 
 Supply, the permanent or average 
 values of such commodities are regu- 
 lated. This we shall do in the next 
 chapter. 
 
 Ms.
 
 274 
 
 BOOK m. CHAPTER IH. 1. 
 
 CHAPTER 
 
 OF COST OP PRODUCTION, IN ITS RELATION TO VALUE. 
 
 1. WHEN the production of a 
 commodity is the effect of labour and 
 expenditure, whether the commodity 
 is susceptible of unlimited multiplica- 
 tion or not, there is a minimum value 
 which is the essential condition of its 
 being permanently produced. The 
 value at any particular time is the 
 result of supply and demand ; and is 
 always that which is necessary to 
 create a market for the existing supply. 
 But unless that value is sufficient to 
 repay the Cost of Production, and to 
 afford, besides, the ordinary expecta- 
 tion of profit, the commodity will not 
 continue to be produced. Capitalists 
 will not go on permanently producing 
 at a loss. They will not even go on 
 producing at a profit less than they can 
 live upon. Persons whose capital is 
 already embarked, and cannot be easily 
 extricated, will persevere for a con- 
 siderable time without profit, and have 
 been known to persevere even at a 
 loss, in hope of better times. But 
 they will not do so indefinitely, or 
 when there is nothing to indicate that 
 times are likely to improve. No new 
 capital will be invested in an employ- 
 ment, unless there be an expectation 
 not only of some profit, but of a profit 
 as great (regard being had to the de- 
 gree of eligibility of the employment 
 in other respects) as can be hoped for 
 in any other occupation at that time 
 and place. When such profit is evi- 
 dently not to be had, if people do not 
 actually withdraw their capital, they 
 at least abstain from replacing it when 
 consumed. The cost of production, 
 together with the ordinary profit, may, 
 therefore be called the necessary price 
 or value, of all things made by labour 
 and capital. Nobody willingly pro- 
 duces in the prospect of loss. Who- 
 ever does so, does it under a miscalcu- 
 lation, which he corrects as fast as he 
 is able. 
 
 When a commodity is not only made 
 
 by labour and capital, but can be made 
 by them in indefinite quantity, this 
 Necessary Value, the minimum with 
 which the producers will be content, is 
 also, if competition is free and active, 
 the maximum which they can expect. 
 If the value of a commodity is such 
 that it replays the cost of production 
 not only with the customary, but with 
 a higher rate of profit, capital rushes 
 to share in this extra gain, and by in- 
 creasing the supply of the article, 
 reduces its value. This is not a mere 
 supposition or surmise, but a fact 
 familiar to those conversant with com- 
 mercial operations. Whenever a new 
 line of business presents itself, offering 
 a hope of unusual profits, and when- 
 ever any established trade or manu- 
 facture is believed to be yielding a 
 greater profit than customary, there is 
 sure to be in a short time so large a 
 production or importation of the com- 
 modity, as not only destroys the extra 
 profit, but generally goes beyond the 
 mark, and sinks the value as much too 
 low as it had before been raised too 
 high ; until the over-supply is corrected 
 by a total or partial suspension of fur- 
 ther production. As already inti- 
 mated,* these variations in the 
 quantity produced do not presuppose 
 or require that any person should 
 change his employment. Those whose 
 business is thriving, increase their pro- 
 duce by availing themselves more 
 largely of their credit, while those who 
 are not making the ordinary profit, 
 restrict their operations, and (in manu- 
 facturing phrase) work short time. In 
 this mode is surely and speedily effected 
 the equalization, not of profits perhaps, 
 but of the expectations of profit, in 
 different occupations. 
 
 As a general rule, then, things tend to 
 exchange for one another at such values 
 as will enable each producer to be re- 
 paid the cost of production with tha 
 * Supra, p. 249.
 
 COST OF PRODUCTION. 
 
 275 
 
 prcliuary profit ; in other words, such 
 as will give to all producers the same 
 ratit of [irolit on their outlay. But in 
 order that the profit may be equal 
 ft here the outlay, that is, the cost of 
 production, is equal, things must on 
 the, average exchange for one another 
 in the ratio of their cost of production ; 
 things of which the cost of production 
 is the same, must be of the same value. 
 For only thus will an equal outlay 
 yield an equal return. If a farmer 
 with a capital equal to 1000 quarters 
 of corn, can produce 1200 quarters, 
 yielding him a profit of 20 per cent ; 
 whatever else can be produced in the 
 same time by a capital of 1000 quar- 
 ters, must be worth, that is, must ex- 
 change for, 1200 quarters, otherwise 
 the producer would gain either more 
 or less than 20 per cent. 
 
 Adam Smith and Ricardo have 
 called that value of a thing which is 
 proportional to its cost of production, 
 its Natural Value (or its Natural 
 Price). They meant by this, the point 
 about which, the value oscillates, and 
 to which it always tends to return ; the 
 centre value, towards which, as Adam 
 Smith expresses it, the market value 
 of a thing is constantly gravitating; 
 and any deviation from which is but a 
 temporary irregularity, which, the 
 moment it exists, sets forces in motion 
 tending to correct it. On an average 
 of years sufficient to enable the oscil- 
 lations on one side of the central line 
 to be compensated by those on the 
 other, the market value agrees with 
 the natural value ; but it' very seldom 
 coincides exactly with it at any par- 
 ticular time. The sea everywhere 
 tends to a level ; but it never is at an 
 exact level ; its surface is always ruf- 
 fled by waves, and often agitated by 
 storms. It is enough that no point, at 
 least in the open sea, is permanently 
 higher than another. Each place is 
 alternately elevated and depressed ; 
 but the ocean preserves its level. 
 
 2. The latent influence by which 
 the values of things are made to con- 
 form in the long run to the cost of 
 production, is the variation that would 
 otherwise take place in the supply of 
 
 the commodity. The supply would bo 
 increased if the thing continued to sell 
 above the ratio of its cost of produc- 
 tion, and would be diminished if it 
 fell below that ratio. But we must not 
 therefore suppose it to be necessary 
 that the supply should actually b 
 either diminished or increased. Sup- 
 pose that the cost of production of a 
 thing is cheapened by some mecha. 
 nical invention, or increased by a tax. 
 The value of a thing would in a little 
 time, if not immediately, fall in tha 
 one case, and rise in the other ; and it 
 would do so, because if it did not, tho 
 supply would in the one case be in- 
 creased, until the price fell, in the other 
 diminished, until it rose. For this 
 reason, and from the erroneous notion 
 that value depends on the proportion 
 between the demand and the supply, 
 many persons suppose that this pro- 
 portion must be altered whenever there 
 is any change in the value of the com- 
 modity ; that the value cannot fall 
 through a diminution of the cost of 
 production, unless the supply is perma- 
 nently increased ; nor rise, unless the 
 supply is permanently diminished. But 
 this is not the fact : there is no need 
 that there should be any actual altera- 
 tion of supply ; and when there is, the 
 alteration, it permanent, is not the 
 cause but the consequence of the altera- 
 tion in value. If, indeed, the supply 
 could nof be increased, no diminution 
 in the cost of production would lower 
 the value : but there is by no means 
 any necessity that it should. The 
 mere possibility often suffices ; the 
 dealers are aware of what would hap- 
 pen, and their mutual competition 
 makes them anticipate the result by 
 lowering the price. Whether there 
 will be a greater permanent supply of 
 the commodity, after its production 
 has been cheapened, depends on quite 
 another question, namely, on whether 
 a greater quantity is wanted at tho 
 reduced value. Most commonly a 
 greater quantity is wanted, but not 
 necessarily. " A man,'' says Mr. 
 De Quincey,* "buys an article of in- 
 stant applicability to his own purposes 
 the more readily and the more largely 
 Logic of Political Economy, pp. 2301. 
 T2
 
 276 
 
 BOOK m. CHAPTER III. 2. 
 
 as it happens to be cheaper. Silk 
 handkerchiefs having fallen to half- 
 price, he will huy, perhaps, in three- 
 fold quantity ; but he does not buy 
 more steam-engines because the price 
 is lowered. His demand for steam- 
 engines is almost always predetermined 
 by the circumstances of his situation. 
 So far as he considers the cost at all, 
 it is much more the cost of working 
 this engine than the cost upon its 
 purchase. But there are many articles 
 lor which the market is absolutely 
 and merely limited by a pre-existing 
 system, to which those articles are 
 attached as subordinate parts or mem- 
 bers. How could we force the dials or 
 faces of timepieces by artificial cheap- 
 ness to sell more plentifully than the 
 inner works or movements of such 
 timepieces ? Could the sale of 
 wine-vaults be increased without in- 
 creasing the sale of wine? Or the 
 tools of shipwrights find an enlarged 
 market whilst shipbuilding was sta- 
 tionary? .... Offer to a town of 
 3000 inhabitants a stock of hearses, 
 no cheapness will tempt that town into 
 buying more than one. Offer a stock of 
 yachts, the chief cost lies in manning, 
 victualling, repairing ; no diminution 
 upon the mere price to a purchaser 
 will tempt into the market any man 
 whose habits and propensities had not 
 already disposed him to such a pur- 
 chase. So of professional costume for 
 bishops, lawyers, students at Oxford. 1 ' 
 Nobody doubts, however, that the price 
 and value of all these things would be 
 eventually lowered by any diminution 
 of their cost of production ; and 
 lowered through the apprehension 
 entertained of new competitors, and 
 an increased supply : though the great 
 hazard to which a new competitor 
 would expose himself, in an article 
 not susceptible of any considerable ex- 
 tension of its market, would enable 
 the established dealers to maintain 
 their original pi-ices much longer than 
 they could do in an article offering 
 more encouragement to competition. 
 
 Again, reverse the case, and sup- 
 pose the cost of production increased, 
 as for example by laying a tax on the 
 commodity. The value would rise ; 
 and that, probably, immediately. 
 
 Would the supply be diminished? Only 
 if the increase of value diminished 
 the demand. Whether this effect fol- 
 lowed, would soon appear, and if it did, 
 the value would recede somewhat, 
 from excess of supply, until the pro- 
 duction was reduced, and would then 
 rise again. There are many articles 
 for which it requires a very consider- 
 able rise of price, materially to reduce 
 tho demand ; in particular, articles of 
 necessity, such as the habitual food of 
 the people ; in England, wheaten 
 bread : of which there is probably 
 almost as much consumed, at the pre- 
 sent cost price, as there would be with 
 the present population at a price con- 
 siderably lower. Yet it is especially 
 in such things that deamess or high 
 price is popularly confounded with 
 scarcity. Food may be dear from 
 scarcity, as after a bad harvest ; but 
 the dearness (for example) which is the 
 effect of taxation, or of corn la\\ a. has 
 nothing whatever to do with insuf- 
 ficient supply: such causes do not 
 much diminish the quantity of food in 
 a country : it is other things rather 
 than food that are diminished in quan- 
 tity by them, since, those who pay 
 more for food not having so much to 
 expend otherwise, the production of 
 other things contracts itself to the 
 limits of a smaller demand. 
 
 It is, therefore, strictly correct to 
 say, that the value of things which 
 can be increased in quantity at plea- 
 sure, does not depend (except acci- 
 dentally, and during the time necessary 
 for production to adjust itself,) upon 
 demand and supply ; on the contrary, 
 demand and supply depend upon it. 
 There is a demand for a certain quan- 
 tity of the commodity at its natural or 
 cost value, and to that the supply in 
 the long run endeavours to conform. 
 When at any time it fails of so con- 
 forming, it is either from miscalcula- 
 tion, or from a change in some of the 
 elements of the problem : either in the 
 natural value, that is, in the cost of 
 production ; or in the demand, from 
 an alteration in public taste or in the 
 number or wealth of the consumers. 
 These causes of disturbance are very 
 liable to occur, and when any one of 
 them does occur, the market value of
 
 ULTIMATE ANALYSIS OF COST OF PRODUCTION. 277 
 
 the article ceases to agree with the 
 natural value. The real law of de- 
 mand and supply, the equation between 
 them, holds good in all cases : if a 
 value different from the natural value 
 be necessary to make the demand 
 equal to the supply, the market value 
 will deviate from the natural value ; 
 but omy for a time ; for the permanent 
 tendency of supply is to conform itself 
 to the demand which is found by expe- 
 rience to exist for the commodity when 
 selling at its natural value. If the 
 supply is either more or less than this, 
 it is so accidentally, and affords either 
 more or less than the ordinary rate of 
 profit ; which, under free and active 
 competition, cannot long continue to 
 be the case. 
 
 To recapitulate : demand and supply 
 govern the value of all things which 
 cannot be indefinitely increased; ex- 
 cept that even for them, when produced 
 
 by industry, there is a minimum value, 
 determined by the cost of production, 
 But in all things which admit of inde- 
 finite multiplication, demand and supply 
 only determine the perturbations of 
 value, during a period which cannot 
 exceed the length of time necessary 
 for altering the supply. While thus 
 ruling the oscillations of value, they 
 themselves obey a superior force, which 
 makes value gravitate towards Cost of 
 Production, and which would settle it 
 and keep it there, if fresh disturbing 
 influences were not continually arising 
 to make it again deviate. To pursue 
 the same strain of metaphor, demand 
 and supply always rush to an equili- 
 brium, but the condition of stable 
 equilibrium is when things exchange 
 for each other according to their cost 
 of production, or, in the expression we 
 have used, when things are at their 
 Natural Value. 
 
 CHAPTER IV. 
 
 ULTIMATE ANALYSIS OF COST OF PRODUCT105. 
 
 1. THE component elements of 
 Cost of Production have been set forth 
 in the First Part of this enquiry.* 
 The principal of them, and so much 
 the principal as to be nearly the sole, 
 we found to be Labour. What the 
 production of a thing costs to its pro- 
 ducer, or its series of producers, is the 
 labour expended in producing it. If 
 we consider as the producer the capi- 
 talist who makes the advances, the 
 word Labour may be replaced by the 
 word Wages : what the produce costs 
 to him, is the wages which he has had 
 to pay. At the first glance indeed 
 this seems to be only a part of his out- 
 lay, since he has not only paid wages 
 to labourers, but has likewise provided 
 them with tools, materials, and per- 
 haps buildings. These tools, materials, 
 and buildings, however, were produced 
 by labour and capital ; and their value, 
 like that of the article to the produc- 
 tion of which they are subservient, 
 
 * Supra, pp. 19, 20. 
 
 depends on cost of production, which 
 again is resolvable into labour. The 
 cost of production of broadcloth does 
 not wholly consist in the wages of 
 weavers ; which alone are directly paid 
 by the cloth manufacturer. It consists 
 also of the wages of spinners and 
 woolcombers, and it may b added, of 
 shepherds, all of which the clothier 
 has paid for in the price of yarn. It 
 consists too of the wages of builders 
 and brickmakers, which he has reim- 
 bursed in the contract price of erecting 
 his factory. It partly consists of the 
 wages of machine-makers, iron-founders, 
 and miners. And to these must be 
 added the wages of the carriers who 
 transported any of the means and 
 appliances of the production to the 
 place where they were to be used, 
 and the product itself to the place 
 where it is to be sold. 
 
 The value of commodities, there- 
 fore, depends principally (we shall pre- 
 sently Bee whether it depends solely)
 
 2.rt 
 10 
 
 BOOK m. CHAPTER IV. 2. 
 
 on the quantity of labour required for 
 their production ; including in the idea 
 of production, that of conveyance to 
 the market. "In estimating," says 
 Eicardo,* " the exchangeable value of 
 stockings, for example, we shall find 
 that their value, comparatively with 
 other things, depends on the total 
 quantity of labour necessary to manu- 
 facture them and bring them to 
 market. First, there is the labour 
 necessary to cultivate the land on 
 which the raw cotton is grown ; 
 secondly, the labour of conveying the 
 cotton to the country where the stock- 
 ings are to be manufactured, which 
 includes a portion of the labour be- 
 stowed in building the ship in which it 
 is conveyed, and which is charged in 
 the freight of the goods ; thirdly, the 
 labour of the spinner and weaver ; 
 fourthly, a portion of the labour of the 
 engineer, smith, and carpenter, who 
 erected the buildings and machinery 
 by the help of which they are made ; 
 fifthly, the labour of the retail dealer, 
 and of many others, whom it is un- 
 necessary further to particularize. The 
 aggregate sum of these various kinds 
 of labour, determines the quantity of 
 other things for which these stockings 
 will exchange, while the same con- 
 sideration of the various quantities of 
 labour which have been bestowed on 
 those other things, will equally govern 
 the portion of them which will be given 
 for the stockings. 
 
 " To convince ourselves that this is 
 the real foundation of exchangeable 
 value, let us suppose any improvement 
 to be made in the means of abridging 
 labour in any one of the various pro- 
 cesses through which the raw cotton 
 must pass before the manufactured 
 stockings come to the market to be 
 exchanged for other things ; and ob- 
 serve the effects which will follow. If 
 fewer men were required to cultivate 
 the raw cotton, or if fewer sailors were 
 employed in navigating, or shipwrights 
 in constructing, the ship in which it 
 was conveyed to us ; if fewer hands 
 were employed in raising the buildings 
 and machinery, or if these, when raised, 
 
 * Principles of Political Economy and 
 3'vxuiit* ch.i. sect. 3. 
 
 were rendered more efficient ; the 
 stockings would inevitably fall in value, 
 and command less of other things. 
 They would fall, because a less quan- 
 tity of labour was necessary to their 
 production, and would therefore ex- 
 change for a smaller quantity of those 
 things in which no such abridgment of 
 labour had been made. 
 
 "Economy in the use of labour 
 never fails to reduce the relative value 
 of a commodity, whether the saving be 
 in the labour necessary to the manu- 
 facture of the commodity itself, or in 
 that necessary to the formation of the 
 capital, by the aid of which it is pro- 
 duced. In either case the price of 
 stockings would fall, whether there 
 were fewer men employed as bleachers, 
 spinners, and weavers, persons imme- 
 diately necessary to their manufacture ; 
 or as sailors, carriers, engineers, and 
 smiths, persons more indirectly con- 
 cerned. In the one case, the whole 
 saving of labour would fall on the 
 stockings, because that portion of 
 labour was wholly confined to the 
 stockings ; in the other, a portion only 
 would fall on the stockings, the re- 
 mainder being applied to all those 
 other commodities, to the production 
 of which the buildings, machinery, 
 and carriage, were subservient." 
 
 2. It will have been observed that 
 Eicardo expresses himself as if the 
 quantity of labour which it costs to 
 produce a commodity and bring it to 
 market, were the only thing on whidi 
 its value depended. But since the 
 cost of production to the capitalist is 
 not labour but wages, and since wages 
 may be either greater or less, the quan- 
 tity of labour being the same ; it would 
 seem that the value of the product 
 cannot be determined solely by the 
 quantity of labour, but by the quantity 
 together with the remuneration ; and 
 that values must partly depend on 
 
 In order to decide this point, it must 
 be considered, that value is a relative 
 term ; that the value of a commodity is 
 not a name for an inherent and sub- 
 stantive quality of the thing itself, but 
 means the quantity of other thing*
 
 ULTIMATE ANALYSIS OF COST OF PRODUCTION. 279 
 
 which can bo obtained in exchange 
 for it. The value of one thing, must 
 always be understood relatively to 
 some other thing, or to things in general. 
 Now the relation of one thing to another 
 cannot be altered by any cause which 
 afll-cts them both alike. A rise or fall 
 of general wages is a fact which affects 
 all commodities in the same manner, 
 and therefore affords no reason why 
 they should exchange for each other 
 in one rather than in another propor- 
 tion. To suppose that high wages 
 make high values, is to suppose that 
 there can be such a thing as general 
 high values. But this is a contradic- 
 tion in terms : the high value of some 
 things is synonymous with the low 
 value of others. The mistake arises 
 from not attending to values, but only 
 to prices. Though there is no such 
 thing as a general rise of values, there 
 is such a thing as a general rise of 
 prices. As soon as we form distinctly 
 the idea of values, we see that high or 
 low wages can have nothing to do with 
 them : but that high wages make high 
 prices, is a popular and wide-spread 
 opinion. The whole amount of error 
 involved in this proposition can only 
 be seen thoroughly when we come to 
 the theory of money ; at present we 
 need only say that if it be true, there 
 can be no such thing as a real rise of 
 wages ; for if wages could not rise 
 without a proportional rise of the price 
 of everything, they could not, for any 
 substantial purpose, rise at all. This 
 surely is a sufficient reductio ad ab- 
 surdum, and shows the amazing folly 
 of the propositions which may and do 
 become, and long remain, accredited 
 doctrines of popular political economy. 
 It must be remembered, too, that 
 general high prices, even supposing 
 them to exist, can be of no use to a 
 producer or dealer, considered as such ; 
 for if they increase his money returns, 
 they increase in the same degree all 
 his expenses. There is no mode in 
 which capitalists can compensate them- 
 selves for a high cost of labour, through 
 any action on values or prices. It 
 cannot be prevented from taking its 
 effect in low profits. If the labourers 
 really get more, that is, get the pro- 
 
 duce of more labour, a smaller per- 
 centage must remain for profit. From 
 this Law of Distribution, resting as it 
 does on a law of arithmetic, there is no 
 escape. The mechanism of Exchange 
 and Price may hide it from us, but is 
 quite powerless to alter it. 
 
 3. Although, however, general 
 wages, whether high or low, do not 
 affect values, yet if wages are higher 
 in one employment than another, or if 
 they rise or fall permanently in one 
 employment without doing so in others, 
 these inequalities do really operate 
 upon values. The causes which make 
 wages vary from one employment to 
 another, have been considered in a 
 former chapter. When the wages of 
 an employment permanently exceed 
 the average rate, the value of the 
 thing produced will, in the same degree, 
 exceed the standard determined by 
 mere quantity of labour. Things, for 
 example, which are made by skilled 
 labour, exchange for the produce of a 
 much greater quantity of unskilled 
 labour ; for no reason but because the 
 
 ! labour is more highly paid. If, through 
 the extension of education, the labourers 
 
 I competent to skilled employments were 
 so increased in number as to diminish 
 the difference between their wages 
 and those of common labour, all things 
 produced by labour of the superior 
 kind would fall in value, compared with 
 things produced by common labour, 
 and these might be said therefore to 
 rise in value. We have before re- 
 marked that the difficulty of passing 
 from one class of employments to a 
 class greatly superior, has hitherto 
 caused the wages of all those classes 
 of labourers who are separated from 
 one another by any very marked barrier, 
 to depend more than might be sup- 
 posed upon the increase of the popu- 
 lation of each class, considered sepa- 
 rately ; and that the inequalities in 
 the remuneration of labour are much 
 greater than could exist if the com- 
 petition of the labouring people gene- 
 rally, could be brought practically to 
 bear on each particular employment. 
 It follows from this, that wages in 
 different employments do not rise or
 
 280 
 
 BOOK III. CHAPTER IV. 4. 
 
 fall simultaneously, but are, for short 
 and sometimes even for long periods, 
 nearly independent of one another. 
 All such disparities evidently alter the 
 relative cost of production of different 
 comn.?ditics, and will therefore be 
 completely represented in their natural 
 or average value. 
 
 It thus appears that the maxim 
 laid down by some of the best political 
 economists, that wages do not enter 
 into value, is expressed with greater 
 latitude than the truth warrants, or 
 than accords with their own meaning. 
 Wages do enter into value. The 
 relative wages of the labour necessary 
 for producing different commodities, 
 affect their value just as much as the 
 relative quantities of labour. It is 
 true, the absolute wages paid have no 
 effect upon values ; but neither has 
 the absolute quantity of labour. If 
 that were to vary simultaneously and 
 equally in all commodities, values 
 would not be affected. If, for in- 
 stance, the general efficiency of all 
 labour were increased, so that all 
 things without exception could be pro- 
 duced in the same quantity as before 
 with a smaller amount of labour, no 
 trace of this general diminution of cost 
 of production would show itself in the 
 values of commodities. Any change 
 which might take place in them would 
 only represent the unequal degrees in 
 which the improvement affected dif- 
 ferent things ; and would consist in 
 cheapening those in which the saving 
 of labour had been the greatest, while 
 those in which there had been some, 
 but a less saving of labour, would ac- 
 tually rise in value. In strictness, 
 therefore, wages of Labour have as 
 much to do with value as quantity of 
 labour : and neither Eicardo nor any 
 one else has denied the fact. In con- 
 sidering, however, the causes of varia- 
 tions in value, quantity of labour is 
 the thing of chief importance ; for 
 when that varies, it is generally in 
 one or a few commodities at a time, 
 but the variations of wages (except 
 passing fluctuations) are usually ge- 
 neral, and have no considerable effect 
 on value. 
 
 4. Thus far of labour, or wages, 
 as an element in cost of production. 
 But in our analysis, in the First Book, 
 of the requisites of production, we found 
 that there is another necessary clement 
 in it besides labour. There is also 
 capital ; and this being the result of 
 abstinence, the produce, or its value, 
 must be sufficient to remunerate, not 
 only all the labour required, but the 
 abstinence of all the persons by whom 
 the remuneration of the different 
 classes of labourers was advanced. 
 The return for abstinence is Profit. 
 And profit, we have also seen, is not 
 exclusively the surplus remaining to 
 the capitalist after he has been com- 
 pensated for his outlay, but forms, in 
 most cases, no unimportant part of 
 the outlay itself. The flax-spinner, 
 part of whose expenses consists of the 
 purchase of flax and of machinery, has 
 had to pay, in their price, not only the 
 wages of the labour by which the flax 
 was grown and the machinery made, 
 bnt the profits of the grower, the flax- 
 dresser, the miner, the iron-founder, 
 and the machine-maker. All these 
 profits, together with those of the spin- 
 ner himself, were again advanced by 
 the weaver, in the price of his material, 
 linen yam : and along with them the 
 profits of a fresh set of machine-makers, 
 and of the miners and iron-workera 
 who supplied them with their metallic 
 material. All these advances form 
 part of the cost of production of linen. 
 Profits, therefore, as well as wages, 
 enter into the cost of production which 
 determines the value of the produce. 
 
 Value, however, being purely re- 
 lative, cannot depend upon absolute 
 profits, no more than upon absolute 
 wages, but upon relative profits only. 
 High general profits cannot, any more 
 than high general wages, be a cause of 
 high values, because high general values 
 arc an absurdity and a contradiction. 
 In so far as profits enter into the cost 
 of production of all things, they cannot 
 affect the value of any. It is only 
 by entering in a greater degree into 
 the cost of production of some things 
 than of others, that they can have any 
 influence on value. 
 
 For example, we have seen that
 
 ULTIMATE ANALYSIS OF COST OF PKODUCTION. 281 
 
 there arc causes which necessitate a 
 permanently higher rate of profit in 
 certain employments than in others. 
 There must be a compensation for 
 superior risk, trouble, and disagreeable- 
 iivss. This can only be obtained by 
 selling the commodity at a value above 
 that which is due to the quantity of 
 labour necessary for its production. 
 If gunpowder exchanged for other 
 things in no higher ratio than that of 
 the labour required from first to last 
 for producing it, no one would set up 
 a powder-mill. Butchers are certainly 
 a more prosperous class than bakers, 
 and do not seem to be exposed to 
 greater risks, since it is not remarked 
 that they are oftener bankrupts. They 
 seem, therefore, to obtain higher pro- 
 fits, which can only arise from the 
 more limited competition caused by 
 the unpleasantness, and to a certain 
 degree, the unpopularity of their trade. 
 But this higher profit implies that they 
 sell Aeir commodity at a higher value 
 than that due to their labour and out- 
 lay. All inequalities of profit which 
 are necessary and permanent, are re- 
 presented in the relative values of the 
 commodities. 
 
 5. Profits, however, may enter 
 more largely into the conditions of 
 production of one commodity than of 
 another, even though there be no dif- 
 ference in the rate of profit between 
 the two employments. The one com- 
 modity may be called upon to yield 
 profit during a longer period of time 
 than the other. The example by which 
 this cass is usually illustrated is that 
 of wine. Suppose a quantity of wine, 
 and a quantity of cloth, made by equal 
 amounts of labour, and that labour 
 paid at the same rate. The cloth 
 does not improve by keeping; the 
 wine does. Suppose that, to attain 
 the desired quality, the wine requires 
 to be kept five years. The producer 
 or dealer will not keep it, unless at 
 the end of five years he can sell it for 
 as much more than the cloth, as 
 amounts to five years profit, accumu- 
 lated at compound interest. The wine 
 and the cloth were made by the same 
 original outlay. Here then is a case 
 
 in which the natural values, relatively 
 to one another, of two commodities, do 
 not conform to their cost of production 
 alone, but to their cost of production 
 plus something else. Unless, indeed, 
 for the sake of generality in the ex- 
 pression, we include the profit which 
 the wine-merchant foregoes during the 
 five years, in the cost of production of 
 the wine : looking upon it as a kind of 
 additional outlay, over and above his 
 other advances, for which outlay he 
 must be indemnified at last. 
 
 All commodities made by machinery 
 are assimilated, at least approximately, 
 to the wine in the preceding example. 
 In comparison with things made 
 wholly by immediate labour, profits 
 enter more largely into their cost of 
 production. Suppose two commodities, 
 A ami B, each requiring a year for its 
 production, by means of a capita] 
 which we will on this occasion denote 
 by money, and suppose to be 1000?. 
 A is made wholly by immediate labour, 
 the whole 1QOOI. being expended di- 
 rectly in wages. B is made by means 
 of labour which costs 5001. and a ma- 
 chine which costs 5001., and the ma- 
 chine is worn out by one year's use. 
 The two commodities will be exactly 
 of the same value ; which, if computed 
 in money, and if profits are 20 per 
 cent, per annum, will be 12001. But 
 of this 12001., in the case of A, only 
 200Z., or one-sixth, is profit: while in 
 the case of B there is not only the 
 2001., but as much of 5001. (the price 
 of the machine) as consisted of the 
 profits of the machine-maker; which, 
 it' we suppose the machine also to have 
 taken a year for its production, is again 
 one-sixth. So that in the case of A 
 only one-sixth of the entire return is 
 profit, whilst in B the element of profit 
 comprises not only a sixth of the 
 whole, but an additional sixth of a 
 large part. 
 
 The greater the proportion of the 
 whole capital which consists of ma- 
 chinery, or buildings, or material, or 
 anything else which must be provided 
 before the immediate labour can com- 
 mence, the more largely will profits 
 enter into the cost of production. It 
 is equally true, though not so obvioua
 
 282 
 
 at first sight, that greater durability 
 IB the portion of capital which consists 
 of machinery or buildings, has precisely 
 the same effect as a greater amount 
 of it. As we just supposed one ex- 
 treme case, of a machine entirely worn 
 out by a year's use, let us now suppose 
 the opposite and still more extreme 
 case, of a machine which lasts for ever, 
 and requires no repairs. In this case, 
 which is as well suited for the purpose 
 of illustration as if it were a possible 
 one, it will be unnecessary that the 
 manufacturer should ever be repaid 
 the 5001. which he gave for the ma- 
 chine, since he has always the machine 
 itself, worth 5001. ; but he must be 
 paid, as before, a profit on it. The 
 commodity B, therefore, which in the 
 case previously supposed was sold for 
 1200Z., of which sum 1000Z. were to 
 replace the capital and 200Z. were 
 profit, can now be sold for TOOL, being 
 500Z. to replace wages, and 200Z. profit 
 on the entire capital. Profit, there- 
 fore, enters into the value of B in the 
 ratio of 2001. out of 7001, being two- 
 sevenths of the whole, or 28f per cent, 
 while in the case of A, as before, it 
 enters only in the ratio of one-sixth, 
 or 1 Of per cent. The case is of course 
 purely ideal, since no machinery or 
 other fixed capital lasts for ever ; but 
 the more durable it is, the nearer it 
 approaches to this ideal case, and the 
 more largely does profit enter into the 
 return. If, for instance, a machine 
 worth 500Z. loses one fifth of its value 
 by each year's use, 100Z. must be added 
 to the return to make up this loss, and 
 the price of the commodity will be 
 8001. Profit therefore will enter into 
 it in the ratio of 2001. to 800Z., or one- 
 fourth, which is still a much higher 
 proportion than one-sixth, or 2001. in 
 1200Z., as in case A. 
 
 From the unequal proportion in 
 which, in different employments, profits 
 enter into the advances of the capi- 
 talist, and therefore into the returns 
 required by him, two consequences 
 follow in regard to value. One is, 
 that commodities do not exchange in the 
 ratio simply of the quantities of labour 
 required to produce them ; not even if 
 Ve allow for the unequal rates at which 
 
 BOOK III. CHAPTER IV. 5. 
 
 different kinds of labour are perma- 
 nently remunerated. We have already 
 illust rated this by the example of wine : 
 we shall now further exemplify it by 
 the case of commodities made by ma- 
 chinery. Suppose, as before, an article 
 
 A, made by a thousand pounds' worth 
 of immediate labour. But instead of 
 
 B, made by 500Z. worth of immediate 
 labour and a machine worth 500Z., let 
 us suppose C, made by 500Z. worth of 
 immediate labour with the aid of a 
 machine which has been produced by 
 another 500Z. worth of immediate la- 
 bour: the machine requiring a year 
 for making, and worn out by a year's 
 use ; profits being as before 20 per cent. 
 A and C are made by equal quantities 
 of labour, paid at the same rate : A costs 
 1000Z. worth of direct labour ; C, only 
 500Z. worth, which however is made 
 up to 1000Z. by the labour expended 
 in the construction of the machine. If 
 labour, or its remuneration, were tho 
 sole ingredient of cost of production, 
 these two things would exchange for 
 one another. But will they do so? 
 Certainly not. The machine having 
 been made in a year by an outlay of 
 500Z., and profits being 20 per cent, 
 the natural price of the machine is 
 600Z. : making an additional 100Z. 
 which must be advanced, over and 
 above his other expenses, by the 
 manufacturer of C, and repaid to him 
 with a profit of 20 per cent. "While, 
 therefore, the commodity A is sold for 
 1200Z., C cannot be permanently sold 
 for less than 1320Z. 
 
 A second consequence is, that every 
 rise or fall of general profits will have 
 an effect on values. Not indeed by 
 raising or lowering them generally, 
 (which, as we have so often said, is a 
 contradiction and an impossibility) : 
 but by altering the proportion in which 
 the values of things are affected by 
 the unequal lengths of time for which 
 profit is due. When two things, 
 though made by equal labour, are of 
 unequal value because the one is called 
 upon to yield profit for a greater num- 
 ber of years or months than the other; 
 this difference of value will be greater 
 when profits are greater, and less when 
 they are less. The wine which has to
 
 ULTIMATE ANALYSIS OF COST OF PRODUCTION. 283 
 
 yield five years profit more than the 
 cloth, will surpass it in value much more 
 if profits are 40 per cent, thun if they 
 are only 20. The commodities A and 
 C, which, though made hy equal quan- 
 tities of labour, were sold for 12001. 
 and 1320Z., a difference of 10 per cent, 
 would, if profits had been only half as 
 much, have been sold for 1 1 001. and 
 11551., a difference of only 5 per cent. 
 
 It follows from this, that even a 
 general rise of wages, when it involves 
 a real increase in the cost of labour, 
 does in some degree influence values. 
 It does not affect them in the manner 
 vulgarly supposed, by raising them 
 universally. But an increase in the 
 cost of labour, lowers profits; and 
 therefore lowers in natural value the 
 things into which profits enter in a 
 greater proportion than the average, 
 and raises those into which they enter 
 in a less proportion than the average. 
 All commodities in the production of 
 which machinery hears a large part, 
 especially if the machinery is very 
 durable, are lowered in their relative 
 value when profits fall ; or, what is 
 equivalent, other things are raised in 
 value relatively to them. This truth 
 is sometimes expressed in a phrase- 
 ology more plausible than sound, by 
 saying that a rise of wages raises the 
 value of things made by labour, in 
 comparison with those made by ma- 
 chinery. But things made by ma- 
 chinery, just as much as any other 
 things, are made by labour, namely 
 the labour which made the machinery 
 itself: the only difference being that 
 profits enter somewhat more largely 
 into the production of things fur which 
 machinery is used, though the prin- 
 cipal item of the outlay is still labour. 
 It is better, therefore, to associate the 
 effect with fall of profits than with rise 
 of wages ; especially as this last ex- 
 pression is extremely ambiguous, sug- 
 gesting the idea of an increase of the 
 labourer's real remuneration, rather 
 than of what is alone to the purpose 
 here, namely, the cost of labour to its 
 em )loyer. 
 
 6. Besides the natural and ne- 
 cessary elements in cost of production 
 
 labour and profits there are others 
 which are artificial and casual, as for 
 instance a tax. The tax on malt is 
 as much a part of the cost of produc- 
 tion of that article, as the wages of 
 the labourers. The expenses which 
 the law imposes, as well as those which 
 the nature of tilings imposes, must be 
 reimbursed with the ordinary profit 
 from tho value of the produce, or the 
 things will not continue to be produced. 
 But the influence of taxation on value 
 is subject to the same conditions as 
 the influence of wages and of profits. 
 It is not general taxation, but differ- 
 ential taxation, that produces the 
 effect. If all productions were taxed 
 so as to take an equal percentage from 
 all profits, relative values would be in 
 no way disturbed. If only a few com- 
 modities were taxed, their value would 
 rise : and if only a few were left un- 
 taxed, their value would fall. If half 
 were taxed and the remainder untaxed, 
 the first half would rise and the last 
 would fall relatively to each other. 
 This would be necessary in order to 
 equalize the expectation of profit in 
 all employments, without which the 
 taxed employments would ultimately, 
 if not immediately, he abandoned. 
 But general taxation, when equally 
 imposed, and not disturbing the re- 
 lations of different productions to one 
 another, cannot produce any effect on 
 values. 
 
 ^Ye have thus far supposed that all 
 the means and appliances which enter 
 into the cost of production of com- 
 modities, are things whose own value 
 depends on their cost of production. 
 Some of them, however, may belong to 
 the class of things which cannot be 
 increased ad libitum in quantity, and 
 which therefore, if the demand goes 
 beyond a certain amount, command a 
 scarcity value. The materials of many 
 of the ornamental articles manufac- 
 tured in Italy are the substances called 
 rosso, giallo, and verde antico, which, 
 wUether truly or falsely I know not, 
 are> asserted to be solely derived from 
 the destruction of ancient columns 
 and other ornamental structures: the 
 quarries from which the stone was 
 originally cut being exhausted, or their
 
 284 
 
 BOOR IIL CHAFIER IV. 8. 
 
 locality forgotten.* A material of 
 such a nature, if in much demand, 
 must be at a scarcity value ; and this 
 value enters into the cost of produc- 
 tion, and, consequently, into the value, 
 of the finished article. The time seems 
 to be approaching when the more 
 valuable furs will come under the 
 influence of a scarcity value of the 
 material. Hitherto the diminishing 
 number of the animals which produce 
 them, in the wildernesses of Siberia and 
 on the coasts of the Esquimaux Pea, 
 has operated on the value only through 
 the greater labour which has become 
 necessary for securing any given quan- 
 tity of the article ; since, without 
 doubt, by employing labour enough, it 
 might still be obtained in much greater 
 abundance for some time longer. 
 
 But the case in which scarcity value 
 chiefly operates in adding to cost of 
 production, is the case of natural 
 agents. These, when unappropriated, 
 and to be had for the taking, do not 
 enter into cost of production, save to 
 the extent of the labour which maybe 
 necessary to fit them for use. Even 
 when appropriated, they do not (as we 
 have already seen) bear a value from 
 the mere fuct of the appropriation, but 
 only from scarcity, that is, from limi- 
 tation of supply. But it is equally 
 certain that they often do bear a scar- 
 city value. Suppose a fall of water, 
 in a place where there are more mills 
 wanted than there is water-power to 
 supply them ; the use of the fall of 
 water will have a fcarcity value, suffi- 
 cient either to bring the demand down 
 to the supply, or to pay for the creation 
 of an artificial power, by steam or 
 otherwise, equal in efficiency to the 
 water-power. 
 
 * Some of these quarries, I believe, have 
 been rediscovered, and arc again worked. 
 
 A natural agent being a possession 
 in perpetuity, and being only service- 
 able by the products resulting from its 
 continued employment, the ordinary 
 mode of deriving benefit from its 
 ownership is by an annual equivalent, 
 paid by the person who uses it, from 
 the proceeds of its use. This equiva- 
 lent always might be, and generally is>, 
 termed rent. The question therelbre, 
 icspecting the influence which the ap- 
 propriation of natural agents produces 
 on values, is often stated in this form : 
 Does Kent enter into Cost of Produc- 
 tion ? and the answer of the best poli- 
 tical economists is in the negative. 
 The temptation is strong to the adop- 
 tion of these sweeping expressions, 
 even by those who are aware of the 
 restrictions with which they must be 
 taken ; for there is no denying that 
 they stamp a general principle more 
 firmly on the mind, than if it were 
 hedged round in theory with all its 
 practical limitations. But they also 
 puzzle and mislead, and create an im- 
 pression unfavourable to political eco- 
 nomy, as if it disregarded the evidence 
 of facts. No one can deny that rent 
 sometimes enters into cost of produc- 
 tion. If I buy or rent a piece of ground, 
 and build a cloth manufactory on it, 
 the ground-rent forms legitimately a 
 part of my expenses of production, 
 which must be repaid by the product. 
 And since all factories are built on 
 ground, and most of them in places 
 where ground is peculiarly valuable, 
 the rent paid for it must, on the ave- 
 rage, be compensated in the values of 
 all things made in factories. In what 
 sense it is true that rent does not enter 
 into the cost of production or afi'ect the 
 value of agricultural produce, will be 
 shown in the succeeding chapter.
 
 RENT IN ITS RELATION TO VALUE. 
 
 CHAPTER V. 
 
 OF RENT, IN ITS RELATION TO VALUE. 
 
 1. WE have investigated the 
 laws which determine the value of two 
 classes of commodities : the small 
 class which, being limited to a definite 
 quantity, have their value entirely de- 
 termined by demand and supply, save 
 that their cost of production (if they 
 have any) constitutes a minimum below 
 which they cannot permanently fall ; 
 and the large class, which can be mul- 
 tiplied ad libitum by labour and capital, 
 and of which the cost of production 
 fixes the maximum as well as the 
 minimum at which they can perma- 
 nently exchange. But there is still a 
 third kind of commodities to be con- 
 sidered : those which have, not one, 
 but several costs of production ; which 
 can always be increased in quantity by 
 labour and capital, but not by the 
 same amount of labour and capital ; of 
 vhich so much may be produced at a 
 given cost, but a further quantity not 
 without a greater cost. These com- 
 modities form an intermediate class, 
 partaking of the character of both the 
 others. The principal of them is agri- 
 cultural produce. We have already 
 made abundant reference to the funda- 
 mental truth, that in agriculture, the 
 state of the art being given, doubling 
 the labour does not double the produce ; 
 that if an increased quantity of produce 
 is required, the additional supply is 
 obtained at a greater cost than the 
 first. Where a hundred quarters of 
 corn are all that is at present required 
 from the lands of a given village, if 
 the growth of population made it ne- 
 cessary to raise a nundred more, either 
 by breaking up worse land now uncul- 
 tivated, or by a more elaborate cultiva- 
 tion of the land already under the 
 plough, the additional hundred, or 
 some part of them at least, might cost 
 double or treble as much per quarter 
 as the former supply. 
 
 If the first hundred quarters were 
 11 raised at the same expense (only 
 
 the best land being cultivated) : and if 
 that expense would be remunerated 
 with the ordinary profit by a price of 
 20s. the quarter ; the natural price of 
 wheat, so long as no more than that 
 quantity was required, would be 20s. ; 
 and it could only rise above, or fall 
 below that price, from vicissitudes of 
 seasons, or other casual variations in 
 supply. But if the population of the 
 district advanced, a time would arrive 
 when more than a hundred quarters 
 would be necessary to feed it. We 
 must suppose that there is no access 
 to any foreign supply. By the hypo- 
 thesis, no more than a hundred quarters 
 can be produced in the district, unless 
 by either bringing worse land into cul- 
 tivation, or altering the system of 
 culture to a more expensive one. 
 Neither of these things will be done 
 without a rise in price. This rise o' 
 price will gradually be brought about 
 by the increasing demand. So long 
 as the price has risen, but not risen 
 enough to repay with the ordinary 
 profit the cost of producing an addi- 
 tional quantity, the increased value of 
 the limited supply partakes of the 
 nature of a scarcity value. Suppose 
 that it will not answer to cultivate the 
 second best land, or land of the second 
 degree of remoteness, for a less return 
 than 25s. the quarter ; and that this 
 price is also necessary to remunerate 
 the expensive operations by which an 
 increased produce might be raised 
 from land of the first quality. If BO, 
 the price will rise, through the increased 
 demand, until it reaches 25s. That 
 will now be the natural price ; being 
 the price without which the quantity, 
 for which society has a demand at 
 that price, will not be produced. At 
 that price, however, society can go on 
 for some time longer ; could go on 
 perhaps for ever, if population did not 
 increase. The price, having attained 
 that point, will not again permanently
 
 28B 
 
 BOOK III. CHAPTER V. 2. 
 
 recede (though it may fall temporarily 
 from accidental abundance) ; nor will 
 it advance further, so long as society 
 can obtain the supply it requires with- 
 out a second increase of the cost of 
 production. 
 
 I have made use of Price in this 
 reasoning, as a convenient symbol of 
 Value, from the greater familiarity of 
 the idea ; and I shall continue to do 
 BO as far as may appear to be necessary. 
 
 In the case supposed, different por- 
 tions of the supply of corn have dif- 
 ferent costs of production. Though 
 the 20, or 50, or 150 quarters addi- 
 tional have been produced at a cost 
 proportional to 25s., the original hun- 
 dred quarters per annum are still pro- 
 duced at a cost only proportional to 
 20s. This is self-evident, if the original 
 and the additional supply are produced 
 on different qualities of land. It is 
 equally true if they are produced on 
 the same land. Suppose that land of 
 the best quality, which produced 100 
 quarters at 20s., has been made to 
 produce 150 by an expensive process, 
 which it would not answer to under- 
 take without a price of 25s. The cost 
 which requires 25s. is incurred for the 
 sake of 50 quarters alone : the first 
 hundred might have continued for ever 
 to be produced at the original cost, 
 and with the benefit, on that quantity, 
 of the whole rise of price caused by 
 the increased demand : no one, there- 
 fore, will incur the additional expense 
 for the sake of the additional fifty, 
 unless they alone will pay for the 
 whole of it. The fifty, therefore, will 
 be produced at their natural price, 
 proportioned to the cost of their pro- 
 duction : while the other hundred will 
 now bring in 5s. a quarter more than 
 their natural price than the price 
 corresponding to, and sufficing to re- 
 munerate, their lower cost of pro- 
 duction. 
 
 If the production of any, even the 
 smallest, portion of the supply, re- 
 quires as a necessary condition a 
 certain price, that price will be ob- 
 tained for all the rest. We are not 
 able to buy one loaf cheaper than 
 another because the corn from which 
 it was made, being grown* on a richer 
 
 soil, has cost less to the grower. The 
 value, therefore, of an article (meaning 
 its natural, which is the same with its 
 average value) is determined by the 
 cost of that portion of the supply 
 which is produced and brought to 
 market at the greatest expense. This 
 is the Law of Value of the third of 
 the three classes into which all com- 
 modities are divided. 
 
 2. If the portion of produce raised 
 in the most unfavourable circumstances, 
 obtains a value proportioned to its cost 
 of production ; all the portions raised 
 in more favourable circumstances, sell- 
 ing as they must do at the same value, 
 obtain a value more than proportioned 
 to their cost of production. Their value 
 is not, correctly speaking, a scarcity 
 value, for it is determined by the cir- 
 cumstances of the production of the 
 commodity, and not by the degree of 
 dearness necessary for keeping down 
 the demand to the level of a limited 
 supply. The owners, however, of those 
 portions of the produce enjoy a pri- 
 vilege ; they obtain a value which 
 yields them more than the ordinary 
 profit. If this advantage depends upon 
 any special exemption, such as being 
 free 1'rom a tax, or upon any personal 
 advantages, physical or mental, or 
 any peculiar process only known to 
 themselves, or upon the possession of 
 a greater capital than other people, 
 or upon various other things which 
 might be enumerated, they retain it to 
 themselves as an extra gain, over and 
 above the general profits of capital, of 
 the nature, in some sort, of a monopoly 
 profit. But when, as in the case 
 which we are more particularly con- 
 sidering, the advantage depends on 
 the possession of a natural agent of 
 peculiar quality, as, for instance, of 
 more fertile land than that which 
 determines the general value of the 
 commodity; and when this natural 
 agent is not owned by themselves ; 
 the person who does own it, is able to 
 exact from them, in the form of rent, 
 the whole extra gain derived from its 
 use. We are thus brought by another 
 road to the Law of Bent, investigated 
 in the concluding chapter of the Second
 
 RENT IN ITS RELATION TO VALUE. 
 
 287 
 
 Book. Rent, we again see, is the 
 difference between the unequal returns 
 to different parts of the capital em- 
 ployed on the soil. Whatever surplus 
 any portion of agricultural capital 
 produces, beyond what is produced by 
 the same amount of capital on the 
 worst soil, or under the most expensive 
 mode of cultivation, which the existing 
 demands of society compel a recourse 
 to ; that surplus will naturally be paid 
 as rent from that capital, to the owner 
 of the land on which it is employed. 
 
 It was long thought by political 
 economists, among the rest even by 
 Adam Smith, that the produce of land 
 is always at a monopoly value, because 
 (they said) in addition to the ordinary 
 rate of profit, it always yields some- 
 thing further for rent. This we now 
 see to be erroneous. A thing cannot 
 be at a monopoly value, when its supply 
 can be increased to an indefinite ex- 
 tent if we are only willing to incur the 
 cost. If no more corn than the exist- 
 ing quantity is grown, it is because 
 the value has not risen high enough to 
 remunerate any one for growing it. 
 Any land (not reserved for other uses, 
 or for pleasure) which at the existing 
 price, and by the existing processes, 
 will yield the ordinary profit, is tole- 
 rably certain, unless some artificial 
 hindrance intervenes, to be cultivated, 
 although nothing may be left for rent. 
 As long as there is any land fit for 
 cultivation, which at the existing price 
 cannot be profitably cultivated at all, 
 there must be some land a little better, 
 which will yield the ordinary profit, 
 but allow nothing for rent : and that 
 land, if within the boundary of a farm, 
 will be cultivated by the farmer ; if 
 not so, probably by the proprietor, or 
 by some other person on sufferance. 
 Some such land at least, under culti- 
 vation, there can scarcely fail to be. 
 
 Rent, therefore, forms no part of the 
 cost of production which determines 
 the value of agricultural produce. 
 Circumstances no doubt may be con- 
 ceived in which it might do so, and 
 very largely too. We can imagine 
 a country so fully peopled, and with all 
 its cultivable soil so completely occu- 
 pied, that to produce any additional 
 
 quantity would require more labour 
 than the produce would feed : and if 
 we suppose this to be the condition of 
 the whole world, or of a country de- 
 barred from foreign supply, then, if 
 population continued increasing, both 
 the land and its produce would really 
 rise to a monopoly or scarcity price. 
 But this state of things never can have 
 really existed anywhere, unless pos- 
 sibly in some small island cut off from 
 the rest of the world ; nor is there any 
 danger whatever that it should exist 
 It certainly exists in no known region 
 at present. Monopoly, we have seen, 
 can take effect on value, only through 
 limitation of supply. In all countries 
 of any extent there is more cultivable 
 land than is yet cultivated : and while 
 there is any such surplus, it is th^ 
 same thing, so far as that quality of 
 land is concerned, as if there w T ere an 
 indefinite quantity. What is prac- 
 tically limited in supply is only the 
 better qualities ; and even for those, so 
 much rent cannot be demanded as 
 would bring in the competition of the 
 lands not yet in cultivation ; the rent 
 of a piece of land must be somewhat 
 less than the whole excess of its pro- 
 ductiveness over that of the best land 
 which it is not yet profitable to cul- 
 tivate ; that is, it must be about equal 
 to the excess above the worst land 
 which it is profitable to cultivate. The 
 land or the capital most unfavourably 
 circumstanced among those actually 
 employed, pays no rent ; and that land 
 or capital determines the cost of pro- 
 duction which regulates the value of 
 the whole produce. Thus rent is, as 
 we have already seen, no cause of value, 
 but the price of the privilege which 
 the inequality of the returns to different 
 portions of agricultural produce confers 
 on all except the least favoured portion. 
 Rent, in short, merely equalizes the 
 profits of different farming capitals, by 
 enabling the landlord to appropriate 
 all extra gains occasioned by supe- 
 riority of natural advantages. If all 
 landlords were unanimously to forego 
 their rent, they would but transfer it 
 to the farmers, without benefiting the 
 consumer; for the existing price of 
 corn would still be an indispensable
 
 BOOK III. CHAPTER 
 
 condition of the production of part of 
 the existing supply, and if a part 
 obtained that price the whole would 
 obtain it. Rent, therefore, unless 
 artificially increased by restrictive 
 laws, is no burthen on the consumer ; 
 it does not raise the price of corn, and 
 is no otherwise a detriment to the 
 public, than inasmuch as if the state had 
 retained it, or imposed an equivalent 
 in the shape of a land-tax, it would 
 then have been a fund applicable to 
 general instead of private advantage. 
 
 3. Agricultural productions are 
 not the only commodities which have 
 several different costs of production at 
 once, and which, in consequence of 
 that difference, and in proportion to it, 
 afford a rent. Mines are also an in- 
 stance. Almost all kinds of raw material 
 extracted from the interior of the earth 
 metals, coals, precious stones, &c., 
 are obtained from mines differing con- 
 siderably in fertility, that is, yielding 
 very different quantities of the product 
 to the same quantity of labour and 
 capital. This being the case, it is an 
 obvious question, why are not the most 
 fertile mines so worked as to supply 
 the whole market ? No such question 
 can arise as to land ; it being self- 
 evident, that the most fertile lands 
 could not possibly be made to supply 
 the whole demand of a fully-peopled 
 country ; and even of what they do 
 yield, a part is extorted from them by 
 a labour and outlay as great as that 
 required to grow the same amount on 
 worse land. But it is not so with 
 mines ; at least, not universally. There 
 are, perhaps, cases in which it is im- 
 possible to extract from a particular 
 vein, in a given time, more than a 
 certain quantity of ore, because there 
 is only a limited surface of the vein 
 exposed, on which more than a certain 
 number of labourers cannot be simul- 
 taneously employed. But this is not 
 true of all mines. In collieries, for 
 example, some other cause of limita- 
 tion must be sought for. In some 
 instances the owners limit the quan- 
 tity raised, in order not too rapidly to 
 exhaust the mine : in others there are 
 said to be combinations of owners, to 
 
 V. 3. 
 
 keep up a monopoly price bj limiting 
 the production. Whatever be the 
 causes, it is a fact that mines of dif- 
 ferent degrees of richness are in opera- 
 tion, and since the value of the pro- 
 duce must be proportional to the cost 
 of production at the worst mine (fer- 
 tility and situation taken together), it. 
 is nrre than proportional to that of 
 the oest. All mines superior in pro- 
 duce to the worst actually worked, will 
 yield, therefore, a rent equal to the 
 excess. They may yield more ; and 
 the worst miue may itself yield a runt. 
 Mines being comparatively few, their 
 qualities do not graduate gently into 
 one another, as the qualities of land 
 do ; and the demand may be such as to 
 keep the value of the produce con- 
 siderably above the cost of production 
 at the worst mine now worked, with- 
 out being sufficient to bring into opera- 
 tion a still worse. During the interval, 
 the produce is really at a scarcity 
 value. 
 
 Fisheries are another example. Fish- 
 eries in the open sea are not appro- 
 priated, but fisheries in lakes or rivers 
 almost always are so, and likewise 
 oyster-beds or other particular fishing 
 grounds on coasts. We may take 
 salmon fisheries as an example of the 
 whole class. Some rivers are far more 
 productive in salmon than others. 
 None, however, without being ex- 
 hausted, can supply more than a very 
 limited demand. The demand of a 
 country like England can only be sup- 
 plied by taking salmon from many 
 different rivers of unequal productive- 
 ness, and the value must be sufficient 
 to repay the cost of obtaining the fish 
 from the least productive of these. All 
 others, therefore, will if appropriated 
 afford a rent equal to the value of their 
 superiority. Much higher than this it 
 cannot be, if there are salmon rivers 
 accessible which from distance or in- 
 ferior productiveness have not yet con- 
 tributed to supply the market. If 
 there are not, the value, doubtless, may 
 rise to a scarcity rate, and the worst 
 fisheries in use may then yield a con- 
 siderable rent. 
 
 Both in the case of aines and of 
 fisheries, the natural order of events i*
 
 RENT IN ITS RELATION TO VALUE. 
 
 289 
 
 Kable to be interrupted by the opening 
 of a new mine, or a new fishery, of 
 superior quality to some of those 
 already in use. The first effect of such 
 an incident is an increase of the supply; 
 which of course lowers the value to 
 call forth an increased demand. This, 
 reduced value may be no longer suf- 
 ficient to remunerate the worst of the 
 existing mines or fisheries, and these 
 may consequently be abandoned. If 
 the superior mines or fisheries, with 
 the addition of the one newly opened, 
 produce as much of the commodity as 
 is required at the lower value corre- 
 eponding to their lower cost of produc- 
 tion, the fall of value will be permanent, 
 and there will be a corresponding fa41 
 in the rents of those mines or fisheries 
 which are not abandoned. In this 
 case, when things have permanently 
 adjusted themselves, 5the result will be, 
 that the scale of qualities which supply 
 the market will have been cut short at 
 the lower end, while a new insertion 
 will have been made in the scale at 
 some point higher up ; and the worst 
 mine or fishery in use the one which 
 regulates the rents of the superior 
 qualities and the value of the com- 
 modity will be a mine or fishery of 
 better quality than that by which 
 they were previously regulated. 
 
 Land is used for other purposes 
 than agriculture, especially for resi- 
 dence ; and when so used, yields a 
 rent, determined by principles similar 
 to those already laid down. The 
 ground rent of a building, and the rent 
 of a garden or park attached to it, will 
 not be less than the rent which the 
 same land would afford in agriculture : 
 but may be greater than this to an 
 indefinite amount : the surplus being 
 either in consideration of beauty or of 
 convenience, the convenience often 
 consisting in superior facilities for 
 pecuniary gain. Sites of remarkable 
 beauty are generally limited in supply, 
 and therefore, if in great demand, are 
 at a scarcity value. Sites superior 
 only in convenience, are governed as to 
 their value by the ordinary principles 
 of rent. The ground rent of a house 
 in a small village is but little higher 
 than the rent of a similar paten of 
 P.E. 
 
 ground in the open fields : but that of 
 a shop in Cheapside will exceed these, 
 by the whole amount at which people 
 estimate the superior facilities of money- 
 making in the more crowded place. 
 The rents of wharfage, dock and 
 harbour room, water-power, and many 
 other privileges, may be analysed on 
 similar principles. 
 
 4. Cases of extra profit analogous 
 to rent, are more frequent in the trans- 
 actions of industry than is sometimes 
 supposed. Take the case, for example, 
 of a patent, or exclusive privilege for 
 the use of a process by which cost of 
 production is lessened. If the value of 
 the product continues to be regulated 
 by what it costs to those who are 
 obliged to persist in the old process, 
 the patentee will make an extra profit 
 equal to the advantage which his pro- 
 cess possesses over theirs. This extra 
 profit is essentially similar to rent, and 
 sometimes even assumes the form of 
 it ; the patentee allowing to other pro- 
 ducers the use of his privilege, in con- 
 sideration of an annual payment. So 
 long as he, and those whom he asso- 
 ciates in the privilege, do not produce 
 enough to supply the whole market, so 
 long the original cost of production, 
 being the necessary condition of pro- 
 ducing a part, will regulate the value 
 of the whole ; and the patentee will be 
 enabled to keej) up his rent to a full 
 equivalent for the advantage which 
 his process gives him. In the com- 
 mencement indeed he will probably 
 forego a pail of this advantage for the 
 sake of underselling others : the in- 
 creased supply which he brings for- 
 ward will lower the value, and make 
 the trade a bad one for those who do 
 not share in the privilege: many of 
 whom therefore will gradually retire, 
 or restrict their operations, or enter 
 into arrangements with the patentee. 
 As his supply increases theirs wil 
 diminish, the value meanwhile con- 
 tinuing slightly depressed. But if he 
 stops short in his operations before the 
 market is wholly supplied by the nev 
 process, things will again adjust them 
 selves to what was the natural valuo 
 before the invention was made, and 
 U
 
 BOOK III. CHAPTER VI. 1. 
 
 the benefit of the improvement will 
 accrue solely to tho patentee. 
 
 The extra gains which any producer 
 or dealer obtains through superior ta- 
 lents for business, or superior business 
 arrangements, are very much of a 
 similar kind. If all his competitors 
 had the same advantages, and used 
 them, the benefit would be transferred 
 to their customers, through the dirni- 
 
 rent unless paid periodically by on 
 person to another, is governed by laws 
 entirely the same with it. The prica 
 paid for a differential advantage in 
 producing a commodity, cannot enter 
 into the general cost of production of 
 the commodity. 
 
 A commodity may, no doubt, in 
 some contingencies, yield a rent even 
 under the most disadvantageous cir- 
 
 nished value of the article : he only cumstances of its production ; but only 
 retains it for himself because he is when it is, for the time, in the condi- 
 able to bring his commodity to market tion of those commodities which are 
 
 at a lower cost, while its value is deter- 
 mined by a higher. All advantages, 
 in fact, which one competitor has over 
 another, whether natural or acquired, 
 whether personal or the result of social 
 
 absolutely limited in supply, and is 
 therefore selling at a scarcity value ; 
 which never is, nor has been, nor can 
 be, a permanent condition of any of the 
 great rent-yielding commodities : un- 
 
 arrangements, bring the commodity, so less through their approaching exhaus- 
 far. into the Third Class, and assimilate tion, if they are mineral products (coal, 
 the possessor of the advantage to a' for example), or through an increase of 
 receiver of rent. Wages and profits' population, continuing after a further 
 represent the universal elements in! increase of production becomes im- 
 
 production, while rent may be taken 
 to represent the differential and pecu- 
 liar : any difference in favour of certain 
 producers, or in favour of production in 
 certain circumstances, being the source 
 of a gain, which, though not called 
 
 possible ; a contingency, which the 
 almost inevitable progress of human 
 culture and improvement in the long 
 interval which has first to elapse, for- 
 bids us to consider as probable. 
 
 CHAPTER VL 
 
 SUMMARY OF THE THEORY OF VALtJE. 
 
 1. WE have now attained a favour- 
 able point for looking back, and taking 
 a simultaneous view of the space which 
 we have traversed since the commence- 
 ment of the present Book. The 
 following are the principles of the 
 theory of Value, so far as we have yet 
 ascertained them. 
 
 I. Value is a relative term. The 
 value of a thing means the quantity of 
 some other thing, or of things in 
 general, which it exchanges for. The 
 values of all things can never, there- 
 fore, rise or fall simultaneously. There 
 is no such thing as a general rise or a 
 general fall of values. Every rise of va- 
 lue supposes a fall, and every fall a rise. 
 
 1L The temporary or market value 
 
 of a thing depends on the demand and 
 supply; rising as the demand rises, 
 and falling as the supply rises. The 
 demand, however, varies with the 
 value, being generally greater when 
 the thing is cheap than when it is 
 dear; and the value always adjusts 
 itself in such a manner, that the demand 
 is equal to the supply. 
 
 III. Besides their temporary value, 
 things have also a permanent, or as it 
 may be called, a Natural Value, to 
 which the market value, after every 
 variation, always tends to return ; and 
 the oscillations compensate for one 
 another, so that, on the average, com- 
 modities exchange at about their natural 
 value.
 
 SUMMARY OF THE THEORY OF VALUE. 
 
 291 
 
 IV. The natural value of some things 
 is a scarcity value : but most things 
 naturally exchange for one another in 
 the ratio of their cost of production, or at 
 what may be termed their Cost Value. 
 
 V. The things which are naturally 
 and permanently at a scarcity value, 
 are those of which the supply cannot 
 be increased at all, or not sufficiently 
 to satisfy the whole of the demand 
 which would exist for them at their 
 cost value. 
 
 VI. A monopoly value means a 
 scarcity value. .Monopoly cannot give 
 a value to anything, except through a 
 limitation of the supply. 
 
 VII. Every commodity of which the 
 supply can be indefinitely increased by 
 labour and capital, exchanges for other 
 things proportionally to the cost neces- 
 sary for producing and bringing to 
 market the most costly portion of the 
 supply required. The natural value is 
 synonymous with the Cost Value, and 
 the cost value of a thing, means the cost 
 value of the most costly portion of it. 
 
 VIII. Cost of Production consists of 
 several elements, some of which are 
 constant and universal, others occa- 
 sional. The universal elements of 
 cost of production are, the wages of the 
 labour, and the profits of the capital. 
 The occasional elements are, taxes, 
 and any extra cost occasioned by a 
 scarcity value of some of the requisites. 
 
 IX. Rent is not an clement in the 
 cost of production of the commodity 
 which yields it : except in the cases, 
 (rather conceivable than actually exist- 
 ing) in which it results from, and repre- 
 sents, a scarcity value. But when 
 laud capable of yielding rent in agri- 
 culture is applied to some other pur- 
 pose, the rent which it would hare 
 yielded is an element in the cost of pro- 
 duction of the commodity which it is 
 employed to produce. 
 
 X. Omittingthe occasional elements; 
 things which admit of indefinite in- 
 crease, naturally and permanently ex- 
 change for each other according to the 
 comparative amount of wages which 
 must be paid for producing them, and 
 the comparative amount of profits 
 which must be obtained by the capi- 
 talists who pay those wages. 
 
 XI. Tlio comparative amount of 
 wages does not depend on what wages 
 are in themselves. High wages do 
 not make high values, nor low wages 
 low values. The comparative amount 
 of wages depends partly on the com- 
 parative quantities of labour required, 
 and partly on the comparative rates of 
 its remuneration. 
 
 XII. So, the comparative rate of 
 profits does not depend on what profita 
 are in themselves ; nor do high or low 
 profits make high or low values. It 
 depends partly on the comparative 
 lengths of time during which the capital 
 is employed, and partly on the com- 
 parative rate of profits in different ei& 
 ployments. 
 
 XIII. If two things are made by the 
 same quantity of labour, and that labour 
 paid at the same rate, and if the wages 
 of the labourer have to be advanced 
 for the same space of time, and the 
 nature of the employment does not 
 require that there be a permanent 
 difference in their rate of profit ; then, 
 whether wages and profits be high or 
 low, and whether the quantity of labour 
 expended be much or little, these two 
 things will, on the average, exchange 
 for one another. 
 
 XIV. If one of the two things com- 
 mands, on the average, a greater value 
 than the other, the cause must be that 
 it requires for its production either a 
 greater quantity of labour, or a kind of 
 labour permanently paid at a highef 
 rate ; or that the capital, or part of the 
 capital, which supports that labour, 
 must be advanced for a longer period ; 
 or lastly, that the production is attended 
 with some circumstance which requires 
 to be compensated by a permanently 
 higher rate of profit. 
 
 XV. Of these elements, the quantity 
 of labour required for the production is 
 the most important : the effect of the 
 others is smaller, though none of them 
 are insignificant. 
 
 XVI. The lower profits are, the less 
 important becorno the minor elements 
 of cost of production, and the less do 
 commodities deviate from a value pro- 
 portioned to the quantity and quality 
 of the labour required for their pro- 
 duction. 
 
 12
 
 292 
 
 BOOK lU. CHAPTER VI. 2. 
 
 XVII. But eve/y fall of profits lowers, 
 in some degree, the cost value of things 
 made with much or durable machinery, 
 and raises that of things made by 
 hand ; and every rise of profits does 
 the reverse. 
 
 2. Such is the general theory of 
 Exchange Value. It is necessary, 
 however, to remark that this theory 
 contemplates a system of production 
 carried on by capitalists for profit, 
 and not by labourers for subsistence. 
 In proportion as we admit this last 
 supposition and in most countries 
 we must admit it, at least in re- 
 spect of agricultural produce, to a 
 very great extent such of the pre- 
 ceding theorems as relate to the de- 
 pendence of value on cost of produc- 
 tion will require modification. Those 
 theorems are all grounded on the sup- 
 position, that the producer's object 
 and aim is to derive a profit from 
 his capital. This granted, it follows 
 that he must sell his commodity at 
 the price which will afford the ordi- 
 nary rate of profit, that is to say, it 
 must exchange for other commodities 
 at its cost value. But the peasant 
 proprietor, the metayer, and even the 
 peasant-fanner or allotment-holder 
 the labourer, under whatever name, pro- 
 ducing on his own account is seeking, 
 not an investment for his little capital, 
 but an advantageous employment for 
 his time and labour. His disburse- 
 ments, beyond his own maintenance 
 and that of his family, are so small, 
 that nearly the whole proceeds of the 
 sale of the produce are wages of labour. 
 When he and his family have been 
 fed from the produce of the farm (and 
 perhaps clothed with materials grown 
 thereon, and manufactured in the 
 family) he may, in respect of the sup- 
 plementary remuneration derived from 
 the sale of the surplus produce, be 
 Jompared to those labourers who, de- 
 riving their subsistence from an in- 
 dependent source, can afford to sell 
 their labour at any price which is to 
 their minds -worth the exertion. A 
 peasant, who supports himself and his 
 family with one portion of his produce, 
 will often sell the remainder very much 
 
 below what would be its cost value to 
 the capitalist. 
 
 There is, however, even in this case, 
 a minimum, or inferior limit, of value. 
 The produce which he carries to market, 
 must bring in to him the value of 
 all necessaries which he is compelled 
 to purchase ; and it must enable him 
 to pay his rent. Eent, under peasant 
 cultivation, is not governed by the 
 principles set forth in the chapters 
 immediately preceding, but is either 
 determined by custom, as in the caso 
 of metayers, or, if fixed by competition, 
 depends on the ratio of population to 
 land. Eent, therefore, in this case, is 
 an element of cost of production. The 
 
 Eeasant must work until he has cleared 
 is rent and the price of all purchased 
 necessaries. After this, he will go on 
 working only if he can sell the produce 
 for such a price as will overcome his 
 aversion to labour. 
 
 The minimum just mentioned is 
 what the peasant must obtain in ex- 
 change for the whole of his surplus 
 produce. But inasmuch as this surplus 
 is not a fixed quantity, but may be 
 either greater or less according to the 
 degree of his industry, a minimum 
 value for the whole of it does not give 
 any minimum value for a definite 
 quantity of the commodity. In this 
 state of things, therefore, it can hardly 
 be said, that the value depends at all 
 on cost of production. It depends 
 entirely on demand and supply, that is, 
 on the proportion between the quantity 
 of surplus food which the peasants 
 choose to produce, and the numbers of 
 the non-agricultural, or rather of the 
 non-peasant population. If the buying 
 class were numerous and the growing 
 class lazy, food might be permanently 
 at a scarcity price. I am not aware 
 that this case has anywhere a real 
 existence. If the growing class is 
 energetic and industrious, and the 
 buyers few, food will bo extremely 
 cheap. This also is a rare case, though 
 some parts of France perhaps approxi- 
 mate to it. The common cases are, 
 either that, as in Ireland until lately, 
 the peasant class is indolent and the 
 buyers few, or the peasants industrious 
 and the town population numerous and
 
 opulent, as in Belgium, the north of 
 Italy, and parts of Germany. The 
 price of the produce will adjust itself 
 to these varieties of circumstances, un- 
 less modified, as in many cases it is, 
 by the competition of producers who 
 are not peasants, or hy the prices of 
 foreign markets. 
 
 3. Another anomalous case is that 
 of <slave-grown produce : which pre- 
 sents, however, hy no means the same 
 degree of complication. The slave- 
 owner is a capitalist, and his induce- 
 ment to production consists in a profit 
 on his capital. This profit must amount 
 to the ordinary rate. In respect to his 
 expenses, he is in the same position as 
 if his slaves were free labourers working 
 with their present efficiency, and were 
 hired with wages equal to their present 
 cost. If the cost is less in proportion 
 to the work done, than the wages of 
 free lahour would he, so much the 
 greater are his profits : hut if all other 
 producers in the country possess the 
 same advantage, the values of com- 
 
 modities will not be at all affected hy 
 it. The only case in which they can 
 be affected, is when the privilege of 
 cheap labour is confined to particular 
 branches of production, free labourers 
 at proportionally higher wages being 
 employed in the remainder. In this 
 case, as in all cases of permanent in- 
 equality between the wages of different 
 employments, prices and values receive 
 the impress of the inequality. Slave- 
 grown will exchange for non-slave- 
 grown commodities in a less ratio than 
 that of the quantity of labour required 
 for their production ; the value of the 
 former will be less, of the latter greater, 
 than if slavery did not exist. 
 
 The further adaptation of the theory 
 of value lo the varieties of existing or 
 possible industrial systems may be left 
 with great advantage to the intelligent 
 reader. It is well said by Montesquieu, 
 " It is not always advisable so com- 
 pletely to exhaust a subject, as to leave 
 nothing to be done by the reader. The 
 important thing is not to be read, but 
 to excite the reader to thought. 1 '* 
 
 CHAPTER VH. 
 
 OP MONET. 
 
 1 . HAVING proceeded thus far in 
 ascertaining the general laws of Value, 
 without introducing the idea of money 
 (except occasionally for illustration), 
 it is time that we should now superadd 
 that idea, and consider in what man- 
 ner the principles of the mutual inter- 
 change of commodities are affected by 
 the use of what is termed a Medium of 
 Exchange. 
 
 In order to understand the manifold 
 functions of a Circulating Medium, 
 there is no better way than to con- 
 Bider what are the principal incon- 
 veniences which we should experience 
 if we had not such a medium. The 
 first and most obvious would be the 
 want of a common measure for values 
 of different sorts. If a tailor had only 
 coats, and wanted to buy bread or a 
 
 horse, it would be very troublesome to 
 ascertain how much bread he ought to 
 obtain for a coat, or how many coats 
 he should give for a horse. The calcu- 
 lation must be recommenced on dif- 
 ferent data, every time he bartered his 
 coat for a different kind of article ; 
 and there could be no current price, or 
 regular quotations of value. Whereas 
 now each thing has a current price in 
 money, and he gets over all difficulties 
 by reckoning his coat at 41. or 5l., and 
 a four -pound loaf at 6d. or Id. As it 
 is much easier to compare different 
 lengths by expressing them in a com- 
 mon language of feet and inches, so it 
 is much easier to compare values by 
 means of a common language of 
 pounds, shillings, and pence. In no 
 * Spirit <jfLaKi, conclusion of book xi.
 
 294 
 
 BOOK III. CHAPTER VII. 2. 
 
 other way CAII values be arranged one 
 above another in a scale ; in no other 
 can a person conveniently calculate 
 the sum of his possessions ; and it is 
 easier to ascertain and remember the 
 relations of many things to one thing, 
 than their innumerable cross relations 
 with one another. This advantage of 
 having a common language in which 
 values may be expressed, is, even by 
 itself, so important, that some such 
 mode of expressing and computing 
 them would probably be used even if a 
 pound or a shilling did not express 
 any real thing, but a mere unit of cal- 
 culation. It is said that there are 
 African tribes in which this somewhat 
 artificial contrivance actually prevails. 
 They calculate the value of things in 
 a sort of money of account, called ma- 
 cutes. They say, one thing is worth 
 ten macutes, another fifteen, another 
 twenty.* There is no real thing 
 called a macute : it is a conventional 
 unit, for the more convenient com- 
 parison of things with one another. 
 
 This advantage, however, forms but 
 an inconsiderable part of the econo- 
 mical benefits derived from the use of 
 money. The inconveniences of barter 
 are so great, that without some more 
 commodious means of effecting ex- 
 changes, the division of employments 
 could hardly have been earned to any 
 considerable extent. A tailor, who 
 had nothing but coats, might starve 
 before he could find any person having 
 bread to sell who wanted a coat : be- 
 sides, he would not want as much 
 bread at a time as would be worth a 
 coat, and the coat could not be divided. 
 Every person, therefore, would at all 
 times hasten to dispose of his com- 
 modity in exchange for anything which, 
 though it might not be fitted to his 
 own immediate wants, was in great and 
 general demand, and easily divisible, 
 so that he might be sure of being 
 able to purchase with it whatever was 
 offered for sale. The primary neces- 
 saries of life possess these properties 
 in a high degree. Bread is extremely 
 divisible, and an object of universal 
 desire. Still, this is not the sort of 
 
 * Montesquieu, Spirit of Lavs, book xxii. 
 cli, 6. 
 
 thing require 1; for, of food, unless 
 in expectation of a scarcity, no one 
 wishes to possess more at once, than 
 is wanted for immediate consumption ; 
 so that a person is never sure of find- 
 ing an immediate purchaser for articles 
 of food : and unless soon disposed of, 
 most of them perish. The thing which 
 people would select to keep by them for 
 making purchases, must be one which, 
 besides being divisible, and generally 
 desired, does not deteriorate by keep- 
 ing. This reduces the choice to a 
 small number of articles. 
 
 2. By a tacit concurrence, almost 
 all nations, at a very early period, 
 fixed upon certain metals, and espe- 
 cially gold and silver, to serve this 
 purpose. No other substances unite the 
 necessary qualities in so great a degree, 
 with so many subordinate advantages. 
 Xext to food and clothing, and in 
 some climates even before clothing, the 
 strongest inclination in a rude state of 
 society is for personal ornament, and 
 for the kind of distinction which is 
 obtained by rarity or costliness in such 
 ornaments. After the immediate neces- 
 sities of life were satisfied, every one 
 was eager to accumulate as great a store 
 as possible of things at once costly and 
 ornamental ; which were chiefly geld, 
 silver, and jewels. These were the 
 things which it most pleased every 
 one to possess, and which there was 
 most certainty of finding others willing 
 to receive in exchange for any kind of 
 produce. They were among the most 
 imperishable of all substances. They 
 were also portable, and containing great 
 value in small bulk, were easily hid : 
 a consideration of much importance in 
 an age of insecurity. Jewels are infe- 
 rior to gold and silver in the quality of 
 divisibility; and are of very various 
 qualities, not to be accurately discri- 
 minated without great trouble. Gold 
 and silver are eminently divisible, and 
 when pure, always of the same quality ; 
 and their purity may be ascertained 
 and certified by a public authority. 
 
 Accordingly, though furs have been 
 employed as money in some countries, 
 cattle in others, in Chinese Tartary 
 cubes of tea closely pressed together,
 
 MONEY. 
 
 295 
 
 the shells called cowries on the coast 
 of Western Africa, and in Abyssinia 
 at this day blocks of rock salt ; though 
 even of metals, the less costly have 
 sometimes been chosen, as iron in Lace- 
 dzemon from an ascetic policy, copper 
 in the early Roman republic from the 
 poverty of the people ; gold and silver 
 Lave been generally preferred by na- 
 tions which were able to obtain them, 
 either by industry, commerce, or con- 
 quest. To the qualities which ori- 
 ginally recommended them, another 
 came to be added, the importance of 
 which only unfolded itself by degrees. 
 Of all commodities, they are among 
 the least influenced by any of the 
 causes which produce fluctuations of 
 value. No commodity is quite free 
 from such fluctuations. Gold and silver 
 have sustained, since the beginning of 
 history, one great permanent altera- 
 tion of value, from the discovery of 
 the American mines; and some tem- 
 porary variations, such as that which, 
 in the last great war, was produced by 
 the absorption of the metals in hoards, 
 and in the military chests of the im- 
 mense armies constantly in the field. 
 In the present age the opening of new 
 sources of supply, so abundant as the 
 Ural Mountains, California, and Aus- 
 tralia, may be the commencement of 
 another period of decline, on the limits 
 of which it would be useless at present 
 to speculate. But on the whole, no com- 
 modities are so little exposed to causes 
 of variation. They fluctuate less than 
 almost any other things in their cost 
 of production. And from their dura- 
 bility, the total quantity in existence 
 is at all times so great in proportion to 
 the annual supply, that the effect on 
 value even of a change in the cost of 
 production is not sudden : a very long 
 time being required to diminish mate- 
 rially the quantity in existence, and 
 even to increase it very greatly not 
 being a rapid process. Gold and silver, 
 therefore, are more fit than any other 
 commodity to be the subject of engage- 
 ments for receiving or paying a given 
 quantity at some distant period. If 
 the engagement were made in corn, 
 a failure of crops might increase the 
 burthen of the payment in one year 
 
 to fourfold what was intended, or an 
 exuberant harvest sink it in another 
 to one-fourth. If stipulated in cloth, 
 some manufacturing invention might 
 permanently reduce the payment to a 
 tenth of its original value. iSuch things 
 have occurred even in the case of pay- 
 ments stipulated in gold and silver ; but 
 the great fall of their value after the dis- 
 covery of America, is, as yet, the only 
 authenticated instance ; and in this 
 case the change was extremely gra- 
 dual, being spread over a period of 
 many years. 
 
 A\ hen gold and silver had become 
 virtually a medium of exchange, by 
 becoming the things lor which people 
 generally sold, and with which they 
 generally bought, whatever they had 
 to sell or buy ; the contrivance of coin- 
 ing obviously suggested itself. By this 
 process the metal was divided into con- 
 venient portions, of any degree of small- 
 ness, and bearing a recognised propor- 
 tion to one another; and the trouble 
 was saved of weighing and assaying 
 at every change of possessors, an in- 
 convenience which on the occasion of 
 small purchases would soon have 
 become insupportable. Governments 
 found it their interest to take the 
 operation into their own hands, and to 
 interdict all coining by private persons ; 
 indeed, their guarantee was often the 
 only one which would have been re- 
 lied on, a reliance however which very 
 often it ill deserved ; profligate govern- 
 ments having until a very modern 
 period seldom scrupled, for the sake of 
 robbing their creditors, to confer on 
 all other debtors a licence to rob theirs, 
 by the shallow and impudent artifice 
 of lowering the standard ; that least 
 covert of all modes of knavery, which 
 consists in calling a shilling a pound, 
 that a debt of a hundred pounds may 
 be cancelled by the payment of a hun- 
 dred shillings. It would have been as 
 simple a plan, and would have answered 
 the purpose as well, to have enacted 
 that " a hundred" should always be in- 
 terpreted to nisan five, which would 
 have effected the same reduction in all 
 pecuniary contracts, and would not 
 have been at all more shameless. Such 
 strokes of policy have not wlwliy
 
 296 
 
 BOOK III. CHAPTER VII. $ 3. 
 
 ceased to be recommended, but tbey 
 have ceased to be practised ; except 
 occasionally through the medium of 
 paper money, in which case the cha- 
 racter of the transaction, from the 
 greater obscurity of the subject, is a 
 little less barefaced. 
 
 3. Money, when its use has grown 
 habitual, is the medium through which 
 the incomes of the different members 
 of the community are distributed to 
 them, and the measure by which they 
 estimate their possessions. As it is 
 always by means of money that people 
 provide for their different necessities, 
 there grows up in their minds a power- 
 ful association leading them to regard 
 money as wealth in a more peculiar 
 sense than any other article ; and even 
 those who pass their lives in the pro- 
 duction of the most useful objects, ac- 
 quire the habit of regarding those ob- 
 jects as chiefly important by their 
 capacity of being exchanged for money. 
 A person who parts with money to 
 obtain commodities, unless he intends 
 to sell them, appears to the imagina- 
 tion to be making a worse bargain than 
 a person who parts with commodities 
 to get money; the one seems to be 
 spending his means, the other adding 
 to them. Illusions which, though now 
 in some measure dispelled, were long 
 powerful enough to overmaster the 
 mind of every politician, both specula- 
 tive and practical, in Europe. 
 
 It must be evident, however, that 
 the mere introduction of a particular 
 mode of exchanging things for one 
 another, by first exchanging a thing 
 for money, and then exchanging the 
 money for something else, makes no 
 difference in the essential character of 
 transactions. It is not with money 
 that things are really purchased. No- 
 body's income (except that of the gold 
 or silver miner) is derived from the 
 precious metals. The pounds or shil- 
 lings which a person receives weekly 
 or yearly, are not what constitutes his 
 income ; they are a sort of tickets or 
 orders which he can present for pay- 
 ment at any shop he pleases, and which 
 sntitle him to receive a certain value 
 f any commodity that he makes choice 
 
 of. The farmer pays his labourers arid 
 his landlord in these tickets, as the 
 most convenient plan for himself and 
 them; but their real income is their 
 share of his corn, cattle, and hay. and 
 it makes no essential difference whether 
 ho distributes it to them directly, or 
 sells it for them and gives them the 
 price ; but as they would have to sell 
 it for money if he did not, and as he 
 is a seller at any rate, it best suits the 
 purposes of all, that he should sell their 
 share along with his own, and leave 
 the labourers more leisure for work and 
 the landlord for being idle. The capi- 
 talists, except those who are producers 
 of the precious metals, derive no part 
 of their income from those metals, since 
 they only get them by buying them 
 with their own produce : while all other 
 persons have their incomes paid to them 
 by the capitalists, or by those who have 
 received payment from the capitalists, 
 and as the capitalists have nothing, 
 from the first, except their produce, it 
 is that and nothing else which supplies 
 all incomes furnished by them. There 
 cannot, in short, be intrinsically a more 
 insignificant thing, in the economy of 
 society, than money; except in the 
 character of a contrivance for sparing 
 time and labour. It is a machine for 
 doing quickly and commodiously, what 
 would be done, though less quickly and 
 commodiously, without it : and like 
 many other kinds of machinery, it 
 only exerts a distinct and independent 
 influence of its own when it gets out 
 of order. 
 
 The introduction of money does not 
 interfere with the operation of any ot 
 the Laws of Value laid down in the 
 preceding chapters. The reasons which 
 make the temporary or market value 
 of things depend on the demand and 
 supply, and their average and perma- 
 nent values upon their cost of pro- 
 duction, are as applicable to a money 
 system as to a system of barter. Things 
 which by barter would exchange for 
 one another, will, if sold for money, 
 sell for an equal amount of it, and so 
 will exchange for one another still, 
 though the process of exchanging them 
 will consist of two operations instead 
 of only one. The relations of com-
 
 VALUE OF MONEY. 
 
 facilities to one another remain unal- 
 tered by money : the only new relation 
 introduced, is their relation to money 
 itself; how much or how little money 
 they will exchange for ; in other words, 
 bow the Exchange Value of money 
 
 itself is determined. And this is not 
 a question of any difficulty, when the 
 illusion is dispelled, which caused 
 money to be looked upon as a peculiar 
 thing, not governed by the same laws 
 as other things. Money is a commodity, 
 and its value is determined like that 
 of other commodities, temporarily by 
 demand and supply, permanently and 
 
 297 
 
 on the average by cost of production. 
 The illustration of these principles, con- 
 sidered in their application to money, 
 must be given in some detail, on ao 
 count of tiie confusion which, in mind* 
 not scientifically instructed on the sub- 
 
 ject, envelopes the whole matter; partly 
 from a lingering remnant of the old 
 misleading associations, and partly from 
 the mass of vapoury and baseless spe- 
 culation with which this, more than 
 any other topic of political economy, 
 has in latter times become surrounded. 
 I shall therefore treat of the Value of 
 Money in a chapter apart. 
 
 CHAPTER VIII 
 
 OP THE VALUE OF MONEY, A3 DEPENDENT ON DEMAND AND SUPPLY. 
 
 1. IT is unfortunate that in the 
 very outset of the subject we have to 
 clear from our path a formidable am- 
 biguity of language. The Value of 
 Money is to appearance an expression 
 as precise, as free from possibility of 
 misunderstanding, as any in science. 
 The value of a thing, is what it will 
 exchange for : the value of money, is 
 what money will exchange for ; the 
 purchasing power of money. If prices 
 are low, money will buy much of other 
 things, ar.d is of high value ; if prices 
 are high, it will buy little of other 
 things, and is of low value. The value 
 of money is inversely as general prices : 
 falling as they rise, and rising as they 
 fall. 
 
 But unhappily the same phrase is 
 also employed, in the current language 
 of commerce, in a very different sense. 
 Money, \vhich is so commonly under- 
 stood as the synonyme of wealth, is 
 more especially the term in use to 
 denote it when it is the subject of bor- 
 rowing. When one person lends to 
 nnother, as well as when he pays wages 
 or rent to another, what he transfers is 
 not the mere money, but a right to a 
 certain value of the produce of the 
 conntiy, to be selected at pleasure ; the 
 lender having first bought this right, 
 
 by giving for it a portion of his capital. 
 What he really lends is so much 
 capital ; the money is the mere instru- 
 ment of transfer. But the capital 
 usually passes from the lender to the 
 receiver through the means either of 
 money, or of an order to receive money, 
 and at any rate it is in money that 
 the capital is computed and estimated. 
 Hence, borrowing capital is universally 
 called borrowing money; the loan 
 market is called the money market : 
 those who have their capital disposable 
 for investment on loan are called the 
 monied class : and the equivalent given 
 for the use of capital, or in other words, 
 interest, is not only called the interest 
 of money, but, by a grosser perversion 
 of terms, the value of money. This 
 misapplication of language, assisted by 
 some fallacious appearances which we 
 shall notice and clear up hereafter,* 
 has created a general notion among 
 persons in business, that the Value of 
 Money, meaning the rate of interest, 
 has an intimate connexion with tho 
 Value of Money in its proper sense, the 
 value or purchasing power of the cir- 
 culating medium. We shall return to 
 this subject before long : at present it 
 is enough to say, that by Value I shall 
 * Tnfnx, ch. sjciii.
 
 298 
 
 BOOK III. CHAPTER VIII. 2. 
 
 always mean Exchange Value, and by 
 money the medium of exchange, not 
 the capital which is passed from hand 
 to hand through that medium. 
 
 2. The value or purchasing power 
 of money depends, in the first instance, 
 on demand and supply. But demand 
 and supply, in relation to money, present 
 themselves in a somewhat different 
 shape from the demand and supply of 
 other things. 
 
 The supply of a commodity means 
 the quantity offered for sale. But it 
 is not usual to speak of offering money 
 for sale. People are not usually said 
 to buy or sell money. This, however, 
 is merely an accident of language. 
 In point of fact, money is bought and 
 sold like other things, whenever other 
 things are bought and sold for money. 
 Whoever sells corn, or tallow, or cotton, 
 buys money. "Whoever buys bread, or 
 wine, or clothes, sells money to the 
 dealer in those articles. The money 
 with which people are offering to buy, 
 is money offered for sale. The supply 
 of money, then, is the quantity of it 
 which people are wanting to lay out ; 
 that is, all the money they have in 
 their possession, except what they are 
 hoarding, or at least keeping by them 
 as a reserve for future contingencies. 
 The supply of money, in short, is all 
 the money in circulation at the 
 time. 
 
 The demand for money, again, con- 
 sists of all the goods offered for sale. 
 Every seller of goods is a buyer of 
 money, and the goods he brings with 
 him constitute hi? demand. The de- 
 mand for money differs from the demand 
 for other things in this, that it is 
 limited only bv the means of the pur- 
 chaser. The demand for other things 
 is for so much and no more ; but there 
 is always a demand for as much money 
 as can be got. Persons may indeed 
 refuse to sell, and withdraw their goods 
 from the market, if they cannot got for 
 them what they consider a sufficient 
 price. But this is only when they think 
 that the price will rise, and that they 
 shall get more money by waiting. If 
 they thought the low price likely to bo 
 permanent, they would take what they 
 
 could get. It is always a sine qua non 
 with a dealer to dispose of his goods. 
 
 As the whole of the goods in the 
 market compose the demand for money, 
 so the whole of the money constitutes 
 the demand for goods. The money and 
 the goods are seeking each other for 
 the purpose of being exchanged. They 
 are reciprocally supply and demand to 
 one another. It is indifferent whether, 
 in characterizing the phenomena, we 
 speak of the demand and supply of 
 goods, or the supply and the demand 
 of money. They are equivalent ex- 
 pressions. 
 
 We shall proceed to illustrate this 
 proposition more fully. And in doing 
 this, the reader will remark a great dif- 
 ference between the class of questions 
 which now occupy us, and those which 
 we previously had under discussion re- 
 specting Values. In considering Value, 
 we were only concerned with causes 
 which acted upon particular commo- 
 dities apart from the rest. Causes 
 which affect all commodities alike, do 
 not act upon values. But in consider- 
 ing the relation between goods and 
 money, it is with the causes that ope- 
 rate upon all goods whatever, that 
 we are especially concerned. We are 
 comparing goods of all sorts on one 
 side, with money on the other side, as 
 things to be exchanged against each 
 other. 
 
 Suppose, everything else being the 
 same, that there is an increase in the 
 quantity of money, say by the arrival 
 of a foreigner in a place, with a treasure 
 of gold and silver. When he commences 
 expending it (for this question it mat- 
 ters not whether productively or unpro- 
 ductively), he adds to thr supply of 
 money, and by the same act, to the 
 demand for goods. Doubtless he adds, 
 in the first instance, to the demand 
 only for certain kinds of goods, namely, 
 those which he selects for purchase ; he 
 will immediately raise the price of 
 those, and so far as he is individually 
 concerned, of those only. If he spends 
 his funds in giving entertainments, he 
 will raise the prices of food and wine. 
 If he expends thenf-in establishing a 
 manufactory, he will raise the prices 
 of labour and materials. But at the
 
 VALUE OF MONEY. 
 
 299 
 
 higher prices, more money will pass 
 into the hamls of the sellers of these 
 different articles ; and they, whether 
 labourers or dealers, having more money 
 to lay out, will create an increased de- 
 mand for all the things which they are 
 accustomed to purchase : these accord- 
 ingly will rise in price, and so on until 
 the rise has reached everything. I say 
 everything, though it is of course pos- 
 sible that the influx of money might 
 take place through the medium of some 
 new class of consumers, or in such a 
 manner as to alter the proportions of 
 ;.i classes of consumers to one 
 another, so that a greater share of 
 the national income than before would 
 thenceforth be expended in some ar- 
 ticles, and a smaller in others ; exactly 
 as if a change had taken place in the 
 tastes and wants of the community. If 
 this were the case, then until production 
 had accommodated itself to this change 
 in the comparative demand for different 
 things, there would be a real alteration 
 in values, and some things would rise 
 in price more than others, while some 
 perhaps would not rise at all. These 
 effects, however, would evidently pro- 
 ceed, not from the mere increase of 
 money, but from accessory circum- 
 stances attending it. \Ye are now only 
 called upon to consider what would be 
 the effect of an increase of money, con- 
 sidered by itself. Supposing the money 
 in the hands of individuals to be in- 
 creased, the wants and inclinations of 
 the community collectively in respect 
 to consumption remaining exactly the 
 same ; the increase of demand would 
 reach all things equally, and there 
 would be an universal rise of prices. 
 We might suppose with Hume, that 
 some morning, every person in the 
 nation should wake and find a gold 
 coin in his pocket : this example, how- 
 ever, would involve an alteration of the 
 proportions in the demand for different 
 commodities ; the luxuries of the poor 
 would, in the first instance, be raised in 
 price, in a much greater degree than 
 other things. Let us rather suppose, 
 therefore; that to every pound, or shil- 
 ling, or penny, in the possession of any 
 one, another pound, shilling, or penny, 
 were suddenly added. There would be 
 
 an increased money d</mand, and con- 
 sequently an increased money value, or 
 price, for things of all sorts. This in- 
 creased value would do no good to any 
 one ; would make no difference, except 
 that of having to reckon pounds, shil- 
 lings, and pence, in higher numbers. 
 It would be an increase of values only 
 as estimated in money, a thing only 
 wanted to buy other things with ; and 
 would not enable any one to buy more 
 of them than before. Prices would have 
 risen in a certain ratio, and the value 
 of money would have fallen in the same 
 ratio. 
 
 It is to be remarked that this ratio 
 would be precisely that in which the 
 
 Juantity of money had been increased, 
 f the whole money in circulation was 
 doubled, prices would be doubled. If it 
 was only increased one-fourth, prices 
 would rise one-fourth. There would be 
 one-fourth more money, all of which 
 would be used to purchase goods of 
 some description. AYhen there had 
 been time for the increased supply of 
 money to reach all markets, or (accord- 
 ing to the conventional metaphor) to 
 permeate all the channels of circulation, 
 all prices would have risen one-fourth. 
 But the general rise of price is inde- 
 pendent of this diffusing and equaliz- 
 ing process. Even if some prices were 
 raised more, and others less, the ave- 
 rage rise would be one-fourth. This is 
 a necessary consequence of the fact, 
 that a fourth more money would have 
 been given for only the same quantity 
 of goods. General prices, therefore, 
 would in any case be a fourth higher. 
 
 The very same effect would be pro- 
 duced on prices if we suppose the goods 
 diminished, instead of the money in- 
 creased : and the contrary effect if the 
 goods were increased, or the money 
 diminished. If there were less money 
 in the hands of the community, and the 
 same amount of goods to be sold, less 
 money altogether would be given for 
 them, and they would be sold at lower 
 prices ; lower, too, in the precise ratio 
 in which the money was diminished. 
 So that the value of money, other 
 things being the same, varies inversely 
 as its quantity ; every increase of quan- 
 tity lowering the value, and every
 
 so v 
 
 BOOK III. CHAPTER Vltl. 3. 
 
 diminution raising it, in a ratio exactly 
 equivalent. 
 
 This, it must be observed, is a pro- 
 perty peculiar to money. We did not 
 lincl it to be true of commodities gene- 
 rally, that every diminution of supply 
 raised the value exactly in proportion 
 to the deficiency, or that every increase 
 lowered it in the precise ratio of the 
 excess. Some things are usually 
 affected in a greater ratio than that of 
 tho excess or deficiency, others usually 
 in a less : because, in ordinary cases of 
 demand, the desire, being for the thing 
 itself, may be stronger or weaker ; and 
 the amount of what people are willing 
 to expend on it, being in any case a 
 limited quantity, may be affected in 
 very unequal degrees by difficulty or 
 facility of attainment. But in the case 
 of money, which is desired as the 
 means of universal purchase, the de- 
 mand consists of everything which 
 people have to sell ; and the only limit 
 to what they are willing to give, is the 
 limit set by their having nothing more 
 to offer. The whole of the goods being 
 in any case exchanged for the whole of 
 the money which comes into the market 
 to be laid out, they will sell for less or 
 more of it, exactly according as less or 
 more is brought. 
 
 3. From what precedes, it might 
 for a moment be supposed, that all the 
 goods on sale in a country at any one 
 time, are exchanged for all the money 
 existing and in circulation at that same 
 time : or, in other words, that there is 
 always in circulation in a country, a 
 quantity of money equal in value to 
 the whole of the goods then and there 
 on sale. But this would be a complete 
 misapprehension. The money laid out 
 is equal in value to the goods it pur- 
 chases ; but the quantity of money laid 
 out is not the same thing with the 
 quantity in circulation. As the money 
 passes from hand to hand, the same 
 piece of money is laid out many times, 
 before all the things on sale at one 
 time are purchased and finally removed 
 from the market : and each pound or 
 dollar must be counted for as many 
 pounds or dollars, as the number of 
 times it changes hands in order to 
 
 effect this object. The greater part- 
 of the goods must also be counted more 
 than once, not only because most things 
 pass through the hands of several sets 
 of manufacturers and dealers before 
 they assume the form in which they 
 are finally consumed, but because in 
 times of speculation (and all times are 
 so, more or less) the same goods are 
 often bought repeatedly, to be resold 
 for a profit, before they are bought 
 for the purpose of consumption at all. 
 
 If we assume the quantity of goods 
 on sale, and the number of times those 
 goods are resold, to be fixed quantities, 
 the value of money will depend upon 
 its quantity, together with the average 
 number of times that each piece changes 
 hands in the process. The whole of the 
 goods sold (counting each resale of 
 the same goods as so much added to 
 the goods) have been exchanged for the 
 whole of the money, multiplied by the 
 number of purchases made on the aver- 
 age by each piece. Consequently, the 
 amount of goods and of transactions 
 being the same, the value of money is 
 inversely as its quantity multiplied by 
 what is called the rapidity of circula- 
 tion. And the quantity of money in 
 circulation, is equal to the money value 
 of all the goods sold, divided by the 
 number which expresses the rapidity of 
 circulation. 
 
 The phrase, rapidity of circulation, 
 requires some comment. It must not 
 be understood to mean, the number of 
 purchases made by each piece of money 
 in a given time. Time is not the thing 
 to be considered. The state of society 
 may be such, that each piece of money 
 hardly performs more than one pur- 
 chase in a year ; but if this arise from 
 the small number of transactions from 
 the small amount of business done, the 
 want of activity in traffic, or because 
 what traffic there is, mostly takes place 
 by barter it constitutes no reason why 
 prices should be lower, or the value of 
 money higher. The essential point is, 
 not how often the same money changes 
 hands in a given time, but how often 
 it changes hands in order to perform a 
 given amount of traffic. 'We must com- 
 pare the number of purchases made by 
 the money in a given time, not witft
 
 VALUE OF MONEY. 
 
 301 
 
 the time itself, but with the goods sold 
 in that same time, if each piece of 
 money changes hands on an average 
 ten times while go^ds are sold to the 
 value of a million sterling, it is evident 
 that the money required to circulate 
 those goods is" 100,0002. And con- 
 versely, if the money in circulation is 
 100,0002., and each piece changes 
 hands by the purchase of goods ten 
 times in a month, the sales of goods 
 for money which take place every 
 month must amount on the average to 
 1,000,0002. 
 
 Eapidity of circulation being a phrase 
 BO ill adapted to express the only thing 
 which it is of any importance to express 
 by it, and having a tendency to con- 
 fuse the subject by suggesting a mean- 
 ing extremely different from the one 
 intended, it would be a good thing if 
 the phrase could be got rid of, and 
 another substituted, more directly 
 significant of the idea meant to be con- 
 veyed. Some such expression as " the 
 efficiency of money," though not un- 
 sxceptionable, would do better : as it 
 would point attention to the quantity 
 of work done, without suggesting the 
 idea of estimating it by time. Until 
 n appropriate term can be devised, we 
 must be content, when ambiguity is to 
 be apprehended, to express the idea by 
 the circumlocution which alone conveys 
 it adequately, namely, the average 
 number of purchases made by each 
 piece in order to effect a given pecu- 
 niary amount of transactions. 
 
 4. The proposition which we have 
 laid down respecting the dependence 
 of general prices upon the quantity of 
 money in circulation, must be under- 
 stood as applying only to a state of 
 things in which money, that is, gold or 
 silver, is the exclusive instrument of 
 exchange, and actually passes from 
 hand to hand at every purchase, credit 
 in any of its shapes being unknown. 
 When credit comes into play as a means 
 of purchasing, distinct from money in 
 hand, we shall hereafter find that the 
 connexion between prices and the 
 amount of the circulating medium is 
 much less direct and intimate, and that 
 each connexion as does exist, no longer 
 
 admits of so simple a mode of expres- 
 sion. But on a subject so full of com- 
 plexity as that of currency and prices, 
 it is necessary to lay the foundation of 
 our theory in a thorough understanding 
 of the most simple cases, winch wo 
 shall always find lying as a ground- 
 work or substratum under those which 
 arise in practice. That an increase of 
 the quantity of money raises prices, and 
 a diminution lowers them, is the most 
 elementary proposition in the theory of 
 currency, and without it we should 
 have no key to any of the others. In 
 any state of things, however, except 
 the simple and primitive one which we 
 have supposed, the proposition is only 
 true other things being the same : and 
 what those other things are, which 
 must be the same, we are not yet ready 
 to pronounce. We can, however, point 
 out, even now, one or two of the cau- 
 tions with which the principle must bo 
 guarded in attempting to make use of 
 it for the practical explanation of phe- 
 nomena ; cautions the more indispensa- 
 ble, as the doctrine, though a scientific 
 truth, has of late years been the foun- 
 dation of a greater mass of false theory, 
 and erroneous interpretation of facts, 
 than any other proposition relating to 
 interchange. From the time of tho 
 resumption of cash payments by tho 
 Act of 1819, and especially since tha 
 commercial crisis of 1825, the favourite 
 explanation of every rise or fall of prices 
 has been "the currency;" and like 
 most popular theories, the doctrine has 
 been applied with little regard to the 
 conditions necessary for making it cor- 
 rect. 
 
 For example, it is habitually assumed 
 that whenever there is a greater 
 amount of money in the country, or in 
 existence, a rise of prices must neces- 
 sarily follow. But this is by no means 
 an inevitable consequence. In no com- 
 modity is it the quantity in existence, 
 but the quantity offered for sale, that 
 determines the value. Whatever maj 
 be the quantity of money in the country, 
 only that part of it will affect prices, 
 which goes into the market of commo- 
 dities, and is there actually exchanged 
 against goods. Whatever increases the 
 amount <f this portion of the money in
 
 302 
 
 BOOK III. CHAPTEK VIII. 4. 
 
 ho country, terms to raise prices. But 
 money hoarded does not act on prices. 
 Jloney kept in reserve by individuals 
 M meet contingencies which do not 
 occur, does not act on prices. The 
 money in the coffers of the Bank, or 
 retained as a reserve by private bank- 
 ers, does not act on prices until drawn 
 out, nor even then unless drawn out to 
 be expended in commodities. 
 
 It frequently happens that money, to 
 a considerable amount, is brought into 
 the country, is there actually invested 
 as capital, and again flows out, without 
 having ever once acted upon the mar- 
 kets of commodities, but only upon the 
 market of securities, or, as it is com- 
 monly though improperly called, the 
 money market. Let us return to the 
 case already put for illustration, that 
 of a foreigner lauding in the country 
 with a treasure. We supposed him to 
 employ his treasure in the purchase of 
 goods for his own use, or in setting up a 
 manufactory and employing labourers ; 
 and in either case he would, cceteris 
 paribus, raise prices. But instead of 
 doing either of these things, he might 
 very probably prefer to invest his for- 
 tune at interest ; which we shall sup- 
 pose him to do in the most obvious way, 
 by becoming a competitor for a portion 
 of the stock, exchequer bills, railway 
 debentures, mercantile bills, mortgages, 
 &c., which are at all times in the hands 
 of the public. By doing this he would 
 raise the prices of those different secu- 
 rities, or in other words would lower 
 the rate of interest ; and since this 
 would disturb the relation previously 
 existing between the rate of interest 
 on capital in the country itself, and 
 that in foreign countries, it would pro- 
 bably induce some of those who had 
 floating capital seeking employment, to 
 send it abroad for foreign investment, 
 rather than buy securities at home at 
 the advanced price. As much money 
 might thus go out as had previously 
 come in, while the prices of commodities 
 would have shown no trace of its tem- 
 porary presence. This is a case highly 
 deserving of attention : and it is a fact 
 now beginning to be recognised, that 
 the passage of the precious metals from 
 country to country is determined much 
 
 more than was formerly supposed, by 
 the state of the loan market in different 
 countries, and much less by the state 
 of prices. 
 
 Another point must be adverted to, 
 in order to avoid serious error in the in- 
 terpretation of mercantile phenomena. 
 If there be, at any time, an increase in 
 the number of money transactions, a 
 thing continually liable to happen from 
 differences in the activity of specula- 
 tion, and even in the lime of year (since 
 certain kinds of business are transacted 
 only at particular seasons); an increase 
 of the currency which is only propor- 
 tional to this increase of transactions, 
 and is of no longer duration, has no 
 tendency to raise prices. At the 
 quarterly periods when the public 
 dividends are paid at the Bank, a sud- 
 den increase takes place of the money 
 in the hands of the public ; an increase 
 estimated at from a fifth to two-fifths 
 of the whole issues of the Bank of Eng- 
 land. Yet this never has any effect on 
 prices ; and in a very few weeks, the 
 currency has again shrunk into its 
 usual dimensions, by a mere reduction 
 in the demands of the public (after so 
 copious a supply of ready money) for 
 accommodation from the Bank in the 
 way of discount or loan. In like manner 
 the currency of the agricultural dis- 
 tricts fluctuates in amount at different 
 seasons of the year. It is always low- 
 est in August : " it rises generally 
 towards Christmas, and obtains its 
 greatest elevation about Lady-day, 
 when the farmer commonly lays in his 
 stock, and has to pay his rent and 
 summer-taxes,'' and when he therefore 
 makes his principal applications to 
 country bankers for loans. "Those 
 variations occur with the same regu- 
 larity as the season, and with just as 
 little disturbance of the markets as the 
 quarterly fluctuations of the notes of 
 the Bank of England. As soon as the 
 extra payments have been completed, 
 the superfluous' 1 currency, which is 
 estimated at half a million, "as cer- 
 tainly and immediately is reabsorbed 
 and disappears."* 
 
 If extra currency were not forth- 
 
 * Ful!arton on the Regulation of Curreif 
 ties, 2nd edit, pp. 879.
 
 VALUE OF MONEY. 
 
 303 
 
 crnnnpf to make these extra payments, 
 ore of three things must happen. Either 
 the payments must be made without 
 money, by a resort to some of those 
 contrivances by which its use is dis- 
 pensed with ; or there must be an in- 
 crease in the rapidity of circulation, the 
 same sum of money being made to per- 
 form more payments ; or if neither of 
 these things took place, money to make 
 the extra payments must be withdrawn 
 from the market for commodities, and 
 prices, consequently, must fall. An 
 increase of the circulating medium, 
 conformable in extent and duration to 
 
 the temporary stress of business, does 
 not raise prices, but merely prevents 
 this fall. 
 
 The sequel of our investigation will 
 point out many other qualifications with 
 which the proposition must be received, 
 that the value of the circulating medium 
 depends on the demand and supply, and 
 is in the inverse ratio of the quantity; 
 qualifications which, under a complex 
 system of credit like that existing in 
 England, render the proposition an 
 extremely incorrect expression of the 
 fact. 
 
 CHAPTER IX. 
 
 OF TF1E VALUE OF MONEY, AS DEPENDENT OX COST OF PRODUCTION. 
 
 1. 13 LT money, no more than 
 commodities in general, has its value 
 definitively determined by demand and 
 supply. The ultimate regulator of its 
 value is Cost of Production. 
 
 Wo are supposing, of course, that 
 things are left to themselves. Govern- 
 ments have not always left things to 
 themselves. They have undertaken to 
 prevent the quantity of money from 
 adjusting itself according to sponta- 
 neous laws, and have endeavoured to 
 regulate it at their pleasure ; generally 
 with a view of keeping a greater quan- 
 tity of money in the country, than 
 would otherwise have remained there. 
 It was, until lately, the policy of all 
 governments to interdict the exporta- 
 tion and the melting of money ; while, 
 by encouraging the exportation and 
 impeding the importation of other 
 things, they endeavoured to have a 
 stream of money constantly flowing in. 
 By this course they gratified two pre- 
 judices ; they drew, or thought that 
 they drew, more money into the country, 
 which they believed to be tantamount 
 to more wealth ; and they gave, or 
 thought they gave, to all producers and 
 dealers, high prices, which, though no 
 real advantage, people are always in- 
 clined to suppose to be one. 
 
 la this attempt to regulate the value 
 
 of money artificially by means of the 
 supply, governments have never suc- 
 ceeded in the degree, or even in the 
 manner, which they intended. Their 
 prohibitions against exporting or melt- 
 ing the coin have never been effectual. 
 A commodity of such small bulk in 
 proportion to its value is so easily 
 smuggled, and still more easily melted, 
 that it has been impossible by the 
 most stringent measures to prevent 
 these operations. All the risk which 
 it was in the power of governments to 
 attach to them, was outweighed by a 
 very moderate profit.* In the more 
 indirect mode of aiming at the same 
 purpose, by throwing difficulties in tlio 
 way of making the returns for exported 
 goods in any other commodity than 
 money, they have not been quite so 
 unsuccessful. They have not, indeed, 
 succeeded in making money flow con- 
 tinuously into the country ; but they 
 have to a certain extent been able to 
 keep it at a higher than its natural 
 
 * The effect of the prohibition cannot, 
 however, have been so entirely insignificant 
 as it has been supposed to be by writers on 
 the subject. The facts adduced by Mr. Ful- 
 larton, in the note to page 7 of his work on 
 the Regulation qf Currenciet, show that it 
 required a greater percentage of difference 
 in ralue between coin and bullion than has 
 commonly been imagined, to bring th coin 
 to the melting-pot.
 
 304 
 
 level ; and have, thus far, removed the 
 value of money from exclusive depen- 
 dence on the causes which fix the 
 values of things not artificially inter- 
 fered with. 
 
 We are, however, to suppose a state, 
 not of artificial regulation, but of free- 
 dom. In that state, and assuming no 
 charge to be made for coinage, the 
 value of money will conform to the 
 value of the bullion of which it is made. 
 A pound weight of gold or silver in 
 coin, and the same weight in an ingot, 
 will precisely exchange for one another. 
 On the supposition of freedom, the 
 metal cannot be worth more in the 
 state of bullion than of coin ; for as it 
 can be melted without any loss of time, 
 and with hardly any expense, this 
 would of course be done, until the 
 quantity in circulation was so much 
 diminished as to equalize its value with 
 that of the same weight in bullion. It 
 may be thought however that the coin, 
 though it cannot be of less, may be, 
 and being a manufactured article will 
 naturally be, of greater value than the 
 bullion contained in it, on the same 
 principle on which linen cloth is of 
 more value than an equal weight of 
 linen yarn. This would be true, were 
 it not that Government, in this country 
 and in some others, coins money gratis 
 for any one who furnishes the metal. 
 The labour and expense of coinage, 
 when not charged to the possessor, do 
 not raise the value of the article. If 
 Government opened an office where, on 
 delivery of a given weight of yarn, it 
 returned the same weight of cloth to 
 any one who asked for it, cloth would 
 be worth no m? re in the market than 
 the yarn it contained. As soon as coin 
 is worth a fraction more than the value 
 of the bullion, it becomes the interest 
 of the holders of bullion to send it to be 
 coined. If Government, however, throws 
 the expense of coinage, as is reason- 
 able, upon the holder, by making a 
 charge to cover the expense, (winch is 
 done by giving back rather less in coin 
 than has been received in bullion, and 
 is called levying a seignorage), the coin 
 will rise, to the extent of the seignorage, 
 above the value of the bullion. If the 
 Mint kept back one per cent, to pay 
 
 BOOK III. CHAPTER IX. 2. 
 
 the expense of coinage, it would be 
 against the interest of the holders of 
 bullion to have it coined, until the coin 
 was more valuable than the bullion by 
 at least that fraction. The coin, there- 
 fore, would be kept one per cent higher 
 in value, which could only be by 
 keeping it one per cent less in 
 quantity, than if its coinage were 
 gratuitous. 
 
 The Government might attempt to 
 obtain a profit by the transaction, and 
 might lay on a seignorage calculated 
 for that purpose ; but whatever they 
 took for coinage beyond its expenses, 
 would be so much profit on private 
 coining. Coining, though not so easy 
 an operation as melting, is far from a 
 difficult one, and, when the coin pro- 
 duced is of full weight and standard 
 fineness, is very difficult to detect. If, 
 therefore, a profit could be made by 
 coining good money, it would certainly 
 be done : and the attempt to make 
 seignorage a source of revenue would 
 be defeated. Any attempt to keep the 
 value of the coin at an artificial eleva- 
 tion, not by a seignorage, but by re- 
 fusing to coin, would be frustrated in 
 the same manner.* 
 
 2. The value of money, then, 
 conforms, permanently, and, in a state 
 of freedom, almost immediately, to the 
 value of the metal of which it is made ; 
 with the addition, or not, of the ex- 
 penses of coinage, according as those 
 expenses are borne by the individual at 
 by the state. This simplifies extremely 
 the question which we have here to 
 consider: since gold and silver bullion 
 are commodities like any others, and 
 
 * In England, though there is no seignor- 
 age on gold coin, (the Mint returning in coin 
 the same weight of pure metal which it re- 
 ceives in bullion) there is a delay of a few 
 weeks after the bullion is deposited, before 
 the coin can be obtained, occasioning a loss of 
 interest, which, to the holder, is equivalent 
 to a trifling seignorage. From this cause, 
 the value of coin is in general slightly abore 
 that of the bullion it contains. An ounce of 
 gold, according to ;he quantity of metal in a 
 sovereign, should be worth 31. 17s. 10J<i. ; 
 but it was usually quoted at 31. 17*. 6d., 
 until the Bank Charter Act of 1844 made it 
 imperative on the Bank to give its notes for 
 all bullion offered w it at the rate of 
 3/. 17*. 9<f
 
 VALUE OF MONEY. 
 
 305 
 
 their value depends, like that of other 
 things, on their cost of production. 
 
 To the majority of civilized countries, 
 gold and silver are foreign products : 
 and the circumstances which govern 
 the values of foreign products, present 
 some questions which we are not yet 
 ready to examine. For the present, 
 therefore, we must suppose the country 
 which is the subject of our inquiries, to 
 be supplied with gold and silver by its 
 own mines, reserving for future consi- 
 deration how far our conclusions require 
 modification to adapt them to the more 
 usual case. 
 
 Of the three classes into which com- 
 modities are divided those absolutely 
 limited in supply, those which may be 
 had in unlimited quantity at ... given 
 cost of production, and those which 
 may be had in unlimited quantity, but 
 at an increasing cost of production 
 the precious metals, being the produce 
 of mines, belong io the third class. 
 Their natural value, therefore, is in the 
 long run proportional to their cost of 
 production in the most unfavourable 
 existing circumstances, that is, at the 
 worst mine which it is necessary to 
 work in order to obtain the required 
 supply. A pound weight of gold will, 
 in the gold-producing countries, ulti- 
 mately tend to exchange for as much 
 of every other commodity, as is pro- 
 duced at a cost equal to its own ; mean- 
 ing by its own cost the cost in labour 
 and expense, at the least productive 
 souices of supply which the then exist- 
 ing demand makes it necessary to 
 work. The average value of gold is 
 made to conform to its natural value in 
 the same manner as the values of other 
 things are made to conform to their 
 natural value. Suppose that it were 
 selling above its natural value ; that is, 
 xbove the value which is an equivalent 
 i'jr the labour and expense of mining, 
 and for the risks attending a branch of 
 industry in which nine out of ten expe- 
 riments have usually been failures. A 
 pavt of the mass of floating capital 
 which is on the look-out for investment, 
 would take the direction of mining 
 enterpiise ; the supply would thus be 
 increased, and the value would fall. If, 
 no the contrary, it were selling below 
 
 its natural value, miners would not be 
 obtaining the ordinary profit; they 
 would slacken their works; if the de- 
 preciation was great, some of the infe- 
 rior mines would perhaps stop working 
 altogether: and a falling off in the 
 annual supply, preventing the annual 
 wear and tear from being completely 
 compensated, would by decrees reduce 
 the quantity, and restore the value. 
 
 When examined more closely, the 
 following are the details of the process. 
 If gold is above its natural or cost 
 value the coin, as we have seen, con- 
 forming in its value to the bullion 
 money will be of high value, and the 
 prices of all things, labour included, 
 will be low. These low prices will 
 lower the expenses of all producers ; 
 but as their returns will also be lowered, 
 no advantage will be obtained by any 
 producer, except the producer of gold : 
 whose returns from his mine, not de- 
 pending on price, will be the same aa 
 before, and his expenses being less, he 
 will obtain extra profits, and will bo sti- 
 mulated to increase his production. The 
 reverse is the case if the metal is below 
 its natural value : since this is as much 
 as to say that prices are high, and the 
 money expenses of ail producers un- 
 usually great: for this, however, all 
 other producers will be compensated 
 by increased money returns : the miner 
 alone will extract from his mine no 
 more metal than before, while his ex- 
 penses will be greater: his profits 
 therefore being diminished or annihi- 
 lated, he will diminish his production, 
 if not abandon his employment. 
 
 In this manner it is that the valuf 
 of money is made to conform to the 
 cost of production of the metal of which 
 it is made. It may be well, however, 
 to repeat (what has been said before) 
 that the adjustment takes a long timo 
 to effect, in the case of a commodity 
 so generally desired and at the same 
 time so durable as the precious metals. 
 Being so largely used not only aa 
 money but for plate and ornament, 
 there is at all times a very large quan- 
 tity of these metals in existence : while 
 they are so slowly worn out, that a 
 comparatively small annual production 
 is suflicient to keep up the supply, and
 
 306 
 
 BOOK IH. CHAPTER IX. 3. 
 
 to make any addition to it which imvy 
 be required by the increase of goods to 
 be circulated, or by the increased de- 
 mand for gold and silver articles by 
 wealthy consumers. Even if this small 
 annual supply -were stopt entirely, it 
 would require many years to reduce 
 the quantity so much as to make any 
 very material difference in prices. The 
 quantity may be increased, much more 
 rapidly than it can be diminished ; but 
 the increase must be very great before 
 it can make itself much felt over such 
 a mass of the precious metals as exists 
 in the whole commercial world. And 
 hence the effects of all changes in the 
 conditions of production of the precious 
 metals are at first, and continue to be 
 for many years, questions of quantity 
 only, with little reference to cost of 
 production. More especially is this 
 the case when, as at the present time, 
 many new sources of supply have been 
 simultaneously opened, most of them 
 practicable by labour alone, without 
 any capital in advance beyond a pickaxe 
 and a week's food, and when the opera- 
 tions are as yet wholly experimental, the 
 comparative permanent productiveness 
 of the different sources being entirely 
 unascertained. 
 
 3. Since, however, the value of 
 money really conforms, like that of 
 other things, though more slowly, to its 
 cost of production, some political econo- 
 mists have objected altogether to the 
 statement that the value of money de- 
 pends on its quantity combined with 
 the rapidity of circulation ; which, they 
 think, is assuming a law for money that 
 does ->ot exist for any other commodity, 
 when, the truth is that it is governed by 
 the very same laws. To this we may 
 answer, in the first place, that the state- 
 ment in question assumes no peculiar 
 law. It is simply the law of demand 
 and supply, which is acknowledged to 
 be applicable to all commodities, and 
 which in the case of money as of most 
 other things, is controlled, but not set 
 aside, by the law of cost of production, 
 eince cost of production would have no 
 effect on value if it could have none on 
 supply. But, secondly, there really is, 
 in coie respect a closer connexion be- 
 
 tween the value of money and its quan- 
 tity, than between the values of other 
 things and their quantity. The value 
 of other things conforms to the changes 
 in the cost of production, without r<* 
 quiring, as a condition, that there shoulu 
 be any actual alteration of the supply f 
 the potential alteration is sufficient:' 
 and if there even be an actual altera- 
 tion, it is but a temporary one, except 
 in so far as the altered value may make 
 a difference in the demand, and so re- 
 quire an increase or diminution of 
 supply, as a consequence, not a cause, 
 of the alteration in value. Now this is 
 also true of gold and silver, considered 
 as articles of expenditure for ornament 
 and luxury ; but it is not true of money. 
 If the permanent cost of production of 
 
 fold were reduced one-fourth, it might 
 appen that there would not be more 
 of it bought for plate, gilding, or jewel- 
 lery, than before ; and if so, though the 
 value would fall, the quantity extracted 
 from the mines for these purposes would 
 be no greater than previously. Not so 
 with the portion used as money ; that 
 portion could not fall in value one- 
 fourth, unless actually increased one- 
 fourth ; for, at prices one-fourth higher, 
 one-fourth more money would be re- 
 quired to make the accustomed pur- 
 chases ; and if this were not forth- 
 coming, some of the commodities would 
 be without purchasers, and prices could 
 not be kept up. Alterations, therefore, 
 in the cost of production of the precioua 
 metals, do not act upon the value of 
 money except just in proportion- as they 
 increase or diminish its quantity; which 
 cannot be said of any other commodity. 
 It would therefore, I conceive, be an 
 error, both scientifically and practi- 
 cally, to discard the proposition which 
 asserts a connexion between the value 
 of money and its quantity. 
 
 It is evident, however, that the cost 
 of production, in the long run, regulates 
 the quantity ; and that every country 
 (temporary fluctuations excepted) will 
 possess, and have in circulation, just 
 that quantity of money, which will per- 
 form all the exchanges required of it, 
 consistently with maintaining a value 
 conformable to its cost of production. 
 The prices of things will, on the ave-
 
 DOUBLE STANDARD, AND SUBSDDIARY COINS. 
 
 36? 
 
 rage, be such that money will exchange 
 for its own cost in all other goods : and, 
 precisely luTausc the quantity cannot 
 be prevented from affecting the value, 
 the quantity itself will (by a sort of 
 self-acting machinery) he kept at tho 
 amount consistent with that standard 
 of prices at the amount necessary for 
 performing, at those prices, all the 
 business required of it. 
 
 " The quantity wanted will depend 
 partly on the cost of producing gold, 
 and partly on the rapidity of its circu- 
 lation. The rapidity of circulation 
 Leing given, it would depend on the 
 cost of production : and the cost of pro- 
 duction heing given, the quantity of 
 money would depend on the rapidity of 
 its circulation."* After what has 
 been already said, I hope that neither 
 of these p:v]-ositiuns stands in need of 
 any further illustration. 
 
 Money, then, like commodities in 
 general, having a value dependent on, 
 and proportional to, its cost of produc- 
 tion ; the theory of money is, by the 
 admission of this principle, strict of a 
 great part of the mystery which appa- 
 rently surrounded it. We must not 
 forget, however, that this doctrine only 
 applies to the places in which the pre- 
 cious metals are actually produced ; and 
 
 that we have yet to enquiie whether the 
 law of the dependence of value on cost 
 of production applies to the exchange 
 of things produced at distant places. 
 But however this may be, our proposi- 
 tions with respect to value will require 
 no other alteration, where money is an 
 imported commodity, than that of sub- 
 stituting for the cost of its production, 
 the cost of obtaining it in the country. 
 Every foreign commodity is bought by 
 giving for it some domestic production ; 
 and the labour and capital which a 
 foreign commodity costs to us, is the 
 labour and capital expended in pro- 
 ducing the quantity of our own goods 
 which we give in exchange for it. 
 What this quantity depends upon, 
 what determines the proportions of in- 
 terchange between the productions of 
 one country and those of another, is 
 indeed a question of somewhat greater 
 complexity than those we have hitherto 
 considered. But this at least is indis- 
 putable, that within the country itself 
 the value of imported commod'ities is 
 determined by the value, and conse 
 quently by the cost of production, ot 
 tne equivalent given for them ; and 
 money, where it is an imported com- 
 modity, is subject to the same law. 
 
 CHAPTER X. 
 
 OF A DOUBLE STANDARD, AND SUBSIDIARY COINS. 
 
 1. "Iftouon the qualities neces- 
 sary to fit any commodity for being 
 used as money are rarely united in any 
 considerable perfection, there are two 
 commodities which possess them in an 
 eminent, and nearly an equal degree ; the 
 two precious metals, as they are called; 
 gold and silver. Some nations have ac- 
 cordingly attempted to compose their 
 emulating medium of these two metals 
 indiscriminately. 
 
 * From some printed, but not published, 
 Lectures of Mr. Senior : in wliich the great 
 differences in the business done by money, 
 as well as in the rapidity of its circulation, 
 in different states of society and civilization, 
 are interestingly illustrated. 
 
 There is an obvious convenience in 
 making use of the more costly metal for 
 larger payments, and the cheaper one 
 for smaller ; and the only question re- 
 lates to the mode in which this can 
 best be done. The mode most fre- 
 quently adopted has been to establish 
 between the two metals a fixed propor- 
 tion ; to decide, for example, that a gold 
 coin called a sovereign should be equiva- 
 lent to twenty of the silver coins called 
 shillings : boffi the one and the other 
 being called, in the ordinary money of 
 account of the country, by the same 
 denomination, a pound: and it being 
 left free to every one who has a pound 
 X2
 
 608 
 
 to pay, either to pay it in the one metal 
 
 or in the other. 
 
 At the time when the valuation of 
 the two metals relatively to each other, 
 say twenty shillings to the sovereign, 
 or twenty-one shillings to the guinea, 
 was first made, the proportion probably 
 corresponded, as nearly as it could be 
 made to do, with the ordinary relative 
 values of the two metals, grounded on 
 their cost of production ; and if those 
 natural or cost values always continued 
 to bear the same ratio to one another, 
 the arrangement would be unobjection- 
 able. This, however, is far from being 
 the fact. Gold and silver, though the 
 least variable in value of all commo- 
 dities, are not invariable, and do not 
 always vary simultaneously. Silver, 
 for example, was lowered in permanent 
 value more than gold, by the discovery 
 of the American mines ; and those 
 small variations of value which take 
 place occasionally, do not affect both 
 metals alike. Suppose such a variation 
 to take place : the value of the two 
 metals relatively to one another no 
 longer agreeing with their rated pro- 
 portion, one or other of them will now 
 be rated below its bullion value, and 
 there will be a profit to be made by 
 melting it. 
 
 Suppose, for example, that gold rises 
 in value relatively to silver, so that the 
 quantity of gold in a sovereign is now 
 worth more than the quantity of silver 
 in twenty shillings. Two consequences 
 will ensue. No debtor will any longer 
 find it his interest to pay in gold. He 
 will always pay in silver, because twenty 
 shillings are a legal tender for a debt of 
 one pound, and he can procure silver 
 convertible into twenty shillings, for less 
 gold than that contained in a sovereign. 
 The other consequence will be, that 
 unless a sovereign can be sold for more 
 than twenty shillings, all the sovereigns 
 will be melted, since as bullion they will 
 purchase a greater number of shillings 
 than they exchange for as coin. The 
 converse of all this would happen if 
 silver, instead of gold, were the metal 
 which had risen in comparative value. 
 A sovereign would not now be worth so 
 much as twenty shillings, and whoever 
 nad a pound to pay would prefer paying 
 
 fiOOK III. CHAPTER X. 2. 
 
 it by a sovereign ; while the silver coins 
 would be collected for the purpose of 
 being melted, and sold as bullion for 
 gold at their real value, that is, above 
 the legal valuation. The money of the 
 community, therefore, would never 
 really consist of both metals, but of the 
 one only which, at the particular time, 
 best suited the interest of debtors ; and 
 the standard of the currency would be 
 constantly liable to change from the 
 one metal to the other, at a loss, on 
 each change, of the expense of coin- 
 age on the metal which fell out of 
 use. 
 
 It appears, therefore, that the value 
 of money is liable to more frequent 
 fluctuations when both metals are a 
 legal tender at a fixed valuation, than 
 when the exclusive standard of the cur- 
 rency is either gold or silver. Instead 
 of being only affected by variations in 
 the cost of production of one metal, it 
 is subject to derangement from those of 
 two. The particular kind of variation 
 to which a currency is rendered more 
 liable by having two legal standards, 
 is a fall of value, or what is commonly 
 called a depreciation ; since practically 
 that one of the two metals will always 
 be the standard, of which the real 
 has fallen below the rated value. If 
 the tendency of the metals be to rise in 
 value, all payments will be made in the 
 one which has risen least ; and if to 
 fall, then in that which has fallen 
 most. 
 
 2. The plan of a double standard 
 is still occasionally brought forward by 
 here and there a writer or orator as a 
 great improvement in currency. It is 
 probable that, with most of its ad- 
 herents, its chief merit is its tendency 
 to a sort of depreciation, there being at 
 all times abundance of supporters for 
 any mode, either open or covert, of 
 lowering the standard. Some, how- 
 ever, are influenced by an exaggerated 
 estimate of an advantage which to a 
 certain extent is real, that of being able 
 to have recourse, for replenishing the 
 circulation, to the united stock of gold 
 and silver in the commercial world, in- 
 stead of being confined to one of them, 
 which, from accidental absorption, may
 
 CREDIT AS A SUBSTITUTE FOR MONEY. 
 
 300 
 
 not be obtainable with sufficient ra- 
 pidity. The advantage without the 
 disadvantages of a double standard, 
 seems to be best obtained by those na- 
 tions with whom only one of the two 
 metals is a legal tender, but the other 
 also is coined, and allowed to pass for 
 whatever value the market assigns to 
 it. 
 
 When this plan is adopted, it is na- 
 turally the more costly metal which is 
 left to be bought and sold as an article 
 of commerce. But nations which, like 
 England, adopt the more costly of the 
 two as their standard, resort to a dif- 
 ferent expedient for retaining them 
 both in circulation, namely, to make 
 silver a legal tender, but only for small 
 payments. In England no one can be 
 compelled to receive silver in payment 
 for a larger amount than forty shillings. 
 With this regulation there is necessa- 
 rily combined another, namely, that 
 silver coin should be rated, in compa- 
 
 rison with gold, somewhat above its 
 intrinsic value ; that there should not 
 be, in twenty shillings, as much silver 
 as is worth a sovereign : for if there 
 were, a very slight turn of the market 
 in its favour would make it worth more 
 than a sovereign, and it would be pro- 
 fitable to melt the silver coin. The 
 over-valuation of the silver coin creates 
 an inducement to buy silver and send 
 it to the Mint to be coined, since it is 
 given back at a higher value than pro- 
 perly belongs to it : this, however, has 
 been guarded against, by limiting the 
 quantity of the silver coinage, which 
 is not left, like that of gold, to the dis- 
 cretion of individuals, but is determined 
 by the government, and restricted to 
 the amount supposed to be required for 
 small payments. The only precaution 
 necessary is, not to put so nigh a va- 
 luation upon the silver, as to hold out 
 a strong temptation to private coining. 
 
 CHAPTER XI. 
 
 OF CREDIT, AS A SUBSTITUTE FOB MONEY. 
 
 1. THE functions of credit have 
 been a subject of as much misunder- 
 standing and as much confusion of ideas 
 as any single topic in Political Eco- 
 nomy. This is not owing to any pe- 
 culiar difficulty in the theory of the 
 subject, but to the complex nature of 
 some of the mercantile phenomena 
 arising from the forms in which credit 
 clothes itself; by which attention is 
 diverted from the properties of credit 
 in general, to the peculiarities of its 
 particular ibrms. 
 
 As a specimen of the confused no- 
 tions entertained respecting the nature 
 of credit, we may advert to the exag- 
 gerated language so often used respect- 
 ing its national importance. Credit has 
 a great, but not, as many people seem to 
 suppose, a magical power; it cannot 
 make something out of nothing. How 
 often is an extension of credit talked of 
 as equivalent to a creation of capital, 
 
 or as if credit actually were capital. 
 It seems strange that there should be 
 any need to point out, that credit being 
 only permission to use the capital of 
 another person, the means of produc- 
 tion cannot be increased by it, but only 
 transferred. If the borrower's means 
 of production and of employing labour 
 are increased by the credit given him, 
 the lender's are as much diminished. 
 The same sum cannot be used as capital 
 both by the owner and also by the 
 person to whom it is lent : it cannot 
 supply its entire value in wages, tools, 
 and materials, to two sets of labourers 
 at once. It is true that the capital 
 which A has borrowed from B, and 
 makes use of in his business, still forms 
 part of the wealth of B for other pur- 
 poses : he can enter into arrangement* 
 in reliance on it, and can borrow, when 
 needful, an equivalent sum on the se- 
 curity of it : so that to a superficial
 
 310 
 
 BOOK III. CHAPTER XI. 2. 
 
 eye it might seem as if both B and A 
 had the use of it at once. But the 
 smallest consideration will show that 
 when B has parted with his capital to 
 A, the use of it as capital rests with 
 A alone, and that B has no other ser- 
 vice from it than in so far as his ulti- 
 mate claim upon it serves him to obtain 
 the use of another capital from a third 
 person C. All capital (not his own) 
 of which any person has really the use, 
 is, and must be, so much subtracted 
 from the capital of some one else.* 
 
 2. But though credit is but a 
 transfer of capital from hand to hand, 
 it is generally, and naturally, a transfer 
 to hands more competent to employ the 
 capital efficiently in production. If 
 there were no such thing as credit, 
 or if, from general insecurity and want 
 of confidence, it were scantily prac- 
 tised, many persons who possess more 
 
 * To make the proposition in the text 
 strictly true, a correction, though a very 
 slight one, requires to be made. The circu- 
 lating medium existing in a country, at a 
 given time, is partly employed in purchases 
 for productive, and partly for unproductive 
 consumption. According as a larger propor- 
 tion of it is employed in the one way or in 
 the other, the real capital of the country is 
 greater or less. If, then, an addition were 
 made to the circulating medium in the hands 
 of unproductive consumers exclusively, a 
 larger portion of the existing stock of com- 
 modities would be bought for unproductive 
 consumption, and a smaller for productive, 
 which state of things, while it lasted, would 
 be equivalent to a diminution of capital. 
 And on the contrary, if the addition made 
 be to the portion of the circulating medium 
 which is in the hands of producers, and des- 
 tined for their business, a greater portion of 
 the commodities in the country will for the 
 present be employed as capital, and a less 
 portion unproductively. Now, an effect of 
 this latter character naturally attends some 
 extensions of credit, especially when taking 
 place in the form of bank notes, or other 
 instruments of exchange. The additional 
 bank notes are, in ordinary course, first 
 issued to producers or dealers, to be em- 
 ployed as capital ; and though the stock of 
 commodities in the country is no greater 
 than before, yet as a greater share of that 
 stock now comes by purchase into the hands 
 of producers and dealers, to that extent 
 what would have been unproductively con- 
 sumed is applied to production, and there is 
 a real increase of capital. The effect ceases, 
 nd a counter-process takes place, when the 
 additional credit is stopped and the notes 
 colled in. 
 
 or less of capital, but who from their 
 occupations, or for want of the ne- 
 cessary skill and knowledge, cannot 
 personally superintend its employment, 
 would derive no benefit from it: their 
 funds would either lie idle, or would 
 be, perhaps, wasted and annihilated in 
 unskilful attempts to make them yield 
 a profit. All this capital is now lent 
 at interest, and made available for 
 production. Capital thus circum- 
 stanced forms a large portion of the 
 productive resources of any commercial 
 country ; and is naturally attracted to 
 those producers or traders \iho, being 
 in the greatest business, have the 
 means of employing it to most advan- 
 tage ; because such are both the most 
 desirous to obtain it, and able to give 
 the best security. Although, therefore, 
 the productive funds of the country are 
 not increased by credit, they are called 
 into a more complete state of produc- 
 tive activity. As the confidence on 
 which credit is grounded extends itself, 
 means are developed by which even 
 the smallest portions of capital, the 
 sums which each person keeps by him 
 to meet contingencies, are made avail- 
 able for productive uses. The principal 
 instruments for this purpose are banks 
 of deposit. Where these do not exist, 
 a prudent person must keep a sufficient 
 sum unemployed in his own possession, 
 to meet every demand which he has 
 even a slight reason for thinking him- 
 self liable to. When the practice, 
 however, has grown up of keeping this 
 reserve not in his own custody but 
 with a banker, many small sums, pre- 
 viously lying idle, become aggregated in 
 the banker's hands ; and the banker, 
 being taught by experience what pro- 
 portion of the amount is likely to be 
 wanted in a given time, and knowing 
 that if one depositor happens to require 
 more than the average, another will 
 require less, is able to lend the re- 
 mainder, that is, the far greater part, 
 to producers and dealers : thereby 
 adding the amount, not indeed to tho 
 capital in existence, but to that in em- 
 ployment, and making a corresponding 
 addition to the aggregate production 
 of the community. 
 
 While credit is thus indispensable
 
 CREDIT AS A SUBSTITUTE FOR MONEY. 
 
 311 
 
 foi rendering the whole capital of the 
 country productive, it is also a means 
 by which the industrial talent of the 
 country is turned to better account for 
 purposes of production. Many a person 
 who has either no capital of his own, 
 or very little, but who has qualifica- 
 tions for business which are known and 
 appreciated by some possessors of ca- 
 pital, is enabled to obtain either ad- 
 vances in money, or more frequently 
 goods on credit, by which his indus- 
 trial capacities are made instrumental 
 to the increase of the public wealth ; 
 and this benefit will be reaped far more 
 lar^rly, whenever, through better laws 
 and better education, the community 
 shall have made such progress in in- 
 tegrity, that personal character can be 
 accepted as a sufficient guarantee not 
 only against dishonestly appropriating, 
 but against dishonestly risking, what 
 belongs to another. 
 
 Such are, in the most general point 
 of view, the uses of credit to the 
 productive resources of the world. 
 But these considerations only apply to 
 the credit given to the industrious 
 classes to producers aiid dealers. 
 Credit given by dealers to unproduc- 
 tive consumers is never an addition, 
 but always a detriment, to the sources 
 of public wealth. It makes over in 
 temporary use, not the capital of the 
 nnproductive classes to the productive, 
 but that of the productive to the un- 
 productive. If A, a dealer, supplies 
 goods to B, a landowner or annuitant, 
 to be paid for at the end of five years, 
 as much of the capital of A as is equal 
 to the value of these goods, remains 
 for five years unproductive. During 
 such a period, if payment had been 
 made at once, the sum might have been 
 several times expended and replaced, 
 and goods to the amount might have 
 been several times produced, consumed, 
 and reproduced : consequently B's 
 withholding IQQl. for five years, even if 
 he pays at last, has cost to the labour- 
 ing classes of the community during 
 that period an absolute loss of probably 
 several times that amount. A, indi- 
 vidually, is compensated, by putting a 
 higher price upon his goods, which is 
 ultimately paid by B : but there in no 
 
 compensation made to the labouring 
 classes, the chief sufferers by every 
 diversion of capital, whether perma- 
 nently or temporarily, to unproductive 
 uses. The country has had WOl. less 
 of capital during those five years, B 
 having taken that amount from A's 
 capital, and spent it unproductively, in 
 anticipation of his own means, and 
 having only after five years set apart 
 a sum from his income and converted 
 it into capital for the purpose of indem- 
 nifying A. 
 
 3. Thus far of the general func- 
 tion of Credit in production. It is not 
 a productive power in itself, though, 
 without it, the productive powers al- 
 ready existing could not be brought 
 into complete employment. But a more 
 intricate portion of the theory of 
 Credit is its influence on prices ; the 
 chief cause of most of the mercantile 
 phenomena which perplex observers. 
 In a state of commerce in which much 
 credit is habitually given, general 
 prices at any moment depend much 
 more upon the state of credit than upon 
 the quantity of money. For credit, 
 though it is not productive power, is 
 
 Eurchasing power ; and a person who, 
 aving credit, avails himself of it in 
 the purchase of goods, creates just as 
 much demand for the goods, and tends 
 quite as much to raise their price, as 
 if he made an equal amount of pur* 
 chases with ready money. 
 
 The credit which we are now called 
 upon to consider, as a distinct pur- 
 chasing power, independent of money, 
 is of course not credit in its simplest 
 form, that of money lent by one person 
 to another, and paid directly into his 
 hands ; for when the borrower expends 
 this in purchases, he makes the pur- 
 chases with money, not credit, and ex- 
 erts no purchasing power over and 
 above that conferred by the money. 
 The forms of credit which create pur- 
 chasing power, are those in which no 
 money passes at the time, and very 
 often none passes at all, the transac- 
 tions being included with a mass of 
 other transactions in an account, and 
 nothing paid but a balance. This 
 takes place in a variety of ways,
 
 612 
 
 BOOK in. CHAPTER XI. 4. 
 
 which we shall proceed to examine, 
 beginning, as is our custom, with the 
 nippiest. 
 
 z ( 'irst : Suppose A and B to be two 
 dealers, who have transactions with 
 each other both as buyers and as 
 sellers. A buys from B on credit. B 
 does the like with respect to A. At 
 the end of the year, the sum of A's 
 debts to B is set against the sum of 
 B's debts to A, and it is ascertained 
 to which side a balance is due. This 
 balance, which may be less than the 
 amount of many of the transactions 
 singly, and is necessarily less than the 
 sum of the transactions, is all that is 
 paid in money : and perhaps even 
 this is not paid, but carried over in an 
 account current to the next year. A 
 single payment of a hundred pounds 
 may in this manner suffice to liquidate 
 a long series of transactions, some of 
 them to the value of thousands. 
 
 But secondly : The debts of A to B 
 may be paid without the intervention 
 of money, even though there be no 
 reciprocal debts of B to A. A may 
 satisfy B by making over to him a debt 
 due to himself from a third person, C. 
 This is conveniently done by means of 
 a written instrument, called a bill of 
 exchange, which is, in fact, a transfer- 
 able order by a creditor upon his debtor, 
 and when accepted by the debtor, that 
 is, authenticated by his signature, be- 
 comes an acknowledgment of debt. 
 
 4. Bills of exchange were first in- 
 troduced to save the expense and risk 
 of transporting the precious metals 
 from place to place. " Let it be sup- 
 posed," says Mr. Henry Thornton,* 
 " that there are in London ten manufac- 
 turers who fell their article to ten shop- 
 keepers in York, by whom it is retailed ; 
 and that there are in York ten manu- 
 facturers of another commodity, who 
 pell it to ten shopkeepers in London. 
 There would be no occasion for the ten 
 shopkeepers in London to send yearly 
 
 * Enquiry into the Nature and, Effects of 
 the Paper 'Credit of Great Britain, p. 24. 
 This work, published in 1802, is even now 
 the clearest exposition that I am acquainted 
 with, in the English language, of the modes 
 in which credit is given and taken in a mer- 
 cantile community. 
 
 to York guineas for the payment of the 
 York manufacturers, and for the ten 
 York shopkeepers to send yearly as 
 many guineas to London. It would 
 only be necessary for the York manu- 
 facturers to receive from each of the 
 shopkeepers at their own door the 
 money in question, giving in return 
 letters which should acknowledge the 
 receipt of it ; and which should also 
 direct the money, lying ready in the 
 hands of their debtors in London, to 
 be paid to the London manufacturers, 
 so as to cancel the debt in London in 
 the same manner as that at York. The 
 expense and the risk of all transmission 
 of money would thus be saved. Letters 
 ordering the transfer of the debt are 
 termed, in the language of the present 
 day, bills of exchange. They are bills 
 by which the debt of one person is ex- 
 changed for the debt of another ; and 
 the debt, perhaps, which is due in one 
 place, for the debt due in another." 
 
 Bills of exchange having been found 
 convenient as means of paying debts at 
 distant places without the expense of 
 transporting the precious metals, their 
 use was afterwards greatly extended 
 from another motive. It is usual in 
 every trade to give a certain length of 
 credit for goods bought : three months, 
 six months, a year, even two years, 
 according to the convenience or custom 
 of the particular trade. A dealer who 
 has sold goods, for which he is to be 
 paid in six months, but who desires to 
 receive payment sooner, draws a bill 
 on his debtor payable in six months, 
 and gets the bill discounted by a banker 
 or other money-lender, that is, transfers 
 the bill to him, receiving the amount, 
 minus interest for the time it has still 
 to run. It has become one of the chief 
 functions of bills of exchange to serve 
 as a means by which a debt due from 
 one person can thus be made available 
 for obtaining credit from another. The 
 convenience of the expedient has led 
 to the frequent creation of bills of ex- 
 change not grounded on any debt pre- 
 viously due to the drawer of the bill by 
 the person on whom it is drawn. These 
 are called accommodation bills ; and 
 sometimes, with a tinge of disapproba- 
 tion, fictitious bills. Their nature is so
 
 CREDIT AS A SUBSTITUTE FOR MONEY. 
 
 313 
 
 clearly stated, and with such judicious 
 remarks, by the author whom I have 
 just quoted, that I shall transcribe the 
 entire passage.* 
 
 "A, being in want of 100?., requests 
 B to accept a note or bill drawn at two 
 months, which 1!, therefore, on the face 
 of it, is bound to pay ; it is understood, 
 however, that A will take care either to 
 discharge the bill himself, or to furnish 
 Li with the means of paying it. A 
 obtains ready money for the bill on the 
 joint credit of the two parties. A ful- 
 tils his promise of paying it when due, 
 and thus concludes the transaction. 
 This service rendered by B to A is, 
 however, not unlikely to be requited, 
 hi a more or less distant period, by a 
 Himilar acceptance of a bill on A, drawn 
 and discounted for B's convenience. 
 
 " Let us now compare such a bill 
 with a real bill. Let us consider in 
 what points they differ or seem to 
 differ ; and in what they agree. 
 
 " They agree, inasmuch as each is a 
 discountable article ; each has also been 
 created for the purpose of being dis- 
 counted ; and each is, perhaps, dis- 
 counted in fact. Each, therefore, serves 
 equally to supply means of speculation 
 to the merchant. So far, moreover, as 
 bills and notes constitute what is called 
 the circulating medium, or paper cur- 
 rency of the country, and prevent the 
 use of guineas, the fictitious and the 
 real bill are upon an equality; and if 
 the price of commodities be raised in 
 proportion to the quantity of paper 
 currency, the one contributes to that 
 rise exactly in the same manner as the 
 other. 
 
 " Before we come to the points in 
 which they differ, let us advert to one 
 point in which they are commonly sup- 
 posed to be unlike ; but in which they 
 cannot be said always or necessarily to 
 differ. 
 
 "Real notes (it is sometimes said) 
 represent actual property. There are 
 actual goods in existence, which are the 
 counterpart to every real note. Notes 
 which are not drawn in consequence of 
 a sale of goods, are a species of false 
 wealth, "by which a nation is deceived. 
 
 * Pp. 29-33. 
 
 These supply only an imaginary capital; 
 the others indicate one that is real. 
 
 " In answer to this statement it may 
 be observed, first, that the notes given 
 in consequence of a real sale of goods 
 cannot be considered as on that account 
 certainly representing any actual pro- 
 perty. Suppose that A sells IQQl. worth 
 of goods to B at six months credit, and 
 takes a bill at six months for it ; and 
 that B, within a month after, sells the 
 same goods, at a like credit, to C, taking 
 a like bill ; and again, that C, after 
 another month, sells them to D, taking 
 a like bill, and so on. There may then, 
 at the end of six months, be six bills of 
 100Z. each, existing at the same time; 
 and every one of these may possibly 
 have been discounted. Of all these 
 bills, then, only one represents any 
 actual property. 
 
 " In order to justify the supposition 
 that a real bill (as it is called) repre- 
 sents actual property, there ought to be 
 some power in the bill-holder to prevent 
 the property which the bill represents, 
 from being turned to other purposes 
 than that of paying the bill in question. 
 No such power exists ; neither the man 
 who holds the real bill, nor the man 
 who discounts it, has any property in 
 the specific goods for which it was 
 given : he as much trusts to the general 
 ability to pay of the giver of the bill, as 
 the holder of any fictitious bill does. 
 The fictitious bill may, in many cases, 
 be a bill given by a person having a 
 large and known capital, a part of 
 which the fictitious bill may be said in 
 that case to represent. The supposition 
 that real bills represent property, and 
 that fictitious bills do not, seems, there- 
 fore, to be one by which more than 
 justice is done to one of these species 
 of bills, and something less than justice 
 to the other. 
 
 " We come next to some points in 
 which they differ. 
 
 " First, the fictitious note, or note of 
 accommodation, is liable to the ob- 
 jection that it professes to be what it 
 is not. This objection, however, lies 
 only against those fictitious bills which 
 are passed as real. In many cases, it 
 is sufficiently obvious what they are. 
 Secondly, the fictitious bill is, in gene-
 
 314 
 
 rul, less likely to be punctually paid 
 than the real one. There is a general 
 presumption, that the dealer in fictitious 
 bills is a man who is a more adven- 
 turous speculator than he who carefully 
 abstains from them. It follows, thirdly, 
 that fictitious bills, besides being less 
 safe, are less subject to limitation as to 
 tlieir quantity. The extent of a man's 
 actual sales forms some limit to the 
 amount of his real notes ; and as it is 
 highly desirable in commerce that 
 credit should be dealt out to all per- 
 sons in some sort of regular and due 
 proportion, the measure of a man's 
 actual sales, certified by the appear- 
 ance of his bills drawn in virtue of 
 those sales, is some rule in the case, 
 though a very imperfect one in many 
 respects. 
 
 " A fictitious bill, or bill of accom- 
 modation, is evidently, in substance, the 
 same as any common promissory note ; 
 and even better in this respect, that 
 there is but one security to the pro- 
 missory note, whereas in the case of 
 the bill of accommodation there are 
 two. So much jealousy subsists lest 
 traders should push their means of 
 raising money too far, that paper, the 
 same in its general nature with that 
 which is given, being the only paper 
 which can be given, by men out of 
 business, is deemed somewhat discre- 
 ditable when coming from a merchant. 
 And because such paper, when in the 
 merchant's hand, necessarily imitates 
 the paper which passes on the occasion 
 of a sale of goods, the epithet fictitious 
 has been cast upon it; an epithet 
 which has seemed to countenance the 
 confused and mistaken notion, that 
 there is something altogether false and 
 delusive in the nature of a certain part 
 Doth of the paper and of the apparent 
 wealth of the country." 
 
 A bill of exchange, when merely 
 discounted, and kept in the portfolio 
 of the discounter until it falls due, does 
 not perform the functions or supply the 
 place of money, but is itself bought and 
 sold for money. It is no more currency 
 than the public funds, or any other 
 securities. But when a bill drawn 
 upon one person is paid to another (or 
 tven. to the same person) in discharge 
 
 BOOK HI. CHAPTER XI. 5. 
 
 of a debt or a pecuniary claim, it does 
 something for which, if the bill did not 
 exist, money would be required : it 
 performs the functions of currency. 
 This is a use to which bills of exchange 
 are often applied. " They not only," 
 continues Mr. Thornton,* " spare the 
 use of ready money ; they also occupy 
 its place in many cases. Let us 
 imagine a farmer in the country to dis- 
 charge a debt of 101. to his neighbour- 
 ing grocer, by giving him a bill for 
 that sum, drawn on his cornfactor in 
 London for grain sold in the metro- 
 polis ; and the grocer to transmit the 
 bill, he having previously indorsed it, 
 to a neighbouring sugar-baker, in dis- 
 charge of a like debt; and the sugar- 
 baker to send it, when again indorsed, 
 to a West India merchant in an out- 
 
 ort, and the West India merchant to 
 eliver it to his country banker, who 
 also indorses it, and sends it into further 
 circulation. The bill in this case will 
 have effected five payments, exactly as 
 if it were a 101. note payable to bearer 
 on demand. A multitude of bills pasa 
 between trader and trader in the 
 country, in the manner which has been 
 described ; and they evidently form, in 
 the strictest sense, a part of the circu- 
 lating medium of the kingdom." 
 
 Many bills, both domestic and 
 foreign, are at last presented for pay- 
 ment quite covered with indorsements, 
 each of which represents either a fresh 
 discounting, or a pecuniary transaction 
 in which the bill has performed the 
 functions of money. Within the pre- 
 sent generation, the circulating medium 
 of Lancashire for sums above five 
 pounds, was almost entirely composed 
 of such bills. 
 
 5. A third form in which credit 
 is employed as a substitute for cur 
 rency, is that of promissory notes. A 
 bill drawn upon any one and accepted 
 by him, and a note of hand by him 
 promising to pay the same sum, are, as 
 far as he is concerned, exactly equiva- 
 lent, except that the former commonly 
 bears interest and the latter generally 
 does not ; and that the former is com- 
 monly payable only after a certain 
 ? 10.
 
 r I {EDIT AS A SUBSTITUTE FOR MONEY. 
 
 315 
 
 lapse of time, ami the latlrr [>;iyaliln 
 at sight. But it is chiefly in the latter 
 form that it has become, in commercial 
 countries, an express occupation to 
 issue such substitutes for money. 
 Dealers in money (as lenders by pro- 
 l'"-sion are improperly called) desire, 
 like other dealers, to stretch their 
 operations beyond what can be carried 
 on by their own means : they wish to 
 lend, not their capital merely, but their 
 credit, and not only such portion of 
 their credit as consists of funds actually 
 deposited with them, but their power 
 of obtaining credit from the public 
 generally, so far as they think they 
 can safely employ it. This is done in 
 a very convenient manner by lending 
 their own promissory notes payable to 
 bearer on demand : the borrower being 
 willing to accept these as so much 
 money, because the credit of the lender 
 makes other people willingly receive 
 them on the same footing, in purchases 
 or other payments. These notes, there- 
 fore, perform all the functions of cur- 
 rency, and render an equivalent amount 
 of money which was previously in cir- 
 culation, unnecessary. As, however, 
 being payable on demand, they may 
 be at any time returned on the issuer, 
 and money demanded for them, he 
 must, on pain of bankruptcy, keep by 
 him as much money as will enable 
 him to meet any claims of that sort 
 which can be expected to occur within 
 the time necessary for providing him- 
 self with more : and prudence also re- 
 quires that he should not attempt to 
 issue notes beyond the amount which 
 experience shows can remain in circu- 
 lation without being presented for 
 payment. 
 
 The convenience of this mode of (as 
 it were) coining credit, having once 
 been discovered, governments have 
 availed themselves of the same expe- 
 dient, and have issued their own pro- 
 missory notes in payment of their 
 expenses ; a resource the more useful, 
 because it is the only mode in which 
 they arc able to borrow money without 
 paying interest, their promises to pay 
 on demand being, in the estimation of 
 the holders, equivalent to money in 
 hand. The practical differences be- 
 
 tween such government notes and the 
 issues of private bankers, and the 
 further diversities of which this class 
 of substitutes for money are suscepti- 
 ble, will be considered presently. 
 
 6. A fourth mode of making 
 credit answer the purposes of money, 
 by which, when carried far enough, 
 money may be very completely super- 
 seded, consists in making payments by 
 cheques. The custom of keeping tho 
 spare rash reserved for immediate use 
 or against contingent demands, in the 
 hands of a banker, and making all 
 payments, except small ones, by 
 orders on bankers, is in this country 
 spreading to a continually larger por- 
 tion of the public. If the person 
 making the payment, and the person 
 receiving it, keep their money with 
 the same banker, the payment takes 
 place without any intervention of 
 money, by the mere transfer of its 
 amount in the banker's books from the 
 credit of the payer to that of the re- 
 ceiver. If all persons in London kept 
 their cash at the same banker's, and 
 made all their payments by means of 
 cheques, no money would be required 
 or used for any transactions beginning 
 and terminating in London. This ideal 
 limit is almost attained in fact, so far 
 as regards transactions between dealers. 
 It is chiefly in the retail transactions 
 between dealers and consumers, and in 
 the payment of wages, that money or 
 bank notes now pass, and then only 
 when the amounts are small. In 
 London, even shopkeepers of any 
 amount of capital or extent of business 
 have generally an account with a 
 banker ; which, besides the safety and 
 convenience of the practice, is to theil 
 advantage in another respect, by giving 
 them an understood claim to have 
 their bills discounted in cases when 
 they could not otherwise expect it. As 
 for the merchants and larger dealers, 
 they habitually make all payments in 
 the course of their business by cheques. 
 They do not, however, all deal with the 
 same banker, and when A gives a 
 cheque to B, B usually pays it not 
 into the same but into some other 
 bank. But the convenient"' of bu^i-
 
 316 
 
 BOOK m. CHAPTER XII. 1. 
 
 ness has given birth to an arrangement 
 which makes all the banking houses of 
 the City of London, for certain pur- 
 poses, virtually one establishment. A 
 ranker does not send the cheques 
 which are paid into his banking house, 
 to the banks on which they are drawn, 
 and demand money for them. There 
 is a building called the Clearing house, 
 to which every City banker send-, ca< -li 
 afternoon, all the cheques on other 
 bankers which he has received during 
 the day, and they are there exchanged 
 for the cheques on him which have 
 come into the hands of other bankers, 
 the balances only being paid in money ; 
 or even these not in money, but in 
 cheques on the Bank of England. By 
 this contrivance, all the business trans- 
 actions of the City of London during 
 that day, amounting often to millions 
 of pounds, and a vast amount besides 
 of country transactions, represented by 
 bills which country bankers have 
 
 drawn upon their London correspnn 
 dents, are liquidated by payments not 
 exceeding on the average 200,000/.* 
 
 By means of the various instruments 
 of credit which have now been ex- 
 plained, the immense business of a 
 country like Great Britain is trans- 
 acted with an amount of the precious 
 metals surprisingly small ; many times 
 smaller, in proportion to the pecuniary 
 value of the commodities bought and 
 sold, than is found necessary in France, 
 or any other country in which, the 
 habit and the disposition to give credit 
 not being so generally diffused, those 
 " economizing expedients," as they 
 have been called, are not practised to 
 the same extent. What becomes of 
 the money thus superseded in its fnc- 
 tions, and by what process it is made 
 to disappear from circulation, are 
 questions the discussion of which must 
 be for a short time postponed. 
 
 CHAPTER XH. 
 
 INFLUENCE OF CREDIT ON PRICES. 
 
 1 . HAVING now formed a general 
 idea of the modes in which credit is 
 made available as a substitute for 
 money, we have to consider in what 
 manner the use of these substitutes 
 affects the value of money, or, what is 
 equivalent, the prices of commodities. 
 It is hardly necessary to say that the 
 permanent value of money the natural 
 and average prices of commodities 
 are not in question here. These are 
 determined by the cost of producing or 
 of obtaining the precious metals. An 
 ounce of gold or silver will in the long 
 run exchange for as much of every 
 other commodity, as can be produced 
 or imported at the same cost with 
 itself. And an order, or note of hand, 
 or bill payable at sight, for an ounce of 
 gold, while the credit of the giver is 
 unimpaired, is worth neither more nor 
 less than the gold itself. 
 
 It is not, however, with ultimate or 
 
 average, but with immediate and tem- 
 porary prices, that we are now con- 
 cerned. These, as we have seen, may 
 deviate very widely from the standard 
 of cost of production. Among other 
 causes of fluctuation, one we have 
 found to be, the quantity of money in 
 circulation. Other things being the 
 same, an increase of the money in cir- 
 culation raises prices, a diminution 
 lowers them. If more money is thrown 
 into circulation than the quantity 
 which can circulate at a value con- 
 
 * According to Mr. Tooke ("Enquiry in!a 
 the Currency Principle, p. 27) the adjustments 
 at the clearing hou.'e "in the year 1839 
 amounted to 954,401,600?., making an ave- 
 rage amount of payments of upwards of 
 3,000,0007,. of bills of exchange and cheques 
 daily effected through the medium of little 
 inure than 200, 00(11. of bank notes." At pre- 
 sent a very much greater amount of trans- 
 actions is daily liquidated, without bank 
 notes at all, cheques on the Bank of 
 Englan4 supplying their place.
 
 INFLUENCE OF CREDIT ON PRICES. 
 
 317 
 
 formable to its cost of production, the 
 value of money, so long as the excess 
 lasts, will remain below the standard 
 of cost of production, and general 
 prices will be sustained above the 
 natural rate. 
 
 But we have now found that there 
 are other things, such as bank notes, 
 bills of exchange, and cheques, which 
 circulate as money, and perform all 
 functions of it: and the question 
 arises, Do these various substitutes 
 operate on prices in the same manner 
 as money itself? Does an increase in 
 the quantity of transferable paper tend 
 to raise pi-ices, in the same manner 
 and degree as an increase in the 
 quantity of money ? There has been 
 no small amount of discussion on this 
 point among writers on currency, with- 
 out any result so conclusive as to have 
 yet obtained general assent. 
 
 I apprehend that bank notes, bills, 
 or cheques, as such, do not act on 
 prices at all. What does act on prices 
 is Credit, in whatever shape given, 
 and whether it gives rise to any trans- 
 ferable instruments capable of passing 
 into circulation, or not. 
 
 I proceed to explain and substantiate 
 this opinion. 
 
 2. Money acts upon prices in no 
 other way than by being tendered in 
 exchange for commodities. The de- 
 mand which influences the prices of 
 commodities consists of the money 
 offered for them. But the money 
 offered, is not the same thing with the 
 money possessed. It is sometimes less, 
 sometimes very much more. In the 
 long run indeed, the money which 
 people lay out will be neither more nor 
 less than the money which they have 
 to lay out : but this is far from being 
 the case at any given time. Sometimes 
 they keep money by them for fear of 
 an emergency, or in expectation of a 
 more advantageous opportunity for 
 expending it. In that case the money 
 is said not to be in circulation : in 
 plainer language, it is not offered, nor 
 about to be offered, for commodities. 
 Money not in circulation has no effect 
 on prices. The converse, however, is 
 a much commoner case ; people make 
 
 purchases with money not in their 
 possession. An article, for instance, 
 which is paid for by a cheque on n 
 banker, is bought with money which 
 not only is not in the payer's posses- 
 sion, but generally not even in the 
 banker's, having been lent by him (all 
 but the usual reserve) to other persons. 
 We just now made the imaginary sup- 
 position that all persons dealt with a 
 bank, and all with the same bank, 
 payments being universally made by 
 cheques. In this ideal case, there 
 would be no money anywhere except 
 in the hands of the banker ; who might 
 then safely part with all of it, by sell- 
 ing it as bullion, or lending it, to be 
 sent out of the country in exchange 
 for goods or foreign securities. But 
 though there would then be no money 
 in possession, or ultimately perhaps 
 even in existence, money would be 
 offered, and commodities bought with 
 it, just as at present. People would 
 continue to reckon their incomes and 
 their capitals in money, and to make 
 their usual purchases with orders for 
 the receipt of a thing which would 
 have literally ceased to exist. There 
 would be in all this nothing to com- 
 plain of, so long as the money, in dis- 
 appearing, left an equivalent value in 
 other things, applicable when required 
 to the reimbursement of those to whom 
 the money originally belonged. 
 
 In the case however of payment by 
 cheques, the purchases are at any rate 
 made, thougn not with money in the 
 buyer's possession, yet with money to 
 which he has a right. But he may 
 make purchases with money which he 
 only expects to have, or even only 
 pretends to expect. He may obtain 
 goods in return for his acceptances 
 payable at a future time ; or on his 
 note of hand ; or on a simple book 
 credit, that is, on a mere promise to 
 pay. All these purchases have exactly 
 the same effect on price, as if they 
 were made with ready money. The 
 amount of purchasing power which a 
 person can exercise is composed of all 
 the money in his possession or due to 
 him, and of all his credit. For exer- 
 cising the whole of this power he finds 
 a sufficient motive only under peculiar
 
 318 
 
 circumstances ; but he always pos- 
 sesses it ; and the portion of it which 
 he at any time does exercise, is the 
 measure of the effect which he produces 
 on price. 
 
 Suppose that, in the expectation 
 that some commodity will rise in price, 
 he determines, not only to invest in it 
 all his ready money, but to take up on 
 credit, from the producers or importers, 
 as much of it as their opinion of his 
 resources will enable him to obtain. 
 Every one must see that by thus acting 
 he produces a greater effect on price, 
 than if he limited his purchases to the 
 money he has actually in hand. He 
 creates a demand for the article to the 
 full amount of his money and credit 
 taken together, and raises the price 
 proportionally to both. And this effect 
 is produced, though none of the written 
 instruments called substitutes for cur- 
 rency may be called into existence ; 
 though the transaction may give rise 
 to no bill of exchange, nor to the issue 
 of a single bank note. The buyer, 
 instead of taking a mere book credit, 
 might have given a bill for the amount ; 
 or might have paid for the goods with 
 bank notes borrowed for that purpose 
 from a banker, thus making the pur- 
 chase not on his own credit with the 
 seller, but on the banker's credit with 
 the seller, and his own with the banker. 
 Had he done so, he would have pro- 
 duced as great an effect on price as by 
 a simple purchase to the same amount 
 on a book credit, but no greater effect. 
 The credit itself, not the form and 
 mode in which it is given, is the 
 operating cause. 
 
 3. The inclination of the mercan- 
 tile public to increase their demand for 
 commodities by making use of all or 
 much of their credit as a purchasing 
 power, depends on their expectation of 
 profit. When there is a general im- 
 pression that the price of some com- 
 modity is likely to rise, from an extra 
 demand, a short crop, obstructions to 
 importation, or any other cause, there 
 is a disposition among dealers to in- 
 crease their stocks, in order to profit 
 by the expected rise. This disposition 
 tends in itself to produce the effect 
 
 BOOK III. CHAPTER XII. 3. 
 
 which it looks forward to, a rise of 
 price: and if the rise is considerable 
 and progressive, other speculators are 
 attracted, who, so long as the price has 
 not begun to fall, are willing to believe 
 that it will continue rising. These, by 
 further purchases, produce a further 
 advance : and thus a rise of price for 
 which there were originally some ra- 
 tional grounds, is often heightened by 
 merely speculative purchases, until it 
 greatly exceeds what the original 
 grounds will justify. After a time 
 this begins to be perceived ; the price 
 ceases to rise, and the holders, think- 
 ing it time to realize their gains, are 
 anxious to sell. Then the price begins 
 to decline : the holders rush into the 
 market to avoid a still greater loss, 
 and, few being willing to buy in a 
 falling market, the price falls much 
 more suddenly than it rose. Those 
 who have bought at a higher price 
 than reasonable calculation justified, 
 and who have been overtaken by the 
 revulsion before they had realized, are 
 losers in proportion to the greatness of 
 the fall, and to the quantity of the 
 commodity which they hold, or have 
 bound themselves to pay for. 
 
 Now all these effects might take 
 place in a community to which credit 
 was unknown : the prices of some com- 
 modities might rise from speculation, 
 to an extravagant height, and then 
 fall rapidly back. But if there were 
 no such thing as credit, this could 
 hardly happen with respect to com- 
 modities generally. If all purchases 
 were made with ready money, the 
 payment of increased prices for some 
 articles would draw an unusual pro- 
 portion of the money of the community 
 into the markets for those articles, and 
 must therefore draw it away from some 
 other class of commodities, and thus 
 lower their prices. The vacuum might, 
 it is true, be partly filled up by increased 
 rapidity of circulation; and in this 
 manner the money of the community 
 is virtually increased in a time of spe- 
 culative activity, because people keep 
 little of it by them, but hasten to lay 
 it out in some tempting adventure aa 
 soon as possible after they receive it. 
 This resource, however, is limited : on
 
 INFLUENCE OF CREDIT ON PRICES. 
 
 819 
 
 ihe whole, people cannot, while the 
 quantity of money remains the same, 
 lay out much more of it in some things, 
 without laying out less in others. But 
 what they cannot do by ready money, 
 they can do by an extension of credit. 
 When people go into the market and 
 purchase with money which they hope 
 to receive hereafter, they are drawing 
 upon an unlimited, not a limited fund. 
 Speculation, thus supported, may be 
 going on in any number of commodi- 
 ties, without disturbing the regular 
 course of business in others. It might 
 even be going on in all commodities at 
 once. We could imagine that in an 
 epidemic fit of the passion of gambling, 
 all dealers, instead of giving only their 
 accustomed orders to the manufac- 
 turers or growers of their commodity, 
 commenced buying up all of it which 
 they could procure, as far as their 
 capital and credit would go. All prices 
 would rise enormously, even if there 
 were no increase of money, and no 
 paper credit, but a mere extension of 
 purchases on book credits. After a 
 time those who had bought would 
 wish to sell, and prices would collapse. 
 This is the ideal extreme case of 
 what is called a commercial crisis. 
 There is said to be a commercial crisis, 
 when a great number of merchants and 
 traders at once, either have, or appre- 
 hend that they shall have, a difficulty 
 in meeting their engagements. The 
 most usual cause of this general em- 
 barrassment, is the recoil of prices 
 after they have been raised by a spirit 
 of speculation, intense in degree, and 
 extending to many commodities. Some 
 accident, which excites expectations of 
 rising prices, such as the opening of a 
 new foreign market, or simultaneous 
 indications of a short supply of several 
 great articles of commerce, sets specu- 
 lation at work in several leading de- 
 partments at once. The prices rise, 
 and the holders realize, or appear to 
 have the power of realizing, great 
 gains. In certain states of the public 
 mind, such examples of rapid increase 
 of fortune call forth numerous imita- 
 tors, and speculation not only goes 
 much beyond what is justified by the 
 original grounds for expecting rise of 
 
 price, but extends itself to articles in 
 which there never was any such ground: 
 these, however, rise like the rest as 
 soon as speculation sets in. At periods 
 of this kind, a great extension of credit 
 takes place. Not only do all whom 
 the contagion reaches, employ their 
 credit much more freely than usual ; 
 but they really have more credit, be- 
 cause they seem to be making unusual 
 gains, and because a generally reckless 
 and adventurous feeling prevails, which 
 disposes people to give as well as take 
 credit more largely than at other timea, 
 and give it to persons not entitled to 
 it. In this manner, in the celebrated 
 speculative year 1825, and at various 
 other periods during the present cen- 
 tury, the prices of many of the principal 
 articles of commerce rose greatly, with- 
 out any fall in others, so that general 
 prices might, without incorrectness, be 
 said to have risen. When, after such 
 a rise, the reaction comes, and prices 
 begin to fall, though at first perhaps 
 only through the desire of the holders 
 to realize, speculative purchases cease : 
 but were this all, prices would only 
 fall to the level from which they rose, 
 or to that which is justified by the state 
 of the consumption and of the supply. 
 They fall, however, much lower; for 
 as, when prices were rising, and every- 
 body apparently making a fortune, it 
 was easy to obtain almost any amount 
 of credit, so now, when everybody 
 seems to be losing, and many fail en- 
 tirely, it is with difficulty that firms of 
 known solidity can obtain even the 
 credit to which they are accustomed, 
 and which it is the greatest inconve- 
 nience to them to be without ; because 
 all dealers have engagements to fulfi\. 
 and nobody feeling sure that the pos 
 tion of his means which he has en- 
 trusted to others will be available in 
 time, no one likes to part with ready 
 money, or to postpone his claim to it. 
 To these rational considerations there 
 is superadded, in extreme cases, a 
 panic as unreasoning as the previous 
 over-confidence ; money is borrowed fof 
 short periods at almost any rate of in- 
 terest, and sales of goods for immediate 
 payment are made at almost any sacri- 
 fice. Thus general prices, during a con*-
 
 320 
 
 BOOK 111. CHAPTER XII. 4. 
 
 mercial revulsion, fall as much below 
 the usual le.vel, as during the previous 
 period of speculation they have risen 
 above it : the fall, as well as the rise, 
 originating not in anything affecting 
 money, but in the state of credit; 
 an unusually extended employment of 
 credit during the earlier period, fol- 
 lowed by a great diminution, never 
 amounting however to an entire cessa- 
 tion of it, in the later. 
 
 It is not, however, universally true 
 that the contraction of credit, charac- 
 teristic of a commercial crisis, must 
 have been preceded by anextraordinary 
 and irrational extension of it. There 
 are other causes ; and one of the most 
 recent crises, that of 1847, is an in 
 stance, having been preceded by no 
 particular extension of credit, and by 
 no speculations ; except those in rail- 
 way shares, which, though in many 
 cases extravagant enough, yet being 
 carried on mostly with that portion of 
 means which the speculators could afford 
 to lose, were not calculated to produce 
 the wide-spread ruin which arises from 
 vicissitudes of price in the commodi- 
 ties in which men habitually deal, and 
 in which the bulk of their capital is 
 invested. The crisis of J847 belonged 
 to another class of mercantile pheno- 
 mena. There occasionally happens a 
 concurrence of circumstances tending 
 to withdraw from the loan market a 
 considerable portion of the capital 
 which usually supplies it. These cir- 
 cumstances, in the present case, were 
 great foreign payments, (occasioned by 
 a high price of cotton and an unpre- 
 cedented importation of food,) together 
 with the continual demands on the cir- 
 culating capital of the country by rail- 
 way calls and the loan transactions of 
 railway companies, for the purpose of 
 being converted into fixed capital and 
 made unavailable for future lending. 
 These various demands fell princi- 
 pally, as such demands always do, on 
 the loan market. A great, though not 
 the greatest part of the imported food, 
 was actually paid for by the proceeds 
 of a government loan. The extra pay- 
 ments which purchasers of corn and 
 cotton, and railway shareholders, found 
 themselves obliged to make, were either 
 
 made with their own spare cash, or with 
 money raised for the occasion. On the 
 first supposition, they were made by 
 withdrawing deposits from bankers, 
 and thus cutting off a part of the 
 streams which fed the loan market; 
 on the second supposition, they were 
 made by actual drafts on the loan 
 market, either by the sale of securities, 
 or by taking up money at interest. This 
 combination of a fresh demand for 
 loans, with a curtailment of the capital 
 disposable for them, raised the rate of 
 interest, and made it impossible to 
 borrow except on the very best se- 
 curity. Some firms, therefore, which, 
 by an improvident and unmercantilo 
 mode of conducting business had al- 
 lowed their capital to become eithei 
 temporarily or permanently unavail- 
 able, became unable to command that 
 perpetual renewal of credit which had 
 previously enabled them to struggle 
 on. These firms stopped payment : 
 their failure involved more or less 
 deeply many other firms which had 
 trusted them ; and, as usual in such 
 cases, the general distrust, commonly 
 called a panic, began to set in, and 
 might have produced a destruction of 
 credit equal to that of 1825, had not 
 circumstances which may almost bo 
 called accidental, given to a very 
 simple measure of tin government 
 (the suspension of the Bank Charter 
 Act of 1844) a fortunate power of 
 allaying panic, to which, when con- 
 sidered in itself, it had no sort of 
 claim.* 
 
 4. The general operation of credit 
 upon prices being such as we have 
 described, it is evident that if any par- 
 ticular mode or form of credit is cal- 
 culated to have a greater operation on 
 prices than others, it can only be by 
 giving greater facility, or greater en- 
 couragement, to the multiplication of 
 * The commercial difficulties, not how- 
 ever amounting to a commercial crisis, o( 
 1861, had essentially the same origin. 
 Heavy payments for cotton imported at high 
 prices, and large investments in banking and 
 other joint-stock projects, combined with 
 the loan operations of foreign governments, 
 made such large drafts upon the loan market 
 as to raise the rate of discount on mercantile 
 bills * high as nine per cent.
 
 INFLUENCE OF CREDIT ON PRICES. 
 
 321 
 
 credit transactions generally. If bank 
 notes, for instance, or bills, have a 
 greater effect on prices than book 
 credits, it is not by any difference in 
 the transactions themselves, which are 
 essentially the same, whether taking 
 place in the one way or in the other : 
 it must be that there are likely to bo 
 more of them. If credit is likely to 
 be more extensively used as a pur- 
 chasing power when bank notes or 
 bills are the instruments used, than 
 when the credit is given by mere 
 entries in an account, to that extent 
 and no more there is ground for as- 
 cribing to the former a greater power 
 over the markets than belongs to the 
 latter. 
 
 Now it appears that there is some 
 such distinction. As far as respects 
 the particular transaction, it makes no 
 difference in the effect on price whether 
 A buys goods of B on simple credit, or 
 gives a bill for them, or pays for them 
 with bank notes lent to him by a banker 
 C. The difference is in a subsequent 
 stage. If A has bought the goods on 
 ft book credit, there is no obvious or 
 convenient mode by which B can make 
 A's debt to him a means of extending 
 his own credit. Whatever credit he 
 has, will be due to the general opinion 
 entertained of his solvency : he cannot 
 specifically pledge A's debt to a third 
 person, as a security for money lent or 
 goods bought. But if A has given him 
 a bill for the amount, he can get this 
 discounted, which is the same thing as 
 borrowing money on the joint credit of 
 A and himself: or he may pay away 
 the bill in exchange for goods, which 
 is obtaining goods on the same joint 
 credit. In either case, here is a second 
 credit transaction, grounded on the 
 first, and which would not have taken 
 place if the first had been transacted 
 without the intervention of a bill. Nor 
 need the transactions end here. The 
 bill may be again discounted, or again 
 paid away for goods, several times be- 
 fore it is itself presented for payment. 
 Nor would it be correct to say that 
 these successive holders, if they had 
 not had the bill, might have attained 
 their purpose by purchasing goods on 
 thoir own credit with the dealers. 
 
 They may not all of thorn be persons 
 of credit, or they may already have 
 stretched their credit as fnr as it will 
 go. And at all events, either money 
 or goods are more readily obtained ou 
 the credit of two persons than of one. 
 Nobody will pretend that it is as easy 
 a thing for a merchant to borrow a 
 thousand pounds on his own credit, as to 
 get a billdiscounted to the same amount, 
 when the drawee is of known solvency. 
 If we now suppose that A, instead of 
 giving a bill, obtains a loan of bank 
 notes from a banker C, and with them 
 pays B for his goods, we shall find the 
 difference to be still greater. B is now 
 independent even of a discounter : A'g 
 bill would have been takeu in payment 
 only by those who were acquainted 
 with his reputation for solvency, but a 
 banker is a person who has credit with 
 the public generally, and whose notes 
 are taken in payment by every one, at 
 least in his own neighbourhood : inso- 
 much that, by a custom which has 
 grown into law, payment in bank notea 
 is a complete acquittance to the payer, 
 whereas if he has paid by a bill, he 
 still remains liable to the debt, if the 
 person on whom the bill is drawn fails 
 to pay it when due. B therefore can 
 expend the whole of the bank notes 
 without at all involving his own credit : 
 and whatever power he had before of 
 obtaining goods on book credit, remains 
 to him unimpaired, in addition to tho 
 purchasing power he derives from the 
 possession of the notes. The same re- 
 mark applies to every person in suc- 
 cession, into whose hands the notes 
 may come. It is only A, the first 
 holder, (who used his credit to obtain 
 the notes as a loan from the issuer,) 
 who can possibly find the credit he 
 possesses in other quarters abated by 
 it ; and even in his case that result ia 
 not probable; for though, in reason, 
 and if all his circumstances were 
 known, every draft already made upon 
 his credit ought to diminish by so much 
 his power of obtaining more, yet in 
 practice the reverse more frequently 
 happens, and his having been trusted 
 by one person is supposed to be evi- 
 dence that he may safely be trusted by 
 others also.
 
 322 
 
 BOOK III. CHAPTER XII. 5. 
 
 It appears, therefore, that bank 
 notes are a more powerful instrument 
 for raising prices than bills, and bills 
 than book credit. It does not, indeed, 
 follow that credit will be more used 
 because it can be. When the state of 
 trade holds out no particular tempta- 
 tion to make large purchases on credit, 
 dealers will use only a small portion of 
 the credit-power, and it will depend only 
 on convenience whether the portion 
 which they use will be taken in one 
 form or in another. It is not until the 
 circumstances of the markets, and the 
 itate of the mercantile mind, render 
 many persons desirous of stretching 
 their credit to an unusual extent, that 
 the distinctive properties of the dif- 
 ferent forms of credit display them- 
 selves. Credit already stretched to 
 the utmost in the form of book debts, 
 would be susceptible of a great addi- 
 tional extension by means of bills, and 
 of a still greater by means of bank 
 notes. The first, because each dealer, 
 in addition to his own credit, would be 
 enabled to create a further purchasing 
 power out of the credit which he had 
 himself given to others : the second, 
 because the banker's credit with the 
 public at large, coined into notes, as 
 bullion is coined into pieces of money 
 to make it portable and divisible, is so 
 much purchasing power supcradded, 
 in the hands of every successive holder, 
 to that which he may derive from his 
 own credit. To state the matter other- 
 wise ; one single exertion of the credit- 
 power in the form of book credit, is 
 only the foundation of a single pur- 
 chase : but if a bill is drawn, that 
 same portion of credit may serve for 
 as many purchases as the number of 
 times the bill changes hands : while 
 every bank note issued, renders the 
 credit of the banker a purchasing 
 power to that amount in the hands of 
 all the successive holders, without im- 
 pairing any power they may possess of 
 effecting purchases on their own credit. 
 Credit, in short, has exactly the same 
 purchasing power with money ; and as 
 money tells upon prices not simply in 
 proportion to its amount, but to its 
 amount multiplied by the number of 
 times it changes hands, so also does 
 
 credit ; and credit transferable from 
 hand to hand is in that proportion 
 more potent than credit which only 
 performs one purchase. 
 
 5. All this purchasing power, how- 
 ever, is operative upon prices, only 
 according to the proportion of it which 
 is used : and the effect, therefore, is 
 only felt in a state of circumstances 
 calculated to lead to an unusually ex- 
 tended use of credit. In such a state 
 of circumstances, that is, in speculative 
 times, it cannot, I think, be denied, 
 that prices arc likely to rise higher if 
 the speculative purchases are made 
 with bank notes, than when they are 
 made with bills, and when made by 
 bills than when made by book credits. 
 This, however, is of far less practical 
 importance than might at first be 
 imagined ; because, in point of fact, 
 speculative purchases are not in tho 
 great majority of cases, made either 
 with bank notes or with bills, but 
 are made almost exclusively on book 
 credits. "Applications to the Bank for 
 extended discount," says the highest 
 authority on such subjects, * (and the 
 same thing must be true of applications 
 to other banks) " occur rarely if ever 
 in the origin or progress of extensive 
 speculations in commodities. These are 
 entered into, for the most part if not 
 entirely, in the first instance, on credit 
 for the length of term usual in the 
 several trades ; thus entailing on the 
 parties no immediate necessity for bor- 
 rowing so much as may be wanted for 
 the purpose beyond their own available 
 capital. This applies particularly to 
 speculative purchases of commodities 
 on the spot, with a view to resale. But 
 these generally form the smaller pro- 
 portion of engagements on credit. By 
 far the largest of those entered into on 
 the prospect of a rise of prices, are 
 such as have in view importations from 
 abroad. The same remark, too, is ap- 
 plicable to the export of commodities, 
 when a large proportion is on the credit 
 of the shippers or their consignees. As 
 long as circumstances hold out the 
 prospect of a favourable result, the 
 
 * Tooke's History of Pricet, voL iv. pp. 
 1256.
 
 INFLUENCE OF CREDIT ON PRICES. 
 
 323 
 
 credit of the parties is generally sus- 
 tained. If some of them wish to realize, 
 there are others with capital and credit 
 re:,-dy to replace them ; and if the events 
 fully justify the grounds on which the 
 speculative transactions were entered 
 into (thus admitting of sales for con- 
 sumption in time to replace the capital 
 embarked) there is no unusual demand 
 for borrowed capital to sustain them. 
 It is only when by the vicissitudes of 
 political events, or of the seasons, or 
 other adventitious circumstances, the 
 forthcoming supplies are found to ex- 
 ceed the computed rate of consumption, 
 and a fall of prices ensues, that an 
 increased demand for capital takes 
 place ; the market rate of interest 
 then rises, and increased applications 
 are made to the Bank of England for 
 discount." So that the multiplication 
 of bank notes and other transferable 
 paper does not, for the most part, ac- 
 company and facilitate the speculation ; 
 but comes into play chiefly when the 
 tide is turning, and difficulties begin to 
 be felt. 
 
 Of the extraordinary height to 
 which speculative transactions can be 
 carried upon mere book credits, without 
 the smallest addition to what is com- 
 monly called the currency, very few 
 persons are at all aware. " The power 
 of purchase," says Mr. Tooke,* "by 
 persons having capital and credit, is 
 much beyond anything that those who 
 an 1 unacquainted practically with spe- 
 culative markets have any idea of. ... 
 A person having the reputation of 
 capital enough for his regular business, 
 and enjoying good credit in his trade, 
 if he takes a sanguine view of the 
 prospect of a rise of price of the article 
 in which he deals, and is favoured by 
 circumstances in the outset and pro- 
 gress of his speculation, may effect pur- 
 chases to an extent perfectly enormous, 
 compared with his capital." Mr. 
 Tooke confirms this statement by some 
 remarkable instances, exemplifying the 
 immense purchasing power which may 
 be exercised, and rise of price which 
 may be produced, by credit not repre- 
 
 * Inquiry into the Cumncy Principle, pp. 
 T and 1368. 
 
 sented by either bank notes or bills of 
 exchange. 
 
 " Amongst the earlier speculators 
 for an advance in the price of tea, in 
 consequence of o>:r dispute with China 
 in 1839, were several retail grocers and 
 tea-dealers. There was a general dis- 
 gosition among the trade to get into 
 stock : that is, to lay in at once a quan- 
 tity , which would meet the probable 
 demand from their customers for seve- 
 ral months to come. Some, however, 
 among them, more sanguine and ad- 
 venturous than the rest, availed them- 
 selves of their credit with the importers 
 and wholesale dealers, for purchasing 
 
 Quantities much beyond the estimated 
 emand in their own business. As the 
 purchases were made in the first instance 
 ostensibly, and perhaps really, for the 
 legitimate purposes and within the 
 limits of their regular business, the 
 parties were enabled to buy without 
 the condition of any deposit ; whereas 
 speculators, known to be such, are 
 required to pay 21. per chest, to cover 
 any probable difference of price which 
 might arise before the expiration of the 
 prompt, which, for this article, is three 
 months. Without, therefore, the outlay 
 of a single farthing of actual capital or 
 currency in any shape, they made pur- 
 chases to a considerable extent; and 
 with the profit realized on the resale of 
 a part of these purchases, they were 
 enabled to pay the deposit on further 
 quantities when required, as was the 
 case when the extent of the purchases 
 attracted attention. In this way, the 
 speculation went on at advancing 
 prices (100 per cent and upwards) till 
 nearly the expiration of the prompt, 
 and if at that time circumstances had 
 been such as to justify the appre- 
 hension which at one time prevailed, 
 that all future supplies would be cut 
 off, the prices might have still further 
 advanced, and at any rate not have 
 retrograded. In this case, the specu- 
 lators might have realized, if not all 
 the profit they had anticipated, a very 
 handsome sum, upon which they might 
 have been enabled to extend their 
 business greatly, or to retire from it 
 altogether, with a reputation for great 
 sagacity in thn making their fortune 
 Y 2
 
 324 
 
 I Jut, instead of this favourable result, it 
 .<> happened that two or three cargoes 
 of tea which had been transhipped 
 were admitted, contrary to expectation, 
 to entry on their arrival here, and it 
 was found that further indirect ship- 
 ments were in progress. Thus the 
 r.ipply was increased beyond the cal- 
 culation of the speculators : and at the 
 same time, the consumption had been 
 diminished by the high price. There 
 was, consequently, a violent reaction 
 on the market ; the speculators were 
 unable to sell without such a sacrifice 
 as disabled them from fulfilling their 
 engagements, and several of them con- 
 sequently failed. Among these, one 
 was mentioned, who having a capital 
 not exceeding 1200Z., which was locked 
 up in his business, had contrived to 
 buy 4000 chests, value above 80,OOOZ., 
 the loss upon which was about 1G,OOOZ. 
 
 " The other example which I have to 
 give, is that of the operation on the 
 corn market between 1838 and 1842. 
 There was an instance of a person who, 
 when he entered on his extensive spe- 
 culations, was, as it appeared by the 
 subsequent examination of his affairs, 
 possessed of a capital not exceeding 
 5000Z., but being successful in the out- 
 set, and favoured by circumstances in 
 the progress of his operations, he con- 
 trived to make purchases to such an 
 extent, that when he stopped payment 
 his engagements were found to amount 
 to between 500.000Z. and 600,OOOZ. 
 Other instances might be cited of 
 parties without any capital at all, who, 
 liy dint of mere credit, were enabled, 
 while the aspect of the market favoured 
 their views, to make purchases to a 
 very great extent. 
 
 "And be it observed, that these 
 speculations, involving enormous pur- 
 chases on little or no capital, were 
 carried on in 1839 and 1840, when the 
 money market was in its most con- 
 tracted state ; or when, according to 
 modern phraseology, there was the 
 greatest scarcity of money." 
 
 But though the great instrument of 
 {speculative purchases is book credits, it 
 cannot be contested that in speculative 
 periods an increase does take place in 
 the quantity both of bills of exchange 
 
 BOOK III. CHAPTER Xll. 5, 
 
 and of bank notes. This increase, iu- 
 deed, so far as bank notes are concerned, 
 hardly ever takes place in the earliest 
 stage of the speculations ; advances 
 from bankers (as Mr. Tooke observes) 
 not being applied for in order to pur- 
 chase, but in order to hold on without 
 selling, when the usual term of credit 
 has expired, and the high price which 
 was calculated on has not arrived. But 
 the tea speculators mentioned by Mr. 
 Tooke could not have carried their 
 speculations beyond the three months 
 which are the usual term of credit in 
 their trade, unless they had been able 
 to obtain advances from bankers, which, 
 if the expectation of a rise of price had 
 still continued, they probably could 
 have done. 
 
 Since, then, credit in the form of 
 bank notes is a more potent instrument 
 for raising prices than book credits, au 
 unrestrained power of resorting to this 
 instrument may contribute to prolong 
 and heighten the speculative rise jf 
 prices, and hence to aggravate the sub- 
 sequent recoil. But in what degree ? 
 and what importance ought we to 
 ascribe to this possibility ? It may help 
 us to form some judgment on this point, 
 if we consider the proportion which the 
 utmost increase of bank notes in a 
 period of speculation, bears, I do not 
 say to the whole mass of credit in the 
 country, but to the bills of exchange 
 alone. The average amount of bills in 
 existence at any one time is supposed 
 greatly to exceed a hundred millions 
 sterling.* The bank note circulation 
 of Great Britain and Ireland seldom 
 exceeds forty millions, and the increase 
 in speculative periods at most two or 
 three. And even this, as we have seen, 
 hardly ever comes into play until that 
 advanced period of the speculation at 
 which the tide shows signs of turning, 
 and the dealers generally are rather 
 thinking of the means of fulfilling their 
 existing engagements, than meditating 
 an extension of them : while the quan- 
 tity of bills in existence is largely in- 
 creased from the very commencement 
 of the speculations. 
 
 6. It is well known that of late 
 * The most approved estimate is that of
 
 INFLUENCE OF Cl.'EDIT ON P1UCES. 
 
 325 
 
 years, an artificial limitation of the 
 issue of bank notes has been regarded 
 by many political economists, and by a 
 pv.-u portion of the public, as an ex- 
 ni'ilinit of supreme efficacy for prevent- 
 in _;-. and when it cannot prevent, for 
 in.', Crating, the fever of speculation ; 
 and this opinion received the recog- 
 nition and sanction of the legislature 
 by the Currency Act of 1844. At the 
 point, however, which our inquiries 
 have reached, though we have con- 
 ceded to bank notes a greater power 
 over prices than is possessed by bills or 
 book credits, we have not found reason 
 to think that this superior efficacy has 
 much share in producing the rise of 
 prices which accompanies a period of 
 speculation, nor consequently that any 
 restraint applied to this one instru- 
 ment, can be efficacious to the degree 
 which is often supposed, in moderating 
 either that rise, or the recoil which 
 follows it. We shall be still less in- 
 clined to think so, when we consider 
 that there is a fourth form of credit 
 
 Mr. Leatham, grounded on the official 
 returns of bill stamps issued. The following 
 are the results : 
 
 
 Bills created in 
 
 
 
 Great Britain 
 
 
 
 and Ireland, 
 
 Average amount 
 
 Year. 
 
 founded on re- 
 
 in circulation 
 
 
 turns of Bill 
 
 at one time in 
 
 
 Stamps issued 
 
 each year. 
 
 
 from the Stamp 
 
 
 
 Office. 
 
 
 im 
 
 356,153,409 
 
 ^89,033,352 
 
 1833 
 
 383,659,585 
 
 95,914,896 
 
 1834 
 
 379,155,052 
 
 94,788,763 
 
 IS* 35 
 
 405,403,051 
 
 101,350,762 
 
 l-.'.'i 
 
 485,943,473 
 
 121,185,868 
 
 1837 
 
 455,084,445 
 
 113,771,111 
 
 1833 
 
 465,504,041 
 
 116,376,010 
 
 1839 
 
 528,493,842 
 
 132,123,460 
 
 " Mr. Leatham," says Mr. Tooke, " gives 
 .he process by which, upon the data fur- 
 nished by the returns of stamps, he arrives 
 at these results; and I am disposed to think 
 that they are as near an approximation to 
 the truth as the nature of the materials ad- 
 mits of arriving at." Inquiry into the Cur- 
 rency Principle, p. 26. Mr. Newmarch (Ap- 
 pendix No. 39 to Report of the Committee on 
 the Sank Acts in 1857, and History of Prices, 
 vol. vi. p. 587) shows grounds for the opinion 
 that the total bill circulation in 1857 was 
 not much less than 180 millions sterling, and 
 that it sometimes rises to 200 millions. 
 
 transactions, by cheques on bankers, 
 and transfers in a banker's books, which 
 is exactly parallel in every respect to 
 bank notes, giving equal facilitii-s ;.; 
 an extension of credit, and capable of 
 acting on prices quite as posverfully. 
 In the words of Mr. Fullarton,* " there 
 is not a single object at present at- 
 tained through the agency of Bank of 
 England notes, which might not be as 
 effectually accomplished by each indi- 
 vidual keeping an account with thu 
 bank, and transacting all his payments 
 of five pounds and upwards by cheque." 
 A bank, instead of lending its notes lo 
 a merchant or dealer, might open an 
 account with him, and credit the ac- 
 count with the sum it had agreed to 
 advance : on an understanding that he 
 should not draw out that sum in any 
 other mode than by drawing cheques 
 against it in favour of those to whom 
 he had occasion to make payments. 
 These cheques might possibly even 
 pass from hand to hand like bank 
 notes ; more commonly however the 
 receiver would pay them into the 
 hands of his own banker, and when he 
 wanted the money, would draw a fresh 
 cheque against it: and hence an ob- 
 jector may urge that as the original 
 cheque would very soon be presented 
 for payment, when it must be paid 
 either in notes or in coin, notes or coin 
 to an equal amount must be provided 
 as the ultimate means of liquidation. 
 It is not so, however. The person to 
 whom the cheque is transferred, may 
 perhaps deal with the same banker, 
 and the cheque may return to the very 
 bank on which it was drawn : this is 
 very often the case in country districts ; 
 if so, no payment will be called for, but 
 a simple transfer in the banker's books 
 will settle the transaction. If the 
 cheque is paid into a different bank, it 
 will not be presented for payment, 
 but liquidated by set-off against other 
 cheques ; and in a state of circum- 
 stances favourable to a general exten- 
 sion of banking credits, a banker who 
 has granted more credit, and has there- 
 fore more cheques drawn on him, will 
 also have more cheques on other 
 bankers paid to him, and will only have 
 * On the Regulation of Currencies, p. 41.
 
 326 
 
 BOOK in. CHAPTER XII. 7. 
 
 to provide notes or cash for the pay- 
 ment of balances ; for which purpose 
 the ordinary reserve of prudent bankers, 
 one-third of their liabilities, will abun- 
 dantly suffice. Now, if he had granted 
 the extension of credit by means of an 
 issue of his own notes, he must equally 
 have retained, in coin or Bank of 
 England notes, the usual reserve : so 
 that he can, as Mr. Fullarton says, give 
 every facility of credit by what may be 
 termed a cheque circulation, which he 
 could give by a note circulation. 
 
 This extension of credit by entries in 
 a banker's books, has all that superior 
 efficiency in acting on prices, which we 
 ascribed to an extension by means of 
 bank notes. As a bank note of 20Z., 
 paid to any one, gives him 201. of pur- 
 chasing-power based on credit, over 
 and above whatever credit he had of 
 his own, so does a cheque paid to him 
 do the same : for, although he may 
 make no purchase with the cheque 
 itself, he deposits it with his banker, 
 and can draw against it. As this act 
 of drawing a cheque against another 
 which has been exchanged and can- 
 celled, can be repeated as often as a 
 purchase with a bank note, it effects 
 ihe same increase of purchasing power. 
 The original loan, or credit, given by 
 the banker to his customer, is po- 
 tentially multiplied as a means of pur- 
 chase, in the hands of the successive 
 persons to whom portions of the credit 
 are paid away, just as the purchasing 
 power of a bank note is multiplied by 
 the number of persons through whose 
 hands it passes before it is returned to 
 the issuer. 
 
 These considerations abate very 
 much from the importance of any 
 effect which can be produced in allay- 
 ing the vicissitudes of commerce, by 
 so superficial a contrivance as the one 
 so much relied on of late, the restric- 
 tion of the issue of bank notes by an 
 artificial rule. An examination of all 
 the consequences of that restriction, 
 and an estimate of the reasons for and 
 against it, must be deferred until we 
 have treated of the foreign exchanges, 
 and the international movements of 
 bullion. At present we are only con- 
 cerned with the general theory of 
 
 prices, of which the different influence 
 
 of different kinds of credit is an essen- 
 tial part. 
 
 7. There has been a great amount 
 of discussion and argument on the ques- 
 tion whether several of these forms of 
 credit, and in particular whether bank 
 notes, ought to be considered as money. 
 The question is so purely verbal as to 
 be scarcely worth raising, and one 
 would have some difficulty in compre- 
 hending why BO much importance is 
 attached to it, if there were not some 
 authorities who, still adhering to the 
 doctrine of the infancy of society and 
 of political economy, that the quantity 
 of money, compared with that of com- 
 modities, determines general prices, 
 think it important to prove that bank 
 notes and no other forms of credit are 
 money, in order to support the infer- 
 ence that bank notes and no other forms 
 of credit influence prices. It is obvious, 
 however, that prices do not depend on 
 money, but on purchases. Money left 
 with a banker, and not drawn against, 
 or drawn against for other purposes 
 than buying commodities, has no effect 
 on prices, any more than credit which 
 is not used. Credit which is used to 
 purchase commodities, affects prices in 
 the same manner as money. Money 
 and credit are thus exactly on a par, 
 in their effect on prices ; and whether 
 we choose to class bank notes with the 
 one or the other, is in this respect en- 
 tirely immaterial. 
 
 Since, however, this question ol 
 nomenclature has been raised, it seems 
 desirable that it should be answered. 
 The reason given for considering bank 
 notes as money, is, that by law and 
 usage they have the property, in com- 
 mon with metallic money, of finally 
 closing the transactions in which they 
 are employed : while no other mode 
 of paying .one debt by transferring 
 another has that privilege. The first 
 remark which here suggests itself is, 
 that on this showing, the notes at 
 least of private banks are not money ; 
 for a creditor cannot be forced to accept 
 them in payment of a debt. They cer- 
 tainly close the transaction if he does 
 accept them ; but so, on the same sup-
 
 HXCE OF CREDIT ON PKICES 
 
 327 
 
 position, would a bale of cloth, or a 
 pipu of wine ; which are not for that 
 ivason regarded as money. It seems 
 to be an essential part of the idea of 
 money, that it be legal tender. An in- 
 convertible paper which is legal tender 
 is universally admitted to be money ; 
 in the French language the phrase 
 papier-monnaie actually means incon- 
 vertibility, convertible notes being 
 merely billets d porteur. It is only in 
 the case of Bank of England notes under 
 the law of convertibility, that any diffi- 
 culty arises ; those notes not being a 
 logU tender from the Bank itself, 
 though a legal tender from all other 
 persons. Bank of England notes un- 
 doubtedly do close transactions, so far 
 as respects the buyer. 'When he has 
 once paid in Bank of England notes, 
 he can in no case be required to pay 
 over again. But I confess I cannot 
 see how the transaction can be deemed 
 complete as regards the seller, when 
 lie will only be found to have received 
 the price of his commodity provided 
 the bank keeps its promise to pay. An 
 instrument which would be deprived 
 of all value by the insolvency of a cor- 
 poration, cannot be money in any 
 sense in which money is opposed to 
 credit. It either is not money, or it 
 is money and credit too. It may be 
 most suitably described as coined cre- 
 dit. The other forms of credit may 
 be distinguished from it as credit in 
 ingots. 
 
 8. Some high authorities have 
 claimed for bank notes, as compared 
 with other modes of credit, a greater 
 distinction in respect to influence on 
 price than we have seen reason to allow ; 
 a difference, not in degree, but in kind. 
 They ground this distinction on the 
 fact, that all bills and cheques, as well 
 as all book-debts, are from the first in- 
 tended to be, and actually are, ulti- 
 mately liquidated either in coin or in 
 notes. The bank notes in circulation, 
 jointly with the coin, are therefore, 
 according to these authorities, the 
 basis on which all the other expedients 
 of credit rest ; and in proportion to 
 the basis will be the superstructure ; 
 insomuch that the quantity of bank 
 
 notes determines that of all the other 
 forms of credit. If bank notes are 
 multiplied, there will, they sei 
 think, be more bills, more payments 
 by cheque, and, i presume, more 
 book credits ; and, by regulating and 
 limiting the insue of bank notes, they 
 think that all other forms of credit are, 
 by an indirect consequence, brought 
 under a similar limitation. I believe 
 I have stated the opinion of these 
 authorities correctly, though I have 
 nowhere seen the grounds of it set 
 forth with such distinctness as to mako 
 me feel quite certain that I understand 
 them. It may be true, that according 
 as there are more or fewer bank notes, 
 there is also, in general (though not 
 invariably), more or less of other de- 
 scriptions of credit ; for the same state 
 of affairs which leads to an increase of 
 credit in one shape, leads to an increase 
 of it in other shapes. But I see no 
 reason for believing that the one is the 
 cause of the other. If indeed we begin 
 by assuming, as I suspect is tacitly 
 done, that prices are regulated by c -in 
 and bank notes, the proposition main- 
 tained will certainly follow : for, accord- 
 ing as prices are higher or lower, the 
 same purchases will give rise to bills, 
 cheques, and book credits of a larger 
 or a smaller amount. But the premise 
 in this reasoning is the very proposi- 
 tion to be proved. Setting this assump- 
 tion aside, I know not how the conclu- 
 sion can be substantiated. The credit 
 given to any one by those with whom 
 he deals, does not depend on the quan- 
 tity of bank notes or coin in circulation 
 at the time, but on their opinion of hia 
 solvency : if any consideration of a more 
 general character enters into their cal- 
 culation, it is only in a time of pressure 
 on the loan market, when they are not 
 certain of being themselves able to ob- 
 tain the credit on which they have been 
 accustomed to rely ; and even then, 
 what they look to is the general state 
 of the loan market, and not (precon- 
 ceived theory apart) the amount of 
 bank notes. So far, as to the willing- 
 ness to give credit. And the willing- 
 ness of a dealer to use his credit, de- 
 pends on his expectations of gain, that 
 is, on his opinion of the probable future
 
 328 
 
 COOK III. CHAPTER XIII. 1. 
 
 price of bis commodity ; an opinion 
 grounded either on the rise or fall 
 already going on, or on his prospective 
 judgment respecting the supply and Ihe 
 rate of consumption. "When a dealer 
 extends his purchases beyond his im- 
 mediate means of payment, engaging 
 to pay at a specified time, he does so 
 in the expectation cither that the trans- 
 action will have terminated favourably 
 before that time arrives, or that he 
 shall then be in possession of sufficient 
 funds from the proceeds of his other 
 transactions. The fulfilment of these 
 expectations depends upon prices, but 
 not specially upon the amount of bank 
 notes. He may, doubtless, also ask him- 
 self, in case he should be disappointed 
 in these expectations, to what quarter 
 he can look for a temporary advance, 
 to enable him, at the worst, to keep 
 his engagements. But in the first 
 place, this prospective reflection on the 
 somewhat more or less of difficulty 
 which he may have in tiding over his 
 embarrassments, seems too slender an 
 
 inducement to be much of a restraint 
 in a period supposed to be one of rash ad- 
 venture, and upon persons so confident 
 of success as to involve themselves be- 
 yond their certain means of extrication. 
 And further, I apprehend that their con- 
 fidence of being helped out in the event 
 of iFI-fortune, will mainly depend on 
 their opinion of their own individual 
 credit, with, perhaps, some considera- 
 tion, not of the quantity of the currency, 
 but of the general state of the loan 
 market. They are aware that, in case 
 of a commercial crisis, they shall have 
 difficulty in obtaining advances. But 
 if they thought it likely that a com- 
 mercial crisis would occur before they 
 had realized, they would not speculate. 
 If no great contraction of general cre- 
 dit occurs, they will feel no doubt of 
 obtaining any advances which they 
 absolutely require, provided the state 
 of their own affairs at the time affords 
 in the estimation of lenders a sufficient 
 prospect that those advances will be 
 repaid. 
 
 CHAPTER XIII. 
 
 OF AN INCONVERTIBLE PAPER CURRENCY. 
 
 1. AFTER experience had shown 
 that pieces of paper, of no intrinsic 
 value, by merely bearing upon them 
 the written profession of being equiva- 
 lent to a certain number of francs, dol- 
 lars, or pounds, could be made to circu- 
 late as such, and to produce all the 
 benefit to the issuers which could have 
 been produced by the coins which they 
 purported to represent; governments 
 began to think that it would be a happy 
 device if they could appropriate to them- 
 selves this benefit, free from the con- 
 dition to which individuals issuing such 
 paper substitutes for money were sub- 
 ject, of giving, when required, for the 
 sign, the thing signified. They deter- 
 mined to try whether they could not 
 emancipate themselves from this un- 
 pleasant obligation, and make a piece 
 of paper issued by them pass for a 
 pound, by merely calling it a pound, 
 
 and consenting to receive it in payment 
 of the taxes. And such is the influence 
 of almost all established governments, 
 that they have generally succeeded in 
 attaining this object : I believe 1 might 
 say they have always succeeded for a 
 time, and the power has only been lost 
 to them after they had compromised it 
 by the most flagrant abuse. 
 
 In the case supposed, the functions 
 of money are performed by a thing 
 which derives its power of performing 
 them solely from convention ; but con- 
 vention is quite sufficient to confer the 
 power ; since nothing more is needful 
 to make a person accept anything as 
 money, and even at any arbitrary value, 
 than the persuasion that it will bo 
 taken from him on the same terms by 
 others. The only question is, what de- 
 termines the value of such a currency ; 
 since it cannot be, as in the case of gclcj
 
 INCONVERTIBLE PAPER CURRENCY. 
 
 329 
 
 and silver (or paper exchangeable for 
 them at pleasure), the cost of produc- 
 tion. 
 
 We have seen, however, that even in 
 the case of a metallic currency, the im- 
 mediate agency in determining its value 
 is its quantity. If the quantity, in- 
 stead of depending on the ordinary mer- 
 cantile motives ot profit and loss, could 
 Le arbitrarily fixed by authority, the 
 value would depend on the fiat of that 
 authority, not on cost of production. 
 The quantity of a paper currency not 
 convertible into the metals at the option 
 of the holder, can be arbitrarily fixed ; 
 especially if the issuer is the sovereign 
 power of the state. The value, there- 
 fore, of such a currency, is entirely 
 arbitrary. 
 
 Suppose that, in a country of which 
 the currency is wholly metallic, a paper 
 currency is suddenly issued, to the 
 amount of half the metallic circulation : 
 not by a banking establishment, or in 
 the form of loans, but by the govern- 
 ment, in payment of salaries and pur- 
 chase of commodities. The currency 
 being suddenly increased by one-half, 
 all prices will rise, and among the 
 rest, the prices of all things made of 
 gold and silver. An ounce of manu- 
 factured gold will become more valu- 
 able than an ounce of gold coin, by 
 more than that customary difference 
 which compensates for the value of the 
 workmanship ; and it will be profitable 
 to melt the coin for the purpose of 
 being manufactured, until as much has 
 been taken from the currency by the 
 subtraction of gold, as had been added 
 to it by the issue of paper. Then prices 
 .will relapse to what they were at first, 
 and there will be nothing changed ex- 
 cept that a paper currency has been 
 substituted for half of the metallic cur- 
 rency which existed before. Suppose, 
 now, a second emission of paper ; the 
 game series of effects will be renewed ; 
 and so on, until the whole of the me- 
 tallic money has disappeared : that is, 
 if paper be issued of as low a denomi- 
 nation as the lowest coin ; if not, as 
 much will remain, as convenience re- 
 quires for the smaller payments. The 
 audition made to the quantity of gold 
 and silver disposable for ornamental 
 
 purposes, will somewhat reduce, for a 
 time, the value of the article ; and as 
 long as this is the case, even though 
 paper lias been issued to the original 
 amount of the metallic circulation, as 
 much coin will remain in circulation 
 along .with it, as will keep the value of 
 the currency down to the reduced value 
 of the metallic material ; but the value 
 having fallen below the cost of produc- 
 tion, a stoppage or diminution of the 
 supply from the mines will enable the 
 surplus to be carried off by the ordinary 
 agents of destruction, alter which, the 
 metals and the currency will recover 
 their natural value. We are here sup- 
 posing, as we have supposed through- 
 out, that the country has mines of its 
 own, and no commercial intercourse 
 with other countries: for, in a country 
 having foreign trade, the coin which is 
 rendered superfluous by an issue of 
 paper is carried off by a much prompter 
 method. 
 
 Up to this point, the effects of a 
 paper currency are substantially the 
 same, whether it is convertible into 
 specie or not. It is when the metals 
 have been completely superseded and 
 driven from circulation, that the diffe- 
 rence between convertible and incon- 
 vertible paper begins to be operative. 
 When the gold or silver has all gone 
 from circulation, and an equal quantity 
 of paper has taken its place, suppose 
 that a still further issue is superadded. 
 The same series of phenomena recom- 
 mences : prices rise, among the rest 
 the prices of gold and silver articles, 
 and it becomes an object as before to 
 procure coin in order to convert it into 
 bullion. There is no longer any coin 
 in circulation ; but if the paper cur- 
 rency is convertible, coin may still be 
 obtained from the issuers, in exchange 
 for notes. All additional notes, there- 
 fore, which are attempted to be forced 
 into circulation after the metals have 
 been completely superseded, will return 
 upon the issuers in exchange for coin ; 
 and they will not be able to maintain 
 in circulation such a quantity of con- 
 vertible paper, as to sink its value below 
 the metal which it represents. It is 
 not so, however, with an inconvertible 
 currency. To the increase of that (as
 
 BOOK III. CHAPTER XIII. 2. 
 
 permitted by law) there is no check. 
 The issuers may add to it indefinitely, 
 lowering its value and r;ii.-ing prices in 
 proportion ; they may, in other words, 
 depreciate the currency without limit. 
 Such a power, in whomsoever vc-t' d, 
 is an intolerable evil. All variations 
 in the value of the circulating medium 
 are mischievous : they disturb existing 
 contracts and expectations, and tho 
 liability to such changes renders every 
 pecuniary engagement of long date 
 entirely precarious. The person who 
 buys for himself, or gives to another, 
 nn annuity of lOOi., does not know 
 whether it will be equivalent to 200Z. 
 or to 501. a few years hence. Great 
 as ' ; this evil would be if it depended 
 only on accident, it is still greater 
 when placed at the arbitrary disposal 
 of an individual or a body of indi- 
 viduals; who may have any kind or 
 degree of interest to be served by an 
 artificial fluctuation in fortunes; and 
 who have at any rate a strong interest 
 in issuing as much as possible, each 
 issue being in itself a source of profit. 
 Not to add, that the issuers may have, 
 and in the case of a government paper 
 always have, a direct interest in lower- 
 ing tho value of the currency, because 
 it is the medium in which their own 
 debts are computed. 
 
 2. In order that the value of the 
 currency may be secure from being 
 altered by design, and may be as little 
 as possible liable to fluctuation from 
 accident, the articles least liable of all 
 known commodities to vary in their 
 value, the precious metals, have been 
 made in all civilized countries the 
 standard of value for the circulating 
 medium ; and no paper currency ought 
 to exist of which the value cannot be 
 made to conform to theirs. Nor has 
 this fundamental maxim ever been en- 
 tirely lost sight of even by the govern- 
 ments which have most abused the 
 tiower of creating inconvertible paper, 
 f they have not (as they generally 
 have) professed an intention of paying 
 in specie at some indefinite future time, 
 i.!;ey have at least, by giving to their 
 paper issues the names of their coins, 
 Uiade a virtual, though generally a 
 
 false, profession of intending to keep 
 them at a value corresponding to that 
 of the coins. This is not impracticable, 
 even with an inconvertible paper. 
 There is not indeed the self-acting 
 check which convertibility brings with 
 it. But there is a clear and unequi- 
 vocal indication by which to judge 
 whether the currency is depreciated, 
 and to what extent. That indication 
 is, the price of the precious metals. 
 When holders of paper canm.t demand 
 coin to be converted into bullion, and 
 when there is none left in circulation, 
 bullion rises and falls in price like other 
 things ; and if it is above the Mint 
 price, if an ounce of gold, which would 
 be coined into the equivalent oi 
 3Z. 175. IQ^d., is sold for 4l. or 51. in 
 paper, the value of the currency has 
 sunk just that much below what the 
 value of a metallic currency would be. 
 If, therefore, the issue of inconvertible 
 paper were subjected to strict rules, 
 one rule being that whenever bullion 
 rose above the Mint price, the issues 
 should be contracted until the market 
 price of bullion and the Mint price were 
 again in accordance, such a currency 
 would not be subject to any of the evils 
 usually deemed inherent in an incon- 
 vertible paper. 
 
 But also such a system of currency 
 would have no advantages sufficient to 
 recommend it to adoption. An incon- 
 vertible currency, regulated by tho 
 price of bullion, would conform exactly, 
 in all i(.3 variations, to a convertible 
 one ; and the only advantage gained, 
 would be that of exemption from the 
 necessity of keeping any reserve of the 
 precious metals ; which is not avuy 
 important consideration, especially as 
 a government, so long as its good faith 
 is not suspected, needs not keep so 
 large a reserve as private issuers, being 
 not so liable to great and sudden de- 
 mands, since there never can be any 
 real doubt of its solvency. Again -t 
 this small advantage is to be set, in the 
 first place, the possibility of fraudulent 
 tampering with the price of bullion for 
 the sake of acting on the currency ; in 
 the manner of the fictitious sales of 
 corn, to influence the averages, so 
 much and so justly complained of while
 
 INCONVERTIBLE PAPER CURRENCY. 
 
 331 
 
 tl/e com laws were in force. But a 
 still stronger consideration is the im- 
 
 i of adhering to a simple prin- 
 ciple, intelligible to the most untaught 
 capacity. Everybody can understand 
 convertibility; every one sees that 
 wiiat can be at any moment exchanged 
 for five pounds, is worth five pounds. 
 Regulation by the price of bullion is 
 a more complex idea, and does -not re- 
 
 1 itself through the same fa- 
 miliar associations. There would be 
 nothing like the same confidence, l>y 
 the public generally, in an inconver- 
 tible currency so regulated, as in a con- 
 vertible one : and the most instructed 
 person might reasonably doubt wL -thcr 
 i IK h a rale would be as likely to be in- 
 ik-xibly adhered to. The grounds of 
 the rule not being so well understood 
 hy the public, opinion would probably 
 not enforce it with as much rigidity, 
 and, in any circumstances of difficulty, 
 would he likely to turn against it, 
 while to the government itself a sus- 
 pension of convertibility would appear 
 a much stronger and more extreme 
 measure, than a relaxation of what 
 might possibly be considered a some- 
 what artificial rule. There is therefore 
 a great preponderance of reasons in 
 favour of a convertible, in preference to 
 even the best regulated inconvertible 
 currency. The temptation to over- 
 issue, in certain financial emergencies, 
 is so strong, that nothing is admissible 
 which can tend, in however slight a 
 degree, to weaken the barriers that 
 restrain it. 
 
 3. Although no doctrine in poli- 
 tical economy rests on more obvious 
 grounds than the mischief of a paper 
 currency not maintained at the same 
 value with a metallic, either by con- 
 vertibility, or by some principle of limi- 
 tation equivalent to it ; and although, 
 accordingly, this doctrine has, though 
 not till after the discussions of many 
 years, been tolerably effectually 
 drummed into the public mind ; yet 
 !onts are still numerous, and 
 projectors every now and then start 
 up, with plans for curing all the econo- 
 vils of society by means of an 
 unlimited hsne of inconvertible paper. 
 
 There is, in truth, a great charm in the 
 idea. To be able to pay off the na- 
 tional debt, defray the expenses of go- 
 vernment without taxation, and in fine, 
 to make the fortunes of the whole com- 
 munity, is a brilliant prospect, when 
 once a man is capable of believing that 
 printing a few characters on bits of 
 paper will do it. The philosopher's 
 stone could not be expected to do 
 more. 
 
 As these projects, however often 
 slain, always resuscitate, it is not su- 
 perfluous to examine one or two of the 
 fallacies by which the schemers impose 
 upon themselves. One, of the com- 
 monest is, that a paper currency can- 
 not be issued in excess so long as every 
 note issued represents property, or has 
 a foundation of actual property to 
 rest on. These phrases, of represent- 
 ing and resting, seldom convey any 
 distinct or well-defined idea : when 
 they do, their meaning is no more than 
 this that the issuers of the paper 
 must Jiave property, either of their 
 own or entrusted to them, to the value 
 of all the notes they issue; though 
 for what purpose does not very clearly 
 appear ; lor if the property cannot be 
 claimed in exchange for the notes, it is 
 difficult to divine in what manner its 
 mere existence can serve to uphold 
 their value. I presume, however, it is 
 intended as a guarantee that the 
 holders would be finally reimbursed, in 
 case any untoward event should cause 
 the whole concern to be wound up. On 
 this theory there have been many 
 schemes for " coining the whole land of 
 the country into money" and the like. 
 
 In so far as this notion has any con- 
 nexion at all with reason, it seems to 
 originate in confounding two entirely 
 distinct evils, to which a paper cur- 
 rency is liable. One is, the insolvency 
 of the issuers ; which, if the paper is 
 grounded on their credit if it makes 
 any promise of payment in cash, either 
 on demand or at any future time of 
 course deprives the paper of any value 
 which it derives from tue promise. To 
 this evil paper credit is equally liable, 
 however moderately used ; and against 
 it, a proviso that all issues should be 
 " founded on property," as for instance
 
 532 
 
 BOOK III. CHAPTER XIII. 4. 
 
 that notes should only be issued on the 
 Mvurity of some valuable thing ex- 
 pressly pledged for their redemption, 
 would really be efficacious as a pre- 
 caution, liut the theory takes no ac- 
 count of another evil, which is incident 
 to the notes of the most solvent firm, 
 company, or government : that of being 
 depreciated in value from being issued 
 in excessive quantity. The assignats, 
 during the French Revolution, were an 
 example of a currency grounded on 
 tl ese principles. The assignats " re- 
 presented'' an immense amount of 
 highly valuable property, namely the 
 lands of the crown, the church, the 
 monasteries, and the emigrants ; 
 amounting possibly to half the terri- 
 tory of France. They were, in fact, 
 orders or assignments on this mass of 
 land. The revolutionary government 
 had the idea of " coining" these lands 
 into money; but, to do them justice, 
 they did not originally contemplate the 
 immense multiplication of issues to 
 which they were eventually driven by 
 the failure of all other financial re- 
 sources. They imagined that the as- 
 signats would come rapidly back to the 
 issuers in exchange for land, and that 
 they should be able to reissue them 
 continually until the lands were all 
 disposed of, without having at any 
 time more than a very moderate quan- 
 tity in circulation. Their hope was 
 frustrated: the land did not sell so 
 quickly as they expected ; buyers were 
 not inclined to invest their money in 
 possessions which were likely to be re- 
 sumed without compensation if the 
 Revolution succumbed : the bits of 
 paper which represented land, becom- 
 ing prodigiously multiplied, could no 
 more keep up their value than the 
 land itself would have done if it had 
 all been brought to market at once : 
 and the result was that it at last re- 
 quired an assignat of six hundred 
 francs to pay for a pound of butter. 
 
 The example of the assignats has 
 been said not to be conclusive, because 
 an assignat only represented laud in 
 general, but not a definite quantity of 
 land. To have prevented their depre- 
 ciation, the proper course, it is affirmed, 
 would have been to have made a valua* 
 
 tion of all the confiscated property at 
 its metallic value, and to have issued 
 assignats up to, but not beyond, that 
 limit ; giving to the holders a right tc 
 demand any piece of land, at its re- 
 gistered valuation, in exchange for 
 assignats to the same amount. There 
 can be no question about the superiority 
 of this plan over the one actually 
 adopted. Had this course been fol- 
 lowed, the assignats could never have 
 been depreciated to the inordinate de- 
 gree they were ; for as they would have 
 retained all their purchasing power in 
 relation to land, however much they 
 might have fallen in respect to other 
 things before they had lost very much 
 of their market value, they would pro- 
 bably have been brought in to be ex- 
 changed for land. It must be remem- 
 bered, however, that their not being 
 depreciated would presuppose that no 
 greater number of them continued in 
 circulation than would have circulated 
 if they had been convertible into cash. 
 However convenient, therefore, in a 
 time of revolution, this currency con- 
 vertible into land on demand might 
 have been, as a contrivance for selling 
 rapidly a great quantity of laud with 
 the least possible sacrifice ; it is diffi- 
 cult to see what advantage it would 
 have, as the permanent system of a 
 country, over a currency convertible 
 into coin : while it is not at all difficult 
 to see what would be its disadvantages ; 
 since land is far more variable in value 
 than gold and silver ; and besides, land, 
 to most persons, being rather an in- 
 cumbrance than a desirable possession, 
 except to be converted into money, 
 people would submit to a much .greater 
 depreciation before demanding land, 
 than they will before demanding gold 
 or silver.* 
 
 4. Another of the fallacies from 
 which the advocates of an inconvertible 
 
 * Among the schemes of currency to which, 
 strange to say, intelligent writers have been 
 found to give their sanction, one is as fol- 
 lows: that the state should receive in pledge 
 or mortgage, any kind or amount of property, 
 such as land, stock, &c., and should advance 
 to the owners inconvertible paper money to 
 the estimated value. Such a currency would 
 net even have the recommendations of the
 
 INCONVERTIBLE PAPER CtJBBENCY. 
 
 333 
 
 currency derive support, is the notion 
 lli. -it an increase of the currency 
 quickens industry. This idea was set 
 *float by Hume, in his Essay on 
 Money, and has had many devoted ad- 
 iercnts since ; witness the Birmingham 
 currency school, of whom Mr. Attwood 
 was at one time the most conspicuous 
 representative. Mr. Attwood main- 
 tained lhat a rise of prices produced by 
 an increase of paper currency, stimu- 
 lates every producer to his utmost ex- 
 ertions, and brings all the capital and 
 labour of the country into complete 
 employment : and that this has inva- 
 riably happened in all periods of rising 
 prices, when the rise was on a suffi- 
 ciently great scale. I presume, how- 
 ever, that the inducement which, ac- 
 cording to Mr. Attwood, excited this 
 unusual ardour in all persons engaged 
 in production, must have been the ex- 
 pectation of getting more of commo- 
 dities generally, more real wealth, in 
 exchange for the produce of their 
 labour, and not merely more pieces of 
 paper. This expectation, however, 
 must have been, by the very terms of 
 the supposition, disappointed, since, all 
 prices being supposed to rise equally, 
 no one was really better paid for his 
 goods than before. Those who agree 
 with Mr. Attwood could only succeed 
 in winning people on to these unwonted 
 exertions, by a prolongation of what 
 would in fact be a delusion ; contriving 
 matters so, that by a progressive rise 
 of money prices, every producer shall 
 always seem to be in the very act of 
 obtaining an increased remuneration 
 which he never, in reality, does obtain. 
 It is unnecessary to advert to any 
 other of the objections to this plan, 
 than that of its total impracticability. 
 It calculates on finding the whole world 
 persisting for ever in the belief that 
 more pieces of paper are more riches, 
 and never discovering that, with all 
 their paper, they cannot buy more of 
 
 Imaginary assignata supposed in the text; 
 since those into whose hands the notes were 
 paid by the persons who received them, could 
 not return them to the Government, and de- 
 mand in exchange land or stock which was 
 only pledged, not alienated. There would 
 be no reflux of such as.sipiats as those, and 
 their depreciation would be indefinite. 
 
 anything than they could before. No 
 siK-li mistake was made during any of 
 the periods of high prices, on the ex- 
 perience of which this school lays so 
 much stress. At the periods which 
 Mr. Attwood mistook for times of 
 prosperity, and which were simply (as 
 all periods of high prices, under a 
 convertible currency, must be) times 
 of speculation, the speculators did not 
 think they were growing rich because 
 the high prices would last, but because 
 they would not last, and because who- 
 ever contrived to realize while they did 
 last, would find himself, after the re- 
 coil, in possession of a greater number 
 of pounds sterling, without their hav- 
 ing become of less value. If, at the 
 close of the speculation, an issue of 
 paper had been made, sufficient to keep 
 prices up to the point which they at- 
 tained when at the highest, no one 
 would have been more disappointed 
 than the speculators ; since the gain 
 which they thought to have reaped by 
 realizing in time (at the expense of 
 their competitors, who bought when 
 they sold, and had to sell after the revul- 
 sion) would have faded away in their 
 hands, and instead of it they would 
 have got nothing except a few more 
 paper tickets to count by. 
 
 Hume's version of the doctrine dif- 
 fered in a slight degree from Mr. 
 Attwood's. He thought that all com- 
 modities would not rise in price simul- 
 taneously, and that some persons 
 therefore would obtain a real gain, by 
 gettir.g more money for what they had 
 to sell, while the things which they 
 wished to buy might not yet have 
 risen. And those who would reap this 
 gain wonld always be (he seems to 
 think) the first comers. It seems 
 obvious, however, that for every person 
 who thus gains more than usual, there 
 is necessarily some other person who 
 gains less. The loser, if things took 
 place as Hume supposes, would be the 
 seller of the commodities which are 
 slowest to rise ; who, by the supposi- 
 tion, parts with his goods at the old 
 prices, to purchasers who have already 
 benefited by the new. This seller has 
 obtained for his commodity only the 
 accustomed quantity of money, while
 
 334 
 
 there are already some things of which 
 that money will no longer purchase as 
 much as before. If, therefore, he 
 knows what is going on, he will raise 
 his price, and then the buyer will not 
 have the gain, which is supposed to 
 stimulate his industry. But if, on the 
 contrary, the seller does not know the 
 state of the case, and only discovers it 
 when he finds, in laying his money out, 
 that it does not go so far, he then ob- 
 tains less than the ordinary remunera- 
 tion for his labour and capital ; and if 
 the other dealer's industry is encou- 
 raged, it should seem that his' must, 
 from the opposite cause, be inpaired. 
 
 5. There is no way in which a 
 general and permanent rise of prices, 
 or in other words, depreciation of money, 
 can benefit anybody, except at the ex- 
 pense of somebody else. The substitu- 
 tion of paper for metallic currency is 
 a national gain : any further increase 
 of paper beyond this is but a form of 
 robbery. 
 
 An issue of notes is a manifest gain 
 to the issuers, who, until the notes are 
 returned for payment, obtain the use of 
 them as if they were a real capital : 
 and so long as the notes are no perma- 
 nent addition to the currency, but 
 merely supersede gold or silver to the 
 same amount, the gain of the issuer is 
 a loss to no one : it is obtained by 
 saving to the community the expense 
 of the more costly material. But if 
 there is no gold or silver to be super- 
 seded if the notes are added to the 
 currency, instead of being substituted 
 for the metallic part of it all holders 
 of currency lose, by the depreciation of 
 its value, the exact equivalent of what 
 the issuer gains. A tax is virtually 
 levied on them for his benefit. It will 
 Ve objected by some, that gains are 
 also made by the producers and dealers 
 who, by means of the increased issue, 
 are accommodated with loans. Theirs, 
 however, is not an additional gain, but 
 a portion of that which is reaped by the 
 issuer at the expense of all possessors 
 of money. The profits arising from the 
 contribution levied upon the public, he 
 does not keep to himself, but divides 
 with his cust oners. 
 
 BOOK III. CHAPTER XIII. 6. 
 
 But besides the benefit reaped by 
 the issuers, or by others through them 
 at the expense of the public generally, 
 there is another unjust gain obtained 
 by a larger class, namely by those who 
 are under fixed pecuniary obligations. 
 All such persons are freed, by a depre- 
 ciation of the currency, from a portion 
 of the burthen of their debts or other 
 engagements : in other words, part of 
 the property of their creditors is gra- 
 tuitously transferred to them. On a 
 superficial view it may be imagined 
 that this is an advantage to industry ; 
 since the productive classes are great 
 borrowers, and generally owe larger 
 debts to the unproductive (if we include 
 among the latter all persons not actually 
 in business) than the unproductive 
 classes owe to them ; especially if the 
 national debt be included. It is only 
 thus that a general rise of prices can 
 be a source of benefit to producers and 
 dealers ; by diminishing the pressure 
 of their fixed burthens. And this might 
 be accounted an advantage, if integrity 
 and good faith were of no importance 
 to the world, and to industry and com- 
 merce in particular. Not many, how- 
 ever, have been found to say that the 
 currency ought to be depreciated on the 
 simple ground of its being desirable to 
 rob the national creditor and private cre- 
 ditors of a part of what is in their bond. 
 The schemes which have tended that 
 way have almost always had some ap- 
 pearance of special and circumstantial 
 justification, such as the necessity of 
 compensating for a prior injustice com- 
 mitted in the contrary direction. 
 
 6. Thus in England, for many 
 years subsequent to 1819, it was perti- 
 naciously contended, that a large portion ; 
 of the national debt, and a multitude 
 of private debts still in existence, wero 
 contracted between 1797 and 1819, 
 when the Bank of England was ex- 
 empted from giving cash for its notes , 
 and that it is grossly unjust to bor- 
 rowers, (that is, in the case of the na- 
 tional debt, to all tax-payers) that they 
 should be paying interest on the sama 
 nominal sums in a currency of fu8, 
 value, which were borrowed in a depnv 
 ciated one. The depreciation, accord*
 
 INCONVERTIBLE PAPEE CURRENCY. 
 
 335 
 
 ing to the views and objects of the par- 
 ticular writer, was represented to have 
 averaged thirty, fifty, or even more than 
 fi'iy ji'/r cent: and the conclusion was, 
 that cither we ought to return to this 
 : .ited currency, or to strike oft' 
 iioia the national debt, and from mort- 
 r other private debts of old stand- 
 ing, a percentage corresponding to the 
 estimated amount of the depreciation. 
 
 To this doctrine, the following was 
 (he answer usually made. Granting 
 that, by returning to cash payments 
 without lowering the standard, an in- 
 was done to debtors, in holding 
 them liable for the same amount of a 
 currency enhanced in value, which they 
 had boiTowed while it was depreciated ; 
 it is now too late to make reparation 
 for this injury. The debtors and cre- 
 ditors of to-day are not the debtors and 
 creditors of 1819: the lapse of years 
 has entirely altered the pecuniary rela- 
 tions of the community ; and it being 
 impossible now to ascertain the par- 
 ticular persons who were cither bene- 
 fited or injured, to attempt to retrace 
 our steps would be not redressing a 
 wrong, but suporadding a second act 
 of wide-spread injustice to the one al- 
 ready committed. This argument is 
 certainly conclusive on the practical 
 question ; but it places the honest con- 
 clusion on too narrow and too low a 
 ground. It concedes that the measure 
 of 1819, called Peel's Bill, by which 
 cash payments were resumed at the 
 original standard of 3l. Us. lO^d., was 
 really the injustice it was said to be. 
 This is an admission wholly opposed 
 to the truth. Parliament had no alter- 
 native ; it was absolutely bound to ad- 
 here to the acknowledged standard ; as 
 may be shown on three distinct grounds, 
 two of fact, and one of principle. 
 
 The reasons of fact are these. In 
 the first place, it is not true that the 
 debts, private or public, incurred during 
 the Bank restriction, were contracted 
 in a currency of lower value than that 
 in which the interest is now paid. It 
 is indeed true that the suspension of 
 the obligation to pay in specie, did put 
 it in the power of the Bank to depre- 
 ciate the currency. It is true also that 
 U.t Funk really exercised that power, 
 
 though to a far less extent than is often 
 pretended; since the difference between 
 the market price of gold and the Mint 
 valuation, during the greater part of 
 the interval, was very trilling, and when 
 it was greatest, during the last five 
 years of the war, did not much exceed 
 thirty per cent. To the extent of that 
 difference, the currency was depre- 
 ciated, that is, its value was below 
 that of the standard to which it pro- 
 fessed to adhere. But the state of 
 Europe at that time was such there 
 was so unusual an absorption of the 
 precious metals, by hoarding, and in 
 the military chests of the vast armies 
 which then desolated the Continent, 
 that the value of the standard itself 
 was very considerably raised : and the 
 best authorities, among whom it is suf- 
 ficient to name Mr. Tooke, have, after 
 an elaborate investigation, satisfied 
 themselves that the difference between 
 paper and bullion was not greater than 
 the enhancement in value of gold itself, 
 and that the paper, though depreciated 
 relatively to the then value of gold, did 
 not sink below the ordinary value, at 
 other times, either of gold or of a con- 
 vertible paper. If this be true (and 
 the evidences of the fact are conclu- 
 sively stated in Mr. Tooke's History 
 of Prices) the foundation of the whole 
 case against the fundholder and other 
 creditors on the ground of depreciation 
 is subverted. 
 
 But, secondly, even if the currency 
 had really been lowered in value at 
 each period of the Bank restriction, in 
 the same degree in which it was de- 
 preciated in relation to its standard, 
 we must remember that a part only of 
 the national debt, or of other perma- 
 nent engagements, was incurred during 
 the Bank restriction. A large part 
 had been contracted before 1797 ; a 
 still larger during the early years of 
 the restriction, when the difference be- 
 tween paper and gold was yet small. 
 To the holders of the former part, an 
 injury was done, by paying the interest 
 for twenty-two years in a depreciated 
 currency : those of the second, suffered 
 an injury during the years in which tho 
 interest was paid in a currency more 
 depreciated than that in which the
 
 336 
 
 BOOK in. CHAPTER xiv. i. 
 
 loans were contracted. To have re- 
 sumed cash payments at a lower 
 standard would have been to perpe- 
 tuate the injury to these two classes 
 of creditors, in order to avoid giving an 
 undue benefit to a third class, who had 
 lent their money during the lew years 
 of greatest depreciation. As it is, there 
 was an underpayment to one set of per- 
 sons, and an overpayment to another. 
 The late Mr. Mushet took the trouble 
 to make an arithmetical comparison 
 between the two amounts. He ascer- 
 tained by calculation, that if an ac- 
 count had been made out in 1819, of 
 what the fundholders had gained and 
 lost by the variation of the paper cur- 
 rency from its standard, they would 
 have been found as a body to have been 
 losers; so that if any compensation 
 was due on the ground of depreciation, 
 it would not be from the fundholders 
 collectively, but to them. 
 
 Thus it is with the facts of the case. 
 But these reasons of fact are not the 
 strongest. There is a reason ot prin- 
 ciple, still more powerful. Suppose 
 that, not a part of the debt merely, but 
 the whole, had been contracted in a 
 depreciated currency, depreciated not 
 only in comparison with its standard, 
 but with its own value before and 
 after ; and that we were now paying 
 the interest of this debt in a currency 
 of fifty or even a hundred per cent 
 more valuable than that in which it 
 was contracted. What difference 
 would this make in the obligation of 
 paying it, if the condition that it should 
 be so paid was part of the original com- 
 pact ? Now this is not only truth, but 
 less than the truth. The compact 
 stipulated better terms for the fund- 
 holder than he has received. During 
 the whole continuance of the Bank re- 
 
 striction, there was a parliamentary 
 pledge, by which the legislature was 
 as much bound as any legislature is 
 capable of binding itself, that cash 
 payments should be resumed on the 
 original footing, at farthest in six 
 months after the conclusion of a ge- 
 neral peace. This was therefore an 
 actual condition of every loan ; and the 
 terms of the loan were more favourable 
 in consideration of it. Without some 
 such stipulation, the Government could 
 not have expected to borrow unless on 
 the terms on which loans are made to 
 the native princes of India. If it had 
 been understood and avowed that, 
 after borrowing the money, the 
 standard at which it was computed 
 might be permanently lowered, to any 
 extent which to the "collective wis- 
 dom" of a legislature of borrowers 
 might seem fit who can say what 
 rate of interest would have been a suffi- 
 cient inducement to persons of common 
 sense to risk their savings in such an 
 adventure ? However mucti the fund- 
 holders had gained by the resumption 
 of cash payments, the terms of the con- 
 tract insured their giving ample value 
 for it. They gave value for more than 
 they received ; since cash payments 
 were not resumed in six months, but in 
 as many years, after the peace. So 
 that waving all our arguments except 
 the last, and conceding all the facts as- 
 serted on the other side of the question, 
 the fundholders, instead of being unduly 
 benefited, are the injured party ; and 
 would have a claim to compensation, if 
 such claims were not very properly 
 barred by the impossibility of adjudica- 
 tion, and by the salutary general maxim 
 of law and policy, that questions should 
 at some time or another come to an, 
 end. 
 
 CHAPTER XIV. 
 
 OF EXCESS OP SUPPLY. 
 
 1. AFTER the elementary exposi- 
 tion of the theory of money contained 
 in the last few chapters, we shall re- 
 
 turn to a question in the general theory 
 of Value, which could not be satisfac- 
 torily discussed until the uuturo ?5d
 
 EXCESS OF SUPPLY. 
 
 837 
 
 Operations of Money were in some 
 measure understood, because the errors 
 against which we have to contend 
 mainly originate in a misunderstand- 
 ing of those operations. 
 
 We have seen that the value of 
 everything gravitates towards a cer- 
 tain medium point (which has been 
 called the Natural Value), namely, 
 that at which it exchanges for every 
 other thing in the ratio of their cost 
 of production. We have seen, too, 
 that the actual or market value coin- 
 cides, or nearly so, with the natural 
 value, only on an average of years ; 
 and is continually either rising above, 
 or falling below it, from alterations in 
 the demand, or casual fluctuations in 
 the supply : but that these variations 
 correct themselves, through the ten- 
 dency of the supply to accommodate 
 itself to the demand which exists for 
 the commodity at its natural value. A 
 general convergence thus results from 
 the balance of opposite divergences. 
 Dearth, or scarcity, on the one hand, 
 and over-supply, or, in mercantile lan- 
 guage, glut, on the other, arc incident 
 to all commodities. In the first case, 
 the commodity affords to the producers 
 or sellers, while the deficiency lasts, an 
 unusually high rate of profit: in the 
 second, the supply being in excess of 
 that for which a demand exists, at such 
 a value as will afford the ordinary profit, 
 the sellers must be content with less, 
 and must, in extreme cases, submit to 
 a loss. 
 
 Because this phenomenon of over- 
 eupply, and consequent inconvenience 
 or loss to the producer or dealer, 
 may exist in the case of any one 
 commodity whatever, many per- 
 sons, including some distinguished 
 political economists, have thought 
 that it may exist with regard to 
 all commodities; that there may be 
 R general over-production of wealth ; 
 a supply of commodities in th' 1 
 gate, surpassing the demand ; and a 
 consequent depressed condition of all 
 classes of producers. Against this doc- 
 trine, of which Mr. Malthus and Dr. 
 Chalmers in this country, and M. !: 
 Sismondi on the Continent, were the 
 chief apostles, I have already con- 
 .*. 
 
 tended in the First Book ;* but it was 
 not possible, in that stage of our in- 
 quiry, to enter into a complete exami- 
 nation of an error (as I conceive) essen- 
 tially grounded on a misunderstanding 
 of the phenomena of Value and Price. 
 The doctrine appears to me to in- 
 volve so much inconsistency in its very 
 conception, that I feel considerable 
 difficulty in giving any statement of it 
 which shall be at once clear, and satis- 
 factory to its supporters. They agree 
 in maintaining that there may be, and 
 sometimes is, an excess of productions 
 in general beyond the demand for 
 them ; that when this happens, pur- 
 chasers cannot be found at prices which 
 will repay the cost of production with 
 a profit ; that there ensues a general 
 depression of prices or values (they are 
 seldom accurate in discriminating be- 
 tween the two), so that producers, the 
 more they produce, find themselves 
 the poorer, instead of richer : and Dr. 
 Chalmers accordingly inculcates on 
 capitalists the practice of a aoral re- 
 straint in reference to the pursuit of 
 gain ; while Sismondi deprecates ma- 
 chinery, and the various inventions 
 which increase productive power. They 
 both maintain that accumulation of 
 capital may proceed too fast, not merely 
 for the moral, but for the material in- 
 terests of those who produce and accu- 
 mulate ; and they enjoin the rich to 
 guard against this evil by an ample 
 unproductive consumption. 
 
 2. When these writers speak of 
 the supply of commodities as out- 
 running the demand, it is not clear 
 which of the two elements of demand 
 they have in view the desire to pos- 
 sess, or the means of purchase : whether 
 their meaning is that there are, in such 
 cases, more consumable products in 
 existence than the public desires to 
 consume, or merely more than it is 
 able to pay for. In this uncertainty, 
 it is necessary to examine both sup- 
 positions. 
 
 First, let us suppose that the quan- 
 tity of commodities produced is not 
 greater than the community would be 
 glad to consume : is it, in that case, 
 Supra, pp. 41-43,
 
 838 
 
 BOOK III. CHAPTER XIV. 3. 
 
 possible that there should be a defi- 
 ciency of demand for all commodities, 
 for want of the means of payment? 
 Those who think so, cannot have con- 
 sidered what it is which constitutes 
 the means of payment for commodities. 
 It is, simply, commodities. Each per- 
 son's means of paying for the produc- 
 tions of other people consists of those 
 which he himself possesses. All sellers 
 are inevitably, and by the meaning of 
 the word, buyers. Could we suddenly 
 double the productive powers of the 
 country, we should double the supply 
 of commodities in every market; but 
 we should, by the same stroke, double 
 the purchasing power. Everybody 
 would bring a double demand as 
 well as supply : everybody would be 
 able to buy twice as much, because 
 every one would have twice as much 
 to offer in exchange. It is probable, 
 indeed, that there would now be a super- 
 fluity of certain things. Although the 
 community would willingly double its 
 aggregate consumption, it may already 
 have as much as it desires of some 
 commodities, and it may prefer to do 
 more than double its consumption of 
 others, or to exercise its increased pur- 
 chasing power on some new thing. If 
 so, the supply will adapt itself accord- 
 ingly, and the values of things will 
 continue to conform to their cost of 
 production. At any rate, it is a sheer 
 absurdity that all things should fall in 
 value, and that all producers should, 
 in consequence, be insufficiently remu- 
 nerated. If values remain the same, 
 what becomes of prices is immaterial, 
 since the remuneration of producers 
 does not depend on how much money, 
 but on how much of consumable arti- 
 cles, they obtain for their goods. Be- 
 sides, money is a commodity ; and if all 
 commodities are supposed to be doubled 
 in quantity, we must suppose money 
 to be doubled too, and then prices 
 would no more fall than values would. 
 
 3. A general over-supply, or ex- 
 cess of all commodities above the de- 
 mand, so far as demand consists in 
 means of payment, is thus shown to 
 be an impossibility. But it may, per- 
 haps, be supposed that it is not the 
 
 ability to purchase, but the desire to 
 possess, that falls short, and that the 
 general produce of industry may be 
 greater than the community desires to 
 consume the part, at least, of the 
 community which has an equivalent 
 to give. It is evident enough, that 
 produce makes a market for produce, 
 and that there is wealth in the country 
 witli which to purchase all the wealth 
 in the country; but those who have 
 the means, may not have the wants, 
 and those who have the wants may be 
 without the means. A portion, there- 
 fore, of the commodities produced may 
 be unable to find a market, from the 
 absence of means in those who have 
 the desire to consume, and the want 
 of desire in those who have the means. 
 This is much the most plausible form 
 of the doctrine, and does not, like that 
 which we first examined, involve a 
 contradiction. There may easily be a 
 greater quantity of any particular com- 
 modity than is desired by those who 
 have the ability to purchase, and it 
 is abstractedly conceivable that this 
 might be the case with all commodi- 
 ties. The error is in not perceiving 
 that though all who have an equivalent 
 to give, might be fully provided with 
 every consumable article which they 
 desire, the fact that they go on adding 
 to the production proves that this is 
 not actually the case. Assume the 
 most favourable hypothesis for the pur- 
 pose, that of a limited community, 
 every member of which possesses as 
 much of necessaries and of all known 
 luxuries as he desires : and since it is 
 not conceivable that persons whose 
 wants were completely satisfied would 
 labour and economize to obtain what 
 they did not desire, suppose that a 
 foreigner arrives, and produces an ad- 
 ditional quantity of something of which 
 there was already enough. Here, it 
 will be said, is over-production : true, 
 I reply ; over-production of that par 
 ticular article : the community wanted 
 no more of that, but it wanted some- 
 thing. The old inhabitants, indeed, 
 wanted nothing; but did not the 
 foreigner himself want something? 
 When he produced the superfluous 
 article, was he labouring without a
 
 EXCESS OF SUPPLY. 
 
 339 
 
 motive? He has produced, but the 
 wrong thing instead of the right. 1 Iu 
 wanted, perhaps, food, and has pro- 
 duced watches, with which everybody 
 was sufficiently supplied. The new 
 coiner brought with him into the 
 country a demand for commodities, 
 equal to all that he could produce by 
 his industry, and it was his business 
 to see that the supply he brought 
 should be suitable to that demand. If 
 he could not produce something capa- 
 ble of exciting a new want or desire in 
 the community, for the satisfaction of 
 which some one would grow more food 
 and give it to him in exchange, he had 
 the alternative of growing food for 
 himself; either on fresh land, if there 
 was any unoccupied, or as a tenant, or 
 partner, or servant, of some former 
 occupier, willing to be partially re- 
 lieved from labour. He has produced 
 a thing not wanted, instead of what 
 was wanted ; and he himself, perhaps, 
 is not the kind of producer who is 
 wanted; but there is no over-pro- 
 duction ; production is not excessive, 
 but merely ill assorted. We saw be- 
 fore, that whoever brings additional 
 commodities to the market, brings an 
 additional power of purchase ; we now 
 see that he brings also an additional 
 desire to consume ; since if he had not 
 that desire, he would not have troubled 
 himself to produce. Neither of the 
 elements of demand, therefore, can be 
 wanting, when there is an additional 
 supply ; though it is perfectly possible 
 that the demand may be for one thing, 
 and the supply may unfortunately con- 
 sist of another. 
 
 Driven to his last retreat, an oppo- 
 nent may perhaps allege, that there 
 are persons who produce and accu- 
 mulate from mere habit ; not because 
 they have any object in growing richer, 
 or desire to add iu any respect to their 
 consumption, but from vis inertice. 
 They continue producing because the 
 machine is ready mounted, and save 
 and re-invest their savings because 
 they have nothing on which they care 
 to expend them. I grant that this is 
 possible, and in some few instances 
 probably happens ; but these do not 
 iu the smallest degree affect our con- 
 
 clusion. For, what do these persons 
 do with their savings? They invest 
 them productively; that is, expend 
 them in employing labour. In other 
 words, having a purchasing power be- 
 longing to them, more than they know 
 what to do with, they make over the 
 surplus of it for the general benefit of 
 the labouring class. Now, will that 
 class also not know what to do with 
 it? Are we to suppose that they too 
 have their wants perfectly satisfied, 
 and go on labouring from mere habit ? 
 Until this is the case ; until the work- 
 ing classes have also reached the point 
 of satiety there will be no want of 
 demand for the produce of capital, 
 however rapidly it may accumulate : 
 since, if there is nothing else for it to 
 do, it can always find employment in 
 producing the necessaries or luxuries 
 of the labouring class. And when they 
 too had no further desire for necessa- 
 ries or luxuries, they would take the 
 benefit of any further increase of wages 
 by 'diminishing their work ; so that the 
 over-production which then for the first 
 time would be possible in idea, could 
 not even then take place in fact, for 
 want of labourers. Thus, in whatever 
 manner the question is looked at, even 
 though we go to the extreme verge 
 of possibility to invent a supposition 
 favourable to it, the theory of general 
 over-production implies an absurdity. 
 
 4. What then is it by which men 
 who have reflected much on economical 
 phenomena, and have even contributed 
 to throw new light upon them by ori- 
 ginal speculations, have been led to 
 embrace so irrational a doctrine? I 
 conceive them to have been deceived 
 by a mistaken interpretation of cer- 
 tain mercantile facts. They imagined 
 that the possibility of a general over- 
 supply of commodities was proved by 
 experience. They believed that they 
 saw this phenomenon in certain con 
 ditions of the markets, the true ex- 
 planation of which is totally different. 
 
 I have already described the stnto 
 of the markets for commodities which 
 accompanies what is termed a com- 
 mercial crisis. At such times there is 
 really an excess of all commodities 
 Z 2
 
 340 
 
 BOOK III. CHAPTER XIV. 4. 
 
 above the money demand : in other 
 words, there is an under-supply of 
 money. From the sudden annihilation 
 of a great mass of credit, every one 
 dislikes to part with ready money, and 
 many are anxious to procure it at any 
 sacrifice. Almost everybody therefore 
 is a seller, and there are scarcely any 
 buyers: so that there may really be, 
 though only while the crisis lasts, an 
 extreme depression of general prices, 
 from what may be indiscriminately 
 called a glut of commodities or a dearth 
 of money. But it is a great error to 
 suppose, with Sismoncli, that a com- 
 mercial crisis is the effect of a general 
 excess of production. It is simply the 
 consequence of an excess of speculative 
 purchases. It is not a gradual advent 
 of low prices, but a sudden recoil from 
 prices extravagantly high: its imme- 
 diate cause is a contraction of credit, 
 and the remedy is, not a diminution of 
 supply, but the restoration of confi- 
 dence. It is also evident that this 
 temporary derangement of markets is 
 an evil only because it is temporary. 
 The fall being solely of money prices, 
 if prices did not rise again no dealer 
 would lose, since the smaller priee 
 would be worth as much to him as the 
 larger price was before. In no manner 
 does this phenomenon answer to the 
 description which these celebrated 
 economists have given of the evil of 
 over-production. That permanent de- 
 cline id the circumstances of producers, 
 for want of markets, which those 
 writers contemplate, is a conception to 
 which the nature of a commercial 
 crisis gives no support. 
 
 The other phenomenon from which 
 the notion of a general excess of wealth 
 and superfluity of accumulation seems 
 to derive countenance, is one of a more 
 permanent nature, namely, the fall of 
 profits and interest which naturally 
 takes place with the progress of popu- 
 lation and production. The cause of 
 this decline of profit is the increased 
 cost of maintaining labour, which re- 
 sults from an increase of population 
 and of the demand for food, outstrip- 
 ping the advance of agricultural im- 
 provement. This important feature in 
 the economical progress of nations will 
 
 receive full consideration and discTiS- 
 sion in the succeeding Book.* It is 
 obviously a totally different thing from 
 a want of market for commodities, 
 though often confounded with it in the 
 complaints of the producing and trading 
 classes. The true interpretation of the 
 modern or present state of industrial 
 economy is, that there is hardly any 
 amount of business which may not be 
 done, if people will be content to do it 
 on small profits ; and this, all active 
 and intelligent persons in business 
 perfectly well know : but even those 
 who comply with the necessities of 
 their time, grumble at what they 
 comply with, and wish that there were 
 less capital, or as they express it, less 
 competition, in order that there might 
 be greater profits. Low profits, how- 
 ever, are a different thing from defi- 
 ciency of demand ; and the production 
 and accumulation which merely reduce 
 profits, cannot be called excess of 
 supply or of production. What the 
 phenomenon really is, and its effects 
 and necessary limits, will be seen when 
 we treat of that express subject. 
 
 I know not of any economical facts, 
 except the two 1 have specified, which 
 can have given occasion to the opinion 
 that a general over-production of com- 
 modities ever presented itself in actual 
 experience. I am convinced that there 
 is no fact in commercial affairs, which, 
 in order to its explanation, stands iu 
 need of that chimerical supposition. 
 
 The point is fundamental ; any dif- 
 ference of opinion on it involves radi- 
 cally different conceptions of political 
 economy, especially in its practical 
 aspect. On the one view, we have 
 only to consider how a sufficient pro- 
 duction may be combined with the best 
 possible distribution ; but on the other 
 there is a third thing to be considered 
 how a market can be created for 
 produce, or how production can be 
 limited to the capabilities of the 
 market. Besides; a theory so essen- 
 tially self-contradictory cannot intrude 
 itself without carrying confusion into 
 the very heart of the subject, and 
 making it impossible even to conceive 
 with any distinctness many of the 
 * Infra, book iy. ch. 4.
 
 MEASURE OF VALUE. 
 
 341 
 
 more complicated economical workings 
 of society. This error has been, I con- 
 ceive, fatal to the systems, as systems, 
 of the three distinguished economists 
 to whom I before referred, Malthas, 
 Chalmers, and Sismondi ; all of whom 
 have admirably conceived and ex- 
 plained several of the elementary 
 theorems of political economy, but 
 this fatal misconception has spread 
 itself like a veil between them aud the 
 more difficult portions of the subject, 
 not suffering one ray of light to pene- 
 trate. Still more is this same contused 
 idea constantly crossing and bewilder- 
 ing the speculations of minds inferior 
 to theirs. It is but justice to two emi- 
 nent names, to call attention to the 
 
 fact, that the merit of having placed 
 this most important point in its true 
 light, belongs principally, on the Con- 
 tinent, to the judicious J. B. Say, and 
 in this country to Mr. Mill ; who (be- 
 sides the conclusive exposition which 
 lie gave of the subject in his Elements 
 of Political Economy) had set forth the 
 correct doctrine with great force and 
 clearness in an early pamphlet, called 
 forth by a temporary controversy, and 
 entitled, "Commerce Defended;" the 
 first of his writings which attained any 
 celebrity, and which he prized more as 
 having been his first introduction to 
 tfie friendship of David Ricardo, the 
 most valued and most intimate friend- 
 ship of his life. 
 
 CHAPTER XV. 
 
 OF A MEASURE OF VALUE. 
 
 1. THERE has been much discus- 
 sion among political economists re- 
 specting a Measure of Value. An 
 importance has been attached to the 
 subject greater than it deserved, and 
 what has been written respecting it 
 has contributed not a little to the re- 
 proach of logomachy, which is brought, 
 with much exaggeration, but not alto- 
 gether without ground, against the 
 speculations of political economists. It 
 is necessary, however, to touch upon the 
 subject, if only to show how little there 
 is to be said on it. 
 
 A Measure of Value, in the ordinary 
 sense of the word measure, would mean, 
 something, by comparison with which 
 we may ascertain what is the value of 
 any other thing. When we consider 
 farther, that value itself is relative, and 
 that two things are necessary to con- 
 stitute it, independently of the third 
 thing which is to measure it ; we may 
 define a Measure of Value to be some- 
 thing, by comparing with which any 
 two other things, we may infer their 
 value in relation to one another. 
 
 In this sense, any commodity will 
 serve as a measure of value at a given 
 time aud place ; since we can always 
 
 infer the proportion in which things 
 exchange for one another, when we 
 know the proportion in which each ex- 
 changes for any third thing. To serve 
 as a convenient measure of value is 
 one of the functions of the commodity 
 selected as a medium of exchange. It 
 is in that commodity that the values of 
 all other things are habitually esti- 
 mated. We say that one thing is 
 worth 21., another 31. ; and it is then 
 known without express statement, that 
 one is worth two-tnirds of the other, or 
 that the things exchange for one an- 
 other in the proportion of 2 to 3. Money 
 is a complete measure of their value. 
 
 But the desideratum sought by poli- 
 tical economists is not a measure of 
 the value of things at the same time 
 and place, but a measure of the value 
 of the same thing at different times 
 and places : something by comparison 
 with which it may be known whether 
 any given thing is of greater or less 
 value now than a century ago, or ia 
 this country than in America or China. 
 And for this also, money, or any othol 
 commodity, will serve quite as well as 
 at the same time and place, provided 
 we can obtain the same data ; provide^
 
 842 
 
 BOOK III. CHAPTER XV. 2. 
 
 we are able to compare with the mea- 
 ure not one commodity only, but the 
 two or more which are necessary to the 
 idea of value. If wheat is now 40s. 
 the quarter, and a fat sheep the same, 
 and if in the time of Henry the Second 
 wheat was 20s., and a sheep 10s., we 
 know that a quarter of wheat was then 
 worth two sheep, and is now only worth 
 one, and that the value therefore of a 
 sheep, estimated in wheat, is twice as 
 great as it was then ; quite indepen- 
 dently of the value of money at the 
 two periods, either in relation to those 
 two articles (in respect to both of which 
 we sxippose it to have fallen), or to 
 other commodities, in respect to which 
 we need not make any supposition. 
 
 What seems to be desired, however, 
 by writers on the subject, is some means 
 of ascertaining the value of a commodity 
 by merely comparing it with the mea- 
 sure, without referring it specially to 
 any other given commodity. They 
 would wish to be able, from the mere 
 fact that wheat is now 40s. the quarter, 
 and was formerly 20s., to decide whe- 
 ther wheat has varied in its value, and 
 in -what degree, without selecting a 
 second commodity, such as a sheep, to 
 compare it with ; because they are de- 
 sirous of knowing, not how much wheat 
 has varied in value relatively to sheep, 
 but how much it has varied relatively 
 to things in general. 
 
 The first obstacle arises from the 
 necessary indefiniteness of the idea of 
 general exchange value value in rela- 
 tion not to some one commodity, but 
 to commodities at large. Even if we 
 knew exactly how much a quarter of 
 wheat would have purchased at the 
 earlier period, of every marketable 
 article considered separately, and that 
 it will now purchase more of some 
 things and less of others, we should 
 often find it impossible to say whether 
 it had risen or fallen in relation to 
 things in general. How much more 
 impossible when we only know how it 
 has varied in relation to the measure. 
 To enable the money price of a thing 
 at two different periods to measure the 
 quantity of things in general which it 
 will exchange for, the same sum of 
 money must correspond at both periods 
 
 to the same quantity of things in 
 general, that is, money must always 
 have the same exchange value, the 
 same general purchasing powei . Now, 
 not only is this not true of money, or 
 of any other commodity, but we canuot 
 even suppose any state of circumstances 
 in which it would be true. 
 
 2. A measure of exchange value, 
 therefore, being impossible, writers 
 have formed a notion of something, 
 under the name of a measure of value., 
 which would be more properly termed 
 a measure of cost of production. They 
 have imagined a commodity invariably 
 produced by the same quantity of 
 labour: to which supposition it is 
 necessary to add, that the fixed capital 
 employed in the production must bear 
 always the same proportion to tho 
 wages of the immediate labour, and 
 must be always of the same durability : 
 in short, the same capital must be ad- 
 vanced for the same length of time, so 
 that the element of value which con- 
 sists of profits, as well as that which 
 consists of wages, may be unchange- 
 able. We should then have a com- 
 modity always produced under one and 
 the same combination of all the cir- 
 cumstances which affect permanent 
 value. Such a commodity would be by 
 no means constant in its exchange 
 value ; for (even without reckoning the 
 temporary fluctuations arising from 
 supply and demand) its exchange 
 value would be altered by every change 
 in the circumstances of production ^of 
 the things against which it was ex- 
 changed. But if there existed such a 
 commodity, we should derive this ad- 
 vantage from it, that whenever any 
 other thing varied permanently in re- 
 lation to it, we should know that the 
 cause of variation was not in it, but 
 in the other thing. It would thus be 
 fitted to serve as a measure, not indeed 
 of the value of other things, but of 
 their cost of production. If a com- 
 modity acquired a greater permanent 
 purchasing power in relation to the 
 invariable commodity, its cost of pro- 
 duction must have become greater; 
 and in the contrary case, less. This 
 measure of cost, is what political
 
 MEASURE OF VALUE. 
 
 843 
 
 economists have generally meant by a 
 measure of value. 
 
 But a measure of cost, though per- 
 fectly conceivable, can no more exist 
 in fact, than a measure of exchange 
 value. There is no commodity which 
 is invariable in its cost of production. 
 Gold and silver are the least variable, 
 but even these are liable to changes in 
 their cost of production, from the ex- 
 haustion of old sources of supply, the 
 discovciy of new, and improvements 
 in the mode of working. If we attempt 
 to ascertain the changes in the cost of 
 production of any commodity from the 
 changes in its money price, the conclu- 
 sion will require to be corrected by the 
 best allowance we can mako for the 
 intermediate changes in the cost of 
 the production of money itself. 
 
 Adam Smith fancied that there were 
 two commodities peculiarly fitted to 
 serve as a measure of value : corn, and 
 labour. Of corn, he said that although 
 its value fluctuates much from year to 
 year, it does not vary greatly from cen- 
 tury to century. This we now know 
 to be an error : corn tends to rise in 
 cost of production with every increase 
 of population, and to fall with every 
 improvement in agriculture, either in 
 the country itself, or in any foreign 
 country from which it draws a portion 
 of its supplies. The supposed con- 
 stancy of the cost of the production of 
 corn depends on the maintenance of a 
 complete equipoise between these an- 
 tagonizing forces, an equipoise which, 
 if ever realized, can only be accidental. 
 With respect to (about as a measure of 
 value, the language c/ Adam Smith is 
 not uniform. He sometimes speaks of 
 : t as a good measure only for short 
 periods, saying that the value of la- 
 bour (or wages) does not vary much 
 from year to year, though it does from 
 generation to generation. On other 
 occasions he speaks as if labour were 
 intrinsically the most proper measure 
 of value, on the ground that one day's 
 irdinary muscular exertion of one man, 
 nay be looked upon as always, to him, 
 '.he same amount of effort or sacrifice. 
 Xut this proposition, whether in itself 
 admissible or not, discards the idea of 
 exchange value altogether, substituting 
 
 a totally different idea, more analogous 
 to value in use. If a day's labour will 
 purchase in America twice as much of 
 ordinary consumable articles as in Eng 
 land, it seems a vain subtlety to insist 
 on saying that labour is of the same 
 value in both countries, and that it is 
 the value of the other things which is 
 different. Labour, in this case, may be 
 correctly said to be twice as valuable, 
 both in the market and to the labourer 
 himself, in America as in England. 
 
 If the object were to obtain an 
 approximate measure by which to esti- 
 mate value in use, perhaps nothing 
 better could be chosen than one day's 
 subsistence of an average man, reckoned 
 in the ordinary food consumed by the 
 class of unskilled labourers. If in any 
 country a pound of maize flour will sup- 
 port a labouring man for a day, a thing 
 might be deemed more or less valuable 
 in proportion to the number of pounds 
 of maize flour it exchanged for. If 
 one thing, either by itself or by what 
 it would purchase, could maintain a 
 labouring man for a day, and another 
 could maintain him for a week, there 
 would be some reason in saying that 
 the one was worth, for ordinary human 
 uses, seven times as much as the other. 
 But this would not measure the worth 
 of the thing to its possessor for his own 
 purposes, which might be greater to 
 any amount, though it could not be less, 
 than the worth of the food which the 
 thing would purchase. 
 
 The idea of a Measure of Value must 
 not be confounded with the idea of the 
 regulator, or determining principle, of 
 value. When it is said by Eicardo and 
 others, that the value of a thing is 
 regulated by quantity of labour, they 
 do not mean the quantity of labour for 
 which the thing will exchange, but the 
 quantity required for producing it. 
 This, they mean to affirm, determines 
 its value ; causes it be of the value it is, 
 and of no other. But when Adam 
 Smith and Malthas say that labour ia 
 a measure of value, they do not mean 
 the labour by which the thing was or 
 can be made, but the quantity of labour 
 which it will exchange for, or purchase j 
 in other words, the value of the thing, 
 estimated in labour. And they do not
 
 844 
 
 BOOK 111. 
 
 mean that this regulates the general 
 exchange value of the thing, or has any 
 effect in determining ..hat that value 
 shall be, but only ascertains what it is, 
 and whether and how much it varies 
 
 CHAPTEK XVI. I. 
 
 from time to time and from place tc 
 place. To confound these two ideas, 
 would be much the same thing as to 
 overlook the distinction between the 
 thermometer and the fire. 
 
 CHAPTER XVI. 
 
 OF SOME PECULIAR CASES OF VALUE. 
 
 1. THE general laws of value, 
 in all the more important cases of 
 the interchange of commodities in 
 Hie same country, have now been 
 investigated. We examined, first, the 
 case of monopoly, in which the value 
 is determined by either a natural or 
 an artificial limitation of quantity, 
 that is, by demand and supply : 
 secondly, the case of free competition, 
 when the article can be produced in 
 indefinite quantity at the same cost ; 
 in which case the permanent value is 
 determined by the cost of production, 
 and only the fluctuations by supply and 
 demand : thirdly, a mixed case, that of 
 the articles which can be produced in 
 indefinite quantity, but not at the same 
 cost ; in which case the permanent 
 value is determined by the greatest cost 
 which it is necessary to incur in order 
 to obtain the required supply. And 
 lastly, we have found that money itself 
 is a commodity of the third class ; that 
 its value, in a state of freedom, is 
 governed by the same laws as the values 
 of other commodities of its class : and 
 that prices, therefore, follow the same 
 laws as values. 
 
 From this it appears that demand 
 and supply govern the fluctuations 
 of values and prices in all cases, 
 and the permanent values and prices 
 of all things of which the supply is 
 determined by any agency other than 
 that of free competition : but that, under 
 the regime of competition, things are, 
 on the average, exchanged for each 
 other at such values, and sold at such 
 prices, as afford equal expectation of 
 advantage to all classes of producers ; 
 which can only be when things ex- 
 
 change for one another in the ratio of 
 their cost of production. 
 
 It is now, however, necessary to take 
 notice of certain cases, to which, from, 
 their peculiar nature, this law of ex- 
 change value is inapplicable. 
 
 It sometimes happens that two diffe- 
 rent commodities have what may be 
 termed a joint cost of production. They 
 are both products of the same operation, 
 or set of operations, and the outlay is 
 incurred for the sake of both together, 
 not part for one and part for the other. 
 The same outlay would have to be in- 
 curred for either of the two, if the other 
 were not wanted or used at all. There 
 are not a few instances of commodities 
 thus associated in their production. 
 For example, coke and coal-gas are- 
 both produced from the same material, 
 and by the same operation. In a more 
 partial sense, mutton and wool are an 
 example : beef, hides, and tallow: calves 
 and dairy produce : chickens and eggs. 
 Cost of production can have nothing to 
 do with deciding the value of the asso- 
 ciated commodities relatively to each 
 other. It only decides their.joint value. 
 The gas and the coke together have to 
 repay the expenses of their production, 
 with the ordinary profit. To do this, a 
 given quantity of gas, together with 
 the coke which is the residuum of its 
 manufacture, must exchange for other 
 things in the ratio of their joint cost of 
 production. But how much of the re- 
 muneration of the producer shall be 
 derived from the coke, and how much 
 from the gas, remains to be decided. 
 Cost of production does not determine 
 their prices, but the sum of their prices, 
 A principle is wanting to apportiog
 
 SOME PECULIAR CASES OF VALUE. 
 
 345 
 
 the expenses of production between the 
 two. 
 
 Since cost of production here fails us, 
 we must revert to a law of value ante- 
 rior to cost of production, and more 
 fundamental, the law of demand and 
 (supply. The law is, that the demand 
 for a commodity varies with its value, 
 and that the value adjusts itself so that 
 the demand shall be equal to the supply. 
 This supplies the principle of reparti- 
 tion whicu we are in quest of. 
 
 Suppose that a certain quantity of 
 gas is produced and sold at a certain 
 price, and that the residuum of coke is 
 offered at a price wkich, together with 
 that of the gas, repays the expenses 
 with the ordinary rate of profit. Sup- 
 pose, too, that at the price put upon the 
 gas and coke respectively, the whole of 
 the gas finds an easy market, without 
 either surplus or deficiency, but that 
 purchasers cannot be found for all the 
 coke corresponding to it. The coke 
 will be offered at a lower price in order 
 to force a market. But this lower price, 
 together with the price of gas, will not 
 be remunerating : the manufacture, as 
 a whole, will not pay its expenses with 
 the ordinary profit, and will not, on 
 these terms, continue to be carried on. 
 The gas, therefore, must be sold at a 
 higher price, to make up for the defi- 
 ciency on the coke. The demand con- 
 sequently contracting, the production 
 will be somewhat reduced ; and prices 
 will become stationary when, by the 
 joint cftect of the rise of gas and the 
 fall of coke, so much less of the first is 
 sold, and so much more of the second, 
 that there is now a market for all the 
 coke which results from the existing 
 extent of the gas manufacture. 
 
 Or suppose the reverse case ; that 
 moro coke is wanted at the present 
 prices than can be supplied by the 
 operations required by the existing de- 
 mand for gas. Coke, being now in de- 
 ficiency, will rise in price. The whole 
 operation will yield more than the 
 usual rate of profit, and additional capi- 
 tal will be attracted to the manufacture. 
 The unsatisfied demand for coke will 
 be supplied ; but this cannot be done 
 without increasing the supply of gas too; 
 nd as the existing demand was fully 
 
 supplied already, an increased quantity 
 can only find a market by lowering 
 the price. The result will be that the 
 two together will yield the return re- 
 quired by their joint cost of production, 
 but that more of this return than before 
 will be furnished by the coke, and 
 less by the gas. Equilibrium will be 
 attained when the demand for each 
 article fits so well with the demand for 
 the other, that the quantity required 
 of each is exactly as much as is gene- 
 rated in producing the quantity re- 
 quired of the other. If there is any 
 surplus or deficiency on either side ; if 
 there is a demand for coke, and not a 
 demand for all the gas produced along 
 with it, or vice versa; the values and 
 prices of the two things will so readjust 
 themselves that both shall find a 
 market. 
 
 When, therefore, two or more com- 
 modities have a joint cost of production, 
 their natural values relatively to each 
 other are those which will create a 
 demand for each, in the ratio of the 
 quantities in which they are sent 
 forth by the productive process. This 
 theorem is not in itself of any great 
 importance : but the illustration it 
 affords of the law of demand, and of 
 the mode in which, when cost of pro- 
 duction fails to be applicable, the other 
 principle steps in to supply the vacancy, 
 is worthy of particular attention, as 
 we shall find in the next chapter but 
 one that something very similar takes 
 place in cases of much greater moment. 
 
 2. Another case of value which 
 merits attention, is that of the different 
 kinds of agricultural produce. This is 
 rather a more complex question than 
 the last, and requires that attention 
 should be paid to a greater number of 
 influencing circumstances. 
 
 The case would present nothing pe- 
 culiar, if different agricultural products 
 were either grown indiscriminately and 
 with equal advantage on the same 
 soils, or wholly on different soils. The 
 difficulty arises from two things : first, 
 that most soils are fitter for one kind 
 of produce than another, without being 
 absolutely unfit for any ; and secondly, 
 the rotation of crops,.
 
 846 
 
 BOOK III. CHAPTER XVI. 2. 
 
 For simplicity, we will confine our 
 supposition to two kinds of agricultural 
 produce ; for instance, wheat and oats. 
 If all soils were equally adapted for 
 tvheat and for oats, both would be 
 grown indiscriminately on all soils, and 
 their relative cost of production, being 
 the same everywhere, would govern 
 their relative value. If the same labour 
 which grows three quarters of wheat 
 on any given soil, would always grow 
 on that soil five quarters of oats, the 
 three and the five quarters would be of 
 the same value. If, again, wheat and 
 oats could not be grown on the same 
 soil at all, the value of each would be 
 determined by its peculiar cost of pro- 
 duction on the least favourable of' the 
 soils adapted for it which the existing 
 demand required a recourse to. The 
 fact, however, is that both wheat and 
 nats can be grown on almost any soil 
 tvhich is capable of producing either : 
 but some soils, such as the stiff clays, 
 are better adapted for wheat, while 
 others (the light sandy soils) are more 
 suitable for oats. There might be some 
 soils which would yield, to the same 
 quantity of labour, only four quarters of 
 oats to three of wheat ; others perhaps 
 less than three of wheat to five quarters 
 of oats. Among these diversities, what 
 determines the relative value of the 
 two things ? 
 
 It is evident that each grain will be 
 cultivated in preference, on the soils 
 which are better adapted for it than 
 for the other ; and if the demand is 
 supplied from these alone, the values of 
 the two grains will have no reference 
 to one another. But when the demand 
 for both is such as to require that each 
 should be grown not only on the soils 
 peculiarly fitted for it, but on the 
 medium soils which, without being spe- 
 cifically adapted to either, are about 
 equally suited for both, the cost of 
 production on those medium soils will 
 determine the relative value of the two 
 grains ; while the rent of the soils 
 specifically adapted to each, will be 
 regulated by their productive power, 
 considered with reference to that one 
 alone to which they are peculiarly 
 applicable. Thus far the question pre- 
 sents no difficulty, to any one to whom 
 
 the general principles of value are 
 familiar. 
 
 It may happen, however, that the 
 demand for one of the two, as for 
 example wheat, may so outstrip the 
 demand for the other, as not only to 
 occupy the soils specially suited for 
 wheat, but to engross entirely those 
 equally suitable to both, and even en- 
 croach upon those which are better 
 adapted to oats. To create an induce- 
 ment for this unequal apportionment of 
 the cultivation, wheat must be rela- 
 tively dearer, and oats cheaper, than 
 according to the cost of their production 
 on the medium land. Their relative 
 value must be in proportion to the cost 
 on that quality of land, whatever it 
 may be, on which the comparative de- 
 mand for the two grains requires that 
 both of them should be grown. If, from 
 the state of the demand, the two culti- 
 vations meet on land more favourable 
 to one than to the other, that one will 
 be cheaper and the other dearer, in 
 relation to each other and to things in 
 general, than if the proportional de- 
 mand were as we at first supposed. 
 
 Here, then, we obtain a fresh illus- 
 tration, in a somewhat different manner, 
 of the operation of demand, not as an 
 occasional disturber of value, but as a 
 permanent regulator of it, conjoined 
 with, or supplementary to, cost of 
 production. 
 
 The case of rotation of crops does 
 not require separate analysis, being a 
 case of joint cost of production, like 
 that of gas and coke. If it were the 
 practice to grow white and green crops 
 on all lands in alternate years, the one 
 being necessary as much for the sako 
 of the other as for its own sake ; the 
 farmer would derive his remuneration 
 for two years' expenses from one white 
 and one green crop, and the prices of 
 the two would so adjust themselves as 
 to create a demand which would carry 
 off an equal breadth of white and of 
 green crops. 
 
 There would be little difficulty in 
 finding other anomalous cases of value, 
 which it might be a useful exercise to 
 resolve : but it is neither desirable nor 
 possible, in a work like the present, to 
 enter more int details than is neces-
 
 INTERNATIONAL TRADE. 
 
 347 
 
 gary for the elucidation of principles. 
 I now therefore proceed to the only 
 part of the general theory of exchange 
 which has not yet been touched upon, 
 
 that of International Exchanges, or to 
 speak more generally, exchanges be- 
 tween distant places. 
 
 CHAFrER XVII. 
 
 0* INTERNATIONAL TRADK. 
 
 1. THE causes which occasion a 
 tommodity to be brought from a dis- 
 tance, instead of being produced, as 
 convenience would seem to dictate, as 
 near as possible to the market where 
 it is to be sold for consumption, are 
 usually conceived in a rather superficial 
 manner. Some things it is physically 
 impossible to produce, except in par- 
 ticular circumstances of heat, soil, 
 water, or atmosphere. But there are 
 many things which, .though they could 
 be produced at home without difficulty 
 and in any quantity, are yet imported 
 from a distance. The explanation 
 which would be popularly given of this 
 would be, that it is cheaper to import 
 than to produce them : and this is the 
 true reason. But this reason itself 
 requires that a reason be given for it. 
 Of two things produced in the same 
 place, if one is cheaper than the other, 
 the reason is that it can be produced 
 with less labour and capital, or, in a 
 word, at less cost. Is this also the 
 reason as between things produced in 
 different places? Are things never 
 imported but from places where they 
 can be produced with less labour (or 
 loss of the other element of cost, time) 
 than in the place to which they are 
 brought? Does the law, that perma- 
 nent value is proportioned to cost of 
 production, hold good between com- 
 modities produced in distant places, as 
 it does between those produced in ad- 
 jacent places ? 
 
 We shall find that it does not. A 
 thing may sometimes be sold cheapest, 
 by being produced in some other place 
 than that at which it can be produced 
 with the smallest amount of labour 
 and abstinence. England might import 
 
 corn from Poland and pay for it in cloth, 
 even though England had a decided 
 advantage over Poland in the produc- 
 tion of both the one and the other. 
 England might send cottons to Por- 
 tugal in exchange for wine, although 
 Portugal might be able to produce 
 cottons with a less amount of labour 
 and capital than England could. 
 
 This could not happen between ad- 
 jacent places. If the north bank of the 
 Thames possessed an advantage over 
 the south bank in the production of 
 shoes, no shoes would be produced on 
 the south side ; the shoemakers would 
 remove themselves and their capitals 
 to the north bank, or would have esta- 
 blished themselves there originally; 
 for, being competitors in the same 
 market with those on the north side, 
 they could not compensate themselves 
 for their disadvantage at the expense 
 of the consumer : the amount of it 
 would fall entirely on their profits ; 
 and they would not long content them- 
 selves with a smaller profit, when, by 
 simply crossing a river, they could 
 increase it. But between distant 
 places, and especially between differ- 
 ent countries, profits may continue dif- 
 ferent : because persons do not usually 
 remove themselves or their capitals to 
 a distant place without a very strong 
 motive. If capital removed to remote 
 parts of the world as readily, and for as 
 small an inducement, as it moves to 
 another quarter of the same town ; if 
 people would transport their manufac- 
 tories to America or China whenever 
 they could save a small percentage in 
 their expenses by it ; profits would be 
 alike (or equivalent) all over the world, 
 and all things would be produced in
 
 248 
 
 BOOK III. CHAPTER XVII. 1. 
 
 the places where the same labour and 
 capital would produce them in greatest 
 
 Quantity and of best quality. A ten- 
 ency may, even now, be observed 
 towards such a state of things ; capital 
 is becoming more and more cosmopoli- 
 tan ; there is so much greater similarity 
 of manners and institutions than for- 
 merly, and so much less alienation of feel- 
 ing, among the more civilized countries, 
 that both population and capital now 
 vnove from one of those countries to 
 another on much less temptation than 
 heretofore. But there are still extra- 
 ordinary differences, both of wages and 
 of profits, between different parts of 
 the world. It needs but a small motive 
 to transplant capital, or even persons, 
 from Warwickshire to Yorkshire : but 
 a much greater to make them remove 
 to India, the colonies, or Ireland. To 
 France, Germany, or Switzerland, ca- 
 pital moves perhaps almost as readily as 
 to the colonies ; the differences of lan- 
 guage and government being scarcely 
 so great a hindrance as climate and 
 distance. To countries still barbarous, 
 or, like Russia or Turkey, only be- 
 ginning to be civilized, capital will not 
 migrate, unless under the inducement 
 of a very great extra profit. 
 
 Between all distant places therefore 
 in some degree, but especially between 
 different countries (whether under the 
 same supreme government or not), 
 there may exist great inequalities in 
 the return to labour and capital, with- 
 out causing them to move from one 
 place to the other in such quantity as 
 to level those inequalities. The capital 
 belonging to a country will, to a great 
 extent, remain in the country, even if 
 there be no mode of employing it in 
 which it would not be more productive 
 elsewhere. Yet even a country thus cir- 
 cumstanced might, and probably would, 
 carry on trade with other countries. It 
 would export articles of some sort, even 
 to places which could make them with 
 less labour than itself; because those 
 countries, supposing them to have au 
 advantage over it in all productions, 
 would have a greater advantage in 
 some things than in others, and would 
 find it their interest to import the 
 articles in which their advantage was 
 
 smallest, that they might employ more 
 of their labour and capital on those in 
 which it was greatest. 
 
 2. As I have said elsewhere* after 
 Ricardo (the thinker who has done 
 most towards clearing up this subject), ) 
 " it is not a difference in the absolute 
 cost of production, which determines 
 the interchange, but a difference in the 
 comparative cost. It may be to our 
 advantage to procure iron from Sweden, 
 in exchange for cottons, even although 
 the mines of England as well as her 
 manufactories should be more produc- 
 tive than those of Sweden ; for if we 
 have an advantage of one-half in cot- 
 tons, and only an advantage of a 
 quarter in iron, and could sell our 
 cottons to Sweden at the price which 
 Sweden must pay for them if she pro- 
 duced them herself, we should obtain 
 our iron with an advantage of one-half, 
 as well as our cottons. We may often, 
 by trading with foreigners, obtain their 
 commodities at a smaller expense of 
 labour and capital than they cost to 
 the foreigners themselves. The bargain 
 is still advantageous to the foreigner, 
 because the commodity which he re- 
 ceives in exchange, though it has cost 
 us less, would have cost him more." 
 
 To illustrate the cases in which in- 
 terchange of commodities will not, and 
 those in which it will, take place be- 
 tween two countries, Mr. Mill, in his 
 Elements of Political Economy,^ makes 
 the supposition, that Poland has an 
 advantage over England in the produc- 
 tion both of cloth and of corn. He first 
 supposes the advantage to be of equal 
 amount in both commodities : the cloth 
 and the corn, each of which required 
 100 days labour in Poland, requiring 
 
 * ]3say on tomt Umettled Question* of 
 Political Economy, Essay 1. 
 
 t I at one time believed Mr. Ricardo to 
 have been the sole author of the doctrine 
 now universally received by political econo- 
 mists, on the nature and measure of the be- 
 nefit which a country derives from foreign 
 trade. But Colonel Torrens, by the repub- 
 lication of one of his early writings, The 
 Economists Refuted, has established at least 
 a joint claim with Mr. Kicardo to the origi- 
 nation of the doctrine, and an exclusive oi)9 
 to its earliest publication. 
 
 J Third ed. p. 120,
 
 INTERNATIONAL TRADE. 
 
 349 
 
 er.cli laO clays labour in England. "It 
 would follow that the cloth of 150 days 
 labour iu England, if sent to Poland, 
 would be equal to the cloth of 100 days 
 labour in Poland ; if exchanged for corn, 
 therefore, it would exchange for the 
 corn of only 1 00 days labour. But the 
 corn of 100 days labour in Poland, was 
 supposed to be the same quantity with 
 that of 150 days labour in England. 
 \\ith 150 days labour in cloth, there- 
 fore, England would only get as much 
 corn in Poland as she could raise with 
 150 days labour at home; and she 
 would, in importing it, have the cost 
 of carriage besides. In these circum- 
 stances no exchange would take place." 
 In this case the comparative costs of 
 the two articles in England and in 
 Poland were supposed to be the same, 
 though the absolute costs were differ- 
 ent ; on which supposition we see that 
 there would be no labour saved to 
 cither country by confining its industry 
 to one of the two productions, and im- 
 porting the other. 
 
 It is otherwise when the comparative, 
 and not merely the absolute costs of the 
 two articles are different in the two 
 countries. "If," continues the same 
 author, " while the cloth produced with 
 100 days labour in Poland was pro- 
 duced with 150 days labour in England, 
 the corn which was produced in Poland 
 with 100 days labour could not be pro- 
 duced in England with less than 200 
 days labour ; an adequate motive to ex- 
 change would immediately arise, ^"ith 
 a quantity of cloth which England pro- 
 duced with 150 days labour, she would 
 l:'e able to purchase as much corn in 
 Poland as was there produced with 1 00 
 days labour; but the quantity which 
 was there produced with 100 days 
 labour, would be as great as the quan- 
 tity produced in England with 200 days 
 labour." By importing corn, therefore, 
 from Poland, and paying for it with 
 cloth, England would obtain for 150 
 days labour what would otherwise cost 
 her 200 ; being a saving of 50 days 
 labour on each repetition of the trans- 
 action : and not merely a saving to 
 England, but a saving absolutely; for 
 it is not obtained at the expense of 
 Poland, who, with com that costs her 
 
 100 days labour, has purchased cloth 
 which, if produced at home, would have 
 cost her the same. Poland, therefore, 
 on this supposition, loses nothing ; but 
 also she derives no advantage from the 
 trade, the imported cloth costing her as 
 much as if it were made at home. To 
 enable Poland to gain anything by the 
 interchange, something must be abated 
 from the gain of England : the corn pro- 
 duced in Poland by 100 days labour, 
 must be able to purchase from England 
 more cloth than Poland could produce 
 by that amount of labour ; more there- 
 fore than England could produce by 
 150 days labour, England thus obtain- 
 ing the corn which would have cost 
 her 200 days, at a cost exceeding 150, 
 though short of 200. England there- 
 fore no longer gains the whole of the 
 labour which is saved to the two jointly 
 by trading with one another. 
 
 3. From this exposition we per- 
 ceive in what consists the benefit o* 
 international exchange, or in other 
 words, foreign commerce. Setting aside 
 its enabling countries to obtain com- 
 modities which they could not them- 
 selves produce at all ; its advantage 
 consists in a more efficient employ- 
 ment of the productive forces of the 
 world. If two countries which trade 
 together attempted, as far as was phy- 
 sically possible, to produce for them- 
 selves what they now import from one 
 another, the labour and capital of the 
 two countries would not be so pro- 
 ductive, the two together would not 
 obtain from their industry so great a 
 quantity of commodities, as when each 
 employs itself in producing, both for 
 itself and for the other, the things in 
 which its labour is relatively most 
 efficient. The addition thus made to 
 the produce of the two combined, con- 
 stitutes the advantage of the trade. 
 It is possible that one of the two 
 countries may be altogether inferior 
 to the other in productive capacities, 
 and that its labour and capital could 
 be employed to greatest advantage by 
 being removed bodily to the other. 
 The labour and capital which have 
 been sunk in rendering Holland habit- 
 able, would have produced a much
 
 350 
 
 greater return if transported to Ame- 
 rica cr Ireland. The produce of the 
 whole world would be greater, or the 
 labour less, than it is, if everything 
 were produced where there is the 
 greatest absolute facility for its pro- 
 duction. But nations do not, at least 
 in modern times, emigrate en masse; 
 and while the labour and capital of a 
 country remain in the country, they 
 are most beneficially employed in pro- 
 ducing for foreign markets as well as 
 for its own, the things in which it lies 
 under the least disadvantage, if there 
 be none in which it possesses an ad- 
 vantage. 
 
 4. Before proceeding further, let 
 us contrast this view of the benefits 
 of international commerce with other 
 theories which have prevailed, and 
 which to a certain extent still prevail, 
 on the 'same subject. 
 
 According to the doctrine now stated, 
 the only direct advantage of foreign 
 commerce consists in the imports. A 
 country obtains things which it either 
 could not have produced at all, or which 
 it must have produced at a greater ex- 
 pense of capital and labour than the 
 cost of the things which it exports to 
 pay for them. It thus obtains a more 
 ample supply of the commodities it 
 wants, for the same labour and capital ; 
 or the same supply, for less labour and 
 capital, leaving the surplus disposable 
 to produce other things. The vulgar 
 theory disregards this benefit, and 
 deems the advantage of commerce to 
 reside in the exports : as if not what a 
 country obtains, but what it parts with, 
 by its foreign trade, was supposed to 
 constitute the gain to it. An extended 
 market for its produce an abundant 
 consumption for its goods a vent for 
 its surplus are the phrases by which 
 it has been customary to designate the 
 uses and recommendations of commerce 
 with foreign countries. This notion is 
 intelligible, when we consider that the 
 authors and leaders of opinion on mer- 
 cantile questions have always hitherto 
 been the selling class. It is in truth 
 a surviving relic of the Mercantile 
 Theory, according to which, money 
 being the only wealth, selling, or in 
 
 BOOK m. CHAPTER XVII. 4. 
 
 other words, exchanging goods for 
 money, was (to countries without 
 mines of their own) the only way of 
 growing rich and importation of 
 goods, that is to say, parting with 
 money, was so much subtracted from 
 the benefit. 
 
 The notion that money alone is 
 wealth, has been long defunct, but ii 
 has left many of its progeny Behind 
 it ; and even its destroyer, Adam Smith, 
 retained some opinions which it is im- 
 possible to trace to any other origin. 
 Adam Smith's theory of the benefit of 
 foreign trade, was that it afforded an out- 
 let for the surplus produce of a country, 
 and enabled a portion of the capital 
 of the country to replace itself with a 
 profit. These expressions suggest ideas 
 inconsistent with a clear conception of 
 the phenomena. The expression, sur- 
 plus produce, seems to imply that a 
 country is under some kind of neces- 
 sity of producing the corn or cloth 
 which it exports ; so that the portion 
 which it docs not itself consume, if 
 not wanted and consumed elsewhere ; 
 would either be produced in sheer 
 waste, or if it were not produced, the 
 corresponding portion of capital would 
 remain idle, and the mass of productions 
 in the country would be diminished by 
 so much. Either of these suppositions 
 would be entirely erroneous. The 
 country produces an exportable article 
 in excess of its own wants, from no in- 
 herent necessity, but as the cheapest 
 mode of supplying itself with other 
 things. If prevented from exporting this 
 surplus, it would cease to produce it, and 
 would no longer import anything, being 
 unable to give an equivalent ; but the 
 labour and capital which had been 
 employed in producing with a view to 
 exportation, would find employment in 
 producing those desirable objects which 
 were previously brought from abroad : 
 or, if some of them could not be pro- 
 duced, in producing substitutes for 
 them. These articles would of course 
 be produced at a greater cost than that 
 of the things with which they had pre- 
 viously been purchased from foreign 
 countries. But the value and price of 
 the articles would rise in proportion; 
 and the capital would just as much bf
 
 INTERNATIONAL TRADE. 
 
 replaced, with the ordinary profit, from 
 the returns, as it was when employed 
 in producing for the foreign market. 
 The only losers (after the temporary 
 inconvenience of the change) would be 
 the consumers of the heretofore im- 
 ported articles ; who would be obliged 
 either to do without them, consuming 
 in lieu of them something which they 
 did not like as well, or to pay a higher 
 price for them than before. 
 
 There is much misconception in the 
 common notion of what commerce does 
 for a country. When commerce is 
 spoken of as a source of national 
 wealth, the imagination fixes itself 
 upon the large fortunes acquired by 
 merchants, rather than upon the saving 
 of price to consumers. But the gains 
 of merchants, when they enjoy no ex- 
 clusive privilege, are no greater than 
 the profits obtained by the employment 
 of capital in the country itself. If it 
 be said that the capital now employed 
 in foreign trade could not find employ- 
 ment in supplying the home market, I 
 might reply, that this is the fallacy of 
 general over-production, discussed in a 
 former chapter : but the thing is in this 
 particular case too evident, to require 
 an appeal to any general theory. We 
 not only see that the capital of the 
 merchant would find employment, but 
 we see what employment. There would 
 be employment created, equal to that 
 which would be taken away. Exporta- 
 tion ceasing, importation to an equal 
 value would cease also, and all that 
 part of the income of the country 
 which had been expended in imported 
 commodities, would be ready to expend 
 itself on the same things produced at 
 home, or on others instead of them. 
 Commerce is virtually a mode of cheap- 
 ening production ; and in all such cases 
 the consumer is the person ultimately 
 benefited; the dealer, in the end, is 
 sure to get his profit, whether the buyer 
 obtains much or little for his money. 
 This is said without prejudice to the 
 effect (already touched upon, and to 
 be hereafter fully discussed) which the 
 cheapening of commodities may have 
 in raising profits; in the case when 
 the commodity cheapened, being one 
 of those consumed by labourers, enters 
 
 into the cost of labour, by which tho 
 rate of profits is determined. 
 
 5. Such, then, is the direct eco- 
 nomical advantage of foreign trade. 
 But th-jre are, besides, indirect eft'ecta, 
 which must be counted as benefits of 
 a high order. One is, the tendency of 
 every extension of the market to im- 
 prove the processes of production. A 
 country which produces for a larger 
 market than its own, can introduce a 
 more extended division of labour, can 
 make greater use of machinery, and is 
 more likely to make inventions and 
 improvements in the processes of pro- 
 duction. Whatever causes a greater 
 quantity of anything to be produced 
 in the same place, tends to the general 
 increase of the productive powers of 
 the world.* There is another con- 
 sideration, principally applicable to an 
 early stage of industrial advancement. 
 A people may be in a quiescent, in- 
 dolent, uncultivated state, with all 
 their tastes either fully satisfied or 
 entirely undeveloped, and they may 
 fail to put forth the whole of their pro- 
 ductive energies for want of any suffi- 
 cient object of desire. The opening of 
 a foreign trade, by making them ac- 
 quainted with new objects, or tempting 
 them by the easier acquisition of things 
 which they had not previously thought 
 attainable, sometimes works a sort of 
 industrial revolution in a country whose 
 resources were previously undeveloped 
 for want of energy and ambition in 
 the people : inducing those who were 
 satisfied with scanty comforts and little 
 work, to work harder for the gratifica- 
 tion of their new tastes, and even to 
 save, and accumulate capital, for tho 
 still more complete satisfaction of those 
 tastes at a future time. 
 
 But the economical advantages of 
 commerce are surpassed in importance 
 by those of its effects, which are in- 
 tellectual and moral. It is hardly pos- 
 sible to overrate the value, in the pre- 
 sent low state of human improvement, 
 of placing human beings in contact 
 with persons dissimilar to themselves, 
 and with modes of thought 
 
 * Vide supra, book i. ch. ix. $ 1,
 
 BOOK III. CHAPTER XVIII. 1. 
 
 unlike those with which they are fami- 
 liar. Commerce is now, what war once 
 was, the principal source of this con- 
 tact. Commercial adventurers from 
 more advanced countries have gene- 
 rally been the first civilizers of bar- 
 barians. And commerce is the purpose 
 of the far greater part of the communi- 
 cation which takes place between civi- 
 lized nations. Such communication 
 has always been, and is peculiarly in 
 the present age, one of the primary 
 sources of progress. To human beings, 
 who, as hitherto educated, can scarcely 
 cultivate even a good quality without 
 running it into a fault, it is indispen- 
 sable to be perpetually comparing their 
 own notions and customs with the expe- 
 rience and example of persons in dif- 
 ferent circumstances from themselves : 
 and there is no nation which does not 
 need to borrow from others, not merely 
 particular arts or practices, but essen- 
 
 tial points of character in which it 
 own type is inferior. Finally, com- 
 merce first taught nations to see with 
 good-will the wealth and prosperity of 
 one another. Before, the patriot, un- 
 less sufficiently advanced in culture to 
 feel the world his country, wished all 
 countries weak, poor, and ill-governed, 
 but his own: he now sees in their 
 wealth and progress a direct source of 
 wealth and progress to his own country. 
 It is commerce which is rapidly ren- 
 dering war obsolete, by strengthening 
 and*multiplying the personal interests 
 which are in natural opposition to it. 
 And it may be said without exaggera- 
 tion, that the great extent and rapid 
 increase of international trade, in being 
 the principal guarantee of the peace of 
 the world, is the great permanent se- 
 curity for the uninterrupted progress of 
 the ideas, the institutions, and the cha- 
 racter of the human race. 
 
 CHAPTER XVIII. 
 
 OF INTERNATIONAL VALUES. 
 
 1. THE values of commodities 
 produced at the same place, or in 
 places sufficiently adjacent for capital 
 to move freely between them let us 
 say, for simplicity, of commodities 
 produced in the same country depend 
 (temporary fluctuations apart) upon 
 iheir cost of production. But the value 
 of a commodity brought from a distant 
 nlace, especially from a foreign country, 
 uoes not depend on its cost of produc- 
 tion in the place from whence it conies. 
 On what, then, does it depend? The 
 value of a thing in any place, depends 
 on the cost of its acquisition in that 
 place ; which in the case of an imported 
 article, means the cost of production of 
 the thing which is exported to pay 
 for it. 
 
 Since all trade is in reality barter, 
 money being a mere instrument for 
 exchanging things against one another, 
 w will, for simplicity, begin by sup- 
 posing the international trade to be in 
 
 form, what it always is in reality, an 
 actual trucking of one commodity 
 against another. As far as we have 
 hitherto proceeded, we have found all 
 the laws of interchange to be essen- 
 tially the same, whether money is used 
 or not; money never governing, but 
 always obeying, those general laws. 
 
 If, then, England imports wine from 
 Spain, giving for every pipe oi' wine 
 a bale of cloth, the exchange value 
 of a pipe of wine in England will 
 not depend upon what the produc- 
 tion of the wine may have cost in 
 Spain, but upon what the production 
 of the cloth has cost in England. 
 Though the wine may have cost 
 in Spain the equivalent of only tea 
 days labour, yet, if the cloth costs in 
 England twenty days labour, the wine, 
 when brought to England, will ex- 
 change for the produce of twenty days 
 English labour, plus the cost of car- 
 riage; including the usual profit on th
 
 INTERNATIONAL VALUES. 
 
 85.1 
 
 importer's capital during the time it is 
 locked up, and withheld from other 
 employment. 
 
 The value, then, in any country, of 
 a foreign commodity, depends on the 
 quantity of home produce which must 
 be given to the foreign country in ex- 
 change for it. In other words, the 
 values of foreign commodities depend 
 on the terms of international exchange. 
 AY hat, then, do these depend upon? 
 \Vhat is it, -which, in the case sup- 
 posed, causes a pipe of wine from Spam 
 to bo exchanged with England for 
 exactly that quantity of cloth? Wo 
 have seen that it is not their cost of 
 production. If the cloth and the wine 
 were both made in Spain, they would 
 exchange at their cost of production in 
 Hp.-iin ; if they were both made in 
 England, they would exchange at their 
 cost of production in England : but all 
 the cloth being made in England, and 
 all the wine in Spain, they are in cir- 
 cumstances to which we have already 
 determined that the law of cost of pro- 
 duction is not applicable. We must 
 accordingly, as we have done before in 
 a similar embarrassment, fall back 
 upon an antecedent law, that of supply 
 and demand: and in this we shall 
 iigain find the solution of our difficulty. 
 
 I have discussed this question in a 
 separate Essay, already once referred 
 to ; and a quotation of part of the 
 exposition then given, will be the best 
 introduction to my present view of the 
 subject. I must give notice that we 
 are now in the region of the most 
 complicated questions which political 
 economy affords ; that the subject is 
 OHO which cannot possibly bo made 
 elementary ; and that a more continu- 
 ous effort of attention than has yet 
 been required, will be necessary to 
 follow the series of deductions. The 
 thread, however, which we are about 
 to take in hand, is in itself very simple 
 and manageable ; the only difficulty is 
 in following it through the windings 
 and entanglements of complex interna- 
 tional transactions. 
 
 2. "When the trade is csta- 
 1'li-hril between the two countries, the 
 two commodities will exchange for 
 
 each other at the same rate of inter- 
 change in both countries bating the 
 cost of carriage, of which, for the pre- 
 sent, it will be more convenient to omit 
 the consideration. Supposing, there- 
 fore, for the sake of argument, that the 
 carriage of the commodities from one 
 country to the other could be effected 
 without labour and without cost, no 
 sooner would the trade be opened than 
 the value of the two commodities, esti- 
 mated in each other, would come to a 
 level in both countries. 
 
 " Suppose that 10 yards cf broad- 
 cloth cost in England as much labour 
 as 15 yards of linen, and in Germany 
 as much as 20." In common with 
 most of my predecessors, I find it ad- 
 visable, in these intricate investiga- 
 tions, to give distinctness and fixity to 
 the conception by numerical examples. 
 These examples must sometimes, as in 
 the present case, be purely suppositi- 
 tious. I should have preferred real 
 ones ; but all that is essential is, that 
 the numbers should be such as admit 
 of being easily followed through the 
 subsequent combinations into which 
 they enter. 
 
 This supposition then being made, 
 it would be the interest of England to 
 import linen from Germany, and of 
 Gei-many to import cloth from England. 
 "When each country produced both 
 commodities for itself, 10 yards of cloth 
 exchanged for 15 yards of linen in 
 England, and for 20 in Germany. They 
 will now exchange for the same number 
 of yards of linen in both. For what 
 number ? If for 15 yards, England 
 will be just as she was, and Germany 
 will gain all. If for 20 yards, Germany 
 will be as before, and England will 
 derive the whole of the benefit. If for 
 any number intermediate between 15 
 and 20, the advantage will be shared 
 between the two countries. If, for 
 example, 10 yards of cloth exchange 
 for 18 of linen, England will gain an 
 advantage of 3 yards on every 15, 
 Germany will save 2 out of every 20. 
 The problem is, what are tho causes 
 which determine the proportion in 
 which the cloth of England and thu 
 linen of Germany wi 1 exchange for 
 each other. 
 
 AA
 
 3.54 
 
 " As exchange value, in this case as 
 in every other, is proverbially fluctu- 
 ating, it does not matter \vhat we 
 tuppose it to be when we begin : we 
 shall soon see whether there be any 
 fixed point about which it oscillates, 
 which it has a tendency always to 
 approach to, and to remain at. Let 
 us suppose, then, that by the effect of 
 what Adam Smith calls the higgling 
 of the market, 10 yards of cloth, in 
 both countries, exchange for 17 yards 
 of linen. 
 
 " The demand for a commodity, that 
 is, the quantity of it which can find a 
 purchaser, varies, as we have before 
 remarked, according to the price. In 
 Germany the price of 10 yards of cloth 
 is now 17 yards of linen, or whatever 
 quantity of money is equivalent in 
 Germany to 17 yards of linen. Now, 
 that being the price, there is some 
 particular number of yards of cloth, 
 which will be in demand, or will find 
 purchasers, at that price. There is some 
 given quantity of cloth, more than 
 which could not be disposed of at that 
 price ; less than which, at that price, 
 would not fully satisfy the demand. 
 Let us suppose this quantity to be 1000 
 times 10 yards. 
 
 "Let us now turn our attention to 
 England. There, the price of 1 7 yards 
 of linen is 10 yards of cloth, or what- 
 ever quantity of money is equivalent 
 in England to 10 yards of cloth. 
 There is some particular number 
 of yards of linen which, at that 
 price, will exactly satisfy the de- 
 mand, and no more. Let us suppose 
 that this number is 1000 times 17 
 yards. 
 
 " As 1 7 yards of linen are to 1 yards 
 of cloth, so are 1000 times 17 yards to 
 1000 times 10 yards. At the existing 
 exchange value, the linen which Eng- 
 land requires will exactly pay for the 
 quantity of cloth which, on the same 
 terms of interchange, Germany re- 
 quires. The demand on each side is 
 precisely sufficient to carry off the 
 supply on the other. The conditions 
 required by the principle of demand 
 and supply are fulfilled, and the two 
 commodities will continue to be inter- 
 changed, as we supposed them to be, 
 
 BOOK III. CHAPTER XV11I. g 2. 
 
 in the ratio of 17 yards of linen for 10 
 yards of cloth. 
 
 " But our suppositions might have 
 been different. Suppose that, at the 
 assumed rate of interchange, England 
 had been disposed to consiime no 
 greater quantity of linen than 800 
 times 17 yards : it is evident that, at 
 the rate supposed, this would not have 
 sufficed to pay for the 1000 times 10 
 yards of cloth which we have supposed 
 Germany to require at the assumed 
 value. Germany would be able to 
 procure no more than 800 times 10 
 yards at that price. To procure the 
 remaining 200, which she would have 
 no means of doing but by bidding 
 higher for them, she would offer more 
 than 17 yards of linen in exchange for 
 10 yards of cloth : let us suppose her 
 to offer 18. At this price, perhaps, 
 England would be inclined to purchase 
 a greater quantity of linen. She would 
 consume, possibly, at that price, 900 
 times 18 yards. On the other hand, 
 cloth having risen in price, the demand 
 of Germany for it would probably have 
 diminished. If, instead of 1000 times 
 10 yards, she is now contented with 
 900 times 10 yards, these will exactly 
 pay for the 900 times 18 yards of linen 
 which England is willing to take at 
 the altered price : the demand on each 
 side will again exactly suffice to take 
 off the corresponding supply; and 10 
 yards for 18 will be the rate at which, 
 in both countries, cloth will exchange 
 for linen. 
 
 " The converse of all this would have 
 happened, if, instead of 800 times 17 
 yards, we had supposed that England, 
 at the rate of 10 for 17, would havo 
 taken 1200 times 17 yards of linen. In 
 this case, it is England whose demand 
 is not fully supplied; it is England 
 who, by bidding for more linen, will 
 alter the rate of interchange to her 
 own disadvantage; and 10 yards of 
 cloth will fall, in both countries, below 
 the value of 17 yards of linen. By tln.s 
 fall of cloth, or what is the same thing, 
 this rise of linen, the demand of Ger- 
 many for cloth will increase, and the 
 demand of England for linen will 
 diminish, till the rate of interchange 
 has so adjusted itself that the cloTli
 
 INTERNATIONAL VALUES. 
 
 865 
 
 and tlio linen will exactly pay for one 
 another; and when once this point is 
 attained, values will remain without 
 limber alteration. 
 
 "It may be considered, therefore, as 
 established, that when two countries 
 trade together in two commodities, the 
 exchange value of these commodities 
 relatively to each other will adjust 
 itself to the inclinations and circum- 
 stances of the consumers on both sides, 
 in such manner that the quantities 
 required by each country, of the articles 
 which it imports from its neighbour, 
 shall be exactly sufficient to pay for 
 one another. As the inclinations and 
 circumstances of consumers cannot be 
 reduced to any rule, so neither can the 
 proportions in which the two commo- 
 dities will be interchanged. We know 
 that the limits within which the varia- 
 tion is confined, are the ratio between 
 their costs of production in the one 
 country, and the ratio between their 
 costs of production in the other. Ten 
 yards of cloth cannot exchange for 
 more than 20 yards of linen, nor for 
 less than 15. But they may exchange 
 for any intermediate number. The 
 ratios, therefore, in which the advan- 
 tage of the trade may be divided be- 
 tween the two nations, are various. 
 The circumstances on which the pro- 
 portionate share of each country more 
 remotely dependa, admit only of a very 
 general indication. 
 
 "It is even possible to conceive an 
 extreme case, in which the whole of 
 the advantage resulting from the inter- 
 change would be reaped by one party, 
 the other country gaining nothing at 
 all. There is no absurdity in the 
 hypothesis that, of some given com- 
 modity, a certain quantity is all that 
 is wanted at any price ; and that, when 
 that quantity is obtained, no fall in the 
 exchange value would induce other 
 consumers to come forward, or those 
 who are already supplied, to take more. 
 Let us suppose that this is the case in 
 Germany with cloth. Before her trade 
 with England commenced, when 10 
 yards of cloth cost her as much labour 
 as 20 yards of linen, she nevertheless 
 consumed as much, cloth as she wanted 
 under any circumstances, and, if she 
 
 could obtain it at the rate of 10 yards 
 of cloth for 15 of linen, she would not 
 consume more. Let this fixed quantity 
 be 1000 times 10 yards. At the rate, 
 however, of 10 for 20, England would 
 want more linen than would be equi- 
 valent to this quantity of cloth. Sho 
 would, consequently, offer a higher 
 value for linen ; or, what is the- samo 
 thing, she would offer her cloth at a 
 cheaper rate. But, as by no lowering 
 of the value could she prevail on Ger- 
 many to take a greater quantity of 
 cloth, there would be no limit to the 
 rise of linen or fall of cloth, until the 
 demand of England for linen was re- 
 duced by the rise of its value, to the 
 quantity which 1000 times 10 yards of 
 cloth would purchase. It might be, 
 that to produce this diminution of the 
 demand a less fall would not suffice 
 than that which would make 10 yards 
 of cloth exchange for 15 of linen. 
 Germany would then gain the whole of 
 the advantage, and England would be 
 exactly as she was before the trade 
 commenced. It would be for the in- 
 terest, however, of Germany herself to 
 keep her linen a little below the value 
 at which it could be produced in Eng- 
 land, in order to keep herself from 
 being supplanted by the home pro- 
 ducer. England, therefore, would 
 always benefit in some degree by the 
 existence of the trade, though it might 
 be a very trifling one." 
 
 In this statement, I conceive, is con- 
 tained the first elementary principle of 
 International Values. 1 have, as is 
 indispensable in such abstract and hy- 
 pothetical cases, supposed the circum- 
 stances to be much less complex than 
 they really are : in the first place by 
 suppressing the cost of carriage : next, 
 by supposing that there are only two 
 countries trading together ; and lastly, 
 that they trade only in t\vo commodi- 
 ties. To render the exposition of the 
 principle complete, it is necessnrv to 
 restore the various circumstances, thus 
 temporarily left out to simplify the 
 argument. Those who are accustomed 
 to any kind of scientific investigation 
 will probably see, without formal proof, 
 that the introduction of these circum- 
 stances cannot alter the theory of the 
 A A 2
 
 856 
 
 BOOK III. CHAPTER XV1T1. 4. 
 
 subject. Trade among any number of 
 countries, and in any number of com- 
 modities, must take place on the same 
 essential principles as trade between 
 two countries and in two commodities. 
 Introducing a greater number of agents 
 precisely similar, cannot change the 
 law of their action, no more than 
 putting additional weights into the 
 two scales of a balance alters the law 
 of gravitation. It alters nothing but 
 the numerical results. For more com- 
 plete satisfaction, however, we will 
 enter into the complex cases with the 
 ame particularity with which, vre have 
 stated the simpler one. 
 
 3. First, let us introduce the ele- 
 ment of cost of carriage. The chief 
 difference will then be, that the clo^h 
 and the linen will no longer exchange 
 for each other at precisely the same 
 rate in both countries. Linen, having 
 to be carried to England, will be dearer 
 there by its cost of carriage ; and cloth 
 will be dearer in Germany by the cost 
 of carrying it from England. Linen, 
 estimated in cloth, will be dearer in 
 England than in Germany, by the cost 
 ot carnage of both articles . and so will 
 cloth in Germany, estimated in linen. 
 Suppose that the cost of carriage of 
 each is equivalent to one yard of linen ; 
 and suppose that, if they could have 
 been carried without cost, the terms of 
 interchange would have been 10 yards 
 of cloth for 17 of linen. It may seem 
 at first that each country will pay its 
 own cost of carriage ; that is, the car- 
 riage of the article it imports ; that in 
 Germany 10 yards" of cloth will ex- 
 change for 18 of linen, namely, the 
 original 17, and 1 to cover the cost of 
 carriage of the cloth ; while in Eng- 
 land, 10 yards of cloth will only pur- 
 ; chase 16 of linen, 1 yard being de- 
 , ducted for the cost of carnage of the 
 ' linen. This, however, cannot be af- 
 lirmed with certainty ; it will only be 
 true, if the linen which the English 
 consumers would take at the price of 
 10 for 16, exactly pays for the cloth 
 which the German consumers would 
 take at 10 for 18. The values, what- 
 ever they are, must establish this equi- 
 librium. No absolute rule, therefore, 
 
 can be laid down for the division of the 
 cost, no more than for the division of 
 the advantage : and.it does not follow 
 that in whatever ratio the one is di- 
 vided, the other will be divided in the 
 same. It is impossible to say, if the 
 cost of carriage could be annihilated, 
 whether the producing or the importing 
 country would be most benefited. This 
 would depend on the play of interna- 
 tional demand. 
 
 Cost of carriage has one effect more. 
 But for it, every commodity would (if 
 trade be supposed free) be either regu- 
 larly imported or regularly exported. 
 A country would make nothing for 
 itself which it did not also make for 
 other countries. But in consequence 
 of cost of carriage there are many 
 things, especially bulky articles, which 
 every, or almost every country pro- 
 duces within itself. After exporting 
 the things in which it can employ itself 
 most advantageously, and importing 
 those in which it is under the greatest 
 disadvantage, there are many lying 
 between, of which the relative cost of 
 production in that and in other countries 
 differs so little, that the cost of carriage 
 would absorb more than the whole 
 saving in cost of production which 
 would be obtained by importing one 
 and exporting another. This is the 
 case with numerous commodities of 
 common consumption ; including the 
 coarser qualities of many articles of 
 food and manufacture, of which the 
 finer kinds are the subject of extensive 
 international traffic. 
 
 4. Let us now introduce a greater 
 number of commodities than the two 
 we have hitherto supposed. Let cloth 
 and linen, however, be still the articles 
 of which the comparative cost of pro- 
 duction in England and in Germany 
 dill'ers the most ; so that if they wero 
 confined to two commodities, these 
 would be the two which it would be 
 most their interest to exchange. We 
 will now again omit cost of carriage, 
 which, having been shown not to affect 
 the essentials of the question, does but 
 embarrass unnecessarily the statement 
 of it. Let us suppose, then, that the 
 demand of England for linen, is either
 
 INTERNATIONAL VAiA'ES. 
 
 357 
 
 o mncli greater than that of Germany 
 for cloth, or BO much more extensible hy 
 cheapness, that if England had no com- 
 modity but cloth which Germany would 
 take, the demand of England would 
 force up the terms of interchange to 10 
 yards of cloth for only 1 6 of linen, so 
 that England would gain only the dif- 
 ference between 15 and 16, Germany 
 the difference between 16 and 20. But 
 let us now suppose that England has 
 also another commodity, say iron, 
 which is in demand in Germany, and 
 that the quantity of iron which is of 
 equal value in England with 10 yards 
 of cloth, (let us call this quantity a 
 hundred weight) will, if produced in 
 Germany, cost as much labour as 18 
 vards of linen, so that if offered by Eng- 
 land for 17, it will undersell the Ger- 
 man producer. In these circumstances, 
 linen will not be forced up to the rate 
 of 16 yards for 10 of cloth, hut will stop, 
 suppose at 17; for although at that 
 rate of interchange, Germany will not 
 take enough cloth to pay for all the 
 linen required by England, she will 
 take iron for the remainder, and it is 
 the same thing to England whether she 
 gives a hundred weight of iron or 10 
 yards of cloth, both being made at the 
 same cost. If we now superadd coals 
 or cottons on the side of England, and 
 wine, or corn, or timber, on the side of 
 Germany ; it will make no difference in 
 the principle. The exports of each 
 country must exactly pay for the im- 
 ports ; meaning now the aggregate ex- 
 ports and imports, not those of par- 
 ticular commodities taken singly. The 
 produce of fifty days English labour, 
 whether in cloth, coals, iron, or any 
 other exports, will exchange for the 
 produce of forty, or fifty, or sixty days 
 German labour, in linen, wine, corn, or 
 timber, according to the international 
 demand. There is some proportion at 
 which the demand of the two countries 
 for each other's products will exactly 
 correspond ; so that the things 
 supplied by England to Germany 
 will be completely paid for, and 
 no more, by those supplied by Ger- 
 many to England. This accordingly 
 will be the ratio in which the pro- 
 duce of English and the produce of 
 
 German labour will exchange for one 
 another. 
 
 If, therefore, it be asked what country 
 draws to itself the greatest share of the 
 advantage of any trade it carries on, 
 the answer is, the country for whose 
 productions there is in other countries 
 the greatest demand, and a demand 
 the most susceptible of increase from 
 additional cheapness. In so far as the 
 productions of any country possess this 
 property, the country obtains all foreign 
 commodities at less cost. It gets its im- 
 ports cheaper, the greater the intensity 
 of the demand in foreign countries for 
 its exports. It also gets its imports 
 cheaper, the less the extent and in. 
 tensity of its own demand for them. 
 The market is cheapest to those whoso 
 demand is small. A country which 
 desires few foreign productions, and 
 only a limited quantity of them, whila 
 its own commodities are in great re- 
 quest iniforeign countries, will obtain 
 its limited imports at extremely small 
 cost, that is, in exchange for the pro- 
 duce of a very small quantity of its 
 labour and capital. 
 
 Lastly, having introduced more than 
 the original two commodities into the 
 hypothesis, let us also introduce more 
 than the original two countries. After 
 the demand of England for the linen of 
 Germany has raised the rate of inter- 
 change to 10 yards of cloth 'for 16 of 
 linen, suppose a trade opened between 
 England and some other country which 
 also exports linen. And let us suppose 
 that if England had no trade but with 
 this third country, the play of interna- 
 tional demand would enable her to ob- 
 tain from it, for 10 yards of cloth or its 
 equivalent, 17 yards of linen. She 
 evidently would not go on buying linen 
 from Germany at the former rate : Ger- 
 many would be undersold, and must 
 consent to give 1 7 yards, like the other 
 country. In this case, the circum- 
 stances of production and of demand in 
 the third country are supposed to he in 
 themselves more advantageous to Eng- 
 land than the circumstances of Ger- 
 many ; but this supposition is not ne- 
 cessary : we might suppose that if the 
 trade with Germany did not exist, Eng- 
 land would be obliged to give to tlip
 
 BOOK III. CHAPTER XVIII. 5. 
 
 other country the same advantageous 
 terms which she gives to Germany; 10 
 yards of cloth for 1 6, or even less than 
 1 6, of linen. Even so, the opening of the 
 third country makes a great difference 
 hi favour of England. There is now a 
 double market for English exports, 
 while the demand of England for linen 
 is only what it was before. This 
 necessarily obtains for England more 
 advantageous terms of interchange. 
 The two countries, requiring much 
 more of her produce than was required 
 by either alone, must, in order to ob- 
 tain it, force an increased demand for 
 their exports, by offering them at a 
 lower value. 
 
 It deserves notice, that this effect in 
 favour of England from the opening of 
 another market for her exports, will 
 equally be produced even though the 
 country from which the demand comes 
 should have nothing to sell which Eng- 
 land is willing to take. Suppose that 
 the third country, though requiring 
 cloth or iron from England, produces 
 no linen, nor any other article which 
 is in demand there. She however pro- 
 duces exportable articles, or she would 
 have no means of paying for imports : 
 her exports, though not suitable to the 
 English consumer, can find a market 
 somewhere. As we are only supposing 
 three countries, we must assume her to 
 find this market in Germany, and to 
 pay for what she imports from England 
 by orders on her German customers. 
 Germany, therefore, besides having to 
 pay for her own imports, now owes a 
 debt to England on account of the 
 third country, and the means for both 
 purposes must be derived from her ex- 
 portable produce. She must therefore 
 tender that produce to England on 
 terms sufficiently favourable to force a 
 demand equivalent to this double debt. 
 Everything will take place precisely as 
 if the third country had bought Ger- 
 man produce with her own goods, and 
 offered that produce to England in ex- 
 change for hers. There is an increased 
 demand for English goods, for which 
 German goods have to furnish the pay- 
 ment ; and this can only be done by 
 forcing an increased demand for them 
 vn England, that is, by lowering their 
 
 value. Thus an increase of demand 
 for a country's exports in any foreign 
 country, enables her to obtain more 
 cheaply even those imports which sho 
 procures from other quarters. And 
 conversely, an increase of her own de- 
 mand for any foreign commodity com- 
 pels her, cceteris parfais, to pay dearer 
 for all foreign commodities. 
 
 The law which we have now illus- 
 trated, may be appropriately named, 
 the Equation of International Demand* 
 It may be concisely stated as follows. 
 The produce of a country exchanges for 
 the produce of other countries, at such 
 values as are required in order that the 
 whole of her exports may exactly pay 
 for the whole of her imports. This law 
 of International Values is but an ex- 
 tension of the more general law of 
 Value, which we called the Equation of 
 Supply and Demand.* We have seen 
 that the value of a commodity always 
 so adjusts itself as to bring the demand 
 to the exact level of the supply. But 
 all trade, either between nations or 
 individuals, is an interchange of com- 
 modities, in which the things that they 
 respectively have to sell, constitute 
 also their means of purchase : the supply 
 brought by the one constitutes kis de- 
 mand for what is brought by the other. 
 So that supply and demand are but 
 another expression for reciprocal de- 
 mand : and to say that value will adjust 
 itself so as to equalize demand with 
 supply, is in fact to say that it will ad- 
 just itself so as to equalize the demand 
 on one side with the demand on the 
 other. 
 
 5. To twee the consequences of 
 this law of InternationalValues through 
 their wide ramifications, would occupy 
 more space than can be here devoted 
 to such a purpose. But there is one- 
 of its applications which I will notice, 
 as being in 'itself not unimportant, as 
 bearing on the question which will 
 occupy us in the next chapter, and 
 especially as conducing to the more 
 full and clear understanding of the la\7 
 itself. 
 
 AVe have seen that the value at which 
 a country purchases a foreign comuio 
 Supra, book Hi. ch. ii, | 4
 
 INTERNATIONAL VALUES. 
 
 859 
 
 dity, docs not conform to the cost of 
 production in the country from which 
 the commodity comes. Suppose now a 
 change in that cost of production ; an 
 improvement, for example, in the pro- 
 cess of manufacture. Will the benefit of 
 the improvement be fully participated 
 in by other countries ? "\\ ill the com- 
 modity be sold as much cheaper to 
 foreigners, as it is produced cheaper at 
 htrue ? This question, and the consi- 
 derations which must be entered into 
 in order to resolve it, are well adapted 
 to try the worth of the theory. 
 
 Let us first suppose, that the im- 
 provement is of a nature to create a new 
 branch of export : to make foreigners 
 resort to the country for a commodity 
 which they had previously produced at 
 home. On this supposition, the foreign 
 demand for the productions of the 
 country is increased ; which necessarily 
 alters the international values to its 
 advantage, and to the disadvantage of 
 foreign countries, who, therefore, though 
 they participate in the benefit of the 
 new product, must purchase that benefit 
 by paying for all the other productions 
 of the country at a dearer rate than be- 
 fore. How much dearer, will depend 
 on the degree necessary for re-establish- 
 ing, under these new conditions, the 
 Equation of International Demand. 
 Those consequences follow in a very 
 obvious manner from the law of inter- 
 national values, and I shall not occupy 
 space in illustrating them, but shall 
 pass to the more frequent case, of an 
 improvement which does not create a 
 new article of export, but lowers the 
 cost of production of something which 
 the country already exported. 
 
 It being advantageous, in discussions 
 of this complicated nature, to employ 
 definite numerical amounts, we shall 
 return to our original example. Ten 
 yards of cloth, if produced in Germany, 
 would require the same amount of 
 labour and capital as twenty yards of 
 linen ; but, by the play of international 
 demand, they can be obtained from 
 England for seventeen. Suppose now, 
 that by a mechanical improvement 
 made in Germany, and not capable of 
 being transferred to England, the same 
 quantity of labour and capital >vhich 
 
 produced twenty yards of linen, is 
 enabled to produce thirty. Linen falls 
 one-third in value in the German mar- 
 ket, as compared with other commodi- 
 ties produced in Germany. Will it 
 also fall one-third as compared with. 
 English cloth, thus giving to England, 
 in common with Germany, the full 
 benefit of the improvement ? Or (ought 
 we not rather to say), since the cost 
 to England of obtaining linen was not 
 regulated by the cost to Germany of 
 producing it, and since England, 
 accordingly, did not get the entire 
 benefit even of the twenty yards which 
 Germany could have given for ten 
 yards of cloth, but only obtained seven- 
 teen why should she now obtain more, 
 merely because this theoretical limit is 
 removed ten degrees further off? 
 
 It is evident that in the outset, the 
 improvement will lower the value of 
 linen in Germany, in relation to all 
 other commodities in the German mar- 
 ket, including, among the rest, even 
 the imported commodity, cloth. If 10 
 yards of cloth previously exchanged for 
 17 yards of linen, they will now ex 
 change for half as much more, or 25i 
 yards. But whether they will continue 
 to do so, will depend on the effect which 
 this increased cheapness of linen pro- 
 duces on the international demand. 
 The demand for linen in England could 
 scarcely fail to be increased. But it 
 might be increased either in proportion 
 to the cheapness, or in a greater pro- 
 portion than the cheapness, or in a less 
 proportion. 
 
 If the demand was increased in the 
 same proportion with the cheapness, 
 England would take as many times 25 J 
 yards of linen, as the number of times 
 17 yards which she took previously. 
 She would expend in linen exactly as 
 much of cloth, or of the equivalents of 
 cloth, as much in short of the collective 
 income of her people, as she did before. 
 Germany, on her part, would probably 
 require, at that rate of interchange, the 
 same quantity of cloth as before, be- 
 cause it would in reality cost her ex 
 actly as much ; 25 yards of linen being 
 now of the same value in her market, 
 as 17 yards were before. In this case, 
 therefore, 10 yards of cloth for 25$ of
 
 360 
 
 BOOK m. CHAPTER XVIII. 6. 
 
 linen is the rate of interchange which 
 under these new conditions would re- 
 etore the equation of international de- 
 mand ; and England would ohtain linen 
 one-third cheaper than before, being 
 the same advantage as was obtained by 
 Germany. 
 
 It might happen, however, that this 
 great cheapening of linen would in- 
 crease the demand foi it in England in 
 a greater ratio than tlie increase of 
 cheapness ; and that if she before 
 wanted 1000 times 17 yards, she would 
 now require more than 1000 times 25| 
 yards to satisfy her demand. If so, 
 the equation of international demand 
 cannot establish itself at that rate of 
 interchange ; to pay for the linen Eng- 
 land must offer cloth on more advan- 
 tageous terms : say, for example, 10 
 yards for 21 of linen ; so that England 
 will not have the full benefit of the 
 improvement in the production of linen, 
 while Germany, in addition to that 
 benefit, will also pay less for cloth. 
 tut again, it is possible that England 
 might not desire to increase her con- 
 sumption of linen in even so great a 
 proportion as that of the increased 
 cheapness ; she might not desire so 
 great a quantity as 1000 times 25i 
 yards : and in that case Germany must 
 force a demand, by offering more than 
 25 yards of linen for 10 of cloth ; 
 linen will be cheapened in England in 
 a still greater degree than in Germany; 
 while Germany will obtain cloth on 
 more unfavourable terms, and at a 
 higher exchange value than before. 
 
 After what has already been said, it 
 is not necessary to particularize the 
 manner in which these results might 
 be modified by introducing into the 
 hypothesis other countries and other 
 commodities. There is a further cir- 
 rumstance by which they may also be 
 modified. In the case supposed, the 
 consumers of Germany have had a part 
 of their incomes set at liberty by the 
 increased eheapness of linen, which 
 they may indeed expend in increasing 
 their consumption of that article, but 
 which they may, likewise, expend in 
 other articles, and among others, in 
 cloth or other imported commodities. 
 This would be an additional demerit in 
 
 the international demand, and would 
 modify more or less the terms of inter- 
 change. 
 
 Of the three possible varieties in tho 
 influence of cheapness on demand, 
 which is the more probable that the 
 demand would be increased more than 
 the cheapness, as much as the cheap- 
 ness, or less than the cheapness? This 
 depends on the nature of the particular 
 commodity, and on the tastes of pur- 
 chasers. When the commodity is ono 
 in general request, and the fall of its. 
 price brings it within the reach of a 
 much larger class of incomes than be- 
 fore, the demand is often increased in 
 a greater ratio than the fall of price, 
 and a larger sum of money is on the 
 whole expended in the article. Such 
 was the case with coffee, when its price 
 was lowered by successive reductions 
 of taxation ; and such would probably 
 be the case' with sugar, wine, and a 
 large class of commodities which, 
 though not necessaries, are largely con- 
 sumed, and in which many consumers 
 indulge when the articles are cheap 
 and economize when they are dear. 
 But it more frequently happens that 
 when a commodity falls in price, less 
 money is spent -in it than before : a 
 greater quantity is consumed, but not 
 so great a value. The consumer who 
 saves money by the cheapness of tho 
 article, will be likely to expend part of 
 the saving in increasing his consump- 
 tion of other things : and unless the 
 low price attracts a large class of new 
 purchasers who were either not consu- 
 mers of the article at all, or only in 
 small quantity and occasionally, a less 
 aggregate sum will be expended on it. 
 Speaking generally, therefore, the third 
 of our three cases is the most probable : 
 and an improvement in an exportable 
 article is likely to be as beneficial (if nob 
 more beneficial) to foreign countries, 
 as to the country where the article is 
 produced. 
 
 G. Thus far had the theory of in- 
 ternational values been carried in the 
 first and second editions of this work. 
 But intelligent criticisms (chiefly those 
 of my friend Mr. 'William ThnrntonJ 
 and subsequent further investigation,
 
 INTERNATIONAL VALUES. 
 
 361 
 
 have shewn that the doctrine stated in 
 the preceding pages, though correct as 
 far as it goes, is not yet the complete 
 theory of the subject matter. 
 
 It has been shown that the exports 
 and imports between the two countries 
 (or, if we suppose more than two, be- 
 tween each country and the world) 
 must in the aggregate pay for each 
 other, and must therefore be exchanged 
 for one another at such values as will 
 be compatible with the equation of in- 
 ternational demand. That this, how- 
 ever, does not furnish the complete law 
 of the phenomenon, appears from the 
 following consideration : that several 
 different rates of international value 
 may all equally fulfil the conditions of 
 this law. 
 
 The supposition was, that England 
 could produce 10 yards of cloth with 
 the same labour as 15 of linen, and 
 Germany with the same labour as 20 
 of linen ; that a trade was opened be- 
 tween the two countries ; that England 
 thenceforth confined her production to 
 cloth, and Germany to linen ; and, that 
 if 1 yards of cloth should thenceforth 
 exchange for 17 of linen, England and 
 Germany would exactly supply each 
 other's demand : that, for instance, if 
 England wanted at that price 17,000 
 yards of linen, Germany would want 
 exactly the 10,000 yards of cloth, 
 which, at that price, England would 
 be required to give for the linen. 
 Under these suppositions it appeared, 
 that 10 cloth for 17 linen, would be, in 
 point of fact, the international values. 
 
 But it is quite possible that some 
 other rate, such as 10 cloth for 18 linen, 
 might also fulfil the conditions of the 
 equation of international demand. Sup- 
 pose that at this last rate, England 
 would want more linen than at the 
 rate of 10 for 17, but not in the ratio of 
 the cheapness ; that she would not want 
 the 18,000 which she could now buy 
 with 10,000 yards of cloth, but would 
 be content with 17,500, for which she 
 wouLl pay (at the new rate of 10 for 
 18) 9722 yards of cloth. Germany, 
 again, having to pay dearer for cloth 
 than when it could be bought at 10 
 for 17, would probably reduce her con- 
 sumption to an amount below 10,000 
 
 yards, perhaps to the very same num- 
 l"r. ',>722. Under these conditions tho 
 Equation of International Demand 
 would still exist. Thus, the rate of 
 10 for 17, and that of 10 for 18, would 
 equally satisfy the Equation of De- 
 mand : and many other rates of inter- 
 change might satisfy it in like manner. 
 It is conceivable that the conditions 
 might be equally satisfied by every nu- 
 merical rate which could be supposed. 
 There is still, therefore, a portion of 
 indeterminateness in the rate at which 
 the international values would adjust 
 themselves, showing that the whole 
 of the influencing circumstances can- 
 not yet have been taken into the 
 account. 
 
 7. It will be found that to supply 
 this deficiency, we must take into con- 
 sideration not only, as we have already 
 done, the quantities demanded in each 
 country, of the imported commodities ; 
 but also the extent of the means of 
 supplying that demand, which are set 
 at liberty in each country by the 
 change in the direction of its industry. 
 
 To illustrate this point it will be 
 necessary to choose more convenient 
 numbers than those which we have 
 hitherto employed. Let it be supposed 
 that in England 100 yards of cloth, 
 previously to the trade, exchanged for 
 100 of linen, but that in Germany 100 
 of cloth exchanged for 200 of linen. 
 When the trade was opened, England 
 would supply cloth to Germany, Ger- 
 many linen to England, at an exchange 
 value which would depend partly on 
 the element already discussed, viz. tha 
 comparative degree in which, in the 
 two countries, increased cheapness 
 operates in increasing the demand ; 
 and partly on some other element not 
 yet taken into account. In order to 
 isolate this unknown element, it will 
 be necessary to make some definite and 
 invariable supposition in regard to the 
 known element. Let us therefore as- 
 sume, that the influence of cheapness 
 on demand conforms to some simple 
 law, common to both countries and 
 to both commodities. As the simplest 
 and most convenient, let us suppose 
 that in both countries any giveu in-
 
 S62 
 
 BOOK III. CHAPTER XV T lIi. f. 
 
 crease of cheapness produces an ex- 
 actly proportional increase of consump- 
 tion : or, in other words, that the value 
 expended in the commodity, the cost 
 incurred for the sake of obtaining it, 
 is always the same, whether that cost 
 affords a greater or a smaller quantity 
 /)f the commodity. 
 
 Let us now suppose that England, 
 previously to the trade, required a 
 million of yards of linen, which were 
 worth," at the English cost of produc- 
 tion, a million yards of cloth. By 
 turning all the labour and capital with 
 which that linen was produced, to the 
 production of cloth, she would produce 
 for exportation a million yards of 
 cloth. Suppose that this is the ex- 
 act quantity which Germany is accus- 
 tomed to consume. England can dis- 
 pose of all this cloth in Germany at 
 the German price ; she must consent 
 indeed to take a little less until she has 
 driven the German producer from the 
 market, but as soon as this is effected, 
 she can sell her million of cloth for two 
 millions of linen ; being the quantity 
 that the German clothiers are enabled 
 to make, by transferring their whole 
 labour and capital from cloth to linen. 
 Thus England would gain the whole 
 benefit of the trade, and Germany 
 nothing. This would be perfectly con- 
 sistent with the equation of interna- 
 tional demand : since England (ac- 
 cording to the hypothesis in the pre- 
 ceding paragraph) now requires two 
 millions of linen (being able to get 
 them at the same cost at which she 
 previously obtained only one), while 
 the prices in Germany not being 
 altered, Germany requires as before 
 exactly a million of cloth, and can ob- 
 tain it by employing the labour and 
 capital set at liberty from the pro- 
 duction of cloth, in producing the 
 two millions of linen required by 
 England. 
 
 Thus far, we have supposed that the 
 additional cloth which England could 
 make, by transferring to cloth the 
 whole of the capital previously em- 
 ployed in making linen, was exactly 
 sufficient to supply the whole of Ger- 
 many's existing demand. But suppose 
 next that rl ia auore than sufficient. 
 
 Suppose that while England could 
 make with her liberated capital a 
 million yards of cloth for exportation, 
 the cloth which Germany had hereto- 
 fore required was 800,000 yards only, 
 equivalent at the German cost of pro- 
 duction to 1,600,000 yards of linen. 
 England therefore could not dispose 
 of a whole million of cloth in Germany 
 at the German prices. Yet she wants, 
 whether cheap or dear (by our suppo- 
 sition), as much linen as can be bought 
 for a million of cloth : and since this 
 can only be obtained from Germany, or 
 by the more expensive process of 
 production at home, the holders of the 
 million of cloth will be forced by each 
 other's competition to offer it to Ger- 
 many on any terms (short of the 
 English cost of production) which will 
 induce Germany to take the whole. 
 What terms these would be, the sup- 
 position we have made enables us 
 exactly to define. The 800,000 yard.s 
 of cloth which Germany consumed, 
 cost her the equivalent of 1,600,000 
 linen, and that invariable cost is what 
 she is willing to expend in cloth, 
 whether the quantity it obtains for 
 her be more or less. England, there- 
 fore, to induce Germany to take a mil- 
 lion of cloth, must offer it for 1,600.000 
 of linen. The international values 
 will thus be 100 cloth for 160 linen, 
 intermediate between the ratio of the 
 costs of production in England and 
 that of the costs of production in 
 Germany : and the two countries will 
 divide the benefit of the trade, England 
 gaining in the aggregate 600,000 
 yards of linen, and Germany being 
 richer by 200,000 additional yards of 
 cloth. 
 
 Let us now stretch the last supposi- 
 tion still farther, and suppose that the 
 cloth previously consumed by Germany 
 was not only less than the million 
 yards which England is enabled ta 
 furnish by discontinuing her production 
 of linen, but less in the full proportion 
 of England's advantage in the produc- 
 tion, that is, that Germany only re- 
 quired half a million. In this case, 
 by ceasing altogether to produce cloth, 
 Germany can add a million, but a 
 million only, to her production of linen,
 
 IN T I RNATIONAL VALUES. 
 
 363 
 
 and this million being the equivalent 
 of what the half million previously 
 cost her, is all that she can be induced 
 by any degree of cheapness to expend 
 in cloth. England will be forced by 
 IHT own competition to give a whole 
 million of cloth for this million of linen, 
 .-lie was forced in the preceding 
 case to give it for 1,600,000. But 
 England could have produced at the 
 same cost a million yards of linen for 
 hermit'. England therefore derives, in 
 this case, no advantage from the inter- 
 national trade. Germany gains the 
 whole ; obtaining a million of cloth 
 instead of half a million, at what the 
 half million previously cost her. Ger- 
 many, in short, is, in this third case, 
 exactly in the same situation as Eng- 
 land was in the first case ; which may 
 be verified by reversing the 
 figures. 
 
 As the general result of the three 
 cases, it maybe laid down as a theorem, 
 that under the supposition we Lave 
 made of a demand exactly in propor- 
 tion to the cheapness, the law of 
 international value will be as fol- 
 lows : 
 
 The whole of the cloth which Eng- 
 land can make with the capital pre- 
 viously devoted to linen, will exchange 
 for the whole of the linen which Ger- 
 many can make with the capital pre- 
 viously devoted to cloth. 
 
 Or, still more generally, 
 
 The whole of the commodities which 
 the two countries can respectively make 
 for exportation, with the labour and 
 capital thrown out of employment by 
 importation, will exchange against one 
 another. 
 
 This law, and the three different 
 possibilities arising from it in respect 
 to the division of the advantage, may 
 be conveniently generalized by means 
 of algebraical symbols, as follows: 
 
 Let the quantity of cloth which 
 England can make with the labour and 
 capital withdrawn from the production 
 of linen, be = n. 
 
 Let the cloth previously required 
 by Germany (at the German cost of 
 production) be = m. 
 
 Then n of cloth will always ex- 
 change for exactly "2m of linen. 
 
 Consequently if n m, the whole 
 advantage will be on the side of Eng- 
 land. 
 
 If n = 2m, the whole advantage will 
 be on the side of Germany. 
 
 If n be gi eater than m, but less than 
 2m, the two countries will share the 
 advantage ; England getting 2m of 
 linen where she before got only n; 
 Germany getting n of cloth where she 
 before got only m. 
 
 It is almost superfluous to observe 
 that the figure 2 stands where it does, 
 only because it is the figure which ex- 
 presses the advantage of Germany over 
 England in linen as estimated in cloth, 
 and (what is the same thing) of Eng- 
 land over Germany in cloth as esti- 
 mated in linen. If we had supposed 
 that in Germany, before the trade, 100 
 of cloth exchanged for 1000 instead of 
 200 of linen, then n (after the trade 
 commenced) would have exchanged for 
 IQm instead of 2m. If instead of 1000 
 or 200 we had supposed only 150, n 
 
 would have exchanged 
 
 for only -m. 
 
 If (in fine) the cost value of cloth (as 
 estimated in linen) in Germany, ex- 
 ceeds the cost value similarly estimated 
 in England, in the ratio of p to q, then 
 will n, after the opening of the trade, 
 
 exchange for - 
 2 
 
 8. We have now arrived at what 
 seems a law of International Values, of 
 great simplicity and generality. But 
 we have done so by setting out from 
 
 * It may be asked, why we have supposed 
 the number n to have as its extreme limits, 
 
 m and 2n> (or 2-m) ? why may not n be less 
 
 1 
 
 than m, or greater than 2m ; and if so, wh&l 
 will be the result ? 
 
 This we shall now examine, and when we 
 do so it will appear that n is always, practi- 
 cally speaking, confined within these limits. 
 
 Suppose for example that n is less than m ; 
 or, reverting to our former figures, that the 
 million yards of cloth, which England can 
 make, will not satisfy the whole of Germany's 
 pre-existing demand; that demand being (let 
 us suppose) for 1,200,000 yards. It would 
 then, at first sight, appear that England 
 would supply Germany with cloth up to the 
 extent of a million; that Germany would 
 continue to supply herself with the remain- 
 ing 200,000 bj home production; trt tliit
 
 S64 
 
 LOOK III. CHAPTER XVIII. 8. 
 
 purely arbitrary hypothesis respecting 
 the relation between demand and 
 cheapness. We have assumed their 
 relation to be fixed, though it is essen- 
 tially variable. We have supposed 
 that every increase of cheapness pro- 
 duces an exactly proportional extension 
 of demand ; in other words, that the 
 same invariable value is laid out in a 
 commodity whether it be cheap or dear ; 
 and the law which we have investi- 
 gated holds good only on this hypo- 
 thesis, or gome other practically equi- 
 valent to it. Let us now, therefore, 
 combine the two variable elements of 
 the question, the variations of each 
 of which we have considered sepa- 
 rately. Let us suppose the relation 
 between demand and cheapness to 
 vary, and to become such as would 
 prevent the rule of interchange laid 
 down in the last theorem from satis- 
 fying the conditions of the Equation 
 of International Demand. Let it be 
 supposed, for instance, that the demand 
 
 portion of the supply would regulate the price 
 of the whole ; that England therefore would 
 be able permanently to sell her million of 
 cloth at the German cost of production (viz. 
 for two millions of linen) and would gain the 
 wl-ole advantage of the trade, Germany being 
 no better off than before. 
 
 That such, however, would not be the 
 practical result, will soon be evident. The 
 residuary demand of Germany for 200,000 
 yards of cloth furnishes a resource to Eng- 
 land for purposes of foreign trade of which it 
 is still her interest to avail herself; and 
 though she has no n:ore labour and capital 
 which she can withdraw from linen for the 
 production of this extra quantity of cloth, 
 there must be some other commodities in 
 which Germany has a relative advantage 
 over her (though perhaps not so great as in 
 linen) : these she will now import, instead of 
 producing, and the labour and capital for- 
 merly employed in producing them will be 
 transferred to cloth, until the required 
 amount is made up. If this transfer just 
 makes up the 200,000 and no more, this aug- 
 mented n will now be equal to m ; England 
 will sell the whole 1,200,000 at the German 
 values; and will still gain the whole advan- 
 tage of the trade. But if the transfer makes 
 up more than the 200,000, England will have 
 more cloth than 1,200,000 yards to offer; M will 
 become greater than m, and England must 
 part with enough of the advantage to induce 
 Germany to take the surplus. Thus, the case 
 which seemed at first sight to be beyond the 
 limits, is transformed practically into a case 
 either coinciding with one of the limits, or 
 between them. And so with every other 
 c*e which can be supposed. 
 
 of England for linen is exactly propor- 
 tional to the cheapness, but that of 
 Germany for cloth, not proportional. 
 To revert to the second of our three 
 cases, the case in which England by 
 discontinuing the production of linen 
 could produce for exportation a million 
 yards of cloth, and Germany by ceas- 
 ing to produce cloth could produce an 
 additional 1,600,000 yards of linen. 
 If the one of these quantities exactly 
 exchanged for the other, the demand 
 of England would on our present sup- 
 position be exactly satisfied, for sho 
 requires all the linen which can be got 
 for a million yardp of cloth : but Ger- 
 many perhaps, though she required 
 800,000 cloth at a cost equivalent to 
 1,600,000 linen, yet when she can get 
 a million of cloth at the same cost, may 
 not require the whole million ; or may 
 require more than a million. First, 
 let her not require so much ; but only 
 as much as she can now buy for 
 1,500,000 linen. England will still 
 offer a million for these 1,500,000; 
 but even this may not induce Germany 
 to take so much as a million ; and if 
 England continues to expend exactly 
 the same aggregate cost on linen 
 whatever be the price, she will have to 
 submit to take for her million of cloth 
 any quantity of linen (not less than a 
 million) which may be requisite to in- 
 duce Germany to take a million of 
 cloth. Suppose this to be 1,400,000 
 yards. England has now reaped from 
 the trade a gain not of 600,000 but 
 only of 400,000 yards ; while German}', 
 besides having obtained an extra 
 200,000 yards of cloth, has obtained it 
 with only seven-eighths of the labour 
 and capital which she previously ex- 
 pended in supplying herself with cloth, 
 and may expend the remainder in in- 
 creasing her own consumption of linen, 
 or of any other commodity. 
 
 Suppose on the contrary that Ger- 
 many, at the rate of a million cloth 
 for 1,600,000 linen, requires more than 
 a million yards of cloth. England 
 having only a million which she can 
 give without trenching upon the quan- 
 tity she previously reserved for herself. 
 Germany must bid for the extra cloth 
 at a higher rate than ICO for 100,
 
 INTERNATIONAL VALUES. 
 
 365 
 
 tintil she readies a rate (say 170 for 
 1 00) which will cither bring down her 
 own demand for cloth to the limit of a 
 million, or else tempt England to part 
 with some of the cloth she previously 
 consumed at home. 
 
 Let us next suppose that the pro- 
 portionality of demand to cheapness, 
 iistcad of holding good in one country 
 but not in the other, does not hold 
 good in either country, and that the 
 deviation is of the same kind in both ; 
 that, for instance, neither of the two 
 increases its demand in a degree equi- 
 valent to the increase of cheapness. 
 On this supposition, at the rate of one 
 million cloth for 1,600,000 linen, Eng- 
 land will not want so much as 1,600,000 
 linen, nor Germany so much as a 
 million cloth : and if they fall short of 
 that amount in exactly the same 
 degree ; if England only wants linen 
 to the amount of nine-tenths of 
 1,600,000 (1,440,000), and Germany 
 only nine hundred thousand of cloth, 
 the interchange will continue to take 
 place at the same r^te. And so if 
 England wants a tenth more than 
 1,600,000, and Germany a tenth more 
 than a million. This coincidence 
 (which, it is to be observed, supposes 
 demand to extend cheapness in a cor- 
 responding, but not in an equal de- 
 gree*) evidently could not exist unless 
 by mere accident : and in any other 
 case, the equation of international de- 
 mand would require a different adjust- 
 ment of international values. 
 
 The only general law, then, which 
 can be laid down, is this. The values 
 at which a country exchanges its pro- 
 duce with foreign countries depend on 
 two things : first, on the amount and 
 extensibility of their demand for its 
 commodities, compared with its de- 
 mand for theirs ; and secondly, on the 
 capital which it has to spare, from the 
 production of domestic commodities 
 
 * The increase of demand from 800,000 to 
 iJOO.OOO, and that from a million to 1,440,000, 
 are neither equal in themselves, nor bear an 
 equal proportion to the increase of cheapness. 
 Germany's demand for cloth has increased 
 one-eighth, while the cheapness is increased 
 one-fourth. England's demand for linen is 
 increased 44 per cent, while the cheapness is 
 increased 60 per cent. 
 
 for its own consumption. The more 
 the foreign demand for its commodities 
 exceeds its demand for foreign commo 
 dities, and the less capital it can spare 
 to produce for foreign markets, com- 
 pared with what foreigners spare to 
 produce for its markets, the more fa- 
 vourable to it will be the terms of 
 interchange: that is, the more it 
 will obtain of foreign commodities 
 in return for a given quantity of its 
 own. 
 
 But these two influencing circum- 
 stances are in reality reducible to one : 
 for the capital which a country has to 
 spare from the production of domestic 
 commodities for its own use, is in pro- 
 portion to its own demand for foreign 
 commodities: whatever proportion of 
 its collective income it expends in pur- 
 chases from abroad, that same propor- 
 tion of its capital is left without a home 
 market for its productions. The new 
 element, therefore, which for the sake 
 of scientific correctness we have intro- 
 duced into the theory of international 
 values, does not seem to make any 
 very material difference in the practical 
 result. It still appears, that the coun- 
 tries which carry on their foreign trade 
 on the most advantageous terms, are 
 those whose commodities are most in 
 demand by foreign countries, and \vlu.-h 
 have themselves the least demand for 
 foreign commodities. From which, 
 among other consequences, it follows, 
 that the richest countries, cceteris pari- 
 bus, gain the least by a given amount 
 of foreign commerce : since, having a 
 greater demand for commodities gene- 
 rally, they are likely to have a greater 
 demand for foreign commodities, and 
 thus modify the terms of interchange 
 to their own disadvantage. Their ag- 
 gregate gains by foreign trade, doubt- 
 less, are generally greater than those 
 of poorer countries, since they carry 
 on a greater amount of such trade, and 
 gain the benefit of cheapness oa a 
 larger consumption : but their gain ii 
 less on each individual article cou- 
 sumcd. 
 
 _ 9. We now pass to another essen- 
 tial part of the theory of the subject 
 There are two senses "in "-bi;'h
 
 BOOK III. CHAPTER XVIII. 9. 
 
 S66 
 
 try obtain* commodities cheaper by 
 foreign trade ; in the sense of Value, 
 and in the sense of Cost. It gets them 
 cheaper in the first sense, by their 
 falling in value relatively to other 
 things: the same quantity of them 
 exchanging, in the country, for a 
 smaller quantity than before of the 
 other produce of the country. To re- 
 vert to our original figures ; in England, 
 all consumers of linen obtained, after 
 the trade was opened, 17 or some 
 greater number of yards for the same 
 quantity of all other things for which 
 they before obtained only 15. The 
 degree of cheapness, in this sense of 
 the term, depends on the laws of Inter- 
 national Demand, so copiously illus- 
 trated in the preceding sections. But 
 in the other sense, that of Cost, a 
 country gets a commodity cheaper, 
 when it obtains a greater quantity of 
 the commodity with the same expen- 
 diture of labour and capital. In this 
 sense of the term, cheapness in a great 
 measure depends upon a cause of a 
 different nature : a country gets its im- 
 ports cheaper, in proportion to the gene- 
 ral productiveness of its domestic in- 
 dustry ; to the general efficiency of its 
 labour. The labour of one country 
 may be, as a whole, much more effi- 
 cient than that of another : all or most 
 of the commodities capable of being 
 produced in both, may be produced in 
 one at less absolute cost than in the 
 other; which, as we have seen, will 
 not necessarily prevent the two coun- 
 tries from exchanging commodities. 
 The things which the more favoured 
 country will import from others, are 
 of course those in which it is least 
 superior; but by importing them it 
 acquires, even in those commodities, 
 the same advantage which it possesses 
 in the articles it gives in exchange for 
 them. Thus the countries which ob- 
 tain their own productions at least 
 cost, also get tleir imports at least 
 cost. 
 
 This will be made still more obvious 
 if we suppose two competing countries. 
 England sends cloth to Germany, and 
 gives 10 yards of it for 17 yards of 
 linen, or for something else which in 
 Germany is the equivalent of those 
 
 17 yards. Another country, as for ex- 
 ample France, does the same. The one 
 giving 10 yards of cloth for a certain 
 quantity of German commodities, so 
 must the other : if, therefore, in Eng- 
 land, these 10 yards are produced by 
 only half as much labour as that by 
 which they are produced in France, 
 the linen or other commodities of Ger- 
 many will cost to England only half 
 the amount of labour which they will 
 cost to France. England would thus 
 obtain her imports at less cost than 
 France, in the ratio of the greater effi- 
 ciency of her labour in the production 
 of cloth : which might be taken, in 
 the case supposed, as an approximate 
 estimate of the efficiency of her labour 
 generally; since France, as well as 
 England, by selecting cloth as her 
 article of export, would have shown 
 that with her also it was the commo- 
 dity in which labour was relatively the 
 most efficient. It follows, therefore, 
 that every country gets its imports at 
 less cost, in proportion to the general 
 efficiency of its labour. 
 
 This proposition was first clearly 
 seen and expounded by Mr. Senior,* 
 but only as applicable to the importa- 
 tion of the precious metals. I think it 
 important to point out that the proposi- 
 tion holds equally true of all other im- 
 ported commodities ; and further, that 
 it is only a portion of the truth. For, 
 in the case supposed, the cost to Eng- 
 land of the linen which she pays for 
 with ten yards of cloth, does not depend 
 solely upon the cost to herself of ten 
 yards of cloth, but partly also upon 
 how many yards of linen she obtains 
 in exchange for them. What her im- 
 ports cost to her is a function of two 
 variables ; the quantity of her own 
 commodities which she gives for them, 
 and the cost of those commodities. Of 
 these, the last alone depends on the 
 efficiency of her labour: the first de- 
 pends on the law of international 
 values ; that is, on the intensity and 
 extensibility of the foreign demand for 
 her commodities, compared with her 
 demand for foreign commodities. 
 
 In the case just now supposed, of 
 
 Three Lectures on the Cost of Obt.iimngj 
 Money.
 
 ;Y AS AN IMPORTED COMMODITY. 
 
 A competition between England ami 
 France, the state of international 
 values affected both competitors alike, 
 since they were supposed to trade with 
 the same country, and to export and 
 import the same commodities. The 
 difference, therefore, in what their im- 
 ports cost them, depended solely on 
 the other cause, the unequal efficiency 
 of their labour. They gave the same 
 quantities; the difference could only 
 be in the cost of production. But if 
 England traded to Germany with cloth, 
 and France with iron, the comparative 
 demand in Germany for those two com- 
 modities would bear a share in deter- 
 
 mining the comparative cost, in labour 
 and capital, with which England an<i 
 France would obtain German product* 
 If iron were more in demand in Gc 
 many than cloth, France would recover, 
 through that channel, part of her dis 
 advantage; if less, her disadvantage 
 would be increased. The efficiency, 
 therefore, of a country's labour, is not 
 the only thing which determines even 
 the cost at which that country obtains 
 imported commodities while it has no 
 share whatever in determining either 
 their exchange value, or, as we shall 
 presently see, their price. 
 
 CHAPTER XIX. 
 
 OP MONEY, CONSIDERED A3 AN IMPORTED COMMODITY 
 
 1. THE degree of progress which 
 we have now made in the theory of 
 Foreign Trade, puts it in our power to 
 supply what was previously deficient 
 in our view of the theory of Money ; 
 and this, when completed, will in its 
 turn enable us to conclude the subject 
 of Foreign Trade. 
 
 Money, or the material of which it 
 is composed, is, in Great Britain, and 
 in most other countries, a foreign com- 
 modity. Its value and distribution 
 must therefore be regulated, not by 
 the law of vilue which obtains in ad- 
 jacent places, but by that which is ap- 
 plicable to imported commodities the 
 .aw of International Values. 
 
 In the discussion into which we are 
 now about to enter, I shall use the 
 terms Money and the Precious Metals 
 indiscriminately. This may be done 
 without leading to any error ; it having 
 been shown that the value of money, 
 when it consists of the precious metals, 
 or of a paper currency convertible into 
 them on demand, is entirely governed 
 by the value of the metals themselves : 
 from which it never permanently differs, 
 except by the expense of coinage when 
 this is paid by the individual and not by 
 the state. 
 
 L 
 
 Money is brought into a country in 
 two different ways. It is imported 
 (chiefly in the form of bullion) like any 
 other merchandize, as being an advan- 
 tageous article of commerce. It is also 
 imported in its other character of a 
 medium of exchange, to pay some debt 
 due to the country, either for goods ex- 
 ported or on any other account. Thero 
 are other ways in which it may be in- 
 troduced casually ; these are the two 
 in which it is received in the ordinary 
 course of business, and which deter- 
 mine its value. The existence of these 
 two distinct modes in which money 
 flows into a country, while other com- 
 modities are habitually introduced only 
 in the first of these modes, occasions 
 somewhat more of complexity and ob- 
 scurity than exists iu the case of other 
 commodities, and for this reason only 
 is any special and aiinute exposition 
 necessary. 
 
 2. In so far as the precious metals 
 aro imported in the ordinary way of 
 commerce, their value must depend on 
 the same causes, and conform to the 
 same laws, as the value of any other 
 foreign production. It is in this mode 
 chiefly that gold and silver diffuse them
 
 868 
 
 COOK III. CHAPTER XIX. 2. 
 
 selves from tile mining countries into 
 all other parts of the commercial world. 
 They are the staple commodities of 
 those countries, or at least are among 
 their great articles of regular export ; 
 and are shipped on speculation, in the 
 same manner as other exportable com- 
 modities. The quantity, therefore, 
 which a country (say England) will 
 give of its own produce, for a certain 
 quantity of bullion, will depend, if we 
 suppose only two countries and two 
 commodities, upon the demand in Eng- 
 land for bullion, compared with the 
 demand in the mining country (which 
 we will call Brazil) for what England 
 has to give. They must exchange in 
 such proportions as will leave no un- 
 satisfied demand on either side, to alter 
 values by its competition. The bullion 
 required by England must exactly pay 
 for the cottons or other English com- 
 modities required by Brazil. If, how- 
 ever, we substitute for this simplicity 
 the degree of complication which really 
 exists, the equation of international 
 demand must be established not be- 
 tween the bullion wanted in England 
 and the cottons or broadcloth wanted 
 in Brazil, but between the whole of the 
 imports of England and the whole of 
 her exports. The demand in foreign 
 countries for English products, must 
 be brought into equilibrium with the 
 demand in England for the products 
 of foreign countries ; and all foreign 
 commodities, bullion among the rest, 
 must be exchanged against English 
 products in such proportions, as will, 
 by the effect they produce on the de- 
 mand, establish this equilibrium. 
 
 There is nothing in the peculiar 
 nature or uses of the precious metals, 
 which should make them an exception 
 to the general principles of demand. 
 So far as they are wanted for purposes 
 of luxury or the arts, the demand in- 
 creases with the cheapness, in the 
 earne irregular way as the demand for 
 any other commodity. So far as they 
 are required for money, the demand 
 increases with the cheapness in a per- 
 fectly regular way, the quantity needed 
 being always in inverse proportion to 
 the value. This is the only real dif- 
 ference, in respect to demand, bet \veeu 
 
 money and other things ; and for the 
 present purpose it is a difference alto- 
 gether immaterial. 
 
 Money, then, if imported solely aa a 
 merchandize, will, like other imported 
 commodities, be of lowest value in the 
 countries for whose exports there is the 
 greatest foreign demand, and which 
 have themselves the least demand for 
 foreign commodities. To these two cir- 
 cumstances it is however necessary to 
 add two others, which produce their 
 effect through cost of carriage. The 
 cost of obtaining bullion is compounded 
 of two elements ; the goods given to pur- 
 chase it, and the expense of transport : 
 of which last, the bullion countries will 
 bear a part (though an uncertain 
 part) in the adjustment of international! 
 values. The expense of transport is 
 partly that of carrying the goods to the 
 bullion countries, and partly that of 
 bringing back the bullion : both these 
 items are influenced by the distance 
 from the mines ; and the former is also 
 much affected by the bulkiness of the 
 goods. Countries whose exportable 
 produce consists of the finer manufac- 
 tures, obtain bullion, as well as all 
 other foreign articles, cceteris paribus, 
 at less expense than countries which 
 export nothing but bulky raw produce. 
 
 To be quite accurate, therefore, we 
 must say The countries whose ex- 
 portable productions are most in de- 
 mand abroad, and contain greatest 
 value in smallest bulk, which aro 
 nearest to the mines, and which have 
 least demand for foreign productions, 
 are those in which money will be of 
 lowest value, or in other words, in 
 which prices will habitually range the 
 highest. If we are speaking not of the 
 value of money, but of its cost (that is, 
 the quantity of the country's labour 
 which must be expended to obtain it), 
 we must add to these four conditions 
 of cheapness a fifth condition, namely, 
 " whose productive industry is the most 
 efficient." This last, however, does 
 not at all affect the value of money, 
 estimated in commodities : it affects 
 the general abundance and facility 
 with which all things, money and com- 
 modities togelher, can be obtained. 
 
 Although, therefore, Mr. Senior ifl
 
 MONEY AS AN IMPORTED COMMODITY. 369 
 
 in error who contend that the value 
 of money, in countries where it is an 
 imported commodity, must be entirely 
 regulate J by it:; value in the countries 
 which produce it ; and cannot be raised 
 or lowered in any permanent manner 
 
 right in pointing out the groat efliciency 
 of English labour as the chief cause 
 whv the precious metals lire obtained 
 at less cost by England than by most 
 other countries, I cannot admit that it 
 at all accounts for their bcin^ of less 
 
 value; for their going less far in the 
 purchase of commodities. This, in so 
 lar as it is a fact, and not ail illusion, 
 must be occasioned by the great de- 
 mand in foreign countries for the 
 staple commodities of England, and the 
 generally unbulky character of those 
 commodities, compared with the com, 
 wine, timber, sugar, wool, hides, tallow, 
 hemp, ilax, tobacco, raw cotton, &c., 
 which form the exports of other com- 
 mercial countries. These two causes 
 will account for a somewhat higher 
 range of general prices in England 
 than elsewhere, notwithstanding the 
 counteracting influence of her own 
 great demand for foreign commodities. 
 1 am, however, strongly of opinion that 
 the high prices of commodities and 
 low purchasing power of money in 
 England, are more apparent than real. 
 Food, indeed, is somewhat dearer ; and 
 food composes so large a portion of the 
 expenditure when the income is small 
 and the family large, that to such 
 families England is a dear country. 
 Services, also, of most descriptions 
 are dearer than in the other countries of 
 Europe, from the less costly mode of 
 living of the poorer classes on the 
 Continent. But manufactured commo- 
 dities (except most of those in which 
 good taste is required) are decidedly 
 cheaper ; or would bo so, if buyers 
 t. ould be content with the same quality 
 ef material and of workmanship. What 
 is called the dcarncss of living in 
 England, is mainly an affair not of 
 ii'-'->'Ssity but of foolish custom ; it being 
 thought imperative by all classes in 
 England above the condition of a day- 
 labourer, that the things they consume 
 should either le of the same quality 
 with those used by much richer people, 
 or at least should be as nearly as pos- 
 sible undistinguishable from them in 
 outward appearance. 
 
 3. From the preceding considera- 
 tions, it appears that those are greatly 
 
 F.K. 
 
 unless some change has taken p'ace in 
 the cost of production at the mines. 
 On the contrary, any circumstance 
 which disturbs the equation of inter- 
 national demand with respect to a 
 particular country, not only may, but 
 must, affect the value of money in that 
 country its value at the mines re- 
 maining the same. The opening of 
 a new branch of export trade from 
 England ; an increase in the foreign 
 demand for English products, either by 
 the natural course of events or by the 
 abrogation of duties ; a check to the 
 demand in England for foreign com- 
 modities, by the laying on of import 
 duties in England or of export duties 
 elsewhere ; these and all other events 
 of similar tendency, would make tho 
 imports of England (bullion and other 
 things taken together) no longer an 
 equivalent for the exports ; and tho 
 countries which take her exports would 
 be obliged to offer their commodities, 
 and bullion among the rest, on cheaper 
 terms, in order to re-establish the 
 equation of demand : and thus England 
 would obtain money cheaper, and would 
 acquire a generally higher range of 
 prices. Incidents the reverse of these 
 would produce effects the reverse 
 would reduce prices ; or, in other words, 
 raise the value of the precious metals. 
 It must be observed, however, that 
 money would be thus raised in value 
 only with respect to home commodities : 
 in relation to (ill imported articles it 
 would remain as before, since their 
 values would be affected in the same 
 way and in the samo degree with its 
 own. A country which, from any of the 
 causes mentioned, gets money cheaper, 
 obtains all its other imports -cheaper 
 likewise. 
 
 It is by no means necessary that the 
 
 increased demand for English comnio 
 
 I dities, which enables England to sup. 
 
 ; ply herself with bullion at a cheaper 
 
 1 rate, should be a demand in the mining 
 
 i countries. England might export no- 
 
 B li
 
 370 
 
 thing whatever to those countries, and 
 yet might he the country which ob- 
 tained bullion from them on the lowest 
 term?, provided there were a sufficient 
 intensity of demand in other foreign 
 countries for English goods, which 
 would he paid for circuitously,with gold 
 and silver from the mining countries. 
 The whole of its exports are what a 
 country exchanges against the whole of 
 
 BOOK Hi. CilArt'Eft XX. 2. 
 
 its imports, and not its exports and 
 imports to and from any one country ; 
 and the general foreign demand for its 
 productions will determine what equi- 
 valent it must give for imported goods, 
 in order to establish an equilibrium 
 between its sales and purchases gene- 
 rally ; without regard to the mainte- 
 nance of a similar equilibrium between 
 it and any country singly. 
 
 CHAPTER XX. 
 
 OF THE FOREIGN EXCHANGE?. 
 
 1. WE have thus far considered 
 the precious metals as a commodity, 
 imported like other commodities in the 
 common course of trade, and have ex- 
 amined what are the circumstances 
 which would in that case determine 
 their value. But those metals are also 
 imported in another character, that 
 which belongs to them as a medium of 
 exchange ; not as an article of com- 
 merce, to be sold for money, but as 
 themselves money, to pay a debt, or 
 efl'ect a transfer of property. It re- 
 mains to consider whether the liability 
 of gold and silver to be transported 
 from country to country for such pur- 
 poses, in any way modifies the con- 
 clusions we have already arrived at ; or 
 E laces those metals under a different 
 iw of value from that to which, in 
 common with all other imported com- 
 modities, they would be subject if in- 
 ternational trade were an affair of 
 direct barter. 
 
 Money is sent from one country to 
 another for various purposes : such as 
 the payment of tributes or subsidies ; 
 remittances of revenue to or from de- 
 pendencies, or of rents or other incomes 
 to their absent owners; emigration of 
 capital, or transmission of it for foreign 
 investment. The most usual pin-pose, 
 however, is that of payment for goods. 
 To show in what circumstances money 
 actually passes from country to country 
 for this or any of the other purposes 
 mentioned, it is necessary briefly to 
 itate the nature of the mechanism by 
 
 which international trade is carried on, 
 when it takes place not by barter but 
 through the medium of money. 
 
 2. In practice, the exports and im- 
 ports of a country not only are not 
 exchanged directly against each other, 
 but often do not even pass through the 
 same hands. Each is separately bought 
 and paid for with money. We have 
 seen, however, that, even in the same 
 country, money does not actually pass 
 from hand to hand each time that pur- 
 chases are made with it, and still less 
 does this happen between different 
 countries. The habitual mode of pay- 
 ing and receiving payment for com- 
 modities, between country and country, 
 is by bills of exchange. 
 
 A merchant in England, A, has ex- 
 ported English commodities, consign- 
 ing them to his correspondent B in 
 France. Another merchant in France, 
 C, has exported French commodities, 
 suppose of equivalent value, to a mer- 
 chant D in England. It is evidently 
 unnecessary that B in France should 
 send money to A in England, and that 
 D in England should send an equal 
 sum of money to C in France. The one 
 debt may be applied to the payment of 
 the other, and the double cost and risk 
 of carriage be thus saved. A draws a 
 bill on B for the amount which B owes 
 to him : D, having an equal amount to 
 pay in France, buys this bill from A, 
 and sends it to C, who, at the expira- 
 tion of the number of d-ivs which *.h
 
 THE FOREIGN EXCHANGES. 
 
 bill has to run, presents it to B for 
 payment. Thus the-^lebt-diie .from 
 France to England, and the debt due 
 from England to France, are both paid 
 without sending an ounce of gold or 
 silver from one country to the other. 
 
 In this statement, however, it is 
 supposed that the sum of the debts due 
 from France to England, and the sum 
 of those due from England to France, 
 are equal; that each country has 
 exactly the same number of ounces of 
 gold or silver to pay and to receive. 
 This implies (if we exclude for the 
 present any other international pay- 
 ments than those occurring in the 
 course of commerce,) that the exports 
 and imports exactly pay for one an- 
 other, or in other words, that the equa- 
 tion of international demand is esta- 
 blished. When such is the fact, the 
 international transactions are liqui- 
 dated without the passage of any 
 money from one country to the other. 
 But if there is a greater sum due from 
 England to France, than is due from 
 France to England, or vice versa, the 
 debts cannot be simply written off 
 against one another. After the one 
 has been applied, as far as it will go, 
 towards covering the other, the balance 
 must be transmitted in the precious 
 metals. In point of fact, the merchant 
 who has the amount to pay, will even 
 then pay for it by a bill. When a 
 person has a remittance to make to a 
 foreign country, he does not himself 
 search for some one who has money to 
 receive from that country, and ask him 
 for a bill of exchange. In this as in 
 other branches of business, there is a 
 class of middlemen or brokers, who 
 bring buyers and sellers together, or 
 stand between them, buying bills from 
 those who have money to receive, 
 and selling bills to those who have 
 money to pay. When a customer 
 comes to a broker for a bill on 
 Paris or Amsterdam, the broker sells 
 to him, perhaps the bill he may him- 
 self have bought that morning from 
 a merchant, perhaps a bill on his own 
 correspondent in the foreign city : and 
 to enable his correspondent to pay, 
 when due, all the bills he has granted, 
 be remits to him all those which he has 
 
 bought and has not resold. In this 
 manner these brokers take upon them- 
 selves the whole settlement of the 
 pecuniary transactions between distant 
 places, being remunerated by a email 
 commission or percentage on the 
 amount of each bill which they eithpr 
 sell or buy. Now, if the brokers find 
 that they are askedTor bills on the one 
 part, to a greater amount than bills 
 are offered to them on the other, they 
 do not on this account refuse to give 
 them ; but since, in that case, they 
 have no means of enabling the corre- 
 spondents on whom their bills are 
 drawn, to pay them when due, except 
 by transmitting part of the amount m 
 gold or silver, they require from those 
 to whom they sell bills an additional 
 price, sufficient to cover the freight and 
 insurance of the gold and silver, with a 
 profit sufficient to compensate them for 
 their trouble and for the temporary 
 occupation of a portion of their capital. 
 This premium (as it is called) the 
 buyers are willing to pay, because they 
 must otherwise go to the expense of 
 remitting the precious metals them 
 selves, and it is done cheaper by those 
 who make doing it a part of their es 
 pecial business. But though only some 
 of those who have a debt to pay would 
 have actually to remit money, all will 
 be obliged, by each other's competition, 
 to pay the premium ; and the brokers 
 are for the same reason obliged to pay 
 it to those whose bills they buy. The 
 reverse of all this happens, if on the 
 comparison of exports and imports, the 
 country, instead of having a balance to 
 pay, has a balance to receive. The 
 brokers find more bills offered to them, 
 than are sufficient to cover those which 
 they are required to grant. Bills on 
 foreign countries consequently fall to a. 
 discount ; and the competition among 
 the brokers, which is exceedingly ac- 
 tive, prevents them from retaining this 
 discount as a profit for themselves, and 
 obliges them to give the benefit of it to 
 those who buy the bills for the purposes 
 of remittance. 
 
 Let us suppose that all countries had 
 the same curreury, as in the progress 
 of political improvement they one day 
 will have : ami, as the most familiar to 
 
 B B a
 
 572 
 
 BOOK m. CHAPTER XX. 2. 
 
 the reader, though not the best, let us 
 suppose this currency to be the English. 
 \Vhen England had the same number 
 of pounds sterling to pay to France, 
 winch France had to pay to her, one 
 set of merchant 1 * in England would 
 wnnt bills, and another set would have 
 bijls to dispose of, for the very same 
 number of pounds sterling; and conse- 
 quently a bill on France for 100Z. 
 would sell for exactly IQOL, or, in the 
 phraseologyof merchants, the exchange 
 would be at par. As France also, on 
 this supposition, would have an equal 
 number of pounds sterling to pay and 
 to receive, bills on England would be 
 nt par in France, whenever bills on 
 France were at par in England. 
 
 If, however, England had a larger 
 sum to pay to France than to receive 
 from her, there would be persons re- 
 quiring bills on France for a greater 
 iiumber of pounds sterling than there 
 were bills drawn by persons to whom 
 money was due. A bill on France for 
 100J. would then sell for more than 
 100Z., and bills would be said to be at 
 a premium. The premium, however, 
 could not exceed the cost and risk of 
 making the remittance in gold, toge- 
 ther with a trifling profit ; because if 
 it did, the debtor would send the gold 
 itself, in preference to buying the bill. 
 
 If, on the contrary, England had 
 more money to receive from France 
 than to pay, there would be bills offered 
 for a greater number of pounds than 
 were wanted for remittance, and the 
 price of bills would fall below par : a 
 bill for 100Z. might be bought for some- 
 what less than lOQl., and bills would be 
 said to be at a discount. 
 
 When England has more to pay than 
 to receive, France has more to receive 
 than to pay, and vice versa. When, 
 therefore, in England, bills on France 
 bear a premium, then, in France, bills 
 on England are at a discount: and 
 when bills on France are at a discount 
 in England, bills on England are at a 
 premium in France. If they are at 
 5>ap in either country, they are so, as 
 ive have already seen, in both. 
 
 Thus do matters stand between 
 countries, or places, which have the 
 8$ine currency. So much of barbarism, 
 
 however, still remains in the transao 
 tions of the most civilized nations, that 
 almost all independent countries choose 
 to assert their nationality by having, 
 to their own inconvenience and that of 
 their neighbours, a peculiar currencj 
 of their own. To our present purpos* 
 this makes no other difference, than 
 that instead of speaking of equal sums 
 of money, we have to speak of equivar 
 lent sums. By equivalent sums, when 
 both currencies are composed of the 
 same metal, are meant sums which 
 contain exactly the same quantity of 
 the metal, in weight and fineness ; but 
 when, as in the case of France and 
 England, the metals are different, what 
 is meant is that the quantity of gold in 
 the one sum, and the quantity of silver 
 in the other, are of the same value in 
 the general market of the world : there 
 being no material difference between 
 one place and another in the relative 
 value of these metals. Suppose 25 
 francs to be (as within a trifling frac 
 tion it is) the equivalent of a pound 
 sterling. The debts and credits of the 
 two countries would be equal, when the 
 one owed as many times 25 francs, aa 
 the other owed pounds. When this 
 was the case, a bill on France for 2500 
 francs would be worth in England 
 WOl., and a bill on England for 100J. 
 would be worth in France 2500 francs. 
 The exchange is then said to be at 
 par : and 25 francs (in reality 25 francs 
 and a trifle more)* is called the par of 
 exchange with France. When England 
 cwed to France more than the equiva- 
 lent of what France owed to her, a bill 
 for 2500 francs would be at a premium, 
 that is, would be worth more than 1 OOL 
 When France owed to England more 
 than the equivalent of what England 
 owed to France, a bill for 2500 francs 
 would be worth less than 100/., or 
 would be at a discount. 
 
 When bills on foreign countries are 
 at a premium, it is customary to say 
 that the exchanges are against the 
 country, or unfavourable to it. In order 
 
 * Written before the change in the rel 
 live value of the two metals produced by th 
 gold discoveries. The par of exchange be 
 tween gold and silver currencies is now va 
 riable, and no one can foresee at what point 
 it will ultimately rest.
 
 THE FOKEIGN EXCHANGES. 
 
 373 
 
 to understand these phrases, we must 
 take notice of what "the exchange," 
 in the language of merchants, really 
 means. It means the power which the 
 money of the country has of purchasing 
 the money of other countries. Sup- 
 posing 25 francs to be the exact par of 
 exchange, then when it requires more 
 than 100Z. to buy a bill for 2500 francs, 
 100/. of English money are worth less 
 than their real equivalent of French 
 money : and this is called, an exchange 
 unfavourable to England. The only 
 persons in England, however, to whom 
 it is really unfavourable, are those who 
 have money to pay in France ; for they 
 come into the bill market as buyers, 
 and have to pay a premium : but to 
 those who have money to receive in 
 France, the same state of things is 
 favourable ; for they come as sellers, 
 and receive the premium. The pre- 
 mium, however,indicates that a balance 
 is due by England, which might have to 
 be eventually liquidated in the precious 
 metals : and since, according to the old 
 theory, the benefit of a trade consisted 
 in bringing money into the country, 
 this prejudice introduced the practice 
 of calling the exchange favourable 
 when it indicated a balance to receive, 
 and unfavourable when it indicated 
 one to pay : and the phrases in turn 
 tended to maintain the prejudice. 
 
 3. It might be supposed at first 
 sight that when the exchange is un- 
 favourable, or in other words, when 
 bills are at a premium, the premium 
 must always amount to a full equi- 
 valent for the cost of transmitting 
 money: since, as there is really a 
 balance to pay, and as the full cost 
 must therefore be incurred by some of 
 those who have remittances to make, 
 their competition will compel all to 
 submit to an equivalent sacrifice. And 
 such would certainly be the case, if it 
 were always necessary that whatever 
 is destined to be paid should be paid 
 immediately. The expectation of great 
 and immediate foreign payments some- 
 times produces a most startling effect 
 on the exchanges.* But a small excess 
 
 On the news of Bonaparte's landing from 
 Elba, the price of bills advanced in one day 
 
 of imports above exports, or any other 
 small amount of debt to be paid to 
 foreign countries, does not usually affect 
 the exchanges to the full extent of the 
 cost and risk of transporting bullion. 
 The length of credit allowed, generally 
 permits, on the part of some of the 
 debtors, a postponement of payment, 
 and in the mean time the balance may 
 turn the other way, and restore the 
 equality of debts and credits without 
 any actual transmission of the metals. 
 And this is the more likely to happen, 
 as there is a self-adjusting power in 
 the variations of the exchange itself. 
 Bills are at a premium because a 
 greater money value has been im- 
 ported than exported. But the pre- 
 mium is itself an extra profit to those 
 who export. Besides the price they 
 obtain for their goods, they draw for 
 the amount and gain the premium. It 
 is, on the other hand, a diminution of 
 profit to those who import. Besides 
 the price of the goods, they have to 
 pay a premium for remittance. So 
 that what is called an unfavourable 
 exchange is an encouragement to ex- 
 port, and a discouragement to import. 
 And if the balance due is of small 
 amount, and is the consequence of 
 some merely casual disturbance in the 
 ordinary course of trade, it is soon 
 liquidated in commodities, and the ac- 
 count adjusted by means of bills, with- 
 out the transmission of any bullion. 
 Not so, however, when the excess of 
 imports above exports, which has made 
 
 03 much as ten per cent. Of course this pre- 
 mium was not a mere equivalent for cost ol 
 carriage, since the freight of such an article 
 as gold, even with the addition of war in- 
 surance, could never have amounted to so 
 much. This great price was an equivalent 
 not for the difficulty of sending gold, but for 
 the anticipated difficulty of procuring it to 
 send; the expectation being that there would 
 be such immense remittances to the Conti- 
 nent in subsidies and for the support of 
 armies, as would press hard on the stock of 
 bullion in the country (which was then en- 
 tirely denuded of specie), and this, too, in a 
 shorter time than would allow of its being 
 replenished. Accordingly the price of bul- 
 lion rose likewise, with the same suddenness. 
 It is hardly necessary to say that this took 
 place during the Bank restriction. In a con- 
 vertible state of the currency, no such thing 
 could have occurred until the Bank stopped 
 payment.
 
 374 
 
 BOOK III. CHAPTER XXI. 1. 
 
 the exchange unfavourable, arises from 
 a permanent cause. In that case, what 
 disturbed the equilibrium must have 
 been the state of prices, and it can 
 only be restored by acting on prices. 
 It is impossible that prices should be 
 such as to invite to an excess of im- 
 ports, and yet the exports should be 
 kept permanently up to the imports by 
 the extra profit on exportation derived 
 from the premium on bills ; for if the 
 exports were kept up to the imports, 
 bills would not be at a premium, 
 and the extra profit would not exist. 
 It is through the prices of commodities 
 that the correction must be adminis- 
 tered. 
 
 Disturbances, therefore, of the equi- 
 librium of imports and exports, and 
 consequent disturbances of the ex- 
 change, may be considered as of two 
 classes ; the one casual or accidental, 
 which, if not on too large a scale, cor- 
 rect themselves through the premium 
 on bills, without any transmission of 
 the precious metals : the other arising 
 from the general state of prices, which 
 cannot be corrected without the sub- 
 traction of actual money from the cir- 
 culation of one of the countries, or an 
 annihilation of credit equivalent to it ; 
 
 since the mere transmission of bullion 
 (as distinguished from money), not 
 having any effect on prices, is of no 
 avail to abate the cause from which 
 the disturbance proceeded. 
 
 It remains to observe, that the ex- 
 changes do not depend on the balance 
 of debts and credits with each country 
 separately, but with all countries taken 
 together. England may owe a balance 
 of payments to France ; but it does not 
 follow that the exchange with France 
 will be against England, and that bills 
 on France will be at a premium ; be- 
 cause a balance may be due to England 
 from Holland or Hamburgh, and she 
 may pay her debts to France with bills 
 on those places ; which is technically 
 called arbitration of exchange. There 
 is some little additional expense, partly 
 commission and partly loss of interest, 
 in settling debts in this circuitous 
 manner, and to the extent of that 
 small difference the exchange with 
 one country may vary apart from that 
 with others ; but in the main, the ex- 
 changes with all foreign countries vary 
 together, according as the country has 
 a balance to receive or to pay on the 
 general result of its foreign transac- 
 tions. 
 
 CHAPTER XXI. 
 
 OP THE DISTRIBUTION OF THE PRECIOUS METALS THROUGH THE 
 COMMERCIAL WORLD. 
 
 1. HAVING now examined the 
 mechanism by which the commercial 
 transactions between nations are ac- 
 tually conducted, we have next to in- 
 quire whether this mode of conduct- 
 ing them makes any difference in the 
 conclusions respecting international 
 values, -which we previously arrived at 
 on the hypothesis of barter. 
 
 The nearest analogy would lead us 
 to presume the negative. We did not 
 find that the intervention of money and 
 its substitutes made any difference in 
 the law of value as applied to adjacent 
 places. Things which would have been 
 
 equal in value if the mode of exchange 
 had been by barter, are worth equal 
 sums of money. The introduction of 
 money is a mere addition of one more 
 commodity, of which the value is regu- 
 lated by the same laws as that of all 
 other commodities. We shall not be 
 surprised, therefore, if we find that in- 
 ternational values also are determined 
 by the same causes under a money and 
 bill system, as they would be under 
 a system of barter; and that money 
 has little to do in the matter, except 
 to furnish a convenient mode of com 
 paring values.
 
 DISTRIBUTION OF THE PRECIOUS METALS. 
 
 37.5 
 
 All interchange is, in substance and 
 effect, barter : whoever sells commodi- 
 ties for money, rind with that money 
 buys other poods, really buys those 
 goods with his own commodities. And 
 so of nations: their trade is a mere 
 exchange of exports for imports ; and 
 whether money is employed or not, 
 things are only in their permanent 
 state when the exports and imports 
 exactly pay for each other. "When 
 this is the case, equal sums of money 
 are due from each country to the other, 
 the debts are settled by bills, and there 
 is no balance to be paid in the precious 
 metals. The trade is in a state like 
 that which is called in mechanics a 
 condition of stable equilibrium. 
 
 But the process by which things are 
 brought back to this state when they 
 happen to deviate from it, is, at least 
 outwardly, not the same in a barter 
 system and in a money system. Under 
 the first, the country which wants more 
 imports than its exports will pay for, 
 must offer its exports at a cheaper rate, 
 as the sole means of creating a demand 
 for them sufficient to re-establish the 
 equilibrium. When money is used, the 
 country seems to do a thing totally dif- 
 ferent. She takes the additional im- 
 ports at the same price as before, and 
 as she exports no equivalent, the 
 bilance of payments turns against 
 her; the exchange becomes unfavour- 
 able, and the difference has to be paid 
 in money. This is in appearance a 
 very distinct operation from the former. 
 Let us see if it differs in its essence, 
 or only in its mechanism. 
 
 Let the country which has the 
 balance to pay be England, and the 
 country which receives it, France. By 
 this transmission of the precious metals, 
 the quantity of the currency is dimi- 
 nished in England, and increased in 
 France. This I am at liberty to as- 
 sume. As wo shall sec hereafter, it 
 would be a very erroneous assumption 
 if made in regard to all payments of 
 international balances. A balance which 
 has only to be paid once, such as the 
 payment made for an extra importation 
 of corn in a season of dearth, may be 
 paid from hoards, or from the reserves 
 of bankers, without acting on the cir- 
 
 culation. But we are now ttipposing 
 that there is an excess of imports over 
 exports, arising from the fact that the 
 equation of international demand is not 
 yet established : that there is at the 
 ordinary prices a permanent demand 
 in England for more French goods than 
 the English goods required in France 
 at the ordinary prices will pay for. 
 When this is the case, if a change were 
 not made in the prices, there would be 
 a perpetually renewed balance to be 
 paid in money. The imports require 
 to be permanently diminished, or the 
 exports to be increased ; which can 
 only be accomplished through prices ; 
 and hence, even if the balances are at 
 first paid from hoards, or by the ex- 
 portation of bullion, they will reach 
 the circulation at last, for until they 
 do, nothing can stop the drain. 
 
 When, therefore, the state of prices 
 is such that the equation of inter- 
 national demand cannot establish it- 
 self, the country requiring more im- 
 ports than can be paid for by the 
 exports ; it is a sign that the country 
 has more of the precious metals or 
 their substitutes, in circulation, than 
 can permanently circulate, and must 
 necessarily part with some of them 
 before the balance can bo restored. 
 The currency is accordingly contracted : 
 prices fall, and among the rest, the 
 prices of exportable articles ; for which, 
 accordingly, there arises, in foreign 
 countries, a greater demand: while 
 imported commodities have possibly 
 risen in price, from the influx of money 
 into foreign countries, and at all events 
 have not participated in the general 
 fall. But until the increased cheapness 
 of English goods induces foreign coun- 
 tries to take a greater pecuniary value, 
 or until the increased dearness (positive 
 or comparative) of foreign goods makes 
 England take a less pecuniary value, 
 the exports of England will be no 
 nearer to paying for the imports than 
 before, and the stream of the preciuiia 
 metals which had begun to flow out of 
 England, will still flow on. This ef- 
 flux will continue, until the fall of prices 
 in England brings within reach of 
 the foreign market some commodity 
 which England did not previously send
 
 ste 
 
 III. CHAPTER XXI. $ 2. 
 
 thither; or until the reduced price of 
 the things which she did send, lias 
 forced a demand abroad for a sulii'-i' -nt 
 quantity to pay for the imports, aided, 
 perhaps, by a reduction of the English 
 demand for foreign goods, through 
 their enhanced price, either positive 
 or comparative. 
 
 Now this is the very process which 
 took place on our original supposition 
 of barter. Not only, therefore, docs 
 the trade between nations tend to the 
 same equilibrium between exports and 
 :<nports, whether money is employed 
 or not, but the means by which this 
 equilibrium is established are essen- 
 tially the same. The country whose 
 exports are not sufficient to pay for 
 her imports, offers them on cheaper 
 terms, until she succeeds in forcing the 
 necessary demand : in other words, the 
 Equation of International Demand, 
 under a money system as well as 
 under a barter system, is the law of 
 international trade. Every country 
 exports and imports the very same 
 things, and in the very same quantity, 
 under the one system as under the 
 other. In a barter system, the trade 
 gravitates to the point at which the 
 sum of the imports exactly exchanges 
 for the sum of the exports : in a money 
 system, it gravitates to the point at 
 which the sum of the imports and the 
 Bum of the exports exchange for the 
 Game quantity of money. And since 
 things which are equal to the same 
 thing are equal to one another, the 
 exports and imports which are equal 
 in money price, would, if money were 
 not used, precisely exchange for one 
 another.* 
 
 * The subjoined extract from the separate 
 Essay previously referred to, will give some 
 assistance in following the course of the phe- 
 nomena. It is adapted to the imaginary case 
 used for illustration throughout that Essay, 
 the case of a trade between England and 
 Germany in cloth and linen. 
 
 " We may at first make whatever supposi- 
 tion we will with respect to the value of 
 money. Let us suppose, therefore, that be- 
 fore the opening of the trade, the price of 
 iloth is the same in both countries, namely, 
 six shillings per yard. As 10 yards of cloth 
 were supposed to exchange in England for 
 15 yards of linen, in Germany for 20, we must 
 suppose that linen is sold in England at four 
 shilling* per yard, in Germany at three. 
 
 2. It thus appears that the law 1 of 
 international values, and, consequently, 
 the division of the advantages of trade 
 among the nations which carry it on, 
 are the same on the supposition of 
 money, as they would be in a state of 
 barter. In international, as in ordinary 
 domestic interchanges, money is to 
 commerce only what oil is to ma- 
 chinery, or railways to locomotion, a 
 contrivance to diminish friction. In 
 order still further to test these con- 
 clusions, let us proceed to re-examine, 
 on the supposition of money, a question 
 which we have already investigated on 
 the hypothesis of barter, namely, to 
 what extent the benefit of an improve- 
 ment in the production of an exportable 
 article, is participated in by the coun- 
 tries importing it. 
 
 The improvement may cither consist 
 in the cheapening of some article which 
 was already a staple production of the 
 country, or in the establishment of 
 some new branch of industry, or of 
 some process rendering an article ex- 
 portable which had not till then been 
 exported at all. It will be convenient 
 to begin with the case ofanewexport,as 
 being somewhat the simpler of the two. 
 
 The first effect is that the article 
 falls in price, and a demand arises for 
 it abroad. This new exportation dis- 
 turbs the balance, turns the exchanges, 
 money flows into the country (which 
 we shall suppose to be England), and 
 continues to flow until prices rise. This 
 higher range of prices will somewhat 
 check the demand in foreign countries 
 for the new article of export ; and will 
 diminish the demand which existed 
 abroad for the other things which 
 
 Cost of carriage and importer's profit aro 
 left, as before, out of consideration. 
 
 " In this state of prices, cloth, it is evident, 
 cannot yet be exported from England into 
 Germany: but linen can be imported from 
 Germany into England. It will be so : and, 
 in the first instance, the linen will be paid 
 for in money. 
 
 " The efflux of money from England, and 
 its influx into Germany, will raise money 
 prices in the latter country, and lower them 
 in the former, Linen will rise in Germany 
 above three shillings per yard, and cloth 
 above six shillings. Linen in Kigland, being 
 imported from Germany, will (since cost of 
 carriage is not reckoned) sink to the same 
 price as in that country, while cloth will fall
 
 DISTRIBUTION OF THE PRECIOUS METALS. 
 
 37? 
 
 England was in the habit of exporting. 
 The exports will thus be diminished ; 
 while at the same time the English 
 public, having more money, will have 
 a greater power of purchasing foreign 
 commodities. If they make use of this 
 
 below six shillings. As soon as the price of 
 cloth is lower in England than in Germany, 
 it will begin to be exported, and the price of 
 cloth in Germany will fall to what it is in 
 Kngland. As long as the cloth exported Joes 
 not suffice to pay for the linen imported, 
 money will continue to flow from Kngland 
 into Germany, and prices generally will con- 
 tinue to fall in England and rise in Ger- 
 many. By the fall, however, of cloth in 
 England, cloth will fall in Germany also, 
 and the demand for it will increase. By 
 the rise of linen in Germany, linen must 
 rise in England also, and the demand for it 
 will diminish. As cloth fell in price and 
 linen rose, there would be some particular 
 price of both articles, at'which the cloth ex- 
 ported and the linen imported would exactly 
 pay for each other. At this point prices 
 would remain, because money would then 
 cease to move out of England into Germany. 
 What this point might be, would entirely 
 depend upon the circumstances and inclina- 
 tions of the purchasers on both sides. If 
 the fall of cloth did not much increase the 
 demand for it in Germany, and the rise of 
 linen did not diminish very rapidly the de- 
 mand for it in England, much money must 
 pass before the equilibrium is restored ; cloth 
 would fall very much, and linen would rise, 
 until England, perhaps, had to pay nearly as 
 much for it as when she produced it for her- 
 self. But if, on the contrary, the fall of 
 cloth caused a very rapid increase of the de- 
 mand for it in G ermany, and the rise of linen 
 in Germany reduced very rapidly the de- 
 mand in England from what it was under 
 the influence of the first cheapness produced 
 by the opening of the trade ; the cloth would 
 very soon suffice to pay for the linen, little 
 money would pass between the two countries, 
 and England would derive a large portion of 
 the benefit of the trade. We have thus ar- 
 rived at precisely the same conclusion, in sup- 
 posing the employment of money, which we 
 found to hold under the supposition of barter. 
 " In what shape the benefit accrues to the 
 two nations from the trade is clear enough. 
 Germany, before the commencement of the 
 trade, paid six shillings per yard for broad- 
 cloth : she now obtains it at a lower price. 
 This, however, is not the whole of her ad- 
 vantage. As the money-prices of all her 
 other commodities have risen, the money- 
 incomes of all her producers have increased. 
 This is no advantage to them in buying from 
 each ether, because the price of what they 
 buy has risen in the same ratio with their 
 weans of paying for it : but it is an advan- 
 tage to them in buying anything which has 
 not risen, and, still more, anything which 
 has fallen. They, therefore, benefit as con- 
 sumers of cloth, not merely to the extent to 
 
 increased power of purchase, there will 
 be an increase of imports ; and by this, 
 and the check to exportation, the 
 equilibrium oi' imports and exports will 
 be restored. The result to foreign 
 countries will be, that they have to 
 
 which cloth has fallen, but also to the extent 
 to which other prices have risen. Suppose 
 that this is one-tenth. The same proportion 
 of their money-incomes as before, will suffice 
 to supply their other wants ; and the re- 
 mainder, being increased one-tenth in 
 amount, will enable them to purchase one- 
 tenth more cloth than before, even though 
 cloth had not fallen : but it has fallen ; so that 
 they are doubly gainers. They purchase 
 the same quantity with less money, and have 
 more to expend upon their other wants. 
 
 "In England, on the contrary, general 
 money-prices have fallen. Linen, however, 
 has fallen more than the rest, having been 
 lowered in price by importation from a 
 country where it was cheaper; whereas the 
 others have fallen only from the consequent 
 efflux of money. Notwithstanding, there- 
 fore, the general fall of money-prices, the 
 English producers will be exactly as they 
 were in all ;other respects, while they will 
 gain as purchasers of linen. 
 
 " The greater the efflux of money required 
 to restore the equilibrium, the greater will 
 be the gain of Germany, both by the fall of 
 cloth and by the rise of her general prices. 
 The less the efflux of money requisite, the 
 greater will be the gain of England ; because 
 the price of linen will continue lower, and 
 her general prices will not be reduced so 
 much. It must not, however, be imagined 
 that high money-prices are a good, and low 
 money-prices an evil, in themselves. But 
 the higher the general money-prices in any 
 country, the greater will be that country's 
 means of purchasing those commodities, 
 which, being imported from abroad, are in- 
 dependent of the causes which keep prices 
 high at home." 
 
 In practice, the cloth and the linen would 
 not, as here supposed, be at the same price 
 in England and in Germany : each would be 
 dearer in money-price in the country which 
 imported than in that which produced it, by 
 the amount of the cost of carriage, together 
 with the ordinary profit on the importer's 
 capital for the average length of time which 
 elapsed before the commodity could be dis- 
 posed of. But it does not follow that each 
 country pays the cost of carriage of the com- 
 modity it imports ; for the addition of this 
 item to the price may operate as a greater 
 check to demand on one side than on the 
 other; and the equation of international 
 demand, and consequent equilibrium of pay- 
 ments, may not be maintained. Money 
 would then flow out of one country into the 
 other, until, in the manner already illus- 
 trated, the equilibrium w.is restore!: and, 
 when this was effected, one country would 
 be paying more than its own cost of carriage) 
 and the other less.
 
 878 
 
 pay dearer than before for their other 
 imports, and obtain the new commodity 
 cheaper than before, but not so much 
 theaper as England herself does. I say 
 this, being well aware that the article 
 would be actually at the very same 
 nrice (cost of carnage excepted) in 
 England and in other countries. The 
 cheapness, however, of the article is 
 not measured solely by the money- 
 price, but by that price compared with 
 1he money incomes of the consumers. 
 The price is the same to the English 
 find to the foreign consumers ; but the 
 former pay that price from money in- 
 comes which have been increased by 
 the new distribution of the precious 
 inetals ; while the latter have had their 
 money incomes probably diminished by 
 the same cause. The trade, therefore, 
 has not imparted to the foreign con- 
 sumer the whole, but only a portion, of 
 the benefit which the English con- 
 sumer has derived from the improve- 
 ment; while England has also benefited 
 in the prices of foreign commodities. 
 Thus, then, any industrial improve- 
 ment which leads to the opening of a 
 new branch of export trade, benefits a 
 country not only by the cheapness of 
 the article in which the improvement 
 has taken place, but by a general 
 cheapening of all imported products. 
 
 Let us now change the hypothesis, 
 and suppose that the improvement, 
 instead of creating a new export from 
 England, cheapens an existing one. 
 When we examined this case on the 
 supposition of barter, it appeared to 
 us that the foreign consumers might 
 either obtain the same benefit from the 
 improvement as England herself, or a 
 lesa benefit, or even a greater benefit, 
 according to the degree in which tho 
 consumption of the cheapened article is 
 calculated to extend itself as the article 
 diminishes in price. The same con- 
 clusions will be found true on the sup- 
 position of money. 
 
 Let the commodity in which there is 
 an improvement, be cloth. The first 
 effect of the improvement is that its 
 price falls, and there is an increased de- 
 mand for it in the foreign market. But 
 this demand is of uncertain amount. 
 Suppose the foreign consumers to hi- 
 
 BOOK III. CHAPTER XXI. 2. 
 
 crease their purchases in the exact 
 ratio of the cheapness, or in other 
 words, to lay out in cloth the same 
 sum of money as before ; the same 
 aggregate payment as before will be 
 due from foreign countries to England ; 
 the equilibrium of exports and imports 
 will remain undisturbed, and foreigners 
 will obtain the full advantage of the 
 increased cheapness of cloth. But if 
 the foreign demand for cloth is of such 
 a character as to increase in a greater 
 ratio than the cheapness, a larger sum 
 than formerly will be due to England 
 for cloth, and when paid will raise 
 English prices, the price of cloth ir- 
 cluded; this rise, however, will affect 
 only the foreign purchaser, English 
 incomes being raised in a corresponding 
 proportion ; and the foreign consumer 
 will thus derive a less advantage than 
 England from the improvement. If, on 
 the contrary, the cheapening of cloth 
 does not extend the foreign demand for 
 it in a proportional degree, a less sum 
 of debts than before will be due to 
 England for cloth, while there will be 
 the usual sum of debts due from Eng- 
 land to foreign countries ; the balanco 
 of trade will turn against England, 
 money will be exported, prices (that of 
 cloth included) will fall, and cloth will 
 eventually be cheapened to the foreign 
 purchaser in a still greater ratio than 
 the improvement has cheapened it to 
 England. These are the very conclu- 
 sions which we deduced on tho hypo- 
 thesis of barter. 
 
 The result of the preceding discussion 
 cannot be better summed up than in 
 the words of Eicardo.* " Gold and 
 silver having been chosen for the gene- 
 ral medium of circulation, they are, 
 by the competition of commerce, dis- 
 tributed in such proportions amongst 
 the different countries of the world as 
 to accommodate themselves to the 
 natural traffic which would take place 
 if no such metals existed, and the trade 
 between countries were purely a trade 
 of barter." Of this principle, so fertile 
 in consequences, previous to which the 
 theory of foreign trade was an unintel- 
 ligible chaos, Mr. Eicardo, though he 
 
 * Principles of Political Economy and Taxa- 
 tion, 3rd ed. p. 143.
 
 DISTRIBUTION OF THE PREClOl'S METALS. 
 
 379 
 
 did not pursue it into its ramifications, 
 was the renl originator. No writer who 
 preceded him appears to have had a 
 glimpse of it : and few are those who 
 even since his time have had an ade- 
 quate conception of its scientific value. 
 
 3. [t is now necessary to inquire, 
 in what manner this law of the distri- 
 bution of the precious metals by means 
 of the exchanges, affects the exchange 
 value of money itself; and how it 
 tallies with the law by which we found 
 that the value of money is regulated 
 when imported as a mere article of 
 merchandize. For there is here a 
 semblance of contradiction, which has, 
 1 think, contributed more than any- 
 thing else to make some distinguished 
 political economists resist the evidence 
 of the preceding doctrines. Monej 7 , 
 they justly think, is no exception to 
 the general laws of value ; it is a com- 
 modity like any other, and its average 
 or natural value must depend on the 
 cost of producing, or at least of obtain- 
 ing it. That its distribution through 
 the world therefore, and its different 
 value in different places, should be 
 liable to be altered, not by causes 
 affecting itself, but by a hundred 
 causes unconnected with it ; by every- 
 thing which affects the trade in other 
 commodities, so as to derange the 
 equilibrium of exports and imports ; 
 appears to these thinkers a doctrine 
 altogether inadmissible. 
 
 But the supposed anomaly exists 
 only in semblance. The causes which 
 bring money into or carry it out of a 
 country through the exchanges, to re- 
 store the equilibrium of trade, and 
 which thereby raise its value in some 
 countries and lower it in others, are 
 the very same causes on which the 
 local value of money would depend, if 
 it were never imported except as a 
 merchandize, and never except directly 
 from the mines. When the value of 
 money in a country [9 permanently 
 lowered by an influx of it through the 
 balance ot' trade, the cause, if it is not 
 diminished cost of production, must be 
 one of those causes which compel a 
 new adjustment, more favourable to 
 the country, of the equation of inter- 
 
 national demand : namely, either an 
 increased demand abroad for her com- 
 modities, or a diminished demand on 
 her part for those of foreign countries. 
 Now an increased foreign demand for 
 the commodities of a country, or a 
 diminished demand in the country for 
 imported commodities, are the very 
 causes which, on the general principles 
 of trade, enable a country to purchase 
 all imports, and consequently the pre- 
 cious metals, at a lower value. There 
 is therefore no contradiction, but the 
 most perfect accordance, in the results 
 of the two different modes in which 
 the precious metals may be obtained. 
 When money flows from country to 
 country in consequence of changes in 
 the international demand for commodi- 
 ties, and by so doing alters its own 
 local value, it merely realizes, by a 
 more rapid process, the effect which 
 would otherwise take place more 
 slowly, by an alteration in the relative 
 breadth of the streams by which the 
 precious metals flow into different re- 
 gions of the earth from the mining 
 countries. As therefore we before saw 
 that the use of money as a medium of 
 exchange does not in the least alter 
 the law on which the values of other 
 things, either in the same country or 
 internationally, depend, so neither does 
 it alter the law of the value of tho 
 precious metal itself: and there is in 
 the whole doctrine of international 
 values as now laid down, a unity and 
 harmony which is a strong collateral 
 presumption of truth. 
 
 4. Before closing this discussion, 
 it is fitting to point out in what 
 manner and degree the preceding con- 
 elusions arc affected by the existence 
 of international payments not originat- 
 ing in commerce, and for which no 
 equivalent in either money or com- 
 modities is expected or received ; such 
 as a tribute, or remittances of rent to 
 absentee landlords or of interest to 
 foreign creditors, or a government ex- 
 penditure abroad, such as England 
 incurs in the management of some of 
 her colonial dependencies. 
 
 To begin with the case of barter. 
 The supposedannual remittances being
 
 880 
 
 BOOK in. CHAPTER XXII. 1. 
 
 made in commodities, and being ex- 
 ports for which there is to be no return, 
 it is no longer requisite that the im- 
 ports and exports should pay for one 
 another : on the contrary, there must 
 be an annual excess of exports over 
 imports, equal to the value of the re- 
 mittance. If, before the country be- 
 came liable to the annual payment, 
 foreign commerce was in its natural 
 state of equilibrium, it will now be 
 necessary for the purpose of effecting 
 the remittance, that foreign countries 
 should be induced to take a greater 
 quantity of exports than before : which 
 can only be done by offering those ex- 
 ports on cheaper terms, or in other 
 words, by paying dearer for foreign 
 commodities. The international values 
 will so adjust themselves that either by 
 greater exports, or smaller imports, or 
 both, the requisite excess on the side 
 of exports will be brought about ; and 
 this excess will become the permanent 
 state. The result is, that a country 
 which makes regular payments to 
 foreign countries, besides losing what 
 it pays, loses also something more, by 
 the less advantageous terms on which 
 it is forced to exchange its productions 
 for foreign commodities. 
 
 The same results follow on the sup- 
 
 position of money. Commerce beit.g 
 supposed to be in a state of equilibrium 
 when the obligatory remittances begin, 
 the first remittance is necessarily made 
 in money. This lowers prices in the 
 remitting country, and raises them in 
 the receiving. The natural effect is 
 that more commodities are exported 
 than before, and fewer imported, and 
 that, on the score of commerce alone, a 
 balance of money will be constantly 
 due from the receiving to tho paying 
 country. When the debt thus annually 
 due to the tributary country becomes 
 equal to the annual tribute or other 
 regular payment due from it, no further 
 transmission of money takes place ; 
 the equilibrium of exports and imports 
 will no longer exist, but that of pay- 
 ments will; the exchange will be at 
 par, the two debts will be set off 
 against one another, and the tribute or 
 remittance will be virtually paid in 
 goods. The result to the interests of 
 the two countries will be as already 
 pointed out : the paying country will 
 give a higher price for all that it buys 
 from the receiving country, while the 
 latter, besides receiving the tribute, 
 obtains the exportable produce of the 
 tributary country at a lower price. 
 
 CHAPTER XX1L 
 
 INFLtEXCE OF THE CDltr.EXCY OS THE EXCHANGES AKD OK FOREIGS TRADE 
 
 1. Is our inquiry into the laws 
 of international trade, we commenced 
 with the principles which determine 
 international exchanges and inter- 
 national values on the hypothesis of 
 barter. We next showed that the in- 
 troduction of money as a medium of 
 exchange, makes no difference in the 
 laws of exchanges and of values be- 
 tween country and country, no more 
 than between individual and indi- 
 vidual : since the precious netals, 
 under the influence of those same laws, 
 distribute themselves in such propor- 
 
 tions among the different countries of 
 the world, as to allow the very same 
 exchanges to go on, and at the same 
 values, as would be the case under a 
 system of barter. We lastly considered 
 how the value of money itself is 
 affected, by those alterations in the 
 state of trade which arise from altera- 
 tions either in the demand and supply 
 of commodities or in their cost of pro- 
 duction. It remains to consider the 
 alterations in the state of trade which 
 originate not in commodities but in 
 money.
 
 INFLUENCE OF CURRENCY ON FOREIGN TRADE. 381 
 
 Gold and silver may vary like other 
 things, though they are not so likely 
 to vary as other things, in their cost of 
 production. The demand for them in 
 foreign countries may also vary. It 
 may increase, by augmented employ- 
 ment of the metals for purposes of art 
 and ornament, or because the increase 
 of production and of transactions has 
 created a greater amount of business 
 to be done by the circulating medium. 
 }t may diminish, for the opposite 
 leasons ; or from the extension of the 
 economizing expedients by which the 
 use of metallic money is partially dis- 
 pensed with. These changes act upon 
 the trade between other countries and 
 the mining countries, and upon the 
 value of the precious metals, according 
 to the general laws of the value of im- 
 ported commodities : which have been 
 Bet forth in the previous chapters with 
 sufficient fulness. 
 
 What I propose to examine in the 
 present chapter, is not those circum- 
 stances affecting money, which alter 
 the permanent conditions of its value ; 
 but the effects produced on interna- 
 tional trade by casual or temporary 
 variations in the value of money, 
 which have no connexion with any 
 causes affecting its permanent value. 
 This is a subject of importance, on 
 account of its bearing upon the prac- 
 tical problem which has excited so 
 much discussion for sixty years past, 
 the regulation of the currency. 
 
 2. Let us suppose in any country 
 a circulating medium purely metallic, 
 and a sudden casual increase made to 
 it ; for example, by bringing into cir- 
 culation hoards of treasure, which had 
 been concealed in a previous period of 
 foreign invasion or internal disorder. 
 The natural effect would be a rise of 
 prices. This would check exports, and 
 encourage imports ; the imports would 
 exceed the exports, the exchanges 
 would become unfavourable, and the 
 newly-acquired stock of money would 
 diffuse itself over all countries with 
 which the supposed country carried on 
 trade, and from them, progressively, 
 through all parts of the commercial 
 world. The money which thus over- 
 
 flowed would spread itself to an equal 
 depth over all commercial countries. 
 For it would go on flowing until the 
 exports and imports again balanced 
 one another : and this (as no change 
 is supposed in the permanent circum- 
 stances of international demand) could 
 only be, when the money had diffused 
 itself so equally that prices had risen 
 in the same ratio in all countries, so 
 that the alteration of price would be 
 for all practical purposes ineffective, 
 and the exports and imports, though 
 at a higher money valuation, woidd be 
 exactly the same as they were ori- 
 ginally. This diminished value of 
 money throughout the world, (at least 
 if the diminution was considerable) 
 would cause a suspension, or at least 
 a diminution, of the annual supply 
 from the mines : since the metal 
 would no longer command a value 
 equivalent to its highest <jost of pro- 
 duction. The -annual waste would, 
 therefore, not be fully made up, and 
 the usual causes of destruction would 
 gradually reduce the aggregate quan- 
 tity of the precious metals to its 
 former amount ; after which their pro- 
 duction would recommence on its 
 former scale. The discovery of the 
 treasure would thus produce only tem- 
 porary effects ; namely, a brief dis- 
 turbance of international trade until 
 the treasure had disseminated itself 
 through the world, and then a tem- 
 porary depression in the value of the 
 metal, below that which corresponds 
 to the cost of producing or of obtain- 
 ing it ; which depression would gra- 
 dually be corrected, by a temporarily 
 diminished production in the producing 
 countries, and importation in the im- 
 porting countries. 
 
 The same effects which would thus 
 arise from the discovery of a treasure, 
 accompany the process by which bank 
 notes, or any of the other substitutes 
 for money, take the place of the pre- 
 cious metals. Suppose that England 
 possessed a currency wholly metallic, 
 of twenty millions sterling, and that 
 suddenly twenty millions of bank notes 
 were sent into circulation. If these were 
 issued by bankers, they would be em- 
 ployed in loans, or in the purchase of
 
 382 
 
 BOOK III. CHAPTER XXII. 2. 
 
 securities, and would therefore create 
 a sudden fall in the rate of interest, 
 which would probably send a great 
 part of the twenty millions of gold out 
 of the country as capital, to seek a 
 higher rate of interest elsewhere, be- 
 f orc there had been time for any 
 action on prices. But we will suppose 
 that the notes are not issued by 
 bankers, or money-lenders of any 
 kind, but by manufacturers, in the 
 payment of wages and purchase of 
 materials, or by the government in its 
 ordinary expenses, so that the whole 
 amount would be rapidly carried into 
 the markets for commodities. The 
 following would be the natural order 
 of consequences. All prices would 
 rise greatly. Exportation would almost 
 cease ; importation would be prodi- 
 giously stimulated. A great balance 
 of payments would become due ; the 
 exchanges would turn against England, 
 to the full extent of the cost of ex- 
 porting money ; and the surplus coin 
 would pour itself rapidly forth, over 
 the various countries of the world, in 
 the order of their proximity, geogra- 
 phically and commercially, to England. 
 The efflux would continue until the 
 currencies of all countries had come 
 to a level ; by which I do not mean, 
 until money became of the same value 
 everywhere, but until the differences 
 were only those which existed before, 
 and which corresponded to permanent 
 differences in the cost of obtaining it. 
 When the .rise of prices had extended 
 itself in an equal degree to all coun- 
 tries, exports and imports would every- 
 where revert to what they were at 
 first, would balance one another, and 
 tie exchanges would return to par. 
 If such a sum of money as twenty 
 millions, when spread over the whole 
 (surface of the commercial world, were 
 sufficient to raise the general level in 
 a perceptible degree, the effect would 
 be of no long duration. No alteration 
 Laving occurred in the general condi- 
 tions under which the metals were 
 procured, either in the world at large 
 or in any part of it, the reduced value 
 would no longer be remunerating, and 
 the supply from the mines would 
 ceaso partially or wholly, until the 
 
 twenty millions were absorbed ;* after 
 which absorption, the currencies of all 
 countries would be, in quantity and in 
 value, nearly at their original level. 
 I say nearly, for in strict accuracy 
 there would be a slight difference. A 
 somewhat smaller annual supply of 
 the precious metals would now he re- 
 quired, there being in the world twenty 
 millions less of metallic money under- 
 going waste. The equilibrium of pay- 
 ments, consequently, between the 
 mining countries and the rest of the 
 world, would thenceforth require that 
 the mining countries should either 
 export rather more of something else, 
 or import rather less of foreign com 
 modities ; which implies a somewhat 
 lower range of prices than previously 
 in the mining countries, and a some- 
 what higher in all others ; a scantier 
 currency in the former, and rather 
 fuller currencies in the latter. This 
 effect, which would be too trifling to 
 require notice except for the illustra- 
 tion of a principle, is the only perma- 
 nent change which would be produced 
 on international trade, or on the value 
 or quantity of the currency of any 
 country. 
 
 Effects of another kind, however, 
 will have been produced. Twenty 
 millions which formerly existed in the 
 unproductive form of metallic money, 
 have been converted into what is, or 
 is capable of becoming, productive 
 capital. This gain is at first made by 
 England at the expense of othef 
 countries, who have taken her super- 
 fluity of this costly and unproductive 
 article off her hands, giving for it an 
 equivalent value in other commodities. 
 By degrees the loss is made up to 
 those countries by diminished influx 
 from the mines, and finally the world 
 has gained a virtual addition of twenty 
 millions to its productive resources. 
 Adam Smith's illustration, though so 
 well known, deserves for its extreme 
 
 * I am here supposing a state of thing 
 in which gold and silver mining are a per- 
 manent branch of industry, carried on under 
 known conditions; and not the present stats 
 of uncertainty, in which gold-gathering is a 
 game of chance, prosecuted (for the present) 
 in the spirit of an adventure, ivjt in that of 
 regular industrial pursuit,
 
 INFLUENCE OF CURRENCY ON FOREIGN TRADE. 
 
 583 
 
 aptness to be onco more repeated. 
 He compares the substitution of paper 
 iu the room of the precious metals, to 
 the construction of a highway through 
 the air, by which the ground now 
 occupied by roads would become avail- 
 able for agriculture. As in that case 
 a portion of the soil, so in this a part 
 of tho accumulated wealth of the 
 country, would be relieved from a 
 function in which it was only em- 
 ployed in rendering other foils and 
 capitals productive, and would itself 
 become applicable to production ; the 
 office it previously fulfilled being equally 
 well discharged by a medium which 
 costs nothing. 
 
 The value saved to the community 
 by thus dispensing with metallic 
 money, is a clear gain to those who 
 provide the substitute. They have the 
 use of twenty millions of circulating 
 medium which have cost them only the 
 expense of an engraver's plate. If 
 they employ this accession to their 
 fortunes as productive capital, the pro- 
 duce of the country is increased and 
 the community benefited, as much as 
 by any other capital of equal amount. 
 Whether it is so employed or not, de- 
 pends, in some degree, upon the mode 
 of issuing it. If issued by the govern- 
 ment, and employed in pay ing oif debt, 
 it would probably become productive 
 capital. The government, however, 
 may prefer employing this extraor- 
 dinary resource in its ordinary ex- 
 penses ; may squander it uselessly, or 
 make it a mere temporary substitute 
 for taxation to an equivalent amount ; 
 in which last case the amount is saved 
 by the taxpayers at large, who either 
 add it to their capital or spend it as 
 income. When paper currency is sup- 
 
 Clied, as in our own country, by 
 ankers and banking companies, the 
 amount is almost wholly turned into 
 productive capital : for the issuers, 
 being at all times liable to be called 
 apon to refund the value, are under 
 the strongest inducements not to 
 squander it, and the only cases in 
 which it is not forthcoming are cases 
 of fraud or mismanagement. A 
 banker's profession being that of a 
 money-lender, his issue of notes ia a 
 
 simple extension of his ordinary occu- 
 pation. He lends the amount to 
 farmers, manufacturers, or dealers, who 
 employ it in their several businesses. 
 So employed, it yields, like any other 
 capital, wages of labour and profits of 
 stock. The profit is shared between 
 the banker, who receives interest, and 
 a succession of borrowers, mostly for 
 short periods, who after paying the 
 interest, gain a profit in addition, or a 
 convenience equivalent to profit. The 
 capital itself in the long run becomes 
 entirely wages, and when replaced by 
 the sale of the produce, becomes wages 
 again; thus affording a perpetual fund, 
 of the value of twenty millions, for the 
 maintenance of productive labour, and 
 increasing the annual produce of the 
 country by all that can be produced 
 through the means of a capital of that 
 value. To this gain must be added a 
 further saving to the country, of the 
 annual supply of the precious metals 
 necessary for repairing the wear and 
 tear, and other waste, of a metallic 
 currency. 
 
 The substitution, therefore, of paper 
 for the precious metals, should always 
 be carried as far as is consistent with 
 safety ; no greater amount of metallic 
 currency being retained, than is ne- 
 cessary to maintain, both in fact and in 
 public belief, the convertibility of the 
 paper. A country with the extensive 
 commercial relations of England, is 
 liable to be suddenly called upon for 
 large foreign payments, sometimes in 
 loans, or other investments of capital 
 abroad, sometimes as the price of some 
 unusual importation of goods, the most 
 frequent case being that of large im- 
 
 Eortations of food consequent on a bad 
 arvest. To meet such demands it is 
 necessary that there should be, either 
 in circulation or in the coffers of the 
 banks, coin or bullion to a very consi- 
 derable amount, and that this, when 
 drawn out by any emergency, should 
 be allowed to return after the emer- 
 gency is past. But since gold wanted 
 for exportation is almost invariably 
 drawn from the reserves of the banks, 
 and is never likely to be taken directly 
 from tho circulation while tho banks 
 remain solvent, the oulv advantaga
 
 8S4 
 
 BOOK III. CHAPTER XXII. 3. 
 
 which can l>e obtained from retaining 
 partially a metallic currency for daily 
 purposes is, that the banks may oc- 
 casionally replenish their reserves 
 from it. 
 
 3. "When metallic money had 
 been entirely superseded and expelled 
 from circulation, by the substitution of 
 an equal amount of banknotes, any at- 
 tempt to keep a still further quantity 
 of paper in circulation must, if the 
 notes are convertible, be a complete 
 failure. The new issue would again 
 set in motion the same train of conse- 
 quences by which the gold coin had 
 already been expelled. The metals 
 would, as before, be required for ex- 
 portation, and would be for that pur- 
 pose demanded from the banks, to the 
 full extent of the superfluous notes ; 
 which thus could not possibly be re- 
 tained in circulation. If, indeed, the 
 notes were inconvertible, there would 
 be no such obstacle to the increase 
 of their quantity. An inconvertible 
 paper acts in the same way as a con- 
 vertible, while there remains any coin 
 for it to supersede : the difference 
 begins to manifest itself when all the 
 coin is driven from circulation (except 
 what may be retained for the con- 
 venience of small change), and the 
 issues still go on increasing. When 
 the paper begins to exceed in quantity 
 the metallic currency which it super- 
 seded, prices of course rise ; things 
 which were worth 51. in metallic 
 money, become worth Ql. in inconver- 
 tible paper, or more as the case may 
 be. But this rise of price will not, as 
 in the cases before examined, stimulate 
 import, and discourage export. The 
 imports and exports are determined by 
 the metallic prices of things, not by 
 the paper prices : and it is only when 
 the paper is exchangeable at pleasure 
 for the metals, that paper prices and 
 metallic prices must correspond. 
 
 Let us suppose that England is the 
 country which has the depreciated 
 paper. Suppose that some English 
 production could be bought, while the 
 currency was still metallic, for 5L, and 
 sold in France for 51. 10s., the differ- 
 ence covering the expense and risk. 
 
 and affording a profit to the merchant. 
 On account of the depreciation, this 
 commodity will now cost in England 
 Gl., and cannot be sold in France for 
 more than 51. 10s., and yet it will be 
 exported as before. AVliy? Because 
 the 51. 10s. which the exporter can get 
 for it in France, is not depreciated 
 paper, but gold or silver : and since in 
 England bullion has risen, in the same 
 proportion with other things if the 
 merchant brings the gold or silver to 
 England, he can sell his 51. 10s. for 
 Ql. 12s , and obtain as before 10 per 
 cent for profit and expenses. 
 
 It thus appears, that a. depreciation 
 of the currency does not affect the 
 foreign trade of the country : this is 
 carried on precisely as if the currency 
 maintained its value. But though the 
 trade is not affected, the exchanges 
 are. AVhen the imports and exports 
 are in equilibrium, the exchange, in a 
 metallic currency, would be at par ; a 
 bill on France for the equivalent of 
 five sovereigns, would be worth five 
 sovereigns. But five sovereigns, or the 
 quantity of gold contained in them, 
 having come to be worth in England 
 6., it follows that a bill on France for 
 51., will be worth Gl. When, therefore, 
 the real exchange is at par, there will 
 be a nominal exchange against the 
 country, of as much per cent as the 
 amount of the depreciation. If the 
 currency is depreciated 10, 15, or 20 
 per cent, then in whatever way the 
 real exchange, arising from the varia- 
 tions of international debts and credits, 
 may vary, the quoted exchange will 
 always d'iffcr 10, 15, or 20 per cent 
 from it. However high this nominal 
 premium may be, it has no tendency to 
 send gold out of the country, for the 
 purpose of drawing a bill against it 
 and profiting by the premium; be- 
 cause the gold so sent must be pro- 
 cured, not from the banks and at par, 
 as in the cass of a convertible cur- 
 rency, but in the market, at an ad- 
 vance of price equal to the premium. 
 In such cases, instead of saying that 
 the exchange is unfavourable, it would 
 be a more correct representation to say 
 that the par has altered, since there is 
 now required a larger quantity of
 
 RATE OF INTEREST. 
 
 385 
 
 English currency to be equivalent to 
 the same quantity of foreign. The 
 exchanges, however, continue to be 
 computed according to the metallic par. 
 The quoted exchanges, therefore, when 
 there is a depreciated currency, are 
 compounded of two elements or factors ; 
 the real exchange, which follows the 
 variations of international payments, 
 and the nominal exchange, which 
 varies with the depreciation of the cur- 
 rency, but which, while there is any 
 depreciation at all, must always be un- 
 favourable. Since the amount of de- 
 preciation is exactly measured by the 
 degree in which the market price of 
 bullion exceeds the Mint valuation, we 
 have a sure criterion to determine what 
 portion of the quoted exchange, being 
 referable to depreciation, may be struck 
 oft' as nominal ; the result so corrected 
 expressing the real exchange. 
 
 The same disturbance of the ex- 
 changes and of international trade, 
 which is produced by an increased 
 issue of convertible bank notes, is in 
 like manner produced by those exten- 
 sions of credit, which, as was so fully 
 shown in a preceding chapter, have the 
 game effect on prices as an increase of 
 the currency. Whenever circumstances 
 have given such an impulse to the 
 spirit of speculation as to occasion a 
 great increase of purchases on credit, 
 money prices rise, just as much as they 
 would have risen if each person who so 
 buys on credit had bought with money. 
 All the effects, therefore, must be simi- 
 lar. As a consequence of high prices, 
 
 exportation is checked and importation 
 stimulated ; though in fact the increase 
 of importation seldom waits for tho 
 rise of prices which is the consequence 
 of speculation, inasmuch as some of 
 the great articles of import are usually 
 among the things in which speculative 
 overtrading first shows itself. There 
 is, therefore, in such periods, usually a 
 great excess of imports over exports ; 
 and when the time comes at which 
 these must be paid for, the exchangea 
 become unfavourable, and gold flow 
 out of the country. In what precise 
 manner this efflux of gold takes effect 
 on prices, depends on circumstances of 
 which we shall presently speak more 
 fully; but that its effect is to make 
 them recoil downwards, is certain and 
 evident. The recoil, once begun, gene- 
 rally becomes a total rout, and the 
 unusual extension of credit is rapidly 
 exchanged for an unusual contraction 
 of it. Accordingly, when credit has 
 been imprudently stretched, and the 
 speculative spirit carried to excess, the 
 turn of the exchanges, and consequent 
 pressure on the banks to obtain gold 
 for exportation, are generally the 
 proximate cause of the catastrophe. 
 But these phenomena, though a con- 
 spicuous accompaniment, are no essen- 
 tial part, of the collapse of credit called 
 a commercial crisis; which, as we 
 formerly showed,* might happen to as 
 great an extent, and is quite as likely 
 to happen, in a country, if any such 
 there were, altogether destitute of 
 foreign trade. 
 
 CHAPTER XXIII. 
 
 OP THE RATE OF INTEREST. 
 
 1. THE present seems the most 
 proper place for discussing the circum- 
 stances which determine the rate of 
 interest. The interest of loans, being 
 really a question of exchange value, 
 falls naturally into the present division 
 
 of our subject : and the two topics of 
 Currency and Loans, though in them- 
 selves distinct, are so intimately 
 blended in the phenomena of what in 
 called the money market, that it is in> 
 * Supra, pp. 3189. 
 
 G Q
 
 386 
 
 BOOK III. CHAPTER XXlil. 2. 
 
 possible to understand the one without 
 the other, and in many minds the two 
 Bubjects arc mixed up in the most in- 
 extricable confusion. 
 
 In the preceding Book* we defined 
 the relation in which interest stands to 
 profit. We found that the gross profit 
 of capital might be distinguished into 
 three parts, which are respectively the 
 remuneration for risk, for trouble, and 
 for the capital itself, and may be 
 termed insurance, wages of superin- 
 tendence, and interest. After making 
 compensation for risk, that is, after 
 covering the average losses to which 
 capital is exposed either by the general 
 circumstances of society or by the 
 hazards of the particular employment, 
 there remains a -.purplus, which partly 
 goes to repay the owner of the capital 
 for his abstinence, and partly the em- 
 ployer of it for his time and trouble. 
 How much goes to the one and how 
 much to the other, is shown by the 
 amount of the remuneration which, 
 when the two functions are separated, 
 the owner of capital can obtain from 
 the employer for its use. This is evi- 
 dently a question of demand and 
 supply. Nor have demand and supply 
 any different meaning or effect in this 
 case from what they have in all others. 
 The rate of interest will be such as to 
 equalize the demand for loans with the 
 supply of them. It will be such, that 
 exactly as much as some people are 
 desirous to borrow at that rate, others 
 shall be willing to lend. If there is 
 more offered than demanded, interest 
 will fall; if more is demanded than 
 offered, it will rise ; and in both cases, 
 to the point at which the equation of 
 supply and demand is re-established. 
 
 Both the demand and supply of 
 loans fluctuate more incessantly than 
 any other demand or supply whatso- 
 ever. The fluctuations in other things 
 depend on a limited number of influ- 
 encing circumstances ; but the desire 
 to borrow, and the willingness to lend, 
 are more or less influenced by every 
 circumstance which affects the state or 
 prospects of industry or commerce, 
 either generally or in any of their 
 branches. The rate of interest, there- 
 * Supra, book ii. ch. XT. 1, 
 
 fore, on good security, which alone we 
 have here to consider (for interest in 
 which considerations of risk bear a part 
 may swell to any amount) is seldom, 
 in the great centres of money transac- 
 tions, precisely the same for two days 
 together ; as is shown by the never- 
 ceasing variations in the quoted prices 
 of the funds and other negotiable secu- 
 rities. Nevertheless, there must be, as 
 in other cases of value, some rate 
 which (in the language of Adam Smith 
 and Eicardo) may be called the natural 
 rate ; some rate about which the mar- 
 ket rate oscillates, and to which it 
 always tends to return. This rate 
 partly depends on the amount of accu- 
 mulation going on in the hands of 
 persons who cannot themselves attend 
 to the employment of their savings, 
 and partly on the comparative taste 
 existing in the community for the 
 active pursuits of industry, or for the 
 leisure, ease, and independence of an 
 annuitant. 
 
 2. To exclude casual fluctuations, 
 we will suppose commerce to b in a 
 quiescent condition, no employment 
 being unusually prosperous, and none 
 particularly distressed. In these cir- 
 cumstances, the more thriving pro- 
 ducers and traders have their capital 
 fully employed, and many are able to 
 transact business to a considerably 
 greater extent than they have capital 
 for. These are naturally borrowers : 
 and the amount which they desire to 
 borrow, and can give security for, con- 
 stitutes the demand for loans on ac- 
 count of productive employment. To 
 these must be added the loans required 
 by Government, and by landowners, or 
 other unproductive consumers who have 
 good security to give. This constitutes 
 the mass of loans for which there is an 
 habitual demand. 
 
 Now it is conceivable that there 
 might exist, in the hands of persons 
 disinclined or disqualified for engaging 
 personally in business, a mass of capi- 
 tal equal to, and even exceeding, this 
 demand. In that case there would be 
 an habitual excess of competition on. 
 the part of lenders, and the rate of in- 
 terest would bear a low proportion to
 
 RATE OF INTEREST. 
 
 387 
 
 the rate of pinfit. Interest would bo 
 forced down to the point which would 
 either tempt borrowers to take a greater 
 amount of loans than they had a 
 reasonable expectation of being able to 
 employ in their business, or would so 
 discourage a portion of the lenders, as 
 to make them either forbear to accu- 
 mulate, or endeavour to increase their 
 income by engaging in business on 
 their own account, and incurring the 
 risks, it' not the labours, of industrial 
 employment. 
 
 On the other hand, the capital owned 
 by persons who prefer lending it at 
 interest, or whose avocations prevent 
 them from personally superintending 
 its employment, may be short of the 
 habitual demand for loans. It may be 
 in great part absorbed by the invest- 
 ments afforded by the public debt and 
 by mortgages, and the remainder may 
 not be sufficient to supply the wants of 
 commerce. If so, the rate of interest 
 will be raised so high as in some way 
 to re-establish the equilibrium. When 
 there is only a small difference between 
 interest and profit, many borrowers 
 may no longer be willing to increase 
 their responsibilities and involve their 
 credit for so small a remuneration : or 
 some who would otherwise have en- 
 gaged in business, may prefer leisure, 
 and become lenders instead of bor- 
 rowers : or others, under the induce- 
 ment of high interest and easy in- 
 vestment for their capital, may re- 
 tire from business earlier, and with 
 smaller fortunes, than they otherwise 
 would have done. Or, lastly, there is 
 another process by which, in England 
 and other commercial countries, a 
 large portion of the requisite supply 
 of loans is obtained. Instead of its 
 being afforded by persons not in busi- 
 ness, the affording it may itself become 
 a business. A portion of the capital 
 employed in trade may be supplied by 
 a class of professional moneylenders. 
 These money lenders, however, must 
 have more than a mere interest ; they 
 must have the ordinary rate of profit 
 on their capital, risk and all other 
 circumstances being allowed for. But 
 it can never answer to any one who 
 borrows for the purposes of his busi- 
 
 ness, to pay a full profit for capita." 
 from which, he will only derive a full 
 profit : and money-lending, as an em- 
 ployment, for the regular supply 0} 
 trade, cannot, therefore, be earned on 
 except by persons who, in addition to 
 their own capital, can lend their credit, 
 or, in other words, the capital of othe? 
 people : that is, bankers, and persons 
 (such as bill-brokers) who are virtually 
 bankers, since they receive money in 
 deposit. A bank which lends its notes 
 lends capital which it borrows from 
 the community, and for which it pays 
 no interest. A bank of deposit lends 
 capital which it collects from the com- 
 munity in small parcels ; sometimes 
 without paying any interest, as is the 
 case with the London private bankers ; 
 and if, like the Scotch, the joint stock, 
 and most of the country banks, it docs 
 pay interest, it still pays much less 
 than it receives ; for the depositors, 
 who in any other way could mostly 
 obtain for such small balances no 
 interest worth taking any trouble for, 
 are glad to receive even a little. 
 Having this subsidiary resource, 
 bankers are enabled to obtain, by 
 lending at interest, the ordinary rate 
 of profit on their own capital. In any 
 other manner, money-lending could not 
 be carried on as a regular mode of 
 business, except upon terms on which 
 none would consent to borrow but 
 persons either counting on extraor- 
 dinary profits, or in urgent need : un- 
 productive consumers who have ex- 
 ceeded their means, or merchants in 
 fear of bankruptcy. The disposable 
 capital deposited in banks; that re- 
 presented by bank notes ; the capital 
 of bankers themselves, and that which 
 their credit, in any way in which they 
 use it, enables them to dispose of; 
 these, together with the funds belong- 
 ing to those who, either from necessity 
 or preference, live upon tho interest of 
 their property, constitute the general 
 loan fund of the country: and the 
 amount of this aggregate fund, when 
 set against the habitual demands of 
 producers and dealers, and those of 
 the Government and of unproductive 
 consumers, determines the permanent 
 or average rate of interest; which 
 C C 2
 
 388 
 
 BOOK III. CHAPTER XXIII. 3. 
 
 must always be such as to adjust 
 these twoamounts to one another/* But 
 while the whole of this mass of lent 
 capital takes effect upon the permanent 
 rate of interest, the fluctuations de- 
 pend almost entirely upon the portion 
 which is in the hands of bankers ; for 
 it is that portion almost exclusively, 
 which, being lent for short times only, 
 is continually in the market seeking 
 an investment. The capital of those 
 who live on the interest of their own 
 fortunes, has generally sought and 
 found some fixed investment, such as 
 the public funds, mortgages, or the 
 bonds of public companies, which in- 
 vestment, except under peculiar temp- 
 tations or necessities, is not changed. 
 
 3. fluctuations in the rate of 
 interest arise from variations either in 
 demand for loans, or in the supply. 
 The supply is liable to variation, 
 tin mgh less so than the demand. The 
 willingness to lend is greater than 
 usual at the commencement of a 
 period of speculation, and much less 
 than usual during the revulsion which 
 follows. In speculative times, money- 
 lenders as well as other people are in- 
 clined to extend their business by 
 stretching their credit; they lend 
 more than usual (just as other classes 
 of dealers and producers employ more 
 than usual) of capital which docs not 
 belong to them. Accordingly, these 
 are the times when the rate of interest 
 is low; though for this too (as we 
 shall hereafter see) there are other 
 causes. During the revulsion, on the 
 contrary, interest always rises inor- 
 
 * I do not include in the general loan fund 
 of the country the capitals, large as they 
 sometimes are, which are habitually em- 
 ployed in speculatively buying and selling 
 the public funds and other securities. It is 
 true that all who buy securities add, for the 
 time, to the general amount of money on loan, 
 and lower, to that extent, the rate of interest. 
 But as the persons I speak of buy only to sell 
 Again at a higher price, they are alternately 
 in the position of lenders and of borrowers: 
 their operations raise the rate of interest at 
 one time, exactly as much as they lower it at 
 another. Like all persons who buy and sell 
 on speculation, their function is to equalize, 
 not to raise or lower, the value of the com- 
 modity. When they speculate prudently, 
 they temper the fluctuations of price ; when 
 Imprudently, they often aggravate them. 
 
 dinately, because, while thci is a 
 most pressing need on the part of 
 many persons to borrow, there is a 
 general disinclination to lend. This 
 disinclination, when at its extreme 
 point, is called a panic. It occurs 
 when a succession of unexpected fai- 
 lures has created in the mercantile, 
 and sometimes also in the non-mer- 
 cantile public, a general distrust in 
 each other's solvency; disposing every 
 one not only to refuse fresh credit, 
 except on very onerous terms, but to 
 call in, if possible, all credit which ho 
 has already given. Deposits are with- 
 drawn from banks ; notes are re- 
 turned on the issuers in exchange for 
 specie ; bankers raise their rate of 
 discount, and withhold their customary 
 advances ; merchants refuse to renew 
 mercantile bills. At such times the 
 most calamitous consequences were 
 formerly experienced from the attempt 
 of the law to prevent more than a 
 certain limited rate of interest from 
 being given or taken. Persons who 
 could not borrow at five per cent, had 
 to pay, not six or seven, but ten or 
 fifteen per cent, to compensate the 
 lender for risking the penalties of the 
 law : or had to sell securities or goods 
 for ready money at a still greater 
 sacrifice. 
 
 In the intervals between commercial 
 crises, there is usually a tendency in 
 the rate of interest to a progressive 
 decline, from the gradual process of 
 accumulation ; which process, in the 
 great commercial countries, is suffi- 
 ciently rapid to account for the almost 
 periodical recurrence of these fits of 
 speculation ; since, when a few years 
 have elapsed without a crisis, and 
 no new and tempting channel for in- 
 vestment has been opened in the 
 meantime, there is always found to 
 have occurred in those few years so 
 large an increase of capital seeking 
 investment, as to have lowered con- 
 siderably the rate of interest, whether 
 indicated by the prices of securities or 
 by the rate of discount on bills ; and 
 this diminution of interest tempts the 
 possessors to incur hazards in hopes of 
 a more considerable return. 
 The rate of interest is, at times,
 
 RATE OF INTEREST. 
 
 389 
 
 affected more or less permanently by 
 circumstances, though not of frequent, 
 yet of occasional occurrence, which 
 tend to alter the proportion between 
 the class of interest-receiving and that 
 of profit-receiving capitalists. Two 
 causes of this description, operating in 
 contrary ways, have manifested them- 
 selves of late years, and are now pro- 
 ducing considerable effects in England. 
 One is, the gold discoveries. The 
 masses of the precious metals which 
 are constantly arriving from the gold 
 countries, are, it may safely be said, 
 wholly added to the funds that supply 
 the loan market. So great an addi- 
 tional capital, not divided between the 
 two classes of capitalists, but aggre- 
 gated bodily to the capital of the 
 interest-receiving class, disturbs the 
 pre-existing ratio between the two, 
 and tends to depress interest, relatively 
 to profit. Another circumstance of still 
 more recent date, but tending to the 
 contrary effect, is the legalization of 
 joint-stock associations with limited 
 liability. The shareholders in these 
 associations, now so rapidly multiply- 
 ing, are drawn almost exclusively from 
 the lending class ; from those who 
 either left their disposable funds in 
 deposit, to be lent out by hankers, or 
 invested them in public or private secu- 
 rities, and received the interest. To 
 the extent of their shares in any of 
 these companies (with the single ex- 
 ception of banking companies) they 
 have become traders on their own 
 capital ; they have ceased to be lenders, 
 and have even, in most cases, passed 
 over to the class of borrowers. Their 
 subscriptions have been abstracted 
 from the funds which feed the loan 
 market, and they themselves have be- 
 come competitors for a share of the 
 remainder of those funds : of all which, 
 the natural effect is a rise of interest. 
 And it would not be surprising if, for 
 a considerable time to come, the ordi- 
 nary rate of interest in England should 
 bear a higher proportion to the common 
 rate of mercantile profit, than it has 
 borne at any time since the influx of 
 new gold set in.* 
 
 * To the cause of augmentation in the rate 
 of interest, mentioned in the text, must be 
 
 The demand for loans varies mnch 
 more largely than the supply, and em- 
 braces longer cycles of years in its 
 aberrations. A time of war, for ex- 
 ample, is a period of unusual drafts on 
 the loan market. The Government, at 
 such times, generally incurs new loans, 
 and as these usually succeed each other 
 rapidly as long as the war lasts, thn 
 general rate of interest is kept higher 
 in war than in peace, without reference 
 to the rate of profit, and productive 
 industry is stinted of its usual supplies. 
 During part of the last French war, 
 the Government could not borrow under 
 six per cent, and of course all other 
 borrowers had to pay at least as much. 
 Nor does the influence of these loans 
 altogether cease when the Government 
 ceases to contract others ; for those 
 already contracted continue to afford 
 an investment for a greatly increased 
 amount of the disposable capital of the 
 country, which if the national debt 
 were paid off, would be added to tho 
 mass of capital seeking investment, and 
 (independently of temporary disturb- 
 ance) could not but, to some extent, 
 permanently lower the rate of interest. 
 The same effect on interest which is 
 produced by Government loans for war 
 expenditure, is produced by the sudden 
 opening of any new and generally 
 attractive mode of permanent invest- 
 ment. The only instance of the kind 
 in recent history on a scale comparable 
 to that of the war loans, is the absorp- 
 tion of capital in the construction of 
 railways. This capital must have been 
 principally drawn from the deposits in 
 banks, or from savings which would 
 have gone into deposit, and which were 
 added another, forcibly insisted on by the 
 author of an able article in the Edixbwgk 
 Bei-icip for January 1805 ; the increased and 
 increasing willingness to send capital abroad 
 for investment. Owing to the vastly aug- 
 mented facilities of access to foreign coun- 
 tries, and the abundant information inces- 
 santly received from them, foreign invest- 
 ments have ceased to inspire the terror that 
 belongs to the unknown ; capital flows, with- 
 out misgiving, to any place which affords an 
 expectation of high profit ; and the loan 
 market of the whole commercial world is 
 becoming rapidly one. The rate of intereat, 
 therefore, in the part of the world out of 
 which capital most freely flows, cannot any 
 longer remain so much inferior to the rate 
 elsewhere, as it has hitherto been.
 
 890 
 
 BOOK III. CHAFIEll XXH1. 4. 
 
 destined to be ultimately employed in 
 buying securities from persons \vlio 
 would have employed the purchase 
 money in discounts or other loans at 
 interest : in either case, it was a draft 
 on the general loan fund. It is, in 
 fact, evident, that unless savings were 
 made expressly to be employed in rail- 
 way adventure, the amount thus em- 
 ployed must have been derived either 
 from the actual capital of persons in 
 business, or from capital which would 
 have been lent to persons in business. 
 In the first case, the subtraction, by 
 crippling their means, obliges them to 
 be larger borrowers ; in the second, it 
 leaves less for them to borrow ; in either 
 case it equally tends to raise the rate 
 of interest. 
 
 4. I have, thus far, considered 
 Joans, and the rate of interest, as a 
 matter which concerns capital in gene- 
 ral, in direct opposition to the popular 
 notion, according to which it only con- 
 cerns money. In loans, as in all other 
 money transactions, I have regarded 
 the money which passes, only as the 
 medium, and commodities as the thing 
 teally transferred the real subject of 
 the transaction. And this is, in the 
 main, correct : because the purpose for 
 which, in the ordinary course of affairs, 
 money is borrowed, is to acquire a pur- 
 chasing power over commodities. In 
 an industrious and commercial country, 
 the ulterior intention commonly is, to 
 employ the commodities as capital: 
 but even in the case of loans for un- 
 productive consumption, as those of 
 spendthrifts, or of the Government, the 
 amount borrowed is taken from a pre- 
 vious accumulation, which would other- 
 wise have been lent to carry on produc- 
 tive industry ; it is, therefore, so much 
 subtracted from what may correctly be 
 called the amount of loanable capital. 
 
 There is, however, a not unfrequent 
 case, in which the purpose of the bor- 
 rower is different from what I have 
 here supposed. He may borrow money, 
 neither to employ it as capital nor to 
 gpend it unproductively, but to pay a 
 previous debt. In this case, what he 
 wants is not purchasing power, but 
 legal tender, or something which a 
 
 creditor will accept as equivalent to it. 
 His need is specifically for money, not 
 for commodities or capital. It is the 
 demand arising from this cause, which 
 produces almost all the great and sud 
 den variations of the rate of interest. 
 Such a demand forms one of the ear- 
 liest features of a commercial crisis. 
 At such a period, many persons in 
 business who have contracted engage- 
 ments, have been prevented by a change 
 of circumstances from obtaining in time 
 the means on which they calculated for 
 fulfilling them. These means they 
 must obtain at any sacrifice, or submit 
 to bankruptcy; and what they must 
 have is money. Other capital, how- 
 ever much of it they may possess, can- 
 not answer the purpose unless money 
 can first be obtained for it; while, on 
 the contrary, without any increase of 
 the capital of the country, a mere in- 
 crease of circulating instruments of 
 credit, (be they of as little worth for 
 any other purpose as the box of one 
 pound notes discovered in the vaults of 
 the Bank of England during the panic 
 of 1825) will effectually serve their 
 turn, if only they are allowed to make 
 use of it. An increased issue of notes, 
 in the form of loans, is all that is re- 
 quired to satisfy the demand, and put 
 an end to the accompanying panic. 
 But although, in this case, it is not 
 capital, or purchasing power, that the 
 borrower needs, but money as money, 
 it is not only money that is transferred 
 to him. The money carries its pur- 
 chasing power with it wherever it goes ; 
 and money thrown into the loan market 
 really does, through its purchasing 
 power, turn over an increased portion 
 of the capital of the country into the 
 direction of loans. Though money 
 alon$> was wanted, capital passes ; and 
 it may still be said with truth that it 
 is by an addition to loanable capital 
 that the rise of the rate of interest is 
 met and corrected. 
 
 Independently of this, however, 
 there is a real relation, which it is 
 indispensable to recognise, between 
 loans and money. Loanable capital 
 is all of it in the form of money. 
 Capital destined directly for produc- 
 tion exists in many forms ; but capital
 
 RATE OF INTEREST. 
 
 391 
 
 destined for lending exists normally 
 m that form alone. Owing to this 
 circumstance, we should naturally ex- 
 pect that among the causes which 
 affect more or less the rate of interest, 
 would be found not only causes which 
 act through capital, but gome causes 
 which act, directly at least, only 
 through money. 
 
 The rate of interest bears no neces- 
 sary relation to the quantity or value of 
 the money in circulation. The perma- 
 nent amount of the circulating medium, 
 whether great or small, affects only 
 prices ; not the rate of interest. A 
 depreciation of the currency, when it 
 has become an accomplished fact, 
 affects the rate of interest in no man- 
 ner whatever. It diminishes indeed 
 the power of money to buy commodi- 
 ties, but not the power of money to 
 buy money. If a hundred pounds 
 will buy a perpetual annuity of four 
 pounds a year, a depreciation which 
 makes the hundred pounds worth only 
 half as much as before, has precisely 
 the same effect on the four pounds, 
 and cannot therefore alter the relation 
 between the two. The greater or 
 emaller number of counters which 
 must be used to express a given 
 amount of real wealth, makes no dif- 
 ference in the position or interests of 
 lenders or borrowers, and therefore 
 makes no difference in the demand 
 and supply of loans. There is the 
 same amount of real capital lent and 
 boirowed; and if the capital in the 
 hands of lenders is represented by a 
 greater number of pounds sterling, the 
 panic greater number of pounds ster- 
 ling will, in consequence of the rise of 
 prices, be now required for the pur- 
 poses to which the borrowers intend to 
 apply 
 
 .Hut though the greater or less 
 quantity of money makes in itself no 
 difference in the rate of interest, a 
 change from a less quantity to a 
 greater, or from a greater to a less, 
 may and docs make a difference in it. 
 
 Suppose money to be in process of 
 depreciation, by means of an incon- 
 vertible currency, issued by a govern- 
 ment in payment of its expenses. 
 This fact will in no way diminish the 
 
 demand for real capital on loan ; but 
 it will diminish the real capital loan- 
 able, because, this existing only in the 
 form of money, the increase of quan- 
 tity depreciates it. Estimated in 
 capital, the amount offered is less, 
 while the amount required is the same 
 as before. Estimated in currency, the 
 amount offered is only the same as 
 before, while the amount required, 
 owing to the rise of prices, is greater. 
 Either way, the rate of interest must 
 rise. So that in this case increase of 
 currency really affects the rate of inte- 
 rest, but in the* contrary way to that 
 which is generally supposed ; by rais- 
 ing, not by lowering it. 
 
 The reverse will happen as the 
 effect of calling in, or diminishing in 
 quantity, a depreciated currency. The 
 money in the hands of lenders, in 
 common with all other money, will be 
 enhanced in value, that is, there will 
 be a greater amount of real capital 
 seeking borrowers ; while the real 
 capital wanted by borrowers will be 
 only the same as before, and the 
 money amount less : the rate of inte- 
 rest, therefore, will tend to fall. 
 
 We thus see that depreciation, 
 merely as such, while in process of 
 taking place, tends to raise the rate of 
 interest: and the expectation of fur- 
 ther depreciation adds to this effect ; 
 because lenders who expect that their 
 interest will be paid, and the principal 
 perhaps redeemed, in a less valuable 
 currency than they lent, of course re- 
 quire a rate of interest sufficient to 
 cover this contingent loss. 
 
 But this effect is more than counter- 
 acted by a contrary one, when the 
 additional money is thrown into circu- 
 lation not by purchases but by loans. 
 In England, and in most other com- 
 mercial countries, the paper currency 
 in common use, being a currency pro- 
 vided by bankers, is all issued in the 
 way of loans, except the part employed 
 in the purchase of gold and silver. 
 The same operation, therefore, which 
 adds to the currency also adds to tho 
 loans : tho whole increase of currency 
 in the first instance swells the loaii 
 market. Considered as an addition to 
 loans it tends to lower interest, more
 
 302 
 
 than in its character of depreciation it 
 tends to raise it ; for the former effect 
 depends ou the ratio which the new 
 money bears to the money lent, while 
 the latter depends on its ratio to all 
 the money in circulation. An in- 
 crease, therefore, of currency issued by 
 banks, tends, while the process con- 
 tinues, to bring down or to keep down 
 the rate of interest. A similar effect 
 is produced by the increase of money 
 arising from the gold discoveries ; 
 almost the whole of which, as already 
 noticed, is, when brought to Europe, 
 added to the deposits in banks, and 
 consequently to the amount of loans ; 
 and when drawn out and invested 
 in securities, liberates an equivalent 
 amount of other loanable capital. The 
 newly-arrived gold can only get itself 
 invested, in any given state of busi- 
 ness, by lowering the rate of interest ; 
 and as long as the influx continues, it 
 cannot fail to keep interest lower than, 
 all other circumstances being supposed 
 the same, would otherwise have been 
 the case. 
 
 As the introduction of additional 
 gold and silver which goes into the 
 loan market, tends to keep down the 
 rate of interest, so any considerable 
 abstraction of them from the country 
 invariably raises it ; even when occur- 
 ring in the course of trade, as in pay- 
 ing for the extra importations caused 
 by a bad harvest, or for the high-priced 
 cotton which is, just now, imported 
 from so many parts of the world. The 
 money required for these payments is 
 taken in the first instance from the 
 deposits in the hands of bankers, and 
 to that extent starves the fund that 
 supplies the loan market. 
 
 The rate of interest, then, depends, 
 essentially and permanently, on the 
 comparative amount of real capital 
 offered and demanded in the way of 
 loan ; but is subject to temporary dis- 
 turbances of various sorts, from in- 
 crease and diminution of the circu- 
 lating medium ; which derangements 
 are somewhat intricate, and some- 
 times in direct opposition to first ap- 
 pearances. All these distinctions are 
 veiled over and confounded, by the 
 Unfortunate misapplication of language 
 
 BOOK m. CHAPTER XX11I. 4. 
 
 which designates the rate of interest 
 by a phrase ("the value of money") 
 which properly expresses the purchas- 
 ing power of the circulating medium. 
 The public, even mercantile, habitu- 
 ally fancies that ease in the money 
 market, that is, facility of borrowing 
 at low interest, is proportional to the 
 quantity of money in circulation. Not 
 only, therefore, are bank notes sup- 
 posed to produce effects as currency, 
 which they only produce as loans, but 
 attention is habitually diverted from 
 effects similar in kind and much 
 greater in degree, when produced by 
 an action on loans which does not 
 happen to be accompanied by any 
 action on the currency. 
 
 For example, in considering the 
 effect produced by the proceedings of 
 banks in encouraging the excesses of 
 speculation, an immense effect is 
 usually attributed to their issues of 
 notes, but until of late hardly any 
 attention was paid to the management 
 of their deposits; though nothing is 
 more certain than that their impru- 
 dent extensions of credit take place 
 more frequently by means of their 
 deposits than of their issues. " There 
 is no doubt," says Mr. Tooke,* "that 
 banks, whether private or joint stock, 
 may, if imprudently conducted, minister 
 to an undue extension of credit for the 
 purpose of speculations, whether in 
 commodities, or in over-trading in ex- 
 ports or imports, or in building or 
 mining operations, and that they have 
 so ministered not unfrequently, and in 
 some cases to an extent ruinous to 
 themselves, and without ultimate 
 benefit to the parties to whose views 
 their resources were made subser- 
 vient." But, " supposing all the de- 
 posits received by a banker to be in 
 coin, is he not, just as much as the 
 issuing banker, exposed to the impor- 
 tunity of customers, whom it may be 
 impolitic to refuse, for loans or dis- 
 counts, or to be tempted by a high 
 interest ? and may he not be induced 
 to encroach so much upon his deposits 
 as to leave him, under not improbable 
 circumstances, unable to meet the de- 
 mands of his depositors? In what 
 * Inquiry into the Currency Princip'e,c\i. xiVt
 
 RATE OF INTEREST. 
 
 393 
 
 respect, indeed, would the case of a 
 banker in a perfectly metallic circula- 
 tion, differ from that of a London 
 banker at the present day ? He is not 
 a creator of money, he cannot avail 
 himself of his privilege as an issuer in 
 aid of his other business, and yet there 
 have been lamentable instances of Lon- 
 don bankers issuing money in excess." 
 In the discussions, too, which have 
 been for so many years carried on re- 
 specting the operations of the Bank of 
 England, and the effects produced by 
 those operations on the state of credit, 
 though for nearly half a century there 
 never has been a commercial crisis 
 which the Bank has not been strenu- 
 ously accused either of producing or of 
 aggravating, it has been almost uni- 
 versally assumed that the influence of 
 its acts was felt only through the 
 amount of its notes in circulation, and 
 that if it could be prevented from ex- 
 ercising any discretion as to that one 
 feature in its position, it would no longer 
 have any power liable to abuse. This 
 at least is an error which, after the 
 experience of the year 1847, we may 
 hope has been committed for the last 
 time. During that year the hands of 
 the Bank were absolutely tied, in its 
 character of a bank of issue ; but 
 through its operations as a bank of de- 
 posit it exercised as great an influence, 
 or apparent influence, on the rate of 
 interest and the state of credit, as at 
 any former period ; it was exposed to 
 as vehement accusations of abusing 
 that influence ; and a crisis occurred, 
 such as lew that preceded it had 
 equalled, and none perhaps surpassed, 
 in intensity. 
 
 5. Before quitting the general 
 subject of this chapter, 1 will make the 
 obvious remark, that the rate of in- 
 terest determines the value and price 
 of all those saleable articles which are 
 desired and bought, not for themselves, 
 but for the income which they are ca- 
 pable of yielding. The public funds, 
 shares in joint-stock companies, and all 
 descriptions of securities, arc at a high 
 price in proportion as the rate of in- 
 terest is lo v. They are sold at the 
 price which will cjive the market rate 
 
 of interest on the purchase money, with 
 allowance for .ill differences in the risk 
 incurred, or in any circumstance of 
 convenience. Exchequer bills, for ex- 
 ample, usually sell at a higher price 
 than consols, proportionally to the in- 
 terest which they yield ; because, 
 though the security is the same, yet 
 the former being annually paid off at 
 par unless renewed by the nolder, the 
 purchaser (unless obliged to sell in a 
 moment of general emergency), is in no 
 danger of losing anything by the re-sale, 
 except the premium he may have paid. 
 The price of land, mines, and all 
 other fixed sources of income, depends 
 in like manner on the rate of interest. 
 Land usually sells at a higher price, in 
 proportion to the income afforded by it, 
 than the public funds, not only because 
 it is thought, even in this country, to 
 be somewhat more secure, but because 
 ideas of power and dignity are asso- 
 ciated with its possession. But these 
 differences are constant, or nearly so ; 
 and in the variations of price, land 
 follows, c&teris paribus, the permanent 
 (though of course not the daily) varia- 
 tions of the rate of interest. When in- 
 terest is low, land will naturally be 
 dear ; when interest is high, land will 
 be cheap. The last long war presented 
 a striking exception to this rule, since 
 the price of land as well as the rate of 
 interest was then remarkably high. For 
 this, however, there was a special 
 cause. The continuance of a very high 
 average price of corn for many years, 
 had raised the rent of land even more 
 than in proportion to the rise of in- 
 terest ; and fall of the selling price of 
 fixed incomes. Had it not been for 
 this accident, chiefly dependent on the 
 seasons, land must have sustained as 
 trivat a depreciation in value as the 
 public funds : which it probably would 
 do, were a similar war to break out 
 hereafter; to the signal disappoint- 
 ment of those landlords and farmers 
 who, generalizing from the casual cir- 
 cumstances of a remarkable period, so 
 long persuaded themselves that a state 
 of war was peculiarly advantageous, 
 and a state of peace disadvantageous, 
 to what they chose to call the interests 
 of agriculture.
 
 894 
 
 BOOK III. CHAPTER XXIV. 5 l. 
 
 CHAPTER XXIV. 
 
 THE REGULATION OF A CONVERTIBLE PAPER CURRENCY. 
 
 1. THE frequent recurrence during 
 the last half century of the painful 
 scries of phenomena called a commer- 
 cial crisis, has directed much of the at- 
 tention both of economists and of prac- 
 tical politicians to the contriving of 
 expedients for averting, or at the least, 
 mitigating its evils. And the habit 
 which grew up during the era of the 
 Bank restriction, of ascribing all al- 
 ternations of high and low prices to the 
 issues of banks, has caused inquirers 
 in general to fix their hopes of success 
 in moderating those vicissitudes, upon 
 schemes for the regulation of bank 
 notes. A scheme of this nature, after 
 having obtained the sanction of high 
 authorities, so far established itself in 
 the public mind, as to be, with general 
 approbation, converted into a law, at 
 the renewal of the Charter of the Bank 
 of England in 1844 : and the regula- 
 tion is still in force, though with a great 
 abatement of its popularity, and with 
 its prestige impaired by two temporary 
 suspensions, on the responsibility of the 
 executive, the earlier of the two little 
 more than three years after its enact- 
 ment. It is proper that the merits of 
 this plan for the regulation of a con- 
 vertible bank note currency should be 
 here considered. Before touching upon 
 the practical provisions of Sir Robert 
 Peel's Act of 1844, I shall briefly state 
 the nature, and examine the grounds, 
 of the theory on which it is founded. 
 
 It is believed by many, that banks 
 of issue universally, or the Bank of 
 England in particular, have a power of 
 throwing their notes into circulation, 
 and thereby raising prices, arbitrarily ; 
 that this power is only limited by the 
 degree of moderation with which they 
 think fit to exercise it ; that when they 
 increase their issues beyond the usual 
 amount, the rise of prices, thus pro- 
 duced, generates a spirit of speculation 
 in commodities, which carries prices 
 still higher, and ultimately causes a 
 
 reaction and recoil, amounting in ex- 
 treme cases to a commercial crisis; 
 and that every such crisis which has 
 occurred in this country within mer- 
 cantile memory, has been either ori- 
 ginally produced by this cause, or 
 greatly aggravated by it. To this ex- 
 treme length the currency theory has 
 not been carried by the eminent poli- 
 tical economists who have given to a 
 more moderate form of the same theory 
 the sanction of their names. But I 
 have not overstated the extravagance 
 of the popular version ; which is a re- 
 markable instance to what lengths a 
 favourite theory will hurry, not the 
 closet students whose competency in 
 such questions is often treated with so 
 much contempt, but men of the world 
 and of business, who pique themselves 
 on the practical knowledge which they 
 have at least had ample opportunities 
 of acquiring. Not only has this fixed 
 idea of the currency as the prime agent 
 in the fluctuations of price, made them 
 shut their eyes to the multitude of cir- 
 cumstances which, by influencing tha 
 expectation of supply, are the true 
 causes of almost all speculations and of 
 almost all fluctuations of pi-ice ; but in 
 order to bring about the chronological 
 agreement required by their theory, 
 between the variations of bank issues 
 and those of prices, they have played 
 such fantastic tricks with facts and 
 dates as would be thought incredible, 
 if an eminent practical authority had 
 not taken the trouble of meeting 
 them, on the ground of mere history, 
 with an elaborate exposure. I refer, 
 as all conversant with the subject 
 must be aware, to Mr. Tooke's His- 
 tory of Prices. The result of Mr. 
 Tooke's investigations was thus stated 
 by himself, in his examination before 
 the Commons Committee on the Bank 
 Charter question in 1832 ; and the evi- 
 dences of it stand recorded in his 
 book : " In point of fact, and histori-
 
 REGULATION OF CURRENCY. 
 
 395 
 
 cally, as far as my researches have 
 gone, in every signal instance of a rise 
 or fall of prices, the rise or fall has 
 preceded, and therefore could not be the 
 effect of, an enlargement or contrac- 
 tion of the bank circulation." 
 
 The extravagance of the currency 
 theorists, in attributing almost every 
 rise or fall of prices to an enlargement 
 or contraction of the issues of bank 
 notes, has raised up, by reaction, a 
 theory the extreme opposite of the 
 former, of which, in scientific discus- 
 sion, the most prominent representa- 
 tives are Mr. Tooke and Mr. Fullarton. 
 This counter- theory denies to bank 
 notes, so long as their convertibility is 
 maintained, any power whatever of 
 raising prices, and to banks any power 
 of increasing their circulation, except 
 as a consequence of, and in proportion 
 to, an increase of the business to be 
 done. This last statement is supported 
 by the unanimous assurances of all the 
 c'ountry bankers who have been ex- 
 amined before successive Parliamentary 
 Committees on the subject. They all 
 bear testimony that (in the words of 
 Mr. Fullarton*) " the amount of their 
 issues is exclusively regulated by the 
 extent of local dealings and expendi- 
 ture in their respective districts, fluc- 
 tuating with the fluctuations of produc- 
 tion and price, and that they neither 
 can increase their issues beyond the 
 limits which the range of such dealings 
 and expenditure prescribes, without 
 the certainty of having their notes im- 
 mediately returned to them, nor dimi- 
 nish them, but at an almost equal 
 certainty of the vacancy being filled up 
 from some other source." From these 
 premises it is argued by Mr. Tooke 
 and Mr. Fullarton, that bank issues, 
 since they cannot be increased in 
 amount unless there be an increased 
 demand, cannot possibly raise prices ; 
 cannot encourage speculation, nor oc- 
 casion a commercial crisis ; and that 
 the attempt to guard against that evil 
 by an artificial management of the 
 issue of notes, is of no effect for the 
 intended purpose, and liable to produce 
 other consequences extremely calami- 
 tous. 
 
 * Eegulation nf Currencies, p. 85. 
 
 2. As much of this doctrine as 
 rests upon testimony, and not upon in- 
 ference, appears tome incontrovertible. 
 I give complete credence to the asser- 
 tion of the country bankers, very clearlv 
 and correctly condensed into a small 
 compass in the sentence just quoted 
 from Mr. Fullarton. I am convinced 
 that they cannot possibly increase their 
 issue of notes in any other circum- 
 stances than those which are thero 
 stated. I believe, also, that the theory, 
 grounded by Mr. Fullarton upon this 
 fact, contains a large portion of truth, 
 and is far nearer to being the expres- 
 sion of the whole truth than any form 
 whatever of the currency theory. 
 
 There are two states of the markets: 
 one which may be termed the quiescent 
 state, the other the expectant, or 
 speculative state. The first is that in 
 which there is nothing tending to en- 
 gender in any considerable portion of 
 the mercantile public a desire to extend 
 their operations. The producers pro- 
 duce and the dealers purchase only 
 their usual stocks, having no expecta- 
 tion of a more than usually rapid vent 
 for them. Each person transacts his 
 ordinary amount of business and no 
 more, or increases it only in corre- 
 spondence with the increase of his 
 capital or connexion, or with the gra- 
 dual growth of the demand for his 
 commodity, occasioned by the public 
 prosperity. Not meditating any un- 
 usual extension of their own operations, 
 producers and dealers do not need 
 more than the usual accommodation 
 from bankers and other money lenders ; 
 and as it is only by extending thci? 
 loans that bankers increase their issuer, 
 none but a momentary augmentation 
 of issues is in these circumstances 
 possible. If at a certain time of the 
 year a portion of the public have larger 
 payments to make than at other times, 
 or if an individual, under some peculiar 
 exigency, requires an extra advance, 
 they may apply for more bank notes, 
 and obtain them ; but the notes will no 
 more remain in circulation, than the 
 extra quantity cf Bank of England 
 notes which are issued once in every 
 three months in payment of the divi- 
 dends. The person to whom, after
 
 BOOK 111. CHAPTER XXIV. 2. 
 
 being borrowed, the notes are paid 
 away, has no extra payments to make, 
 and no peculiar exigency, and he keeps 
 them by him unused, or sends them 
 into deposit, or repays with them a 
 previous advance made to him by some 
 banker : in any case he does not buy 
 commodities with them, since by the 
 supposition there is nothing to induce 
 him to lay in a larger stock of com- 
 modities than before. Even if we 
 suppose, as we may do, that bankers 
 create an artificial increase of the de- 
 mand for loans, by offering them below 
 the market rate of interest, the notes 
 they issue will not remain in circula- 
 tion ; for when the borrower, having 
 completed the transaction for which he 
 availed himself of them, has paid them 
 away, the creditor or dealer who re- 
 ceives them, having no demand for the 
 immediate use of an extra quantity of 
 notes, sends them into deposit. In 
 this case, therefore, there can be no 
 addition, at the discretion of bankers, 
 to the general circulating medium : 
 any increase of their issues either 
 comes back to them, or remains idle in 
 the hands of the public, and no rise 
 takes place in prices. 
 
 But there is another state of the 
 markets, strikingly contrasted with the 
 preceding, and to this state it is not so 
 obvious that the theory of Mr. Tooke 
 and Mr. Fullarton is applicable ; 
 namely, when an impression prevails, 
 whether well founded or groundless, 
 that the supply of one or more great 
 articles of commerce is likely to fall 
 short of the ordinary consumption. In 
 such circumstances all persons con- 
 nected with those commodities desire 
 to extend their operations. The pro- 
 ducers or importers desire to produce 
 or import a larger quantity, speculators 
 desire to lay in a stock in order to 
 profit by the expected rise of price, 
 and holders of the commodity desire 
 additional advances to enable them to 
 continue holding. All these classes 
 are disposed to make a more than 
 ordinary use of their credit, and to this 
 desire it is not denied that bankers 
 very often unduly administer. Effects 
 of the same kind may be produced by 
 anything which, exciting more than 
 
 usual hopes of profit, gives increased, 
 briskness to business : for example, a 
 sudden foreign demand for commodities 
 on a large scale, or the expectation of 
 it; such as occurred on the opening of 
 Spanish America to English trade, and 
 has occurred on various occasions in 
 the trade with the United States. 
 Such occurrences produce a tendency 
 to a rise of price in exportable articles, 
 and generate speculations, sometimes 
 of a reasonable, and (as long as a large 
 proportion of men in business prefer 
 excitement to safety) frequently of an 
 irrational or immoderate character. 
 In such cases there is a desire in the 
 mercantile classes, or in some portion 
 of them, to employ their credit, in a 
 more than usual degree, as a power of 
 purchasing. This is a state of business 
 which, when pushed to an extreme 
 length, brings on the revulsion called 
 a commercial crisis ; and it is a known 
 fact that such periods of speculation 
 hardly ever pass off without having 
 been attended, during some part of 
 their progress, by a considerable in- 
 crease of bank notes. 
 
 To this, however, it is replied by 
 Mr. Tooke and Mr. Fullarton, that the 
 increase of the circulation always fol- 
 lows, instead of preceding, the rise of 
 prices, and is not its cause, but its 
 effect. That in the first place, the 
 speculative purchases by which prices 
 are raised, are not effected by bank 
 notes but by cheques, or still more 
 commonly on a simple book credit : and 
 secondly, even if they were made with 
 bank notes borrowed for that express 
 puqjose from bankers, the notes, after 
 being used for that purpose, would, if 
 not wanted for current transactions, I >e 
 returned into deposit by the persons 
 receiving them. In this I fully concur, 
 and I regard it as proved, both scienti- 
 fically and historically, that during the 
 ascending period of speculation, and as 
 long as it is confined to transactions 
 between dealers, the issues of bank 
 notes are seldom materially increased, 
 nor contribute anything to the specula- 
 tive rise of prices. It seems to me, 
 however, that this can no longer bo 
 affirmed when speculation has pro- 
 ceeded BO far as to reach the producers.
 
 I;I.<;ULATION OF CURRENCY. 
 
 397 
 
 Speculative orders riven by merchants 
 to manufacturers induce them to extend 
 their operations, and to become appli- 
 cants to bankers for increased advances, 
 which, if made in notes, are not paid 
 away to persons who return them into 
 deposit, but are partially expended in 
 paying wages, and pass into the va- 
 rious channels of retail trade, where they 
 become directly effective in producing 
 a further rise of prices. I cannot but 
 think that this employment of bank 
 notes must have been powerfully opera- 
 tive on prices at the time when notes 
 of one and two pounds value were per- 
 mitted by law. Admitting, however, 
 that the prohibition of notes below five 
 pounds has now rendered this part of 
 their operation comparatively insignifi- 
 cant, by greatly limiting their applica- 
 bility to the payment of wages, there 
 is another form of their instrumentality 
 which comes into play in the later 
 stages of speculation, and which forms 
 the principal argument of the more 
 moderate supporters of the currency 
 theory. Though advances by bankers 
 are seldom demanded for the purpose 
 of buying on speculation, they are 
 largely demanded by unsuccessful 
 speculators for the purpose of holding 
 on ; and the competition of these specu- 
 lators for a share of the loanable capital, 
 makes even those who have not specu- 
 lated, more dependent than before on 
 bankers for the advances they require. 
 Between the ascending period of specu- 
 lation and the revulsion, there is an 
 interval, extending to weeks and some- 
 times months, of struggling against a 
 fall. The tide having shown signs of 
 turning, the speculative holders are 
 unwilling to sell in a falling market, 
 and in the meantime they require funds 
 to enable them to fulfil even their ordi- 
 nary engagements. It is this stage 
 that is ordinarily marked by a con- 
 siderable increase in the amount of the 
 bank note circulation. That such an 
 increase does usually take place, is 
 denied by no one. And I think it must 
 be admitted that this increase tends 
 to prolong the duration of the specula- 
 tions ; that it enables the speculative 
 prices to be kept up for some time after 
 they would otherwise have collapsed ; 
 
 and therefore prolongs and increases 
 the drain of the precious metals for 
 exportation, which is a leading feature 
 of this stage in the progress of a com- 
 mercial crisis : the continuance of 
 which drain at last endangering the 
 power of the banks to fulfil their en- 
 gagement of paying their notes on 
 demand, they are compelled to contract 
 their credit more suddenly and severely 
 than would have been necessary if they 
 had been prevented from propping up 
 speculation by increased advances, after 
 the time when the recoil had become 
 inevitable. 
 
 3. To prevent this retardation of 
 the recoil, and ultimate aggravation of 
 its severity, is the object of the scheme 
 for regulating the currency, of which 
 Lord Overstone, Mr. Norman, and 
 Colonel Torrens, were the first pro- 
 rnul^ators, and which has, in a slightly 
 modified form, been enacted into law.* 
 
 * I think myself justified in affirming that 
 the mitigation of commercial revulsions is 
 the real, and only serious, purpose of the Act 
 of 1844. I am quite aware that its sup- 
 porters insist (especially since 1847) on its 
 supreme efficacy in " maintaining the con- 
 vertibility of the Bank note." But I must 
 be excused for not attaching any serious im- 
 portance to this one among its alleged merits. 
 The convertibility of the Bank note was 
 maintained, and would have continued to be 
 maintained, at whatever cost, under the old 
 system. As was well said by Lord Over- 
 stone in his Evidence, the Bank can always, 
 by a sufficiently violent action on credit, 
 save itself at the expense of the mercantile 
 public. That the Act of 1844 mitigates the 
 violence of that process, is a sufficient claim 
 to prefer in its behalf. Besides, if we sup- 
 pose such a degree of mismanagement on the 
 part of the Bank, as, were it not for the Act, 
 would endanger the continuance of con- 
 vertibility, the same (or a less) degree of 
 mismanagement, practised under the Act, 
 would suffice to produce a suspension of 
 payments by the Banking Department ; an 
 event which the compulsory separation of 
 the two departments brings much nearer to 
 possibility than it was before, and which, 
 involving as it would the probable stoppage 
 of every private banking establishment in 
 London, and perhaps also the non-payment 
 of the dividends to the national creditor, 
 would be a far greater immediate calamity 
 than a brief interruption of the converti- 
 bility of the note ; insomuch that, to enable 
 the Bank to resume payment of its deposits, 
 no Government would hesitate a moment to 
 suspend payment of the notes, if suspension 
 of the Act of 1844 proved insufficient.
 
 398 
 
 BOOK III. CHAPTER XXIV. 3. 
 
 According to the scheme in its origi- 
 nal purity, the issue of promissory 
 notes for circulation was to be confined 
 to one body. In the form adopted by 
 Parliament, all existing issuers were 
 permitted to retain this privilege, but 
 none were to be thereafter admitted to 
 it, even in the place of those who might 
 discontinue their issues: and, for all 
 except the Bank of England, a maxi- 
 mum of issues was prescribed, on a 
 scale intentionally low. To the Bank 
 of England no maximum was fixed for 
 the aggregate amount of its notes, but 
 only for the portion issued on securi- 
 ties, or in other words, on loan. These 
 were never to exceed a certain limit, 
 fixed in the first instance at fourteen 
 millions.* All issues beyond that 
 amount must be in exchange for bul- 
 lion; of which the Bank is bound to 
 purchase, at a trifle below the Mint 
 valuation, any quantity which is offered 
 to it, giving its notes in exchange. In 
 regard, therefore, to any issue of notes 
 beyond the limit of fourteen millions, 
 the Bank is purely passive, having no 
 function but the compulsory one of 
 giving its notes for gold at 31. 17s. 9d., 
 and gold for its notes at 3Z. 17s. W^d., 
 whenever and by whomsoever it is 
 called upon to do so. 
 
 The object for which this mechanism 
 is intended is, that the bank note cur- 
 rency may vary in its amount at the 
 exact times, and in the exact degree, 
 in which a purely metallic currency 
 would vary. And the precious metals 
 being the commodity that has hitherto 
 approached nearest to that invariability 
 in all the circumstances influencing 
 value, which fits a commodity for being 
 adopted as a medium of exchange, it 
 seems to be thought that the excel- 
 lence of the Act of 1844 is fully made 
 out, if under its operation the issues 
 conform in all their variations of quan- 
 
 * A conditional increase of this maximum 
 Is permitted, but only when by arrangement 
 with any country bank the issues of that 
 bank are discontinued, and Bank of England 
 notes substituted; and even then the in- 
 trease is limited to two-thirds of the amount 
 of the country notes to be thereby superseded. 
 Under this provision, the amount of notes 
 Which the Hank of England is now at 
 liberty to issue against securities, is rather 
 under fourteen and a half millions. 
 
 tity, and therefore, as is inferred, of 
 value, to the variations which would 
 take place in a currency wholly me- 
 tallic. 
 
 Now, all reasonable opponents of 
 the Act, in common with its sup- 
 porters, acknowledge as an essential 
 requisite of any substitute for the 
 precious metals, that it should con- 
 form exactly in its permanent value 
 to a metallic standard. And they say, 
 that so long as it is convertible into 
 specie on demand, it does and must so 
 conform. But when the value of a 
 metallic or of any other currency is 
 spoken of, there are two points to be 
 considered ; the permanent or average 
 value, and the fluctuations. It is to 
 the permanent value of a metallic 
 currency, that the value of a paner 
 currency ought to conform. But there 
 is no obvious reason why it should be 
 required to conform to the fluctuations 
 too. The only object of its conform- 
 ing at all, is steadiness of value ; and 
 with respect to fluctuations the sole 
 thing desirable is that they should be 
 the smallest possible. Now the fluctu- 
 ations in the value of the currency 
 are determined, not by its quantity, 
 whether it consist of gold or of paper, 
 but by the expansions and contractions 
 of credit. To discover, therefore, what 
 currency will conform the most nearly 
 to the permanent value of the precious 
 metals, we must find under what cur- 
 rency the variations in credit are least 
 frequent and least extreme. Now, 
 whether this object is best attained 
 by a metallic currency (and therefore 
 by a paper currency exactly conform- 
 ing in quantity to it) is precisely the 
 question to be decided. If it should 
 prove that a paper currency which 
 follows all the fluctuations in quantity 
 of a metallic, leads to more violent re- 
 vulsions of credit than one which is 
 not held to this rigid conformity, it 
 will follow that the currency which 
 agrees most exactly in quantity with 
 a metallic currency is not that which 
 adheres closest to its value ; that is to 
 say, its permanent value, with which 
 alone agreement is desirable. 
 
 WhetheV this is really the case or 
 not we will now inquire. And first,
 
 REGULATION OF CURRENCY. 
 
 399 
 
 let us consider whether the Act effects 
 the practical object chiefly relied on 
 in its defence by the more sober of its 
 advocates, that of arresting specula- 
 tive extensions of credit at nn earlier 
 period, with a less drain of gold, and 
 consequently by a milder and more 
 gradual process. I think it must be 
 admitted that to a certain degree it is 
 wiccessful in this object. 
 
 I am aware of what may be urged, 
 snd reasonably urged, in opposition to 
 this opinion. It may be said, that 
 when the time arrives at which the 
 banks are pressed for increased ad- 
 vances to enable speculators to fulfil 
 their engagements, a limitation of the 
 issue of notes will not prevent the 
 banks, if otherwise willing, from mak- 
 ing these advances ; that they have 
 still their deposits as a source from 
 which loans may be made beyond the 
 point which is consistent with pru- 
 dence as bankers ; and that even if 
 they refused to do so, the only effect 
 would be, that the deposits themselves 
 would be drawn out to supply the 
 wants of the depositors ; which would 
 be just as much an addition to the 
 bank notes and coin in the hands of 
 the public, as if the notes themselves 
 were increased. This is true, and is a 
 sufficient answer to those who think 
 that the advances of banks to prop up 
 failing speculations are objectionable 
 chiefly as an increase of the currency. 
 But the mode in which they are really 
 objectionable, is as an extension of 
 credit. If, instead of increasing their 
 discounts, the banks allow their de- 
 posits to be drawn out, there is the 
 same increase of currency (for a short 
 time at least) but there is not an in- 
 crease of loans, at the time when there 
 ought to be a diminution. If they do 
 increase their discounts, not by means 
 of notes, but at the expense of the 
 deposits alone, their deposits (properly 
 BO called) are definite and exhaustible, 
 while notes may be increased to any 
 amount, or, after being returned, may 
 be reissued without limit. It is true 
 that a bank, if willing to add inde- 
 finitely to its liabilities, has the power 
 of making its nominal deposits as un- 
 limited a fund as its issues could be ; 
 
 it has only to make its advances in 
 a book credit, which is creating de- 
 posits out of its own liabilities, the 
 money for which it has made itself 
 responsible becoming a deposit in its 
 hands to be drawn against by cheques ; 
 and the cheques, when drawn, may be 
 liquidated (either at the same bank 
 or at the clearing house) without the 
 aid of notes, by a mere transfer of 
 credit from one account to another. 
 I apprehend it is chiefly in this way 
 that undue extensions of credit, in 
 periods of speculation, are commonly 
 made. But the banks are not likely 
 to persist in this course when the tide 
 begins to turn. It is not when their 
 deposits have already began to flow 
 out, that they are likely to create 
 deposit accounts which represent, 
 instead of funds placed in their hands, 
 fresh liabilities of their own. But 
 experience proves that extension of 
 credit in the form of notes goes on long 
 after the recoil from over-speculation 
 has commenced. When this mode of 
 resisting the revulsion is made impos- 
 sible, and deposits and book credits are 
 left as the only source from which 
 undue advances can be made, the rate 
 of interest is not so often, or so long, 
 prevented from rising, after the diffi- 
 culties consequent on excess of specu- 
 lation begin to be felt. On the con- 
 trary, the necessity which the banks 
 feel of diminishing their advances to 
 maintain their solvency, when they 
 find their deposits flowing out, and 
 cannot supply the vacant place by 
 their own notes, accelerates the rise 
 of the rate of interest. Speculative 
 holders are therefore obliged to sub- 
 mit earlier to that loss by resale, 
 which could not have been prevented 
 from coming on them at last: the 
 recoil of prices and collapse of general 
 credit take place sooner. 
 
 To appreciate the effect which this 
 acceleration of the crisis has in miti- 
 gating its intensity, let us advert 
 more particularly to the nature and 
 effects of that leading feature in the 
 period just preceding the collapse, the 
 drain of gold. A rise of prices pro- 
 duced by a speculative extension of 
 credit, even when bank notes have not
 
 400 
 
 BOOK m. CHAPTER XXIV. 4. 
 
 been the instrument, is not the less 
 effectual (if it lasts long enough) in 
 turning the exchanges : and when the 
 exchanges have turned from this cause, 
 they can only be turned back, and the 
 drain of gold stopped, either by a fall 
 of prices or by a rise of the rate of 
 interest. A fall of prices will stop it 
 by removing the cause which produced 
 it, and by rendering goods a more ad- 
 vantageous remittance than gold, even 
 for paying debts already due. A rise 
 of the rate of interest, and consequent 
 fall of the prices of securities, will 
 accomplish the purpose still more ra- 
 pidly, by inducing foreigners, instead 
 of taking away the gold which is due 
 to them, to leave it for investment 
 within the country, and even send 
 gold into the country to take ad- 
 vantage of the increased rate of in- 
 terest. Of this last mode of stopping 
 a drain of gold, the year 1847 afforded 
 signal examples. But until one of 
 these two things takes place until 
 either prices fall, or the rate of 
 interest rises nothing can possibly 
 arrest, or even moderate, the efflux of 
 gold. Now, neither will prices fall 
 nor interest rise, so long as the un- 
 duly expanded credit is upheld by the 
 continued advances of bankers. It is 
 well known that when a drain of gold 
 has set in, even if bank notes have 
 not increased in quantity, it is upon 
 them that the contraction first falls, 
 the gold wanted for exportation being 
 always obtained from the Bank of 
 England in exchange for its notes. 
 But under the system which pre- 
 ceded 1844, the Bank of England, 
 being subjected, in common with 
 other banks, to the importunities for 
 fresh advances which are character- 
 istic of such a time, could, and often 
 did, immediately re-issue the notes 
 which had been returned to it in 
 exchange for bullion. It is a great 
 error, certainly, to suppose that the 
 mischief of this re-issue chiefly con- 
 sisted in preventing a contraction of 
 the currency. It was, however, quite 
 as mischievous as it has ever been 
 supposed to be. As long as it lasted, 
 the efflux of gold could not cease, 
 gince neither would prices, fall nor 
 
 interest rise while these advances con- 
 tinued. Prices, having risen without 
 any increase of bank notes, could well 
 have fallen without a diminution ol 
 them ; but having risen in conse- 
 quence of an extension of credit, they 
 could not fall without a contraction o! 
 it. As long, therefore, as the Bank of 
 England and the other banks per- 
 severed in this course, so long gold 
 continued to flow out, until so little 
 was left that the Bank of England, 
 being in danger of suspension of pay- 
 ments, was compelled at last to con- 
 tract its discounts so greatly and 
 suddenly as to produce a much more 
 extreme variation in the rate of in- 
 terest, inflict much greater loss and 
 distress on individuals, and destroy a 
 much greater amount of the ordinary 
 credit of the country, than any real 
 necessity required. 
 
 I acknowledge, (and the experience 
 of 1847 has proved to those who over- 
 looked it before,) that the mischief 
 now described, may be wrought, and 
 in large measure, by the Bank of 
 England, through its deposits alone. 
 It may continue or even increase its 
 discounts and advances, when it ought 
 to contract them ; with the ultimate 
 effect of making the contraction much 
 more severe and sudden than neces- 
 sary. I cannot but think, however, 
 that banks which commit this error 
 with their deposits, would commit it 
 still more if they were at liberty to 
 make increased loans with their issues 
 as well as their deposits. I am com- 
 pelled to think that the being re- 
 stricted from increasing their issues, is 
 a real impediment to their making 
 those advances which arrest the tide 
 at its turn, and make it rush like a 
 torrent afterwards : and when the Act 
 is blamed for interposing obstacles at 
 a time when not obstacles but facilities 
 are needed, it must injustice receive 
 credit for interposing them when they 
 are an acknowledged benefit. In this 
 particular, therefore, I think it cannot 
 be denied, that the new system is a 
 real improvement upon the old. 
 
 4. But however this may be, it 
 seems to me certain that these ad-
 
 REGULATION OF CURRENCY. 
 
 401 
 
 vantages, whatever value may be 
 put on them, are purchased by still 
 greater disadvantages. 
 
 In the first place, a large extension 
 of credit by bankers, though most 
 hurtful when, credit being already in 
 an inflated state, it can only serve to 
 retard and aggravate the collapse, is 
 most salutary when the collapse has 
 come, and when credit instead of being 
 in excess is in distressing deficiency, 
 and increased advances by bankers, 
 instead of being an addition to the 
 ordinary amount of floating credit, 
 serve to replace a mass of other credit 
 which has been suddenly destroyed. 
 Antecedently to 1844, if the Bank of 
 England occasionally aggravated the 
 severity of a commercial revulsion by 
 rendering the collapse of credit more 
 tardy and thence more violent than 
 necessary, it in return rendered in- 
 valuable services during the revulsion 
 itself, by coming forward with ad- 
 vances to support solvent firms, at a 
 time when all other paper and almost 
 all mercantile credit had become com- 
 paratively valueless. This service was 
 eminently conspicuous in the crisis of 
 1825-6, the severest probably ever 
 experienced ; during which the Bank 
 increased what is called its circula- 
 tion by many millions, in advances to 
 those mercantile firms of whose ulti- 
 mate solvency it felt no doubt ; ad- 
 vances which if it had been obliged to 
 withhold, the severity of the crisis 
 would have been still greater than it 
 It' the Bank, it is justly re- 
 marked by Mr. Fullarton,* complies 
 with such applications, "it must 
 comply with them by an issue of notes, 
 for notes constitute the only instru- 
 mentality through which the Bank is 
 in the practice of lending its credit. 
 But those notes are not intended to 
 circulate, nor do they circulate. There 
 is no more demand for circulation than 
 there was before. On the contrary, 
 the rapid decline of prices which the 
 case in supposition presumes, would 
 necessarily contract the demand for 
 circulation. The notes would cither 
 be returned to the Bank of England, 
 as fast as they were issued, in the 
 * P. 106. 
 
 r.E. 
 
 shape of deposits, or would Ue locked up 
 in the drawers of the private London 
 bankers, or distributed by them to 
 their correspondents in the country, 
 or intercepted by other capitalists, who, 
 during tho fervour of the previous 
 excitement, had contracted liabilities 
 which they might be imperfectly pre- 
 pared on the sudden to encounter. lu 
 such emergencies, every man con- 
 nected with business, who has been 
 trading on other means than his own, 
 is placed on the defensive, and his 
 whole object is to make himself as 
 strong as possible, an object which 
 cannot be more effectually answereJ 
 than by keeping by him as large a 
 reserve as possible in paper which tho 
 law has made a legal tender. The 
 notes themselves never find their way 
 into the produce market ; and if they 
 at all contribute to retard" (or, as I 
 should rather say, to moderate) " the 
 fall of prices, it is not by promoting in 
 the slightest degree the effective de- 
 mand for commodities, not by enabling 
 consumers to buy more largely for 
 consumption, and so giving briskness 
 to commerce, but by a process pre- 
 cisely the reverse, by enabling the 
 .holders of commodities to hold on, by 
 obstructing traffic and repressing con- 
 sumption. 
 
 The opportune relief thus afforded to 
 credit, during the excessive contraction 
 which succeeds to an undue expansion, 
 is consistent with the principle of tho 
 new system ; for an extraordinary con- 
 traction of credit, and fall of prices, 
 inevitably draw gold into the country, 
 and the principle of the system is that 
 the bank-note currency shall be per- 
 mitted, and even compelled, to enlarge 
 itself, in all cases in which a metallic 
 currency would do the same. But, 
 what the principle of the law would 
 encourage, its provisions in this in- 
 stance preclude, by not suffering the 
 increased issues to take place until the 
 gold has actually arrived ; which is 
 never until the worst part of the crisis 
 is past, and almost all the losses and 
 failures attendant on it are consum- 
 mated. The machinery of the system 
 withholds, until for many purposes it 
 comes too late, the very medicine 
 D D
 
 402 
 
 BOOK III. CHAPTEfi XXIV. 4. 
 
 which the theory of the system pre- 
 scribes as the appropriate remedy.* 
 
 This function of banks in filling up 
 the gap made in mercantile credit by 
 the consequences of undue speculation 
 and its revulsion, is so entirely indis- 
 pensable, that if the Act of 1844 con- 
 tinues unrepealed, there can be no 
 difficulty in foreseeing that its pro- 
 visions must be suspended, as tliey 
 vrere in 1847, in every period of great 
 iommercial difficulty, as soon as the 
 crisis has really and completely set in.f 
 Were this all, there would be no abso- 
 late inconsistency in maintaining the 
 restriction as a means of preventing a 
 crisis, and relaxing it for the purpose 
 of relieving one. But there is another 
 objection, of a still more radical and 
 comprehensive character, to the new 
 By stem. 
 
 Professing, in theory, to require that 
 a paper currency shall vary in its 
 amount in exact conformity to the 
 variations of a metallic currency, it 
 provides, in fact, that in every case of 
 an efflux of gold, a corresponding dimi- 
 nution shall take place in the quantity 
 of bank notes; in other words, that 
 every exportation of the precious 
 metals shall be virtually drawn from 
 the circulation ; it being assumed that 
 this would be the case if the currency 
 were wholly metallic. This theory, 
 and these practical arrangements, are 
 adapted to the case in which the drain 
 of gold originates in a rise of prices 
 produced by an undue expansion of 
 currency or credit; but they are 
 adapted to no case beside. 
 
 When the efflux of gold ia the last 
 
 * True, the Bank is not precluded from 
 making increased advances from its deposits, 
 which are likely to be of unusually large 
 amount, since, at these periods, every one 
 leaves his money in deposit in order to have 
 it within call. But, that the deposits are not 
 always sufficient, was conclusively proved in 
 18-17, when the Bank stretched to the very 
 utmost the means of relieving commerce 
 which its deposits afforded, without allaying 
 the panic, which however ceased at once 
 when the Government decided on suspending 
 the Act. 
 
 t This prediction was verified on the very 
 next occurrence of a commercial crisis, in 
 1857; when Government were again under 
 the necessity of suspending, on their own re- 
 sponsibility, the provisions of the Act. 
 
 stage of a series of effects arising from 
 an increase of the currency, or from au 
 expansion of credit tantamount in its 
 effect on prices to an increase of cur- 
 rency, it is in that case a fair assump- 
 tion that in a purely metallic system 
 the gold exported would be drawn from 
 the currency itself; because such a 
 drain, being in its nature unlimited, 
 will necessarily continue as long aa 
 currency and credit are undiminished. 
 But an exportation of the precious 
 metals often arises from no causes 
 affecting currency or credit, but simply 
 from an unusual extension of foreign 
 payments, arising either from the state 
 of the markets for commodities, or from 
 some circumstance not commercial. 
 In this class of causes, four, of power- 
 ful operation, are included, of each of 
 which the last fifty years of English 
 history afford repeated instances. The 
 first is that of an extraordinary foreign 
 expenditure by government, either 
 political or military ; as in the revolu- 
 tionary war, and, as long as it lasted, 
 during the late war with Russia. The 
 second is the case of a large exporta- 
 tion of capital for foreign investment ; 
 such as the loans and mining opera- 
 tions which partly contributed to the 
 crisis of 1825, and the American 
 speculations which were the principal 
 cause of the crisis of 1839. The third 
 is a failure of crops in the countries 
 which supply the raw material of im- 
 portant manufactures ; such as the 
 cotton failure in America, which com- 
 pelled England, in 1847, to incur un- 
 usual liabilities for the purchase of 
 that commodity at an advanced price. 
 The fourth is a bad harvest, and a 
 great consequent importation of food ; 
 of which the years 1846 and 1847 pre- 
 sented an example surpassing all ante- 
 cedent experience. 
 
 In none of these cases, if the cur- 
 rency were metallic, would the gold or 
 silver exported for the purposes in 
 question be necessarily, or even pro- 
 bably, drawn wholly from the circula- 
 tion. It would be drawn from the 
 hoards, which under a metallic cur- 
 rency always exist to a very large 
 amount; in uncivilized countries, ia 
 the hands of all who caii afford it j in
 
 REGULATION OF CURRENCY. 
 
 403 
 
 civilized countries chiefly in the form 
 of bankers' reserves. Mr. Tooke, in 
 his " Inquiry into the Currency Prin- 
 ciple," bears testimony to this fact ; 
 but it is to Mr. Fullarton that the 
 public are indebted for the clearest and 
 most satisfactory elucidation of it. As 
 1 am not aware that this part of the 
 theory of currency has been set forth 
 by any other writer with anything like 
 the same degree of completeness, I 
 shall quote somewhat largely from this 
 able production. 
 
 " No person who has ever resided in 
 an Asiatic country, where hoarding is 
 carried on to a far larger extent in 
 proportion to the existing stock of 
 wealth, and where the practice has 
 become much more deeply engrafted 
 in the habits of the people, by tradi- 
 tionary apprehensions of insecurity and 
 the difficulty of finding safe and remu- 
 nerative investments, than in any 
 European community no person who 
 has had personal experience of this 
 state of eociety, can be at a loss to re- 
 collect innumerable instances of large 
 metallic treasures extracted in times 
 of pecuniary difficulty from the coffers 
 of individuals by the temptation of a 
 high rate of interest, and brought in 
 aid of the public necessities, nor, on 
 the other hand, of the facility with 
 which those treasures have been ab- 
 Borbed again, when the inducements 
 which had drawn them into light wore 
 no longer in operation. In countries 
 more advanced in civilization and 
 wealth than the Asiatic principalities, 
 and where no man is in fear of attract- 
 ing the cupidity of power by an exter- 
 nal display of riches, but where the 
 interchange of commodities is still 
 almost universally conducted through 
 the medium of a metallic circulation, 
 as is the case with most of the com- 
 mercial countries on the Continent of 
 Europe, the motives for amassing the 
 precious metals may be less powerful 
 than in the majority of Asiatic princi- 
 palities ; but the ability to accumulate 
 being more widely extended, the abso- 
 lute quantity amassed will be found 
 probably to bear a considerably larger 
 proportion to the population.* In 
 
 It is known, from unquestionable facts, 
 
 those states which lie exposed to hos- 
 tile invasion, or whose social condition 
 is unsettled and menacing, the motive 
 indeed must still be very strong ; and 
 in a nation carrying on an extensive 
 commerce, both foreign and internal, 
 without any considerable aid from any 
 of the banking substitutes for money, 
 the reserves of gold and silver indis- 
 pensably required to secure the regu- 
 larity of payments, must of themselves 
 engross a share of the circulating coin 
 which it would not be easy to estimate. 
 " In this country, where the banking 
 system has been carried to an extent 
 and perfection unknown in any other 
 part of Europe, and may be said to 
 have entirely superseded the use of 
 coin, except for retail dealings and the 
 purposes of foreign commerce, the in- 
 centives to private hoarding exist no 
 longer, and the hoards have all been 
 transferred to the banks, or rather, I 
 should say, to the Bank of England. 
 But in France, where the bank-note 
 circulation is still comparatively 
 limited, the quantity of gold and silver 
 coin in existence I find now currently 
 estimated, on what are described as the 
 latest authorities, at the enormous sum 
 of 120 millions sterling; nor is the esti- 
 mate at all at variance with the rea- 
 sonable probabilities of the case. Of 
 this vast treasure there is every reason 
 to presume that a very large proportion, 
 probably by much the greater part, is 
 absorbed in the hoards. If you present 
 for payment a bill for a thousand 
 francs to a French banker, he brings 
 you the silver in a sealed bag from his 
 strong room. And not the banker only, 
 but every merchant and trader, ac- 
 cording to his means, is under the 
 necessity of keeping by him a stock of 
 cash sufficient not only for his ordinary 
 disbursements, but to meet any unex- 
 pected demands. That the quantity 
 of specie accumulated in these innu- 
 
 that the hoards of money at all times existing 
 in the hands of the French peasantry, often 
 from a remote date, surpass any amount 
 which could have been imagined possible; 
 and even in so poor a country as Ireland, it 
 has of late been ascertained, that the small 
 farmers sometimes possess hoards quite dis- 
 proportioned t their visible means of sub- 
 Utcnce. 
 
 D D 2
 
 404 
 
 BOOK HI. CHAPTER XXIV. 4. 
 
 merable depots, not in France only, Imt 
 all over the Continent, where banking 
 institutions are still either entirely 
 wanting or very imperfectly organized, 
 is not merely immense in itself, but 
 admits of being largely drawn upon, 
 and transferred even in vast masses 
 from one country to another, with very 
 little, if any, effect on prices, or other 
 material derangements, we have had 
 some remarkable proofs : " among 
 others, " the signal success which at- 
 tended the simultaneous efforts of some 
 of the principal European powers 
 (Russia, Austria, Prussia, Sweden, and 
 Denmark) to replenish their treasuries, 
 and to replace with coin a considerable 
 portion of the depreciated paper which 
 the necessities of the war had forced 
 upon them, and this at the very time 
 when the available stock of the pre- 
 cious metals over the world had been 
 reduced by the exertions of England to 
 
 recover her metallic currency 
 
 There can be no doubt that these com- 
 bined operations were on a scale of 
 very extraordinary magnitude, that 
 they were accomplished without any 
 sensible injury to commerce or public 
 prosperity, or any other effect than 
 some temporary derangement of the 
 exchanges, and that the private hoards 
 of treasure accumulated throughout 
 Europe during the war must have been 
 the principal source from which all 
 this gold and silver was collected. And 
 no person, I think, can fairly contem- 
 plate the vast superflux of metallic 
 wealth thus proved to be at all times 
 in existence, and, though in a dormant 
 and inert state, always ready to spring 
 into activity on the first indication of a 
 . sufficiently intense demand, without 
 '. feeling themselves compelled to admit 
 | the possibility of the mines being even 
 j shut up for years together, and the 
 production of the metals altogether 
 suspended, while there might be scarcely 
 a perceptible alteration in the ex- 
 changeable value of the metal."* 
 
 Applying this to the currency doc- 
 trine and its advocates, " one might 
 imagine," says Mr. Fullarton,t " that 
 
 * Fullarton on the Regulation qfCurrenciet, 
 pp. 714. 
 
 t Ib. pp. 13942. 
 
 they supposed the gold which is drained 
 off for exportation from a country 
 using a currency exclusively metallic, 
 to be collected by driblets at the fairs 
 and markets, or from the tills of the 
 grocers and mercers. They never even 
 allude to the existence of such a thing 
 as a great hoard of the metals, though 
 upon the action of the hoards depends 
 the whole economy of international 
 payments between specie-circulating 
 communities, while any operation of 
 the money collected in hoards upon 
 prices must, even according to the 
 currency hypothesis, be wholly impos- 
 sible. We know from experience what 
 enormous payments in gold and silver 
 specie-circulating countries are capable, 
 at times, of making, without the least 
 disturbance of their internal pro- 
 sperity ; and whence is it supposed 
 that these payments come, but from 
 their hoards ? Let us think how the 
 money market of a country transacting 
 all its exchanges through the medium 
 of the precious metals only, would be 
 likely to be affected by the necessity of 
 making a foreign payment of several 
 millions. Of course the necessity 
 could only be satisfied by a transmis- 
 sion of capital; and would not the 
 competition for the possession of capi- 
 tal for transmission which the occasion 
 would call forth, necessarily raise the 
 market rate of interest ? If the pay- 
 ment was to be made by the govern- 
 ment, would not the government, in all 
 probability, have to open a new loan 
 on terms more than usually favourable 
 to the lender ?" If made by merchants, 
 would it not be drawn either from the 
 deposits in banks, or from the reserves 
 which merchants keep by them in de- 
 fault of banks, or would it not oblige 
 them to obtain the necessary amount 
 of specie by going into the money 
 market as borrowers? "And would 
 not all this inevitably act upon the 
 hoards, and draw forth into activity a 
 portion of the gold and silver which 
 the money-dealers had been accumu- 
 lating, and some of them with the 
 express view of watching such oppor- 
 tunities for turning their treasures to 
 advantage? .... 
 
 " To come to the present time
 
 REGULATION OF CURRENCY. 
 
 405 
 
 [1844J, the balance of payments with 
 nearly all Europe has for about four 
 years past been m favour of this coun- 
 try, and gold has been pouring in till 
 the influx amounts to the unheard-of 
 sum of about fourteen millions sterling. 
 Vet in all this time, has any one heard 
 a complaint of any serious suffering in- 
 flicted on the people of the Continent? 
 .Have prices there been greatly de- 
 j-ivi.-vd beyond their range in this 
 country? Have wages fallen, or have 
 merchants been extensively ruined by 
 the universal depreciation of their 
 stock ? There has occurred nothing 
 of the kind. The tenor of commercial 
 and monetary affairs has been every- 
 where even and tranquil ; and in 
 France more particularly, an improving 
 revenue and extended commerce bear 
 testimony to the continued progress of 
 internal prosperity. It maybe doubted, 
 indeed, if this great efflux of gold has 
 withdrawn from that portion of the 
 metallic wealth of the nation which 
 really circulates, a single napoleon. 
 And it has been equally obvious, from 
 the undisturbed state of credit, that 
 not only has the supply of specie indis- 
 pensable for the conduct of business in 
 the retail market been all the while 
 uninterrupted, but that the hoards 
 have continued to furnish every facility 
 requisite for the regularity of mercan- 
 tile payments. It is of the very 
 essence of the metallic system, that 
 the hoards, in all cases of probable 
 occurrence, should be equal to both 
 objects ; that they should, in the first 
 place, supply the bullion demanded for 
 exportation, and in the next place, 
 should keep up the home circulation to 
 its legitimate complement. Every man 
 trading under that system, who, in the 
 course of his business may have fre- 
 quent occasion to remit large sums in 
 specie to foreign countries, must either 
 keep by him a sufficient treasure of his 
 own or must have the means of bor- 
 rowing enough from his neighbours, 
 not only to make up when wanted the 
 amount of his remittances, but to en- 
 able him, moreover, to carry on his 
 ordinary transactions at home without 
 interruption." 
 
 In a country in which credit is 
 
 earned to so great an extent as in 
 England, one great resei-ve, in a single 
 establishment, the Bank of England, 
 supplies the place, as far as the pre- 
 cious metals are concerned, of the mul- 
 titudinous reserves of other countries. 
 The theoretical principle, therefore, of 
 the currency doctrine would require, 
 that all those drains of the metal, 
 which, if the currency were purely 
 metallic, would be taken from the 
 hoards, should be allowed to operate 
 freely upon the reserve in the coffers of 
 the Bank of England, without any 
 attempt to stop it either by a diminu- 
 tion of the currency or by a contraction 
 of credit. Nor to this would there be 
 any well-grounded objection, unless the 
 drain were so great as to threaten the 
 exhaustion of the reserve, and a con- 
 sequent stoppage of payments ; a 
 danger against which it is possible to 
 take adequate precautions, because in 
 the cases which we are considering, 
 the drain is for foreign payments of 
 definite amount, and stops of itself as 
 soon as these are effected. And in all 
 systems it is admitted that the habi- 
 tual reserve of the Bank should exceed 
 the utmost amount to which experience 
 warrants the belief that such a drain 
 may extend ; which extreme limit 
 Mr. Fullarton affirms to be seven 
 millions, but Mr. Tooke recommends 
 an average reserve of ten, and in his 
 last publication, of twelve millions. 
 Under these circumstances, the habi- 
 tual reserve, which would never be em- 
 ployed in discounts, but kept to be paid 
 out exclusively in exchange for cheques 
 or bank notes, would be sufficient for a 
 crisis of this description ; which there- 
 fore would pass off without having its 
 difficulties increased by a contraction 
 either of credit or of the circulation. 
 But this, the most advantageous 
 denouement that the case admits of, 
 and not only consistent with, but re- 
 quired by, the professed principle of 
 the system, the panegyrists of the 
 system claim for it as a great merit 
 that it prevents. They boast, that on 
 the first appearance of a drain for ex- 
 portation, (whatever may be its cause, 
 and whether under a metallic currency 
 it would involve a contraction of credit
 
 403 
 
 BOOK III. CHAPTER XXIV. 4. 
 
 or not) the Bank is at once obliged to 
 curtail its advances. And this, be it 
 remembered, when there has been no 
 speculative rise of prices which it is 
 indispensable to correct, no unusual 
 extension of credit requiring contrac- 
 tion ; but the demand for gold is solely 
 occasioned by foreign payments on 
 account of government, or large corn im- 
 portations consequent on a bad harvest. 
 Even supposing that the reserve is 
 insufficient to meet the foreign pay- 
 ments, and that the means -wherewith 
 to make them have to be taken from 
 the loanable capital of the country, the 
 consequence of which is a rise of the 
 rate of interest : in such circumstances 
 some pressure on the money market is 
 unavoidable ; but that pressure is much 
 increased in severity by the separation 
 of the banking from the issue depart- 
 ment. The case is generally stated as 
 if the Act only operated in one way, 
 namely, by preventing the Bank, when 
 it has parted with (say) three millions 
 of bullion in exchange for three millions 
 of its notes, from again lending those 
 notes, in discounts or other advances 
 But the Act really does much more 
 than this. It is well known, that the 
 first operation of a drain is always on 
 the banking department. The bank 
 deposits constitute the bulk of the unem- 
 ployed and disposable capital of the 
 country ; and capital wanted for foreign 
 payments is almost always obtained 
 mainly by drawing out deposits. Sup- 
 posing three millions to be the amount 
 wanted, three millions of notes are 
 drawn from the banking department 
 (either directly or through the private 
 bankers, who keep the bulk of their 
 reserves with the Bank of England), 
 and the three millions of notes, thus 
 obtained, are presented at the Issue 
 Department, and exchanged against 
 gold for exportation. Thus a drain 
 upon the country at large of only three 
 millions, is a drain upon the Bank vir- 
 tually of six millions. The deposits 
 have lost three millions, and the re- 
 serve of the Issue Department has lost 
 an equal amount. As the two depart- 
 ments, so long as the Act remains in 
 operation, cannot even in the utmost 
 extremity help one another, each must 
 
 take its separate precautions for its 
 own safety. Whatever measures, there- 
 fore, on the part of the Bank, would 
 have been required under the old system 
 by a drain of six millions, arc now ren- 
 dered necessary by a drain only of 
 thri'o. The Issue Department protects 
 itself in the manner prescribed by the 
 Act, by not re-issuing the three mil- 
 lions of notes which have been returned 
 to it. But the Banking Department 
 must take measures to replenish its 
 reserve, which has been reduced by 
 thn_-e millions. Its liabilities having 
 also decreased three millions, by the 
 loss of that amount of deposits, the re- 
 serve, on the ordinary banking principle 
 of a third of the liabilities, will bear a 
 reduction of one million. But the 
 other two millions it must procure by 
 letting that amount of advances run 
 out, and not renewing them. Not 
 only must it raise its rate of inte- 
 rest, but it must effect, by whatever 
 means, a diminution of two millions in 
 the total amount of its discounts, or it 
 must sell securities to an equal amount. 
 This violent action on the money mar- 
 ket for the purpose of replenishing the 
 Banking reserve, is wholly occasioned 
 by the Act of 1844. If the restrictions 
 of that Act did not exist, the Bank, 
 instead of contracting its discounts, 
 would simply transfer two millions, 
 either in gold or in notes, [from the 
 Issue to the Banking Department ; not 
 in order to lend them to the public, but 
 to secure the solvency of the Banking 
 Department in the event of further un- 
 expected demands by the depositors. 
 And unless the drain continued, and 
 reached so great an amount as to seem 
 likely to exceed the whole of the gold 
 in the reserves of both departments, 
 the Bank would be under no necessity, 
 while the pressure lasted, of withhold- 
 ing from commerce its accustomed 
 amount of accommodation, at a rate of 
 interest corresponding to the increased 
 demand.* 
 
 This, which I have called " the double 
 action of drains," has been strangely under- 
 stood as if I had asserted that tiie Bank 
 is compelled to part with six millions' worth 
 of property by a drain of three millions. 
 Such an assertion would be too absurd to 
 require any refutation. Drains have a
 
 REGULATION 
 
 I am aware it will bo said that by 
 allowing drains of this character to 
 operate freely upon the Bank reserve 
 until they cease of themselves, a con- 
 traction of the currency and of credit 
 would not be prevented, but only post- 
 poned ; since if a limitation of issues 
 u (!(! not reswted to for the purpose of 
 king the drain in its commence- 
 ment, the same or a still greater limi- 
 tation must take place afterwards, in 
 ordt-r, by acting on prices, to bring back 
 this large quantity of gold, for the in- 
 dispensable purpose of replenishing the 
 Bank reserve. But in this argument 
 il things are overlooked. In the 
 first place, the gold might be brought 
 back, not by a fall of prices, but by the 
 much more rapid and convenient me- 
 dium of a rise of the rate of interest, 
 involving no fall of any prices except 
 the prices of securities. Either Eng- 
 lish securities would be bought on 
 account of foreigners, or foreign secu- 
 rities held in England would be sent 
 abroad for sale, both which operations 
 took place largely during the mercan- 
 
 double action, not npon the pecuniary posi- 
 tion of the Bank itself, but upon the 
 measures it is forced to take in order to stop 
 the drain. Though the Bank itself is no 
 poorer, its two reserves, the reserve in the 
 banking department and the reserve in the 
 i^ue department, have each been reduced 
 three millions by a drain of only three. And 
 as the separation of the departments renders 
 it necessary that each of them separately 
 should be kept as strong as the two together 
 need be if they could help one another, the 
 Bank's action on the money market must be 
 as violent on a drain of three millions, as 
 would have been required on the old system 
 for one of six. The reserve in the banking 
 department being less than it otherwise 
 would be by the entire amount of the bul- 
 lion in the issue department, and the whole 
 amount of the drain falling in the first in- 
 stance on that diminished reserve, the pres- 
 ure of the whole drain on the half reserve is 
 as much felt, and requires as strong measures 
 to stop it, as a pressure of twice the amount 
 on the entire reserve. As I have said else- 
 where,* " it is as if a man having to lift a 
 weight were restricted from using both hands 
 to do it, and v ere only allowed to use one 
 hand at a time ; in which case it would be 
 necessary that each of his hands should be 
 as strong as the two together." 
 
 Evidence before the Committee of the 
 Houe of Commons on the Bank Acts, in 
 1837. 
 
 OF CURRENCY. 407 
 
 tile difficulties of 1847, and not ouly 
 checked tho efflux of gold, but turned 
 the tide and brought the metal back. 
 It was not, therefore, brought back by 
 a contraction of the currency, though 
 in this case it certainly was so by a 
 contraction of loans. But even this is 
 not always indispensable. For in the 
 second place, it is not necessary that 
 the gold should return with the same 
 suddenness with which it went out. A 
 great portion would probably return in 
 the ordinary way of commerce, iu pay- 
 ment for exported commodities. The 
 extra gains made by dealers and pro- 
 ducers in foreign countries through 
 the extra payments they receive from 
 this country, are very likely to be partly 
 expended in increased purchases of 
 English commodities, either for con- 
 sumption or on speculation, though the 
 effect may not manifest itself with suffi- 
 cient rapidity to enable the transmis- 
 sion of gold to be dispensed with in the 
 first instance. These extra purchases 
 would turn the balance of payments in 
 favour of the country, and gradually 
 restore a portion of the exported gold ; 
 and the remainder would probably be 
 brought back, without any considerable 
 rise of the rate of interest in England, 
 by the fall of it in. foreign countries, 
 occasioned by the addition of some 
 millions of gold to the loanable capital 
 of those countries. Indeed, in the state 
 of things consequent on the gold dis- 
 coveries, when the enormous quantity 
 of gold annually produced in Australia, 
 and much of that from California, is 
 distributed to other countries through 
 England, and a month seldom passes 
 without a large arrival, the Bank re- 
 serves can replenish themselves with- 
 out any re-importation of the gold pre- 
 viously carried off by a drain. All that 
 is needful is an intermission, and a very 
 brief intermission is sufficient, of the 
 exportation. 
 
 For these reasons it appears to me, 
 that notwithstanding the beneficial 
 operation of the Act of 1844 in the 
 first stages of one kind of commercial 
 crisis that produced by over-specula- 
 tion), it on the whole materially aggra- 
 vates the severity of commercial revul- 
 sions. And not only are contractions
 
 408 BOOK 111. 
 
 of credit made more severe by the Act, 
 they are also made greatly more 
 frequent. " Suppose," says Mr. George 
 Walker, in a clear, impartial, and con- 
 clusive series of papers in the Aberdeen 
 Herald, forming one of the best exist- 
 ing discussions of the present question 
 " suppose that, of eighteen millions 
 of gold, ten are in the issue department 
 and eight are in the banking depart- 
 ment. The result is the same as under 
 a metallic currency with only eight 
 millions in reserve instead of eighteen. 
 .... The effect of the Bank Act is, 
 that the proceedings of the Bank under 
 a drain are not determined by the 
 amount of gold within its vaults, but 
 arc, or ought to be, determined by the 
 portion of it belonging to the banking 
 department. With the whole of the 
 gold at its disposal, it may find it un- 
 necessary to interfere with credit, or 
 force down prices, if a drain leave a 
 fair reserve behind. With only the 
 banking reserve at its disposal, it must, 
 from the narrow margin it has to ope- 
 rate on, meet all drains by counterac- 
 tives more or less strong, to the injury 
 of the commercial world ; and if it fail 
 to do so, as it may fail, the consequence 
 is destruction. Hence the extraordinary 
 and frequent variations of the rate of 
 interest under the Bank Act. Since 
 1847, when the eyes of the Bank were 
 opened to its true por-ition, it has felt 
 it necessary, as a precautionary mea- 
 sure, that every variation in the reserve 
 should be accompanied by an altera- 
 tion in the rate of interest." To make 
 the Act innocuous, therefore, it would 
 lie necessary that the Bank, in addition 
 to the whole of the; gold in the Issue 
 Department, should retain as great a 
 reserve in gold or notes in the Banking 
 Department alone, as would suffice 
 under the old system for the security 
 both of the issr.os and of the deposits. 
 
 5. There remain two questions 
 respecting a bank-note currency, which 
 have also been a subject of consi- 
 derable discussion of late years : whe- 
 tner the privilege of providing it should 
 be confined to a single establishment, 
 such as the Bank of England, or a 
 plurality of issuers should be allowed: 
 
 CHAPTER XXIV. 5. 
 
 and in the latter case, whether 
 
 any 
 
 peculiar precautions are requisite or 
 advisable, to protect the holdcrsof notes 
 against losses occasioned by the insol- 
 vency of the issuers. 
 
 The course of the preceding specu- 
 lations has led us to attach so much 
 less of peculiar importance to bank 
 notes, as compared with other forms of 
 credit, than accords with the notions 
 generally current, that questions re- 
 specting the regulation of so very small 
 a part of the general mass of credit, 
 cannot appear to us of such momentous 
 import as they are sometimes considered. 
 Bank notes, however, have so far a real 
 peculiarity, that they are the only form 
 of credit sufficiently convenient for all 
 the purposes of circulation, to be ablf 
 entirely to supersede the use of metallic 
 money for internal purposes. Though 
 the extension of the use of cheques has 
 a tendency more ana more to diminish 
 the number of bank notes, as it would 
 that of the sovereigns or other coins 
 which would take their place if thej 
 were abolished ; there is sure, for a long 
 time to come, to be a considerable sup- 
 ply of them wherever the necessary 
 degree of commercial confidence exists, 
 and their free use is permitted. The 
 exclusive privilege, therefore, of issuing 
 them, if reserved to the government or 
 to some one body, is a source of great 
 pecuniary gain. That this gain should 
 be obtained for the nation at large is 
 both practicable and desirable : and if 
 the management of a bank-note cur- 
 rency ought to be so completely mecha- 
 nical, so entirely a thing of fixed ride, as 
 it is made by the Act of 1844, there 
 seems no reason why this mechanism 
 should be worked for the profit of any 
 private issuer, Bather than for the pub- 
 lic treasury. If, however, a plan be 
 preferred which leaves the variations 
 in the amount of issues in any degree 
 whatever to the discretion of the issuers, 
 it is not desirable that to the ever-grow- 
 ing attributions of the government, so 
 delicate a function should be super- 
 added ; and that the attention of the 
 heads of the state should be diverted 
 from larger objects, by their being be- 
 sieged with the applications., and made 
 a mark for all the attacks, which are
 
 REGULATION OF CURRENCY. 
 
 409 
 
 Hover spared to those deemed to be 
 responsible for any acts, however mi- 
 nute, connected with the regulation of 
 the currency. It would be better that 
 treasury notes, exchangeable for gold 
 on demand, should be issued to a fixed 
 amount, not exceeding the minimum of 
 a bank-note currency; the remainder of 
 the notes which may be required being 
 left to be supplied either by one or by 
 a number of private banking establish- 
 ments. Or an establishment like the 
 Lank of England might supply the 
 whole couutry, on condition of lending 
 fifteen or twenty millions of its notes 
 to the government without interest; 
 which would give thj same pecuniary 
 advantage to the state as if it issued 
 that number of its own notes. 
 
 The reason ordinarily alleged in 
 condemnation of the system of plurality 
 of issuers which existed in England 
 before the Act of 1844, and under 
 certain limitations still subsists, is, that 
 the competition of these different is- 
 suers induces them to increase the 
 amount of their notes to an injurious 
 extent. But we have seen that the 
 power which bankers have of augment- 
 ing their issues, and the degree of 
 mischief which they can produce by it, 
 are quite trifling compared with the 
 current over-estimate. As remarked 
 by Mr. Fullarton,* the extraordinary 
 increase of banking competition occa- 
 sioned by the establishment of the 
 joint-stock banks, a competition often 
 of the most reckless kind, has proved 
 utterly powerless to enlarge the aggre- 
 gate mass of the bank-note circulation ; 
 that aggregate circulation having, on 
 the contrary, actually decreased. In 
 the absence of any special case for an 
 exception to freedom of industry, the 
 general rule ought to prevail. It ap- 
 pears desirable, however, to maintain 
 one great establishment like the Bank 
 of England, distinguished from other 
 banks of issue in this, that it alone is 
 required to pay in gold, the others 
 being at liberty to pay their notes with 
 notes of the central establishment. The 
 object of this is that there may be one 
 body, responsible for maintaining a re- 
 aerve of the precious metals sufficient 
 Pp. 8992. 
 
 to meet any drain that can reasonably 
 be expected to take place. By disse- 
 minating this responsibility among a 
 number of banks, it is prevented from 
 operating efficaciously upon any : or if 
 it be still enforced against one, the re- 
 serves of the metals retained by all the 
 others are capital kept idle in pure 
 waste, which may be dispensed with 
 by allowing them at their option to 
 pay in Bank of England notes. 
 
 6. The question remains whether, 
 in case of a plurality of issuers, any 
 peculiar precautions are needed to 
 protect the holders of notes from the 
 consequences of failure of payment. 
 Before 1826, the insolvency of banks of 
 issue was a frequent and very serious 
 evil, often spreading distress through a 
 whole neighbourhood, and at one blow 
 depriving provident industry of the 
 results of long and painful saving. This 
 was one of the chief reasons which in- 
 duced Parliament, in that year, to pro- 
 hibit the issue of bank notes of a deno- 
 mination below five pounds, that the 
 labouring classes at least might be as 
 little as possible exposed to participate 
 in this suffering. As an additional 
 safeguard, it has been suggested to 
 give the holders of notes a priority 
 over other creditors, or to require 
 bankers to deposit stock or other public 
 securities as a pledge for the whole 
 amount of their issues. The insecurity 
 of the former bank-note currency of 
 England was partly the work of the 
 law, which, in order to give a qualified 
 monopoly of banking business to the 
 Bank of England, had actually mado 
 the formation of safe banking establish- 
 ments a punishable offence, by prohi- 
 biting the existence of any banks, in 
 town or country, whether of issue or 
 deposit, with a number of partners ex- 
 ceeding six. This truly characteristic 
 specimen of the old system of monopoly 
 and restriction was done away with in 
 1826, both as to issues and deposits, 
 everywhere bnt in a district of sixty- 
 five miles radius round London, and in 
 1833 in that district also, as far as 
 relates to deposits. It was hoped that 
 the numerous joint-stock banks since 
 established, would have furnished a
 
 410 
 
 BOOK III. CHAPTER XXV. 1. 
 
 more trustworthy currency, and that 
 under their influence the banking 
 system of England would have been 
 almost as secure to the public as that 
 of Scotland (where banking was always 
 free) has been for two centuries past. 
 JJut the almost incredible instances of 
 reckless and fraudulent mismanagement 
 which these institutions have of late 
 allbi-ded (though in some of the most 
 notorious cases the delinquent esta- 
 
 blishments have not been banks of 
 issue), have shown only too clearly that, 
 south of the Tweed at least, the joint- 
 stock principle applied to banking is 
 not the adequate safeguard it was so 
 confidently supposed to be : and it is 
 dillicult now to resist the conviction, 
 that if plurality of issuers is allowed to 
 exist, some kind of special security in 
 favour of the holders of notes should bo 
 exacted as an imperative condition. 
 
 CHAPTEK XXV. 
 
 OP THE COMPETITION OP DIFFERENT COUNTRIES IN THE SAME MARKET. 
 
 1. IN the phraseology of the 
 Mercantile System, the language and 
 doctrines of which are still the basis of 
 what may be called the political eco- 
 nomy of the selling classes, as distin- 
 guished from the buyers or consumers, 
 there is no word of more frequent 
 recurrence or more perilous import 
 than the word underselling. To un- 
 dersell other countries not to be 
 undersold by other countries were 
 spoken of, and are still very often 
 spoken of, almost as if they were the 
 sole purposes for which production and 
 commodities exist. The feelings of 
 rival tradesmen, prevailing among 
 nations, overruled for centuries all 
 sense of the general community of ad- 
 vantage which commercial countries 
 derive from the prosperity of one an- 
 other : and that commercial spirit 
 which is now one of the strongest ob- 
 stacles to wars, was during a certain 
 period of European history their prin- 
 cipal cause. 
 
 Even in the more enlightened view 
 now attainable of the nature and con- 
 sequences of international comrjerce, 
 some, though a comparatively small, 
 space must still be made for the fact of 
 commercial rivality. Nations may, 
 like individual dealers, be competitors, 
 with opposite interests, in the markets 
 of some commodities, while in others 
 they are in the more fortunate relation 
 of reciprocal customere. The benefit 
 
 of commerce does not consist, as it was 
 once thought to do, in the commodities 
 sold ; but, since the commodities sold 
 are the means of obtaining those which 
 are bought, a nation would be cut off 
 from the real advantage of commerce, 
 the imports, if it could not induce other 
 nations to take any of its commodities 
 in exchange ; and in proportion as the 
 competition of other countries compels 
 it to offer its commodities on cheaper 
 terms, on pain of not selling them at 
 all, the imports which it obtains by its 
 foreign trade are procured at greater 
 cost. 
 
 These points have been adequately, 
 though incident-ally, illustrated in some- 
 of the preceding chapters. But the 
 great space which the topic has filled, 
 and continues to fill, in economical 
 speculations, and in the practical 
 anxieties both of politicians and of 
 dealers and manufacturers, makes it 
 desirable, before quitting the subject 
 of international exchange, to subjoin a 
 few observations on the things which 
 do, and on those which do not, enable 
 countries to undersell one another. 
 
 One country can only undersell an- 
 other in a given market, to the extent 
 of entirely expelling her from it, on two 
 conditions. In the first place, she must 
 have a greater advantage than the 
 second country in the production of the 
 article exported by both ; meaning by 
 a greater advantage (as has been a.1-
 
 COMPETITION OF COI'NTKIES IN THE SAME MARKET. 411 
 
 ;'ii:ly explained) not absolutely, 
 kit in comparison with other commo- 
 dities; and in the second place, such 
 must bo her relation with the customer 
 country in respect to the demand for 
 each other's products, and such the 
 -late of international va- 
 to giv<; away to the customer 
 country more than the whole advan- 
 tage possessed by the rival country ; 
 otherwise the rival will still be able to 
 hold her ground in the market. 
 
 Let us revert to the imaginary hypo- 
 thesis of a trade between England and 
 Germany in cloth and linen : England 
 being capable of producing 10 yards of 
 cloth at the same cost with 15 yards of 
 Jjnen, Germany at the same cost with 
 20, and the two commodities being 
 exchanged between the two countries 
 (cost of carriage apart) at some inter- 
 mediate rate, say 10 for 17. Germany 
 could not be permanently undersold in 
 the English market, and expelled from 
 it, unless by a country which offered 
 not merely more than 17, but more 
 than 20 yards of linen for 10 of cloth. 
 bhort of that, the competition would 
 only oblige Germany to pay dearer for 
 cloth, but would not disable her from 
 exporting linen. The country, there- 
 fore, which could undersell Germany, 
 must, in the first place, be able to 
 produce linen at less cost, compared 
 with cloth, than Germany herself; and 
 in the next place, must have such a 
 demand for cloth, or other English 
 commodities, as would compel her, even 
 when she became sole occupant of the 
 market, to give a greater advantage to 
 England than Germany could give by 
 resigning the whole of hers ; to give, 
 for example, 21 yards for 10. For if 
 not if, for example, the equation of 
 international demand, after Germany 
 was excluded, gave a ratio of 18 for 10, 
 Germany could again enter into the 
 competition; Germany would be now 
 the underselling nation; and there 
 would be a point, perhaps 19 for 10, at 
 which both countries would be able to 
 maintain their ground, and to sell in 
 England enough linen to pay for the 
 cloth, or other English commodities, 
 for which, on these newly adjusted 
 terms of interchange, they had a de- 
 
 mand, lu liku manner, England, as 
 an exporter of cloth, could only be 
 driven from the German market by 
 some rival whose superior advantages 
 in the production of cloth enabled her, 
 and the intensity of whoso demand for 
 German produce compelled her, to 
 offer 10 yards of cloth, not merely for 
 less than 17 yards of linen, but for less 
 than 15. In that case, England could 
 no longer carry on the trade without 
 loss ; but in any case short of this, she. 
 would merely be obliged to give to 
 Germany more cloth for less linen than 
 she had previously given. 
 
 It thus appears that the alarm of be- 
 ing permanently undersold may be taken 
 much too easily ; may be taken when 
 the thing really to be anticipated is 
 not the loss of the trade, but the minor 
 inconvenience of carrying it on at a 
 diminished advantage ; an inconve- 
 nience chiefly falling on the consumers 
 of foreign commodities, and not on the 
 producers or sellers of the exported 
 article. It is no sufficient ground of 
 apprehension to the English producers, 
 to find that some other country can. 
 sell cloth in foreign markets at some 
 particular time, a trifle cheaper than 
 they can themselves afford to do in tho 
 existing state of prices in England. 
 Suppose them to be temporarily unsold, 
 and their exports diminished ; the im- 
 ports will exceed the exports, there will 
 be a new distribution of the precious 
 metals, prices will fall, and as all the 
 money expenses of the English pro- 
 ducers will be diminished,-they will bo 
 able (if the case falls short of that 
 stated in the preceding paragraph) 
 again to compete with their rivals. 
 The loss which England will incur, 
 will not fall upon the exporters, but 
 upon those who consume imported 
 commodities ; who, with money incomes 
 reduced in amount, will have to pay 
 the same or even an increased price 
 for all things produced in foreign 
 countries. 
 
 2. Such, I conceive, is the trua 
 theory, or rationale, of underselling. 
 It will be observed that it takes no 
 account of some things which we hear 
 spoken of, oftener perhaps than any
 
 412 
 
 BOOK III. CHAPTER XXV. 3. 
 
 others, in the character of causes ex- 
 posing a country to be undersold. 
 
 According to the preceding doctrine, 
 a country cannot be undersold in any 
 commodity, unless the rival country 
 has a stronger inducement than itself 
 for devoting its labour and capital to the 
 production of the commodity; arising 
 from the fact that by doing so it occa- 
 sions a greater saving of labour and 
 capital, to be shared between itself and 
 its customers a greater increase of the 
 aggregate produce of the world. The 
 underselling, therefore, though a loss 
 to the undersold country, is an advan- 
 tage to the world at large ; the sub- 
 stituted commerce being one which 
 economizes more of the labour and 
 capital of mankind, and adds more to 
 their collective wealth, than the com- 
 merce superseded by it. The advan- 
 tage, of course, consists in being able 
 to produce the commodity of better 
 quality, or with less labour (compared 
 with other things) ; or perhaps not with 
 less labour, but in less time ; with a 
 less prolonged detention of the capital 
 employed. This may arise from greater 
 natural advantages (such as soil, cli- 
 mate, richness of mines) ; superior ca- 
 pability, either natural or acquired, iu 
 the labourers ; better division of labour, 
 and better tools, or machinery. But 
 there is no place left in this theory for 
 the case of lower wages. This, how- 
 ever, in the theories commonly current, 
 is a favourite cause of underselling. 
 We continually hear of the disadvan- 
 tage under which the British producer 
 labours, both in foreign markets and 
 even in his own, through the lower 
 wages paid by his foreign rivals. These 
 lower wages, we are told, enable, or are 
 always on the point of enabling them 
 to sell at lower prices, and to dislodge 
 the English manufacturer from all 
 markets in which he is not artificially 
 protected. 
 
 Before examining this opinion on 
 grounds of principle, it is worth while 
 to bestow a moment's consideration 
 upon it as a question of fact. Is it 
 true that the wages of manufachmng 
 labour are lower in foreign countries 
 than in England, in any sense in which 
 low wages are an advantage to the 
 
 capitalist? The artisan of Ghent or 
 Lyons may earn less wages in a day, 
 but docs he not do less work ? Degrees 
 of efficiency considered, does his labour 
 cost less to his employer? Though 
 wages may be lower on the Continent, 
 is not the Cost of Labour, which is the 
 real element in the competition, very 
 nearly the same ? That it is so seems 
 the opinion of competent judges, and is 
 confirmed by the very little difference 
 in the rate of profit between England 
 and the Continental countries. But if 
 so, the opinion is absurd that English 
 producers can be undersold by their 
 Continental rivals from this cause. It 
 is only in America that the supposition 
 is primd facie admissible. In America, 
 wages are much higher than in Eng- 
 land, if we mean by wages the daily 
 earnings of a labourer : but the produc- 
 tive power of American labour is so 
 great its efficiency, combined with 
 the favourable circumstances in which 
 it is exerted, makes it worth so much 
 to the purchaser, that the Cost of 
 Labour is lower in America than in 
 England ; as is indicated by the fact 
 that the general rate of profits and of 
 interest is higher. 
 
 3. But is it true that low wages, 
 even in the sense of low Cost of Labour, 
 enable a countiy to sell cheaper in the 
 foreign market ? I mean, of course, 
 low wages which are common to the 
 whole productive industry of the 
 country. 
 
 If wages, in any of the departments 
 of industry which supply exports, are 
 kept, artificially, or by some accidental 
 cause, below the general rate of wages 
 in the country, this is a real advantage 
 in the foreign market. It lessens the 
 comparative cost of production of those 
 articles, in relation to others ; and 
 has the same effect as if their pro- 
 duction required so much less labour. 
 Take, for instance, the case of the 
 United States in respect to certain 
 commodities. In that country, tobacco 
 and cotton, two great articles of export, 
 are produced by slave labour, while 
 food and manufactures generally are 
 produced by free labourers, who either 
 work on their own account or are paid
 
 COMPETITION OF COUNTRIES IN THE SAME MARKET. 413 
 
 by wages. In spite of the inferior 
 efficiency of slave labour, there can be 
 no reasonable doubt that in a country 
 where the wages of free labour are so 
 high, the work executed by slaves is a 
 bi-tU-r bargain to the capitalist. To 
 'vhatever extent it is so, this smaller 
 cost of labour, being not general, but 
 limited to those employments, is just 
 as much a cause of cheapness in the 
 products, both in the home and in the 
 foreign market, as if they had been 
 made by a less quantity of labour. If 
 the slaves in the Southern States were 
 all emancipated, and their wages rose 
 to the general lavel of the earnings of 
 free labour in America, that country 
 might be obliged to erase some of the 
 slave-grown articles from the catalogue 
 of its exports, and would certainly be 
 unable to sell any of them in the foreign 
 market at the accustomed price. Their 
 cheapness is partly an artificial cheap- 
 ness, which may be compared to that 
 produced by a bounty on production 
 or on exportation : or, considering the 
 means by which it is obtained, an apter 
 comparison would be with the cheap- 
 ness of stolen goods. 
 
 An advantage of a similar economi- 
 cal, though of a very different moral 
 character, is that possessed by domestic 
 manufactures ; fabrics produced in the 
 kioure hours of families partially 
 occupied in other pursuits, who, not 
 depending for subsistence on the pro- 
 duce of the manufacture, can afford to 
 sell it at any price, however low, for 
 which they think it worth while to 
 take the trouble of producing. In an 
 account of the Canton of Zurich, to 
 which I have had occasion to refer on 
 another subject, it is observed,* "The 
 workman of Zurich is to-day a manufac- 
 turer, to-morrow again an agriculturist, 
 and changes his occupations with the 
 seasons, in a continual round. Manu- 
 facturing industry and tillage advance 
 h and in hand, in inseparable alliance, 
 and in this union of the two occupa- 
 tions the secret may be found, why the 
 simple and unlearned Swiss manufac- 
 turer can always go on competing, and 
 increasing in prosperity, in the face of 
 
 * Ilin/orlcal, Geographical, and Statittical 
 Pictum <if Switzerland, vol. i. p. 105 (1834). 
 
 those extensive establishments fitted 
 out with great economic, and (what is 
 still more important) intellectual, re 
 sources. Even in those parts of the 
 Canton where manufactures have ex- 
 tended themselves the most widely, 
 only one-seventh of all the families 
 belong to manufactures alone ; four- 
 sevenths combine that employment 
 with agriculture. The advantage of 
 this domestic or family manufacture 
 consists chiefly in the fact, that it is 
 compatible with all other avocations, 
 or rather that it may in part be re- 
 garded as only a supplementary em- 
 ployment. In winter, in the dwellings 
 of the operatives, the whole family 
 employ themselves in it : but as soon 
 as spring appears, those on whom the 
 early field labours devolve, abandon the 
 in-door work ; many a shuttle stands 
 still ; by degrees, as the field-work 
 increases, one member of the family 
 follows another, till at last, at the 
 harvest, and during the so-called ' great 
 works,' all hands seize the implements 
 of husbandry; but in unfavourable 
 weather, and in all otherwise vacant 
 hours, the work in the cottage is re- 
 sumed, and when the ungenial season 
 again recurs, the people return in the 
 same gradual order to their home 
 occupation, until they have all re- 
 sumed it." 
 
 In the case of these domestic ma- 
 nufactures, the comparative cost of 
 production, on which the interchange 
 between countries depends, is much 
 lower than in proportion to the quan- 
 tity of labour employed. The work 
 people, looking to the earnings of theii 
 loom for a part only, if for any part, o\ 
 their actual maintenance, can afford to 
 work for a less remuneration, than the 
 lowest rate of wages which can per- 
 manently exist in the employments by 
 which the labourer has to support the 
 whole expense of a family. Working, 
 as they do, not for an employer but for 
 themselves, they may be said to carry 
 on the manufacture at no cost at all, 
 except the small expense of a loom and 
 of the material ; and the limit of pos- 
 sible cheapness is not the necessity of 
 living by their trade, but that of earn- 
 ing enough by the work to make that
 
 414 
 
 BOOK Hi. CHAPTER XXV. 4, 5. 
 
 social employment of tlicir leisure hours 
 not disagreeable. 
 
 4. These two cases, of slave labour 
 and of domestic manufactures, exem- 
 plify the conditions under which low 
 wages enable a country to sell its com- 
 modities cheaper in foreign markets, 
 and consequently to undersell its rivals, 
 or to avoid being undersold by them. 
 But no such advantage is conferred by 
 low wages when common to all branches 
 of industry. General low wages never 
 caused any country to undersell its 
 rivals, nor did general high wages ever 
 hinder it from doing so. 
 
 To demonstrate this, we must return 
 to an elementary principle which was 
 discussed in a former chapter.* Gene- 
 ral low wages do not cause low prices, 
 nor high wages high prices, within the 
 country itself. General prices are not 
 raised by a rise of wages, any more than 
 they would be raised by an increase of 
 the quantity of labour required in all 
 production. Expenses which affect all 
 commodities equally, have no influence 
 on prices. If the maker of broadcloth 
 or cutlery, and nobody else, had to pay 
 higher wages, the price of his commo- 
 dity would rise, just as it would if he 
 had to employ more laboiir ; because 
 otherwise he would gain less profit than 
 other producers, and nobody would 
 engage in the employment. But if 
 everybody has to pay higher wages, or 
 everybody to employ more labour, the 
 loss must be submitted to ; as it affects 
 everybody alike, no one can hope to get 
 rid of it by a change of employment, 
 each therefore resigns himself to a 
 diminution of profits, and prices remain 
 as they were. In like manner, general 
 low wages, or a general increase in the 
 productiveness of labour, does not make 
 prices low, but profits high. If wages 
 fall (meaning here by wages the cost 
 of labour), why, on that account, should 
 the producer lower his price? He will 
 be forced, it may be said, by the com- 
 petition of other capitalists who will 
 irowd into his employment. But other 
 capitalists are also paying lower wages, 
 and by entering into competition with 
 him they would gain nothing but what 
 * Supra, book iii. ch. iv. 
 
 they are gaining already. The rate 
 then at which labour is paid, as well as 
 the quantity of it which is employed, 
 affects neither the value nor the price 
 of the commodity produced, except in 
 so far as it is peculiar to that commo- 
 dity, and not common to commodities 
 generally. 
 
 Since low wages are not a cause of 
 low prices in the country itself, so 
 neither do they cause it to offer its 
 commodities in foreign markets at a 
 lower price. It is quite true that if the 
 cost of labour is lower in America than 
 in England, America could sell her 
 cottons to Cuba at a lower price than 
 England, and still gain as high a profit 
 as the English manufacturer. But it 
 is not with the profit of the English 
 manufacturer that the American cotton 
 spinner will make his comparison ; it 
 is with the profits of other American 
 capitalists. These enjoy, in common 
 with himself, the benefit of a low cost 
 of labour, and have accordingly a high 
 rate of profit. This high profit the 
 cotton spinner must also have : he will 
 not content himself with the English 
 profit. It is true he may go on for a 
 time at that lower rate, rather than 
 change his employment ; and a trade 
 may be carried on, sometimes for a 
 long period, at a much lower profit 
 than that for which it would have 
 been originally engaged in. Countries 
 which have a low cost of labour, and 
 high profits, do not for that reason 
 undersell others, but they do oppose a 
 more obstinate resistance to being 
 undersold, because the producers can 
 often submit to a diminution of profit 
 without being unable to live, and even 
 to thrive, by their business. But this 
 is all which their advantage does for 
 them : and in this resistance they will 
 not long persevere, when a change of 
 times, which may give them equal 
 profits with the rest of their country- 
 men, has become manifestly hopeless. 
 
 5. There is a class of trading and 
 exporting communities, on which a 
 few words of explanation seem to be 
 required. These are hardly to bo 
 looked upon as countries, carrying on 
 an exchange of commodities with other
 
 COMPETITION OF COUNTRIES IN THE SAME MARKET. 415 
 
 countries, but more properly as out- 
 lying agricultural or manufacturing 
 establishments belonging to a larger 
 community. Our West India colonies, 
 for example, cannot be regarded as 
 countries, with a productive capital of 
 their own. If Manchester, instead of 
 being where it is, were on a rock in 
 the North Sea (its present industry 
 nt 1 vertheless continuing), it would still 
 be but a town of England, not a 
 country trading with England ; it 
 would be merely, as now, a place 
 where England iiuds it convenient to 
 carry on her cotton manufacture. The 
 West Indies, in like manner, are the 
 place where England finds it con- 
 venient to carry on the production of 
 sugar, coffee, and a few other tropical 
 commodities. All the capital employed 
 is English capital; almost all the in- 
 dustry is carried on for English uses ; 
 there is little production of anything 
 except the staple commodities, and 
 these are sent to England, not to be 
 exchanged for things exported to the 
 colony and consumed by its inhabitants, 
 but to be sold in England for the be- 
 nefit of the proprietors there. The 
 trade with the West Indies is therefore 
 hardly to be considered as external 
 trade, but more resembles the traffic 
 between town and country, and is 
 amenable to the principles of the home 
 trade. The rate of profit in the colo- 
 nies will be regulated by English pro- 
 fits : the expectation of profit must be 
 about the same as in England, with 
 the addition of compensation for the 
 disadvantages attending the more dis- 
 tant and hazardous employment : and 
 after allowance is made for those dis- 
 advantages, the value and price of 
 West India produce in the English 
 market must be regulated (or rather 
 must have been regulated formerly), 
 like that of any English commodity, 
 by the cost of production. For the 
 last twelve or fil'teen years this prin- 
 ciple has been in abeyance : the price 
 was first kept up beyond the ratio of 
 the cost of production by deficient sup- 
 plies, which could not, owing to the 
 deficiency of labour, be increased ; and 
 more recently the admission of foreign 
 competition hae introduced another 
 
 element, and some of the West India 
 Islands are undersold, not so much be- 
 cause wages are higher than in Cuba 
 and Brazil, as because they are higher 
 than in England : for were they not so, 
 Jamaica could sell her sugars at Cuban 
 prices, and still obtain, though not a 
 Cuban, an English rate of profit. 
 
 It is worth while also to notice an- 
 other class of small, but in this case 
 mostly independent communities, 
 which have supported and enriched 
 themselves almost without any produc- 
 tions of their own, (except ships and 
 marine equipments,) by a mere carry- 
 ing trade, and commerce of entrepot ; 
 by buying the produce of one country, 
 to sell it at a profit in another. Such 
 were Venice and the Hanse Towns. 
 The case of these communities is very 
 simple. They made themselves and 
 their capital the instruments, not of 
 production, but ; 'of accomplishing ex- 
 changes between the productions of 
 other countries. These exchanges are 
 attended with an advantage to those 
 countries an increase of the aggregate 
 returns to industry part of which 
 went to indemnify the agents, for the 
 necessary expense of transport, and 
 another part to remunerate the use of 
 their capital and mercantile skill. The 
 countries themselves had not capital 
 disposable for the operation. When 
 the Venetians became the agents of 
 the general commerce of Southern 
 Europe, they had scarcely any compe- 
 titors : the thing would not have been 
 done at all without them, and there 
 was really no limit to their profits 
 except the limit to what the ignorant 
 feudal nobility could and would givo 
 for the unknown luxuries then first 
 presented to their sight. At a later 
 period competition arose, and the profit 
 of this operation, like that of others, 
 became amenable to natural laws. The 
 carrying trade was taken up by Hol- 
 land, a country with productions of 
 its own and a large accumulated ca- 
 pital. The other nations of Europe 
 also had now capital to spare, and were 
 capable of conducting their foreign 
 trade for themselves : but Holland, 
 having, from a variety of circumstances, 
 a lower rate of profit at home, could
 
 416 
 
 BOOK m. CHAPTER XXVI. 1, 
 
 afford to carry for other countries at a 
 smaller advance on the original cost of 
 the goods, than would have been re- 
 quired by their own capitalists ; and 
 Holland, therefore, engrossed the 
 
 greatest part of the carrying tiade of 
 all those countries which did not keep 
 it to themselves by Navigation Laws, 
 constructed, like those of England, tor 
 that express purpose. 
 
 CHAPTER XXVI. 
 
 Ok DISTRIBUTION, AS AFFECTED BY EXCHANGE. 
 
 1 . WE have now completed, as far 
 as is compatible with our purposes and 
 limits, the exposition of the machinery 
 through which the produce of a country 
 is apportioned among the different 
 classes of its inhabitants ; which is no 
 other than the machinery of Exchange, 
 and has for the exponents of its opera- 
 tion, the laws of Value and of Price. 
 We shall now avail ourselves of the 
 light thus acquired, to cast a retro- 
 spective glance at the subject of Dis- 
 tribution. The division of the produce 
 among the three classes, Labourers, 
 Capitalists, and Landlords, when con- 
 sidered without any reference to Ex- 
 change, appeared to depend on certain 
 general laws. It is fit that we should 
 now consider whether these same laws 
 still operate, when the distribution 
 takes place through the complex me- 
 chanism of exchange and money ; or 
 whether the properties of the me- 
 chanism interfere with and modify the 
 presiding principles. 
 
 The primary division of the produce 
 of human oxertion and frugality is, as 
 we have seen, into three shares, wages, 
 profits, and rent ; and these shares are 
 portioned out to the persons entitled 
 to them, in the form of money, and by 
 a process of exchange ; or rather, the 
 capitalist, with whom in the usual ar- 
 rangements of society the produce 
 remains, pays in money, to the other 
 two sharers, the market value of their 
 labour and land. If we examine, on 
 what the pecuniary value of labour, 
 and the pecuniary value of the use of 
 land, depend, we shall find that it is 
 on the very same causes by which we 
 found that wages and rent would be 
 
 regulated if there were no money and 
 no exchange of commodities. 
 
 It is evident, in the first place, that 
 the law of Wages is not affected by 
 the existence or non-existence of Ex- 
 change or Money. Wages depend on 
 the ratio between population and ca- 
 pital ; and would do so it' all the capital 
 in the world were the property of one 
 association, or if the capitalists among 
 whom it is shared maintained each an 
 establishment for the production of 
 every article consumed in the commu- 
 nity, exchange of commodities having 
 no existence. As the ratio between 
 capital and population, in all old 
 countries, depends on the strength of 
 the checks by which the too rapid in- 
 crease of population is restrained, it 
 may be said, popularly speaking, that 
 wages depend on the checks to popu- 
 lation ; that when the check is not 
 death, by starvation or disease ,wnges 
 depend on the prudence of the labour- 
 ing people ; and that wages in any 
 country arc habitually at the lowest 
 rate, to which in that country the 
 labourer will suffer them to be de- 
 pressed rather than put a restraint 
 upon multiplication. 
 
 What is here meant, however, by 
 wages, is the labourer's real scale of 
 comfort ; tho quantity he obtains of 
 the things which nature or habit has 
 made necessary or agreeable to hi in : 
 wages in the sense in which they are 
 of importance to the receiver. In the 
 sense in which they are of importance 
 to the payer, they do not depend ex- 
 clusively on such simple principles. 
 Wages in the first sense, the wages on 
 which the labourer's comfort depends,
 
 DISTRIBUTION AS AFFECTED BY EXCHANGE. 
 
 we will call real wages, or wages in 
 kind. Wages in the second sense, we 
 may be permitted to call, for the pre- 
 sent, money wages ; assuming, as it is 
 allowable to do, that money remains 
 for the time an invariable standard, no 
 alteration taking place in the condi- 
 tions under which the circulating me- 
 dium itself is produced or obtained. 
 If money itself undergoes no variation 
 in cost, the money price of labour is an 
 exact measure of tne Cost of Labour, 
 and may be made use of as a conve- 
 nient symbol to express it. 
 
 The money wages of labour are a 
 compound result of two elements: first, 
 real wages, or wages in kind, or in 
 other words, the quantity which the 
 labourer obtains of the ordinary ar- 
 ticles of consumption ; and secondly, 
 the money prices of those articles. In 
 all old countries all countries in which 
 the increase of population is in any 
 degree checked by the difficulty of 
 obtaining subsistence the habitual 
 money price of labour is that which 
 will just enable the labourers, one 
 with another, to purchase the commo- 
 dities without which they either cannot 
 or will not keep up the population at 
 its customary rate of increase. Their 
 standard of comfort being given, (and 
 by the standard of comfort in a labour- 
 ing class, is meant that, rather than 
 forego which, they will abstain from 
 multiplication), money wages depend 
 on the money price, and therefore on 
 the cost of production, of the various 
 articles which the labourers habitually 
 consume : because if their wages can- 
 not procure them a given quantity of 
 these, their increase will slacken, and 
 their wages rise. Of these articles, 
 food and other agricultural produce 
 are so much the principal, as to leave 
 little influence to anything else. 
 
 It is at this point that we are 
 enabled to invoke the aid of the prin- 
 ciples which have been laid down in 
 this Third Part. The cost of produc- 
 tion of food and agricultural produce 
 has been analyzed in a preceding 
 chapter. It depends on the produc- 
 tiveness of the least fertile land, or of 
 the least productively employed portion 
 of capital, which the necessities of 
 
 society have as yet put in requisition 
 for agricultural purposes. The cost o\ 
 production of food grown in these least 
 advantageous circumstances, deter- 
 mines, as we have seen, the exchange 
 value and money price of the whole. 
 In any given state, therefore, of the 
 labourers' habits, their money wages 
 depend on the productiveness of the 
 least fertile land, or least productive 
 agricultural capital; on the point 
 which cultivation has reached in its 
 downward progress in its encroach- 
 ments on the barren lands, and its gra- 
 dually increased strain upon the powers 
 of the more fertile. Now, the force 
 which urges cultivation in this down- 
 ward course, is the increase of people ; 
 while the counter-force which checks 
 the descent, is the improvement of 
 agricultural science and practice, 
 enabling the same soil to yield to the 
 same labour more ample returns. The 
 costliness of the most costly part of 
 the produce of cultivation, is an exact 
 expression of the state, at any given 
 moment, of the race which population 
 and agricultural skill are always run- 
 ning against each other. 
 
 2. It is well said by Dr. Chalmers, 
 that many of the most important 
 lessons in political economy are to be 
 learnt at the extreme margin of culti- 
 vation, the last point which the culture 
 of the soil has reached in its contest 
 with the spontaneous agencies of nature. 
 The degree of productiveness of this ex- 
 treme margin, is an index to the exist- 
 ing state of the distribution of the 
 produce among the three classes, 
 of labourers, capitalists, and land- 
 lords. 
 
 When the demand of an increasing 
 population for more food cannot be 
 satisfied without extending cultivation 
 to less fertile land, or incurring addi- 
 tional outlay, with a less proportional 
 return, on land already in cultivation, 
 it is a necessary condition of this in- 
 crease of agricultural produce, that the 
 value and price of that produce must 
 first rise. But as soon as the price has 
 risen sufficiently to give to tne addv 
 tional outlay of capital the ordinary 
 profit, the rise will not go on still fur- 
 EE
 
 418 
 
 BOOK HI. CHAPTER XXVI. 3. 
 
 ther for the purpose of enabling the 
 new land, or the new expenditure on 
 old land, to yield rent as well as profit. 
 The land or capital last put in requisi- 
 tion, and occupying what Dr. Chalmers 
 calls the margin of cultivation, will 
 yield, and continue to yield, no rent. 
 But if this yields no rent, the rent 
 afforded by all other land or agricul- 
 tural capital will be exactly so much 
 as it produces more than this. The 
 price of food will always on the average 
 be such, that the worst land, and the 
 least productive instalment of the capi- 
 tal employed on the better lands, shall 
 just replace the expenses with the 
 ordinary profit. If the least favoured 
 land and capital just do thus much, 
 all other land and capital will yield an 
 extra profit, equal to the proceeds of 
 the extra produce due to their superior 
 productiveness ; and this extra profit 
 becomes, by competition, the prize of 
 the landlords. Exchange, and money, 
 therefore, make no diiference in the 
 law of rent: it is the same as we 
 originally found it. Rent is the extra 
 return made to agricultural capital 
 when employed with peculiar advan- 
 tages; the exact equivalent of what 
 those advantages enable the producers 
 to economize in the cost of production : 
 the value and price of the produce 
 being regulated by the cost of pro- 
 duction to those producers who have 
 no advantages ; by the return to that 
 portion of agricultural capital, the cir- 
 cumstances of which are the least 
 favourable. 
 
 3. Wages and Rent being thus 
 regulated by the same principles when 
 paid in money, as they would be if 
 apportioned in kind, it follows that 
 Profits are so likewise. For the sur- 
 plus, after replacing wages and paying 
 rent, constitutes Profits. 
 
 We found in the last chapter of the 
 Second Book, that the advances of the 
 capitalist, when analyzed to their ulti- 
 mate elements, consist either in the 
 purchase or maintenance of labour, or 
 in the profits of former capitalists ; and 
 that therefore profits in the last resort, 
 depend upon the Cost of Labour, falling 
 as tlxat rises, and rising as it falls. Let 
 
 us endeavour to trace more minutely 
 the operation of this law. 
 
 There are two modes in which the 
 Cost of Labour, which is correctly re- 
 presented (money being supposed in- 
 variable) by the money wages of the 
 labourer, may be increased. The la- 
 bourer may obtain greater comforts ; 
 wages in kind real wages may rise. 
 Or the progress of population may force 
 down cultivation to inferior soils, and 
 more costly processes ; thus raising tre 
 cost of production, the value, and the 
 price, of the chief articles of the la- 
 bourer's consumption. On either of 
 these suppositions, the rate of profit 
 will fall. 
 
 If the labourer obtains more abun- 
 dant commodities, only by reason of 
 their greater cheapness ; if he obtain 
 a greater quantity, but not on the 
 whole a greater cost ; real wages will 
 be increased, but not money wages, and 
 there will be nothing to affect the rate 
 of profit. But if he obtains a greater 
 quantity of commodities of which the 
 cost of production is not lowered, lie 
 obtains a greater cost ; his money wages 
 are higher. The expense of these in- 
 creased money wages falls wholly on 
 the capitalist. There are no conceiv- 
 able means by which he can shake it 
 off. It may be said it used formerly 
 to be said that he will get rid of it 
 by raising his price. But this opinion 
 we have already, and more than once, 
 fully refuted.* 
 
 The doctrine, indeed, that a rise 
 of wages causes an equivalent rise of 
 prices, is, as we formerly observed, self- 
 contradictory : for if it did so, it would 
 not be a rise of wages ; the labourer 
 would get no more of any commodity 
 than he had before, let his money wages 
 rise ever so much ; a rise of real wages 
 would be an impossibility. This being 
 equally contrary to reason and to fact, it 
 is evident that a rise of money wages 
 does not raise prices ; that high wages 
 are not a cause of high prices. A rise 
 of general wages falls on profits. There 
 is no possible alternative. 
 
 Having disposed of the case in which 
 the increase of money wages, and of 
 
 * Supra, book Hi. cli. iv. 2, and ch. xxv. 
 4.
 
 DISTRIBUTION AS AFFECTED BY EXCHANGE. 
 
 419 
 
 the Cost of Labour, arises from the 
 labourer's obtaining more ample wages 
 in kind, let us now suppose it to arise 
 from the increased cost of production 
 of the things which he consumes; 
 owing to an increase of population, un- 
 accompanied by an equivalent increase 
 of agricultural skill. The augmented 
 supply required by the population 
 would not be obtained, unless the price 
 of food rose sufficiently to remunerate 
 the farmer for the increased cost of 
 production. The farmer, however, in 
 this case sustains a twofold disadvan- 
 tage. He has to carry on his cultiva- 
 tion under less favourable conditions 
 of productiveness than before. For 
 this, as it is a disadvantage belonging 
 to him only as a farmer, and not shared 
 by other employers, he will, on the 
 general principles of value, be com- 
 pensated by a rise of the price of his 
 commodity: indeed, until this rise has 
 taken place, he will not bring to market 
 the required increase of produce. But 
 this very rise of price involves him in 
 another necessity, for which he is not 
 compensated. He must pay higher 
 money wages to his labourers. This 
 necessity, being common to him with 
 all other capitalists, forms no ground 
 for a rise of price. The price will rise, 
 until it has placed him in as good a 
 situation in respect of profits, as other 
 employers of labour : it will rise so . 
 as to indemnify him for tne increased j 
 labour which he must now employ in I 
 order to produce a given quantity of I 
 food : but the increased wages of that 
 labour are a burthen common to all, 
 and for which no one can be indemnified. 
 It will be paid wholly from profits. 
 
 Thus we see chat increased \rages, 
 when common to all descriptions of pro- 
 ductive labourers, and when really re- 
 presenting a greater Cost of Labour, are 
 always and necessarily at the expense of 
 profits. And by reversing the cases, we 
 should find in like manner that dimi- 
 nished wages, when representing a 
 really diminished Cost of Labour, are 
 equivalent to a rise of profits. But 
 the opposition of pecuniary interest 
 thus indicated between the class of 
 capitalists and that of labourers, is to 
 great extent only apparent. Real 
 
 wages are a very different thing from 
 the Cost of Labour, and are generally 
 highest at the times and places where, 
 from the easy terms on which the land 
 yields all the produce as yet required 
 from it, the value and price of food 
 being low, the cost of labour to the 
 employer, notwithstanding its ample 
 remuneration, is comparatively cheap, 
 and the rate of profit consequently 
 high. We thus obtain a full con- 
 firmation of our original theorem, that 
 Profits depend on the Cost of Labour : 
 or, to express the meaning with still 
 greater accuracy, the rate of profit and 
 the cost of labour vary inversely as one 
 another, and are joint effects of the 
 same agencies or causes. 
 
 But does not this proposition require 
 to be slightly modified, by making al- 
 lowance for that portion (though com- 
 paratively small) of the expenses of 
 the capitalist, which does not consist 
 in wages paid by himself or reim- 
 bursed to previous capitalists, but in 
 the profits of those previous capitalists ? 
 Suppose, for example, an invention in 
 the manufacture of leather, the advan- 
 tage of which should consist in ren- 
 dering it unnecessary that the hides 
 should remain for so great a length 
 of time in the tan-pit. Shoemakers, 
 saddlers, and other workers in leather, 
 would save a part of that portion of the 
 cost of their material which consists of 
 the tanner's profits during the time his 
 capital is locked up ; and this saving, 
 it may be said, is a source from which 
 they might derive an increase of profit, 
 though wages and the Cost of Labour 
 remained exactly the same. In the 
 case here supposed, however, the con- 
 sumer alone would benefit, since the 
 prices of shoes, harness, and all other 
 articles into which leather enters, 
 would fall, until the profits of the 
 producers were reduced to the general 
 leveL To obviate this objection, let 
 us suppose that a similar saving of 
 expenses takes place in all depart- 
 ments of production at once. In that 
 case, since values and prices would not 
 be affected, profits would probably be 
 raised ; but if we look more closely into 
 the case we shall find that it is because 
 the cost of labour would be lowered, 
 E E2
 
 420 
 
 BOOK III. CHAPTER XXVI. 3. 
 
 In this as in any other case of increase 
 in the general productiveness of labour, 
 if the labourer obtained only the same 
 real wages, profits would be raised : 
 tout the same real wages would imply 
 a smaller Cost of Labour ; the cost of 
 production of all things having been, 
 by the supposition, diminished. If, 
 on the other hand, the real wages of 
 labour rose proportionally, and the Cost 
 of Labour to the employer remained 
 the same, the advances of the capi- 
 talist would bear the same ratio to his 
 returns as before, and the rate of profit 
 would be unaltered. The reader who 
 may wish for a more minute examina- 
 
 tion of this point, will find it in the 
 volume of separate Essays to which 
 reference has before been made.* The 
 question is too intricate in comparison 
 with its importance, to be further en- 
 tered into in a work like the present ; 
 and I will merely say, that it seems to 
 result from the considerations adduced 
 in the Essay, that there is nothing in 
 the case in question to affect the inte- 
 grity of the theory which affirms an 
 exact correspondence, in an inverse 
 direction, between the rate of profit 
 and the Cost of Labour. 
 
 * Essay IV. on Profits and InttrtH,
 
 BOOK IV. 
 
 INFLUENCE OF THE PROGRESS OF SOCIETY 
 ON PRODUCTION AND DISTRIBUTION. 
 
 CHAPTER I. 
 
 GENERA!, CHARACTERISTICS OF A PROGRESSIVE STATE OP WEALTH. 
 
 1. Tur three preceding Parts in- 
 clude as detailed a view as our limits 
 permit, of what, by a happy generaliza- 
 tion of a mathematical phrase, has been 
 called the Statics of the subject. We 
 have surveyed the field of economical 
 facts, and have examined how they 
 stand related to one another as causes 
 and effects ; what circumstances deter- 
 mine the amount of production, of em- 
 ployment for labour, of capital and 
 population ; what laws regulate rent, 
 profits, and wages ; under what condi- 
 tions and in what proportions commodi- 
 ties are interchanged between indivi- 
 duals and between countries. We have 
 thus obtained a collective view of the 
 economical phenomena of society, con- 
 sidered as existing simultaneously. We 
 have ascertained, to a certain extent, 
 the principles of their interdependence ; 
 and when the state of some of the ele- 
 ments is known, we should now be able 
 to infer, in a general way, the contem- 
 poraneous state of most of the others. 
 All this, however, has only put us in 
 possession of the economical laws of a 
 stationary and unchanging society. 
 We have still to consider the econo- 
 mical condition of mankind as liable to 
 change, and indeed (in the more ad- 
 vanced portions of the race, and in all 
 regions to which their influence reaches) 
 as at all times undergoing progressive 
 changes. We have to consider what 
 these changes are, what are their laws, 
 and what their ultimate tendencies ; 
 thereby adding a theory of motion to our 
 
 theory of equilibrium the Dynamics 
 of political economy to the Statics. 
 
 In this inquiry, it is natural to com- 
 mence by tracing the operation of 
 known and acknowledged agencies. 
 Whatever may be the other changes 
 which the economy of society is des- 
 tined to undergo, there is one actually 
 in progress, concerning which there can 
 be no dispute. In the leading countries 
 of the world, and in all others as they 
 come within the influence of those lead- 
 ing countries, there is at least one pro- 
 gressive movement which continues 
 with little interruption from year to 
 year and from generation to genera- 
 tion ; a progress in wealth ; an ad- 
 vancement in what is called material 
 prosperity. All the nations which we 
 are accustomed to call civilized, in- 
 crease gradually in production and in 
 population : and there is no reason to 
 doubt, that not only these nations will 
 for some time continue so to increase, 
 but that most of the other nations of 
 the world, including some not yet 
 founded, will successively enter upon 
 the same career. It will, therefore, be 
 our first object to examine the nature 
 and consequences of this progressive 
 change ; the elements which constitute 
 it, and the effects it produces on the 
 various economical facts of \vhich we 
 have been tracing the laws, and espe- 
 cially on wages, profits, rents, values, 
 and prices. 
 
 2, Of the features which charac-
 
 422 
 
 BOOK IV. CHAPTER 1. 2. 
 
 terize tins progressive economical move- 
 ment of civilized nations, that which first 
 excites attention, through its intimate 
 connexion with the phenomena of Pro- 
 duction, is the perpetual, and so far as 
 human foresight can extend, the un- 
 limited, growth of man's power over 
 nature. Our knowledge of the proper- 
 ties and laws of physical ohjects shows 
 no sign of approaching its ultimate 
 boundaries: it is advancing more ra- 
 pidly, and in a greater number of direc- 
 tions at once, than in any previous age 
 or generation, and affording such fre- 
 quent glimpses of unexplored fields be- 
 yond, as to justify the belief that our 
 acquaintance with nature is still almost 
 in its infancy. This increasing phy- 
 sical knowledge is now, too, more ra- 
 pidly than at any former period, con- 
 verted by practical ingenuity, into phy- 
 sical power. The most marvellous of 
 modern inventions, one which realizes 
 the imaginary feats of the magician, 
 not metaphorically but literally the 
 electro-magnetic telegraph sprang 
 into existence but a few years after 
 the establishment of the scientific 
 theory which it realizes and exempli- 
 fies. Lastly, the manual part of these 
 great scientific operations is now never 
 wanting to the intellectual : there is no 
 difficulty in finding or forming, in a suf- 
 ficient number of the working hands of 
 the community, the skill requisite for 
 executing the most delicate processes 
 of the application of science to prac- 
 tical uses. From this union of condi- 
 tions, it is impossible not to look for- 
 ward to a vast multiplication and long 
 succession of contrivances for econo- 
 mizing labour and increasing its pro- 
 duce ; and to an ever wider diffusion 
 of the use and benefit of those contri- 
 vances. 
 
 Another change which has always 
 hitherto characterized, and will as- 
 suredly continue to characterize, the 
 progress of civilized society, is a con- 
 tinual increase of the security of person 
 and property. The people of eveiy 
 country in Europe, the most backward 
 as well as the most advanced, are, in 
 each generation, better protected 
 against the violence and rapacity of 
 one another both by a more efficient 
 
 judicature and police for the suppres- 
 sion of private crime, and by the decay 
 and destruction of those mischievous 
 privileges which enabled certain classes 
 of the community to prey with impunity 
 upon the rest. They are also, in every 
 generation, better protected, either by 
 institutions or by manners and opinion, 
 against arbitraiy exercise of the power 
 of government. Even in semi-barba- 
 rous Russia, acts of spoliation directed 
 against individuals, who have not made 
 themselves politically obnoxious, are 
 not supposed to be now so frequent as 
 much to affect any person's feelings of 
 security. Taxation, in all European 
 countries, grows less arbitrary and op- 
 pressive, both in itself and in the man- 
 ner of levying it. Wars, and the de- 
 struction they cause, are now usually 
 confined, in almost every country, to 
 those distant and outlying possessions 
 at which it comes into contact with 
 savages. Even the vicissitudes of for- 
 tune which arise from inevitable na- 
 tural calamities, are more and more 
 softened to those on whom they fall, by 
 the continual extension of the salutary 
 practice of insurance. 
 
 Of this increased security, one of 
 the most unfailing effects is a great 
 increase both of production and of ac- 
 cumulation. Industry and frugality 
 cannot exist, where there is not a pre- 
 ponderant probability that those who 
 labour and spare will be permitted to 
 enjoy. And the nearer this probability 
 approaches to certainty, the more do 
 industry and frugality become per- 
 vading qualities in a people. Experi- 
 ence has shown that a large proportion 
 o f the results of labour and abstinence 
 may be taken away by fixed taxation, 
 without impairing, and sometimes even 
 with the effect of stimulating, the 
 qualities from which a great production 
 and an abundant capital take their 
 rise. But those qualities are not 
 proof against a high degree of uncer- 
 tainty. The government may carry 
 off a part ; but there must be assurance 
 that it will not interfere, nor suffer 
 any one to interfere, with the re- 
 mainder. 
 
 One of the changes which most in- 
 fallibly attend the progress of modern
 
 PROGRESSIVE STATE OF WEALTH. 
 
 423 
 
 society, is an improvement in the busi- 
 ness capacities of the general mass of 
 mankind. I do not mean that the 
 practical sagacity of an individual 
 human being is greater than formerly. 
 I am inclined to believe that econo- 
 miral progress has hitherto had even a 
 contrary effect. A person of good na- 
 tural endowments, in a rude state of 
 society, can do a greater number of 
 tilings tolerably well, has a greater 
 power of adapting means to ends, is 
 more capable of extricating himself 
 and others from an unforeseen embar- 
 rassment, than ninety-nine in a hun- 
 dred of those who have known only 
 what is called the civilized form of life. 
 How far these points of inferiority of 
 faculties are compensated, and by what 
 means they might be compensated still 
 more completely, to the civilized man 
 as an individual being, is a question 
 belonging to a different inquiry from 
 the present. But to civilized human 
 beings collectively considered, the com- 
 pensation is ample. What is lost in 
 the separate efliciency of each, is far 
 more than made up by the greater ca- 
 pacity of united action. In proportion 
 as they put off the qualities of the 
 savage, they become amenable to dis- 
 cipline ; capable of adhering to plans 
 concerted beforehand, and about which 
 they may not have been consulted ; of 
 subordinating their individual caprice 
 to a preconceived determination, and 
 performing severally the parts allotted 
 to them in a combined undertaking. 
 Works of all sorts, impracticable to the 
 savage or the half-civilized, are daily 
 accomplished by civilized nations, not 
 by any greatness of faculties in the 
 actual agents, but through the fact 
 that i-ach is able to rely with certainty 
 on the others for the portion of the work 
 which they respectively undertake. 
 The peculiar characteristic, in short, of 
 civilized beings, is the capacity of co- 
 operation ; and this, like other facul- 
 ties, tends to improve by practice, and 
 becomes capable of assuming a con- 
 stantly wider sphere of action. 
 
 Accordingly there is no more certain 
 incident of the progressive change 
 taking place in society, than the con- 
 tinual growth of the principle and 
 
 practice of co-operation. Associations 
 of individuals voluntarily combining 
 their small contributions, now perform 
 works, both of an industrial and of 
 many other characters, which no one 
 person or small number of persons arc 
 rich enough to accomplish, or for the 
 performance of which the tew persons 
 capable of .accomplishing them were 
 formerly enabled to exact the most 
 inordinate remuneration. As wealth 
 increases and business capacity im- 
 proves, we may look forward to a great 
 extension of establishments, both for 
 industrial and other purposes, formed 
 by the collective contributions of large 
 numbers ; establishments like those 
 called by the technical name of joint- 
 stock companies, or the associations 
 less formally constituted, which are so 
 numerous in England, to raise funds 
 for public or philanthropic objects, or 
 lastly, those associations of workpeople, 
 either for production or to buy goods 
 for their common consumption, which 
 are now specially known by the name 
 of co-operative societies. 
 
 The progress which is to be expected 
 in the physical sciences and arts, com- 
 bined with the greater security of pro- 
 perty, and greater freedom in disposing 
 of it, which are obvious features in the 
 civilization of modern nations, and 
 with the more extensive and more 
 skilful employment of tho joint-stock 
 principle, afford space and scope for an 
 indefinite increase of capital and pro- 
 duction, and for the increase of popula- 
 tion which is its ordinary accompani- 
 ment. That the growth of population 
 will overpass the increase of produc- 
 tion, there is not much reason to ap- 
 prehend ; and that it should even keep 
 pace with it, is inconsistent with the 
 supposition of any real improvement 
 in the poorest classes of the people. It 
 is, however, quite possible that there 
 might be a great progress in industrial 
 improvement, and in the signs of what 
 is commonly called national prosperity; 
 a great increase of aggregate wealth, 
 and even, in some respects, a better 
 distribution of it; that not only the 
 rich might grow richer, but many of 
 the poor might grow rich, that tho 
 intermediate classes might become
 
 424 
 
 BOOK IV. CHAPTER H. 1. 
 
 more numerous and powerful, and the 
 means of enjoyable existence be more 
 and more largely diffused, while yet 
 the great class at the base of the whole 
 might increase in numbers only, and 
 not in comfort nor in cultivation. We 
 must, therefore, in considering the 
 effects of the progress of industry, 
 admit as a supposition, however greatly 
 we deprecate as a fact, an increase of 
 
 population as long-continued, as inde- 
 finite, and possibly even as rapid, as 
 the increase of production and accu- 
 mulation. 
 
 With these preliminary observations 
 on the causes of change at work in a 
 society which is in a state of econo- 
 mical progress, I proceed to a more 
 detailed examination of the changes 
 themselves. 
 
 CHAPTER H. 
 
 INFLUENCE OK THE PROGRESS OF INDUSTRY AND POPULATION ON 
 VALUES AND PRICES. 
 
 1. THE changes which the pro- 
 gress of industry causes or presupposes 
 in the circumstances of production, are 
 necessarily attended with changes in 
 the values of commodities. 
 
 The permanent values of all things 
 which are neither under a natural nor 
 under an artificial monopoly, depend, 
 as Ave have seen, on their cost of pro- 
 duction. But the increasing power 
 which mankind are constantly ac- 
 quiring over nature, increases more 
 and more the efficiency of human 
 exertion, or in other words, diminishes 
 cost of production. All inventions by 
 which a greater quantity of any com- 
 modity can be produced with the same 
 labour, or the same quantity with less 
 labour, or which abridge the process, 
 BO that the capital employed needs not 
 be advanced for so long a time, lessen 
 the cost of production of the com- 
 modity. As, however, value is relative ; 
 if inventions and improvements in pro- 
 duction were made in all commodities, 
 and all in the same degree, there would 
 be no alteration in values. Things 
 would continue to exchange for each 
 other at the same rates as before ; and 
 mankind would obtain a greater quan- 
 tity of all things in return for their 
 labour and abstinence, without having 
 that greater abundance measured and 
 declared (as it is when it affects only 
 one thing) by the diminished exchange 
 value of tho commodity. 
 
 As for prices, in these circumstances 
 they would be affected or not, accord- 
 ing as the improvements in production 
 did or did not extend to the precious 
 metals. If the materials of money 
 were an exception to the general dimi- 
 nution of cost of production, the values 
 of all other things would fall in relation 
 to money, that is, there would be a fall 
 of general prices throughout the world. 
 But if money, like other things, and in 
 the same degree as other things, were 
 obtained in greater abundance and 
 cheapness, prices would be no more 
 affected than values would ; and there 
 would be no visible sign, in the state 
 of the markets, of any of the changes 
 which had taken place ; except that 
 there would be (if people continued to 
 labour as much as before) a greater 
 quantity of all sorts of> commodities, 
 circulated at the same prices by a 
 greater quantity of money. 
 
 Improvements in production are not 
 the only circumstance accompanying 
 the progress of industry, which tends 
 to diminish the cost of producing, or at 
 least of obtaining, commodities. An- 
 other circumstance is the increase of 
 intercourse between different parts of 
 the world. As commerce extends, and 
 the ignorant attempts to restrain it by 
 tariffs become obsolete, commodities 
 tend more and more to be produced in 
 the places in which their production 
 can be carried on at the least expenso
 
 INFLUCENE OF INDUSTRIAL PROGRESS ON PRICES. 425 
 
 of labour and capital tc mankind. As 
 civilization spreads, and security of 
 person and property becomes esta- 
 blished, in parts of the world which 
 have not hitherto had that advantage, 
 the productive capabilities of those 
 places are called into fuller activity, 
 for the benefit both of their own inha- 
 bitants and of foreigners. The igno- 
 rance and misgovernment in which 
 many of the regions most favoured by 
 nature are still grovelling, afford work, 
 probably, for many generations before 
 those countries will be raised even to 
 the present level of the most civilized 
 parts of Europe. Much will also depend 
 on the increasing migration of labour 
 and capital to unoccupied parts of the 
 earth, of which the soil, climate, and 
 situation are found, by the ample means 
 of exploration now possessed, to pro- 
 mise not only a large return to in- 
 dustry, but great facilities of producing 
 commodities suited to the markets of 
 old countries. Much as the collective 
 industry of the earth is likely to be 
 increased in efficiency by the extension 
 of science and of the industrial arts, a 
 still more active source of increased 
 cheapness of production will be found, 
 probably, for some time to come, in the 
 gradually unfolding consequences of 
 Free Trade, and in the increasing scale 
 on which Emigration and Colonization 
 will be carried on. 
 
 From the causes now enumerated, 
 unless counteracted by others, the 
 progress of things enables a country to 
 obtain at less and less of real cost, not 
 only its own productions but those of 
 foreign countries. Indeed, whatever 
 diminishes the cost of its own produc- 
 tions, when of an exportable character, 
 enables it, as we have already seen, to 
 obtain its imports at less real cost. 
 
 2. But is it the fact, that these 
 tendencies are not counteracted ? Has 
 the progress of wealth and industry no 
 effect in regard to cost of production, 
 but to diminish it ? Are no causes of 
 an opposite character brought into 
 operation by the same progress, suf- 
 ficient in some cases not only to neu- 
 tralize but to overcome the former, and 
 convert the descending movement of 
 
 cost of production into an ascending 
 movement? We are already aware 
 that there are such causes, and that, 
 in the case of the most important 
 classes of commodities, food and mate- 
 rials, there is a tendency diametrically 
 opposite to that of which we have been 
 speaking. The cost of production of 
 these commodities tends to increase. 
 
 This is not a property inherent in 
 the commodities themselves. If popu- 
 lation were stationary, and the produce 
 of the earth never needed to be aug- 
 mented in quantity, there would be no 
 cause for greater cost of production. 
 Mankind would, on the contrary, have 
 the full benefit of all improvements in 
 agriculture, or in the arts subsidiary to 
 it, and there would be no difference, in 
 this respect, between the products of 
 agriculture and those of manufactures. 
 The only products of industry which, if 
 population did not increase, would bo 
 liable to a real increase of cost of pro- 
 duction, are those which, depending on 
 a material which is not renewed, are 
 either wholly or partially exhaustible ; 
 such as coal, and most if not all metals ; 
 for even iron, the most abundant as 
 well as most useful of metallic products, 
 which forms an ingredient of most 
 minerals and of almost all rocks, is 
 susceptible of exhaustion so far as 
 regards its richest and most tractable 
 ores. 
 
 When, however, population in- 
 creases, as it has never yet failed to 
 do when the increase of industry and 
 of the means of subsistence made room 
 for it, the demand for most of the pro- 
 ductions of the earth, and particularly 
 for food, increases in a corresponding 
 proportion. And then comes into 
 effect that fundamental law of produc- 
 tion from the soil, on which we have so 
 frequently had occasion to expatiate ; 
 the law, that increased labour, in any 
 given state of agricultural skill, ia 
 attended with a less than proportional 
 increase of produce. The cost of pro- 
 duction of the fruits of the earth in- 
 creases, cceteris paribus, with every 
 increase of the demand. 
 
 No tendency of a like kind exists 
 with respect to manufactured articles. 
 The tendency is in the contrary direc-
 
 BOOK IV. CHAPTEE H. 3. 
 
 tion. The larger the scale on which 
 manufacturing operations are carried 
 on, the more cheaply they can in 
 general he performed. Mr. Senior has 
 gone the length of enunciating as an 
 inherent law of manufacturing in- 
 dustry, that in it increased production 
 takes place at a smaller cost, while in 
 agricultural industry increased produc- 
 tion takes place at a greater cost. I 
 cannot think, however, that even in 
 manufactures, increased cheapness fol- 
 lows increased production by anything 
 amounting to a law. It is a probable 
 and usual, but not a necessary, con- 
 sequence. 
 
 As manufactures, however, depend 
 for their materials either upon agricul- 
 ture, or mining, or the spontaneous 
 produce of the earth, manufacturing 
 industry is subject, in respect of one 
 of its essentials, to the same law as 
 agriculture. But the crude material 
 generally forms so small a portion of 
 the total cost, that any tendency which 
 may exist to a progressive increase in 
 that single item, is much over-balanced 
 by the diminution continually taking 
 place in all the other elements; to 
 which diminution it is impossible at 
 present to assign any limit. 
 
 The tendency, then, being to a per- 
 petual increase of the productive 
 power of labour in manufactures, while 
 in agriculture and mining there is a 
 conflict between two tendencies, the 
 one towards an increase of productive 
 power, the other towards a diminution 
 of it, the cost of production being les- 
 r.cned by every improvement in the 
 processes, and augmented by every 
 addition to population ; it follows that 
 the exchange values of manufactured 
 articles, compared with the products of 
 agriculture and of mines, have, as 
 population and industry advance, a 
 certain and decided tendency to fall. 
 Money being a product of mines, it 
 may also be laid down as a rule, that 
 manufactured articles tend, as society 
 advances, to fall in money price. The 
 industrial history of modern nations, 
 especially during the last hundred 
 years, fully bears out this assertion. 
 
 3. 'Whether agricultural produce 
 
 increases in absolute as woll as com 
 parative cost of production, depends on 
 the conflict of the two antagonist 
 agencies, increase of population, and 
 improvement in agricultural skill. In 
 some, perhaps inmost, states of society, 
 (looking at the whole surface of the 
 earth,) both agricultural skill and 
 population are either stationary, or 
 increase veiy slowly, and the cost of 
 production of food, therefore, is nearly 
 stationary. In a society which is 
 advancing in wealth, population gene- 
 rally increases faster than agricultural 
 skill, and food consequently tends to 
 become more costly ; but there are 
 times when a strong impulse sets in 
 towards agricultural improvement. 
 Such an impulse has shown itself in 
 Great Britain during the last twenty 
 or five-and-twenty years. In England 
 and Scotland agricultural skill has of 
 late increased considerably faster than 
 population, insomuch that food and 
 other agricultural produce, notwith- 
 standing the increase of people, can be 
 grown at less cost than they were 
 thirty years ago : and the abolition of 
 the Corn Laws has given an additional 
 stimulus to the spirit of improvement. 
 In some other countries, and particu- 
 larly in France, the improvement of 
 agriculture gains ground still more 
 decidedly- upon population, because 
 though agriculture, except in a few 
 provinces, advances slowly, population 
 advances still more slowly, and even 
 with increasing slowness ; its growth 
 being kept down, not by poverty, which 
 is diminishing, but by prudence. 
 
 "Which of tho two conflicting 
 agencies is gaining upon the other at 
 any particular time, might be conjec- 
 tured with tolerable accuracy from the 
 money price of agricultural produce 
 (supposing bullion not to vary mate- 
 rially in value), provided a sufficient 
 number of years could be taken, to 
 form an average independent of the 
 fluctuations of seasons. This, however, 
 is hardly practicable, since Mr. Tooke 
 has shown that even so long a period 
 as half a century may include a much 
 greater proportion of abundant and a 
 smaller of deficient seasons, than is 
 properly due to it. A mere average,
 
 INFLUENCE OF INDUSTRIAL PROGRESS ON PRICES. 427 
 
 therefore, might lead to conclusions 
 onlj the more misleading, for their dc- 
 cept'.ve semblance of accuracy. There 
 would be less danger of error in taking 
 the average of only a small number of 
 years, and correcting it by a conjec- 
 tural allowance for the character of the 
 seasons, than in trusting to a longer 
 average without any such correction. 
 It is hardly necessary to add, that in 
 founding conclusions on quoted prices, 
 allowance must also be made as far 
 as possible for any changes in the 
 general exchange value of the precious 
 metals.* 
 
 4. Thus far, of the eflect of the 
 progress of society on the permanent 
 or average values and prices of com- 
 modities. It remains to be considered, 
 in what manner the same progress 
 affects their fluctuations. Concerning 
 the answer to this question there can 
 be no doubt. It tends in a very high 
 degree to diminish them. 
 
 In poor and backward societies, as 
 in the East, and in Europe during the 
 middle ages, extraordinary differences 
 in the price of the same commodity 
 might exist in places not very 
 distant from each other, because the 
 want of roads and canals, the imper- 
 fection of marine navigation, and the 
 insecurity of communications generally, 
 prevented things from being trans- 
 ported from the places where they were 
 cheap tc those where they were deai. 
 The things most liable to fluctuations 
 in value, those directly influenced by 
 the seasons, and especially food, were 
 seldom carried to any great distances. 
 Each locality depended, as a general 
 rule, on its own produce and that of 
 its immediate neighbourhood. In most 
 years, accordingly, there was, in some 
 part or Jther of any large country, a 
 real dearth. Almost every season must 
 be unpropitious to some among the 
 many soils and climates to be found in 
 an extensive tract of country ; but as 
 the same season is also in general more 
 
 * A still better criterion, perhaps, than 
 that suggested in the text, would be the 
 increase or diminution of the amount of the 
 labourer's wagi>s estimated in agricultural 
 produce. 
 
 than ordinarily favourable to others, it 
 is only occasionally that the aggregate 
 produce of the whole country is de- 
 ficient, and even then in a less degree 
 than that of many separate portions ; 
 while a deficiency at all considerable, 
 extending to the whole world, is a 
 thing almost unknown. In modern 
 times, therefore, there is only dearth, 
 where there formerly would have been 
 famine, and sufficiency everywhere 
 when anciently there would have been 
 scarcity iu some places and superfluity 
 in others. 
 
 The same change has taken place 
 with respect to all other articles of 
 commerce. The safety and cheapness 
 of communications, which enable * 
 deficieucy in one place to be supplier 
 from the surplus of another, at a mode- 
 rate or even a small advance on the 
 ordinary price, render the fluctuations 
 of prices much less extreme than for- 
 merly. This effect is much promoted 
 by the existence of large capitals, be- 
 longing to what are called speculative 
 merchants, whose business it is to buy 
 goods in order to resell them at a profit. 
 These dealers naturally buying thmga 
 when they are cheapest, and storing 
 them up to be brought again into the 
 market when the price has become un- 
 usually high; the tendency of their 
 operations is to equalize price, or at 
 least to moderate its inequalities. The 
 prices of things are neither so much 
 depressed at one time, nor so much 
 raised at another, as they would be if 
 speculative dealers did not exist. 
 
 Speculators, therefore, have a highly 
 useful office in the economy of society ; 
 and (contrary to common opinion) th 
 most useful portion of the class aro 
 those who speculate in commodities 
 affected by the vicissitudes of seasons. 
 If there were no corn-dealers, not only 
 would the price of com be liable to 
 variations much more extreme than at 
 present, but in a deficient season the 
 necessary supplies might not be forth- 
 coming at all. Unless there were 
 speculators in corn, or unless, in de- 
 fault of dealers, the farmers became 
 speculators, the price in a season of 
 abundance would fall without any liftiit 
 or check, except the wasteful consump-
 
 428 
 
 BOOK IV. CHAPTER II. 5. 
 
 tion that would invariably follow. That 
 any part of the surplus of one year 
 remains to supply the deficiency of 
 another, is owing either to farmers 
 who withhold corn from the market, 
 or to dealers who buy it when at the 
 cheapest and lay it up in store. 
 
 5. Among persons who have not 
 much considered the subject, there is a 
 notion that the gains of speculators are 
 often made by causing an artificial 
 scarcity ; that they create a high, price 
 by their own purchases, and then profit 
 by it. This may easily be shown to be 
 fallacious. If a corn-dealer makes pur- 
 chases on speculation, and produces a 
 rise, when there is neither at the time 
 nor afterwards any cause for a rise of 
 price except his own proceedings ; he 
 no doubt appears to grow richer as 
 long as his purchases continue, because 
 he is a holder of an article which is 
 quoted at a higher and higher price : 
 but this apparent gain only seems 
 within his reach so long as he does 
 not attempt to realize it. If he has 
 bought, for instance, a million of quar- 
 ters, and by withholding them from 
 the market, has raised the price ten 
 shillings a quarter; just so much as 
 the price has been raised by with- 
 drawing a million quarters, will it be 
 lowered by bringing them back, and 
 the best that he can hope is that he 
 will lose nothing except interest and 
 his expenses. If by a gradual and 
 cautious sale he is able to realize, on 
 some portion of his stores, a part of the 
 increased price, so also he will un- 
 doubtedly have had to pay a part of 
 that price on some portion of his pur- 
 chases. He runs considerable risk of 
 incurring a still greater loss ; for the 
 temporary high price is very likely to 
 have tempted others, who had no share 
 in causing it, and who might other- 
 wise not have found their way to his 
 market at all, to bring their corn there, 
 and intercept a part of the advantage. 
 So that instead of profiting by a 
 scarcity caused by himself, he is by no 
 means unlikely, after buying in an 
 average market, to be forced to sell in 
 a superabundant one. 
 
 As an individual speculator cannot 
 
 gain by a rise of price solely of his 
 own creating, so neither can a number 
 of speculators gain collectively by a 
 rise, which their operations have ar- 
 tificially produced. Some among a 
 number of speculators may gain, by 
 superior judgment or good fortune in 
 selecting the time for realizing; but 
 they make this gain at the expense, 
 not of the consumer, but of the other 
 speculators who are less judicious. 
 They, in fact, convert to their own 
 benefit the high price produced by the 
 speculations of the others, leaving to 
 these the loss resulting from the recoil. 
 It is not to be denied, therefore, that 
 speculators may enrich themselves by 
 other people's loss. But it is by the 
 losses of other speculators. As much 
 must have been lost by one set of 
 dealers as is gained by another set. 
 
 When a speculation in a commodity 
 proves profitable to the speculators as 
 a body, it is because in the interval 
 between their buying and reselling, 
 the price rises from some cause inde- 
 pendent of them, their only connexion 
 with it consisting in having foreseen 
 it. In this case, their purchases make 
 the price begin to rise sooner than it 
 otherwise would do, thus spreading 
 the privation of the consumers over a 
 longer period, but mitigating it at the 
 time of its greatest height : evidently 
 to the general advantage. In this, 
 however, it is assumed that they have 
 not overrated the rise which they 
 looked forward to. For it often hap- 
 pens that speculative purchases are 
 made in the expectation of some in- 
 crease of demand, or deficiency of 
 supply, which after all does not occur, 
 or not to the extent which the specu- 
 lator expected. Jn that case the specu- 
 lation, instead of moderating fluctua- 
 tions, has caused a fluctuation of price 
 which otherwise would not have hap- 
 pened, or aggravated one which would. 
 But in that case the speculation is a 
 losing one, to the speculators collec- 
 tively, however much some individuals 
 may gain by it. All that part of the 
 rise of price by which it exceeds what 
 there are independent grounds for, 
 cannot give to the speculators as a 
 body any benefit, since the price is as
 
 INFLUENCE OF INDUSTRIAL PROGRESS ON PRICES. 429 
 
 ranch depressed by their sales as it was 
 raised by their purchases ; and while 
 they gain nothing by it, they lose, not 
 only their trouble and expenses, but 
 almost always much more, through the 
 effects incident to the artificial rise of 
 price, in checking consumption, and 
 bringing forward supplies from unfore- 
 seen quarters. The operations, there- 
 fore, of speculative dealers, are useful 
 to the public whenever profitable to 
 themselves ; and though they are 
 sometimes injurious to the public, by 
 heightening the fluctuations which 
 their more usual office is to alleviate, 
 yet whenever this happens the specu- 
 lators are tbe greatest losers. The in- 
 terest, in short, of the speculators as a 
 body, coincides with the interest of the 
 public; and as they can only fail to 
 serve the public interest in proportion 
 as they miss their own, the best way 
 to promote the one is to leave them to 
 pursue the other in perfect freedom. 
 
 I do not deny that speculators may 
 aggravate a local scarcity. In col- 
 lecting corn from the villages to supply 
 the towns, they make the dearth 
 penetrate into nooks and corners 
 which might otherwise have escaped 
 from bearing their share of it. To buy 
 and resell in the same place, tends to 
 alleviate scarcity : to buy in one place 
 and resell in another, may increase it 
 in the former of the two places, but 
 relieves it in the latter, where the 
 price is higher, and which therefore, 
 by the very supposition, is likely to be 
 Buffering more. And these sufferings 
 always fall hardest on the poorest 
 consumers, since the rich, by out- 
 bidding, can obtain their accustomed 
 supply undiminished if they choose. 
 To no persons, therefore, are the ope- 
 rations of corn-dealers on the whole so 
 beneficial as to the poor. Accidentally 
 and exceptionally, the poor may suffer 
 from them : it might sometimes be 
 more advantageous to the rural poor 
 to have corn cheap in winter, when 
 they are entirely dependent on it, even 
 if the consequence were a dearth in 
 spring, when they can perhaps obtain 
 partial substitutes. But there are no 
 substitutes, procurable at that season, 
 which serve in any great degree to 
 
 replace bread-corn as the chief article 
 of food : if there were, its price would 
 fall in the spring, instead of con- 
 tinuing, as it always does, to rise till 
 the approach of harvest. 
 
 There is an opposition of immediate 
 interest, at the moment of sale, be- 
 tween the dealer in corn and the con- 
 sunier, as there always is between the 
 seller and the buyer : and a time of 
 dearth being that in which the specu- 
 lator makes his largest profits, he is 
 an object of dislike and jealousy at 
 that time, to those who are suffering 
 while he is gaining. It is an error, 
 however, to suppose that the corn- 
 dealer's business affords him any ex- 
 traordinary profit ; he makes his gains 
 not constantly, but at particular times, 
 and they must therefore occasionally 
 be great, but the chances of profit in 
 a business in which there is so much 
 competition, cannot on the whole be 
 greater than in other employments. 
 A year of scarcity, in which great 
 gains are made by corn-dealers, rarely 
 comes to an end without a recoil 
 which places many of them in the list 
 of bankrupts. There have been few 
 more promising seasons for corn- 
 dealers than the year 1847, and 
 seldom was there a greater break-up 
 among the speculators than in the 
 autumn of that year. The chances of 
 failure, in this most precarious trade, 
 are a set-off against great occasional 
 profits. If the corn-dealer were to 
 sell his stores, during a dearth, at a 
 lower price than that which the 
 competition of the consumers assigns 
 to him, he would make a sacrifice, to 
 charity or philanthropy, of the fair 
 profits of his employment, which may 
 be quite as reasonably required from 
 any other person of equal means. 
 His business being a useful one, it is 
 the interest of the public that the 
 ordinary motives should exist for car- 
 rying it on, and that neither law nor 
 opinion should prevent an operation 
 beneficial to the public from being 
 attended with as much private ad- 
 vantage as is compatible with full and 
 free competition. 
 
 It appears, then, that the fluctu* 
 lions of values and prices arising from
 
 430 
 
 BOOK IV. CHAPTER III. 1. 
 
 variations of supply, or from alterations 
 in real (as distinguished from specu- 
 lative) demand, may be expected to 
 become more moderate as society 
 advances. With regard to those 
 which arise from miscalculation, and 
 especially from the alternations of 
 undue expansion and excessive con- 
 traction of credit, which occupy so 
 conspicuous a place among commercial 
 phenomena, the same thing cannot be 
 affirmed with equal confidence. Such 
 vicissitudes, beginning with irrational 
 speculation and ending with a com- 
 mercial crisis, have not hitherto be- 
 
 come either less frequent or less 
 violent with the growth of capital 
 and extension of industry. Rather 
 they may be said to have become 
 more so : in consequence, as is often 
 said, of increased competition ; but, as 
 I prefer to say, of a low rate of profits 
 and interest, which makes capitalists 
 dissatisfied with the ordinary course 
 of safe mercantile gains. Tho con- 
 nexion of this low rate of proiil with 
 the advance of population and accu- 
 mulation, is one of the points to bo 
 illustrated in the ensuing chapters. 
 
 CHAPTER IH. 
 
 INFLUENCE OP THE PROGRESS OP INDUSTRY AND POPULATION ON RENTS, 
 PROFITS, AND WAGES. 
 
 1. CONTINUING the inquiry into 
 tlio nature of the economical changes 
 taking place in a society which is in 
 a state of industrial progress, we shall 
 next consider what is the effect of that 
 progress on the distribution of the 
 produce among the various classes who 
 share in it. We may confine our at- 
 tention to the system of distribution 
 which is the most complex, and which 
 virtually includes all others that in 
 which the produce of manufactures is 
 shared between two classes, labourers 
 and capitalists, and the produce of 
 agriculture among three, labourers, 
 capitalists, and landlords. 
 
 The characteristic features of what 
 is commonly meant by industrial pro- 
 gress, resolve themselves mainly into 
 three increase of capital, increase of 
 population, and improvements in pro- 
 duction ; understanding the last ex- 
 pression in its widest sense, to include 
 the process of procuring commodities 
 from a distance, as well as that of pro- 
 ducing them. The other changes 
 which take place are chiefly conse- 
 quences of these ; as, for example, the 
 tendency to a progressive increase of 
 the cost of production of food; arising 
 
 from an increased demand, which may 
 be occasioned either by increased popu- 
 lation, or by an increase of capital and 
 wages, enabling the poorer classes to 
 increase their consumption. ]t will 
 be convenient to set out by consider- 
 ing each of the three causes, as 
 operating separately ; after which we 
 can suppose them combined in any 
 manner we think fit. 
 
 Let us first suppose that population 
 increases, capital and the arts of pro- 
 duction remaining stationary. One of 
 the effects of this change of circum- 
 stances is sufficiently obvious : wages 
 will fall ; the labouring class will be 
 reduced to an inferior condition. The 
 state of the capitalist, on the contrary, 
 will be improved. With the same 
 capital, he can purchase more labour, 
 and obtain more produce. His rate of 
 profit is increased. The dependence 
 of the rate of profits on the cost of 
 labour is here verified; for the labourer 
 obtaining a diminished quantity of 
 commodities, and no alteration being 
 supposed in the circumstances of their 
 production, the diminished quantity 
 represents a diminished cost. The 
 labourer obtains not only a smaller
 
 INFLUENCE OF PROGRESS ON RENTS, PRO PITS, ETC. 431 
 
 rofil reward, but tbo product of a 
 smaller quantity of labour. Tbc first 
 circumstance is the important cue 
 to bimself, the last to his employer. 
 
 Nothing has occurred, thus i'ar, to 
 afl'cct in any way the value of any 
 commodity ; and no reason, therefore, 
 has vet shown itself, why rent should 
 IK: ('iihcr raised or lowered. But if 
 we look forward another stage in the 
 series of effects, we may see our way 
 to such a consequence. The labourers 
 have increased in numbers: their 
 condition is reduced in the same pro- 
 portion ; the increased numbers divide 
 among them only the produce of the 
 same amount of labour as before. But 
 they may economize in their other 
 comforts, and not in their food : each 
 may consume as much food, and of as 
 costly a quality, as previously ; or 
 they may submit to a reduction, but 
 not in proportion to the increase of 
 numbers. On this supposition, not- 
 withstanding the diminution of real 
 wages, the increased population will 
 require an increased quantity of food. 
 But since industrial skill and know- 
 ledge are supposed to bo stationary, 
 more food can only be obtained by 
 resorting to worse laud, or to methods 
 of cultivation which are less productive 
 in proportion to the outlay. Capital 
 for this extension of agriculture will 
 not be wanting ; for though, by hypo- 
 thesis, no addition takes place to 
 the capital in existence, a sufficient 
 amount can be spared from the in- 
 dustry which previously supplied the 
 other and less pressing wants which 
 the labourers have . been obliged to 
 curtail. The additional supply of 
 food, therefore, will be produced, but 
 produced at a greater cost ; and the 
 exchange value of agricultural pro- 
 duce must rise. It may be objected, 
 that profits having risen, the extra cost 
 of producing food can be defrayed from 
 profits, without any increase of price. 
 xt could, undoubtedly, but it will not : 
 because if it did, the agriculturist 
 would be placed in an inferior position 
 to other capitalists. The increase of 
 profits, being the effect of diminished 
 wages, is common to all employers of 
 labour. The increased expenses arising 
 
 from the necessity of a more costly 
 cultivation, aflect the agriculturist 
 alone. For this peculiar burthen 
 he must be peculiarly compensated, 
 whether the general rate of profit bo 
 high or low. He will not submit in- 
 definitely to a deduction from hia 
 profits, to which other capitalists are 
 not subject. He will not extend his 
 cultivation by laying out fresh capital, 
 unless for a return sufficient to yield 
 him as high a profit as could be ob- 
 tained by the same capital in other 
 investments. The value, therefore, of 
 his commodity will rise, and rise in 
 proportion to the increased cost. The 
 fanner will thus be indemnified for 
 the burthen which is peculiar to him- 
 self, and will also enjoy the augmented 
 rate of profit which is common to all 
 capitalists. 
 
 It follows, from principles with 
 which we are already familiar, that 
 in these circumstances rent will rise. 
 Any land can afford to pay, and under 
 free competition will pay, a rent equal 
 to the excess of its produce above the 
 return to an equal capital on the 
 worst land, or under the least favour- 
 able conditions. Whenever, therefore, 
 agriculture is driven to descend to 
 worse land, or more onerous processes, 
 rent rises. Its rise will be twofold, 
 for, in the first place, rent in kind, 01 
 corn rent, will rise ; and in the second, 
 since the value of agricultural pro- 
 duce has also risen, rent, estimated in 
 manufactured or foreign commodities 
 (which is represented cceteris paribus 
 by money rent) will rise still more. 
 
 The steps of the process (if, after 
 what haa been formerly said, it is 
 necessary to retrace them) are as fol- 
 lows. Corn rises in price, to repay 
 with the ordinary profit the capital 
 required for producing additional corn 
 on worse land or by more costly pro- 
 cesses. So far as regards this addi- 
 tional corn, the increased price is but 
 an equivalent for the additional ex- 
 pense; but the rise, extending to all 
 corn, affords on all, except tho last 
 produced, an extra profit. If the 
 farmer was accustomed to produce 
 100 quarters of wheat at 40s., and 
 120 quarters are now required, of
 
 432 
 
 BOOK IV. CHAPTER III. 2. 
 
 which the last twenty cannot be pro- 
 duced under 45s., he obtains the extra 
 five shillings on the entire 120 
 quarters, and not on the last twenty 
 alone. He has thus an extra 251. 
 beyond the ordinary profits, and this, 
 in a state of free competition, he will 
 not be able to retain. He cannot how- 
 ever be compelled to give it up to the 
 consumer, since a less price than 45s. 
 would be inconsistent with the produc- 
 tion of the last twenty quarters. The 
 price, then, will remain at 45s., and 
 the 251. will be transferred by com- 
 petition not to the consumer but 
 to the landlord. A rise of rent is 
 therefore inevitably consequent on an 
 increased demand for agricultural pro- 
 duce, when unaccompanied by in- 
 creased facilities for its production. 
 A truth which, after this final illus- 
 tration, we may henceforth take for 
 granted. 
 
 The new element now introduced 
 an increased demand for food besides 
 occasioning an increase of rent, still 
 further disturbs the distribution of the 
 produce between capitalists and la- 
 bourers. The increase of population 
 will have diminished the reward of 
 labour : and if its cost is diminished 
 as greatly as its real remuneration, 
 profits will be increased by the full 
 amount. If, however, the increase of 
 population leads to an increased pro- 
 duction of food, which cannot be sup- 
 plied but at an enhanced cost of pro- 
 duction, the cost of labour will not be 
 so much diminished as the real reward 
 of it, and profits, therefore, will not be 
 so much raised. It is even possible 
 that they might not be raised at all. 
 The .abourers may previously have 
 been so well provided for, that the 
 whole of what they now lose may be 
 struck off from their other indulgences, 
 and they may not, either by necessity 
 or choice, undergo any reduction in 
 the quantity or quality of their food. 
 To produce the food for the increased 
 number may be attended with such 
 an increase of expense, that wages, 
 though reduced in quantity, may re- 
 present as great a cost, may be the 
 product of as much labour, as before, 
 and the capitalist may not be at all 
 
 benefited. On this supposition the 
 loss to the labourer is partly absorbed 
 in the additional labour required fo 
 producing the last instalment of agri- 
 cultural produce ; and the remainder 
 is gained by the landlord, the only 
 sharer who always benefits by an in- 
 crease of population. 
 
 2. Let us now reverse our hypo- 
 thesis, and, instead of supposing ca- 
 pital stationary and population ad- 
 vancing, let us suppose capital ad- 
 vancing and population stationary; 
 the facilities of production, both natu- 
 ral and acquired, being, as before, un- 
 altered. The real wages of labour, 
 instead of falling, will now rise ; and 
 since the cost of production of the 
 things consumed by the labourer ia 
 not diminished, this rise of wages im- 
 plies an equivalent increase of the cost 
 f labour, and diminution of profits. 
 To state the same deduction in otker 
 terms ; the labourers not being more 
 numerous, and the productive power 
 of their labour being only the same as 
 before, there is no increase of the pro- 
 duce ; the increase of wages, therefore, 
 must be at the charge of the capital- 
 ists. It is not impossible that the 
 cost of labour might be increased in 
 even a greater ratio than its real re- 
 muneration. The improved condition 
 of the labourers may increase the de- 
 mand for food. The labourers may 
 have been so ill off before, as not to 
 have food enough ; and may now con- 
 sume more : or they may choose to 
 expend their increased means partly 
 or wholly in a more costly quality of 
 food, requiring more labour and more 
 land ; wheat, for example, instead of 
 oats or potatoes. This extension of 
 agriculture implies, as usual, a greater 
 cost of production and a higher price, 
 so that besides the increase of the cost 
 of labour arising from the increase of 
 its reward, there will be a further in- 
 crease (and an additional fall of profits) 
 from the increased costliness of the 
 commodities of which that reward 
 consists. The same causes will pro- 
 duce a rise of rent. What the capital- 
 ists lose, above what the labourers 
 gain, is partly transferred to the land-
 
 INFLUENCE OF PROGRESS 
 
 lord, and partly swallowed up in the 
 cost of growing food on worse land or 
 by a less productive process. 
 
 3. Having disposed of the two 
 simple cases, an increasing population 
 and stationary capital, and an increas- 
 ing capital and stationary population, 
 we are prepared to take into consider- 
 ation the mixed case, in which the 
 two elements of expansion are com- 
 bined, both population and capital in- 
 creasing. If either element increases 
 faster than the other, the case is so far 
 assimilated with one or other of the 
 two preceding : we shall suppose 
 them, therefore, to increase with equal 
 rapidity ; the test of equality being, 
 that each labourer obtains the same 
 commodities as before, and the same 
 quantity of those commodities. Let 
 us examine what will be the effect, 
 on rent and profits, of this double 
 progress. 
 
 Population having increased, with- 
 out any falling off in the labourer's 
 condition, there is of course a demand 
 for more food. The arts of production 
 being supposed stationary, this food 
 must be produced at an increased 
 cost. To compensate for this greater 
 cost of the additional food, the price 
 of agricultural produce must rise. The 
 rise extending over the whole amount 
 of food produced, though the increased 
 expenses only apply to a part, there is 
 a greatly increased extra profit, which, 
 by competition, is transferred to the 
 landlord. Rent will rise, both in 
 quantity of produce and in cost ; 
 while wages, being supposed to be the 
 same in quantity, will be greater in 
 cost. The labourer obtaining the 
 same amount of necessaries, money 
 wages have risen ; and as the rise is 
 common to all branches of production, 
 the capitalist cannot indemnify him- 
 self by changing his employment, and 
 the loss must be borne by profits. 
 
 It appears, then, that the tendency 
 of an increase of capital and popula- 
 tion is to add to rent at the expense 
 of profits : though rent does not gain 
 all that profits lose, a part being ab- 
 sorbed in increased expenses of pro- 
 duction, that is, in hiring or feeding a 
 
 ON RENTS, PROFITS, ETC. -433 
 
 greater number of labourers to obtain 
 a given amount of agricultural pro- 
 duce. By profits, must of course be 
 understood the rate of profit ; for a 
 lower rate of profit on a larger capital 
 may yield a larger gross profit, con- 
 sidered absolutely, though a smaller 
 in proportion to the entire produce. 
 
 This tendency of profits to fall, is 
 from time to time counteracted by 
 improvements in production : whether 
 arising from increase of knowledge, or 
 from an increased use of the know- 
 ledge already possessed. This is the 
 third of the three elements, the effects 
 of which on the distribution of the 
 produce we undertook to investigate ; 
 and the investigation will be facili- 
 tated by supposing, as in the case of 
 the other two elements, that it ope- 
 rates, in the first instance, alone. 
 
 4. Let us then suppose capital 
 and population stationary, and a sud- 
 den improvement made in the arts of 
 production ; by the invention of more 
 efficient machines, or less costly pro- 
 cesses, or by obtaining access to 
 cheaper commodities through foreign 
 trade. 
 
 The improvement may either be ia 
 some of the necessaries or indulgences 
 which enter into the habitual consump- 
 tion of the labouring class ; or it may be 
 applicable only to luxuries consumed 
 exclusively by richer people. Very 
 few, however, of the great industrial 
 improvements are altogether of this 
 last description. Agricultural im- 
 provements, except such as specially 
 relate to some of the rarer and more 
 peculiar products, act directly upon 
 the principal objects of the labourer's 
 expenditure. The steam-engine, and 
 every other invention which affords a 
 manageable power, are applicable to 
 all things, and of course to those con- 
 sumed by the labourer. Even the 
 power-loom and the spinning-jenny, 
 though applied to the most delicate 
 fabrics, are available no less for the 
 coarse cottons and woollens worn by 
 the labouring class. All improvements 
 in locomotion cheapen the transport 
 of necessaries as well as of luxuries, 
 Seldom is a new branch of trade opened. 
 F F
 
 434 
 
 BOOR IV. CHAPTER III. 4. 
 
 without, either directly or in some in- 
 direct way, causing some of the articles 
 which the mass of the people consume 
 to be either produced or imported at 
 smaller cost. It may safely be affirmed, 
 therefore, that improvements in pro- 
 duction generally tend to cheapen the 
 commodities on which the wages of 
 the labouring class are expended. 
 
 In so far as the commodities affected 
 by an improvement are those which 
 the labourers generally do not consume, 
 the improvement has no effect in alter- 
 ing the distribution of the produce. 
 Those particular commodities, indeed, 
 are cheapened ; being produced at less 
 cost, they fall in value and in price, 
 and all who consume them, whether 
 landlords, capitalists, or skilled and 
 privileged labourers, obtain increased 
 means of enjoyment. The rate of 
 
 E-ofits, however, is not raised. There 
 a larger gross profit, reckoned in 
 quantity of commodities. But the 
 capital also, if estimated in those com- 
 modities, has risen in value. The 
 profit is the same percentage on the 
 capital that it was before. The capi- 
 talists are not benefited as capitalists, 
 but as consumers. The landlords and 
 the privileged classes of labourers, if 
 they are consumers of the same com- 
 modities, share the same benefit. 
 
 The case is different with improve- 
 ments which diminish the cost of pro- 
 duction of the necessaries of life, or of 
 commodities which enter habitually 
 into the consumption of the great mass 
 of labourers. The play of the different 
 forces being here rather complex, it is 
 necessary to analyze it with some 
 ininuteness. 
 
 As formerly observed,* there are two 
 kinds of agricultural improvements. 
 Some consist in a mere saving of 
 labour, and enable a given quantity of 
 food to be produced at less cost, but 
 not on a smaller surface of land than 
 before. Others enable a given extent 
 of land to yield not only the same pro- 
 duce with less labour, but a greater 
 produce ; so that if no greater produce 
 is required, a part of the land already 
 under culture may be dispensed with. 
 AJS the part rejected will be the least 
 * Supra, p. 113. 
 
 productive portion, the market will 
 thenceforth be regulated by a better 
 description of land than what was pre- 
 viously the worst under cultivation. 
 
 To place the effect of the improve- 
 ment in a clear light, we must suppose 
 it to take place suddenly, so as to leavo 
 no time during its introduction, for any 
 increase of capital or of population. 
 Its first effect will be a fall of the value 
 ami price of agricultural produce. 
 This is a necessary consequence of 
 either kind of improvement, but espe- 
 cially of the last. 
 
 An improvement of the first kind, 
 not increasing the produce, does not 
 dispense with any portion of the land; 
 the margin of cultivation (as Dr. 
 Chalmers terms it) remains where it 
 was ; agriculture does not recede, 
 either in extent of cultivated land, or in 
 elaborateness of methods : and the 
 price continues to be regulated by the 
 same land, and by the same capital, as 
 before. But since that land or capital, 
 and all other land or capital which 
 produces food, now yields its produce 
 at smaller cost, the price of food will 
 fall proportionally. If one-tenth of the 
 expense of production has been saved, 
 the price of produce will fall one-tenth. 
 
 But suppose the improvement to be 
 of the second kind ; enabling the land 
 to produce, not only the same corn 
 with one- tenth less labour, but a tenth 
 more corn with the same labour. Here 
 the effect is still more decided. Culti- 
 vation can now be contracted, and the 
 market supplied from a smaller quan- 
 tity of land. Even if this smaller 
 surface of land were of the same ave- 
 rage quality as the larger surface, the 
 price would fall one-tenth, because the 
 same produce would be obtained with 
 a tenth less labour. But since the 
 portion of land abandoned will be the 
 least fertile portion, the price of pro- 
 duce will thenceforth be regulated by 
 a better quality of land than before 
 In addition, therefore, to the original 
 diminution of one-tenth in the cost of 
 production, there will be a further 
 diminution, corresponding with the re- 
 cession of the " margin" of agriculture 
 to land of greater fertility. There will 
 thus be a twofold fall of price.
 
 INFLUENCE OF PROGRESS 
 
 Let us now examine the effect of the 
 improvements, thus suddenly made, on 
 the division of the produce ; and in the 
 first place, on rent. By the former of 
 the two kinds of improvement, rent 
 would be diminished. By the second, 
 it would he diminished still more. 
 
 Suppose that the demand for food 
 requires the cultivation of three quali- 
 lii-s of land, yielding, on an equal sur- 
 face, and at an equal expense, 100, 80, 
 and 60 hushelt of wheat. The price of 
 wheat will, on the average, be just 
 sufficient to enable the third quality to 
 be cultivated with the ordinary profit. 
 The first quality therefore will yield 
 forty and the second twenty bushels of 
 extra profit, constituting the rent of 
 the landlord. And first, let an im- 
 provement be made, which, without 
 enabling more corn to be grown, en- 
 ables the same corn to be grown with 
 one-fourth less labour. The price of 
 wheat will fall one-fourth, and 80 
 bushels will be sold for the price for 
 which 60 were sold before. But the 
 produce of the land which produces 60 
 bushels is still required, and the ex- 
 penses being as much reduced as the 
 price, that land can still be cultivated 
 with the ordinary profit. The first and 
 second qualities will therefore continue 
 to yield a surplus of 40 and 20 bushels, 
 and com rent will remain the same as 
 before. But com having fallen in price 
 one-fourth, the same corn rent is equi- 
 valent to a fourth less of money and of 
 all other commodities. Sj far, there- 
 fore, as the landlord expends his in- 
 come in manufactured or foreign pro- 
 ducts, he is one-fourth worse off than 
 before. His income as landlord is re- 
 duced to three-quarters of its amount : 
 it is only as a consumer of corn that he 
 is as well off. 
 
 If the improvement is of tha other 
 kind, rent will fall in a still greater 
 ratio. Suppose that the amount of 
 produce winch the market requires, 
 can be grown not only with a fourth 
 less labour, but on a fourth less land. 
 If all the land already in cultivation 
 continued to be cultivated, it would 
 yield a produce much larger than 
 necessary. Land, equivalent to a fourth 
 of the produce, must now bo aban- 
 
 ON RENTS, PROFITS, ETC. 43* 
 
 doned; and as the third quality yielded 
 exactly one-fourth, (being 60 out of 
 240,) that quality will go out of culti- 
 vation. The 240 bushels can now bo 
 grown on land of the first and second 
 qualities only; being, on the first, 100 
 bushels plus one-third, or 133 J bushels; 
 on the second, 80 bushels plus one- 
 third, or 106| bushels ; together, 240. 
 The second quality of land, instead of 
 the third, is now the lowest^ and regu- 
 lates the price. Instead of 60, it is 
 sufficient if 106| bushels repay the 
 capital with the ordinary profit. The 
 price of wheat will consequently fall, 
 not in the ratio of 60 to 80, as in the 
 other case, but in the ratio of 60 to 
 106|. Even this gives an insufficient 
 idea of the degree m which rent will be 
 aflbcted. The whole produce of the 
 second quality of land will now be re- 
 quired to repay the expenses of produc- 
 tion. That land, being the worst in 
 cultivation, will pay no rent. And the 
 first quality will only yield the diffe- 
 rence between 133J bushels and 106, 
 being 26| bushels instead of 40. The 
 landlords collectively will have lost 33 ^ 
 out of 60 bushels in corn rent alone, 
 while the value and price of what in 
 left will have been diminished in the 
 ratio of 60 to 106g. 
 
 It thus appears, that the interest of 
 the landlord is decidedly hostile to the 
 sudden and general introduction of 
 agricultural improvements. This as- 
 sertion has been called a paradox, and 
 made a ground for accusing its first 
 promulgator, Ricardo, of great intellec- 
 tual perverseness, to say nothing worse. 
 I cannot discern in what the paradox 
 consists ; and the obliquity of vision 
 seems to me to be on the side of his 
 assailants. The opinion is only made 
 to appear absurd by stating it unfairly- 
 If the assertion were that a landlord 
 is injured by the improvement of bis 
 estate, it would certainly be indefen- 
 sible ; but what is asserted is, that he 
 is injured by the improvement of the 
 estates of other people, although hit 
 own is included. Nobody doubts that 
 he would gain greatly by the improve- 
 ment if he could keep it to himself, and 
 unite the two benefits, of an increased 
 produce from his land, and a price as 
 FF 2
 
 436 
 
 BOOK IV. CHAPTER III. 4. 
 
 high as before. But if the increase of 
 produce took place simultaneously on all 
 lands, the price would not be as high 
 as before ; and there is nothing un- 
 reasonable in supposing that the land- 
 lords would be, not benefited, but in- 
 jured. It is admitted that whatever 
 permanently reduces the price of pro- 
 duce diminishes rent : and it is quite 
 in accordance with common notions to 
 suppose that if, by the increased pro- 
 ductiveness of land, less land were re- 
 quired for cultivation, its value, like 
 that of other articles for which the 
 demand had diminished, would fall. 
 
 I am quite willing to admit that 
 rents have not really been lowered by 
 the progress of agricultural improve- 
 ment ; but why ? Because improve- 
 ment has never in reality been sudden, 
 but always slow ; at no time much 
 outstripping, and often falling far short 
 of, the growth of capital and popula- 
 tion, which tends as much to raise rent, 
 as the other to lower it, and which is 
 enabled, as we shall presently see, to 
 raise it much higher by means of the 
 additional margin afforded by improve- 
 ments in agriculture. First, however, 
 we must examine in what manner the 
 sudden cheapening of agricultural pro- 
 duce would affect profits and wages. 
 
 In the beginning, money wages 
 would probably remain the same as 
 before, and the labourers would have 
 the full benefit of the cheapness. They 
 would be enabled to increase their 
 consumption either of food or of other 
 articles, and would receive the same 
 cost, and a greater quantity. So 
 far, profits would be unaffected. But 
 the permanent remuneration of the 
 labourers essentially depends on what 
 we have called their habitual stan- 
 dard ; the extent of the require- 
 ments which, as a class, they in- 
 sist on satisfying before they choose 
 to have children. If their tastes and 
 requirements receive a durable impress 
 from the sudden improvement in their 
 condition, the benefit to the class will 
 be permanent. But the same cause 
 which enables them to purchase greater 
 comforts and indulgences with the same 
 wages, would enable them to purchase 
 the same amount of comforts and in- 
 
 dulgences with lower wages ; and a 
 greater population may now exist, 
 without reducing the labourers below 
 the condition to which they are accus- 
 tomed. Hitherto, this and no other 
 has been the use which the labourers 
 have commonly made of any increase 
 of their means of living ; they have 
 treated it simply as convertible into 
 food for a greater number of children. 
 It is probable, therefore, that popula- 
 tion would be stimulated, and that 
 after the lapse of a generation the real 
 wages of labour would be no higher 
 than before the improvement : the re- 
 duction being partly brought about by 
 a fall of money wages, and partly 
 through the price of food, the cost of 
 which, from the demand occasioned 
 by the increase of population, would 
 be increased. To the extent to 
 which money wages fell, profits would 
 rise ; the capitalist obtaining a greater 
 quantity of equally efficient labour by 
 the same outlay of capital. We thus 
 see that a diminution of the cost of 
 living, whether arising from agricultu- 
 ral improvements or from the importa- 
 tion of foreign produce, if the habits 
 and requirements of the labourers are 
 not raised, usually lowers money wages 
 and rent, and raises the general rate of 
 profit. 
 
 What is true of improvements which 
 cheapen the production of food, is true 
 also of the substitution of a cheaper for 
 a more costly variety of it. The same 
 land yields to the same labour a much 
 greater quantity of human nutriment 
 in the form of maize or potatoes, than 
 in the form of wheat. If the labourers 
 were to give up bread, and feed only 
 on those cheaper products, taking as 
 their compensation not a greater quan- 
 tity of other consumable commodities, 
 but earlier marriages and larger fami- 
 lies, the cost of labour would be much 
 diminished, and if labour continued 
 equally efficient, profits would rise ; 
 while rent would be much lowered, 
 since food for the whole population 
 could be raised on half or a third part 
 of the land now sown with corn. At 
 the same time, it being evident that 
 land too barren to be cultivated for 
 wheat might be made in case of neeeo-
 
 INFLUENCE OF PROGRESS ON RENTS, PROFITS, ETC. 43? 
 
 of these rival forces. If during any 
 
 Bity to yield potatoes sufficient to sup- 
 port the little labour necessary for 
 producing them, cultivation might ulti- 
 mately descend lower, and rent even- 
 tually rise higher, on a potato or maize 
 sy>trni, than on a corn system ; be- 
 cause the land would he capable of 
 feeding a much larger population before 
 reaching the limit of its powers. 
 
 If the improvement, which we sup- 
 pose to take place, is not in the pro- 
 duction of food, but of some manufac- 
 tured article consumed by the labouring 
 class, the effect on wages and profits 
 will at first be the same ; but the 
 effect on rent very different. It will 
 not be lowered ; it will even, if the ul- 
 timate effect of the improvement is an 
 increase of population, be raised : in 
 which last case profits will be lowered. 
 The reasons are too evident to require 
 statement. 
 
 5. We have considered, on the 
 one hand, the manner in which the 
 distribution of the produce into rent, 
 profits, and wages, is affected by the 
 ordinary increase of population and 
 capital, and on the other, how it is 
 affected by improvements in produc- 
 tion, and more especially in agricul- 
 ture. We have found that the former 
 cause lowers profits, and raises rent 
 and the cost of labour : while the ten- 
 dency of agricultural improvements is 
 to diminish rent ; and all improve- 
 ments which cheapen any article of 
 the labourer's consumption, tend to 
 diminish the cost of labour, and to 
 raise profits. The tendency of-each 
 cause in its separate state being thus 
 ascertained, it is easy to determine the 
 tendency of the actual course of things, 
 in which the two movements are going 
 on simultaneously, capital and popu- 
 lation increasing with tolerable stea- 
 diness, while improvements in agri- 
 culture are made from time to time, 
 and the knowledge and practice of 
 improved methods become diffused 
 gradually through the community. 
 
 The habits and requirements of the 
 labouring classes being given (which 
 determine their real wages,) rent, 
 profits, and money wages at any given 
 time, are the result of the composition 
 
 period agricultural improvement ad- 
 vances faster than population, rent and 
 money wages during that period will 
 tend downward, and profits upward. 
 If population ads r ances more rapidly 
 than agricultural improvement, either 
 the labourers will submit to a reduc- 
 tion in the quantity or quality of their 
 food, or if not, rent and money wages 
 will progressively rise, and profits will 
 fall. 
 
 Agricultural skill and knowledge are 
 of slow growth, and still slower diffu- 
 sion. Inventions and discoveries, too, 
 occur only occasionally, while the in- 
 crease of population and capital are 
 continuous agencies. It therefore 
 seldom happens that improvement, 
 even during a short time, has so much 
 the start of population and capital as 
 actually to lower rent, or raise the 
 rate of profits. There are many 
 countries in which the growth of 
 population and capital are not rapid, 
 but in these agricultural improvement 
 is less active still. Population almost 
 everywhere treads close on the heels of 
 agricultural improvement, and effaces 
 its effects as fast as they are produced. 
 
 The reason why agricultural im- 
 provement seldom lowers rent, is that 
 it seldom cheapens food, but only pre- 
 vents it from growing dearer ; <md 
 seldom, if ever, throws land out of 
 cultivation, but only enables worse and 
 worse land to be taken in for the sup- 
 ply of an increasing demand. What 
 is sometimes called the natural stato 
 of a country which is but half cul- 
 tivated, namely, that the land is 
 highly productive, and food obtained 
 in great abundance by little labour, is 
 only true of unoccupied countries colo- 
 nized by a civilized people. In the 
 United States the worst land in cul- 
 tivation is of a high quality (except 
 sometimes in the immediate vicinity 
 of markets or means of conveyance, 
 where a bad quality is compensated 
 by a good situation) ; and even if no 
 further improvements were made in 
 agriculture or locomotion, cultivation 
 would have many steps yet to descend, 
 before the increase of population and 
 capital would be brought to a stand;
 
 188 
 
 BOOK IV. 
 
 out in Europe five hundred vears ago, 
 though so thinly peopled in compa- 
 rison to the present population, it is 
 probable that the worst land under the 
 plough was, from the rude state of 
 agriculture, quite as unproductive as 
 the worst land now cultivated ; and 
 that cultivation had approached as 
 near to the ultimate limit of profitable 
 tillage, in those times as in the pre- 
 sent. What the agricultural improve- 
 ments since made have really done is, 
 hy increasing the capacity of produc- 
 tion of land in general, to enable til- 
 lage to extend downwards to a much 
 worse natural quality of land than the 
 worst which at that time would have 
 admitted of cultivation by a capitalist 
 for profit ; thus rendering a much 
 greater increase of capital and popu- 
 lation possible, and removing always 
 a little and a little further off, the 
 barrier which restrains them ; popu- 
 lation meanwhile always pressing so 
 hard against the barrier, that there is 
 never any visible margin left for it to 
 seize, every inch of ground made 
 vacant for it by improvement being at 
 once filled up by its advancing columns. 
 Agricultural improvement may thus 
 be considered to be not so much a 
 counterforce conflicting with increase 
 of population, as a partial relaxation 
 of the bonds which confine that in- 
 crease. 
 
 The effects produced on the division 
 of the produce by an increase of pro- 
 duction, under the joint influence of 
 increase of population and capital and 
 improvements of agriculture, are very 
 different from those deduced from the 
 hypothetical cases previously discussed. 
 In particular, the effect on rent is 
 most materially different. We re- 
 marked that while a great agricul- 
 tural improvement, made suddenly and 
 universally, would in the first instance 
 inevitably lower rent such improve- 
 ments enable rent, in the progress of 
 society, to rise gradually to a much 
 higher limit than it could otherwise 
 attain, since they enable a much 
 lower quality of land to be ultimately 
 cultivated. But in the case we are 
 now supposing, which nearly cor- 
 responds to the usual course of things, 
 
 CHAPTER HI. 5 
 
 this ultimate effect becomes the imma 
 diate effect. Suppose cultivation to 
 have reached, or almost reached, the 
 utmost limit permitted by the state of 
 the industrial arts, and rent, there- 
 fore, to have attained nearly the high- 
 est point to which it can be carried by 
 the progress of population and capital, 
 with the existing amount of skill and 
 knowledge. If a great agricultural 
 improvement were suddenly intro 
 duced, it might throw back rent for 
 a considerable space, leaving it to 
 regain its lost ground by the progress 
 of population and capital, and after- 
 wards to go on further. But, taking 
 place, as such improvement always 
 does, very gradually, it causes no re- 
 trograde movement of either rent or 
 cultivation ; it merely enables the one 
 to go on rising, and the other extend- 
 ing, long after they must otherwise 
 have stopped. It would do this even 
 without the necessity of resorting to 
 a worse quality of land ; simply by 
 enabling the lands already in cultiva- 
 tion to yield a greater produce, with 
 no increase of the proportional cost. 
 If by improvements of agriculture all 
 the lands in cultivation could be made, 
 even with double labour and capital, 
 to yield a double produce, (supposing 
 that in the meantime population in- 
 creased so as to require this double 
 quantity) all rents would be doubled. 
 
 To illustrate the point, let us revert 
 to the numerical example in a former 
 page. Three qualities of land yield 
 respectively 100, 80, and 60 bushels 
 to the same outlay on the same extent 
 of surface. If No. 1 could be made to 
 yield 200, No. 2, 160, and No. 3, 120 
 bushels, at only double the expense 
 and therefore without any increase of 
 the cost of production, and if the popu- 
 lation, having doubled, required aH 
 this increased quantity, the rent of 
 No. 1 would be 80 bushels instead of 
 40, and of No. 2, 40 instead of 20, 
 while the price and value per bushel 
 would be the same as before : so 
 that corn rent and money rent would 
 both bo doubled. I need not point 
 out the difference between this result, 
 and what we have shown would tak 
 place if there were an improvemeil
 
 TENDENCY OF PROFITS TO A MINIMUM. 
 
 439 
 
 in production without the accompa- 
 niment of an increased demand for 
 food. 
 
 Agricultural improvement, then, is 
 always ultimately, and in the manner 
 in which it generally takes place also 
 immediately, beneficial to the landlord. 
 We may add, that when it takes place 
 in that manner, it is beneficial to no 
 one else. When tho demand for pro- 
 duce fully keeps pace with the in- 
 creased capacity of production, food is 
 not cheapened ; the labourers are not, 
 even temporarily, benefited ; the cost 
 of labour is not diminished, nor profits 
 raised. There is a greater aggregate 
 production, a greater produce divided 
 among the labourers, and a larger gross 
 profit ; but thu wages being shared 
 among a larger population, and the 
 profit spread over a larger capital, no 
 labourer is better off, nor does any 
 capitalist derive from the same amount 
 of capital a larger income. 
 
 The result of this long investigation 
 may be summed up as follows. The 
 economical progress of a society con- 
 stituted of landlords, capitalists, and 
 labourers, tends to the progressive en- 
 richment of the landlord class ; while 
 the cost of the labourer's subsistence 
 tends on the whole to increase, and 
 profits to fall. Agricultural improve- 
 ments are a counteracting force to the 
 two last effects ; but the first, though 
 a case is conceivable in which it would 
 be temporarily checked, is ultimately 
 in a high degree promoted by those 
 improvements ; and the increase of 
 
 Eopulation tends to transfer all the 
 enefits derived from agricultural im- 
 provement to the landlords alone, 
 What other consequences, in addition 
 to these, or in modification of them, 
 arise from the industrial progress of a 
 society thus constituted, I shall en- 
 deavour to show in the succeeding 
 chaptei. 
 
 CHAPTER IV. 
 
 OF THE TENDENCY OP TBOFITS TO A MINIMUM. 
 
 1. THE tendency of profits to fall 
 as society advances, which has been 
 brought to notice in the preceding 
 chapter, was early recognised by 
 writers on industry and commerce ; 
 but the laws which govern profits not 
 being then understood, the phenome- 
 non was ascribed to a wrong cause. 
 Adam Smith considered profits to be 
 determined by what he called the 
 competition of capital ; and concluded 
 that when capital increased, this com- 
 petition must likewise increase, and 
 profits must fall. It is not quite cer- 
 tain what sort of competition Adam 
 Smith had here in view. His words 
 in the chapter on Profits of Stock* 
 are, " When the stocks of many rich 
 merchants are turned into the same 
 trade, their mutual competition natu- 
 rally tends to lower its profits ; and 
 * Wealth of Xationi, book i. ch. 9. 
 
 when there is a like increase of stock 
 in all the different trades carried on in 
 the same society, the same competition 
 must produce the same effect in them 
 all." This passage would lead us to 
 infer that, in Adam Smith's opinion, 
 the manner in which the competition 
 of capital lowers profits is by lowering 
 prices ; that being usually the mode 
 in which an increased investment of 
 capital in any particular trade, lowers 
 the profits of that trade. But if this 
 was his meaning, he overlooked the 
 circumstance, that the fall of price, 
 which if confined to one commodity 
 really does lower the profits of the 
 producer, ceases to have that effect as 
 soon as it extends to all commodities ; 
 because, when all things have fallen, 
 nothing has really fallen, except nomi- 
 nally ; and even computed in money, 
 the expenses of every producer have
 
 4-10 
 
 BOOK IV. CHAPTER IV. 2 
 
 diminished as much as his returns. 
 Unless indeed labour he the one com- 
 modity which has not fallen in money 
 price, when all other things hare : if 
 BO, what has really taken place is a 
 rise of wages ; and it is that, aud not 
 the fall of prices, which Las lowered 
 the profits of capital. There is another 
 thing which escaped the notice of 
 Adam Smith ; that the supposed uni- 
 versal fall of prices, through increased 
 competition of capitals, is a thing 
 which cannot take place. Prices are 
 not determined by the competition of 
 the sellers only, but also by that of 
 the buyers ; by demand as well as 
 supply. The demand which affects 
 money prices consists of all the money 
 in the hands of the community des- 
 tined to be laid out in commodities ; 
 and as long as the proportion of this 
 to the commodities is not diminished, 
 there is no fall of general prices. 
 Now, howsoever capital may increase, 
 and give rise to an increased produc- 
 tion of commodities, a full share of the 
 capital will be drawn to the business 
 of producing or importing money, and 
 the quantity of money will be aug- 
 mented in an equal ratio with the 
 quantity of commodities. For if this 
 were not the case, and if money, there- 
 fore, were, as the theory supposes, 
 perpetually acquiring increased pur- 
 chasing power, those who produced or 
 imported it would obtain constantly 
 increasing profits ; and this could not 
 happen without attracting labour and 
 capital to that occupation from other 
 employments. If a general fall of 
 prices, and increased value of money, 
 were really to occur, it could only be 
 as a consequence of increased cost of 
 production, from the gradual exhaus- 
 tion of the mines. 
 
 It is not tenable, therefore, in theory, 
 that the increase of capital produces, 
 or tends to produce, a general decline 
 of money prices. Neither is it true, 
 that any general decline of prices, 
 as capital increased, has manifested 
 itself in fact. The only things ob- 
 served to fall in price with the progress 
 of society, are those in which there 
 have been improvements in production, 
 greater than have taken place in the 
 
 production of the precious metals ; as 
 for example, all spun and woven 
 fabrics. Other things again, instead 
 of falling, have risen in price, be- 
 cause their cost of production, com- 
 pared with that of gold and silver, has 
 increased. Among these are all kinds 
 of food, comparison being made with a 
 much earlier period of history. The 
 doctrine, therefore, that competition of 
 capital lowers profits by lowering 
 prices, is incorrect in fact, as well as 
 unsound in principle. 
 
 But it is not certain that Adam 
 Smith really held that doctrine ; for his 
 language on the subject is wavering 
 and unsteady, denoting the absence of 
 a definite and well-digested opinion. 
 Occasionally he seems to think that 
 the mode in which the competition of 
 capital lowers profits, is by raising 
 wages. And when speaking of the 
 rate of profit in new colonies, he seems 
 on the very verge of grasping the com- 
 plete theory of the subject. "As the 
 colony increases, the profits of stock 
 gradually diminish. When the most 
 fertile and best situated lands have 
 been all occupied, less profit can be 
 made by the cultivation of what is in- 
 ferior both in soil and situation." Had 
 Adam Smith meditated longer on 
 the subject, and systematized his 
 view of it by harmonizing with each 
 other the various glimpses which he 
 caught of it from different points, he 
 would have perceived that this last 
 is the true cause of the fall of profits 
 usually consequent upon increase ot 
 capital. 
 
 2. Mr. Wakefield, in his Com- 
 mentary on Adam Smith, and his im- 
 portant writings on Colonization, takes 
 a much clearer view of the subject, 
 and arrives, through a substantially 
 correct series of deductions, at practi- 
 cal conclusions which appear to me 
 just and important ; but he is not 
 equally happy in incorporating his 
 valuable speculations with the results 
 of previous thought, and reconciling 
 them with other truths. Some of the 
 theories of Dr. Chalmers, in his chapter 
 " On the Increase and Limits of Capi- 
 tal," and the two chapters which follow
 
 TENDENCY OF PROFITS TO A MINIMUM. 
 
 441 
 
 it, coincide in their tendency and 
 spirit with those of Mr. Wakefield ; 
 but Dr. Chalmers' ideas, though de- 
 livered, ns is his custom, with a most 
 attractive semblance of clearness, are 
 rr-allv on this subject much more con- 
 fos i ilian even those of Adam Smith, 
 and more decidedly infected with the 
 often refuted notion that the compe- 
 tition of capital lowers general prices ; 
 the subject of Money apparently not 
 having been included among the parts 
 of Political Economy which this acute 
 and vigorous writer had carefully 
 studied. 
 
 Mr. Wakefield's explanation of the 
 fall of profits is briefly this. Production 
 is limited not solely by the quantity of 
 capital and of labour, but also by the 
 extent of the "field of employment." 
 The field of employment for capital is 
 twofold ; the land of the country, and 
 the capacity of foreign markets to take 
 its manufactured commodities. On a 
 limited extent of land, only a limited 
 quantity of capital can find employment 
 at a profit. As the quantity of capital 
 approaches this limit, profit falls ; when 
 the limit is attained, profit is annihi- 
 lated ; and can only be restored through 
 an extension of the field of employment, 
 either by the acquisition of fertile land, 
 or by opening new markets in foreign 
 countries, from which food and ma- 
 terials can be purchased with the 
 products of domestic capital. These 
 propositions are in my opinion sub- 
 stantially true ; and, even to the phra- 
 seology in which they are expressed, 
 considered as adapted to popular and 
 practical rather than scientific uses, I 
 nave nothing to object. The error which 
 seems to me imputable to Mr. Wake- 
 field is that of supposing his doctrines 
 to be in contradiction to the principles 
 of the best school of preceding political 
 economists, instead of being, as they 
 really are, corollaries from those prin- 
 ciples ; though corollaries which, per- 
 haps, would not always have been 
 admitted by those political economists 
 themselves. 
 
 The most scientific treatment of the 
 Bubject which I have met with, is in an 
 essay on the effects of Machinery, pub- 
 lished in the Westminster Review for 
 
 January 1826, by Mr. William Ellis ;* 
 which was doubtless unknown to Mr, 
 Wakefield, but which had preceded 
 him, though by a different path, in 
 several of his leading conclusions. This 
 essay excited little notice, partly from 
 being published anonymously in a pe- 
 riodical, and partly because it was 
 much in advance of the state of political 
 economy at the time. In Mr. Ellis's 
 view of the subject, the questions and 
 difficulties raised by Mr. Wakefield's 
 speculations and by those of Dr. 
 Chalmers, find a solution consistent 
 with the principles of political economy 
 laid down in the present treatise. 
 
 3. There is at every time and place 
 some particular rate of profit, which is 
 the lowest that will induce the people 
 of that country and time to accumulate 
 savings, and to employ those savings 
 productively. This minimum rate ot 
 profit varies according to circum- 
 stances. It depends on two elements. 
 One is, the strength of the effective 
 desire of accumulation ; the compara- 
 tive estimate made by the people of 
 that place and era, of future interests 
 when weighed against present. This 
 element chiefly affects the inclination to 
 save. The other element, which affects 
 not so much the willingness to save as 
 the disposition to employ savings pro- 
 ductively, is the degree of security of 
 capital engaged in industrial opera- 
 tions. A state of general insecurity, 
 no doubt affects also the disposition to 
 save. A hoard may be a source of ad- 
 ditional danger to its reputed possessor. 
 But as it may also be a powerful means 
 of averting dangers, the effects in this 
 respect may perhaps be looked upon as 
 balanced. But in employing any funds 
 which a person may possess as capital 
 on his own account, or in lending it 
 to others to be so employed, there is 
 always some additional risk, over and 
 above that incurred by keeping it idlo 
 in his own custody. This extra ri.-k is 
 great in proportion as the general state 
 
 * Now so much better known through Ills 
 apostolic exertions, by pen, purse, and per- 
 son, for the improvement of popular educa- 
 tion, and especially for the introduction into 
 it of the elements of practical Political 
 Economy.
 
 44* 
 
 BOOK IV. CHAPTER IV. 3. 
 
 of society is insecure : it may be equi- 
 valent to twenty, thirty, or fifty per 
 cent, or to no more than one or two ; 
 something, however, it must always 
 be : and for this, the expectation of 
 profit must be sufficient to compensate. 
 There would be adequate motives 
 for a certain amount of saving, even 
 if capital yielded no profit. There 
 would be an inducement to lay by 
 in good times a provision for bad ; 
 to reserve something for sickness and 
 infirmity, or as a means of leisure 
 and independence in the latter part of 
 life, or a help to children in the outset 
 of it. Savings, however, which have 
 only these ends in view, have not much 
 tendency to increase the amount of ca- 
 pital permanently in existence. These 
 motives only prompt persons to save at 
 one period of life what they purpose to 
 consume at another, or what will be 
 consumed by their children before they 
 can completely provide for themselves. 
 The savings by which an addition is 
 made to the national capital, usually 
 emanate from the desire of persons to 
 improve what is termed their condition 
 in life, or to make a provision for chil- 
 dren or others, independent of their 
 exertions. Now, to the strength of these 
 inclinations it makes a very material 
 difference how much of the desired ob- 
 ject can be effected by a given amount 
 and duration of self-denial ; which again 
 depends on the rate of profit. And there 
 is in every country some rate of profit, 
 below which persons in general will not 
 find sufficient motive to save for the mere 
 purpose of growing richer, or of leaving 
 others better off than themselves. Any 
 accumulation, therefore, by which the 
 general capital is increased, requires as 
 its necessary condition a certain rate 
 of profit : a rate which an average per- 
 son will deem to be an equivalent for 
 abstinence, with the addition of a suffi- 
 cient insurance against risk. There 
 are always some persons in whom the 
 effective desire of accumulation is above 
 the average, and to whom less than this 
 rate of profit is a sufficient inducement 
 to save ; but these merely step into the 
 place of others whose taste for expense 
 and indulgence is beyond the average, 
 and who, instead of saving, perhaps 
 
 even dissipate what they havo re- 
 ceived. 
 
 I have already observed that this 
 minimum rate of profit, less than which 
 is not consistent with the further in- 
 crease of capital, is lower in some states 
 of society than in others ; and I may 
 add, that the kind of social progress 
 characteristic of our present civilixa- 
 tion, tends to diminish it. In the lir^t 
 place, one of the acknowledged effects 
 of that progress is an increase of gene- 
 ral security. Destruction by wars, ainT 
 spoliation by private or public violence, 
 are less and less to be apprehended; 
 and the improvements which may be 
 looked for in education and in the ad- 
 ministration of justice, or, in their 
 default, increased regard for opinion, 
 afford a growing protection against 
 fraud and reckless mismanagement. 
 The risks attending the investment of 
 savings in productive employment, re- 
 quire therefore a smaller rate of profit 
 to compensate for them than was re- 
 quired a century ago, and will here- 
 after require less than at present. In 
 the second place, it is also one of the 
 consequences of civilization that man- 
 kind become less the slaves of the 
 moment, and more habituated to carry 
 their desires and purposes forward into 
 a distant future. This increase of pro- 
 vidence is a natural result of the in- 
 creased assurance with which futurity 
 can be looked forward to; and is, be- 
 sides, favoured by most of the influ- 
 ences which an industrial life exercises 
 over the passions and inclinations of 
 human nature. In proportion as life 
 has fewer vicissitudes, as habits become 
 more fixed, and great prizes are less 
 and less to be hoped for by any other 
 means than long perseverance, man- 
 kind become more willing to sacrifice 
 present indulgence for future objects. 
 This increased capacity of forethought 
 and self-control may assuredly find 
 other things to exercise itself upon 
 than increase of riches, and some con- 
 siderations connected with this topio 
 will shortly be touched upon. Tho 
 present kind of social progress, how- 
 ever, decidedly tends, though not per- 
 haps to increase the desire of accumu- 
 lation, yet to weaken the obstacles to
 
 TENDENCY OF PROFITS TO A MINIMUM. 
 
 443 
 
 it, and to diminish the amount of profit 
 which people absolutely require as an 
 inducement to save and accumulate. 
 For these two reasons, diminution of 
 risk and increase of providence, a profit 
 fir interest of three or four per cent is 
 as sufficient a motive to the increase of 
 capital in England at the present day, 
 as thirty or forty per cent in the Bur- 
 mese Empire, or in England at the 
 time of King. John. In Holland during 
 the List century a return of two pel- 
 cent, on government security, was con- 
 Mstt-nt with an undimiuished, if not 
 \viih an increasing capital. J)ut though 
 the minimum rate of profit is thus liable 
 to vary, and though to specify exactly 
 what it is would at any given time be 
 impossible, such a minimum always 
 exists; and whether it be high or low, 
 when once it is reached, no further in- 
 crease of capital can for the present 
 take place. The country has then 
 attained what is known to political 
 economists under the name of the sta- 
 tionary state. 
 
 4. We now arrive at the funda- 
 mental proposition which this chapter 
 is intended to inculcate. When a coun- 
 try has long possessed a large produc- 
 tion, and a large net income to make 
 savings from, and when, therefore, the 
 means have long existed of making a 
 great annual addition to capital ; (the 
 country not having, like America, a 
 large reserve of fertile land still un- 
 used ;) it is one of the characteristics 
 of such a country, that the rate of 
 profit is habitually within, as it were, 
 a hand's breadth of the minimum, and 
 the country therefore on the very verge 
 of the stationary state. By this I do 
 not mean that this state is likely, in 
 any of the great countries of Europe, 
 to be soon actually reached, or that 
 capital docs not still yield a profit con- 
 siderably greater than what is barely 
 sufficient to induce the people of those 
 countries to save and accumulate. My 
 meaning is, that it would require but 
 a short time to reduce profits to the 
 minimum, if capital continued to in- 
 .t its present rate, and no cir- 
 cumstances having a tendency to raise 
 the rate of profit occurred in the mean- 
 
 time. The expansion of capital would 
 soon reach its ultimate boundary, if the 
 boundary itself did not continually open 
 and leave more space. 
 
 In England, the ordinary rate of 
 interest on government securities, in 
 which the risk is next to nothing, may 
 be estimated at a little more than three 
 per cent : in all other investments, 
 therefore, the interest or profit calcu- 
 lated upon (exclusively of what -is pro- 
 perly a remuneration for talent or ex- 
 ertion) must be as much more than 
 this amount, as is equivalent to the 
 degree of risk to which the capital is 
 thought to be exposed. Let us suppose 
 that in England even so small a net 
 profit as one per cent, exclusive of in- 
 surance against risk, would constitute 
 a sufficient inducement to save, but 
 that less than this would not be a suffi- 
 cient inducement. I now say, that the 
 mere continuance of the present annual 
 increase of capital, if no circumstance 
 occurred to counteract its effect, would 
 suffice in a small number of years to 
 reduce the rate of net profit to one per 
 cent. 
 
 To fulfil the conditions of the hypo- 
 thesis, we must suppose an entire ces- 
 sation of the exportation of capital for 
 foreign investment. No more capital 
 sent abroad for railways, or loans ; no 
 more emigrants taking capital with 
 them, to the colonies, or to other coun- 
 tries; no fresh advances made, or 
 credits given, by bankers or merchants 
 to their foreign correspondents. We 
 must also assume that there are no 
 fresh loans for unproductive expendi- 
 ture by the government, or on mort- 
 gage, or otherwise ; and none of the 
 waste of capital which now takes place 
 by the failure of undertakings, which 
 people are tempted to engage in by 
 the hope of a better income than can 
 be obtained in safe paths at the present 
 habitually low rate of profit. We must 
 suppose the entire savings of the com- 
 munity to be annually invested in 
 really productive employment within 
 the country itself; and no new channels 
 opened by industrial inventions, or by 
 a more extensive substitution of the 
 best known processes for inferior ones. 
 
 Few persons would hesitate to say
 
 444 
 
 BOOK IV. CHAPTER IV. 5, 
 
 that tlicre would be great difficulty in 
 limling remunerative employment every 
 year ibr so much new capital, and most 
 would conclude that there woull be 
 what used to be termed a general glut ; 
 that commodities would be produced, and 
 remain unsold, or be sold only at a loss. 
 But the full examination which we have 
 already given to this question,* has 
 shown that this is not the mode in 
 which the inconvenience would be ex- 
 perienced. The difficulty would not 
 consist in any want of a market. If 
 the new capital were duly shared 
 among many varieties of employment, 
 it would raise up a demand for its own 
 produce, and there would be no cause 
 why any part of that produce should 
 remain longer on hand than formerly. 
 What would really be, not merely diffi- 
 cult, but impossible, would be to em- 
 ploy this capital without submitting to 
 a rapid reduction of the rate of profit. 
 
 As capital increased, population 
 either would also increase, or it would 
 not. If it did not, wages would rise, 
 and a greater capital would be distri- 
 buted in wages among the same num- 
 ber of labourers. There being no more 
 labour than before, and no improve- 
 ments to render the labour more effi- 
 cient, there would not be any increase 
 of the produce ; and as the capital, 
 however largely increased, would only 
 obtain the same gross return, the whole 
 savings of each year would be exactly 
 so much subtracted from the profits of 
 the next and of every following year. 
 It is hardly necessary to say that in 
 such circumstances profits would very 
 soon fall to the point at which further 
 increase of capital would cease. An 
 augmentation of capital, much more 
 rapid than that of population, must 
 soon reach its extreme limit, unless 
 accompanied by increased efficiency of 
 labour (through inventions and disco- 
 veries, or improved mental and physical 
 education), or unless some of the idle 
 people, or of the unproductive labourers, 
 became productive. 
 
 If population did increase with the 
 increase of capital, and in proportion to 
 it,_the fall of profits wmild still be in- 
 evitable. Increased population implies 
 Book iii. ch. 14. 
 
 increased demand for agricultural pro- 
 duce. In the absence of industrial im- 
 provements, this demand can only be 
 supplied at an increased cost of produc- 
 tion, either by cultivating worse land, 
 or by a more elaborate and costly cul- 
 tivation of the land already under til- 
 lage. The cost of the labourer's sub- 
 sistence is therefore increased ; and 
 unless the labourer submits to a deteri- 
 oration of his condition, profits must fall. 
 In an old country like England, if, in 
 addition to supposing all improvement 
 in domestic agriculture suspended, we 
 suppose that there is no increased pro- 
 duction in foreign countries for the 
 English market, the fall of profits would 
 be very rapid. If both these avenues 
 to an increased supply of food were 
 closed, and population continued to in- 
 crease, as it is said to do, at the rate of 
 a thousand a day, all waste land which 
 admits of cultivation in the existing 
 state of knowledge would soon be culti- 
 vated, and the cost of production and 
 price of food would be so increased, 
 that if the labourers received the in- 
 creased money wages necessary to com- 
 pensate for their increased expenses, 
 profits would very soon reach the mini- 
 mum. The fall of profits would be re- 
 tarded if money wages did not rise, or 
 rose in a less degree ; but the margin 
 which can be gained by a deterioration 
 of the labourers' condition is a very nar- 
 row one : in general they cannot bear 
 much reduction ; when they can, they 
 have also a higher standard of neces- 
 sary requirements, and will not. On 
 the whole, therefore, we may assume 
 that in such a country as England, if 
 the present annual amount of savings 
 were to continue, without any of the 
 counteracting circumstances which now 
 keep in check the natural influence of 
 those savings in reducing profit, the 
 rate of profit would speedily attain the 
 minimum, and all further accumula- 
 tion of capital would for the present 
 cease. 
 
 5. What, then, are these counter- 
 acting circumstances, which, in the 
 existing state of things, maintain a 
 tolerably equal struggle against the 
 downward tendency of profits, and pre
 
 TENDENCY OF PROFITS TO A MINIMUM. 
 
 445 
 
 Vent the great annual savings which 
 take place in this country, from de- 
 pressing the rate of profit much nearer 
 tothat lowest point to which it is always 
 tending, and which, left to itself, it 
 would so promptly attain ? The re- 
 sisting agencies are of several kinds. 
 
 First among them, we may notice 
 one which is so simple and so conspi- 
 cuous, that some political economists, 
 especially M. de Sismondi and Dr. 
 Chalmers, have attended to it almost 
 to the exclusion of all others. This is, 
 the waste of capital in periods of over- 
 trading and rash speculation, and in 
 the commercial revulsions by which 
 such times are always followed. Tt is 
 true that a great part of what is lost 
 at such periods is not destroyed, but 
 merely transferred, like a gambler's 
 losses, to more successful speculators. 
 But even of these mere transfers, a 
 large portion 13 always to foreigners, 
 by the hasty purchase of unusual 
 quantities of foreign goods at advanced 
 prices. And much also is absolutely 
 wasted. Mines are opened, railways 
 or bridges made, and many other works 
 of uncertain profit commenced, and in 
 these enterprises much capital is sunk 
 which yields either no return, or none 
 adequate to the outlay. Factories are 
 built and machinery erected beyond 
 what the market requires, or can keep 
 in employment. Even if they are kept 
 in employment, the capital is no less 
 sunk ; it has been converted from cir- 
 culating into fixed capital, and has 
 ceased to have any influence on wages 
 or profits. Besides this, there is a 
 great unproductive consumption of ca- 
 pital, during the stagnation which fol- 
 lows a period of general over-trading. 
 Establishments are shut up, or kept 
 working without any profit, hands are 
 discharged, and numbers of persons in 
 all ranks, being deprived of their in- 
 come, and thrown for support on their 
 savings, find themselves, after the 
 crisis has passed away, in a condition 
 of more or less impoverishment. Such 
 are the effects of a commercial revul- 
 sion : and that such revulsions are al- 
 most periodical, is a consequence of the 
 very tendency of profits which we are 
 considering. By the time a few ycarc 
 
 have passed over without a crisis, so 
 much additional capital has been ac- 
 cumulated, that it is no longer possible 
 to invest it at the accustomed profit : 
 all public securities rise to a high price, 
 the rate of interest on the best mer- 
 cantile security falls very low, and the 
 complaint is general among persons in 
 business that no money is to be made. 
 Does not this demonstrate how speedily 
 profit would be at the minimum, and 
 the stationary condition of capital 
 would be attained, if these accumula- 
 tions went on without any counteract- 
 ing principle ? But the diminished 
 scale of all safe gains, inclines persons 
 to give a ready ear to any projects 
 which hold out, though at the risk of 
 loss, the hope of a higher rate of 
 profit ; and speculations ensue, which, 
 with the subsequent revulsions, de- 
 stroy, or transfer to foreigners, a con- 
 siderable amount of capital, produce a 
 temporary rise of interest and profit, 
 make room for fresh accumulations, 
 and the same round is recommenced. 
 
 This, doubtless, is one considerable 
 cause which arrests profits in their 
 descent to the minimum, by sweeping 
 away from time to time a part of the 
 accumulated mass by which they are 
 forced down. But this is not, as might 
 be inferred from the language of some 
 writers, the principal cause. If it 
 were, the capital of the country would 
 not increase ; but in England it does 
 increase greatly and rapidly. This is 
 shown by the increasing productiveness 
 of almost all taxes, by the continual 
 growth of all the signs of national 
 wealth, and by the rapid increase of 
 population, while the condition of the 
 labourers is certainly not decb'ning, but 
 on the whole improving. These things 
 prove that each commercial revulsion, 
 however disastrous, is very far from de- 
 stroying all the capital which has been 
 added to the accumulations of the 
 country since the last revulsion pre- 
 ceding it, and that, invariably, room is 
 either found or made for the profitable 
 employment of a perpetually increasing 
 capital, consistently with not forcing 
 down profits to a lower rate. 
 
 | 6. This brings us to the second of
 
 446 
 
 BOOK IV. CHAPTER IV. 7. 
 
 the counter-agencies, namely, improve- 
 ments in production. These evidently 
 have the effect of extending what Mr. 
 Wakefield terms the field of employ- 
 ment, that is, they enable a greater 
 amount of capital to be accumulated 
 and employed without depressing the 
 rate of profit : provided always that they 
 do not raise, to a proportional extent, 
 the habits and requirements of the la- 
 bourer. If the labouring class gain 
 the full advantage of the increased 
 cheapness, in other words, if money 
 wages do not fall, profits are not raised, 
 nor their fall retarded. But if the 
 labourers people up to the improve- 
 ment in their condition, and so relapse 
 to their previous state, profits will rise. 
 All inventions which cheapen any of 
 the things consumed by the labourers, 
 unless their requirements are raised in 
 an equivalent degree, in time lower 
 money wages : and by doing so, enable 
 a greater capital to be accumulated 
 and employed, before profits fall back 
 to what they were previously. 
 
 Improvements which only affect 
 things consumed exclusively by the 
 richer classes, do not operate precisely 
 in the same manner. The cheapening 
 of lace or velvet has no effect in dimi- 
 nishing the cost of labour ; and no 
 mode can be pointed out in which it 
 can raise the rate of profit, so as to 
 make room for a larger capital before 
 the minimum is attained. It, however, 
 produces an effect which is virtually 
 equivalent ; it lowers, or tends to 
 lower, the minimum itself. In the first 
 place, increased cheapness of articles 
 of consumption promotes the inclina- 
 tion to save, by affording to all con- 
 sumers a surplus which they may lay 
 by, consistently with their accustomed 
 manner of living; and unless they 
 were previously suffering actual hard- 
 ships, it will require little self-denial 
 to save some part at least of this sur- 
 plus. In the next place, whatever 
 enables people to live equally well on 
 a smaller income, inclines them to lay 
 I>y capital for a lower rate of profit. 
 If people can live on an independence 
 f 500Z. a year in the same manner as 
 they formerly could on one of 1000Z., 
 lome persons will be induced to save 
 
 in hopes of the one, who wouW have 
 been deterred by the more i smote 
 prospect of the other. All improve- 
 ments, therefore, in the production of 
 almost any commodity, tend in some 
 degree to widen the interval which hat 
 to be passed before arriving at the 
 stationaiy state : but this effect belongs 
 in a much greater degree to the im- 
 provements which affect the articles 
 consumed by the labourer, since these 
 conduce to it in two ways ; they induce 
 people to accumulate for a- lower profit, 
 and they also raise tho rate of profit 
 itself. 
 
 7. Equivalent in effect to improve- 
 ments in production, is the acquisition 
 of any new power of obtaining cheap 
 commodities from foreign countries. If 
 necessaries are cheapened, whether 
 they are so by improvements at home 
 or importation from abroad, is exactly 
 tho same thing to wages and profits. 
 Unless the labourer obtains, and by an 
 improvement of his habitual standard, 
 keeps, the whole benefit, the cost of 
 labour is lowered, and the rate of profit 
 raised. As long as food can continue 
 to be imported for an increasing popu- 
 lation without any diminution of cheap- 
 ness, so long the declension of profits 
 through the increase of population and 
 capital is arrested, and accumulation 
 may go on without making the rate of 
 profit draw nearer to the minimum. 
 And on this ground it is believed by 
 some, that the repeal of the corn laws 
 has opened to this country a long era 
 of rapid increase of capital with an 
 undiminished rate of profit. 
 
 Before inquiring whether this expec- 
 tation is reasonable, one remark must 
 be made, which is much at variance 
 with commonly received notions. Fo- 
 reign trade does not necessarily increase 
 the field of employment for capital. It 
 is not the mere opening of a market 
 for a country's productions, that tends 
 to raise the rate of profits. If nothing 
 were obtained in exchange for those 
 productions but the luxuries of the rich, 
 the expenses of no capitalist would be 
 diminished ; profits would not be at all 
 raised, nor room made for tho accumu- 
 lation of move capital without sub*
 
 TENDENCY OP PROFITS TO A MINIMUM. 
 
 niitting to a reduction of profits : and 
 if tht? attainment of tho stationary 
 state were at all retarded, it would 
 only be because the diminished cost at 
 which a certain degree of luxury could 
 be enjoyed, might induce people, in 
 that prospect, to make fresh savings 
 for a lower profit than they formerly 
 were willing to do. When foreign 
 trade makes room for more capital at 
 the same profit, it is by enabling the 
 necessaries of life, or the habitual ar- 
 ticles of the labourer's consumption, to 
 bo obtained at smaller cost. It may 
 do this in two ways ; by the importa- 
 tion either of those commodities them- 
 selves, or of the means and appliances 
 for producing them. Cheap iron has, 
 in a certain measure, the same effect 
 on profits and the cost of labour as 
 cheap corn, because cheap iron makes 
 cheap tools for agriculture and cheap 
 machinery for clothing. But a foreign 
 trade which neither directly, nor by 
 any indirect consequence, increases 
 the cheapness of anything consumed 
 by the labourers, does not, any mere 
 than an invention or discovery in the 
 like case, tend to raise profits or retard 
 their fall ; it merely substitutes the 
 production of goods for foreign markets, 
 in tho room of the home production of 
 luxuries, leaving the employment for 
 capital neither greater nor less than 
 before. It is true, that there is scarcely 
 any export trade which, in a country 
 that already imports necessaries or ma- 
 terials, comes within these conditions : 
 for every increase of exports enables 
 the country to obtain all its imports on 
 cheaper terms than before. 
 
 A country which, as is now the case 
 with England, admits food of all kinds, 
 and all necessaries and the materials 
 of necessaries, to be freely imported 
 from all parts of the world, no longer 
 depends on the fertility of her own soil 
 to keep up her rate of profits, but on the 
 soil of the whole world. It remains 
 to consider how far this resource can 
 be counted upon for making head 
 during a very long period against the 
 tendency of profits to decline as capital 
 increases. 
 
 It must, of course, be supposed that 
 with the increase of capital, popula- 
 
 tion also increases ; for if it did not, 
 the consequent rise of wages would 
 bring down profits, in spite of any 
 rli.>ii|>u"s3 of food. Suppose then that 
 the population of Great Britain goes 
 on increasing at its present rate, and 
 demands every year a supply of imported 
 food considerably beyond that of the 
 year preceding. This annual increase 
 in the food demanded from the export- 
 ing countries, can only be obtained 
 either by great improvements in their 
 agriculture, or by the application of a 
 great additional capital to the growth 
 of food. The former is likely to be a very 
 slow process, from the rudeness and 
 ignorance of the agricultural classes in 
 the food-exporting conn tries of Europe, 
 while the British colonies and the 
 United States are already in possession 
 of most of the improvements yet made, 
 so far as suitable to their circumstances. 
 There remains as a resource, the ex- 
 tension of cultivation. And on this it 
 is to be remarked, that the capital by 
 which any such extension can take 
 place, is mostly still to be created. In 
 Poland, Russia, Hungary, Spain, the 
 increase of capital is extremely slow. 
 In America it is rapid, but not more 
 rapid than the population. The prin- 
 cipal fund at present available for sup- 
 plying this country with a yearly in- 
 creasing importation of food, is that 
 portion of the annual savings of 
 America which has heretofore been 
 applied to increasing the manufacturing 
 establishments of the United States, 
 and which free trade in corn may pos- 
 sibly divert from that purpose to grow- 
 ing food for our market. This limited 
 source of supply, unless great improve- 
 ments take place in agriculture, cannot 
 be expected to keep pace with tho 
 growing demand of so rapidly increas- 
 ing a population as that of Great Bri- 
 tain ; and if our population and capital 
 continue to increase with their present 
 rapidity, the only mode in which food 
 can continue to be supplied cheaply to 
 the one, is by sending the other abroad 
 to produce it. 
 
 8. This brings us to the last of the 
 counter-forces which check the down- 
 ward tendency of profits in a ccuutsj
 
 448 
 
 BOOK IV. CHAPTER V. 1. 
 
 whose capital increases faster than 
 that of its neighbours, and whose pro- 
 fits are therefore nearer to the mi- 
 nimum. This is, the perpetual over- 
 flow of capital into colonies or foreign 
 countries, to seek higher profits than 
 can be obtained at home. I believe 
 this to have been for many years one 
 of the principal causes by which the 
 decline of profits in England has been 
 arrested. It has a twofold operation. 
 In the first place, it does what a fire, 
 or an inundation, or a commercial crisis 
 would have done : it carries off a part 
 of the increase of capital from which 
 the reduction of profits proceeds. Se- 
 condly, the capital so carried off is not 
 lost, but is chiefly employed either in 
 founding colonies, which become large 
 exporters of cheap agricultural produce, 
 or in extending and perhaps improv- 
 ing the agriculture of older commu- 
 nities. It is to the emigration of En- 
 glish capital, that we have chiefly to 
 look for keeping up a supply of cheap 
 food and cheap materials of clothing, 
 proportional to the increase of our 
 population : thus enabling an increas- 
 ing capital to find employment in the 
 country, without reduction of profit, in 
 producing manufactured articles with 
 which to pay for this supply of raw 
 produce. Thus, the exportation of 
 capital is an agent of great efficacy in 
 extending the field of employment for 
 that which remains : and it may be 
 
 said truly that, up to a certain point, 
 the more capital we send away, the 
 more we shall possess and be able to 
 retain at home. 
 
 In countries which are further ad- 
 vanced in industry and population, and 
 have therefore a lower rate of profit, 
 than others, there is always, long 
 before the actual minimum is reached, 
 a practical minimum, viz. when profits 
 have fallen so much below what they 
 are elsewhere, that, were they to fall 
 lower, all further accumulations would 
 go abroad. In the present state of 
 the industry of the world, when there 
 is occasion, in any rich and improving 
 country, to take the minimum of profits 
 at all into consideration for practical 
 purposes, it is only this practical mi- 
 nimum that needs be considered. As 
 long as there are old countries where 
 capital increases very rapidly, and new 
 countries where profit is still high, 
 profits in the old countries will not sink 
 to the rate which would put a stop to 
 accumulation ; the fall is stopped at the 
 point which sends capital abroad. It 
 is only, however, by improvements in 
 production, and even in the production 
 of things consumed by labourers, that 
 the capital of a country like England 
 is prevented from speedily reaching 
 that degree of lowness of profit, which 
 would cause all further savings to he 
 sent to find employment in the colonies, 
 or in foreign countries. 
 
 CHAPTER V. 
 
 CONSEQUENCES OP THE TENDENCY OP PROFITS TO A MINIMUM. 
 
 1 . THE theory of the effect of ac- 
 cumulation on profits, laid down in the 
 preceding chapter, materially alters 
 many of the practical conclusions which 
 might otherwise be supposed to follow 
 from the general principles of Political 
 Economy, and which were, indeed, long 
 admitted as true by the highest autho- 
 rities on the subject. 
 
 It must greatly abate, or rather, al- 
 together destroy, in countries where 
 
 profits are low, the immense impor- 
 tance which used to be attached by 
 political economists to the effects which 
 an event or a measure of government 
 might have in adding to or subtracting 
 from the capital of the country. We 
 have now seen that the lowness of pro- 
 fits is a proof that the spirit of accu- 
 mulation is so active, and that the 
 increase of capital has proceeded at so 
 rapid a rate, as to outstrip the two
 
 TENDENCY OF PROFITS TO A MINIMUM. 
 
 449 
 
 counter-agencies, improvements in pro- ' 
 duction, and increased supply of cheap 
 necessaries from abroad : and that un- 
 less a considerable portion of the annual 
 increase of capital were either periodi- 
 cally destroyed, or exported for foreign 
 investment, the country would speedily 
 attain the point at which further accu- 
 mulation would cease, or at least spon- 
 taneously slacken, so as no longer to 
 overpass the march of invention in the 
 arts which produce the necessaries of 
 life. In such a state of things as this, 
 a sudden addition to the capital of the 
 country, unaccompanied by any increase 
 of productive power, would be but of 
 transitory duration ; since, by depress- 
 ing profits and interest, it would either 
 diminish by a corresponding amount 
 the savings which would bo made from 
 income in the year or two following, or 
 it would cause an equivalent amount 
 to be sent abroad, or to be wasted in 
 rash speculations. Neither, on the 
 other hand, would a sudden abstraction 
 of capital, unless of inordinate amount, 
 have any real effect in impoverishing 
 the country. After a few months or 
 years, there would exist in the coun- 
 try just as much capital as if none had 
 been taken away. The abstraction, by 
 raising profits and interest, would give 
 a fresh stimulus to the accumulative 
 principle, which would speedily fill up 
 the vacuum. Probably, indeed, the 
 only effect that would ensue, would be 
 that for some time afterwards less capi- 
 tal would be exported, and less thrown 
 away in hazardous speculation. 
 
 In the first place, then, this view of 
 things greatly weakens, in a wealthy 
 and industrious country, the force of 
 the economical argument against tho 
 expenditure of public money for really 
 valuable, even though industriously un- 
 productive, purposes. If for any great 
 object of justice or philanthropic policy, 
 such as the industrial regeneration of 
 Ireland, or a comprehensive measure 
 of colonization or of public education, 
 it were proposed to raise a large sum 
 by way of loan, politicians need not 
 demur to the abstraction of so much 
 capital, as tending to dry up the per- 
 manent sources of the country's wealth, 
 Bud diminish, the Awd 'which supplies 
 Mb 
 
 the subsistence of the labouring popu- 
 lation. The utmost expense which 
 could be requisite for any of these pur- 
 poses, would not in all probability de- 
 Srive one labourer of employment, or 
 iminish the next year's production by 
 one ell of cloth or one bushel of grain. 
 In poor countries, the capital of tho 
 country requires the legislator's sedu- 
 lous care ; he is bound to bo most 
 cautious of encroaching upon it, and 
 should favour to the utmost its accu- 
 mulation at home, and its introduction 
 from abroad. But in rich, populous, 
 and highly cultivated countries, it is 
 not capital which is the deficient ele- 
 ment, but fertile land ; and what the 
 legislator should desire and promote, is 
 not a greater aggregate saving, but a 
 greater return to savings, either by im- 
 proved cultivation, or by access to the 
 produce of more fertile lands in other 
 parts of the globe. In such countries, 
 the government may take any moderato 
 portion of the capital of the country 
 and expend it as revenue, without 
 affecting the national wealth : the whole 
 being either drawn from that portion 
 of the annual savings which would 
 otherwise be sent abroad, or being sub- 
 tracted from the unproductive expendi- 
 ture of individuals for the next year or 
 two, since every million spent makes 
 room for another million to be saved 
 before reaching the overflowing point. 
 "When the object in view is worth the 
 sacrifice of such an amount of the ex- 
 penditure that furnishes tho daily en- 
 joyments of the people, the only well- 
 grounded economical objection against 
 taking the necessary funds directly 
 from capital, consists of the inconve- 
 niences attending tho process of rais- 
 ing a revenue by taxation, to pay the 
 interest of a debt. 
 
 The same considerations enable us 
 to throw aside as unworthy of regard, 
 one of the common arguments against 
 emigration as a means of relief for the 
 labouring class. Emigration, it is said, 
 can do no good to the labourers, if, in 
 order to defray the cost, as much musf 
 be taken away from the capital of th< 
 country as from its population. That 
 anything like this proportion could re- 
 quire to b abstracted from capital fur
 
 450 
 
 BOOK IV. CHAPTEU V. 4. 
 
 the purpose even of the most extensive 
 colonization, few, I should think, would 
 now assert: but even on that untenable 
 supposition, it is an error to suppose 
 that no benefit would be conferred on 
 the labouring class. If one-tenth of 
 the labouring people of England were 
 transferred to the colonies, and along 
 with them one-tenth of the circulating 
 capital of the country, either wages, or 
 profits, or both, would be greatly bene- 
 fited, by the diminished pressure of 
 capital and population upon the ferti- 
 lity of the land. There would be a 
 reduced demand for food : the inferior 
 arable lands would be thrown out of 
 cultivation, and would become pasture ; 
 the superior would be cultivated less 
 highly, but with a greater proportional 
 return ; food would be lowered in price, 
 and though money wages would not 
 rise, every labourer would be consider- 
 ably improved in circumstances ; an 
 improvement which, if no increased 
 stimulus to population and fall of wages 
 ensued, would be permanent ; while if 
 there did, profits would rise, and accu- 
 mulation start forward so as to repair 
 the loss of capital. The landlords alone 
 would sustain some loss of income ; and 
 even they, only if colonization went to 
 the length of actually diminishing capi- 
 tal and population, but not if it merely 
 carried off the annual increase. 
 
 2. From the same principles we 
 are now able to arrive at a final con- 
 clusion respecting the effects which 
 machinery, and generally the sinking 
 of capital for a productive purpose, pro- 
 duce upon the immediate and ultimate 
 interests of the labouring class. The 
 characteristic property of this class of 
 Vidustrial improvements is the conver- 
 sion ef circulating capital into fixed : 
 and it was shown in the First Book,* 
 that in a country where capital accu- 
 mulates slowly, the introduction of ma- 
 chinery, permanent improvements of 
 land, and thelike, might be, for the time, 
 extremely injurious ; since the capital 
 BO employed might be directly taken 
 from the wages fund, the subsistence 
 of the people and the employment for 
 Jabour curtailed, and the gross annual 
 * Supra, p. 69. 
 
 produce of the country actually dimi- 
 nished. But in a country of great 
 annual savings and low profits, no such 
 effects need be apprehended. Since 
 even the emigration of capital, or its 
 unproductive expenditure, or its abso- 
 lute waste, do not in such a country, 
 if confined within any moderate bounds, 
 at all diminish the aggregate amount 
 of the wages fund still less can the 
 ineiC conversion of a like sum into fixed 
 capital, which continues to be produc- 
 tive, have that effect. It merely draws 
 off at one orifice what was already flow- 
 ing out at another; or if not, the greatei 
 vacant space left in the reservoir does 
 but cause a greater quantity to flow in. 
 Accordingly, in spite of the mischievous 
 derangements of the money-market 
 which have been occasioned by the 
 sinking of great sums in railways, I was 
 never able to agree with those who 
 apprehended mischief, from this source, 
 to the productive resources of the coun- 
 try. Not on the absurd ground (which 
 to any one acquainted with the ele- 
 ments of the subject needs no confuta- 
 tion) that railway expenditure is a mere 
 transfer of capital from hand to hand, 
 by which nothing is lost or destroyed. 
 This is true of what is spent in the pur- 
 chase of the land ; a portion too of what 
 is paid to parliamentary agents, coun- 
 sel, engineers, and surveyors, is saved 
 by those who receive it, and becomes 
 capital again : but what is laid out 
 in the bond fide construction of the rail- 
 way itself, is lost and gone ; when once 
 expended, it is incapable of ever being 
 paid in wages or applied to the main- 
 tenance of labourers again ; as a matter 
 of account, the result is that so much 
 food and clothing and tools have been 
 consumed, and the country has got a 
 railway instead. But what I would 
 urge is, that sums so applied are mostly 
 a mere appropriation of the annual 
 overflowing which would otherwise have 
 gone abroad, or been thrown away un- 
 profitably, leaving neither a rail way nor 
 any other tangible result. The railway 
 gambling of 1844 and 1845 probably 
 saved the country from a depression of 
 profits and interest, and a rise of all 
 public and private securities, which 
 would have engendered still wilder spe-
 
 TENDENCY OF PROFITS TO A MINIMUM. 
 
 45V 
 
 dilations, and when the effects camo 
 afterwards to be complicated by the 
 scarcity of food, would have ended in a 
 still more formidable crisis than was 
 need iu the years immediately 
 following. In the poorer countries of 
 Europe, the rage for railway construc- 
 tion might have had worse consequences 
 than in England, were it not that in 
 those countries such enterprises are in 
 a great measure carried on by foreign 
 capital. The railway operations of the 
 various nations of the world may be 
 looked upon as a sort of competition 
 for the overflowing capital of the coun- 
 tries where profit is low and capital 
 nlmndant, as England and Holland. 
 The English railway speculations are 
 a struggle to keep our annual increase 
 of capital at home; those of foreign 
 countries are an effort to obtain it.* 
 
 It already appears from these con- 
 fiMt't-alions, that the conversion of cir- 
 culating capital into fixed, whether by 
 railways, or manufactories, or ships, or 
 machinery, or canals, or mines, or works 
 of drainage and irrigation, is not likely, 
 in any rich country, to diminish the 
 gross produce or the amount of employ- 
 ment for labour. How much then is the 
 case strengthened, when we consider 
 that these transformations of capital are 
 of the nature of improvements in produc- 
 tion, which, instead of ultimately dimi- 
 nishing circulating capital, are the ne- 
 cessary conditions of its increase ; since 
 they alone enable a country to possess 
 a constantly augmenting capital, with- 
 out reducing profits to the rate which 
 would cause accumulation to stop. 
 There is hardly any increase of fixed 
 capital which does not enable the 
 country to contain eventually a larger 
 circulating capital, than it otherwise 
 could possess and employ within its 
 
 * It is hardly needful to point out how 
 fully the remarks in the text have been veri- 
 fied by subsequent facts. The capital of tho 
 country, far from having been in any degree 
 impaired by the large amount sunk in rail- 
 way construction, was Boon again over- 
 BewMfc, 
 
 own limits; for there i hardly any 
 creation of fixed capital which, when 
 it proves successful, does not cheapen 
 the articles on which wages are habi- 
 tually expended. All capital sunk in 
 the permanent improvement of land 
 lessens the cost of food and materials ; 
 almost all improvements in machinery 
 cheapen the labourer's clothing or 
 lodging, or the tools with which these 
 are made ; improvements in locomotion, 
 such as railways, cheapen to the con- 
 sumer all things which are brought 
 from a distance. All these improve- 
 ments make the labourers better off 
 with the same money wages, better off 
 if they do not increase their rate of 
 multiplication. But if they do, and 
 wages consequently fall, at least profits 
 rise, and, while accumulation receives 
 an immediate stimulus, room is made 
 for a greater amount of capital before 
 a sufficient motive arises for sending it 
 abroad. Even the improvements which 
 do not cheapen the things consumed 
 by the labourer, and which, therefore, 
 do not raise profits nor retain capital 
 in the country, nevertheless, as we have- 
 seen, by lowering the minimum of profit 
 for which people will ultimately consent 
 to save, leave an ampler margin than 
 previously for eventual accumulation, 
 before arriving at the stationary state. 
 We may conclude, then, that im- 
 provements in production, and emigra- 
 tion of capital to the more fertile soils 
 and unworked mines of the uninhabited 
 or thinly peopled parts of the globe, d 
 not, as appears to a superficial view, 
 diminish the gross produce and the 
 demand for labour at home, but, on 
 the contrary, are what we have chiefly 
 to depend on for increasing both, and 
 are even the necessary conditions of 
 any great or prolonged augmentation 
 of either. Nor is it any exaggeration 
 to say, that within certain, and not 
 very narrow, limits, the more capital a 
 country like England expends in thcso 
 two ways, the more she will have left.
 
 452 
 
 BOOK IV CHAPTER VI. g 1, 
 
 CHAPTER VL 
 
 OP THE STATIONARY STATE. 
 
 1. THE preceding chapters com- 
 prise the general theory of the econo- 
 mical progress of society, in the sense 
 in which those terms are commonly 
 understood ; the progress of capital, of 
 
 Bjpulation, and of the productive arts, 
 ut in contemplating any progressive 
 movement, not in its nature unlimited, 
 the mind is not satisfied with merely 
 tracing the laws of the movement ; it 
 cannot but ask the further question, to 
 what goal? Towards what ultimate 
 point is society tending by its indus- 
 trial progress? When the progress 
 ceases, in what condition are we to 
 expect that it will leave mankind? 
 
 It must always have been seen, more 
 or less distinctly, by political econo- 
 mists, that the increase of wealth is 
 not boundless : that at the end of what 
 they term the progressive state lies the 
 stationary state, that all progress in 
 wealth is but a postponement of this, 
 and that each step in advance is an 
 approach to it. We have now been 
 led to recognise that this ultimate goal 
 is at all times near enough to be fully 
 in view ; that we are always on the 
 verge of it. and that if we have not 
 reached it long ago, it is because the 
 goal itself flies before us. The richest 
 and most prosperous countries would 
 very soon attain the stationary state, 
 if no further improvements were made 
 in the productive arts, and if there 
 were a suspension of the overflow of 
 capital from those countries into the 
 uncultivated or ill-cultivated regions of 
 the earth. 
 
 This impossibility of ultimatelj 
 avoiding the stationary state this 
 irresistible necessity that the stream 
 of human industry should finally 
 spread itself out into an apparently 
 stagnant sea must have been, to the 
 political economists of the last two 
 generations, an unpleasing and dis- 
 couraging prospect ; for the tone and 
 tendency of theii speculations goes 
 
 completely to identify all that is econo- 
 mically desirable with the progressive 
 state, and with that alone. With Mr. 
 M'Culloch, for example, prosperity docs 
 not mean a large production and a good 
 distribution of wealth, but a rapid in- 
 crease of it ; his test of prosperity is 
 high profits ; and as the tendency of 
 that very increase of wealth, which he 
 calls prosperity, is towards low profits, 
 economical progress, according to him, 
 must tend to the extinction of pros- 
 perity. Adam Smith always assumes 
 that the condition of the mass of the 
 people, though it may not be positively 
 distressed, must be pinched and stinted 
 in a stationary condition of wealth, and 
 can only be satisfactory in a progressive 
 state. The doctrine that, to however 
 distant a time incessant struggling may 
 put oflfour doom, the progress of society 
 must "end in shallows and in miseries," 
 far from being, as many people still 
 believe, a wicked invention of Mr. Mal- 
 thus, was either expressly or tacitly 
 affirmed by his most distinguished pre- 
 decessors, and can only be successfully 
 combated on his principles. Before at- 
 tention had been directed to the prin- 
 ciple of population as the active force 
 in determining the remuneration of 
 labour, the increase of mankind was 
 virtually treated as a constant quan- 
 tity: it was, at all events, assumed 
 that in the natural and normal stata 
 of human affairs population must con- 
 stantly increase, from which it followed 
 that a constant increase of the means 
 of support was essential to the physical 
 comfort of the mass of mankind. The 
 publication of Mr. Malthus' Essay is 
 the era from which better views of tins 
 subject must be dated; and notwith- 
 standing the acknowledged errors of 
 his first edition, few writers have done 
 more than himself, in the subsequent 
 editions, to promote these juster and 
 more hopeful anticipations. 
 Even in a progressiTe state of capital.
 
 THE STATIONARY STATE. 
 
 453 
 
 in old countries, a conscientious or pru- 
 dential restraint on population isindis- 
 pi'tisable, to prevent the increase of 
 iiiinibcia from outstripping the in. 
 crease of capital, and the condition 
 of the classes who are at the bottom 
 of society from being deteriorated. 
 Where there is not, in the people, or 
 in some very large proportion of them, 
 a resolute resistance to this deteriora- 
 tion a determination to preserve an es- 
 tablished standard of comfort the con- 
 dition of the poorest class sinks, even 
 in a progressive state, to the lowest 
 point which they will consent to en- 
 dure. The same determination would 
 be equally effectual to keep up their 
 condition in the stationary state, and 
 would be quite as likely to exist. In- 
 deed, even now, the countries in which 
 the greatest prudence is manifested in 
 the regulating of population, are often 
 those in which capital increases least 
 rapidly. Where there is an indefinite 
 prospect of employment for increased 
 numbers, there is apt to appear less 
 necessity for prudential restraint. If it 
 were evident that a new hand could not 
 obtain employment but by displacing, 
 or succeeding to, one already employed, 
 the combined influences of prudence and 
 public opinion might in some measure 
 be relied on for restricting the coming 
 generation within the numbers neces- 
 sary for replacing the present. 
 
 2. I cannot, therefore, regard the 
 stationary state of capital and wealth 
 with the unaffected aversion so gene- 
 rally manifested towards it by political 
 economists of the old school. I am in- 
 clined to believe that it would be, on 
 the whole, a very considerable improve- 
 ment on our present condition. I con- 
 fess I am not charmed with the ideal 
 of life held out by those who think 
 that the normal state of human beings 
 is that of struggling to get on ; that 
 the trampling, crushing, elbowing, and 
 treading on each other's heels, which 
 form the existing type of social life, 
 are the most desirable lot of human 
 kind, or anything but the disagreeable 
 symptoms of one of the phases of in- 
 dustrial progress. It may be a neces- 
 sary stage in the progress of civiliza- 
 
 tion, and those European nations which 
 have hitherto been so fortunate as to 
 be preserved from it, may have it yet 
 to undergo. It is an incident of growth, 
 not a mark of decline, for ii, is not ne- 
 cessarily destructive of the higher as- 
 pirations and the heroic virtues ; ai 
 America, in her great civil war, is 
 proving to the world, both by her con- 
 duct as a people and by numerous 
 splendid individual examples, and as 
 England, it is to be hoped, would also 
 prove on an equally trying and exciting 
 occasion. But it is not a kind of social 
 perfection which philanthropists to 
 come will feel any very eager desire to 
 assist in realizing. Most fitting, in- 
 deed, is it, that while riches are power, 
 and to grow as rich as possible the 
 universal object of ambition, the path 
 to its attainment should be open to all, 
 without favour or partiality. But the 
 best state for human nature is that in 
 which, while no one is poor, no one 
 desires to be richer, nor has any reason 
 to fear being thrust back, by the efforts 
 of others to push themselves forward. 
 
 That the energies of mankind should 
 be kept in employment by the struggle 
 for riches, as they were formerly by 
 the struggle of war, until the better 
 minds succeed in educating the others 
 into better things, is undoubtedly more 
 desirable than that they should rust 
 and stagnate. While minds are coarse 
 they require coarse stimuli, and let 
 them have them. In the meantime, 
 those who do not accept the present 
 very early stage of human improve- 
 ment as its ultimate type, may bo 
 excused for being comparatively indif- 
 ferent to the kind of economical pro- 
 gress which excites the congratulations 
 of ordinary politicians; the mere in- 
 crease of production and accumulation. 
 For the safety of national independence 
 it is essential that a country should not 
 fall much behind its neighbours in these 
 things. But in themselves they are of 
 little importance, so long as either the 
 increase of population or anything else 
 prevents the mass of the people from 
 reaping any part of the benefit of them. 
 I know not why it should be matter of 
 congratulation that persons who are 
 already richer than any one needs to
 
 464 
 
 BOOK IV. CHAPTER VI. 2. 
 
 be, should have doubled their means of 
 consuming things which give little or 
 no pleasure except as representative of 
 wealth ; or that numbers of individuals 
 should pass over, every year, from the 
 middle classes into a richer class, or 
 from the class of the occupied rich to 
 that of the unoccupied. It is only in 
 the backward countries of the world 
 that increased production is still an im- 
 portant object : in those most advanced, 
 what is economically needed is a better 
 distribution, of which one indispensable 
 means is a stricter restraint on popula- 
 tion. Levelling institutions, either of 
 a just or of an unjust kind, cannot 
 alone accomplish it ; they may lower 
 the heights of society, but they cannot, 
 of themselves, permanently raise the 
 depths. 
 
 On the other hand, we may suppose 
 this better distribution of property at- 
 tained, by the joint effect of the pru- 
 dence and frugality of individuals, and 
 of a system of legislation favouring 
 equality of fortunes, so far as is con- 
 sistent with the just claim of the indi- 
 vidual to the fruits, whether great or 
 small, of his or her own industry. We 
 may suppose, for instance, (according 
 to the suggestion thrown out in a former 
 chapter,*) a limitation of the sum which 
 any one person may acquire by gift or 
 inheritance, to the amount sufficient to 
 constitute a moderate independence. 
 Under this twofold influence, society 
 would exhibit these leading features : 
 a well-paid and affluent body of la- 
 bourers; no enormous fortunes, except 
 what were earned and accumulated 
 during a single lifetime ; but a much 
 larger body of persons than at present, 
 not only exempt from the coarser toils, 
 but with sufficient leisure, both physical 
 and mental, from mechanical details, 
 to cultivate freely the graces of life, 
 and afford examples of them to the 
 classes less favourably circumstanced 
 for their growth. This condition of 
 eociety, so greatly preferable to the 
 present, is not only perfectly compatible 
 with the stationary state, but, it would 
 seem, more naturally allied with that 
 state than with any other. 
 
 There is room in the world, no doubt, 
 * Supra, v. 139. 
 
 and even in old countries, for a great 
 increase of population, supposing the 
 arts of life to go on improving, and 
 capital to increase. But even if innocu- 
 ous, I confess I see very little reason 
 for desiring it. The density of popula- 
 tion necessary to enable mankind to 
 obtain, in the greatest degree, all the 
 advantages both of co-operation and of 
 social intercourse, has, in all the most 
 populous countries, been attained. A 
 population may be too crowded, though 
 all be amply supplied with food and 
 raiment. It is not good for man to be 
 kept perforce at all times in the pre- 
 sence of his species. A world from which 
 solitude is extirpated, is a very poor 
 ideal. Solitude, in the sense of being 
 often alone, is essential to any depth of 
 meditation or of character ; and soli- 
 tude in the presence of natural beauty 
 and grandeur, is the cradle of thoughts 
 and aspirations which are not only good 
 for the individual, but which society 
 could ill do without. Nor is there much 
 satisfaction in contemplating the world 
 with nothing left to the spontaneous 
 activity of nature ; with every rood of 
 land brought into cultivation, which is 
 capable of growing food for human 
 beings ; every flowery waste or natural 
 pasture ploughed up, all quadrupeds or 
 birds which are not domesticated for 
 man's use exterminated as his rivals 
 for food, every hedgerow or superfluous 
 tree rooted out, and scarcely a place 
 left where a wild shrub or flower could 
 grow without being eradicated as a 
 weed in the name of improved agricul- 
 ture. If the earth must lose that great 
 portion of its pleasantness which it 
 owes to things that the unlimited in- 
 crease of wealth and population would 
 extirpate from it, for the mere purpose 
 of enabling it to support a larger, but 
 not a better or a happier population, I 
 sincerely hope, for the sake of posterity, 
 that they will be content to be sta- 
 tionary, long before necessity compels 
 them to it. 
 
 It is scarcely necessary to remark 
 that a stationary condition of capital 
 and population implies no stationary 
 state of human improvement. There 
 would be as much scope as ever for all 
 kinds of mental culture, and moral and
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 455 
 
 social progress ; as much room for im- 
 proving i!io Art of Living, and much 
 more likelihood of its being improved, 
 when minds ceased to be engrossed by 
 the art of getting on. Even the indus- 
 trial arts might be as earnestly and as 
 successfully cultivated, with this sole 
 difference, that instead of serving no 
 
 Surpose but the increase of wealth, in- 
 ustrial improvements would produce 
 their legitimate effect, that of abridging 
 labour. Hitherto it is questionable if 
 all the mechanical inventions yet made 
 have lightened the day's toil of any 
 human being. They have enabled a 
 greater population to live the same life 
 of drudgery and imprisonment, and an 
 
 increased number of manufacturers and 
 others to make fortunes. They have 
 increased the comforts of the middle 
 classes. But they have not yet begun 
 to effect those {Treat changes in human 
 destiny, which it is in their nature and 
 in their futurity to accomplish. Only 
 when, in addition to just institutions, 
 the increase of mankind shall be under 
 the deliberate guidance of judicious fore- 
 sight, can the conquests made from the 
 powers of nature by the intellect and 
 energy of scientific discoverers, become 
 the common property of the species, 
 and the means of improving and ele- 
 vating the universal lot. 
 
 CHAPTER VTI. 
 
 OK THE PROBABLE FUTURITY OP THE LABOURING CLASSES. 
 
 1. THE observations in the pre- 
 ceding chapter had for their principal 
 object to deprecate a false ideal of 
 human society. Their applicability to 
 the practical purposes of present times, 
 consists in moderating the inordinate 
 importance attached to the mere in- 
 crease of production, and fixing atten- 
 tion upon improved distribution, and a 
 large remuneration of labour, as the 
 two desiderata. Whether the aggre- 
 gate produce increases absolutely or 
 not, is a thing in which, after a certain 
 amount has been obtained, neither the 
 legislator nor the philanthropist need 
 fuel any strong interest: but, that it 
 should increase relatively to the num- 
 ber of those who share in it, is of the 
 utmost possible importance ; and this, 
 (whether the wealth of mankind be 
 ry, or increasing at the most 
 rapid rate ever known in an old country,) 
 must depend on the opinions and habits 
 of the most numerous class, the class of 
 manual labourers. 
 
 When I speak, either in this place or 
 elsewhere, of "the labouring classes,'' 
 or of labourers as a " class," I use those 
 phrases in compliance with custom, 
 and as descriptive of an existing, but 
 
 by no means a necessary or permanent 
 state of social relations. I do not re- 
 cognise as either just or salutary, a 
 state of society in which there is any 
 " class" which is not labouring ; any 
 human beings, exempt from bearing 
 their share of the necessary labours of 
 human life, except those unable to 
 labour, or who have fairly earned rest 
 by previous toil. So long, however, as 
 the great social evil exists of a non- 
 labouring class, labourers also consti- 
 tute a class, and may be spoken of, 
 though only provisionally, in that cha- 
 racter. 
 
 Considered in its moral and social 
 aspect, the state of the labouring people 
 has latterly been a subject of much 
 more speculation and discussion than 
 formerly ; and the opinion, that it is 
 not now what it ought to be, has be- 
 come very general. The suggestions 
 which have been promulgated, and the 
 controversies which have been excited,, 
 on detached points rather than on the 
 foundations of the subject, have put in 
 evidence the existence of two conflict- 
 ing theories, respecting the social posi- 
 tion desirable for manual labourers. 
 The one may be called the theory of
 
 BOOK IV. CHAPTER VII. 1. 
 
 dapcnJeoee and protection, the other 
 tlint of self-dependence. 
 
 Accrrding to the former theory, the 
 lot of the poor, in all things which 
 affect them collectively, should be re- 
 gulated/or them, not by them. They 
 ehould not be required or encouraged 
 to think for themselves, or give to their 
 <nvn reflection or forecast an influential 
 voice in the determination of their des- 
 tiny. It is supposed to be the duty of 
 the higher classes to think for them, 
 and to take the responsibility of their 
 lot, as the commander and officers of 
 an army take that of the soldiers com- 
 posing it. This function, it is con- 
 tended, the higher classes should pre- 
 pare themselves to perform conscien- 
 tiously, and their whole demeanour 
 should impress the poor with a reliance 
 on it, in order that, while yielding pas- 
 sive and active obedience to the rules 
 prescribed for them, they may resign 
 themselves in all other respects to a 
 trustful insouciance, and repose under 
 the shadow of their protectors. The 
 relation between rich and poor, accord- 
 ing to this theory, (a theory also ap- 
 plied to the relation between men and 
 women) should be only partly authori- 
 tative ; it should be amiable, moral, 
 and sentimental : affectionate tutelage 
 on the one side, respectful and grateful 
 deference on the other. The rich should 
 be in loco parentis to the poor, guiding 
 and restraining them like children. Of 
 spontaneous action on their part there 
 tumid be no need. They should be 
 called on for nothing but to do their 
 day's work, and to be moral and reli- 
 gious. Their morality and religion 
 should be provided for them by their 
 superiors, who should see them pro- 
 perly taught it, and should do all that 
 is necessary to ensure their being, in 
 return for labour and attachment, pro- 
 perly fed, clothed, housed, spiritually 
 edified, and innocently amused. 
 
 This is the ideal of the future, in the 
 minds of those whose dissatisfaction 
 with the Present assumes the form of 
 affection and regret towards the Past 
 Like other ideals, it exercises an un- 
 conscious influence on the opinions 
 and sentiments of numbers who never 
 consciously guide themselves by any 
 
 ! ideal. It has also this in common with 
 J other ideals, that it has never been his- 
 ! torically realized. It makes its appeal 
 | to our imaginative sympathies in the 
 j character of a restoration of the good 
 times of our forefathers. But no times 
 can be pointed out in which the higher 
 I classes of this or any other country per- 
 ! formed a part even distantly resembling 
 ] the one assigned to them in this theory. 
 It is an idealization, grounded on the 
 conduct and character of here and there 
 an individual. All privileged and 
 powerful classes, as such, have used 
 their power in the interest of their own 
 selfishness, and have indulged their 
 self-importance in despising, and not in 
 lovingly caring for, those who were, in 
 their estimation, degraded, by being 
 under the necessity of working for their 
 benefit. I do not affirm that what has 
 always been must always be, or that 
 human improvement has no tendency 
 to correct the intensely selfish feelings 
 engendered by power ; but though the 
 evil may be lessened, it cannot be eradi- 
 cated, until the power itself is with- 
 drawn. This, at least, seems to me un- 
 deniable, that long before the superior 
 classes could be sufficiently improved 
 to govern in the tutelary manner sup- 
 posed, the inferior classes would be too 
 much improved to be so governed. 
 
 I am quite sensible of all that is se- 
 ductive in the picture of society which 
 this theory presents. Though the facts 
 of it have no prototype in the past, the 
 feelings have. In them lies all that 
 there is of reality in the conception. 
 As the idea is essentially repulsive of 
 a society only held together by the re- 
 lations and feelings arising out of pe- 
 cuniary interests, so there is something 
 naturally attractive in a form of society 
 abounding in strong personal attach- 
 ments and disinterested self-devotion. 
 Of such feelings it must be admitted 
 that the relation of protector and pro- 
 tected has hitherto been the richest 
 source. The strongest attachments of 
 human beings in general, are towards 
 the things or the persons that stand 
 between them and some dreaded evil. 
 Hence, in an age of lawless violence 
 and insecurity, and general hardness 
 and roughness of manners, in which
 
 PKOBABLE FUTURE OF THE LABOURING CLASSES. 457 
 
 life is beset with dangers and sufferings 
 at every step, to those who have neither 
 a commukuBg position of their own, 
 nor a claim on the protection of some 
 one who has a generous giving of pro- 
 tection, and a grateful receiving of it, 
 are the strongest ties which connect 
 human beings; the feelings arising from 
 that relation are their warmest feel- 
 ings ; all the enthusiasm and tender- 
 ness of the most sensitive natures gather 
 round it ; loyalty on the one part and 
 chivalry on the other are principles ex- 
 alted into passions. 1 do not desire to 
 depreciate these qualities. The error 
 lies in not perceiving, that these virtues 
 and sentiments, like the clanship and 
 the hospitality of the wandering Arab, 
 belong emphatically to a rude and im- 
 perfect state of the social union, and 
 that the feelings between protector and 
 protected, whether between kings and 
 subjects, rich and poor, or men and 
 women, can no longer have this beauti- 
 ful and endearing character, where 
 there are no longer any serious dangers 
 from which to protect. What is there 
 in the present state of society to make 
 it natural that human beings,of ordinary 
 strength and courage, should glow with 
 the warmest gratitude and devotion in 
 return for protection? The laws pro- 
 tect them ; wherever the laws do not 
 criminally fail iu their duty. To be 
 under tho power of some one, instead 
 of being as formerly the sole condition 
 of safety, is now, speaking generally, 
 the only situation which exposes to 
 grievous wrong. The so-called protec- 
 tors are now the only persons against 
 r.-hom, in any ordinary circumstances, 
 protection is needed. The brutality 
 and tyranny with which every police 
 report is filled, are those of husbands to 
 wives, of parents to children. That 
 the law does not prevent these atroci- 
 ties, that it is only now making a first 
 timid attempt to repress and punish 
 them, is no matter of necessity, but the 
 deep disgrace of those by whom the 
 laws are made and administered. No 
 man or woman who either possesses or 
 is able to earn an independent liveli- 
 hood, requires any other protection 
 than tnat which the law could and 
 ought to give. This being the case, it ' 
 
 argues great ignorance of human na- 
 ture to continue taking for granted 
 that relations founded on protection 
 must always subsist, and not to see 
 that the assumption of the part of pro- 
 tector, and of the power which belongs 
 to it, without any of the necessities 
 which justify it, must engender feelings 
 opposite to loyalty. 
 
 Of the working men, at least in the 
 more advanced countries of Europe, it 
 may be pronounced certain, that the 
 patriarchal or paternal system of go- 
 vernment is one to which they will not 
 again be subject. That question was 
 decided, when they were taught to 
 read, and allowed access to newspapers 
 and political tracts; when dissenting 
 preachers were suffered to go among 
 them, and appeal to their faculties and 
 feelings in opposition to the creeds 
 professed and countenanced by their 
 superiors; when they were brought 
 together in numbers, to work socially 
 under the same roof; when railways 
 enabled them to shift from place to 
 place, and change their patrons and 
 employers as easily as their coats; 
 when they were encouraged to seek a 
 share in the government, by means of 
 the electoral franchise. The working 
 classes have taken their interests into 
 their own hands, and are perpetually 
 showing that they think the interests of 
 their employers not identical with their 
 own, but opposite to them. Some 
 among the higher classes flatter them- 
 selves that these tendencies may be 
 counteracted by moral and religious 
 education ; but they have let the time 
 go by for giving an education which 
 can serve their purpose. The principles 
 of the Eeformation have reached as 
 low down in society as reading and 
 writing, and the poor will not much 
 longer accept morals and religion of 
 other people's prescribing. 1 speak 
 more particularly of this country, espe- 
 cially the town population, and the 
 districts of the most scientific agricul- 
 ture or the highest wages, Scotland 
 and the north of England. Among 
 the more inert and less modernized 
 agricultural population of the southern 
 counties, it might be possible for tho 
 gentry to retain, for some time longer,
 
 45* 
 
 BOOK IV. CITAPTER VII. 2. 
 
 something of the ancient deference and 
 submission of the poor, by bribing 
 them with high wages and constant 
 employment; by ensuring them sup- 
 port, and never requiring them to do 
 anything which they do not like. But 
 these are two conditions which never 
 have been combined, and never can be, 
 for long together. A guarantee of 
 subsistence can only be practically 
 kept up, when work is enforced, and 
 superfluous multiplication restrained, 
 by at least a moral compulsion. It is 
 then, that the would-be revivers of old 
 times which they do not understand, 
 would feel practically in how hopeless 
 a task they were engaged. The whole 
 fabric of patriarchal or seignorial in- 
 fluence, attempted to be raised on the 
 foundation of caressing the poor, would 
 be shattered against the necessity of 
 enforcing a stringent Poor-law. 
 
 2. It is on a far other basis that 
 the well-being and well-doing of the 
 labouring people must henceforth rest. 
 The poor have come out of leading- 
 strings, and cannot any longer be 
 governed or treated like children. To 
 their own qualities must now be com- 
 mended the care of their destiny. Modern 
 nations will have to learn the lesson, 
 that the well-being of a people must 
 exist by means of the justice and 
 self-government, the SiKatoavvij and 
 ffwtypoavvi], of the individual citizens. 
 The theory of dependence attempts to 
 dispense with the necessity of these 
 qualities in the dependent classes. But 
 now, when even in position they are 
 becoming less and less dependent, and 
 their minds less and less acquiescent 
 in the degree of dependence which re- 
 mains, the virtues of independence are 
 those which they stand in need of. 
 Whatever advice, exhortation, or guid- 
 ance is held out to the labouring classes, 
 must henceforth be tendered to them 
 as equals, and accepted by them with 
 their eyes open. The prospect of the 
 future depends on the degree in which 
 they can be made rational beings. 
 
 There is no reason to believe that 
 prospect other than hopeful. The 
 progress indeed has hitherto been, and 
 still is, slow. But there is a sponta- 
 
 neous education going on in the minds 
 of the multitude, which may be greatly 
 accelerated and improved by artificial 
 aids. The instruction obtained from 
 newspapers and political tracts may 
 not be the most solid kind of instruc- 
 tion, but it is an immense improvement 
 upon none at all. What it does for a 
 people, has been admirably exemplified 
 during the cotton crisis, in the case of. 
 the Lancashire spinners and weavers j 
 who have acted with the consistent 
 good sense and forbearance so justly 
 applauded, simply because, being 
 readers of newspapers, they understood 
 the causes of the calamity which had 
 befallen them, and knew that it was in 
 no way imputable either to their em- 
 ployers or to the Government. It is 
 not certain that their conduct would 
 have been as rational and exemplary, 
 if the distress had preceded the salu- 
 tary measure of fiscal emancipation 
 which gave existence to the penny 
 press. The institutions for lectures 
 and discussion, the collective delibe- 
 rations on questions of common inte- 
 rest, the trades unions, the political 
 agitation, all servo to awaken public 
 spirit, to diffuse variety of ideas among 
 the mass, and to excite thought and 
 reflection in the more intelligent. 
 Although the too early attainment of 
 political franchises by the least edu- 
 cated class might retard, instead of 
 promoting, their improvement, there 
 can be little doubt that it has been 
 greatly stimulated by the attempt to 
 acquire them. In the meantime, the 
 working classes are now part of the 
 public ; in all discussions on matters ot 
 general interest they, or a portion of 
 them, are now partakers ; all who use 
 the press as an instrument may, if it 
 so happens, have them for an audience ; 
 the avenues of instruction through 
 which tho middle classes acquire such 
 ideas as they have, arc accessible to, at 
 least, the operatives in the towns. 
 With these resources, it cannot bo 
 doubted that they will increase in in- 
 telligence, even by their own unaidei 
 efforts ; while there is reason to hopV 
 that great improvements both in th 
 quality and quantity of school educa- 
 tion will be effected by tho exertiant
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 459 
 
 either of Government or of individuals, 
 and that the progress of the mass of 
 the people in mental cultivation, and 
 in the virtues which are dependent on 
 it. will take place more rapidly, and 
 with fewer intermittonces and aberra- 
 tions, than if left to itself. 
 
 From this increase of intelligence, 
 several effects may be confidently an- 
 ticipated. First : that they will become 
 even less willing than at present to be 
 led and governed, and directed into the 
 way they should go, by the mere au- 
 thority and prestige of superiors. If 
 they have not now, still less will they 
 have hereafter, any deferential awe, or 
 religious principle of obedience, holding 
 them in mental subjection to a class 
 above them. The theory of dependence 
 and protection will be more and more 
 intolerable to them, and they will re- 
 quire that their conduct and condition 
 shall be essentially self-governed. It 
 is, at the same time, quite possible 
 that they may demand, in many cases, 
 the intervention of the legislature in 
 their affairs, and the regulation by law 
 of various things which concern them, 
 often under very mistaken ideas of 
 their interest. Still, it is their own 
 will, their own ideas and suggestions, 
 to which they will demand that effect 
 should be given, and not rules laid 
 down for them by other people. It is 
 quite consistent with this, that they 
 should feel respect for superiority of 
 intellect and knowledge, and defer 
 much to the opinions, on' any subject, 
 of those whom they think well ac- 
 
 auainted with it Such deference is 
 eeply grounded in human nature ; but 
 they will judge for themselves of the 
 persons who are and are not entitled 
 to it. 
 
 3. It appears to me impossible 
 cut that the increase of intelligence, of 
 education, and of the love of indepen- 
 dence among the working classes, 
 uust be attended with a corresponding 
 growth of the good sense which mani- 
 fests itself in provident habits of con- 
 duct, and that population, therefore, 
 will hear a gradually diminishing ratio 
 to capital and employment. This most 
 desirable result would be much accele- 
 
 rated by another change, which lies in 
 the direct line of the best tendencies of 
 the time ; the opening of industrial 
 occupations freely to both sexes. The 
 same reasons which make it no longer 
 necessary that the poor should depend 
 on the rich, make it equally unneces- 
 sary that women should depend on 
 men, and the least which justice re- 
 quires is that law and custom should 
 not enforce dependence (when the cor- 
 relative protection has become super- 
 fluous) by orda : ning that a woman, 
 who does not happen to have a provi- 
 sion by inheritance, shall have scarcely 
 any means open to her of gaining a 
 livelihood, except as a wife and mother. 
 Let women who prefer that occupation, 
 adopt it ; but that there should be no 
 option, no other career possible for 
 the great majority of women, except in 
 the humbler departments of life, is a 
 flagrant social injustice. The ideas 
 and institutions by which the accident 
 of sex is made the groundwork of an 
 inequality of legal rights and a forced 
 dissimilarity of social functions, must 
 ere long be recognised as the greatest 
 hindrance to moral, social, and even 
 intellectual improvement. On the 
 present occasion I shall only indicate, 
 among the probable consequences of 
 the industrial and social independence 
 of women, a great diminution of the 
 evil of over-population. It is by devot- 
 ing one-half of the human species to 
 that exclusive function, by making it 
 fill the entire life of one sex, and inter- 
 weave itself with almost all the objects 
 of the other, that the animal instinct 
 in question is nursed into the dispro- 
 portionate preponderance which it has 
 hitherto exercised in human life. 
 
 4, The political consequences of 
 the increasing power and importance 
 of the operative classes, and of the 
 growing ascendancy of numbers, which 
 even in England and under the present 
 institutions, is rapidly giving to the- 
 will of the majority at least a negative 
 voice in the acts of government, are 
 too wide a subject to be discussed in 
 this place. But, confining ourselves to 
 economical considerations, and notwith- 
 standing the effect which improved
 
 BOOK IV. ClUtTER VI t. 4. 
 
 intelligence in tlio working classes, 
 together with just laws, may have in 
 altering the distribution of the produce 
 to their advantage, I cannot think that 
 they will be permanently contented 
 with the condition of labouring for 
 wages as their ultimate state. They 
 may bo willing to pass through the 
 class of servants in their way to that 
 of employers ; but Rot to remain in it 
 all their lives. To begin as hired 
 labourers, then after a few years to 
 work on their own account, and finally 
 employ others, is the normal condition 
 of labourers in a new country, rapidly 
 increasing in wealth and population, 
 like America or Australia. But in an 
 old and fully peopled country, those 
 who begin life as labourers for hire, as 
 a general rule, continue such to the 
 end, unless they 'sink into the still 
 lower grade of recipients of public 
 charity. In the present stage of human 
 progress, when ideas of equality are 
 daily spreading more widely avnong 
 the poorer classes, and can no longer 
 be checked by anything short of the 
 entire suppression of printed discussion 
 and even of freedom of speech, it is not 
 to be expected that the division of the 
 human race into two hereditary classes, 
 employers and employed, can be per- 
 manently maintained. The relation is 
 nearly as unsatisfactory to the payer 
 of wages as to the receiver. If the rich 
 regard the poor as, by a kind of natural 
 law, their servants and dependents, the 
 rich in their turn are regarded as a 
 mere prey and pasture for the poor ; 
 the subject of demands and expecta- 
 tions wholly indefinite, increasing in 
 extent with every concession made to 
 them. The total absence of regard for 
 justice or fairness in the relations be- 
 tween the two, is as marked on the side 
 of the employed as on that of the em- 
 ployers. We look in vain among the 
 working classes in general for the just 
 pride which will choose to give good 
 work for good wages : for the most 
 part, their sole endeavour is to receive 
 as much, and return as little in the 
 shape of service, as possible. It will 
 sooner or later become insupportable 
 to the employing classes to live in close 
 and hourly contact with persons whose 
 
 interests and feelings arc in hostility 
 to them. Capitalists are almost aa 
 much interested as labourers, in placing 
 the operations of industry on such a 
 footing, that those who labour for them 
 may feel the same interest in the work, 
 which is felt by those who labour oi 
 their own account. 
 
 The opinion expressed in a former 
 part of this treatise respecting small 
 landed properties and peasant proprie- 
 tors, may have made the reader anti- 
 cipate that a wide diffusion of property 
 in land is the resource on which I rely 
 for exempting at least the agricultural 
 labourers from exclusive dependence 
 on labour for hire. Such, however, is 
 not my opinion. I indeed deem that 
 form of agricultural economy to be most 
 groundlessly cried down, and to be 
 greatly preferable, in its aggregate 
 effects on human happiness, to hired 
 labour in any form in which it exists at 
 present ; because the prudential check 
 to population acts more directly, and is 
 shown by experience to be more effica- 
 cious; and because, in point of security, 
 of independence, of exercise for any 
 other than the animal faculties, the 
 state of a peasant proprietor is far 
 superior to that of an agricultural la- 
 bourer in this or in any other old coun- 
 try. Where the former system already 
 exists, and works on the whole satis- 
 factorily, I should regret, in the present 
 state of human intelligence, to see it 
 abolished in order to make way for the 
 other, under a pedantic notion of agri- 
 cultural improvement as a thing neces- 
 sarily the same in every diversity of 
 circumstances. In a backward state 
 of industrial improvement, as in Ire- 
 land, I should urge its introduction, in. 
 preference to an exclusive system of 
 hired labour ; as a more powerful in- 
 strument for raising a population from 
 semi-savage listlessness and reckless- 
 ness, to persevering industry and pru- 
 dent calculation. 
 
 But a people who have once adopted 
 the large system of production, either 
 in manufactures or in agriculture, are 
 not likely to recede from it ; and when 
 population is kept in due proportion to 
 the means of support, it is not desir- 
 able that they should. Labour is un-
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 461 
 
 with hostile interests and feelings, tho 
 many who do the work being mere 
 servants under the command of the one 
 who supplies the funds, and having no 
 interest of their own in the enterprise 
 except to earn their wages with aa 
 little labour as possible. The specula- 
 tions and discussions of the last fifty 
 years, and the events of the last twenty, 
 are abundantly conclusive on this point. 
 If the improvement which even tri- 
 umphant military despotism has only 
 retarded, not stopped, shall continue 
 its course, there can be little doubt that 
 the status of hired labourers will gra- 
 dually tend to confine itself to the de- 
 scription of workpeople whose low 
 moral qualities render them unfit for 
 anything more independent : and that 
 the relation of masters and workpeople 
 will be gradually superseded by part- 
 nership, in one of two forms : in some 
 cases, association of the labourers with 
 the capitalist ; in others, and perhaps 
 finally in all, association of labourers 
 among themselves. 
 
 questionably more productive on the 
 system of large industrial enterprises ; 
 the produce, if not greater absolutely, 
 is greater in proportion to the labour 
 employed : the same number of persons 
 can be supported equally well with less 
 toil and greater leisure ; which will be 
 wholly an advantage, as soon as civili 
 zation and improvement have so far 
 advanced, that what is a benefit to the 
 whole shall be a benefit to each indi- 
 vidual composing it. And in the moral 
 aspect of the question, which is still more 
 important than the economical, some- 
 thing better should be aimed at as the 
 goal of industrial improvement, than 
 to disperse mankind over the earth in 
 single families, each ruled internally, 
 as families now are, by a patriarchal 
 despot, and having scarcely any com- 
 munity of interest, or necessary mental 
 communion, with other human beings. 
 The domination of the head of the 
 family over the other members, in this 
 state of things, is absolute ; while the 
 effect on his own mind tends towards 
 concentration of all interests in the 
 family, considered as an expansion of 
 self, and absorption of all passions in 
 that of exclusive possession, of all cares 
 in those of preservation and acquisition. 
 As a step out of the merely animal 
 state into the human, out of reckless 
 abandonment to brute instincts into 
 prudential foresight and self-govern- 
 ment, this moral condition may be seen 
 without displeasure. But if public 
 epirit, generous sentiments, or true jus- 
 tice and equality are desired, associa- 
 tion, not isolation, of interests, is the 
 school in which these excellences are 
 nurtured. The aim of improvement 
 should be not solely to place human 
 beings in a condition in which they will 
 be able to do without one another, but 
 to enable them to work with or for one 
 another in relations not involving de- 
 pendence. Hitherto there has been no 
 alternative for those who lived by their 
 labour, but that of labouring either 
 each for himself alone, or for a master. 
 But the civilizing and improving in- 
 fluences of association, and the effi- 
 ciency and economy of production on a 
 large scale, may be obtained without 
 dividing the producers into two parties 
 
 5. The first of these forms of 
 association has long been practised, 
 not indeed as a rule, but as an excep- 
 tion. In several departments of indus- 
 try there are already cases in which 
 every one who contributes to the work, 
 either by labour or by pecuniary re- 
 sources, has a partner's interest in it, 
 proportional to the value of his contri- 
 bution. It is already a common prac- 
 tice to remunerate those in whom pe- 
 culiar trust is reposed, by means of a 
 percentage on the profits : and cases 
 exist in which the principle is, with 
 excellent success, carried down to the 
 class of mere manual labourers. 
 
 In the American ships trading to 
 China, it has long been the custom for 
 every sailor to have an interest in the 
 profits of the voyage ; and to this has 
 been ascribed the general good conduct 
 of those seamen, and the extreme rarity 
 of any collision between them and tho 
 government or people of the country. 
 An instance in England, not so well 
 known as it deserves to be, is that of 
 the Cornish miners. " In Cornwall tha 
 mines are worked strictly on the sys- 
 tem of joint adventure ; gangs of miners
 
 162 
 
 BOOK IV. CHAPTER VII. 5. 
 
 contracting with the agent, who repre- 
 sents the owner of the mine, to execute 
 a certain portion of a vein, and fit the 
 ore for market, at the price of so much 
 in the pound of the sum for which the 
 ore is sold. These contracts are put 
 up at certain regular periods, generally 
 every two months, and taken by a vo- 
 luntary partnership of men accustomed 
 to the mine. This system has its dis- 
 advantages, in consequence of the un- 
 certainty and irregularity of the earn- 
 ings, and consequent necessity of living 
 for long periods on credit ; but it has 
 advantages which more than counter- 
 balance these drawbacks. It produces 
 a degree of intelligence, independence, 
 and moral elevation, which raise the 
 condition and character of the Cornish 
 miner far above that of the generality 
 of the labouring class. We are told by 
 Dr. Barham, that ' they are not only, 
 as a class, intelligent for labourers, but 
 men of considerable knowledge.' Also, 
 that ' they have a character of indepen- 
 dence, something American, the sys- 
 tem by which the contracts are let 
 giving the takers entire freedom to 
 make arrangements among themselves; 
 so that each man feels, as a partner in 
 his little firm, that he meets his em- 
 ployers on nearly equal terms.' . . . 
 With this basis of intelligence and in- 
 dependence in their character, we are 
 not surprised when we hear that ' a 
 very great number of miners are now 
 located on possessions of their own, 
 leased for three lives or ninety-nine 
 years, on which they have built houses;' 
 or that ' 281, 541 1. are deposited in sav- 
 ings banks in Cornwall, of which two- 
 thirds are estimated to belong to 
 miners.' ''* 
 
 Mr. Babbage, who also gives an ac- 
 count of this system, observes that the 
 payment to the crews of whaling ships 
 is governed by a similar principle ; and 
 that " the profits arising from fishing 
 with nets on the south coast of Eng- 
 land are thus divided : one-half the pro- 
 duce belongs to the owner of the boat 
 
 * This passage is from the Prize Essay on 
 the Causes and Remedies of National Dis- 
 tress by Mr. Samuel Laing. The extracts 
 which it includes are from the Appendix to 
 tho Report of the Children's Enwluxuent 
 
 and net ; the other half ia divided in 
 equal portions between the persona 
 using it, who are also bound to assist 
 in repairing the net when required." 
 Mr. Babbage has the great merit of 
 having pointed out the practicability, 
 and the advantage, of extending tho 
 principle to manufacturing industry 
 generally.* 
 
 Some attention has been excited by 
 an experiment of this nature, com- 
 menced about sixteen years ago by a 
 Paris tradesman, a house-painter, 'M. 
 Leclaire,+ and described by him in a 
 pamphlet published in the year 1842. 
 M. Lecla ; .re, according to his state- 
 ment, employs on an average two hun- 
 dred workmen, whom lie pays in the 
 usual manner, by fixed wages or 
 salaries. He assigns to himself, besides 
 interest for his capital, a fixed allow- 
 ance for his labour and responsibility 
 as manager. At the end of the year, 
 the surplus profits are divided among 
 the body, himself included, in the pro- 
 portion of their salaries.* The reasons 
 by which M. Leclairo was led to adopt 
 this system are highly instructive. 
 Finding the conduct of his workmen 
 unsatisfactory, he first tried the effect 
 of giving higher wages, and by this ho 
 managed to obtain a body of excellent 
 workmen, who would not quit hia 
 service for any other. "Having thus 
 succeeded" (I quote from an abstract 
 of the pamphlet in Chambers' Journal, ) 
 " in producing some sort of stability in 
 the arrangements of his establishment, 
 M. Ledaire expected, he says, to enjoy 
 greater peace of mind. In this, how- 
 ever, he was disappointed. So long as 
 he was able to superintend everything 
 
 * Economy of Machinery and Hantifac* 
 tures, 3rd edition, ch. 26. 
 
 t His establishment is 11, Rue Saint 
 Georges. 
 
 t It appears, however, that the workmen 
 whom M. Leclaire had admitted to this par- 
 ticipation of profits, were only a portion 
 (rather less than half) of the whole number 
 whom he employed. This is explained by 
 another part of his system. M. Leclairo 
 pays the full market rate of wages to all his 
 workmen. The share of profit assign <1 to 
 them is, therefore, a clear adlition to the 
 ordinary gains of their class, which be very 
 laudably uses as an instrument of improve- 
 ment, by making it the reward of desert, or 
 the recompense for peculiar trust. 
 For September 27, 1845.
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 463 
 
 himself, from the general concerns of 
 his business down to its minutest de- 
 tails, ho did enjoy a certain satisfac- 
 tion ; but from the moment that, owing 
 to the increase of his business, ho 
 found that he could be nothing more 
 than the centre from which orders 
 were issued, and to which reports were 
 brought in, his former anxiety and 
 discomfort returned upon him." He 
 speaks lightly of the other sources of 
 anxiety to which a tradesman is 
 subject, but describes as an incessant 
 cause of vexation the losses arising 
 from the misconduct of workmen. An 
 employer "will find workmen whose 
 indifference to his interests is such 
 that they do not perform two-thirds of 
 the amount of work which t^ey are 
 capable of; hence the continual retting 
 of masters, who, seeing their /nterests 
 neglected, believe themselves entitled 
 to suppose that workmen are con- 
 stantly conspiring to ruin those from 
 whom they derive their livelihood. If 
 the journeyman were sure of constant 
 employment, his position would in some 
 respects be more enviable than that of 
 the master, because he is assured of a 
 certain amount of day's wages, which 
 he will pet whether he works much or 
 little. He runs no risk, and has no 
 other motive to stimulate him to do his 
 best than his own sense of duty. The 
 master, on the other hand, depends 
 greatly on chance for his returns : his 
 position is one of continual irritation 
 anil anxiety. This would no longer be 
 the case to the same extent, if the 
 interests of the master and those of the 
 workmen were bound up with each 
 other, connected by some bond of 
 mutual security, such as that which 
 would be obtained by the plan of a 
 yearly division of profits." 
 
 Even in the first year during whicn 
 M. Leclaire's experiment was in com- 
 plete operation, the success was re- 
 markable. Not one of his journeymen 
 who worked as many as three hundred 
 days, earned in that year less than 
 1500 francs, and some considerably 
 more. His highest rate of daily wages 
 being four francs, or 1200 francs for 
 300 days, the remaining 300 francs, 
 or 122., must have been the smallest 
 
 amount which any journeyman win 
 worked that number of days, obtained 
 as his proportion of the surplus profit. 
 M. Leclairo describes in strong terms 
 the improvement which was already 
 manifest in the habits and demeanour 
 of his workmen, not merely when at 
 work, and in their relations with their 
 employer, but at other times and in 
 other relations, showing increased re- 
 spect both for others and for themselves. 
 M. Chevalier, in a work published in 
 1848,* stated on M. Leclaire's autho- 
 rity, that the increased zeal of the 
 workpeople continued to be a full com- 
 pensation to him, even in a pecuniary 
 sense, for the share of profit which 
 he renounced in their favour. And 
 M. Villiaume, in 1857,+ observes: 
 " Though he has always kept himself 
 free from the frauds which are but too 
 frequent in his profession, he has always 
 been able to hold his ground against 
 competition, and has acquired a hand- 
 some competency, in spite of the re- 
 linquishment of so great a portion of 
 his profits. Assuredly he has only been 
 thus successful because the unusual 
 activity of his workpeople, and the 
 watch which they kept over one an 
 other, have compensated him for the 
 sacrifice he made in contenting himself 
 with only a share of the gain."J 
 
 * Letter* on the Organization of Labour, 
 letter 14. 
 
 t l*ev> Treatise on Political Economy. 
 
 j At the present time (1865), M. Leclaire's 
 establishment is conducted on a somewhat 
 altered system, though the principle of 
 dividing the profits is maintained. There 
 are now three partners in the concern : 
 M. Lecture himself, one other person (M. 
 Defournaux), and a Provident Society 
 (Societe de Secours Mutuels), of which all 
 persons in his employment are the members. 
 (This Society owns an excellent library, and 
 has scientific, technical, and other lectures 
 regularly delivered to It). Each of the thru 
 partners has 100,000 francs invested in tha 
 concern; M. Leclaire having advanced to 
 the Provident Society as much as was neces- 
 sary to supply the original insufficiency of 
 their own funds. The partnership, on the 
 part of the Society, is limited ; on that of 
 M. Leclaire and M. Defournaux, unlimited. 
 These two receive 6000 francs (24/01.') per 
 annum each as wages of superintendence. 
 Of the annual profits they receive half, 
 though owning two-thirds of the capital. 
 The remaining half belongs to the employes 
 and workpeople ; two-fifths of it being paid 
 to the Provident Society, and the other
 
 464 
 
 BOOK IV. CHAPTER MI. 5. 
 
 The beneficent example set by M. 
 Leclaire lias been followed, with bril- 
 liant success, by other employers of 
 labour on a large scale at Paris ; and 
 I annex, from the work last referred to 
 (one of the ablest of the many able 
 treatises on political economy produced 
 by the present generation of the po- 
 litical economists of France), some 
 signal examples of the economical 
 and moral benefit arising from this 
 admirable arrangement.* 
 
 three-fifths divided among the body. M. 
 Leclaire, however, now reserves to himself 
 the right of deciding who shall share in the 
 distribution, and to what amount; only 
 binding himself never to retain any part, but 
 to bestow whatever has not been awarded to 
 individuals, on the Provident Society. It is 
 further provided that in case of the retire- 
 ment of both the private partners, the good- 
 will and plant shall become, without pay- 
 ment, the property of the Society. 
 
 " In March 1817, M. Paul Dupont, the 
 head of a Paris printing-office, had the idea 
 of taking his workmen into partnership by 
 assigning to them a tenth of the profits. He 
 habitually employs three hundred ; two 
 hundred of them on piece work, and a 
 hundred by the day. He also employs a 
 hundred extra hands, who are not included 
 in the association. The portion of profit 
 which falls to the workmen does not bring 
 them in, on the average, more than the 
 amount of a fortnight's wages ; but they re- 
 ceive their ordinary pay according to the 
 rates established in all the great Paris print- 
 ing offices ; and have, besides, the advantage 
 of medical attendance in illness at the ex- 
 pense of the association, and a franc and a 
 half per day while incapacitated for work. 
 The workmen cannot draw out their share 
 of profit except on quitting the association. 
 It is left at interest, (sometimes invested in 
 the public funds) and forms an accumulating 
 reserve of savings for its owners. 
 
 " M. Dupont and his partners find this as- 
 sociation a source of great additional profit 
 to them : the workmen, on their side, con- 
 gratulate themselves daily on the happy idea 
 if their employer. Several of them have by 
 their exertions caused the establishment to 
 gain a gold medal in 1849, and an honorary 
 medal at the Universal Exhibition of 1855 : 
 some even have personally received the re- 
 compense of their inventions and of their 
 labours. Under an ordinary employer, these 
 excellent people would not have had leisure 
 to prosecute their inventions, unless by leav- 
 ing the whole honour to one who was not the 
 author of them : but, associated as they were, 
 if the employer had been unjust, two hun- 
 dred men would have obliged him to repair 
 the wrong. 
 
 "I have visited this establishment, and 
 have been able to see for myself the improve- 
 ment which the partnership produces in the 
 of the workpeople, 
 
 Until the passing of the Limited 
 Liability Act, it was held that an 
 arrangement similar to M. Leclaire's 
 would have been impossible in England, 
 as the workmen could not, in the 
 previous state of the law, have been 
 associated in the profits without being 
 liable for losses. One of the ma.uy 
 benefits of that great legislative im- 
 provement, has been to render partner- 
 ships of this description possible : and 
 we may now hope to see them carried 
 
 " M. Gisquet, formerly Prefect of Police, 
 has long been the proprietor of an oil manu- 
 factory at St. Denis, the most important one 
 in France next to that of M. Darblay, of Cor- 
 beil. When in 1848 he took the personal 
 management of it, he found workmen who 
 got drunk several days in the week, and 
 during their work sung, smoked, and some- 
 times quarrelled with one another. Many 
 unsuccessful attempts had been made to alter 
 this state of things: he accomplished it by 
 forbidding his workmen to get drunk on 
 working days, on pain of dismissal, and at 
 the same time promising to share with them, 
 by way of annual gratuity, five per cent of 
 his net profits, in shares proportioned to 
 wages, which are fixed at the current rates. 
 From that time the reformation has been 
 complete, and he is surrounded by a hundred 
 workmen full of zeal and devotion. Their 
 comforts have been increased by what they 
 have ceased to spend in drink, and what they 
 gain by their punctuality at work. The an- 
 nual gratuity has amounted, on the averaget 
 to the equivalent of six weeks' wages. 
 
 " M. Beslay, a member of the Chamber of 
 Deputies from 1S30 to 1839, and afterwards 
 of the Constituent Assembly, has founded an 
 important manufactory of steam engines at 
 Paris, in the Faubourg of the Temple. He 
 has taken his workpeople into partnership 
 ever since the beginning of 18-t", and the co iv 
 tract of association is one of the most com- 
 plete which have been made between em- 
 ployers and workpeople." 
 
 The practical sagacity cf Chinese emi- 
 grants long ago suggested to them, according 
 to the report of a recent visitor to Manilla, a 
 similar constitution of the relation between 
 an employer and labourers. " In these 
 Chinese shops" (at Manilla) "the owner 
 usually engages all the activity of his country- 
 men employed by him in them, by giving 
 each of them a share in the profits of the con- 
 cern, or in fact by making them all small 
 partners in the business, of which he of 
 course takes care to retain the lion's share, 
 so that while doin;; good for him by managing 
 it well, they are also benefiting themselves. 
 To such an extent is this principle carried, 
 that it is usual to give even their coolies a 
 share in the profits of the business in lieu of 
 fixed wages, and the plan appears to suit 
 their temper well ; for although they are in 
 general most complete eye-servants when 
 working for a fixed wage, they are fourjd to
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 465 
 
 into practice. Messrs. Briggs, of the 
 Whitwood and Methley Collieries, near 
 Normanton in Yorkshire, have taken 
 the first step. They have issued a 
 proposal to work those collieries by a 
 company, two-thirds of the capital of 
 which they will themselves continue to 
 hold, but will in the allotment of the 
 remaining third give the preference to 
 the " officials and operatives employed 
 in the concern," and, what is of still 
 greater importance, will propose to the 
 shareholders that whenever the annual 
 profit exceeds 10 per cent, one-half the 
 excess shall be divided among the 
 workpeople and employes, whether 
 sharonoraen or not, in proportion to 
 their earnings during the year. It is 
 highly honourable to these important 
 employers of labour to have initiated a 
 system so full of benefit both to the 
 operatives employed and to the general 
 interest of social improvement; and 
 they express no more than a just con- 
 fidence in the principle when they say, 
 that " the adoption of the mode of ap- 
 propriation thus recommended would, 
 it is believed, add so great an element 
 of success to the undertaking as to 
 increase rather than diminish the divi- 
 dend to the shareholders." 
 
 6. The form of association, how- 
 ever, which if mankind continue to 
 improve, must be expected in the end 
 to predominate, is not that which can 
 exist between a capitalist as chief, 
 and workpeople without a voice in the 
 management, but the association of 
 the labourers themselves on terms of 
 equality, collectively owning the capital 
 with which they carry on their opera- 
 tions. and working under managers 
 elected and removable by themselves. 
 So long as this idea remained in a 
 state of theory, in the writings of Owen 
 or of Louis Blanc, it may have ap- 
 peared, to the common modes oF judg- 
 ment, incapable of being realized, and 
 not likely to be tried unless by seizing 
 on the existing capital, and confiscat- 
 
 p. 24. 
 
 F.E. 
 
 ing it for the benefit of the labourers ; 
 which is even now imagined by many 
 persons, and pretended by more, both 
 in England and on the Continent, to 
 be the meaning and purpose of Social- 
 ism. But there is a capacity of exertion 
 and self-denial in the masses of man- 
 kind, which is never known but on the 
 rare occasions on which it is appealed 
 to in the name of some great idea or 
 elevated sentiment. Such an appeal 
 was made by the French Revolution of 
 1848. For the first time it then seemed 
 to the intelligent and generous of the 
 working classes of a great nation, that 
 they had obtained a government who 
 sincerely desired the freedom and dig- 
 nity of the many, and who did not 
 look upon it as their natural and legiti- 
 mate state to be instruments of pro- 
 duction, worked for the benefit of tli* 
 possessors of capital. Under this en- 
 couragement, the ideas sown by So- 
 cialist writers, of an emancipation of 
 labour to be effected by means of 
 association, throve and fructified ; and 
 many working people came to the re- 
 olution, not only that they would 
 work for one another, instead of 
 working for a master tradesman or 
 manufacturer, but that they would 
 also free themselves, at whatever cost 
 of labour or privation, from the ne- 
 cessity of paying, out of the pro- 
 duce of their industry, a heavy tribute 
 for the use of capital ; that they would 
 extinguish this tax, not by robbing the 
 capitalists of what they or their pre- 
 decessors had acquired by labour and 
 preserved by economy, but by honestly 
 acquiring capital for themselves. If 
 only a lew operatives had attempted 
 this arduous task, or if, while many 
 attempted it, a few only had succeeded, 
 their success might have been deemed 
 to furnish no argument for their sys- 
 tem as a permanent mode of industrial 
 organization. But, excluding all the 
 instances of failure, there exist or ex- 
 isted a short time ago, upwards of a 
 hundred successful, and many emi- 
 nently prosperous, associations of ope- 
 ratives in Paris alone, besides a con 
 siderable number in the departs -uita. 
 An instructive sketch of their history 
 and principles has been published, 
 H H
 
 466 BOOK IV. CHAPTER VII. 
 
 under the title of " Association of 
 Workpeople Manufacturing and Agri- 
 cultural," by II. Feugueray: and as it 
 is frequently affirmed in English news- 
 papers that the associations at Paris 
 have failed, by writers who appear to 
 mistake the predictions of their enemies 
 at their first formation for the testi- 
 monies of subsequent experience, I 
 think it important to show by quota- 
 tions from M. Feugueray's volume, 
 strengthened by still later testimonies, 
 that these representations are not only 
 wide of the truth, but the extreme con- 
 trary of it. 
 
 The capital of most of the associa- 
 tions was originally confined to the few 
 tools belonging to the founders, and 
 the small sums which could be col- 
 lected from their savings, or which 
 were lent to them by other workpeople 
 as poor as themselves. In some cases, 
 however, loans of capital were made to 
 them by the republican government : 
 but the associations which obtained 
 these advances, or at least which ob- 
 tained them before they had already 
 achieved success, are, it appears, in 
 general by no means the most pros- 
 perous. The most .striking instances 
 of prosperity are in the case of those 
 who have had nothing to rely on but 
 their own slender means and the small 
 loans of fellow-workmen, and who lived 
 on bread and water while they devoted 
 the whole surplus of their gains to the 
 formation of a capital. "Often," says 
 M. Feugueray,* " there was no money 
 at all in hand, and no wages could be 
 paid. The goods did not go off, the 
 payments did not come in, bills could 
 not get discounted, the warehouse of 
 materials was empty ; they had to sub- 
 mit to privation, to reduce all expenses 
 to the minimum, to live sometimes on 
 bread and water. ... It is at the price 
 
 6. 
 
 able history of one of these associa- 
 tions.* 
 
 "The necessity of a large capital 
 for the establishment of a pi 
 manufactory was so fully re- 
 in the trade, that in 1848 the delegates 
 of several hundred workmen who had 
 combined to form a great association, 
 solicited from the government a subven- 
 tion of 300,000 francs [12,000?.], being 
 a tenth part of the whole sum voted by 
 the National Assembly. I remember 
 that as one of the Commission charged 
 with the distribution of the fund, I 
 tried in vain for two hours to convince 
 the two delegates with whom tha 
 Commission conferred, that their re- 
 quest was exorbitant. They answered 
 imperturbably, that their trade was a 
 peculiar one ; that the association could 
 only have a chance of success on a very 
 large scale and with a considerable 
 capital ; that 300,000 francs were the 
 smallest sum which could suffice them, 
 and that they could not reduce the de- 
 mand by a single sou. The Commis- 
 sion refused. 
 
 " Now, after this refusal, the project 
 of a great association being abandoned, 
 what happened was this. Fourteen 
 workmen, and it is singular that among 
 them was one of the two delegates, re- 
 solved to set up by themselves a piano- 
 forte-making association. The project 
 was hazardous on the part of men who 
 had neither money nor credit : but 
 faith does not reason it acts. 
 
 " Our fourteen men therefore i 
 work, and I borrow from an excellent 
 article by M. Cochut in the National, 
 the accuracy of which I can 
 the following account of their first pro- 
 ceedings. 
 
 " Some of them, who had worked on 
 their own account, brought with them 
 in tools and materials the value of about 
 
 of -these hardships and anxieties that 2000 francs [801.]. There was needed 
 men who began with hardly any re- j besides a circulating capital. Each 
 Source but their good will and their - 
 hands, succeeded in creating customers, 
 in acquiring credit, forming at last a 
 joint capital, and thus founding asso- 
 
 ciations whose futurity now seems to 
 be assured." 
 
 I will quote at length the remark. 
 
 *P. 112. 
 
 member, not without difficulty, ma- 
 naged to subscribe 10 francs [8s.]. A 
 certain number of workmen not in- 
 terested in the society gave their ad- 
 hesion by bringing small contributions. 
 On March 10, 1849, a sum of 229J 
 francs [92. 8s. 7 Id.] having been real- 
 * Pp. 113-16.
 
 PROBABLE 1TTFRE OF THE LABOUHING CLASSES. 4G7 
 
 ized, the association was declared con- 
 stituted. 
 
 '' This sum was not even sufficient 
 for setting up, and for the small ex- 
 penses required from day to day for the 
 service of a workshop. There being 
 nothing left for wages, nearly two 
 months elapsed without their touching 
 a farthing. How did they subsist during 
 this interval ? As workmen live when 
 out of employment, by sharing the por- 
 tion of a comrade who is in work ; by 
 selling or pawning bit by bit the few 
 articles they possess. 
 
 "They had executed some orders. 
 They received the payment on the 4th 
 <-f May. That day was for them like 
 a victory at the opening of a campaign, 
 and they determined to celebrate it. 
 After paying all debts that had fallen 
 due, the dividend of each member 
 amounted to 6 francs 61 centimes. 
 They agreed to allow to each 5 francs 
 [4. ] on account of his wages, and to 
 devote the surplus to a fraternal repast. 
 The fourteen shareholders, most of 
 tvhom had not tasted wine for a year 
 past, met, along with their wives and 
 children. They expended 32 sous 
 [Is. 4d.] per family. This day is still 
 spoken of iu their workshops with an 
 emotion which it is difficult not to 
 share. 
 
 " For a month longer it was neces- 
 sary to content themselves with the re- 
 ceipt of five francs per week. In the 
 course of June a baker, either from 
 love of music or on speculation, offered 
 to buy a piano, paying for it in bread. 
 The bargain was made at the price of 
 480 francs. It was a piece of good 
 luck to the association. They had 
 now at least what \vas indispensable. 
 They determined not to reckon the 
 bread in the account of wages. Each 
 ate according to his appetite, or rather 
 to that of his family; for the married 
 ehareholders were allowed to take away 
 bread freely for their wives and 
 children. 
 
 " Meanwhile the association, being 
 romposed of excellent workmen, gra- 
 dually surmounted the obsta 
 privations which had embarrassed its 
 starting. Its account-books oiler the 
 lost proof of the progress which its 
 
 pianos had made in the estimation of 
 buyers. From August 184'J the 
 weekly contingent rises to 10, 15, and 
 20 francs per week ; and this last sum 
 does not represent all their profits, each 
 partner having left in the common 
 stock much more than he received from 
 it. Indeed it is not by the sum which 
 the member receives weekly that his 
 situation can be judged, but by the 
 share acquired in the ownership of a 
 property already considerable. The 
 following was the position of the as- 
 sociation when it took stock on the 
 30th December 1850. 
 
 " At this period the nnmber of share- 
 holders was thirty-two. Large work- 
 shops and warehouses, rented for 2000 
 francs, were no longer sufficient for the 
 business. 
 
 Frs. Cents. 
 
 Independent of tools, valued at 5,922 60 
 They possessed in goods and 
 especially in materials, the 
 
 value of 22,972 29 
 
 They had in cash 1,021 10 
 
 in bills 3,540 
 
 There was due to tharn* . . 5,861 90 
 
 They had thus to their credit 39,317 83 
 
 Against this are only to be de- 
 bited 4737 francs 86 centimes 
 due to creditors, and 1650 
 francs to eighty adherents ;t 
 in all 6,387 86 
 
 liemaining 
 
 . 32,930 02 
 4s.] 
 
 which formed their indivisible capital 
 and the reserve of the individual mem- 
 bers. At this period the association 
 had 76 pianos under construction, and 
 received more orders than they could 
 execute." 
 
 From a later report we learn that this 
 society subsequently divided itself into 
 two separate associations, one of which, 
 in 1854, already possessed a circulating 
 capital of 56,000 francs}: [2240Z.]. In 
 1863 its total capital was 6520Z. 
 
 * " The last two items consisted of safe 
 securities, nearly all of which have since been 
 realized." 
 
 t " These adherents are workmen of the 
 trade, who subscribed small sums to the asso- 
 ciation at its commencement : a portion of 
 tlieiii were reimbursed in the beginning of 
 Isol. The sum due to creditors has also 
 been muijh reduced : on the 23rd of April it 
 only amounted to 113 francs 59 centimes." 
 
 1 Article by M. Cherotiiiez on "Opera- 
 
 H H 2
 
 4G8 
 
 The 
 
 which 
 
 BOOK IV. CHAPTER VII. 6. 
 
 same admirable qualities by 
 the associations were carried 
 
 through their early struggles, main- 
 tained them in their increasing pros- 
 perity. Their rules of discipline, in- 
 stead of being more lax, are stricter 
 than those of ordinary workshops ; but 
 
 tive Associations," in the Journal des Econo- 
 mistes for November 1860. 
 
 I subjoin, from M. Villiaume and M. Cher- 
 buliez, detailed particulars of other emi- 
 nently successful experiments by associated 
 workpeople. 
 
 " We will first cite," says M. Cherbuliez, 
 " as having attained its object and arrived at 
 ft definitive result, the Association Remquet, 
 of the Rue GaranciSre, at Paris, whose 
 founder, in 1848, was a foreman in M. Re- 
 nouard's printing establishment. That firm 
 being under the necessity of winding up, he 
 proposed to his fellow- workmen to join with 
 him in continuing the enterprise on their own 
 account, asking a subvention from the go- 
 vernment to cover the purchase-money of 
 the business and the first expenses. Fifteen 
 of them accepted the proposal, and formed 
 an association, whose statutes fixed the wages 
 for every kind of work, and provided for the 
 gradual formation of a working capital by a 
 deduction of 25 per cent from all wages and 
 salaries, on which deduction no dividend or 
 interest was to be allowed during the ten 
 years that the association was intended to 
 last. Remquet asked and obtained for him- 
 self the entire direction of the enterprise, at 
 a very moderate fixed salary. At the wind- 
 ing up, the entire profits were to be divided 
 among all the members, proportionally to 
 their share in the capital, that is, to the work 
 they had done. A subvention of 80,000 francs, 
 was granted by the State, not without great 
 difficulty, and on very onerous conditions. 
 In spite of these conditions, and of the un- 
 favourable circumstances resulting from the 
 political situation of the country, the asso- 
 ciation prospered so well, that on the wind- 
 ing up, after repaying the advance made by 
 the State, it was in possession of a clear ca- 
 pital of 155,000 francs [G200/.], the division of 
 which gave on the average between ten and 
 eleven francs to each partner; 7000 being 
 the smallest and 18,000 the largest share. 
 
 " The Fraternal Association of Working 
 Tinmen and Lampmakers had been founded 
 in March 1848 by 500 operatives, comprising 
 nearly the whole body of the trade. This 
 first attempt, inspired by unpractical ideas, 
 not having survived the fatal days of June, a 
 now association was formed of more modest 
 proportions. Originally composed of forty 
 members, it commenced business in 1849 with 
 a capital composed of the subscriptions of its 
 members, without asking for a subvention. 
 After various vicissitudes, which reduced the 
 number of partners to three, then brought it 
 back to fourteen, then again sunk it to three, 
 It ended by keeping together forty-six mcm- 
 bei'J, who quietly remodelled their statutes 
 m th? points which experience had shown 
 
 being rules self-imposed, for the mani- 
 fest good of the community, and not 
 for the convenience of an employer 
 regarded as having an opposite interest, 
 they are far more scrupulously obeyed, 
 and the voluntary obedience carries 
 with it a sense of personal \vorth and 
 
 to be faulty, and their number having been 
 raised by successive steps to 100, they pos- 
 sessed, in 1858, a joint property of 50,000 
 francs, and were in a condition to divide an- 
 nually 20,000 francs. 
 
 " The Association of Operative Jewellers, 
 the oldest of all, had been founded in 1831 by 
 eight workmen, with a capital of 200 francs 
 [81."] derived from their united savings. A 
 subvention of 21,000 francs enabled them in 
 1849 greatly to extend their operations, which 
 in 1858 had already attained the value of 
 140,000 francs, and gave to each partner an 
 annual dividend equal to double his wages." 
 
 The following are from M. Villiaume : 
 
 " After the insurrection of June 1848, work 
 was suspended in the Faubourg St. Antoino, 
 which, as we know, is principally occupied 
 by furniture-makers. Some operative arm- 
 chair makers made an appeal to those who 
 might be willing to combine with them. Out 
 of six or seven hundred composing the trade, 
 four hundred gave in their names. But ca- 
 pital being wanting, nine of the most zealous 
 began the association with all that they pos- 
 sessed ; being a value of 369 francs in tools, 
 and 135 francs 20 centimes in money. 
 
 " Their good taste, honesty and punctuality 
 having increased their business, they soon 
 numbered 108 members. They received from 
 the State an advance of 25,000 francs, reim- 
 bursable in 14 years by way of annuity, with 
 interest at 3J per cent. 
 
 " In 1857 the number of partners is 65, the 
 auxiliaries average 100. All the partners 
 vote at the election of a council of eight mem- 
 bers, and a manager whose name represents 
 the firm. The distribution and superinten- 
 dence of all the works is entrusted to foremen 
 chosen by the manager and council. There 
 is a foreman to every 20 or 25 workmen. 
 
 " The payment is by the piece, at rates de- 
 termined in general assembly. The earnings 
 vary from 3 to 7 francs a day, according to 
 zeal and ability. The average is 50 francs 
 [2/.] a fortnight, and no one gains much less 
 than 40 francs per fortnight, while many earn 
 80. Some of the carvers and moulders'malie 
 as much as 100 francs, being 200 francs [s/. ] 
 a month. Each binds himself to work 120 
 hours per fortnight, equal to ten per da^. 
 By the regulations, every hour short of the 
 number subjects the delinquent to a penally 
 of 10 centimes [one pennyj per hour up to 
 thirty hours, and 15 centimes [1^.] beyond. 
 The object of this rule was to abolish Saint 
 Monday, and it succeeded in its effort. For 
 the last two years the conduct of the mem- 
 bers has been so good, that fines have fallen 
 into disuse. 
 
 " Though the partners started with only 
 359 francs, the vaJve of the plant (Hue df
 
 PllOBABLE FUTURE OF TUB LABOURING CLASSES. 469 
 
 dignity. With wonderful rapidity the 
 associated workpeople have learnt to 
 correct those of the ideas they set out 
 \\ith, which are in opposition to the 
 teaching of reason and experience. 
 Almost all the associations, at first, ex- 
 cluded piece-work, and gave equal 
 wages whether the work done was more 
 
 Chavonne, Cour St. Joseph, Faubourg St. 
 Antoine) already in 1851 amounted to 5713 
 franca, and the assets of the association, 
 debts due to them included, to 24,000 francs. 
 Since then the association has become still 
 more flourishing, having resisted all the at- 
 tempts made to impede its progress. It does 
 the largest business, and is the most con- 
 sidered, of all the bouses in Paris in the trade. 
 Its business amounts to400,000 francs a year." 
 Its inventory in December 1855 showed, ac- 
 cording to M. Villiaume', a balance of 100,398 
 francs 90 centimes in favour of the associa- 
 tion, but it possessed, he says, in reality, 
 123,000 francs. 
 
 But the most important association of all 
 is that of the 'Masons. " The Association of 
 Masons was founded August 10th, 1848. Its 
 address is Rue St. Victor, 155. Its number of 
 members is So, and its auxiliaries from three 
 to four hundred. There are.two managers, 
 one for the building department, the otherfor 
 the pecuniary administration : these are re- 
 garded as the ablest master-masons in Paris, 
 and are content with a moderate salary. This 
 association has lately constructed three or 
 four of the most remarkable mansions in the 
 metropolis. Though it does its work more 
 economically than ordinary cpntractors,yet as 
 ithastogive long credits, it is called upon for 
 considerable advances : it prospers, however, 
 as is proved by the dividend of 56 per cent 
 which has been paid this year on its capital, 
 including in the payment those who have as- 
 sociated themselves in its operations. It con- 
 sists of workmen who bring only their labour, 
 of others who bring their labour and a capital 
 of some sort, and of a third class who do not 
 work, but contribute capital only. 
 
 " The masons, in the evening, carry on 
 mutual instruction. They, as well as the 
 arm-chair makers, give medical attendance 
 at the expense of the association, arid an allow- 
 ance to its sick members. They extend their 
 protection over every member in every action 
 of his life. The arm-chair makers will soon 
 each possess a capital of two or three thou- 
 sand francs, with which to portion their 
 daughters or commence a reserve for future 
 years. Of the masons, some have already 
 4000 francs, which are left in the common 
 stock. 
 
 " Before they were associated, these work- 
 men were poorly clad in jackets and blouses; 
 because, for want of forethought,and still more 
 from want of work, they had never CO t'rancs 
 beforehand to buy an overcoat. Most ofthem 
 are now as well dressed as shopkeepers, and 
 sometimes more tastefully. For the work- 
 man, having always a credit with the associa- 
 tion, can get whatever he wants by signing an 
 
 or less. Almost all have abandoned 
 this system, and after allowing to every 
 one a fixed minimum, sufficient for sub- 
 sistence, they apportion all further re- 
 muneration according to the work 
 done : most of them even dividing the 
 profits at the end of the year, in tho 
 same proportion as the earnings.* 
 
 order ; and the association reimburses itself 
 by fortnightly stoppages, making him save as 
 it were in spite of himself. Some workmen 
 who are not in debt to the concern, sign 
 orders payable to themselves at five months 
 date, to resist the temptation of needless ex- 
 e. They are put under stoppages of 10 
 ics per fortnight, and thus at the end of 
 five months they have saved the amount." 
 The following table, taken by M.Cherbuliez 
 
 pense. 
 francs 
 
 most ardent and high-principled apostles of 
 this kind of co-operation) shows the rapidly 
 progressive growth in prosperity of the 
 Masons' Association up to 1858: 
 
 Amount of Profits 
 
 Year. business done, realized. 
 
 francs. francs. 
 
 1862 .... 45,530 ... 1,000 
 
 1853 .... 297,208 ... 7,000 
 
 1854 .... 3*4,240 ... 20,000 
 
 1855 .... 614,694 ... 46,000 
 
 1856 .... 998,240 ... 80,000 
 
 1857 .... 1,330,000 ... 100,000 
 
 1858 .... 1,231,461 ... 130,000 
 
 " Of this last dividend," says M. Cherbuliez, 
 "30,000 francs were taken for the reservo 
 fund, and the remaining 100,000, divided 
 among the shareholders, gave to each from 
 600 to 1500 francs, besides their wages or 
 salaries, and their share in the fixed capital 
 of the concern." 
 
 Of the management of the associations 
 generally, M. Villiaume^ says, " I have been 
 able to satisfy myself personally of the ability 
 of the managers and councils of the opera- 
 tive associations. The managers are far su- 
 perior in intelligence, in zeal, and even in 
 politeness, to most of the private masters in 
 their respective trades. And among the as- 
 sociated workmen, the fatal habit of intem- 
 perance is gradually disappearing, along with 
 the coarseness and rudeness which are the 
 consequence of the too imperfect education 
 of the class." 
 
 * Even the association founded by M. 
 Louis Blanc, that of the tailors of Clichy, 
 after eighteen months trial of this system, 
 adopted piece-work. One of the reasons 
 given by them for abandoning the original 
 system is well worth extracting. " Besides 
 the vices I have mentioned, the tailors com- 
 plained that it caused incessant disputes and 
 quarrels, through the interest which each had 
 in making his neighbours work. Their mu- 
 tual watchfulness degenerated into a real 
 slavery ; nobody had the free control of his 
 time and his actions. These dissensions have 
 disappeared since piece-work was intro- 
 duced." Fevgueray, p. 88. One of the most
 
 470 
 
 It is the declared principle of most 
 of these associations, that they do not 
 exist for the mere private benefit of the 
 individual members, but for the pro- 
 motion of the ce-opera live cause. "With 
 every extension, therefore, of their busi- 
 ness, they take in additional members, 
 not (when they remain faithful to their 
 original plan) to receive wages from 
 them as hired labourers, but to enter at 
 once into the full benefits of the asso- 
 ciation, without being required to bring 
 anything in, except their labour: the 
 only condition imposed is that of re- 
 ceiving during a few years a smaller 
 share in the annual division of profits, 
 as some equivalent for the sacrifices of 
 the founders. When members quit the 
 association, which they are always at 
 liberty to do, they carry none of the 
 capital with them : it remains an indi- 
 visible property, of which the members 
 for the time being have the use, but 
 not the arbitrary disposal : by the sti- 
 pulations of most of the contracts, even 
 if the association breaks up, the capital 
 cannot be divided, but must be devoted 
 entire to some work of beneficence or 
 of public utility. A fixed, and gene- 
 rally a considerable, proportion of the 
 annual profits, is not shared among the 
 members, but added to the capital of 
 the association, or devoted to the re- 
 payment of advances previously made 
 to it : another portion is set aside to 
 provide for the sick and disabled, and 
 another to form a fund for extending 
 the practice of association, or aiding 
 other associations in their need. The 
 managers aro paid, like other mem- 
 bers, for the time which is occupied in 
 
 discreditable indications of a low moral con- 
 dition given of late by part of the English 
 working classes, is the opposition to piece- 
 work. When the payment per piece is cot 
 sufficiently high, that is a just ground of ob- 
 jection. But dislike to piece-work in itself, 
 except under mistaken notions, must be dis- 
 like to justice and fairness ; a desire to cheat, 
 by not giving work in proportion to pay. 
 Piece-work is the perfection of contract; 
 and contract, in all work, and in the most 
 minute detail the principle of so much pny 
 for so much service, carried out to tlie utmost 
 extremity is the system, of all others, in the 
 present state of society and degree of civiliza- 
 tion, most favourable to the worker; though 
 most unfavourable to the non-worker who 
 wishes to be paid for being idle. 
 
 BOOK IV. CHAPTER VII. 6. 
 
 management, usually at the rate of 
 the highest paid labour : but the rule is 
 adhered to, that the exercise of power 
 shall never be an occasion for profit. 
 
 Of the ability of the associations to 
 compete successfully with individual 
 capitalists, even at an early period of 
 their existence, M. Feugucray* said, 
 " The associations which have been 
 founded in the last two years" (M. 
 Fcugueray wrote in 1851) "had many 
 obstacles to overcome ; the majority of 
 them were almost entirely without 
 capital : all were treading in a path 
 previously unexplored ; they ran the 
 risks which always threaten innovators 
 and beginners. Nevertheless, in many 
 of the trades in which they have been 
 established, they are already formidable 
 competitors of the old houses, and are 
 even complained of on that account by 
 a part of the bourgeoisie. This is not 
 only true of the cooks, the lemonade 
 sellers, and hairdressers, trades the 
 nature of which enables the associa- 
 tions to rely on democratic custom, but 
 also in other trades where they have 
 not the same advantages. One has 
 only to consult the makers of chairs, of 
 arm-chairs, of files, and one will learn 
 from them if the most important esta- 
 blishments in their respective trades aro 
 not those of the associated workmen." 
 
 The vitality of these associations 
 must indeed be great, to have enabled 
 about twenty of them to survive not 
 only the anti-socialist reaction, which 
 for the time discredited all attempts 
 to enable workpeople to be their own 
 employers not only the tracasseries 
 of the police, and the hostile policy of 
 the government since the usurpation 
 but in addition to these obstacles, all 
 the difficulties arising from the trying 
 condition of financial and commercial 
 affairs from 1854 to 1858. Of the pros- 
 perity attained by some of them even 
 while passing through this difficult 
 period, I have given examples which 
 must be conclusive to all minds as to 
 the brilliant future reserved for the 
 principle of co -opcration.f 
 
 Pp. 37-8. 
 
 t In the last year or two, the co-operativa 
 movement among the French wo, 
 classes has taken a fresh start. An interest*
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 4?l 
 
 It is not in France alone that those 
 
 ;,ive commenced a career 
 
 of prosperity. To say nothing at present 
 
 :iany, Piedmont, or Swi 
 (whore the Consumers' Union of Zurich 
 is one of the most prosperous co-opera- 
 tive associations in Europe), England 
 can produce cases of success, rivalling 
 even those which I have cited from 
 France. Under the impulse commenced 
 by Mr. Owen, and more recently pro- 
 1 1 by the writings and personal 
 
 efforts of a band of friends, chiefly 
 ion and hamsters, to whose 
 noble exertions too much praise can 
 scarcely be given, the good seed was 
 widely S'>wn ; the necessary alterations 
 in the English law of partnership were 
 obtained from Parliament, on the bene- 
 volent and public-spirited initiative of 
 Mr. Slaney; many industrial associa- 
 tions, and a still greater number of 
 co-operative stores for retail purchases, 
 were founded. Among these are already 
 many instances of remarkable pros- 
 perity, the most signal of which are 
 the Leeds Flour Mill, and the Rochdale 
 nt Equitable Pioneers. Of this 
 riation, the most successful of 
 all, the history has been written in a 
 very interesting manner by Mr. Iloly- 
 oake ;* and the notoriety which by 
 
 ing account of the Provision Association of 
 Grenoblo has been given in a pamphlet by 
 M. Casiinir Pcrier; and in the Times of 
 November 21, 1864, we road the following 
 passage : " While a certain number of ope- 
 rutivea stand out for more wages or fewer 
 hours of labour, others, who have also 
 seceded, have associated for the purpose of 
 carrying on their respective trades on their 
 own account, and have collected funds for 
 the purchase of instruments of labour. They 
 have founded a society Societe Generale 
 d'Approvisionnement et de Consommation. 
 It numbers between 300 and 400 members, 
 > already opened a " co-operative 
 store" at Fassy, wuich is now within the limits 
 of Paris. They calculate that by May next 
 fifteen new self-supporting associations of 
 the same kind will be ready to commence 
 operations; so that the number will be, for 
 Paris alone, from 50 to 60. 
 
 Self-Self by tht People History of Co- 
 If trillion in Rochdale. An instructive ac- 
 count of this and other co-operative associa- 
 tions has also been written in the Companion 
 to the Almaih; . by Mr. John 
 
 Plummcr, of Kettcring; himself one of the 
 examples of mental cultiva- 
 tion and high principle in a self-instructed 
 :. irking or. an. 
 
 this and other means has been given 
 to facts so encouraging, is causing a 
 rapid extension of associations with 
 similar objects in Lancashire, York- 
 shire, London, and elsewhere. 
 
 The original capital of the Rochdale 
 Society consisted of 281., brought to- 
 gether by the unassisted economy of 
 about forty labourers, through 1 
 
 Process of a subscription of twopence 
 afterwards raised to threepence) per 
 week. With this sum they established 
 in 1844 a small shop, or store, for the 
 supply of a few common articles for 
 the consumption of their own fami- 
 lies. As their carefulness and honesty 
 brought them an increase of customers 
 and of subscribers, they extended their 
 operations to a greater number of arti- 
 cles of consumption, and in a few years 
 were able to make a large investment 
 in shares of a Co-operative Corn Mill. 
 Mr. Holyoake thus relates the stages 
 of their progress up to 1857. 
 
 " The Equitable Pioneers' Society is 
 divided into seven departments : Gro- 
 ccry,Drapery, Butchering, Shocmakiiig, 
 Clogging, Tailoring, Wholesale. 
 
 " A separate account is kept of each 
 business, and a general account : 
 each quarter, showing the position of 
 the whole. 
 
 " The grocery business was com- 
 menced, as we have related, in De- 
 cember 1844, with only four ar;i 
 sell. It now includes whatever a gro- 
 cer's shop should include. 
 
 " The drapery business was started 
 in 1847, with an humble array of at- 
 tractions. In 1854 it was erected into 
 a separate department. 
 
 "A year earlier, 1846, the Store 
 began to sell butcher's meat, buying 
 eighty or one hundred pounds of a 
 tradesman in the town. After a while, 
 the sales were discontinued until 1850, 
 when the Society had a warehouse of 
 its own. Mr. John Moorhouse, who 
 has now two assistants, buys and kills 
 for the Society three oxen, eight sheep, 
 sundry porkers and calves, which are 
 on the average converted into 1301. of 
 cash per week. 
 
 " Shoemaking commenced in 1852. 
 Three men and an apprentice make, 
 and a stock is kept on sale.
 
 472 
 
 BOOK IV. CHAPTER VII. G. 
 
 " Clogging and tailoring commenced 
 also in this year. 
 
 " The -wholesale department com- 
 menced in 1852, and marks an im- 
 portant development of the Pioneers' 
 proceedings. This department has been 
 created for supplying any members re- 
 quiring largo quantities, and with a 
 view to supply the co-operative stores 
 of Lancashire and Yorkshire, whose 
 small capitals do not enable them to 
 buy in the best markets, nor command 
 the services of what is otherwise indis- 
 pensable to every store a good buyer, 
 who knows the markets and his busi- 
 ness, who knows what, how, and where 
 to buy. The wholesale department 
 guarantees purity, quality, fair prices, 
 standard weight and measure, but all 
 on the never-failing principle, cash pay- 
 ment." 
 
 In consequence of the number of 
 members who now reside at a distance, 
 and the difficulty of serving the great 
 increase of customers, " Branch Stores 
 have been opened. In 1856, the first 
 Branch was opened, in the Oldham 
 Road, about a mile from the centre 
 of Rochdale. In 1857 the Castleton 
 Branch, and another in the Whitworth 
 Road, were established, and a fourth 
 Branch in Pinfold." 
 
 The warehouse, of which the original 
 Store was a single apartment, was 
 taken on lease by the Society, very 
 much out of repair, in 1849. " Every 
 part has undergone neat refitting and 
 modest decoration, and now wears the 
 air of a thoroughly respectable place 
 of business. One room is now hand- 
 somely fitted up as a newsroom. Another 
 
 is neatly fitted up as a library 
 
 Their newsroom is as well supplied as 
 that of a London club." It is now 
 " free to members, and supported from 
 the Education Fund," a fund con- 
 sisting of 2J per cent of all the profits 
 divided, which is set apart for educa- 
 tional purposes. " The Library con- 
 tains 2200 volumes of the best, and 
 among them, many of the most ex- 
 pensive books published. The Library 
 is free. From 1850 to 1855, a school 
 for young persons was conducted at a 
 charge of twopence per month. Since 
 1855, a room has been granted by the 
 
 Board for the use of from twenty to 
 thirty persons, from the ages of four- 
 teen to forty, for mutual instruction on 
 Sundays and Tuesdays. . . . 
 
 " The corn-mill was of course rented, 
 and stood at Small Bridge, some dis- 
 tance from the town one mile and a 
 half. The Society have since built in 
 the town an entirely new mill for them- 
 selves. The engine and the machinery 
 are of the most substantial and im- 
 proved kind. The capital invested . 
 in the corn-mill is 8450Z., of which 
 3731Z. 15s. 2d. is subscribed by the 
 Equitable Pioneers' Society. The corn- 
 mill employs eleven men." 
 
 At a later period they extended their 
 operations to the staple manufacture 
 itself. From the success of the Pioneers' 
 Society grew not only the co-operative 
 corn-mill, but a co-operative associa- 
 tion for cotton and woollgn manufac- 
 turing. " The capital in this depart- 
 ment is 4000Z., of which sum 2042J. 
 has been subscribed by the Equitablo 
 Pioneers' Society. This Manufacturing 
 Society has ninety-six power-looms at 
 work, and employs twenty-six men, 
 seven women, four boys, and five girls 
 in all forty-two persons " 
 
 " In 1853 the Store purchased for 
 745Z. a warehouse (freehold) on the 
 opposite side of the street, where they 
 keep and retail their stores of flour, 
 butcher's meat, potatoes, and kindred 
 articles. Their committee-rooms and 
 offices are fitted up in the same build- 
 ing. They rent other houses adjoining 
 for calico and hosiery and shoe stores. 
 In their wilderness of rooms, the visitor 
 stumbles upon shoemakers and tailors, 
 at work under healthy conditions, and 
 in perfect peace of mind as to the re- 
 sult on Saturday night. Their ware- 
 houses are everywhere as bountifully 
 stocked -as Noah's Ark, and cheerful 
 customers literally crowd Toad Lane 
 at night, swarming like bees to every 
 counter. The industrial districts of 
 England have not such another sight 
 as the Rochdale Co-operative Store on 
 Saturday night.* Since the disgraceful 
 
 * "But it is not," adds Mr. Holyoake, 
 "the brilliancy of commercial activity ia 
 which either writer or reader will take the 
 deepest interest; it is in the new and im
 
 PROBABLE FUTU11E OF THE LABOURING CLASSES. 
 
 failure of the Rochdale Savings Bank 
 
 in 1849, the Society's Store has become 
 
 the virtual Savings Bank of the place. 
 
 The following table, completed to 
 
 1860 from the Almanack published by 
 the Society, shows the pecuniary result 
 of its operations from the commence- 
 ment. 
 
 Tear. 
 
 No. of 
 members. 
 
 Amount of capital. 
 
 Amount of cash sales 
 in store (annual). 
 
 1 
 Amount of profit 
 (annual). 
 
 
 
 8. d. 
 
 s. d. 
 
 . d. 
 
 1044. 
 
 oq 
 
 OQ (] () 
 
 
 
 I O^^ 
 
 1845 
 
 O 
 
 74 
 
 *O V V 
 
 181 12 5 
 
 710 6 5 
 
 32 17 6 
 
 1846 
 
 86 
 
 252 7 li 
 
 1,146 17 7 
 
 80 16 34 
 
 1847 
 
 110 
 
 286 5 34 
 
 1,924 13 10 
 
 72 2 10 
 
 1848 
 
 140 
 
 397 
 
 2,276 6 5i 
 
 117 16 104 
 
 1849 
 
 390 
 
 1,193 19 1 
 
 6,611 18 
 
 561 3 9 
 
 1850 
 
 600 
 
 2,299 10 5 
 
 13,179 17 
 
 889 12 5 
 
 1851 
 
 630 
 
 2,785 li 
 
 17,638 4 
 
 990 19 84 
 
 1852 
 
 680 
 
 3,471 6 
 
 16,352 5 
 
 1,206 15 24 
 
 1853 
 
 720 
 
 5,848 3 11 
 
 22,760 
 
 1,674 18 ll| 
 
 1854 
 
 900 
 
 7,172 15 7 
 
 33,364 
 
 1,763 11 2| 
 
 1855 
 
 1400 
 
 11,032 12 10J 
 
 44,902 12 
 
 3,106 8 44 
 
 1856 
 
 1600 
 
 12,920 13 14 
 
 63,197 10 
 
 3,921 13 14 
 
 1857 
 
 1850 
 
 15,142 1 2 
 
 79,788 
 
 5,470 6 8J 
 
 1858 
 
 1950 
 
 18,160 4 
 
 71,689 
 
 6,284 17 44 
 
 1859 
 
 2703 
 
 27,060 14 2 
 
 104,012 
 
 10,739 18 6 
 
 1860* 
 
 3450 
 
 37,710 9 
 
 152,063 
 
 15,906 9 11 
 
 proved spirit animating this intercourse of 
 trade. Buyer and seller meet as friends ; 
 there is no overreaching on one side, and no 
 
 suspicion on the other These crowds 
 
 of humble working men, who never knew 
 before when they put good food in their 
 mouths, whose every dinner was adulterated, 
 whose shoes let in the water a month too 
 soon, whose waistcoats shone with devil's 
 dust, and whose wives wore calico that would 
 not wash, now buy in the markets like mil- 
 lionnaires, and as far as pureness of food 
 goes, live like lords." Far oetter, probably, 
 in that particular ; for assuredly lords are 
 not the customers least cheated, in the pie- 
 sent race of dishonest competition. " They 
 are weaving their own stuffs, making their 
 own shoes, sewing their own garments, and 
 grinding their own corn. They buy the 
 purest sugar and the best tea, and grind their 
 own coffee. They slaughter their own cattle, 
 and the finest beasts of the land waddle down 
 the streets of Rochdale for the consumption 
 of flannel-weavers and cobblers. (Last year 
 the Society advertised for a Provision Agent 
 to make purchases in Ireland, and to devote 
 his whole time to that duty.) When did 
 competition give poor men these advantages ? 
 And will any man say that the moral cha- 
 lacter of these people is not improved under 
 these influences ? The teetotallers of Koch- 
 dale acknowledge that tho Store has made 
 more sober men since it commenced than all 
 their efforts have been able to make in the 
 same time. Husbands who never knew what 
 
 it was to be out of debt, and poor wives who 
 during forty years never had sixpence uncon- 
 demned in their pockets, now possess little 
 stores of money sufficient to build them cot- 
 tages, and to go every week into their own 
 market with money jingling in their pockets ; 
 and in that market there is no distrust and no 
 deception ; there is no adulteration, and 
 no second prices. The whole atmosphere 
 is honest. Those who serve neither hurry, 
 finesse, nor flatter. They hate no interest in 
 chicanery. They have but one duty to per- 
 form that of giving fair measure, full 
 weight, and a pure article. In other parts 
 of the town, where competition is the prin- 
 ciple of trade, all the preaching in Eoch. 
 dale cannot produce moral effects like 
 these. 
 
 " As the Store hag made no debts, it has 
 incurred no losses; and during thirteen 
 years' transactions, and receipts amounting 
 to 303,852?., it has had no law-suits. Tho 
 Arbitrators of the Societies, during all their 
 years of office, have never had a case to 
 decide, and are discontented that nobody 
 quarrels." 
 
 * The latest report to which I have access 
 is that for the quarter ending Sept. 20, 1864, 
 of which I take the following abstract from 
 the November number of that valuable pe- 
 riodical the Co-operator, conducted by Mr. 
 Henry Pitman, one of the most active and 
 judicious apostles of the Co-operative cause. 
 " The number of members is 4CSO, being 
 tux increase of 132 for the three mouths j
 
 474 
 
 BOOK IV. CHAPTER VII. G. 
 
 I need not enter into similar parti- 
 culars respecting the Corn-Mill Society. 
 and will merely state that in 1860 its 
 capital is set down, on the same autho- 
 rity, at 26,6182. 14s. 6d., and the profit 
 for that single year at 10,1641 12s. 5d. 
 For the manufacturing establishment I 
 have no certified information later than 
 that of Mr. Holyoake, who states the 
 capital of the concern, in 1857, to he 
 5500Z. But a letter in the Rochdale 
 Observer of May 26, 1860, editorially 
 announced as by a person of good in- 
 formation, says that the capital had at 
 that time reached 50,OOOZ.: and the 
 E?.me letter gives highly satisfactory 
 statements respecting other similar 
 associations : the Rossendale Industrial 
 Company, capital 40,OOOZ. ; the Wals- 
 den Co-operative Company, capital 
 8000Z. ; the Bacup and Wardle Com- 
 mercial Company, with a capital of 
 40.000Z., " of which more than one= 
 third is borrowed at 5 per cent, and 
 this circumstance, during the last two 
 years of unexampled commercial pros- 
 perity, has caused the rate of dividend 
 to shareholders to rise to an almost 
 fabulous height." 
 
 It is not necessary to enter into any 
 details respecting the subsequent his- 
 tory of English Co-operation; the less 
 so, as it is now one of the recognised 
 elements in the progressive movement 
 of the age, and as such, has latterly 
 been the subject of elaborate articles in 
 most of our leading periodicals, the 
 most recent, and one of the best of 
 which, was in the Edinburgh Review 
 
 the capital or assets of the society is 
 59,536?. 10. Id., or more than last quarter 
 by 3637Z. 13. 7d. The cash received for sale 
 of goods is 45,8062. 0*. 10%d., being an increase 
 of 22S3Z. 12*. &\d., as compared with the pre- 
 vious three months. The profit realized is 
 6713/. 2f. 7i<7., which after depreciating fixed 
 stock account 182?. 2s. tyd., paying interest 
 on share capital 598?. 17*. 6rf., 'applying 2$ per 
 cent to an educational fund, viz. 122?. 17*. 9</., 
 leaves a dividend to members on their pur- 
 chases of 2s. 4rf.inthc pound. Non-members 
 have received 261?. ISs. 4d., at 1. Bd. in the 
 pound on their purchases, leaving 3d. in the 
 pound profit to the society, which increases 
 the reserve fund 1041. 15*. 4d. This fund 
 now stands at 1352?. 7. 11$<2. the accumula- 
 tion of profits from the trade of the public 
 with the store since September 1S62, over 
 and above tho Is. Sd.ia tie pound allowed to 
 such purchasers." 
 
 for October 1864 : and the progress of 
 Co-operation from month to month is 
 regularly chronicled in the " Co-opera- 
 tor." I must not, however, omit to 
 mention the last great step in advance, 
 in reference to the Co-operative Stores ; 
 the formation, in the North of England 
 (and another is in course of formation 
 in London) of a Wholesale Society, to 
 dispense with the services of the whole- 
 sale merchant as well as of the retail 
 dealer, and extend to the Societies the 
 advantage which each society gives to 
 its own members, by an agency for 
 co-operative purchases of foreign as 
 well as domestic commodities direct 
 from the producers. 
 
 It is hardly possible to take any but 
 a hopeful view of the prospects of man- 
 kind, when in the two leading countries 
 of the world, the obscure depths of 
 society contain simple working men 
 whose integrity, good sense, self-com- 
 mand, and honourable confidence in 
 one another, have enabled them to 
 carry these noble experiments to the 
 triumphant issue which the facts 
 recorded in the preceding pages 
 attest. 
 
 From the progressive advance of tho 
 co-operative movement, a great in- 
 crease may be looked for even in the 
 aggregate productiveness of industry. 
 The sources of the increase are two- 
 fold. In the first place, the class of 
 mere distributors, who are not pro- 
 ducers but auxiliaries of production, 
 and whose inordinate numbers, far 
 more than the gains of capitalists, are 
 the cause why so great a portion of the 
 wealth produced does not reach the 
 producers will be reduced to more 
 modest dimensions. Distributors differ 
 from producers in this, that when pro- 
 ducers increase, even though in any 
 given department of industry they may 
 be too numerous, they actually produce 
 more : but the multiplication of distri- 
 butors does not make more distribution 
 to be done, more wealth to be distri- 
 buted; it does but divide th 
 work among a greater number of per- 
 sons, seldom even cheapening the pro- 
 cess. By limiting the distributors^ to 
 the number really required for making 
 the commodities accessible to the con-
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 473 
 
 Burners which is the direct effect of 
 the co-operative system avast numher 
 of hands will be set free for production, 
 and the capital which feeds and the 
 gains which remunerate them will be 
 applied to feed and remunerate pro- 
 ducers. This great economy of the 
 world's resources would be realized, 
 even if co-operation stopped at as- 
 sociations for purchase and con- 
 sumption, without extending to pro- 
 duction. 
 
 The other mode in which co-opera- 
 tion tends-, still more efficaciously, to 
 increase the productiveness of labour, 
 consists in the vast stimulus given to 
 productive energies, by placing the 
 labourers, as a mass, in a relation to 
 their work which would make it their 
 principle and their interest at present 
 it is neither to do the utmost instead 
 of the least possible in exchange for 
 their remuneration. It is scarcely 
 possible to rate too highly this material 
 benefit, which yet is as nothing com- 
 pared with the moral revolution in 
 society that would accompany it : the 
 healing of the standing feud between 
 capital and labour; the transformation 
 of human life, from a conflict of classes 
 struggling for opposite interests, to a 
 friendly rivalry in the pursuit of a good 
 common to all ; the elevation of the 
 dignity of labour, a new sense of 
 security and independence in the 
 labouring class, and the conversion 
 of each human being's daily occu- 
 pation into a school of the social 
 sympathies and the practical intelli- 
 gence. 
 
 Such is the noble ideal which the 
 promoters of Co-operation should have 
 before them. But to attain, in any 
 degree, these objects, it is indispensable 
 that all, and not some only, of those 
 who do the work, should be identified 
 in interest with the prosperity of the 
 undertaking. Associations which, 
 when they have been successful, re- 
 nounce the essential principle of the 
 system, and become joint-stock com- 
 panies of a limited number of share- 
 holders, who differ from those of other 
 companies only in being working men ; 
 associations which employ hired la- 
 bourers without any interest in the 
 
 profits (and I grieve to say that the 
 Manufacturing Society even of Roch- 
 dale has thus degenerated), are, no 
 doubt, exercising a lawful right in 
 honestly employing the existing system 
 of society to improve their position aa 
 individuals : but it is not from them 
 that anything needs be expected to- 
 wards replacing that system by a 
 better. Neither will such societies, in 
 the long run, succeed in keeping their 
 ground against individual competition. 
 Individual management by the one 
 person principally interested, has great 
 advantages over every description of 
 collective management : co-operation 
 has but one thing to oppose to those 
 advantages the common interest of all 
 the workers in the work. When indi- 
 vidual capitalists, as they will cer- 
 tainly do, add this to their other points 
 of advantage ; when, even if only to 
 increase their gains, they take up the 
 practice which these co-operative socie- 
 ties have dropped, and connect the 
 pecuniary interest of every person in 
 their employment with the most effi- 
 cient and most economical manage- 
 ment of the concern ; they are likely to 
 gain an easy victory over societies 
 which retain the defects, while they 
 cannot possess the full advantages, of 
 the old system. 
 
 Under the most favourable supposi- 
 tion it will be desirable, and perhaps 
 for a considerable length of time, that 
 individual capitalists associating their 
 workpeople in the profits, should co- 
 exist with even those co-operative 
 societies which are faithful to the co- 
 operative principle. Unity of authority 
 makes many things possible, which 
 could not, or would not, be undertaken, 
 subject to the chance of divided coun- 
 cils, or changes in the management. A 
 private capitalist, exempt from the 
 control of a body, if he is a person of 
 capacity, is considerably more likely 
 than almost any association to run 
 judicious risks, and originate costly 
 improvements. Co-operative societies 
 may be depended on for adopting im- 
 provements after they have been tested 
 by success : but individuals are more 
 likely to commence things previously 
 untried. Even in ordinary business,
 
 476 
 
 BOOK IV. CHAPTER VII. ?. 
 
 the competition of capable persons who 
 in the event of failure are to have all 
 the loss, and in case of success the 
 greater part of the gain, will be very 
 useful in keeping the managers of co- 
 operative societies up to the due pitch 
 of activity and vigilance. 
 
 When, however, co-operative societies 
 shall have sufficiently multiplied, it is 
 not probable that any but the least 
 valuable workpeople will any longer 
 consent to work all their lives for wages 
 merely: and both private capitalists 
 and associations will gradually find it 
 necessary to make the entire body of 
 labourers participants in profits. Even- 
 tually, and in perhaps a less remote 
 future than may be supposed, \ve may, 
 through the co-operative principle, see 
 our way to a change in society, which 
 would combine the freedom and inde- 
 pendence of the individual, with the 
 moral, intellectual, and economical 
 advantages of aggregate production ; 
 and which, without violence or spolia- 
 tion, or even any sudden disturbance 
 of existing habits and expectations, 
 would realize, at least in the industrial 
 department, the best aspirations of the 
 democratic spirit, by putting an end to 
 the division of pociety into the indus- 
 trious and the idle, and effacing all 
 social distinctions but those fairly 
 earned by personal services and exer- 
 tions. Associations like those which 
 we have described, by the very process 
 of their success, are a course of educa- 
 tion in those moral and active qualities 
 by which alone success can be cither 
 deserved or attained. As associations 
 multiplied, they would tend more and 
 more to absorb all workpeople, except 
 those who have too little understanding, 
 or too little i virtue, to be capable of 
 learning to act on any other system 
 than that of narrow selfishness. As 
 this change proceeded, owners of capi- 
 tal would gradually find it to their 
 advantage, instead of maintaining the 
 struggle of the old system with work- 
 people of only the worst description, to 
 lend their capital to the associations ; 
 to do this at a diminishing rate of in- 
 terest, and at last, perhaps, even to 
 exchange their capital for terminable 
 annuities. In this or some such mode, 
 
 the existing accumulations of capital 
 might honestly, and by a kind of spon- 
 taneous process, become in the end the 
 joint property of all who participate in 
 their productive employment : a trans- 
 formation which, thus effected, (and 
 assuming of course that both sexes 
 participate equally in the rights and 
 in the government of the association)* 
 would be the nearest approach to social 
 jtistice, and the most beneficial order- 
 ing of industrial affairs for the universal 
 good, which it is possible at present to 
 foresee. 
 
 7. I agree, then, with the So- 
 cialist writers in their conception of 
 the form which industrial operations 
 tend to assume in the advance of im- 
 provement ; and I entirely share their 
 opinion that the time is ripe for com 
 mencing this transformation, and that 
 it should by all just and effectual means 
 be aided and encouraged. But while 
 I agree and sympathize with Socialists 
 in this practical portion of their aims, 
 I utterly dissent from the most conspi- 
 cuous and vehement part of their 
 teaching, their declamations against 
 competition. With moral conceptions 
 in many respects far ahead of the ex- 
 isting arrangements of society, they 
 have in general very confused and 
 erroneous notions of its actual working ; 
 and one of their greatest errors, as I 
 conceive, is to charge upon competition 
 all the economical evils which at 
 present exist. They foi-get that wher- 
 ever competition is not, monopoly is; 
 
 * In this respect also the Rochdale Society 
 has given an example of reason and justice, 
 worthy of the good sense and good feeling 
 manifested in their general proceedings. 
 " The Rochdale Store," says Mr. Holyoake, 
 " renders incidental but valuable aid towards 
 realizing the civil independence of women. 
 Women may be members of this Store, and 
 vote in its proceedings. Single and married 
 women join. Many married v.'omen become 
 members because their husbands will not 
 take the trouble, and others join in it in self- 
 defence, to prevent the husband from spend- 
 ing their money in drink. The husband can- 
 not withdraw the savings at the Store stand- 
 ing in the wife's name, unless she signs the 
 order. Of course, as the law still stands, tho 
 husband could by legal process get possession 
 of the money. But a process takes time, and 
 the husband gets sober and thinks better of 
 it before the law can move."
 
 PROBABLE FUTURE OF THE LABOURING CLASSES. 477 
 
 and that monopoly, in all its forms, is 
 the taxation of the industrious for the 
 support of indolence, if not of plunder. 
 They forget, too, that with the excep- 
 tion of competition among labourers, 
 all other competition is for the benefit 
 of the labourers, by cheapening the 
 articles they consume ; that competi- 
 tion even in the labour market is a 
 source not of low but of high wages, 
 wherever the competition for labour 
 exceeds the competition of labour, as 
 in America, in the colonies, and in the 
 skilled trades; and never could be a 
 cause of low wages, save by the over- 
 stocking of the labour market through 
 the too great numbers of the labourers' 
 families; while, if the supply of la- 
 bourers is excessive, not even Socialism 
 can prevent their remuneration from 
 being low. Besides, if association were 
 universal, there vould be no competi- 
 tion between labourer and labourer; 
 and that between association and asso- 
 ciation would b for the benefit of the 
 consumers, that is, of the associa- 
 tions ; of the industrious classes gene- 
 rally. 
 
 I do not pretend that there are no 
 inconveniences in competition, or that 
 the moral objections urged against it 
 by Socialist writers, as a source of 
 jealousy and hostility amons tnose i 
 engaged in the same occupation, are 
 altogether groundless. But if compe- 
 tition has its evils, it prevents greater 
 evils. As M. Feugueray well says,* 
 "The deepest root of the evils and ini- 
 quities which fill the industrial world, 
 is not competition, but the subjection 
 of labour to capital, and the enormous 
 share which the possessors of the in- 
 struments of industry are able to take 
 from the produce If competi- 
 tion has great power for evil, it is no 
 less fertile of good, especially in what 
 regards the development of the indi- 
 vidual faculties, and the success of 
 innovations." It is the common error 
 of Socialists to overlook the natural in- 
 dolence of mankind ; their tendency to 
 be passive, to be the slaves of habit, to 
 persist indefinitely in a course once 
 chosen. Let them once attain any 
 
 *P. 90. 
 
 state of existence which they consider 
 tolerable, and the danger to be appre- 
 hended is that they will thenceforth 
 stagnate ; will not exert themselves to 
 improve, and by letting their faculties 
 rust, will lose even the energy required 
 to preserve them from deterioration. 
 Competition may not be the best con- 
 ceivable stimulus, but it is at present a 
 necessary one, and no one can foresee 
 the time when it will not be indispen- 
 sable to progress. Even confining our- 
 selves to the industrial department, in 
 which, more than in any other, the 
 majority may be supposed, to be com- 
 petent judges of improvements ; it 
 would be difficult to induce the general 
 assembly of an association to submit to 
 the trouble and inconvenience of alter- 
 ing their habits by adopting some new 
 and promising invention, unless their 
 knowledge of the existence of rival 
 associations made them apprehend that 
 what they would not consent to do, 
 others would, and that they would bo 
 left behind in the race. 
 
 Instead of looking upon competition 
 as the baneful and anti-social principle 
 which it is held to bo by the generality 
 of Socialists, I conceive that, even in 
 the present state of society and in- 
 dustry, every restriction of it is an evil, 
 ana every extension of it, even if for 
 the time injuriously affecting some 
 class of labourers, is always an ultimate 
 good. To be protected against com- 
 petition is to be protected in idleness, 
 in mental dulness ; to be saved tho 
 necessity of being as active and as in- 
 telligent as other people ; and if it is 
 also to be protected against being un- 
 derbid for employment by a less highly 
 paid class of labourers, this is only 
 where old custom or local and partial 
 monopoly has placed some particular 
 class of artisans in a privileged position 
 as compared with the rest; and tho 
 time has come when the interest of 
 universal improvement is no longer 
 promoted by prolonging the privileges 
 of a few. If the slopsellers and others 
 of their class have lowered the wages 
 of tailors, and some other artisans, by 
 making them an affair of competition 
 instead of custom, so much the better 
 in the end. What is now required ia
 
 478 
 
 BOOK IV. CHATTER VII. 7. 
 
 not to bolster up old customs, whereby 
 limited classes of labouring people ob- 
 tain partial gains which interest them 
 in keeping up the present organi/ation 
 of society, but to introduce new general 
 practices beneficial to all ; and there is 
 reason to rejoice at whatever makes 
 the privileged classes of skilled artisans 
 
 feel, that they have the same interests, 
 and depend for their remuneration on 
 the same general causes, and must re- 
 sort for the improvement of their con- 
 dition to the same remedies, as the less 
 fortunately circumstanced and compa- 
 ratively helpless multitude.
 
 BOOK V. 
 
 ON THE INFLUENCE OP GOVEENMENT. 
 
 CHAPTER L 
 
 OF THE FUNCTIONS OP GOVERNMENT IN GENERAL. 
 
 1. ONE of the most disputed 
 questions both in political science and 
 '. .lanship at this par- 
 
 ticular period, relates to the proper 
 limita of the functions and agency of 
 governments. At other times it has 
 been a subject of controversy how go- 
 vernments should be constituted, and 
 according to what principles and rules 
 they should exercise their authority ; 
 but it is now almost equally a question, 
 to what departments of human affairs 
 that authority should extend. And 
 when the tide sets so strongly towards 
 changes in government and legislation, 
 as a means of improving the condition 
 of mankind, this discussion is more 
 likely to increase than to diminish in 
 interest. On the one hand, impatient 
 reformers, thinking it easier and shorter 
 to get possession of the government 
 than of the intellects and dispositions 
 of the public, are under a constant 
 temptation to stretch the province of 
 government beyond due bounds : while, 
 on the other, mankind have been so 
 much accustomed by their rulers to in- 
 terference for purposes other than the 
 public good, or under an erroneous con- 
 ception of what that good requires, 
 and so many rash proposals are made 
 by sincere lovers of improvement, for 
 attempting, by compulsory regulation, 
 the attainment of objects which can 
 only be effectually or only usefully 
 compassed by opinion and discussion, 
 that there has grown up a spirit of re- 
 sistance in limine to tlie interference 
 of government, merely as such, and a 
 disposition to restrict its sphere of 
 
 action within the narrowest bounds. 
 From differences in the historical de- 
 velopment of different nations, not 
 necessary to be here dwelt upon, the 
 former excess, that of exaggerating 
 the province of government, prevails 
 most, both in theory and in practice, 
 among the Continental nations, whilo 
 in England the contrary spirit has 
 hitherto been predominant. 
 
 The general principles of the ques- 
 tion, in so far as it is a question of 
 principle, I shall make an attempt to 
 determine in a later chapter of this 
 Book : after first considering the effects 
 produced by the conduct of government 
 in the exercise of the functions univer- 
 sally acknowledged to belong to it. 
 For this purpose, there must be a 
 specification of the functions which are 
 either inseparable from the idea of a 
 government, or are exercised habitually 
 and without objection by all govern- 
 ments ; as distinguished from those 
 respecting which it has been considered 
 questionable whether governments 
 should exercise them or not. The 
 former may be termed the necessary, 
 the latter the optional, functions of 
 government. By the term optional it 
 is not meant to imply, that it can ever 
 be a matter of indifference, or of arbi- 
 trary choice, whether the government 
 should or should not take upon itself 
 the functions in question ; but only 
 that the expediency of its exercising 
 them does not amount to necessity, and 
 is a subject on which diversity of 
 opinion does or may exist.
 
 480 
 
 BOOK V. CHAPTER I. 2. 
 
 2. In attempting to enumerate 
 the necessary functions of government, 
 we find them to be considerably more 
 multifarious than most people are at 
 first aware of, and not capable of being 
 circumscribed by those very definite 
 lines of demarcation, which, in the in- 
 considerateness of popular discussion, 
 it is often attempted to draw round 
 them. We sometimes, for example, 
 hear it said that governments ought to 
 confine themselves to affording protec- 
 tion against force and fraud : that, 
 these two things apart, people should 
 be free agents, able to take care of 
 themselves, and that so long as a person 
 practises no violence or deception, to 
 the injury of others in person or pro- 
 perty, legislatures and governments 
 are in no way called on to concern 
 themselves about him. But why should 
 people be protected by their govern- 
 ment, that is, by their own collective 
 strength, against violence and fraud, 
 and not against other evils, except that 
 the expediency is more obvious ? If 
 nothing, but what people cannot pos- 
 eibly do for themselves, can be fit to be 
 done for them by government, people 
 might be required to protect them- 
 selves by their skill and courage even 
 against force, or to beg or buy protec- 
 tion against it, as they actually do 
 where the government is not capable 
 of protecting them : and against fraud 
 every one has the protection of his own 
 wits. But without further anticipating 
 the discussion of principles, it is suffi- 
 cient oa the present occasion to con- 
 sider facts. 
 
 Under which of these heads, the re- 
 pression of force or of fraud, are we to 
 place the operation, for example, of the 
 laws of inheritance ? Some such laws 
 must exist in all societies. It may be 
 said, perhaps, that in this matter go- 
 vernment has merely to give effect to 
 the disposition which an individual 
 makes of his own property by will. 
 This, however, is at least extremely 
 disputable ; there is probably no coun- 
 try by whose laws the power of testa- 
 mentary disposition is perfectly abso- 
 lute. And suppose the very common 
 case of there being no will: does not 
 the law, that is, the government, decide 
 
 on principles of general cxpcdicncv, 
 who shall take the succession ? and in 
 case the successor is in any manner 
 incompetent, does it not appoint per- 
 sons, frequently officers of its own, to 
 collect the property and apply it to his 
 benefit? There are many other cases 
 in which the government undertakes 
 the administration of property, because 
 the public interest, or perhaps only 
 that of the particular persons con- 
 cerned, is thought to require it. This 
 is often done in cases of litigated pro- 
 perty; and in cases of judicially de- 
 clared insolvency. It has never been 
 contended that in doing these things, 
 a government exceeds its province. 
 
 Nor is the function of the law in de- 
 fining property itself, so simple a thing 
 as may be supposed. It may be ima- 
 gined, perhaps, that the law has only 
 to declare and protect the right of 
 every one to what he has himself pro- 
 duced, or acquired by the voluntary 
 consent, fairly obtained, of those who 
 produced it. But is there nothing re- 
 cognised as property except what has 
 been produced? Is there not the earth 
 itself, its forests and waters, and all 
 other natural riches, above and below 
 the surface ? These are the inheri- 
 tance of the human race, and there 
 must be regulations for the common 
 enjoyment of it. What rights, and 
 under what conditions, a person shall 
 be allowed to exercise over any portion 
 of this common inheritance, cannot be 
 left undecided. No function of govern- 
 ment is less optional than the regula- 
 tion of these things, or more com- 
 pletely involved in the idea of civilized 
 society. 
 
 Again, the legitimacy is conceded of 
 repressing violence or treachery ; but 
 under which of these heads are we to 
 place the obligation imposed on people 
 to perform their contracts ? Non-per- 
 formance does not necessarily imply 
 fraud ; the person who entered into tho 
 contract may have sincerely intended 
 to fulfil it : and the term fraud, which 
 can scarcely admit of being extended 
 even to the case of voluntary breach of 
 contract when no deception was prac- 
 tised, is certainly not applicable when 
 the omission to perform is a case of
 
 FUNCTIONS OF GOVEKNMEN1 L*? GENERAL. 
 
 481 
 
 negligence. Is it no part of the duty 
 of governments to enforce contracts ? 
 he doctrine of non-interference 
 would no doubt be stretched a little, 
 and it would be said, that enforcing 
 contracts is not regulating the affairs 
 01 individuals at the pleasure of govern- 
 ment, but giving effect to their own 
 expressed desire. Let us acquiesce in 
 this enlargement of the restrictive 
 theory, and take it for what it is worth. 
 But governments do not limit their 
 concern with contracts to a simple en- 
 forcement. They take upon themselves 
 to determine what contracts are fit to 
 be enforced. It is not enough that one 
 person, not being cither cheated or 
 compelled, makes a promise to another. 
 There are promises by which it is not 
 for the public good that persons should 
 have the power of binding themselves. 
 To say nothing of engagements to do 
 something contrary to law, there are 
 engagements which the law refuses to 
 enforce, for reasons connected with the 
 interest of the promisor, or with the 
 general policy of the state. A contract 
 by which a person sells himself to an- 
 other as a slave, would be declared 
 void by the tribunals of this and of 
 most othei European countries. There 
 are few nations whose laws enforce a 
 contract for what is looked upon as 
 prostitution, or any matrimonial en- 
 gagement of which the conditions vary 
 in any respect from those which the 
 law has thought fit to prescribe. But 
 when once it is admitted that there are 
 any engagements which for reasons of 
 expediency the law ought not to en- 
 force, the same question is necessarily 
 opened with respect to all engage- 
 ments. Whether, for example, the law 
 should enforce a contract to labour, 
 when the wages are too low, or the 
 hours of work too severe : whether it 
 should enforce a contract by which a 
 person binds himself to remain, for 
 more than a very limited period, in the 
 sen-ice of a given individual : whether 
 a contract of marriage, entered into for 
 life, should continue to be enforced 
 against the deliberate will of the per- 
 sons, or of either of the persons, who 
 entered into it. Every question which 
 can possibly arise as to the policy of 
 
 contracts, and of the relations whic 
 they establish among human beings, is 
 a question for the legislator ; and on& 
 which he cannot escape from coa 
 sidcring, and in some way or othct 
 deciding. 
 
 Again, the prevention and suppres 
 sion of force and fraud afford apprv 
 priate employment for soldiers, police- 
 men, and criminal judges ; but there 
 are also civil tribunals. The punish- 
 ment of wrong is one business of an 
 administration of justice, but the de- 
 cision of disputes is another. Innu- 
 merable disputes arise between per- 
 sons, without mala fides on either side, 
 through misconception of their legal 
 rights, or from not being agreed about 
 the facts, on the proof of which those 
 rights are legally dependent. Is it 
 not for the general interest that the 
 State should appoint persons to clear 
 up these uncertainties and terminate 
 these disputes ? It cannot be said to 
 be a case of absolute necessity. People 
 might appoint an arbitrator, aad en- 
 gage to submit to his decision ; and 
 they do so where there are no courts 
 of justice, or where the courts are not 
 trusted, or where their delays and 
 expenses, or the irrationality of their 
 rules of evidence, deter people from 
 resorting to them. Still, it is uni- 
 versally thought right that the State 
 should establish civil tribunals ; and 
 if their defects often drive people to 
 have recourse to substitutes, even then 
 the power held in reserve of carrying 
 the case before a legally constituted 
 court, gives to the substitutes their 
 principal efficacy. 
 
 Not only does the State undertake 
 to decide disputes, it takes precautions 
 beforehand that disputes may not arise. 
 The laws of most countries lay down 
 rules for determining many things, not 
 because it is of much consequence in 
 what way they are determined, but in 
 order that they may be determined 
 somehow, and there may be no ques- 
 tion on the subject. The law pre- 
 scribes forms of words for many kinds 
 of contract, in order that no dispute 
 or misunderstanding may arise about 
 their meaning : it makes provisioa 
 that if a dispute does arise, evidence
 
 482 
 
 BOOK V. CHAPTER I. 3. 
 
 shall be procurable for deciding it, by 
 requiring that the document be at- 
 tested by witnesses and executed 
 with certain formalities. The law 
 preserves authentic evidence of facts 
 to which legal consequences are at- 
 tached, by keeping a registry of such 
 facts ; as of births, deaths, and mar- 
 Hages, of wills and contracts, and of 
 judicial proceedings. In doing these 
 things, it has never been alleged that 
 government oversteps the proper limits 
 of its functions. 
 
 Again, however wide a scope we 
 may allow to the doctrine that indi- 
 viduals are the proper guardians of 
 their own interests, and that govern- 
 ment owes nothing to them but to 
 save them from being interfered with 
 by other people, the doctrine can never 
 be applicable to any persons but those 
 who are capable of acting in their own 
 behalf. The individual may be an 
 infant, or a lunatic, or fallen into 
 imbecility. The law surely must look 
 after the interests of such persons. It 
 does not necessarily do this through 
 officers of its own. It often devolves 
 the trust upon some relative or 
 connexion. But in doing so is its 
 duty ended? Can it make over the 
 interests of one person to the control 
 of another, and be excused from super- 
 vision, or from holding the person 
 thus trusted, responsible for the dis- 
 charge of the trust ? 
 
 There is a multitude of cases in 
 which governments, with general ap- 
 probation, assume powers and execute 
 functions for which no reason can bo 
 assigned except the simple one, that 
 ! they conduce to general convenience. 
 . We may take as an example, the 
 : function (which is a monopoly too) of 
 , coining money. This is assumed for 
 no more recondite purpose than that 
 rf saving 'to individuals the trouble, 
 delay, and expense of weighing and 
 assaying. No one, however, even of 
 those most jealous of state interfer- 
 ence, has objected to this as an im- 
 proper exercise of the powers of 
 government. Prescribing a set of 
 standard weights and measures is 
 another instance. Paving, lighting, 
 and cleansing the streets and tho- 
 
 roughfares, is another ; whether done 
 by the general government, or, as is 
 more usual, and generally moie ad 
 visable, by a municipal authority. 
 Making or improving harbours, build- 
 ing lighthouses, making surveys in 
 order to have accurate maps and 
 charts, raising dykes to keep the sea 
 out, and embankments to keep rivers 
 in, are cases in point. 
 
 Examples might be ir.c'efinitely mul 
 tiplied without intruding on any dis- 
 puted ground. But enough has been 
 said to show that the admitted func- 
 tions of government embrace a much 
 wider field than can easily be included 
 within the ring-fence of any restrictive 
 definition, and that it is hardly pos- 
 sible to find any ground of justification 
 common to them all, except the com- 
 prehensive one of general expediency ; 
 nor to limit the interference of govern- 
 ment by any universal rule, save the 
 simple and vague one that it should 
 never be admitted but when the case 
 of expediency is strong. 
 
 3. Some observations, however, 
 may be usefully bestowed on the 
 nature of the considerations on which 
 the question of government interference 
 is most likely to turn, and on the 
 mode of estimating the comparative 
 magnitude of the expediencies in- 
 volved. This will form the last of 
 the three parts into which our discus- 
 sion of the principles and effects of 
 government interference may con- 
 veniently be divided. The following 
 will be our division of the subject. 
 
 We shall first consider the econo- 
 mical effects arising from the mannes 
 in which governments perform their 
 necessary and acknowledged func- 
 tions. 
 
 Wo shall tlicu pass to certain go- 
 vernmental interferences of what I 
 have termed the optional kind (i.e. 
 overstepping the boundaries of the- 
 universally acknowledged functions) 
 which have heretofore taken place, 
 and in some cases still take place, 
 under the influence of false general 
 theories. 
 
 It will lastly remain to inquire 
 whether, independently of any false
 
 GENERAL PRINCIPLES OF TAXATION. 
 
 483 
 
 theory, and consistently with a correct 
 view of the laws which regulate human 
 affairs, there be any cases of the 
 oj;;i mil class in which governmental 
 '. i-nce is really advisable, and 
 
 what are those cases. 
 
 The first of these divisions is of an 
 extremely miscellaneous character : 
 since the necessary functions of go- 
 vernment, and those which are so 
 ,;ly expedient that they have 
 never or very rarely been objected to, 
 s already pointed out, too 
 to be brought under any very 
 simple classification. Those, how- 
 CVIT, which are of principal import- 
 ance, which alone it is necessary hero 
 
 to consider, may be reduced to the 
 following general heads. 
 
 First, the means adopted by govern- 
 ments to raise the revenue which is the 
 condition of their existence. 
 
 Secondly, the nature of the laws 
 which they prescribe on the two 
 great subjects of Property and Con- 
 tracts. 
 
 Thirdly, the excellences or defects 
 of the system of means by which they 
 enforce generally the, execution of 
 their laws, namely, their judicature 
 and police. 
 
 We commence with the first head, 
 that is, with the theory of Taxa- 
 tion. 
 
 CHAPTER IL 
 
 THE GENERAL PRINCIPLES OP TAXATION. 
 
 1. THE qualities desirable, eco- 
 nomically speaking, in a system of 
 taxation, have been embodied by 
 A'lum Smith in four maxims or prin- 
 ciples, which, having been generally 
 concurred in by subsequent writers, 
 may be said to have become classical, 
 and this chapter cannot be better com- 
 menced than by quoting them.* 
 
 " 1. The subjects of every state 
 ought to contribute to the support of 
 the government, as nearly as possible 
 in proportion to their respective abili- 
 ties : that is, in proportion to the re- 
 venue which they respectively enjoy 
 under the protection ot the state. In 
 the observation or neglect of this 
 maxim consists what is called the 
 equality or inequality of taxation. 
 
 " 2. The tax which each individual 
 is bound to pay ought to be certain, 
 and not arbitrary. The time of pay- 
 ment, the manner of payment, the 
 quantity to be paid, ought all to be 
 clear and plain to the contributor, and 
 to every other person. "Where it is 
 otherwise, every person subject to the 
 tax is put more or less in the power of 
 W<xUth ofNatiotu, book v. ch ii. 
 
 the taxgatherer, who can either aggra- 
 vate the tax upon any obnoxious con- 
 tributor, or extort by the terror of such 
 aggravation, some present or perqui- 
 site to himself. The uncertainty of 
 taxation encourages the insolence and 
 favours the corruption of an order of 
 men who are naturally unpopular, 
 aven when they are neither insolent 
 n<w corrupt. The certainty of what 
 eafth individual ought to pay is, in 
 taxation, a matter of so great impor- 
 tance, that a very considerable degree 
 of inequality, it appears, I believe, 
 from th< experience of all nations, is 
 not near so great an evil, as a very 
 small degree of uncertainty. 
 
 " 3. Every tax ought to'be levied at 
 the time, or in the manner, in which 
 it is most likly to be convenient for 
 the contributor to pay it. A tax upon 
 the rent of land or of houses, payable 
 at the same term at which such rents 
 are usually paid, is levied at a time 
 when it is most likely to be convenient 
 for the contributor to pay ; or \\ hen he 
 is most likely to have wherewithal to 
 pay. Taxes upon such consumable 
 goods as are articles of luxuvv, are all
 
 434 
 
 BOOK V. CHAPTER II. 2. 
 
 finally paid by the consumer, and 
 generally in a manner that is very 
 convenient to him. He pays them 
 by little and little, as he has occasion 
 to buy the goods. As he is at liberty, 
 too, .either to buy or not to buy, as he 
 pleases, it must be his own fault if he 
 ever suffers any considerable incon- 
 venience from such taxes. 
 
 " 4. Every tax ought to be so con- 
 trived as both to take out and to keep 
 out of the pockets of the people as 
 little as possible over and above what 
 it brings into the public treasury of 
 the state. A tax may either take out 
 or keep out of the pockets of the people 
 a great deal more than it brings into 
 the public treasury, in the four follow- 
 ing ways. First, the levying of it 
 may require a great number of officers, 
 whose salaries may eat up the greater 
 part of the produce of the tax, and 
 whose perquisites may impose another 
 additional tax upon the people." Se- 
 condly, it may divert a portion of the 
 labour and capital of the community 
 from a more to a less productive em- 
 ployment. " Thirdly, by the forfeitures 
 and other penalties which those un- 
 fortunate individuals incur who at- 
 tempt unsuccessfully to evade the tax, 
 it may frequently ruin them, and there- 
 by put an end to the benefit which the 
 community might have derived from 
 the employment of their capitals. An 
 injudicious tax offers a great tempta- 
 tion to smuggling. Fourthly, by sub- 
 jecting the people to the frequent visits 
 and the odious examination of the tax- 
 gatherers, it may expose them to much 
 unnecessary trouble, vexation, and op- 
 pression :" to which may be added, 
 that the restrictive regulations to 
 which trades and manufactures are 
 often subjected to prevent evasion of a 
 tax, are not only in themselves trouble- 
 some and expensive, but often oppose 
 insuperable obstacles to making im- 
 provements in the processes. 
 
 The last three of these four maxims 
 require little other explanation or illus- 
 tration than is contained in the pas- 
 sage itself. How far any given tax 
 conforms to, or conflicts with them, is 
 a matter to be considered in the dis- 
 cussion of particular taxes. But the 
 
 first of the four points, equality of tax- 
 ation, requires to be more fully exa- 
 mined, being a thing often imperfectly 
 understood, and on which many falsa 
 notions have become to a certain de- 
 gree accredited, through the absence 
 of any definite principles of judgment 
 in the popular mind. 
 
 2. For what reason ought equality 
 to be the rule in matters of taxation ? 
 For the reason, that it ought to be so 
 in all affairs of government. As a 
 government ought to make no dis- 
 tinction of persons or classes in the 
 strength of their claims on it, what- 
 ever sacrifices it requires from them 
 should be made to bear as nearly as 
 possible with the same pressure upon 
 all ; which, it must be observed, is the 
 mode by which least sacrifice is occa- 
 sioned on the whole. If any one bears 
 less than his fair share of the burthen, 
 some other person must suffer more 
 than his share, and the alleviation to 
 the one is not, on the average, so 
 great a good to him, as the increased 
 pressure upon the other is an evil. 
 Equality of taxation, therefore, as a 
 maxim of politics, means equality of 
 sacrifice. It means apportioning tho 
 contribution of each person towards 
 the expenses of government, so that 
 he shall feel neither more nor less 
 inconvenience from his share of the 
 payment than every other person ex- 
 periences from his. This standard, 
 like other standards of perfection, can- 
 not be completely realized ; but the 
 first object in every practical discus- 
 sion should be to know what perfection 
 is. 
 
 There are persons, however, who are 
 not content with the general principles 
 of justice as a basis to ground a rule of 
 finance upon, but must have something, 
 as they think, more specifically appro- 
 priate to the subject. What best 
 pleases them is, to regard the taxes 
 paid by each member of the community 
 as an equivalent for value received, in 
 the shape of service to himself; and 
 they prefer to rest the justice of making 
 each contribute in proportion to his 
 means, upon the ground, that he who 
 has twice as much property to be pro-
 
 GENERAL PRINCIPLES OF TAXATION. 
 
 485 
 
 tected, receives, on an accurate calcu- 
 lation, twice as much protection, and 
 ought, on the principles of bargain and 
 8<ile, to pay twice as much for it. 
 Since, however, the assumption that 
 government exists solely for the pro- 
 tection of property, is not one to he de- 
 liberately adhered to; some consistent 
 adherents of the quid pro quo principle 
 go on to observe, that protection being 
 required for person as well as property, 
 and everybody's person receiving the 
 same amount of protection, a poll-tax 
 of a fixed sum per head is a proper 
 equivalent for this part of the benefits 
 of government, while the remaining 
 part, protection to property, should be 
 paid for in proportion to property. 
 There is in this adjustment a false air 
 of nice adaptation, very acceptable to 
 some minds. But in the first place, it 
 is not admissible that the protection of 
 persons and that of property are the 
 sole purposes of government. The 
 ends of government are as comprehen- 
 sive as those of the social union. They 
 consist of all the good, and all the im- 
 munity from evil, which the existence 
 of government can be made either 
 directly or indirectly to bestow. In 
 the second place, the practice of setting 
 definite values on things essentially 
 indefinite, and making them a ground 
 of practical conclusions, is peculiarly 
 fertile in false views of social questions. 
 It cannot be admitted, that to be pro- 
 tected in the ownership of ten times as 
 much property, is to be ten times as 
 much protected. Neither can it be 
 truly said that the protection of 1000Z. 
 a year costs the State ten times as 
 much as that of 100?. a year, rather 
 than twice as much, or exactly as 
 much. The same judges, soldiers, 
 sailors, who protect the one protect the 
 other ; and the larger income does not 
 necessarily, though it may sometimes, 
 require even more policemen. Whether 
 the labour and expense of the protec- 
 tion, or the feelings of the protected 
 person, or any other definite thing be 
 made the standard, there is no such 
 proportion as the one supposed, nor 
 any other definable proportion. If we 
 wanted to estimate the degrees of 
 benefit which different persons derive 
 
 from the protection of government, we 
 should have to consider who would 
 suffer most if that protection were 
 withdrawn : to which question if any 
 answer could be made, it must be, that 
 those would suffer most who were 
 weakest in mind or body, either by 
 nature or by position. Indeed, such 
 persons would almost infallibly bo 
 slaves. If there were any justice, 
 therefore, in the theory of justice now 
 under consideration, those who are 
 least capable of helping or defending 
 themselves, being those to whom the 
 protection of government is the most 
 indispensable, ought to pay the greatest 
 share of its price : the reverse of the 
 true idea of distributive justice, which 
 consists not in imitating but in re- 
 dressing the inequalities and wrongs of 
 nature. 
 
 Government must be regarded as so 
 pre-eminently a concern of all, that to 
 determine who are most interested in 
 it is of no real importance. If a person 
 or class of persons receive so small a 
 share of the benefit as makes it neces- 
 sary to raise the question, there is 
 something else than taxation which is 
 amiss, and the thing to be done is to 
 remedy the defect, instead of recognis- 
 ing it and making it a ground for de- 
 manding less taxes. As, in a case of 
 voluntary subscription for a purpose in 
 which all are interested, all are thought 
 to have done their part fairly when 
 each has contributed according to his 
 means, that is, has made an equal 
 sacrifice for the common object ; in 
 like manner should this be the prin- 
 ciple of compulsory contributions : and 
 it is superfluous to look for a more in- 
 genious or recondite ground to rest tho 
 principle upon. 
 
 3. Setting out, then, from the 
 maxim that equal sacrifices ought to 
 be demanded from all, we have next to 
 inquire whether this is in fact done, by 
 making each contribute the same per- 
 centage on his pecuniary means. Many 
 persons maintain the negative, saying 
 that a tenth part taken from a small 
 income is a heavier burthen than the 
 same fraction deducted from one much 
 larger : and on this is grounded the
 
 486 
 
 BOOK V. CHAPTER II. 3. 
 
 very popular scheme of what is called 
 graduated property-tax, viz. an in- 
 come tax in which the percentage rises 
 with the amount of the income. 
 
 On the best consideration I am able 
 to give to this question, it appears to 
 me that the portion of truth which the 
 Joctrine contains, arises principally 
 from the difference between a tax which 
 can he saved from luxuries, and one 
 which trenches, in ever so small a de- 
 gree, upon the necessaries of life. To 
 take a thousand a year from the pos- 
 sessor of ten thousand, would not de- 
 prive him of anything really conducive 
 either to the support or to the comfort 
 of existence ; and if such would be the 
 effect of taking five pounds from one 
 whose income is fifty, the sacrifice re- 
 quired from the last is not only greater 
 than, but entirely incommensurable 
 with, that imposed upon the first. The 
 mode of adjusting these inequalities of 
 pressure which seems to be the most 
 equitable, is that recommended by 
 Bentham, of leaving a certain mini- 
 mum of income, sufficient to provide 
 the necessaries of life, untaxed. Sup- 
 pose 501. a year to he sufficient to pro- 
 vide the number of persons ordinarily 
 supported from a single income, with 
 the requisites of life and health, and 
 with protection against habitual bodily 
 suffering, but not with any indulgence. 
 This then should be made the mini- 
 mum, and incomes exceeding it should 
 pay taxes not upon their whole amount, 
 out upon the surplus. If the tax be 
 ten per cent, an income of 601. should 
 be considered as a net income of 101., 
 and charged with II. a year, while an 
 income of 100QL should be charged as 
 one of 950?. Each would then pay a 
 fixed proportion, not of his whole 
 means, but of his superfluities.* An 
 income not exceeding 50Z. should not 
 be taxed at all, either directly or by 
 taxes on necessaries ; for as by suppo- 
 sition this is the smallest income which 
 labour ought to be able to command, 
 the government ought not to he a party 
 
 * This principle of assessment has been 
 partially adopted by Mr. Gladstone at the 
 last renewal of the income tax. From 1007.., 
 at which the tax begins, up to 2007., the 
 income only pays tax on the excess above 
 60*. 
 
 to making it smaller: This arrange- 
 ment however would constitute a 
 reason, in addition to others which 
 might be stated, for maintaining taxes 
 on articles of luxury consumed by the 
 poor. The immunity extended to the 
 income required for necessaries, should 
 depend on its being actually expended 
 for that purpose ; and the poor who, 
 not having more than enough for neces- 
 saries, divert any part of it to indul- 
 gences, should lake other people con- 
 tribute their quota out of those in- 
 dulgences to the expenses of the 
 state. 
 
 The exemption in favour of the 
 smaller incomes should not, I think, be 
 stretched further than to the amount 
 of income needful for life, health, and 
 immunity from bodily pain. If 501. 
 a year is sufficient (which may be 
 doubted) for these purposes, an income 
 of 100?. a year would, as it seems to 
 me, obtain all the relief it is entitled 
 to, compared with one of 1000?., by 
 being taxed only on 501. of its amount. 
 It may be said, indeed, that to take 
 100?. from 10001. (even giving back 
 five pounds) is a heavier impost than 
 1000?. taken from 10,000?. (giving 
 back the same five pounds). But this 
 doctrine seems to me too disputable 
 altogether, and even if true at all, not 
 true to a sufficient extent, to be made 
 the foundation of any rale of taxation. 
 Whether the person with 10,000?. a 
 year cares less for 10001. than the 
 person with only 1000?. a year cares 
 for 100Z., and if so, how much less, 
 does not appear to me capable of being 
 decided with the degree of certainty on 
 which a legislator or a financier ought 
 to act. 
 
 Some indeed contend that the rule 
 of proportional taxation bears harder 
 upon the moderate than upon the large 
 incomes, because the same proportional 
 payment has more tendency in the 
 former case than in the latter, to re- 
 duce the payer to a lower grade of 
 social rank. The fact appears to me 
 more than questionable. But even ad- 
 mitting it, I object to its being con- 
 sidered incumbent on government to 
 shape its course by such considerations, 
 or to recognise the notion that social
 
 GENKKAL PRINCIPLES OF TAXATION. 
 
 487 
 
 importance is or can be determined by 
 amount of expenditure. Government 
 
 sunlit to set an example of rating all 
 things at their true value, and riches, 
 therefore, at the worth, for comfort or 
 
 re, of the things which they will 
 A ouirht not to sanction the 
 
 'i y of prizing them for the pitiful 
 i if being known to possess them, 
 or the paltry shaine of being suspected 
 to be without them, the presiding mo- 
 tives of three-four the of the expenditure 
 of the middle classes. The sacrifices 
 of real comfort or indulgence which 
 government requires, it is bound to 
 apportion among all persons with as 
 much equality as possible; but their 
 sacrifices of the imaginary dignity de- 
 ; t on expense, it may spare itself 
 
 the trouble of estimating. 
 
 Both in England and on the Conti- 
 nent a graduated property-tax has 
 been advocated, on the avowed ground 
 that the state should use the instru- 
 ment of taxation as a means of miti- 
 gating the inequalities of wealth. I 
 am as desirous as any one, that means 
 should be taken to diminish those in- 
 equalities, but not so as to relieve the 
 prodigal at the expense of the prudent. 
 To tax the larger incomes at a higher 
 percentage than the smaller, is to lay 
 a tax on industry and economy ; to 
 impose a penalty on people for having 
 worked harder and saved more than 
 their neighbours. It is not the for- 
 tunes which are earned, but those 
 which arc unearned, that it is for the 
 public good to place under limitation. 
 A just and wise legislation would ab- 
 stain from holding out motives for 
 dissipating rather than saving the 
 earnings of honest exertion: Its im- 
 partiality between competitors would 
 consist in endeavouring that they 
 should all start fair, and not in hang- 
 i:<;,' a weight upon the swift to dimi- 
 nish the distance between them and 
 the Blow. Many, indeed, fail with 
 greater efforts than those with which 
 others succeed, not from difference of 
 merits, but difference of opportunities ; 
 but if all were done which it would be 
 in the power of a good government to 
 do, by instruction and by legislation, 
 to diminish this inequality of oppor- 
 
 tunities, the differences of fortune aris- 
 ing from people's own earnings could 
 not justly give umbrage. With re- 
 snect to the large fortunes acquired by 
 gift or inheiitancc, the power of be- 
 queathing is one of those privileges 
 of property which are fit subjects for 
 regulation on grounds of general ex- 
 pediency ; and I have already sug- 
 gested,* as a possible mode of re- 
 straining the accumulation of large 
 fortunes in the hands of those who 
 have not earned them by exertion, a 
 limitation of the amount which any 
 one person should be permitted to 
 acquire by gift, bequest, or inheritance. 
 Apart from this, and from the proposal 
 of Bentham (also discussed in a former 
 chapter) that collateral inheritance in 
 case of intestacy should cease, and the 
 property escheat to the state, I con- 
 ceive that inheritances and legacies, 
 exceeding a certain amount, are highly 
 proper subjects for taxation : and that 
 the revenue from them should be as 
 great as it can be made without giving 
 rise to evasions, by donation during 
 life or concealment of property, such 
 as it would be impossible adequately 
 to check. The principle of graduation 
 (as it is called,) that is, of levying a 
 larger percentage on a larger sum, 
 though its application to general taxa- 
 tion would be in my opinion objection- 
 able, seems to me both just and ex- 
 pedient as applied to legacy and in- 
 heritance duties. 
 
 The objection to a graduated pro- 
 perty-tax applies in an aggravated 
 degree to the proposition of an exclu- 
 sive tax on what is called "realized 
 property," that is, property not form- 
 ing a part of any capital engaged in 
 business, or rather in business under 
 the superintendence of the owner : as 
 land, the public funds, money lent on 
 mortgage, and shares (I presume) in 
 joint-stock companies. Except the 
 proposal of applying a sponge to the 
 national debt, no such palpable viola- 
 tion of common honesty has found 
 sufficient support in this country, 
 during the present generation, to be 
 regarded as within the domain of dis- 
 cussion. It has not the palliation of 
 * Supra, book ii. cb. ii.
 
 483 
 
 a graduated property-tax, that of lay- 
 ing the burthen on those best able to 
 bear it; for "realized property" in- 
 cludes the far larger portion of the 
 provision made for those who are un- 
 able to work, and consists, in great 
 part, of extremely small fractions. I 
 can hardly conceive a more shameless 
 pretension than that the major part of 
 the property of the country, that of 
 merchants, manufacturers, farmers, and 
 shopkeepers, should be exempted from 
 its share of taxation ; that these classes 
 should only begin to pay their propor- 
 tion after retiring from business, and 
 if they never retire should be excused 
 from it altogether. But even this does 
 not give an adequate idea of the in- 
 justice of the proposition. The burthen 
 thus exclusively thrown on the owners 
 of the smaller portion of the wealth of 
 the community, would not even be a 
 burthen on that class of persons in 
 perpetual succession, but would fall 
 exclusively on those who happened to 
 compose it when the tax was laid on. 
 As land and those particular securities 
 would thenceforth yield a smaller net 
 income, relatively to the general inte- 
 rest of capital and to the profits of 
 trade ; the balance would rectify itself 
 by a permanent depreciation of those 
 kinds of property. Future buyers 
 would acquire land and securities at a 
 reduction of price, equivalent to the 
 peculiar tax, which tax they would, 
 therefore, escape from paying ; while 
 the original possessors would remain 
 burthened with it even after parting 
 with the property, since they would 
 have sold their land or securities at a 
 loss of value equivalent to the fee- 
 Bimple of the tax. Its imposition 
 would thus be tantamount to the con- 
 fiscation for public uses of a percentage 
 of their property, equal to the percent- 
 age laid on their income by the tax. 
 That such a proposition should find 
 any favour, is a striking instance of 
 the want of conscience in matters of 
 taxation, resulting from the absence 
 of any fixed principles in the public 
 mind, and of any indication of a sense 
 of justice on the subject in the general 
 conduct of governments. Should the 
 scheme ever enlist a large party in its 
 
 !VV)K V. CHAPTER II. 4. 
 
 support, the fact would indicate a laxity 
 of pecuniary integrity in national af- 
 fairs, scarcely inferior to American 
 repudiation. 
 
 4. Whether the profits of trade 
 may not rightfully be taxed at a lower 
 rate than incomes derived from inte- 
 rest or rent, is part of the more com- 
 prehensive question, so often mooted 
 on the occasion of the present income- 
 tax, whether life incomes should be 
 subjected to the same rate of taxation 
 as perpetual incomes : whether sala- 
 ries, for example, or annuities, or the 
 gains of professions, should pay tho 
 same percentage as the income from 
 inheritable property. 
 
 The existing tax treats all kinds of 
 incomes exactly alike, taking its seven- 
 pence (now sixpence) in the pound as 
 well from the person whose income 
 dies with him, as from the landholder, 
 stockholder, or mortgagee, who can 
 transmit his fortune undiminished to 
 his descendants. This is a visible in- 
 justice : yet it does not arithmetically 
 violate the rule that taxation ought to 
 be in proportion to means. When it 
 is said that a temporary income ought 
 to be taxed less than a permanent one, 
 the reply is irresistible, that it is taxed 
 less ; for the income which lasts only 
 ten years pays the tax only ten years, 
 while that which lasts for ever pays 
 for ever. On this point some financial 
 reformers are guilty of a great fallacy. 
 They contend that incomes ought to 
 be assessed to the income-tax not in 
 proportion to their annual amount, but 
 to their capitalized value : that, for 
 example, if the value of a perpetual 
 annuity of 100Z. is 3000?., and a life 
 annuity of the same amount being 
 worth only half the number of years' 
 purchase could only be sold for 1 500/., 
 the perpetual income should pay twice 
 as much per cent income-tax as tho 
 terminable income ; if the one pays 
 101. a year, the other should pay only 
 51. But in this argument there is 
 the obvious oversight, that it values 
 the incomes by one standard and tho 
 payments by another ; it capitalizes 
 the incomes, but forgets to capitalize 
 the payments. An annuity worth
 
 PKLSC1PLES OF TAXATION. 
 
 489 
 
 3000Z. ought, it is alleged, to bo taxed 
 twice as highly as one which is only 
 worth 1500/., and no assertion can be 
 more unquestionable ; but it is for- 
 gotten that the income worth 30001. 
 pays to the supposed income-tax 101. 
 ft year in perpetuity, which is equiva- 
 lent, by supposition, to 300J., while the 
 terminable income pays the same 101. 
 only during the life of its owner, which 
 on the same calculation is a value of 
 1501., and could actually be bought for 
 that sum. Already, therefore, the in- 
 come which is only half as valuable, 
 pays only half as much to the tax ; and 
 if in addition to this its annual quota 
 were reduced from 101. to 51., it would 
 pay, not half, but a fourth part only of 
 the payment demanded from the per- 
 petual income. To make it just that 
 the one income should pay only half 
 as much per annum as the other, it 
 would be necessary that it should pay 
 that half for the same period, that is, 
 in 
 
 The rule of payment which this 
 school of financial reformers contend 
 for, would be very proper if the tax 
 were only to be levied once, to meet 
 some national emergency. On the 
 principle of requiring from all payers 
 an equal sacrifice, every person who 
 had anything belonging to him, re- 
 versioners included, would be called 
 on for a payment proportioned to the 
 present value of his property. I 
 wonder it does not occur to the re- 
 formers in question, that precisely be- 
 cause this principle of assessment 
 would be just in the case of a pay- 
 ment made once for all, it cannot 
 possibly be just for a permanent tax. 
 \Vhen each pays only once, one person 
 pays no oftener than another ; and the 
 proportion which would be just in that 
 case, cannot also be just if one person 
 has to make the payment only once, 
 and the other several times. This, 
 however, is the type of the case which 
 actually occurs. The permanent in- 
 comes pay the tax as much oftener 
 than the temporary ones, as a per- 
 petuity exceeds the certain or mi- 
 certain length of time which forms 
 the duration of the income for life or 
 years. 
 
 All attempts to establish a claim in 
 favour of terminable incomes on nu- 
 merical grounds to make out, in 
 short, that a proportional tax is not a 
 proportional tax are manifestly ab- 
 surd. The claim does not rest on 
 grounds of arithmetic, but of human 
 wants and feelings. It is not because 
 the temporary annuitant has smaller 
 means, but because he has greater 
 necessities, that he ought to be as- 
 sessed at a lower rate. 
 
 In spite of the nominal equality of 
 income, A, an annuitant of 10001. a 
 year, cannot so well afford to pay 1001. 
 out of it, as B who derives the same 
 annual sum from heritable property , 
 A having usually a demand on his 
 income which B has not, namely, to 
 provide by saving for children or 
 others ; to which, in the case of 
 salaries or professional gains, must 
 generally be added a provision for his 
 own later years ; while B may expend 
 his whole income without injury to 
 his old age, and still have it all to 
 bestow on others after his death. If 
 A, in order to meet these exigencies, 
 must lay by 5001. of his income, to take 
 1001. from him as iHcome-tax is to 
 take 1 001. from 7001., since it must bo 
 retrenched from that part only of his 
 means which he can afford to spend 
 on his own consumption. Were he to 
 throw it rateably on what he spends 
 and on what he saves, abating 70/. 
 from his consumption and 301. from 
 his annual saving, then indeed his 
 immediate sacrifice would be propor- 
 tionally the same as B's: but then 
 his children or his old age would be 
 worse provided for in consequence of 
 the tax. The capital sum which 
 would be accumulated for them would 
 be one-tenth less, and on the reduced 
 income afforded by this reduced ca- 
 pital, they would be a second time 
 charged with income-tax ; while B's 
 heirs would only be charged once. 
 
 The principle, therefore, of equality 
 of taxation, interpreted in its only 
 just sense, equality of sacrifice, re- 
 quires that a person who has no means 
 of providing for old ago, or for those 
 in whom he is interested, except by 
 saving from income, should have, tho
 
 490 
 
 BOOK V. CHAPTER II. 4. 
 
 tax remitted on all that part of his 
 income which is really and bonajlde 
 applied to that purpose. 
 
 If, indeed, reliance could be placed 
 on the conscience of the contributors, 
 or sufficient security taken for the cor- 
 rectness of their statements by colla- 
 teral precautions, the proper mode of 
 assessing an income-tax would be to 
 tax only the part of income devoted to 
 expenditure, exempting that which is 
 paved. For when saved and invested 
 (and all savings, speaking generally, 
 are invested) it thenceforth pays in- 
 come-tax on the interest or profit 
 which it brings, notwithstanding that 
 it has already been taxed on the prin- 
 cipal. Unless, therefore, savings are 
 exempted from income-tax, the con- 
 tributors are twice taxed on what they 
 save, and only once on what they 
 spend. A person who spends all he 
 receives, pays Id, in the pound, or say 
 three per cent, to the tax, and no 
 more ; but if he saves part of the 
 year's income and buys stock, then in 
 addition to the three per cent which 
 he has paid on the principal, and 
 which diminishes the interest in the 
 same ratio, he pays three per cent 
 annually on the interest itself, which 
 is equivalent to an immediate pay- 
 ment of a second three per cent on 
 the principal. So that while unpro- 
 ductive expenditure pays only three 
 per cent, savings pay six per cent ; or 
 more correctly, three per cent on the 
 whole, and another three per cent on 
 the remaining ninety-seven. The dif- 
 ference thus created to the disad- 
 vantage of prudence and economy, is 
 not only impolitic but unjust. To tax 
 the sum invested, and afterwards tax 
 also the proceeds of the investment, is 
 to tax the same portion of the con- 
 tributor's means twice over. The 
 principal and the interest cannot 
 both together form part of his re- 
 sources; they are the same portion 
 twice counted : if he has the interest, 
 it is because he abstains from using 
 the principal ; if he spends the prin- 
 cipal, he does not receive the in- 
 terest. Yet because he can do either 
 of the two, he is taxed as if he 
 could do botli , and could have the 
 
 benefit of the saving and that of tho 
 spending, concurrently with one an- 
 other. 
 
 It has been urged as an objection to 
 exempting savings from taxation, that 
 the law ought not to disturb, by arti- 
 ficial interference, the natural corn- 
 petition between the motives for 
 saving and those for spending. But 
 we have seen that the law disturbs 
 this natural competition when it taxes 
 savings, not when it spares them ; for 
 as the savings pay at any rate tho 
 full tsx as soon as they are invested, 
 their exemption from payment in the 
 earlier stage is necessary to prevent 
 them from paying twice, while money 
 spent in unproductive consumption 
 pays only once. It has been further 
 objected, that since the rich have the 
 greatest means of saving, any privilege 
 given to savings is an advantage be- 
 stowed on the rich at the expense of 
 the poor. I answer, that it is bestowed 
 on them only in proportion as they 
 abdicate the personal use of their 
 riches ; in proportion as they divert 
 their income from the supply of their 
 own wants, to a productive invest- 
 ment, through which, instead of 
 being consumed by themselves, it is 
 distributed in wages among the 
 poor. If this be favouring the rich, 
 1 should like to have it pointed 
 out, what mode of assessing taxation 
 can deserve the name of favouring 
 the poor. 
 
 No income-tax is really just, from 
 which savings are not exempted ; and 
 no income-tax ought to be voted with- 
 out that provision, if the form of the 
 returns, and the nature of the evidence 
 required, could be so arranged as to 
 prevent the exemption from being 
 taken fraudulent advantage of, by 
 saving with one hand and getting 
 into debt with the other, or by 
 ing in the following year what had 
 been passed tax-free as saving in the 
 year preceding. If this difficulty could 
 be surmounted, the difficulties and 
 complexities arising from the com- 
 parative claims of temporary and per 
 manent incomes, would disappear ; for 
 since temporary incomes have no just 
 claim to lighter taxation than per-
 
 GENERAL PRINCIPLES OF TAXATION. 
 
 491 
 
 mancut incomes, except in so far as 
 their possessors are more called upon to 
 
 !ic exemption of what they do 
 save would fully satisfy the claim. 
 Uut if no plan can be devised for the 
 exemption of actual savings, sufficiently 
 free from liability to fraud, it is neces- 
 sary, as the next thing in point of 
 justice, to take into account in assess- 
 ing the tax, what the different classes 
 of contributors ought to save. And 
 there would probably be no other 
 mode of doing this than the rough 
 expedient of two different rates of 
 
 iont. There would be great 
 difficulty in taking into account dif- 
 ferences of duration between one ter- 
 minable income and another ; and in 
 the most frequent case, that of incomes 
 dependenton life, difierences of age and 
 health would constitute snch extreme 
 diversity as it would be impossible to 
 take proper cognizance of. It would 
 probably bo necessary to be content 
 with one uniform rate for all incomes 
 of inheritance, and another uniform 
 rate for all those which necessarily 
 terminate with the life of the indi- 
 vidual. In fixing the proportion be- 
 tween the two rates, there must 
 inevitably be something arbitrary ; 
 perhaps a deduction of one-fourth in 
 favour of life-incomes would be as little 
 objectionable as any which could be 
 made, it being thus assumed that one- 
 fourth of a life-income is, on the 
 average of all ages and states of 
 health, a suitable proportion to be laid 
 by as a provision for successors and 
 for old age.* 
 
 * Mr. Hubbard, the first person who, as a 
 practical legislator, has attempted the recti- 
 fication of the income tax on principles of 
 unimpeachable justice, and whose well -con- 
 ceived plan wants little of being as near an 
 approximation to a just assessment as it is 
 likely that means could be found of carrying 
 into practical effect, proposes a deduction 
 not of a fourth but of a third, in favour of 
 industrial and professional incomes. He fixes 
 on this ratio, on the ground that, indepen- 
 dently of all consideration as to what the 
 Industrial and professional classes ought to 
 save, the attainable evidence goes to prove 
 that a third of their incomes is what on an 
 average they do save, over ar. 1 above the 
 : n saved by other classes. " The 
 
 savings" (Mr. Hubbard observes) "effected 
 out of incomes derived from invested pro- 
 perty are estimated at one-tenth. The 
 
 Of the net profits of persons in 
 
 , a part, as before <! 
 may bo considered as interest on 
 capital, and of a perpetual character, 
 and the remaining part as remune- 
 ration for the skill and labour of 
 superintendence. The surplus beyond 
 interest depends on the life of the in- 
 
 savings effected out of industrial incomes arc 
 estimated at four-tenths. The ametinta 
 which would be assessed under these two 
 classes being nearly equal, the adjustment is 
 simplified by striking off one-tenth on either 
 side, and then reducing by three-tenths, or 
 one-third, the assessable amount of indus- 
 trial incomes." Proposed Report (p. xiv. of 
 the Report and Evidence of the Committee 
 of 1861 .) In such an estimate there must be 
 a large element of conjecture ; but in so far 
 as it can be substantiated, it affords a valid 
 ground for the practical conclusion which 
 Mr. Hubbard founds on it. 
 
 Several writers on the subject, including 
 Mr. Mill in his Elemviti of Political 
 .Economy, and Mr. M'CuIloch in 1. 
 on Taxation, have contended that as much 
 snouid be deducted as would be sufficient to 
 insure the possessor's life for a sum which 
 would give to his successors for ever an in- 
 come equal to what he reserves for himself; 
 since this is what the possessor of heritable 
 property can do without saving at all : in 
 other words, that temporary incomes should 
 be converted into perpetual incomes of equal 
 present value, and taxed as such. If the 
 owners of life-incomes actually did save this 
 large proportion of their income, or even a 
 still larger, I would gladly grant them an 
 exemption from taxation on the whole 
 amount, since, if practical means could be 
 found of doing it, I would exempt savings 
 altogether. Hut I cannot admit that they 
 have a claim to exemption on the general 
 assumption of their being obliged to save this 
 amount. Owners of life-incomes are not 
 bound to forego the enjoyment of them for 
 the sake of leaving to a perpetual line of 
 successors an independent provision equal 
 to their own temporary one; and no one 
 ever dreams of doing so. Least of all is it 
 to be required or expected from those whose 
 incomes are the fruits of personal exertion, 
 that they should leave to their posterity for 
 ever, without any necessity for exertion, ihe 
 same incomes which they allow to them- 
 selves. All they are bound to do, even for 
 their children, is to place them in circum- 
 stances in which they will have favourable 
 chances of earning their own living. To 
 give, however, either to children or to others, 
 by bequest, being a legitimate inclination, 
 which these persons cannot indulge without 
 laying by a part of their income, while the 
 owners of heritable property can ; this real 
 inequality in cases where the incomes them- 
 selves arc equal, should be considered, to a 
 reasonable degree, in the adjustment of taxa- 
 tion, so as to require from both, as nearly as 
 practicable^ an equal sacrifice.
 
 492 
 
 BOOK V. CHAPTER II. 5. 
 
 dividual, and even on his continuance 
 in business, and is entitled to the 
 full amount of exemption allowed to 
 terminable incomes. It has also, I 
 conceive, a just claim to a further 
 amount of exemption in consideration 
 of its precariousness. An income which 
 some not unusual vicissitude may 
 reduce to nothing, or even convert into 
 u loss, is not the same thing to the 
 feelings of the possessor as a perma- 
 nent income of 1000Z. a year, even 
 though on an average of years it may 
 yield 1000Z. a year. If life-incomes 
 were assessed at three- fourths of their 
 amount, the profits of business, after 
 deducting interest on capital, should 
 not only be assessed at three-fourths, 
 but should pay, on that assessment, a 
 lower rate. Or perhaps the claims of 
 justice in this respect might be suffi- 
 ciently met by allowing the deduction 
 of a fourth on the entire income, 
 interest included. 
 
 These are the chief cases, of ordi- 
 nary occurrence, in which any difficulty 
 arises in interpreting the maxim of 
 equality of taxation. The proper sense 
 to be put upon it, as we have seen in 
 the preceding example, is, that people 
 should be taxed, not in proportion to 
 what they have, but to what they can 
 afford to spend. It is no objection to 
 this principle that we cannot apply it 
 consistently to all cases. A person 
 with a life-income and precarious 
 health, or who has many persons de- 
 pending on his exertions, must, if he 
 wishes to provide for them after his 
 death, be more rigidly economical than 
 one who has a life-income of equal 
 amount, with a strong constitution, and 
 few claims upon him ; and if it be 
 conceded that taxation cannot accom- 
 modate itself to these distinctions, it 
 is argued that there is no use in at- 
 tending to any distinctions, where the 
 absolute amount of income is the same. 
 But the difficulty of doing perfect 
 justice, is no reason against doing as 
 much as we can. Though it may be 
 a hardship to an annuitant whose life 
 is only worth five years purchase, to be 
 allowed no greater abatement than is 
 granted to one whose life is worth 
 twenty, it is better for him even so, 
 
 than if neither of them were allowed 
 any abatement at all. 
 
 5. Before leaving the subject of 
 Equality of Taxation, I must remark 
 that there are cases in which exceptions 
 may be made to it, consistently with 
 that equal justice which is the ground- 
 work of the rule. Suppose that there 
 is a kind of income which constantly 
 tends to increase, without any exer- 
 tion or sacrifice on the part of the 
 owners : those owners constituting a 
 class in the community, whom the 
 natural course of things progressively 
 enriches, consistently with complete 
 passiveness on their own part. In such 
 a case it would be no violation of the 
 principles on which private property 
 is grounded, if the state should appro- 
 priate this increase of wealth, or part 
 of it, as it arises. This would not 
 properly be taking anything from any 
 body ; it would merely be applying an 
 accession of wealth, created by circum- 
 stances, to the benefit of society, in- 
 stead of allowing it to become an un- 
 earned appendage to the riches of a 
 particular class. 
 
 Now this is actually the case with 
 rent. The ordinary progress of a 
 society which increases in wealth, is 
 at all times tending to augment tha 
 incomes of landlords; to give them 
 both a greater amount and a greater 
 proportion of the wealth of the com- 
 munity, independently of any trouble 
 or outlay incurred by themselves. 
 They grow richer, as it were in their 
 sleep, without working, risking, or 
 economizing. What claim have they, 
 on the general principle of social 
 justice, to this accession of riches? In 
 what would they have been wronged 
 if society had, from the beginning, 
 reserved the right of taxing the spon- 
 taneous increase of rent, to the highest 
 amount required by financial exigen- 
 cies ? I admit that it would be unjust 
 to come upon each individual estate, 
 and lay hold of the increase which 
 might be found to have taken place in 
 its rental ; because there would be no 
 means of distinguishing in individual 
 cases, between an inc. v ease owing 
 solely to the general circumstances of
 
 GKM5BAL PEINCIPLES OF TAXATION. 
 
 493 
 
 society, and one which was the effect 
 of skill and expenditure on the part of 
 the proprietor. The only admissible 
 mode of proceeding would be by a 
 general measure. Tho first step 
 should be a valuation of all the land 
 in the country. The present value of 
 all land should be exempt from the 
 tax ; but after an interval nad elapsed, 
 during which society had increased 
 in population and capital, a rough 
 estimate might be made of the spon- 
 taneous increase which had accrued 
 to rent since the valuation was made. 
 Of this the average price of produce 
 would be some criterion : if that had 
 risen, it would be certain that rent had 
 increased, and (as already shown) even 
 in a greater ratio than the rise of 
 price. On this and other data, an 
 approximate estimate might be made, 
 how much value had been added to 
 the land of the country by natural 
 causes; and in laying on a general 
 land-tax, which for fear of miscalcu- 
 lation should be considerably within 
 the amount thus indicated, there would 
 be an assurance of not touching any 
 increase of income which might be 
 the result of capital expended or in- 
 dustry exerted by the proprietor. 
 
 But though there could be no ques- 
 tion as to the justice of taxing the in- 
 crease of rent, if society had avowedly 
 reserved the right, has not society 
 waved that right by not exercising it ? 
 In England, for example, have not all 
 who bought land for the last century 
 or more, given value not only for the 
 existing income, but for the prospects 
 of increase, under an implied assurance 
 of being only taxed in the same pro- 
 portion with other incomes? This 
 objection, in so far as valid, has a dif- 
 ferent degree of validity in different 
 countries ; depending on the degree of 
 desuetude into which society has al- 
 lowed a right to fall, which, as no one 
 can doubt, it once fully possessed. In 
 most countries of Europe, the right to 
 take by taxation, as exigency might 
 require, an indefinite portion of the 
 rent of land, has never been allowed to 
 slumber. In several parts of the Con- 
 tinent the land-tax forms a large pro 
 portion of the public revenues, and nas 
 
 always been confessedly liable to bo 
 raised or lowered without reference to 
 other taxes. In these countries no one 
 can pretend to have become the owner 
 of land on the faith of never being 
 called upon to pay an increased land- 
 tax. In England the land-tax has not 
 varied since the early part of the last 
 century. The last act of the legisla- 
 ture in relation to its amount, was to 
 diminish it: and though the subse- 
 quent increase in the rental of the 
 country has been immense, not only 
 from agriculture, but from the growth 
 of towns and the increase of buildings, 
 the ascendancy of landholders in the 
 legislature has prevented any tax from 
 being imposed, as it so justly might, 
 upon the very large portion of this in- 
 crease which was unearned, and, as it 
 were, accidental. For the expectations 
 thus raised, it appears to me that an 
 amply sufficient allowance is made, if 
 the whole increase of income which has 
 accrued during this long period from a 
 mere natural law, without exertion or 
 sacrifice, is held sacred from any pe- 
 culiar taxation. From the present 
 date, or any subsequent time at which 
 the legislature may think fit to assert 
 the principle, I see no objection to 
 declaring that the future increment of 
 rent should be liable to special taxa- 
 tion ; in doing which all injustice to 
 the landlords would be obviated, if the 
 present market-price of their land were 
 secured to them; since that includes 
 the present value of all future expecta- 
 tions. With reference to such a tax, 
 perhaps a safer criterion than cither a 
 rise of rents or a rise of the price of 
 corn, would be a general rise in the 
 price of land. It would be easy to 
 keep the tax within the amount which 
 would reduce the market-value of land 
 below the original valuation: and up 
 to that point, whatever the amount of 
 the tax might be, no injustice would 
 be done to the proprietors. 
 
 6. But whatever may be thought 
 of the legitimacy of making the State 
 a sharer in all future increase of rent 
 from natural causes, the existing land- 
 tax (which in this country unfortu- 
 nately is very small) ought not to be
 
 BOOK V. CHAPTER II. 7. 
 
 regarded as a tax, but as a rent-charge 
 in favour of the piiblic ; a portion of the 
 rent, reserved irom the beginning by 
 the State, which has never belonged 
 to or formed part of the income of the 
 landlords, and should not therefore be 
 counted to them as part of their taxa- 
 tion, so as to exempt them from their 
 fair share of every other tax. As well 
 might the tithe he regarded as a tax 
 on the landlords : as well, in Bengal, 
 where the State, though entitled to 
 the whole rent of the land, gave away 
 one-tenth of it to individuals, retaining 
 the other nine-tenths, might those 
 nine-tenths be considered as an un- 
 equal and unjust tax on the grantees 
 of the tenth. That a person owns 
 part of the rent, does not make the 
 rest of it his just light, injuriously 
 withheld from him. The landlords 
 originally held their estates subject to 
 feudal burthens, for which the present 
 land-tax is an exceedingly small equi- 
 valent, and for their relief from which 
 they should have been required to pay 
 a much higher price. All who have 
 bought land since the tax existed have 
 bought it subject to the tax. There 
 is not the smallest pretence for looking 
 upon it as a payment exacted from the 
 existing race of landlords. 
 
 These observations are applicable to 
 a land-tax, only in so far as it is a pe- 
 culiar tax, and not when it is merely a 
 mode of levying from the landlords the 
 equivalent of what is taken from other 
 classes. In France, for example, there 
 are peculiar taxes on other kinds of 
 property and income (the mobilier and 
 the patente), and supposing the land- 
 tax to be not more than equivalent to 
 these, there would be no ground for 
 contending that the state had reserved 
 to itself a rent-charge on the land. 
 But wherever and in so far as income 
 derived from land is prescriptively 
 subject to a deduction for public pur- 
 poses, beyond the rate of taxation 
 levied on other incomes, the surplus is 
 not properly taxation, but a share of 
 the property in the soil, reserved by 
 the state. In this country there are no 
 peculiar taxes on other classes, corre- 
 sponding to, or intended to countervail, 
 tlio laud-tax. The whole of it, there- 
 
 fore, is not taxation but a rent-charg^ 
 and is as if the state had retained, no( 
 a portion of the rent, but a portion oi 
 the land. It is no more a burthen on 
 the landlord, than the share of ono 
 joint tenant is a burthen on the other. 
 The landlords are entitled to no com- 
 pensation for it, nor have they any 
 claim to its being allowed for, as part 
 of their taxes. Its continuance on the 
 existing footing is no infringement of 
 the principle of Equal Taxation.* 
 
 We shall hereafter consider, in treat- 
 ing of Indirect Taxation, how far, and 
 with what modifications, the rule of 
 equality is applicable to that depart- 
 ment. 
 
 7. In addition to the preceding 
 rules, another general rule of taxation 
 is sometimes laid down, namely, that 
 it should fall on income, and not on 
 capital. That taxation should not en- 
 croach upon the amount of the national 
 capital, is indeed of the greatest im- 
 portance ; but this encroachment, when 
 it occurs, is not so much a consequence 
 of any particular mode of taxation, as 
 of its excessive amount. Over-taxation, 
 carried to a sufficient extent, is quite 
 capable of ruining the most industrious 
 community, especially when it is in any 
 degree arbitrary, so that the payer is 
 never certain how much or how little 
 he shall be allowed to keep ; or when it 
 is so laid on as to render industry 
 and economy a bad calculation. But if 
 these errors be avoided, and the amount 
 of taxation be not greater than it is at 
 present even in the most heavily taxed 
 country of Europe, there is no danger 
 lest it should deprive the country of a 
 portion of its capital. 
 
 To provide that taxation shall fall 
 entirely on income, and not at all on 
 capital, is beyond the power of any 
 
 * The same remarks obviously apply to 
 those local taxes, of the peculiar pressure of 
 which on landed property so much has been 
 said by the remnant of the Protectionists. 
 As much of these burthens as is of old s!:iud- 
 ing, ought to be regarded as a prescriptive 
 deduction or reservation, for public pur, 
 of a portion of the rent. And any recent 
 additions have either been incurred' for the 
 benefit of the owners of landed property, or 
 occasioned by their fault : in neither case 
 giving them any just ground of complaint.
 
 DIRECT TAXES. 
 
 system of fiscal arrangements. There 
 is no tax which is not partly paid from 
 what would otherwise have D^on saved ; 
 no tax. the amount of which, if remit- 
 ted, would be wholly employed in in- 
 creased expenditure, and no part what- 
 ever laid by as an addition to capital. 
 All taxes, therefore, are in some sense 
 partly paid out of capital ; and in a 
 poor country it is impossible to impose 
 any tax which will not impede the in- 
 crease of the national wealth. But in 
 a country where capital abounds, and 
 the spirit of accumulation is strong, 
 this effect of taxation is scarcely felt. 
 Capital having reached the stage in 
 which, were it not for a perpetual suc- 
 cession of improvements in production, 
 any further increase would soon be 
 stopped and having so strong a 
 tendency even to outran those improve- 
 ments, that profits are only kept above 
 the minimum by emigration of capital, 
 or by a periodical sweep called a com- 
 mercial crisis ; to take from capital by 
 taxation what emigration would re- 
 move, or a commercial crisis destroy, is 
 only to do what either of those causes 
 would have done, namely, to make a 
 clear space for further saving. 
 
 I cannot, therefore, attach any im- 
 portance, in a wealthy country, to the 
 objection made against taxes on lega- 
 cies and inheritances, that they are 
 taxes on capital. It is perfectly true 
 that they are so. As Ricardo observes, 
 if 100Z. are taken from any one in a 
 tax on houses or on wine, he will pro- 
 bably save it, or a part of it, by living 
 in a cheaper house, consuming less 
 wine, or retrenching from some other 
 of his expenses : but if the same sum 
 be taken from him because he has re- 
 
 ceived a legacy of 1000Z., he considers 
 the legacy as only 900Z., and feels no 
 more inducement than at any other 
 time (probably feels rather less in- 
 ducement) to economize in his expendi- 
 ture. The tax, therefore, is wholly paid 
 out of capital : and there are countries 
 in which this would be a serious objec- 
 tion. But in the first place, the ar- 
 gument cannot apply to any country 
 which has a national debt, and devotes 
 any portion of revenue to paying it off ; 
 since the produce of the tax, thus 
 applied, still remains capital, and is 
 merely transferred from the tax-payer 
 to the fundholder. But the objection 
 is never applicable in a country 
 which increases rapidly in wealth. 
 The amount which would be derived, 
 even from a very high legacy duty, in 
 each year, is but a small fraction of 
 the annual increase of capital in such a 
 country ; and its abstraction would but 
 make room for saving to an equivalent 
 amount : while the effect of not taking 
 it, is to prevent that amount of saving, 
 or cause the savings when made, to be 
 sent abroad for investment. A country 
 which, like England, accumulates capi- 
 tal not only for itself, but for half the 
 world, may be said to defray the whole 
 of its public expenses from its over- 
 flowings ; and its wealth is probably at 
 this moment as great as if it had no 
 taxes at all. What its taxes really do 
 is, to subtract from its means, not of 
 production but of enjoyment ; since 
 whatever any one pays in taxes, he 
 could, if it were not taken for that 
 purpose, employ in indulging his ease, 
 or in gratifying some want or tasto 
 which at present remains unsatisfied. 
 
 CHAPTER HL 
 
 OP DIRECT TAXES. 
 
 1. TAXES are either direct or in- 
 
 A direct tax is one which is 
 
 demanded from the very persons who, 
 
 it is intended or desired, should pay it. 
 
 Indirect taxes are those which are 
 demanded from one person in the ex- 
 pectation and intention that he shall 
 indemnify himself at the expense ol
 
 496 BOOK V. CHAPTER III. 
 
 another : such as the excise or customs. 
 'Ihe producer or importer of a com- 
 fiodity is called upon to pay a tax on it, 
 vot with the intention to levy a peculiar 
 IHitribution upon him, but to tax 
 through him the consumers of the com- 
 modity, from whom it is supposed that 
 he will recover the amount by means 
 of an advance in price. 
 
 Direct taxes are either on income, 
 or on expenditure. Most taxes on ex- 
 penditure are indirect, but some are 
 direct, being imposed, not on the pro- 
 ducer or seller of an article, but imme- 
 diately on the consumer. A house-tax, 
 for example, is a direct tax on expendi- 
 ture, if levied, as it usually is, on the 
 occupier of the house. If levied on the 
 builder or owner, it would be an in- 
 direct tax. A window-tax is a direct 
 tax on expenditure ; so are the taxes 
 on horses and carriages, and the rest 
 of what are called the assessed taxes. 
 
 The sources of income are rent, 
 profits, and wages. This incudes 
 every sort of income, except gift or 
 plunder. Taxes may be laid on any 
 one of the three kinds of income, or an 
 uniform tax on all of them. We will 
 consider these in their order. 
 
 2. A tax on rent falls wholly on 
 the landlord. There are no meana by 
 which he can shift the burthen upon 
 any one else. It does not affect the 
 value or price of agricultural produce, 
 for this is determined by the cost of 
 production in the most unfavourable 
 circumstances, and in those circum- 
 stances, as we have so often demon- 
 strated, no rent is paid. A tax on rent, 
 therefore, has no effect, other than its 
 obvious one. It merely takes so much 
 from the landlord, and transfers it to 
 the state. 
 
 This, however, is, in strict exact- 
 ness, only true of the rent which is the 
 result either of natural causes, or of im- 
 provements made by tenants. When 
 the landlord makes improvements 
 which increase the productive power 
 of his land, he is remunerated for them 
 by an extra payment from the tenant ; 
 and this payment, which to the land- 
 lord is properly a profit on capital, is 
 blended and confounded with rent ; 
 
 2, 3. 
 
 which indeed it really is, to the tenant, 
 and in respect of the economical laws 
 which determine its amount. A tax on 
 rent, if extending to this portion of 
 it, would discourage landlords from 
 making improvements : but it does not 
 follow that it would raise the price of 
 agricultural produce. The same im- 
 provements might be made with the 
 tenant's capital, or even with the land- 
 lord's if lent by him to the tenant ; pro- 
 vided he is willing to give the tenant 
 so long a lease as will enable him to 
 indemnify himself before it expires. 
 But whatever hinders improvements 
 from being made in the manner in 
 which people prefer to make them, will 
 often prevent them from being made 
 at all : and on this account a tax on 
 rent would be inexpedient, unless some 
 means could be devised of excluding 
 from its operation that portion of the 
 nominal rent which may be regarded 
 as landlord's profit. This argument, 
 however, is not needed for the con- 
 demnation of such a tax. A peculiar 
 tax on the income of any class, not 
 balanced by taxes on other classes, is a 
 violation of justice, and amounts to a 
 partial confiscation. I have already 
 shown grounds for excepting from this 
 censure a tax which, sparing existing 
 rents, should content itself with appro- 
 priating a portion of any future increase 
 arising from the mere action of natural 
 causes. But even this could not be 
 justly done, without offering as an al- 
 ternative the market price of the land. 
 In the case of a tax on rent which is 
 not peculiar, but accompanied by an 
 equivalent tax on other incomes, tho 
 objection grounded on its. reaching the 
 profit arising from improvements is 
 less applicable : since, profits being 
 taxed as well as rent, the profit which 
 assumes the form of rent is liable to its 
 share in common with other profits ; 
 but since profits altogether ought, for 
 reasons formerly stated, to be taxed 
 somewhat lower than rent properly so 
 called, the objection is only diminished, 
 not removed. 
 
 3. A tax on profits, like a tax on 
 rent, must, at least in its immediate 
 operation, fall wholly on the
 
 DIRECT 
 
 All profits being alike affected, no 
 relief can be obtained by a change of 
 employment. If a tax were laid on the 
 profits of any one branch of productive 
 employment, the tax would be virtually 
 an increase of the cost of production, 
 and the value and price of the article 
 would rise accordingly ; by which the 
 tax would be thrown upon the con- 
 sumers of the commodity, and would 
 not affect profits. But a general and 
 equal tax on all profits would not 
 affect general prices, and would fall, at 
 least in the first instance, on capitalists 
 alone. 
 
 There is, however, an ulterior effect, 
 which, in a rich and prosperous country, 
 requires to be taken into account. 
 "When the capital accumulated is so 
 great, and the rate of annual accumu- 
 lation so rapid, that the country is 
 only kept from attaining the stationary 
 state by the emigration of capital, or 
 by continual improvements in produc- 
 tion ; any circumstance which virtually 
 lowers the rate of profit, cannot be 
 without a decided influence on these 
 phenomena. It may operate in differ- 
 ent ways. The curtailment of profit, 
 and the consequent increased difficulty 
 in making a fortune or obtaining a sub- 
 sistence by the employment of capital, 
 may act as a stimulus to inventions, 
 and to the use of them when made. If 
 improvements in production are much 
 accelerated, and if these improvements 
 cheapen, directly or indirectly, any of 
 the things habitually consumed by the 
 labourer, profits may rise, and rise 
 sufficiently to make up for all that is 
 taken from them by the tax. In that 
 case the tax will have been realized 
 without loss to any one, the produce 
 of the country being increased by an 
 equal, or what would in that case be a 
 far greater amount. The tax, however, 
 must even in this case be considered as 
 paid from profits, because the receivers 
 of profits are those who would be bene- 
 
 .fitcd if it were taken off. 
 
 But though the artificial abstraction 
 
 -of a portion of profits would have a 
 real tendency to accelerate improve- 
 ments in production, no considerable 
 
 "improvements might actually result, 
 at only of such a kind aa not to raise 
 
 P.B. 
 
 TAXES. 497 
 
 general profits at all, or not to raise 
 them so much as the tax had dimi- 
 nished them. If so, the rate of profit 
 would be brought closer to that practi* 
 cal minimum, to which it is constantly 
 approaching : and this diminished re- 
 tura to capital would either give a de- 
 cided check to further accumulation, or 
 would cause a greater proportion than 
 before of the annual increase to be sen* 
 abroad, or wasted in unprofitable spa 
 culations. At its first imposition the 
 tax falls wholly on profits : but the 
 amount of increase of capital, which 
 the tax prevents, would, if it had been 
 allowed to continue, have tended to re- 
 duce profits to the same level ; and at 
 every period of ten or twenty years 
 there will be found less difference be- 
 tween profits as they are, and profits as 
 they would in that case have been : 
 until at last there is no difference, and 
 the tax is thrown either upon the la- 
 bourer or upon the landlord. The real 
 effect of a tax on profits is to make the 
 country possess at any given period, a 
 smaller capital and a smaller aggregate 
 production, and to make the stationary 
 state be attained earlier, and with a 
 smaller sum of national wealth. It ia 
 possible that a tax on profits might 
 even diminish the existing capital of 
 the country. If the rate of profit is 
 already at the practical minimum, that 
 is, at the point at which all that portion 
 of the annual increment which would 
 tend to reduce profits is carried off 
 either by exportation or by specula- 
 tion ; then if a tax is imposed which 
 reduces profits still lower, the same 
 causes which previously carried off the 
 increase would probably carry off a 
 portion of the existing capital. A tax 
 on profits is thus, in a state of capital 
 and accumulation like that in England, 
 extremely detrimental to the national 
 wealth. And this effect is not con- 
 fined to the case of a peculiar, and 
 therefore intrinsically unjust, tax on 
 profits. The mere fact that profits 
 have to bear their share of a neavy 
 general taxation, tends, in the samo 
 manner as a peculiar tax, to drivo 
 capital abroad, to stimulate imprudent 
 speculations by diminishing safe gains, 
 to discourage further accumulation, 
 KK
 
 498 
 
 BOOK V. CHAPTER III. 4. 
 
 and to accelerate the attainment of the 
 stationary state. This is thought to 
 have been the principal cause of the 
 decline of Holland, or rather of her 
 having ceased to make progress. 
 
 Even in countries which do not accu- 
 mulate KO last as to he always within 
 a short interval of the stationary state, 
 it seems impossible that, if capital is 
 accumulating at all, its accumulation 
 should not be in some degree retarded 
 by the abstraction of a portion of its 
 profit ; and unless the effect in stimu- 
 lating improvements be a full counter- 
 balance, it is inevitable that a part of the 
 burthen will be thrown off the capital- 
 ist, upon the labourer or the landlord. 
 One or other of these is always the 
 loser by a diminished rate of accumu- 
 lation. If population continues to in- 
 crease as before, tho labourer suffers : 
 if not, cultivation is checked in its ad- 
 vance, and the landlords lose the acces- 
 sion of rent which would have accrued 
 to them. The only countries in which 
 a tax on profits seems likely to be per- 
 manently a burthen on capitalists ex- 
 clusively, are those in which capital is 
 stationary, because there is no new 
 accumulation. In such countries the 
 tax might not prevent the whole capi- 
 tal from being kept up through habit, 
 or from unwillingness to submit to im- 
 poverishment, and so the capitalist 
 might continue to bear the whole of 
 the tax. It is seen from these consi- 
 derations that the effects of a tax on 
 profits are much more complex, more 
 various, and in some points more un- 
 certain, than writers on the subject 
 have commonly supposed. 
 
 4. We now turn to Taxes on 
 Wages. The incidence of these is very 
 different, according ae the wages taxed 
 are those of ordinary unskilled labour, 
 or are the remuneration of such skilled 
 or privileged employments, whether 
 manual or intellectual, as are taken 
 out of the sphere of competition by a 
 natural or conferred monopoly. 
 
 I have already remarked, that in the 
 present low state of popular education, 
 all the higher grades of mental or edu- 
 cated labour are at a monopoly price ; 
 exceeding the wages of common work- 
 
 men in a degree very far beyond that 
 which is due to tho expense, trouble, 
 and loss of time required in qualifying 
 for the employment. Any tax levieil 
 on these gains, which still leaves them 
 above (or not below) their just propor- 
 tion, falls on those who pay it ; they 
 have no means of relieving themselves 
 at the expense of any other class. The 
 same thing is true of ordinary wages, 
 in cases like that of the United States, 
 or of a new colony, where, capital in- 
 creasing as rapidly as population can 
 increase, wages are kept up by the in- 
 crease of capital, and not by the ad- 
 herence of the labourers to a fixed stan- 
 dard of comforts. In such a case, some 
 deterioration of their condition, whether 
 by a tax or otherwise, might possibly 
 take place without checking the in- 
 crease of population. The tax would 
 in that case fall on the labourers them- 
 selves, and would reduce them prema- 
 turely to that lower state to which, on 
 the same supposition with regard to 
 their habits, they would in any case 
 have been reduced ultimately, by the 
 inevitable diminution in the rate of in- 
 crease of capital, through the occupa- 
 tion of all the fertile land. 
 
 Some will object that, even in this 
 case, a tax on wages cannot be detri- 
 mental to the labourers, since tho 
 money raised by it, being expended in 
 the country, comes back to the labourers 
 again through the demand for labour. 
 The fallacy, however, of this doctrine 
 has been so completely exhibited in the 
 First Book,* that I need do little more 
 than refer to that exposition. It was 
 there shown that funds expended un- 
 productively have no tendency to raise 
 or keep up wages, unless when ex- 
 pended in the direct purchase of labour. 
 If the government took a tax of a 
 shilling a week from every labourer, 
 and laid it all out in hiring labourers 
 for military service, public works, or 
 the like, it would, no doubt, indemnify 
 the labourers as a class for all that tho 
 tax took from them. That would 
 really be " spending the money among 
 the people." But if it expended tho 
 whole in buying goods, or in adding to 
 the salaries of employes who bought 
 Snpra, pp. 49-55.
 
 DI1JKOT TAXES. 
 
 499 
 
 goods with it, this would not increase 
 the demand ibr labour, or tend to raise 
 wages. Without, however, reverting 
 to general principles, wo may rely on 
 an obvious rednctio ad dbsurdum. If 
 to take money from the labourers and 
 hp'.'iid it in commodities is giving it 
 back to the labourers, then, to take 
 money from other classes, and spend it 
 in the same manner, must be giving it 
 to the labourers; consequently, the 
 more a government takes in taxes, the 
 greater will be the demand for labour, 
 and the more opulent the condition of 
 the labourers. A proposition the ab- 
 surdity of which no one can fail to see. 
 In the condition of most communi- 
 ties, wages are regulated by the habi- 
 tual standard of living to which the 
 labourers adhere, and on less than 
 which they will not multiply. Where 
 there exists such a standard, a tax on 
 wages will .indeed for a time be borne 
 by the labourers themselves ; but unless 
 this temporary depression has the 
 effect of lowering the standard itself, 
 the increase of population will receive 
 a check, which will raise wages, and 
 restore the labourers to their previous 
 condition. On whom, in this case, will 
 the tax fall? According to Adam 
 Smith, on the community generally, 
 in their character of consumers ; since 
 the rise of wages, he thought, would 
 raise general prices. We have seen, 
 however, that general prices depend 
 on other causes, and are never raised 
 by any circumstance which affects all 
 kinds of productive employment in the 
 same manner and degree. A rise of 
 wages occasioned by a tax, must, like 
 any other increase of the cost of labour, 
 be defrayed from profits. To attempt 
 to tax day-labourers, in an old country, 
 is merely to impose an extra tax upon 
 all employers of common labour ; unless 
 the tax has the much worse effect of 
 permanently lowering the standard of 
 comfortable subsistence in the minds 
 of the poorest class. 
 
 We lind in the preceding considera- 
 tions an additional argument for the 
 cpinion already expressed, that direct 
 taxation should stop short of the class 
 of incomes which do not exceed what 
 is necessary for healthful existence. 
 
 These very small incomes are mostly 
 derived from manual labour ; and, a"s 
 we now see, any tax imposed on these, 
 either permanently degrades the habits 
 of the labouring class, or falls on pro- 
 fits, and burthens capitalists with an 
 indirect tax, in addition to their shaix 
 of the direct taxes ; which is doubly 
 objectionable, both as a violation of tho 
 fundamental rule of equality, and for 
 the reasons which, as already shown, 
 render a peculiar tax on profits detri- 
 mental to the public wealth, and con- 
 sequently to the means which societ) 
 possesses of paying any taxes whatever 
 
 5. We now pass, from taxes on 
 the separate kinds of income, to a tax 
 attempted to be assessed fairly upon 
 all kinds ; in other words, an Income 
 Tax. The discussion of the conditions 
 necessary for making this tax consis- 
 tent with justice, has been anticipated 
 in the last chapter. We shall suppose, 
 therefore, that these conditions are com- 
 plied with. They are, first, that in- 
 comes below a certain amount should 
 be altogether untaxed. This minimum 
 should not be higher than the amount 
 which suffices for the necessaries of the 
 existing population. The exemption 
 from the present income-tax, of all in- 
 comes under 1002. a year, and the lower 
 percentage levied on those between 
 1001. and 150?., are only defensible on 
 the ground that almost all the indirect 
 taxes press more heavily on incomes 
 between 501. and 150?. than on any 
 others whatever. The second condi- 
 tion is, that incomes above the limit 
 should be taxed only in proportion to 
 the surplus by which they exceed the 
 limit. Thirdly, that all sums saved 
 from income and invested, should be 
 exempt from the tax : or if this be 
 found impracticable, that life incomes 
 and incomes from business and profes 
 sions should be less heavily taxed than 
 inheritable incomes, in a degree as 
 nearly as possible equivalent to the in- 
 creased need of economy arising front 
 their terminable character : allowance 
 being also made, in the case of variable 
 incomes, for their precariousness. 
 
 An income-tax, fairly assessed on 
 these principles, would be, in r.oint ct 
 K K 2
 
 600 
 
 justice, tho least exceptionable of all 
 taxes. The objection to it, in tbe pre- 
 sent low state of public morality, is the 
 impossibility of ascertaining the real 
 incomes of the contributors. The sup- 
 posed hardship of compelling peoplo to 
 disclose the amount of their incomes, 
 ought not, in my opinion, to count for 
 much. One of the social evils of this 
 country is the practice, amounting to a 
 custom, of maintaining, or attempting 
 to maintain, the appearance to the 
 world of a larger income than is pos- 
 sessed ; and it would bo far better for 
 the interests of those who yield to this 
 weakness, if the extent of their means 
 were universally and exactly known, 
 and the temptation removed to expend- 
 ing more than they can afford, or stint- 
 ing real wants in order to make a false 
 show externally. At the eame time, 
 the reason of the case, even on this 
 point, is not so exclusively on one side 
 of the argument as is sometimes sup- 
 posed. So long as the vulgar of any 
 country are in the debased state of 
 mind which this national habit presup- 
 poses so long as their respect (if sucn 
 a word can be applied to it) is pro- 
 portioned to what they suppose to be 
 each person's pecuniary means it may 
 be doubted whether anything which 
 would remove all uncertainty as to that 
 point, would not considerably increase 
 the presumption and arrogance of the 
 vulgar rich, and their insolence towards 
 those above them in mind and charac- 
 ter, but below them in fortune. 
 
 Notwithstanding, too, what is called 
 the inquisitorial nature of the tax, no 
 amount of inquisitorial power which 
 would be tolerated by a people the 
 most disposed to submit to it, could 
 enable the revenue officers to assess 
 the tax from actual knowledge of the 
 circumstances of contributors. Rents, 
 salaries, annuities, and all fixed in- 
 comes, can be exactly ascertained. 
 But the variable gains of professions, 
 and still more the profits of business, 
 which the person interested cannot 
 always himself exactly ascertain, can 
 still less be estimated with any ap- 
 proach to fairness by a tax-collector. 
 The main reliance must be placed, 
 and always has been placed, on the re- 
 
 BOOK V. CHAPTER III. 5. 
 
 turns made by the person himself. 
 No production of accounts is of much 
 avail, except against the more flagrant 
 cases of falsehood; and even against 
 these the check is very imperfect, for 
 if fraud is intended, false accounts can 
 generally be framed which it will baffle 
 any means of inquiry possessed by the 
 revenue officers to detect : the easy re- 
 source of omitting entries on the credit 
 side being often sufficient without the 
 aid of fictitious debts or disbursements. 
 The tax, therefore, on whatever prin- 
 ciples of equality it may be imposed, 
 is in practice unequal in one of the 
 worst ways, falling heaviest on the 
 most conscientious. The unscrupulous 
 succeed in evading a great proportion 
 of what they should pay ; even persons 
 of integrity in their ordinary transac- 
 tions are tempted to palter with their 
 consciences, at least to the extent of 
 deciding in their own favour all points 
 on which the smallest doubt or dis- 
 cussion could arise : while the strictly 
 veracious may be made to pay more 
 than the state intended, by the powers 
 of arbitrary assessment necessarily in- 
 trusted to the Commissioners as the 
 last defence against the tax-payer's 
 power of concealment. 
 
 It is to be feared, therefore, that the 
 fairness which belongs to the principle 
 of an income-tax, cannot be made to 
 attach to it in practice : and that this 
 tax, while apparently the most just 
 of all modes of raising a revenue, is in 
 effect more unjust than many others 
 which are prima facie more objection- 
 able. This consideration would lead 
 us to concur in the opinion which, until 
 of late, has usually prevailed that 
 direct taxes on income should be re- 
 served as an extraordinary resource for 
 great national emergencies, in which 
 the necessity of a large additional re- 
 venue overrules all objections. 
 
 The difficulties of A fair income-tax 
 have elicited a proposition for a direct 
 tax of so much per cent, not on income 
 but on expenditure ; the aggregate 
 amount of each person's expenditure 
 being ascertained, as tho amount of 
 income now is, from statements fur- 
 nished by the contributors themselves. 
 Iho author of this suggestion, Mr.
 
 DIRECT TAXES. 
 
 601 
 
 Eevans, in a clever pamphlet on the 
 subject,* contends that the returns 
 which persons would furnish of their 
 expenditure would be more trustworthy 
 than those which they now make of 
 their income, inasmuch as expenditure 
 is in its own nature more public than 
 income, and false representations of it 
 more easily detected. lie cannot, I 
 think, have sufficiently considered, how 
 few of the items in the annual expen- 
 diture of most families can be judged 
 of with any approximation to correct- 
 ness from the external signs. The only 
 security would still be the veracity of 
 individuals, and there is no reason for 
 supposing that their statements would 
 be more trustworthy on the subject of 
 their expenses than on that of their re- 
 venues ; especially as, the expenditure 
 of most persons being composed of 
 many more items than their income, 
 there would be more scope for conceal- 
 ment and suppression in the detail of 
 expenses than even of receipts. 
 
 The taxes on expenditure at present 
 in force, either in this or in other coun- 
 tries, fall only en particular kinds of 
 expenditure, and diner no otherwise 
 from laxes on commodities than in 
 being paid directly by the person who 
 consumes or uses the article, instead 
 of being advanced by the producer or 
 seller, and reimbursed in the price. 
 The taxes on horses and carriages, on 
 dogs, on servants, are of this nature. 
 They evidently fall on the persons from 
 whom they are levied those who use 
 the commodity taxed. A tax of a simi- 
 lar description, and more important, is 
 a house-tax : which must be considered 
 at somewhat greater leagth. 
 
 6. The rent of a house consists of 
 t\ro parts, the ground-rent, and what 
 Adam Smith calls the building-rent. 
 The first is determined by the ordinary 
 principles of rent, it is the remunera- 
 tion given for the use of the portion of 
 land occupied by the house and its ap- 
 purtenances ; and varies from a mere 
 equivalent for the rent which the ground 
 
 * A Tercentage Tax on Dcmeitic Expendi- 
 ture to mvply the ichole of llie Public 
 Jfecenue. By John Revaus. Published by 
 Hatchard, in 1847. 
 
 would afford in agriculture, to the mono- 
 poly rents paid, for advantageous situa 
 lions in populous thoroughfares. The 
 rent of the house itself, as distinguished 
 from the ground, is the equivalent give* 
 for the labour and capital expended on 
 the building. The fact of its being re- 
 ceived in quarterly or half-yearly pay- 
 ments, makes no difference in the prin- 
 ciples by which it is regulated. It 
 comprises the ordinary profit on the 
 builder's capital, and an annuity, suffi- 
 cient at the current rate of interest, 
 after paying for all repairs chargeabl* 
 on the proprietor, to replace the origina. 
 capital by the time the house is wont 
 out, or by the expiration of the usua 
 term of a building lease. 
 
 A tax of so much per cent on the 
 gross rent, falls on botn those portions 
 alike. The more highly a house is 
 rented, the more it pays to the tax, 
 whether the quality of the situation or 
 that of the house itself is the cause. 
 The incidence, however, of these two 
 portions of the tax must be considered 
 separately. 
 
 As much of it as is a tax on build- 
 ing-rent, must ultimately fall on tho 
 consumer, in other words the occupier. 
 For as the profits of building are al- 
 ready not above the ordinary rate, they 
 would, if the tax fell on the owner and 
 not on the occupier, become lower than 
 the profits of untaxed employments 
 and houses would not be built. It is 
 probable however that for some tima 
 after the tax was first imposed, a great 
 part of it would fall, not on the renter, 
 but on tho owner of the house. A large 
 proportion of the consumers either could 
 not afford, or would not choose, to pay 
 their former rent with the tax in ad- 
 dition, but would content themselves 
 with a lower scale of accommodation. 
 Houses therefore would be for a time 
 in excess of the demand. The conse- 
 quence of such excess, in tho case of 
 most other articles, would be an al- 
 most immediate diminution of the sup- 
 ply : but so durable a commodity as 
 houses does not rapidly diminish il 
 amount. New buildings indeed, of the 
 class for which the demand had de- 
 creased, would cease to be erected, ex- 
 cept for special reasons; but in the
 
 IJOOK. V. CHAl'TEU III. 6. 
 
 meantime the temporary superfluity 
 would lower rents, and the consumers 
 wouRl obtain, perhaps, nearly the same 
 accommodation a formerly, for the 
 same aggregate payment, rent and 
 tax together. By degrees, however, 
 as the existing houses wore out, or as 
 increase of population demanded a 
 greater supply, rents would again rise ; 
 until it became profitable to recom- 
 mence building, which would not be 
 until the tax was wholly transferred 
 to the occupier. In the end, therefore, 
 the occupier bears that portion of a 
 tax on rout, which falls on the payment 
 made for the house itself, exclusively 
 of the ground it stands on. 
 
 The case is partly different with the 
 portion which is a tax on ground-rent. 
 As taxes on rent, properly so called, 
 fall on the landlord, a tax on ground- 
 rent, one would suppose, must fall on 
 the ground-landlord, at least after the 
 expiration of the building lease. It 
 will not however fall wholly on the 
 landlord, unless with the tax on ground- 
 rent there is combined an equivalent 
 tax on agricultural rent. The lowest 
 rent of land let for building is very 
 little above the rent which the same 
 ground would yield in agriculture : 
 since it is reasonable to suppose that 
 land, unless in case of exceptional cir- 
 cumstances, is let or sold for building 
 as soon as it is decidedly worth more 
 for that purpose than for cultivation. 
 If, therefore, a tax were laid on ground- 
 rents without being also laid on agri- 
 cultural rents, it would, unless of trifling 
 amount, reduce the return from the 
 lowest ground-rents below the ordinary 
 return from land, and would check fur- 
 ther building quite as effectually as if 
 it were a tax on building-rents, until 
 cither the increased demand of a grow- 
 ing population, or a diminution of sup- 
 ply by the ordinary causes of destruc- 
 tion, had raised the rent by a full 
 equivalent for the tax. But whatever 
 raises the lowest ground-rents, raises 
 all others, since each exceeds the 
 lowest by the market value of its 
 peculiar advantages. If, therefore, the 
 tax on ground-rents were a fixed sum 
 per square foot, the more valuable 
 situations paying no more than those 
 
 least in request, this fixed [ 
 would ultimately fall on the occupier. 
 Suppose the lowest ground-rent to be 
 101. per acre, and the highest WOOL, a 
 tax of II. per acre on ground-rents 
 would ultimately raise the former to 
 HZ., and the latter consequently to 
 1001Z., since the difference of value 
 between the two situations would bo 
 exactly what it was before : the annual 
 pound, therefore, would be paid by the 
 occupier. But a tax on ground-rent is 
 supposed to be a portion of a house-tax, 
 which is not a fixed payment, but a 
 percentage on the rent. The cheapest 
 site, therefore, being supposed as befor* 
 to pay 11., the dearest would pay 100Z., 
 of which only the 11. could be thrown 
 upon the occupier, since the rent would 
 still be only raised to 1001Z. Conse- 
 quently, 99Z. of the 100Z. levied from 
 the expensive site, would fall on the 
 ground-landlord. A house-tax thus re- 
 quires to be considered in a double 
 aspect, as a tax on all occupiers of 
 houses, and a tax on ground-rents. 
 
 In the vast majority of houses, the 
 ground-rent forms but a small propor- 
 tion of the annual payment made for 
 the house, and nearly all the tax falls 
 on the occupier. It is only in ex- 
 ceptional cases, like that of the fa- 
 vourite situations in large towns, that 
 the predominant element in the rent 
 of the house is the ground-rent ; and 
 among the very few kinds of income 
 which are fit subjects for peculiar taxa- 
 tion, these ground-rents hold the prin- 
 cipal place, being the most gigantic 
 example extant of enormous accessions 
 of riches acquired rapidly, and in many 
 cases unexpectedly, by a few families, 
 from the mere accident of their pos- 
 sessing certain tracts of land, without 
 their having themselves aided in the 
 acquisition by the smallest exertion, 
 outlay, or risk. So far therefore as a 
 house-tax falls on the ground-landlord, 
 it is liable to no valid objection. 
 
 In so far as it falls on the occupier, 
 if justly proportioned to the value of 
 the house, it is one of the fairest and 
 most unobjectionable of all taxes. No 
 part of a person's expenditure is a 
 better criterion of his means, or bears, 
 on the whole, more nearly the same
 
 DIRECT TAXES. 
 
 503 
 
 proportion to them. A house-tax is a 
 nearer approach to a fair income-tax, 
 than a direct assessment on income 
 can easily be ; having the great ad- 
 vantage, that it makes spontaneously 
 all the allowances which it is so diffi- 
 cult to make, and so impracticable to 
 make exactly, in assessing an income- 
 tax : for if what a person pays in house- 
 rent is a test of anything, it is a test 
 not of what he possesses, but of what 
 he thinks he can afford to spend. The 
 equality of this tax can only be seri- 
 ously questioned on two grounds. The 
 iirst is, that a miser may escape it. 
 This objection applies to all taxes on 
 expeniliture : nothing but a direct tax 
 on income can reach a miser. But as 
 misers do not now hoard their treasure, 
 but invest it in productive employments, 
 it not only adds to the national wealth, 
 and consequently to the general means 
 of paying taxes, but the payment claim- 
 able from itself is only transferred from 
 the principal sum to the income after- 
 wards derived from it, which pays taxes 
 as soon as it comes to be expended. 
 The second objection is that a person 
 may require a larger and more ex- 
 pensive house, not from having greater 
 means, but from having a larger family. 
 Of this, however, he is not entitled to 
 complain ; since having a large family 
 is at a person's own choice : and, so 
 far as concerns the public interest, is 
 a thing rather to be discouraged than 
 promoted.* 
 
 * Another common objection is that large 
 nd expensive accommodation is often re- 
 quired, not as a residence, but for business. 
 But it is an admitted principle that buildings 
 or portions of buildings occupied exclusively 
 for business, such as shops, warehouses, or 
 manufactories, ought to be exempted from 
 house-tax. The plea that persons in busi- 
 ness may be compelled to live in situations, 
 such as the great thoroughfares of London, 
 where house-rent is at a monopoly rate, 
 eeems to me unworthy of regard : since no 
 one does so but because the extra profit 
 which he expects to derive from the situation, 
 is more than an equivalent to him for the 
 extra cost. But in any case, the bulk of the 
 tax on this extra rent will not fall on him, but 
 on the ground-landlord. 
 
 It his been also objected that house-rent 
 in the rural districts is much lower than in 
 town--, r.nd lower in some towns and in some 
 rural districts than in others : so that a tar 
 proportioned to it would have a correspond- 
 ing inequality of pressure. To this, however, 
 
 A large portion of the taxation of 
 this country is raised by a house-tax. 
 The parochial taxation of the towns 
 entirely, and of the rural districts par- 
 tially, consists of an assessment on 
 house-rent. The window-tax, which 
 was also a house-tax, but of a bad 
 kind, operating as a tax on light, and 
 a cause of deformity in building, was 
 exchanged in 1851 for a house-tax pro- 
 perly so called, but on a much lower 
 scale than that which existed pre- 
 viously to 1834. It is to be lamented 
 that the new tax retains the unjust 
 principle on which the old house-tax 
 was assessed, and which contributed 
 quite as much as the selfishness of the 
 middle classes to produce the outcry 
 against the tax. The public were 
 justly scandalized on learning that re- 
 sidences like Chatsworth or Belvoir 
 were only rated on an imaginary rent 
 of perhaps 200Z. a year, under the pre- 
 text that owing to the great expense 
 of keeping them up, they could not be 
 let for more. Probably, indeed, they 
 could not be let even for that, and if 
 the argument were a fair one, they 
 ought not to have been taxed at all. 
 But a house-tax is not intended as a 
 tax on incomes derived from houses, 
 but on expenditure incurred for them. 
 The thing which it is wished to ascer- 
 tain is what a house costs to the person 
 who lives in it, not what it would 
 bring in if let to some one else. When 
 the occupier is not the owner, and does 
 not hold on a repairing lease, the rent 
 he pays is the measure of what the 
 house costs him : but when he is the 
 owner, some other measure must be 
 sought. A valuation should be made 
 of the house, not at what it would sell 
 for, but at what would be the cost of 
 rebuilding it, and this valuation might 
 
 it may be answered, that in places where 
 house-rent is low, persons of the same 
 amount of income usually live in larger and 
 better houses, and thus expend in house- 
 rout more nearly the same proportion of 
 their incomes than might at first sight 
 appear. Or if not, the probability will be, 
 that many of them live in those places pre- 
 cisely because they are too poor to live else- 
 where, and have therefore the strongest 
 claim to be taxed lightly. In some cases, it 
 is precisely because the people are poor, 
 that house-rent remains low.
 
 504 
 
 BOOK V. CHAPTER IV. 1. 
 
 be periodically corrected by an allow- 
 ance for what it had lost in value by 
 time, or gained by repairs and improve- 
 ments. The amount of the amended 
 valuation would form a principal sum, 
 the interest of which, at the current 
 price of the public funds, would form 
 the annual value at which the building 
 should be assessed to the tax. 
 
 As incomes below a certain amount 
 ought to be exempt from income-tax, 
 so ought houses below a certain value, 
 
 from house-tax, on the universal prin- 
 ciple of sparing from all taxation the 
 absolute necessaries of healthful exist- 
 ence. In order that the occupiers of 
 lodgings, as well as of houses, might 
 benefit, as injustice they ought, by this 
 exemption, it might be optional with 
 the owners to have every portion of a 
 house which is occupied by a separate 
 tenant, valued and assessed separately, 
 as is now usually the case with cham- 
 bers. 
 
 CHAPTER IV. 
 
 OF TAXES ON COMMODITIES. 
 
 1. BY taxes on commodities are 
 commonly meant, those which are le- 
 vied either on the producers, or on the 
 carriers or dealers who intervene be- 
 tween them and the final purchasers 
 for consumption. Taxes imposed di- 
 rectly on the consumers of particular 
 commodities, such as a house-tax, or 
 the tax in this country on horses and 
 carriages, might be called taxes on 
 commodities, but are not ; the phrase 
 being, by custom, confined to indirect 
 taxes those which are advanced by 
 one person, to be, as is expected and 
 intended, reimbursed by another. 
 Taxes on commodities are either on 
 production within the country, or on 
 importation into it, or on conveyance 
 or sale within it ; and are classed re- 
 spectively as excise, customs, or tolls 
 and transit duties. To whichever class 
 they belong, and at whatever stage in 
 the progress of the community they may 
 be imposed, they are equivalent to an 
 increase of the cost of production ; 
 using that term in its most enlarged 
 sense, which includes the cost of trans- 
 port and distribution, or, in common 
 phrase, of bringing the commodity to 
 market. 
 
 When the cost of production is in- 
 creased artificially by a tax, the effect 
 is the same as when it is increased by 
 natural causes. If only one or a few 
 commodities are affected their value 
 
 and price rise, so as to compensate the 
 producer or dealer for the peculiar bur- 
 then ; but if there were a tax on all 
 commodities, exactly- proportioned to 
 their value, no such compensation 
 would be obtained : there would neither 
 be a general rise of values, which is 
 an absurdity, nor of prices, which de- 
 pend on causes entirely different. 
 There would, however, as Mr. M'Cul- 
 loch has pointed out, be a disturbance 
 of values, some falling, others rising, 
 owing to a circumstance, the effect of 
 which on values and prices we for- 
 merly discussed ; the different durabi- 
 lity of the capital employed in different 
 occupations. The gross produce of 
 industry consists of two parts ; one 
 portion serving to replace the capital 
 consumed, while the other portion is 
 profit. Now equal capitals in two 
 branches of production must have equal 
 expectations of profit ; but if a greater 
 portion of the one than of the other is 
 fixed capital, or if that fixed capital is 
 more durable, there will be a less con- 
 sumption of capital in the year, and 
 less will be required to replace it, so> 
 that the profit, if absolutely the same, 
 will form a greater proportion of tha 
 annual returns. To derive from a ca- 
 pital of 10001. a profit of 1001, the ono 
 producer may have to sell produce to 
 the value of 1100L, the other only to, 
 the value of 5001. If on these 'two
 
 TAXES ON COMMODITIES. 
 
 505 
 
 branches of industry a tax be imposed 
 of five per cent ad valorem, the last 
 will be charged only with 257., the first 
 with 55/. ; leaving to the one 751. 
 profit, to the other only 45?. To 
 equalise, therefore, their expectation of 
 profit, the one commodity must rise in 
 price, or the other must fall, or both : 
 commodities made chiefly by immediate 
 labour must rise in value, as compared 
 with those which are chiefly made by 
 machinery. It is unnecessary to prose- 
 cute this branch of the inquiry any 
 i'urther. 
 
 2. A tax on any one commodity, 
 whether laid on its production, its im- 
 pjilation, its carriage from place to 
 place, or its sale, and whether the tax 
 be a fixed sum of money for a given 
 quantity of the commodity, or an ad 
 valorem duty, will, as a general rule, 
 ,rui-i> the value and price of the com- 
 modity by at least the amount of the 
 tax. There are few cases in which it 
 does not raise them by more than that 
 .amount. In the first place, there are 
 few taxes on production on account of 
 which it is not found or deemed neces- 
 sary to impose restrictive regulations 
 on the manufacturers or dealers, in 
 order to check evasions of the tax. 
 These regulations are always sources 
 of trouble and annoyance, and gene- 
 rally of expense, for all of which, being 
 peculiar disadvantages, the producers 
 r dealers must have compensation in 
 the price of their commodity. These 
 restrictions also frequently interfere 
 with the processes of manufacture, re- 
 quiring the producer to carry on his 
 operations in the way most convenient 
 to the revenue, though not the cheapQst, 
 or most efficient for purposes of produc- 
 tion. Any regulations whatever, en- 
 forced by law, make it difficult for the 
 producer to adopt new and improved 
 processes. Further, the necessity of 
 advancing the tax obliges producers 
 and dealers to carry on their business 
 with larger capitals than would other- 
 wise be necessary, on the whole of 
 which they must receive the ordinary 
 rate of profit, though a part only is em- 
 ployed in defraying the real expenses 
 pf production or importation. The price 
 
 of the article must be such as to afford 
 a profit on more than its natural value, 
 instead of a profit on only its natural 
 value. A part of the capital of the 
 country, in short, is not employed in 
 production, but in advances to the state, 
 repaid in the price of goods ; and tho 
 consumers must give an indemnity to 
 the sellers, equal to the profit which 
 they could have made on the same 
 capital if really employed in produc- 
 tion.* Neither ought it to be forgotten, 
 that whatever renders a larger capital 
 necessary in any trade or business, 
 limits the competition in that business, 
 and by giving something like a mono- 
 poly to a few dealers, may enable them 
 either to keep up the price beyond what 
 would afford the ordinary rate of profit, 
 or to obtain the ordinary rate of profit 
 with a less degree of exertion for iin- 
 
 5 roving and cheapening their conimo- 
 ity. In these several modes, taxes on 
 commodities often cost to the consumer, 
 through the increased price of tho ar- 
 ticle, much more than they bring into 
 the treasury of the state. There is 
 still another consideration. The higher 
 price necessitated by the tax, almost 
 always checks the demand for the com- 
 modity ; and since there are many im- 
 provements in production which, to 
 make them practicable, require a cer- 
 tain extent of demand, such improve- 
 ments are obstructed, and many of them 
 prevented altogether. It is a well- 
 known fact, that the branches of pro- 
 duction in which fewest improvements 
 are made, are those with which the 
 revenue officer interferes; and that 
 nothing, in general, gives a greater 
 impulse to improvements in the pro- 
 duction of a commodity, than taking 
 off a tax which narrowed the market 
 for it. 
 
 * It is true, this does not constitute, as it 
 at first sight appears to do, a case of taking 
 more out of the pockets of the people than 
 the state receives ; since if the state needs 
 the advance, and gets it in this manner, it 
 can dispense with an equivalent amount of 
 borrowing in stock or exchequer bills. But 
 it is more economical that the necessities of 
 the state should be supplied from the dis- 
 posable capital in the hands of the lending 
 class, than by an artificial addition to the 
 expenses of one or several classes of pro- 
 ducers or dealers.
 
 506 
 
 BOOK V. CHAPTER IV. 3. 
 
 3. Such are the effects of taxes 
 on commodities, considered generally ; 
 hut as there are some commodities 
 (those composing the necessaries of the 
 labourer) of which the values have an 
 influence on the distribution of wealth 
 among different classes of the commu- 
 nity, it is requisite to trace the effects 
 of taxes on those particular articles 
 somewhat farther. If a tax be laid, 
 say on corn, and the price rises in pro- 
 portion to the tax, the rise of price may 
 operate in two ways. First : it may 
 lower the condition of the labouring 
 classes ; temporarily indeed it can 
 scarcely fail to do so. If it diminishes 
 their consumption of the produce of the 
 earth, or makes them resort to a food 
 which the soil produces more abun- 
 dantly, and therefore more cheaply, it 
 to that extent contributes to throw 
 back agriculture upon more fertile lands 
 or less costly processes, and to lower 
 the value and price of corn ; which 
 therefore ultimately settles at a pi-ice, 
 increased not by the whole amount of 
 the tax, but by only a part of its 
 amount. Secondly, however, it may 
 happen that the dearness of the taxed 
 food does not lower the habitual stan- 
 dard of the labourer's requirements, 
 but that wages, on the contrary, 
 through an action on population, rise, 
 in a shorter or longer period, so as to 
 compensate the labourers for their por- 
 tion of the tax; the compensation 
 being of course at the expense of 
 profits. Taxes on necessaries must 
 thus have one of two effects. Either 
 they lower the condition of the labour- 
 ing classes ; or they exact from the 
 owners of capital, in addition to the 
 amount due to the state on their own 
 necessaries, the amount due on those 
 consumed by the labourers. In the 
 last case, the tax on necessaries, like a 
 tax on wages, is equivalent to a pecu- 
 liar tax on profits ; which is, like all 
 
 other partial taxation, unjust, and is 
 specially prejudicial to the increase 01 
 the national wealth. 
 
 It remains to speak of the effect on 
 rent. Assuming (what is usually the 
 fact) that the consumption of food is 
 not diminished, the same cultivation as 
 before will be necessary to supply the 
 wants of the community ; the margin 
 of cultivation, to use Dr. Chalmers' 
 expression, remains where it was ; and 
 the same land or capital which, as the 
 least productive, already regulated tho 
 value and price of the whole produce, 
 will continue to regulate them. The 
 effect which a tax on agricultural pro- 
 duce will have on rent, depends on its 
 affecting or not affecting the difference 
 between the return to this least pro- 
 ductive land or capital, and the returns 
 to other lands and capitals. Now tin's 
 depends on the manner in which the 
 tax is imposed. If it is an ad valorem 
 tax, or what is the same thing, a fixed 
 proportion of the produce, such as tithe 
 for example, it evidently lowers corn- 
 rents. For it takes more corn from the 
 better lands than from the worse ; and 
 exactly in the degree in which they are 
 better; land of twice the productive- 
 ness paying twice as much to the tithe, 
 Whatever takes more from the greater 
 of two quantities than from the less, 
 diminishes the difference between 
 them. The imposition of a tithe on 
 corn would take a tithe also from corn- 
 rent : for if we reduce a series of numbers 
 by a tenth each, the differences between 
 them are reduced one-tenth. 
 
 For example, let there be five quali- 
 ties of land, which severally yield, on 
 the same extent of ground and with 
 the same expenditure, 100, 90, 80, 70, 
 and 60 bushels of wheat ; the last of 
 these being the lowest quality which 
 the demand for food renders it neces- 
 sary to cultivate. The rent of these 
 lands will be as follows : 
 
 The land producing 100 bushels will yield a rent of 100 GO, or 40 bushels. 
 
 That producing 90 9060, or 30 
 
 80 80 CO, or 20 
 
 70 7060, or 10 
 
 00 no rent. 
 
 Now let a tithe bo imposed, which 
 takes from these five pieces of 
 
 land 10, 9, 8, 7, and G bushels re- 
 spectively, the fifth quality still
 
 TAXES ON COMMODITIES. 
 
 S07 
 
 being the one which rcguhtos the 
 pi ice, but returning to the farmer, 
 
 after payment of tithe, no more than 
 54 bushels : 
 
 The land producing 100 bushels reduced to 90, will yield a rent of 90 54, or 36 bushels. 
 That producing 90 81 8154, or 27 
 
 80 72 72 51, or 18 
 
 70 63 6354, or 9 
 
 nn.l that producing 60 bushels, reduced 
 ' 5 1. will yield, as before, no rent. So 
 (hat the rent of the first quality of 
 laud has lost four bushels; of the 
 second, three ; of the third, two ; and 
 of the fourth, one : that is, each has 
 1'Xst exactly one-tenth. A tax, there- 
 fore, of a fixed proportion of the pro- 
 duce, lowers, in the same proportion, 
 corn-rent. 
 
 But it is only corn-rent that is 
 !, and not rent estimated in 
 or in any other commodity. 
 For, in the same proportion as corn- 
 rent is reduced in quantity, the com 
 composing it is raised in value. Under 
 the tithe, 54 bushels will be worth in 
 the market what 60 were before ; and 
 nine-tenths will in all cases sell for as 
 nnich as the whole ten-tenths pre\i- 
 ously sold for. The landlords will 
 therefore be compensated in value and 
 price for what they lose in quantity; 
 and will suffer only so far as they con- 
 sume their rent in kind, or, after re- 
 ceiving it in money, expend it in 
 agricultural produce : that is, they 
 only suffer as consumers of agricultural 
 produce, and in common with all the 
 other consumers. Considered as land- 
 lords, they have the same income as 
 before ; the tithe, therefore, falls on 
 the consumer, and not on the landlord. 
 
 The same effect would be produced 
 on reYtt, if the tax, instead of being a 
 fixed proportion of the produce, were a 
 fixed sum per quarter or per bushel. A 
 tax which takes a shilling for every 
 bushel, takes more shillings from one 
 field than from another, just in propor- 
 tion as it produces more bushels ; and 
 operates exactly like tithe, except that 
 lithe is not only the same proportion 
 on all hinds, but is also the same pro- 
 portion at all times, while a fixed sum 
 of money per bushel will amount to a 
 greater or less proportion, according as 
 corn is cheap or dear. 
 
 There are other modes of taxing 
 
 agriculture, which would affect rent 
 differently. A tax proportioned to tho 
 rent would fall wholly on the rent, and 
 would not at all raise the price of corn, 
 which is regulated by the portion of 
 the produce that pays no rent. A fixed 
 tax of so much per cultivated acre, 
 without distinction of value, would have 
 effects directly the reverse. Taking 
 no more from the best qualities of land 
 than from the worst, it would leave tho 
 differences the same as before, and con- 
 sequently the same corn-rents, and the 
 landlords would profit to the full extent 
 of the rise of price. To put the thing 
 in another manner ; the price must riso 
 sufficiently to enable the worst land to 
 pay the tax : thus enabling all lands 
 which produce more than the worst, to 
 pay not only the tax, but also an in- 
 creased rent to the landlords. These, 
 however, are not so much taxes on tho 
 produce of land, as taxes on the land 
 itself. Taxes on the produce, properly 
 so called, whether fixed or ad valorem, 
 do not affect rent, but fall on the con- 
 sumer : profits, however, generally 
 bearing either the whole or the greatest 
 part of the portion which is levied on 
 the consumption of the labouring 
 classes. 
 
 4. The preceding is, I appre- 
 hend, a correct statement of the man- 
 ner in which taxes on agricultural 
 produce operate when first laid on. 
 When, however, they are of old stand- 
 ing, their effect may be different, as 
 was first pointed out, I believe, by 
 Mr. Senior. It is, as we have seen, an 
 almost infallible consequence of any 
 reduction of profits, to retard the rate 
 of accumulation. Now the effect of 
 accumulation, when attended by its 
 usual accompaniment, an increase of 
 population, is to increase the value and 
 price of food, to raise rent, and to 
 lower profits : that is, to do precisely 
 what is done by a tax on agricultural
 
 508 
 
 produce, except that this does not raise 
 rent. The tax, therefore, merely anti- 
 cipates the rise of price, and fall of 
 profits, which would have taken place 
 ultimately through the mere progress 
 of accumulation ; while it at the same 
 time prevents, or at least retards, that 
 progress. If the rate of profit was such, 
 previous to the imposition of a tithe, 
 that the effect of the tithe reduces it 
 to the practical minimum, the tithe 
 will put a stop to all further accumu- 
 lation, or cause it to take place out of 
 the country ; and the only effect which 
 the tithe will then have had on the 
 consumer, is to make him pay earlier 
 the price which he would have had to 
 pay somewhat later part of which, 
 indeed, in the gradual progress of 
 wealth and population, he would have 
 almost immediately begun to pay. 
 After a lapse of time which would have 
 admitted of arise of one-tenth through 
 the natural progress of wealth, the con- 
 sumer will he paying no more than he 
 would have paid if the tithe had never 
 existed; he will have ceased to pay 
 any portion of it, and the person who 
 will really pay it is the landlord, whom 
 it deprives of the increase of rent which 
 would hy that time have accrued to 
 him. At every successive point in this 
 interval of time, less of the hurthen will 
 rest on the consumer, and more of it on 
 the landlord : and in the ultimate re- 
 sult, the minimum of profits will be 
 reached with a smaller capital and 
 population, and a lower rental, than if 
 the course of things had not been dis- 
 turbed by the imposition of the tax. 
 If, on the other hand, the tithe or other 
 tax on agricultural produce does not 
 reduce profits to the minimum, but to 
 eomething above the minimum, accu- 
 mulation will not be stopped, but only 
 slackened : and if population also in- 
 creases, the twofold increase will con- 
 tinue to produce its effects a rise of 
 the price of com, and an increase of 
 rent. These consequences, however, 
 will not take place with the same 
 rapidity as if the higher rate of profit 
 had continued. At the end of twenty 
 years the country will have a smaller 
 population and capital, than, but for 
 the lax, it would by that time have 
 
 BOOK V. CHAPTER IV. 4. 
 
 had ; the landlords will have a smaller 
 rent; and the price of corn, having 
 increased less rapidly than it would 
 otherwise have done, will not be so 
 much as a tenth higher than what, if 
 there had been no tax, it would by that 
 time have become. A part of the tax, 
 therefore, will already have ceased to 
 fall on the consumer, and devolved 
 upon the landlord ; and the proportion 
 will become greater and greater by 
 lapse of time. 
 
 Mr. Senior illustrates this view of 
 the subject by likening the effects of 
 tithes, or other taxes on agricultural 
 produce, to those of natural sterility of 
 soil. If the land of a country without 
 access to foreign supplies, were sud- 
 denly smitten with a permanent dete- 
 rioration of quality, to an extent which 
 would make a tenth more labour neces- 
 sary to raise the existing produce, the 
 price of corn would undoubtedly rise 
 one-tenth. But it cannot hence be 
 infeiTed that if the soil of the country 
 had from the beginning been one-tenth 
 worse than it is, corn would at present 
 have been one-tenth dearer than we 
 find it. It is far more probable, that 
 the smaller return to labour and capital, 
 ever since the first settlement of the 
 country, would have caused in each 
 successive generation a less rapid in- 
 crease than has taken place : that the 
 country would now have contained less 
 capital, and maintained a smaller popu- 
 lation, so that notwithstanding the in- 
 feriority of the soil, the price of com 
 would not have been higher, nor profits 
 lower, than at present ; rent alone 
 would certainly have been lower. Wo 
 may suppose two islands, which, beiurc 
 alike in extent, in natural fertility, and 
 industrial advancement, have up to .1 
 certain time been equal in population 
 and capital, and have had equal reiKals, 
 and the same price of corn. Let us 
 imagine a tithe imposed in one of lho:io 
 islands, but not in the other. 'J Iv.e 
 will be immediately a difference in lhj 
 price of com, and therefore probab! v in 
 profits. While profits are not tending 
 downwards in either country, that is, 
 while improvements in the production 
 of necessaries fully keep pace with llie 
 increase of population, this difference
 
 TAXES ON COMMODITIES. 
 
 509 
 
 of prices and profits between the islands 
 may continue. But if, in the untithecl 
 island, capital increases, and popula- 
 tion along with it, more than enough 
 to counterbalance any improvements 
 which take place, the price of corn will 
 gradually rise, profits will fall, and rent 
 will increase ; while in the tithed island 
 capital and population will either not 
 increase (beyond what is balanced by 
 the improvements), or if they do, will 
 increase in a less degree ; so that rent 
 and the price of corn will either not rise 
 at all, or rise more slowly. Rent, there- 
 fore, will soon be higher in the untithed, 
 than in the tithed island, and profits 
 not so much higher, nor corn so much 
 cheaper, as they were on the first im- 
 position of the tithe. These effects 
 will be progressive. At the end of 
 every ten years there will be a greater 
 difference between the rentals and be- 
 tween the aggregate wealth and popu- 
 lation of the two islands, and a less 
 difference in profits and in the price of 
 corn. 
 
 At what point will these last dif- 
 ferences entirely cease, and the tem- 
 porary effect of taxes on agricultural 
 produce, in raising the price, have en- 
 tirely given place to the ultimate effect, 
 that of limiting the total produce of 
 the country ? Though the untithed 
 island is always verging towards the 
 point at which the price of food would 
 overtake that in the tithed island, its 
 progress towards that point naturally 
 slackens as it draws nearer to attaining 
 it ; since the difference between the 
 two islands in the rapidity of accumu- 
 lation, depending upon the difference 
 in the rates of profit in proportion as 
 these approximate, the movement which 
 draws them closer together, abates of 
 its force. The one may not actually 
 overtake the other, until both islands 
 reach the minimum of profits : up to 
 that point, the tithed island may con- 
 tinue more or less ahead of the untithed 
 island in the price of corn: considerably 
 ahead if it is far from the minimum, 
 and is therefore accumulating rapidly ; 
 lery little ahead if it is near the mini- 
 mum, and accumulating slowly. 
 
 But whatever is true of the tithed 
 and untithed islands, in our hypotheti- 
 
 cal case, is true of any country having 
 a tithe, compared with the same 
 country if it had never had a tithe. 
 
 In England the great emigration of 
 capital, and the almost periodical oc- 
 currence of commercial crises through 
 the speculations occasioned by the 
 habitually low rate of profit, are indi- 
 cations that profit has attained the 
 practical, though not the ultimate 
 minimum, and that all the savings 
 which take place (beyond what im- 
 provements, tending to the cheapening 
 of necessaries, make room for) are 
 either sent abroad for investment, or 
 periodically swept away. There can 
 therefore, I think, be little doubt that 
 if England had never had a tithe, or 
 any tax on agricultural produce, the 
 price of corn would have been by this 
 time as high, and the rate of profits as 
 low, as at present. Independently of 
 the more rapid accumulation which 
 would have taken place if profits had 
 not been prematurely lowered by these 
 imposts ; the mere saving of a part of 
 the capital which has been wasted 
 in unsuccessful speculations, and the 
 keeping at home a part of that which 
 has been sent abroad, would have been 
 quite sufficient to produce the effect. I 
 think, therefore, with Mr. Senior, that 
 the tithe, even before its commutation, 
 had ceased to be a cause of high prices 
 or low profits, and had become a mere 
 deduction from rent ; its other effects 
 being, that it caused the country to 
 have no greater capital, no larger pro- 
 duction, and no more numerous popu- 
 lation than if it had been one-tenth 
 less fertile than it is ; or let us rather 
 say one-twentieth, (considering how 
 great a portion of the land of Great 
 Britain was tithe-free). 
 
 But though tithes and other taxes 
 on agricultural produce, when of long 
 standing, either do not raise the price 
 of food and lower profits at all, or if at 
 all, not in proportion to the tax ; yet 
 the abrogation of such taxes, when 
 they exist, does not the less diminish 
 price, arid, in general, raise the rate of 
 profit. The abolition of a tithe takes 
 one-tenth from the cost of production, 
 and consequently from the price, of 
 all agricultural produce ; and unless it
 
 510 
 
 BOOK V. CHAPTER IV. 5. 
 
 permanently raises the labourer's re- 
 quirements, it lowers the cost of labour, 
 and raises profits. Ecnt, estimated in 
 money or in commodities, generally 
 remains as before; estimated in agri- 
 cultural produce, it is raised. The 
 country adds as much by the repeal of 
 a tithe, to the margin which intervenes 
 between it and the stationary state, as 
 is cut off from that margin by a tithe 
 when first imposed. Accumulation is 
 greatly accelerated ; and if population 
 also increases, the price of corn imme- 
 diately begins to recover itself, and 
 rent to rise ; thus gradually trans- 
 ferring the benefit of the remission, 
 from the consumer to the landlord. 
 
 The effects which thus result from 
 abolishing tithe, result equally from 
 what has been done by the arrange- 
 ments under the Commutation Act for 
 converting it into a rent-charge. When 
 the tax, instead of being levied on the 
 whole produce of the soil, is levied only 
 from the portions which pay rent, and 
 does not touch any fresh extension of 
 cultivation, the tax no longer forms 
 any part of the cost of production of 
 the portion of the produce which regu- 
 lates the price of all the rest. The 
 land or capital which pays no rent, can 
 now send its produce to market one- 
 tenth cheaper. The commutation of 
 tithe ought therefore to have produced 
 a considerable fall in the average price 
 of corn. If it had not come so gradu- 
 ally into operation, and if the price of 
 corn had not during the same period 
 been under the influence of several 
 other causes of change, the effect would 
 probably have been markedly conspicu- 
 ous. As it is, there can be no doubt 
 that this circumstance has had its 
 share in the fall which has taken place 
 in the cost of production and in the 
 price of home-grown produce ; though 
 the effects of the great agricultural 
 improvements which have been simul- 
 taneously advancing, and of the free 
 admission of agricultural produce from 
 foreign countries, have masked those 
 of the other cause. This fall of price 
 would not in itself have any tendency 
 injurious to the landlord, since corn- 
 rents are increased in the same ratio in 
 which the price of com is diminished. 
 
 But neither does it in any way tend (9 
 increase his income. The rent charg^ 
 therefore, which is substituted for tithe, 
 is a dead loss to him at the expiration 
 of existing leases : and the commuta- 
 tion of tithe was not a mere alteration 
 in the mode in which the landlord bora 
 an existing burthen, but theimpositiot 
 of a new one ; relief being afforded to 
 the consumer at the expense of the 
 landlord, who, however, begins imme- 
 diately to receive progressive indemni- 
 fication at the consumer's expense, by 
 the impulse given to accumulation and 
 population. 
 
 5. We have hitherto inquired into 
 the effects of taxes on commodities, on 
 the assumption that they are levied 
 impartially on every mode in which the 
 commodity can be produced or brought 
 to market. Another class of considera- 
 tions is opened, if we suppose that this 
 impartiality is not maintained, and 
 that the tax is imposed, not on the 
 commodity, but on some particular 
 mode of obtaining it. 
 
 Suppose that a commodity is capable 
 of being made by two different pro- 
 cesses ; as a manufactured commodity 
 may be produced either by hand or 
 by steam-power ; sugar may be made 
 either from the sugar-cane or from 
 beet-root, cattle fattened either on hay 
 and green crops, or on oil cake and the 
 refuse of breweries. It is the interest 
 of the community, that of the two 
 methods, producers should adopt that 
 which produces the best article at the 
 lowest price. This being also the in- 
 terest of the producers, unless protected 
 against competition, and shielded from 
 the penalties of indolence ; the process 
 most advantageous to the community 
 is that which, if not interfered with by 
 government, they ultimately find it to 
 their advantage, to adopt. Supp< so 
 however that a tax is laid on one of 
 the processes, and no tax at all, or one 
 of smaller amount, on the other. If the 
 taxed process is the one which the pro- 
 ducers would not have adopted, Ilia 
 measure is simply nugatory. But if 
 the tax falls, as it is of course iniriirlcd 
 to do, upon the one which they would 
 have adopted, it creates an artiiicial
 
 TAXES ON COMMODITIES. 
 
 511 
 
 motive for preferring the untaxcd pro- 
 ce^ ;-, though the interior of the two. 
 If, therefore, it has any elleet at all, it 
 causes the commodity to be produced 
 of worse quality, or at a greater ex- 
 pense of labour ; it causes .so much of 
 tho labour of the community to be 
 . and the capital employed in 
 supporting and remunerating that 
 labour to be expended as uselessly, as 
 it' it wore spent in hiring men to dig 
 holes and fill them up again. This 
 waste of labour and capital constitutes 
 an addition to the cost of production of 
 tho commodity, which raises its value 
 and price in a corresponding ratio, and 
 thus the owners of the capital are in- 
 demnified. The loss falls on the con- 
 ; though the capital of the 
 country is also eventually diminished, 
 by the diminution of their means of 
 saving, and in some degree, of their 
 inducements to save. 
 
 The kind of tax, therefore, which 
 comes under the general denomination 
 of a discriminating duty, transgresses 
 the rule that taxes should take as little 
 as possible from the tax-payer beyond 
 what they bring into the treasury 
 of the state. A discriminating duty 
 makes the consumer pay two distinct 
 taxes, only one of which is paid to the 
 government, and that frequently the 
 less onerous of the two. If a tax were 
 laid on sugar produced from the cane, 
 leaving the sugar from beet-root un- 
 taxed, then in so far as cane sugar 
 continued to be used, the tax on it 
 would be paid to the treasury, and 
 might be as unobjectionable as most 
 other taxes ; but if cane sugar, having 
 previously been cheaper than beet-root 
 sugar, was now dearer, and beet-root 
 sugar was to any considerable amount 
 substituted for it, and fields laid out 
 and manufactories established in con- 
 sequence, the government would gain 
 no revenue from the beet-root sugar, 
 while the consumers of it would pay a 
 real tax. They would pay for beet-root 
 sugar more than they had previously 
 paid for cane sugar, and the difference 
 would go to indemnify producers for a 
 portion of the labour of the country 
 actually thrown away, in producing by 
 the labour of (say) three hundred men, 
 
 what could be obtained by the other 
 process with the labour of two hundred. 
 
 One of the commonest cases of dis- 
 criminating duties, is that of a tax on 
 the importation of a commodity capa- 
 ble of being produced at home, unac- 
 companied by an equivalent tax on 
 the home production. A commodity ia 
 never permanently imported, unless it 
 can be obtained from abroad at a 
 smaller cost of labour and capital on 
 the whole, than is necessary for pro- 
 ducing it. If, therefore, by a duty on 
 the importation, it is rendered cheaper 
 to uroduce the article than to import 
 it, an extra quantity of labour and 
 capital is expended, without any extra 
 result. The labour is useless, and the 
 capital is spent in paying people for 
 laboriously doing nothing. All custom 
 duties which operate as an encourage- 
 ment to the home production of tho 
 taxed article, are thus an eminently 
 wasteful mode of raising a revenue. 
 
 This character belongs in a peculiar 
 degree to custom duties on the produce 
 of land, unless countervailed by excise 
 duties on the home production. Such 
 taxes bring less into the public trea- 
 sury, compared with what they take 
 from the consumers, than any other 
 imposts to which civilized nations are 
 usually subject. If the wheat pro- 
 duced in a country is twenty millions 
 of quarters, and the consumption 
 twenty-one millions, a million being 
 annually imported, and if on this 
 million a duty is laid which raises the 
 price ten shillings per quarter, the 
 price which is raised is not that of 
 the million only, but of the whole 
 twenty-one millions. Taking the most 
 favourable, but extremely improbable 
 supposition', that the importation is 
 not at all checked, nor the home pro- 
 duction enlarged, the state gains a 
 revenue of only half a million, while 
 the consumers are taxed ten millions 
 and a half: the ten millions being a 
 contribution to the home growers, who 
 are forced by competition to resign it 
 all to the landlords. The consumer 
 thus pays to the owners of land an 
 additional tax, equal to twenty times 
 that which he pays to the state. Let 
 us now suppose that the tax really
 
 51$ 
 
 BOOK V. CHAPTER IV. 6. 
 
 checks importation. Suppose importa- 
 tion stopped altogether in ordinary 
 years ; it being found that the million 
 of quarters can be obtained, by a more 
 elaborate cultivation, or by breaking 
 up inferior land, at a less advance than 
 ten shillings upon the previous price 
 say, for instance, five shillings a 
 quarter. The revenue now obtains 
 nothing, except from the extraordinary 
 imports which may happen to take 
 place in a season of scarcity. But the 
 consumers pay every year a tax of 
 five shillings on the whole twenty-one 
 millions of quarters, amounting to 5 
 millions sterling. Of this the odd 
 250,0002. goes to compensate the 
 growers of the last million of quarters 
 for the labour and capital wasted 
 under the compulsion of the law. 
 The remaining five millions go to 
 enrich the landlords as before. 
 
 Such is the operation of what are 
 technically termed Corn Laws, when 
 first laid on; and such continues to 
 be their operation, so long as they 
 have any effect at all in raising the 
 price of corn. But I am by no means 
 of opinion that in the long run they 
 keep up either prices or rents in the de- 
 gree which these considerations might 
 lead us to suppose. What we have 
 said respecting the effect of tithes and 
 other taxes on agricultural produce, 
 applies in a great degree to corn laws : 
 they anticipate artificially a rise of 
 price and of rent, which would at all 
 events have taken place through the 
 increase of population and of produc- 
 tion. The difference between a country 
 without com laws, and a country which 
 has long had corn laws, is not so much 
 that the last has a higher price or a 
 larger rental, but that it has the same 
 price and the same rental with a smaller 
 aggregate capital and a smaller popu- 
 lation. The imposition of corn laws 
 raises rents, but retards that progress 
 of accumulation which would in no 
 long period have raised them fully as 
 much. The repeal of corn laws tends 
 to lower rents, but it unchains a force 
 which, in a progressive state of capital 
 and population, restores and even in- 
 creases the former amount. There is 
 evory reason to expect that under the 
 
 virtually free importation of agricultural 
 produce, at last extorted from the niling 
 powers of this country, the price of food, 
 if population goes on increasing, will 
 gradually but steadily rise ; though this 
 effect may for a time be postponed by 
 the strong current which in this country 
 has set in (and the impulse is extending- 
 itself to other countries) towards the-- 
 improvement of agricultural science,, 
 and its increased application to prac- 
 tice. 
 
 What we have said of duties on im- 
 portation generally, is equally appli- 
 cable to discriminating duties which- 
 favour importation from one place or 
 in one particular manner, in contradis- 
 tinction to others : such as the pre- 
 ference given to the produce of a colony,. 
 or of a country with which there is at 
 commercial treaty : or the higher duties 
 formerly imposed by our navigation- 
 laws on goods imported in other than- 
 British shipping. Whatever else may 
 be alleged in favour of such distinc- 
 tions, whenever they are not nugatory, 
 they are economically wasteful. They 
 induce a resort to a more costly ruode- 
 of obtaining a commodity, in lieu of 
 one less costly, and thus cause a por- 
 tion of the labour which the country 
 employs in providing itself with foreign- 
 commodities, to be sacrificed without 
 return. 
 
 6. There is one more point, re- 
 lating to the operation of taxes on 
 commodities conveyed from one coun- 
 try to another, which requires notice : 
 the influence which they exert on in- 
 ternational exchanges. Every tax on 
 a commodity tends to raise its price, 
 and consequently to lessen the demand 
 for it in the market in which it is .sold. 
 All taxes on international trade ten:], 
 therefore, to produce a disturbance and 
 readjustment of what we have termed 
 the Equation of International Demand. 
 This consideration leads to some rather 
 curious consequences, which have been 
 pointed out in the separate essay on 
 International Commerce, already seve- 
 ral times referred to in this treatise. 
 
 Taxes on foreign trade are of two 
 kinds taxes on imports, and on ex- 
 ports. On the first aspect of the
 
 TAXES ON COMMODITIES. 
 
 613 
 
 matter it would seem that both these 
 taxes nre paid by the consumers of 
 the commodity ; that taxes on exports 
 consequently fall entirely on foreigners, 
 taxes on imports wholly on the homo 
 consumer. The true state of the case, 
 however, is much more complicated. 
 
 " By taxing exports, we may, in 
 certain circumstances, produce a divi- 
 sion of the advantage of the trade 
 more favourable to ourselves. In some 
 cases we may draw into our coffers, at 
 the expense of foreigners, not only the 
 whole tax, but more than the tax : in 
 other cases, we should gain exactly the 
 tax ; iu others, less than the tax. In this 
 last case, a part of the tax is borne by 
 ourselves : possibly the whole, possibly 
 even, as we shall show, more than the 
 whole." 
 
 Reverting to the supposititious case 
 employed in the Essay, of a trade be- 
 tween Germany and England in broad- 
 cloth and linen, " suppose that England 
 taxes her export of cloth, the tax not 
 being supposed high enough to induce 
 Germany to produce cloth for herself. 
 The price at which cloth can be sold 
 in Germany is augmented by the tax. 
 This will probably diminish the quan- 
 tity consumed. It may diminish it so 
 much that, even at the increased price, 
 there will not b required so great a 
 money value as before. Or it may not 
 diminish it at all, or so little, that in 
 consequence of the higher price, a 
 greater money value will be purchased 
 than before. In this last case, Eng- 
 land will gain, at the expense of Ger- 
 many, not only the whole amount of 
 the duty, but more; for, the money 
 value of her exports to Germany being 
 increased, while her imports remain 
 the same, money will flow into England 
 from Germany. The price of cloth 
 will rise in England, and consequently 
 in Germany; but the price of linen 
 will fall in Germany, and consequently 
 in England. We shall export less 
 cloth, and import more linen, till the 
 equilibrium is restored. It thus ap- 
 pears (what is at first sight somewhat 
 remarkable) that by taxing her exports, 
 England would, in some conceivable 
 circumstances, not only gain from her 
 foreign customers tta whole amount of 
 *.. 
 
 the tax, but would also get her imports 
 cheaper. She would get thorn cheaper 
 in two ways; for she would obtain 
 them for lesa money, and would have 
 more money to purchase them with. 
 Germany, n the other hand, would 
 suffer doubly : she would have to pay 
 for her cloth a price increased not only 
 by the duty, but by the influx of money 
 into England, while the same change 
 in the distribution of the circulating 
 medium would leave her less money to 
 purchase it with. 
 
 " This, however, is only one of three 
 possible cases. If, after the imposition 
 of the duty, Germany requires so di- 
 minished a quantity of cloth, that ita 
 total value is exactly the same as be- 
 fore, the balance of trade would be un- 
 disturbed ; England will gain the duty, 
 Germany will lose it, and nothing more. 
 If, again, the imposition of the duty 
 occasions such a falling off in the de- 
 mand that Germany requires a less 
 pecuniary value than before, our ex- 
 ports will no longer pay for our im- 
 ports ; money must pass from England 
 into Germany ; and Germany's share 
 of the advantage of the trade will be 
 increased. By the change in the dis- 
 tribution of money, cloth will fall iu 
 England ; and therefore it will, of 
 course, fall in Germany. Thus Ger- 
 many will not pay the whole of the 
 tax. From the same cause, linen will 
 rise in Germany, and consequently in 
 England. When this alteration of 
 prices has so adjusted the demand, 
 that the cloth and the linen again pay 
 for one another, the result is that Ger- 
 many has paid only a part of the tax, 
 and the remainder of what has been 
 received into our treasury has come in- 
 directly out of the pockets of our own 
 consumers of linen, who pay a higher 
 price for that imported commodity in 
 consequence of the tax on our exports, 
 while at the same time they, in con- 
 sequence of the efflux of money and 
 the fall of prices, have smaller money 
 incomes wherewith to pay for the linen 
 at that advanced price. 
 
 " It is not an impossible supposition 
 
 that by taxing our exports we might 
 
 not only gain nothing from the i<* 
 
 reigner, the tax being paid out of out 
 
 L L
 
 BOOK V. CHAPTEH IV. 6. 
 
 514 
 
 own pockets, but might even compel 
 our own people to pay a second tax to 
 the foreigner. Suppose, as hefore, that 
 the demand of Germany for cloth falls 
 off so much on the imposition of the 
 duty, that she requires a smaller money 
 value than before, but that the case is 
 so different with linen in England, that 
 when the price rises the demand either 
 does not fall off at all, or so little that 
 the money value required is greater 
 than before. The first effect of laying 
 on the duty is, as before, that the cloth 
 exported will no longer pay for the linen 
 imported. Money will therefore flow 
 out of England into Germany. One 
 effect is to raise the price of linen in 
 Germany, and consequently in Eng- 
 land. But this, by the supposition, 
 instead of stopping the efflux of money, 
 only makes it greater, because the 
 higher the price, the greater the money 
 value of the linen consumed. The ba- 
 lance, therefore, can only be restored 
 by the other effect, which is going on 
 at the same time, namely, the fall of 
 cloth in the English and consequently 
 in the German market. Even when 
 cloth has fallen so low that its price 
 with the duty is only equal to what its 
 price without the duty was at first, it 
 is not a necessary consequence that the 
 fall will stop ; for the same amount of 
 exportation as before will not now suf- 
 fice to pay the increased money value 
 of the imports j and although the Ger- 
 man consumers have now not only cloth 
 at the old price, but likewise increased 
 money incomes, it is not certain that 
 they will be inclined to employ the in- 
 crease of their incomes in increasing 
 their purchases of cloth. The price of 
 cloth, therefore, must perhaps fall, to 
 restore the equilibrium, more than the 
 whole amount of the duty ; Germany 
 may be enabled to import cloth at a 
 lower price when it is taxed, than when 
 it was untaxed : and this gain she will 
 acquire at the expense of the English 
 consumers of linen, who, in addition, 
 will be the real payers of the whole of 
 what is received at their own custom- 
 house under the name of duties on the 
 export of cloth." 
 
 It is almost unnecessary to remark 
 tliat cloth and linen are here merely 
 
 representatives of exports and imports 
 in general ; and that the effect which 
 a tax on exports might have in increas- 
 ing the cost of imports, would affect 
 the imports from all countries, and not 
 peculiarly the articles which might bo 
 imported from the particular country 
 to which the taxed exports were sent. 
 
 " Such are the extremely various 
 effects which may result to ourselves 
 and to our customers from the imposi- 
 tion of taxes on our exports ; and the 
 determining circumstances are of a 
 nature so imperfectly ascertainable, 
 that it must be almost impossible to 
 decide with any certainty, even after 
 the tax has been imposed, whether wo 
 have been gainers by it or losers." 
 In general, however, there could be littlo 
 doubt that a country which imposed 
 such taxes would succeed in making 
 foreign countries contribute something 
 to its revenue ; but unless the taxed 
 article be one for which their demand 
 is extremely urgent, they will seldom 
 pay the whole of the amount which the 
 tax brings in.* " In any case, whatever 
 we gain is lost by somebody else, and 
 there is the expense of the collection 
 besides : if international morality, 
 therefore, were rightly understood and 
 acted upon, such taxes, as being con- 
 trary to the universal weal, would not 
 exist." 
 
 Thus far of duties on exports. We 
 now proceed to the more ordinary case 
 of duties on imports. " We have had an 
 example of a tax on exports, that is, on 
 foreigners, falling in part on ourselves. 
 We shall therefore not be surprised 
 if we find a tax on imports, that is, 
 on ourselves, partly falling upon fo- 
 reigners. 
 
 " Instead of taxing the cloth which 
 we export, suppose that we tax the 
 linen which we import. The duty 
 which we are now supposing must not 
 be what is termed a protecting duty, 
 
 * Probably the strongest known instance 
 of a large revenue raised from foreigners by 
 a tax on exports, is the opium trade with 
 China. The high price of the article under 
 the Government monopoly (which is equiva- 
 lent to a high export duty) has so little effect 
 in discouraging its consumption, that it is 
 said to have been occasionally sold in Chin* 
 for as much as its weight in silver.
 
 TAXES ON COMMODITIES. 
 
 515 
 
 that ia, a duty sufficiently high to 
 induce us to produce the article at 
 home. If it had this effect, it would 
 destroy entirely the trade both in cloth 
 and in linen, and both countries would 
 lose the whole of the advantage which 
 tin y previously gained by exchanging 
 those commodities with one another. 
 W<' suppose a duty which might dimi- 
 nish the consumption of the article, but 
 which would not prevent us from con- 
 tinuing to import, as before, whatever 
 linen we did consume. 
 
 " The equilibrium of trade would be 
 disturbed if the imposition of the tax 
 diminished, in the slightest degree, the 
 quantity of linen consumed. For, as 
 the tax is levied at our own custom- 
 house, the German exporter only re- 
 ceives the same price as formerly, 
 though the English consumer pays a 
 higher one. If, therefore, there be any 
 diminution of the quantity bought, al- 
 though a larger sum of money may be 
 actually laid out in the article, a 
 smaller one will be due from England 
 to Germany : this sum will no longer 
 be an equivalent for the sum due from 
 Germany to England for cloth, the ba- 
 lance therefore must be paid in money. 
 Prices will fall in Germany and rise in 
 England ; linen will fall in the German 
 market ; cloth will rise in the English. 
 The Germans will pay a higher price 
 for cloth, and will have smaller money 
 incomes to buy it with ; while the Eng- 
 lish will obtain linen cheaper, that is, 
 its price will exceed what it previously 
 was by less than the amount of the 
 duty, while their means of purchasing 
 it will be increased by the increase oi 
 their money incomes. 
 
 " If the imposition of the tax does 
 not diminish the demand, it will leave 
 the trade exactly as it was before. We 
 shall import as much, and export as 
 much ; the whole of the tax will be 
 paid out of our own pockets. 
 
 " But the imposition of a tax on a 
 commodity almost always diminishes 
 the demand more or less ; and it can 
 aever, or scarcely ever, increase the 
 demand. It may, therefore, be laid 
 down as a principle, that a tax on im- 
 ported commodities, when it really 
 operates as a tax, and not as a prohi- 
 
 ition either total or partial, almost al- 
 ways falls in part upon the foreigners 
 who consume our goods ; and that this 
 s a mode in which a nation may ap- 
 )ropriate to itself, at the expense 
 of foreigners, a larger share than 
 would otherwise belong to it of tho 
 ncrease in the general productive- 
 ness of the labour and capital of the 
 world, which results from the inter, 
 change of commodities among na- 
 ions." 
 
 Those are, therefore, in the right 
 who maintain that taxes on imports 
 are partly paid by foreigners ; but they 
 are mistaken when they say, that it is 
 by the foreign producer. It is not on 
 the person from whom we buy, but on 
 all those who buy from us, that a por- 
 tion of our custom duties spontaneously 
 falls. It is the foreign consumer of our 
 exported commodities, who is obliged 
 to pay a higher price for them because 
 we maintain revenue duties on foreign 
 goods. 
 
 There are but two cases in which 
 duties on commodities can in any de- 
 gree, oj in any manner, fall on the pro- 
 ducer. One is, when the article is a 
 strict monopoly, and at a scarcity price. 
 The price in this case being only limited 
 by the desires of the buyer ; the sum 
 obtained for the restricted supply being 
 the utmost which the buyers would con- 
 sent to give rather than go without it ; 
 if the treasury intercepts a part of this, 
 the price cannot be further raised to 
 compensate for the tax, and it must be 
 paid from the monopoly profits. A tax 
 on rare and high priced wines will fall 
 wholly on the growers, or rather, on 
 the owners of the vineyards. The 
 second case in which the producer 
 sometimes bears a portion of the tax, 
 is more important : the case of duties 
 on the produce of land or of mines. 
 These might be so high as to diminish 
 materially the demand for the produce, 
 and compel the abandonment of some 
 of the interior qualities of land or mines. 
 Supposing this to be the effect, the con- 
 sumers, both in the country itself and 
 in those which dealt with it, would ob- 
 tain the produce at smaller cost ; and 
 a part only, instead of the whole, of 
 the duty would fall on the purchaser, 
 LLl
 
 516 
 
 BOOK V. CHAPTER IV. 6. 
 
 who would be indemnified chiefly at 
 the expense of the landowners or mine- 
 owners in the producing country. 
 
 Duties on importation may, then, be 
 divided " into two classes : those 
 which have the effect of encouraging 
 some particular branch of domestic in- 
 dustry, and those which have not. The 
 former are purely mischievous, both to 
 the country imposing them, and to 
 those with whom it trades. They pre- 
 vent a saving of labour and capital, 
 which, if permitted to be made, would 
 be divided in some proportion or other 
 between the importing country and the 
 countries which buy what that country 
 does or might export. 
 
 "The other class of duties are those 
 which do not encourage one mode of 
 procuring an article at the expense of 
 another, but allow interchange to take 
 place just as if the duty did not exist, 
 and to produce the saving of labour 
 which constitutes the motive to inter- 
 national, as to all other commerce. Of 
 this kind are duties on the importation 
 of any commodity which could not by 
 any possibility be produced at home ; 
 and duties not sufficiently high to 
 counterbalance the difference of ex- 
 pense between the production of the 
 article at home and its importation. 
 Of the money which is brought into 
 the treasury of any country by taxes 
 of this last description, a part only is 
 paid by the people of that country ; the 
 remainder by the foreign consumers of 
 their goods. 
 
 " Nevertheless, this latter kind of 
 taxes are in principle as ineligible as 
 the former, though not precisely on the 
 same ground. A protecting duty can 
 never be n cause of gain, but always 
 and necessarily of loss, to the country 
 imposing it, just so far as it is effica- 
 cious to its end. A non-protecting 
 duty, on the contrary, would in most 
 cases be a source of gain to the country 
 imposing it, in so far as throwing part 
 ol the weight of its taxes upon other 
 people is a gain but it would be a 
 
 means which it could seldom be ad- 
 visable to adopt, being so easily coun- 
 teracted by a precisely similar pro- 
 ceeding on the other side. 
 
 " If England, in the case already 
 supposed, sought to obtain for herself 
 more than her natural sliare of the 
 advantage of the trade with Germany 
 by imposing a duty upon linen, Ger- 
 many would only have to impose a 
 duty upon cloth, sufficient to diminish 
 the demand for that article about as 
 much as the demand for linen had been 
 diminished in England by the tax. 
 Things would then be as before, and 
 each country would pay its own tax. 
 Unless, indeed, the sum of the two 
 duties exceeded the entire advantage 
 of the trade ; for in that case the trade, 
 and its advantage, would cease en- 
 tirely. 
 
 "There would be no advantage, 
 therefore, in imposing duties of this 
 kind, with a view to gain by them in 
 the manner which has been pointed 
 out. But when any part of the revenue 
 is derived from taxes on commodities, 
 these may often be as little objection- 
 able as the rest. It is evident, too, 
 that considerations of reciprocity, which 
 are quite unessential when the matter 
 in debate is a protecting duty, are of 
 material importance when the repeal 
 of duties of this other description is 
 discussed. A country cannot be ex- 
 pected to renounce the power of taxing 
 foreigners, unless foreigners will in re- 
 turn practise towards itself the sama 
 forbearance. The only mode in which 
 a country can save itself from being a 
 loser by the revenue duties imposed by 
 other countries on its commodities, is 
 to impose corresponding revenue duties 
 on theirs. Only it must take care that 
 those duties be not so high as to exceed 
 all that remains of the advantage of 
 the trade, and put an end to importa- 
 tion altogether, causing the article to 
 be cither produced at home, or im- 
 ported from another and a dearor 
 market. 1 '
 
 MISCELLANEOUS TAXES. 
 
 517 
 
 CHAPTER V. 
 
 OF SOME OTHER TAXK8. 
 
 1. BKSIDES direct taxes on in- 
 come, and taxes on consumption, the 
 financial systems of most countries 
 comprise a variety of miscellaneous 
 imposts, not strictly included in either 
 class. The modern European systems 
 retain many such taxes, though in 
 much less number and variety than 
 those semi-barbarous governments 
 which European influence has not yet 
 reached. In some of these, scarcely 
 nny incident of life has escaped being 
 made an excuse for some fiscal exac- 
 tion ; hardly any act, not belonging to 
 daily routine, can be performed by any 
 one, without obtaining leave from some 
 agent of government, which is only 
 granted in consideration of a payment : 
 especially when the act requires the aid 
 or the peculiar guarantee of a public 
 authority. In the present treatise we 
 may confine our attention to such 
 taxes as lately existed, or still exist, in 
 countries usually classed as civilized. 
 
 In almost all nations a considerable 
 revenue is drawn from taxes on con- 
 tracts. These are imposed in various 
 forms. One expedient is that of taxing 
 the legal instrument which serves as 
 evidence of the contract, and which is 
 commonly the only evidence legally 
 admissible. In England, scarcely any 
 contract is binding unless executed on 
 stamped paper, which has paid a tax 
 to government ; and until very lately, 
 when the contract related to property 
 the tax was proportionally much 
 heavier on the smaller than on the 
 larger transactions ; which is still true 
 of some of those taxes. There are also 
 stamp duties on the legal instruments 
 which are evidence of the fulfilment of 
 contracts; such as acknowledgments 
 of receipt, and deeds of release. Taxes 
 on contracts are not always levied by 
 means of stamps. The duty on sales 
 by auction, abrogated by Sir Robert 
 Peel, was an instance in point. The 
 taxes on transfers of landed property, 
 
 in France, are another: in England 
 these are stamp duties. In somo 
 countries, contracts of many kinds are 
 not valid unless registered, and their 
 registration is made an occasion for a 
 tax. 
 
 Of taxes on contracts, the most im- 
 portant are those on the transfer of 
 property, chiefly on purchases and 
 sales. Taxes on the sale of consumable 
 commodities are simply taxes on those 
 commodities. If they affect only some 
 particular commodities, they raise the 
 prices of those commodities, and are 
 paid by the consumer. If the attempt 
 were made to tax all purchases and 
 sales, which, however absurd, was for 
 centuries the law of Spain, the tax, if 
 it could he enforced, would he equiva- 
 lent to a tax on all commodities, and 
 would not affect prices : if levied from 
 the sellers, it would be a tax on profits, 
 if from the buyers, a tax on consump- 
 tion ; and neither class could throw tho 
 burthen upon the other. If confined 
 to some one mode of sale, as tor ex- 
 ample by auction, it discourages re- 
 course to that mode, and if of any 
 material amount, prevents it from being 
 adopted at all, unless in a case of 
 emergency; in which case as the seller 
 is under a necessity to sell, but the 
 buyer under no necessity to buy, the 
 tax falls on the seller ; and this was 
 the strongest of the objections to the 
 auction duty : it almost always fell on 
 a necessitous person, and in the crisia 
 of his necessities. 
 
 Taxes on the purchase and sale of 
 land are, in most countries, liable U 
 the same objection. Landed property 
 in old countries is seldom parted with, 
 except from reduced circumstances, or 
 some urgent need : the seller, there- 
 fore, must take what he can get, while 
 the buyer, whose object is an invest- 
 ment, makes his calculations on the 
 interest which he can obtain for his 
 money in other ways, and wiK not buy
 
 518 
 
 BOOK V. CHAPTER V. 
 
 if he is charged with a government tax 
 :ra the transaction.* It has indeed 
 teen objected, that this argument 
 would not apply if all modes of perma- 
 nent investment, such as the purchase 
 of government securities, shares in 
 joint-stock companies, mortgages, and 
 the like, were subject to the same tax. 
 But even then, if paid by the buyer, it 
 would be equivalent to a tax on in- 
 terest: if sufficiently heavy to be of 
 any importance, it would disturb the 
 established relation between interest 
 and profit; and the disturbance would 
 redress itself by a rise in the rate of 
 interest, and a fall of the price of land 
 and of all securities. It appears to me, 
 therefore, that the seller is the person 
 by whom such taxes, unless under 
 peculiar circumstances, will generally 
 be borne. 
 
 All tapces must be condemned which 
 throw c-Dstacles in the way of the sale 
 of land, or other instruments of produc- 
 tion. Such sales tend naturally to 
 render the property more productive. 
 The seller, whether moved by necessity 
 or choice, is probably some one who is 
 cither without the means, or without 
 the capacity, to make the most advan- 
 tageous use of the property for produc- 
 tive purposes ; while the buyer, on the 
 other hand, is at any rate not needy, 
 and is frequently both inclined and 
 able to improve the property, since, as 
 it is worth more to such a person than 
 to any other, he is likely to offer the 
 highest price for it. All taxes, there- 
 fore, and all difficulties and expenses, 
 annexed to such contracts, are deci- 
 dedly detrimental ; especially in the 
 case of land, the source of subsistence, 
 and the original foundation of all wealth, 
 on the improvement of which, there- 
 fore, so much depends. Too great 
 facilities cannot be given to enable 
 land to pass into the hands, and as- 
 
 * The statement in the text requires 
 modification in the case of countries where 
 the land is owned in small portions. These 
 being neither a badge of importance, nor in 
 general an object of local attachment, are 
 readily parted with at a small advance on 
 their original cost, with the intention of buy- 
 ing elsewhere : and the desire of acquiring 
 laud, even on disadvantageous terms, is so 
 great, as to be little checked by even a high 
 rate of taxation. 
 
 sume the modes of aggregation or divi- 
 sion, most conducive to its productive- 
 ness. If landed properties are too 
 large, alienation should be free, in 
 order that they may be subdivided ; i( 
 too small, in order that they may be 
 united. All taxes on the transfer of 
 landed property should be abolished ; 
 but, as the landlords have no claim to 
 be relieved from any reservation which 
 the state has hitherto made in its own 
 favour from the amount of their rent, 
 an annual impost equivalent to the 
 average produce of these taxes should 
 be distributed over the land generally, 
 in the form of a land-tax. 
 
 Some of the taxes on contracts are 
 very pernicious, imposing a virtual 
 penalty upon transactions which it 
 ought to be the policy of the legislator 
 to encourage. Of this sort is the stamp 
 duty on leases, which in a country of 
 large properties are an essential condi- 
 tion of good agriculture ; and the tax 
 on insurances, a direct discouragement 
 to prudence and forethought. In the 
 case of fire insurances, the tax was 
 until lately in all cases, and still is 
 in most cases, exactly double the 
 amount of the premium of insurance on 
 common risks ; so that the person in- 
 suring is obliged by the government 
 to pay for the insurance just three 
 times the value of the risk. If this tax 
 existed in France, we should not see, as 
 we do in some of her provinces, the plate 
 of an insurance company on almost 
 every cottage or hovel. This, indeed, 
 must be ascribed to the provident and 
 calculating habits produced by the dis 
 semination of property through the la- 
 bouring class : but a tax of so extra- 
 vagant an amount would be a heavy 
 drag upon any habits of providence. 
 
 2. Nearly allied to the taxes on 
 contracts are those on communication. 
 The principal of these is the postage 
 tax ; to which may be added taxes on 
 advertisements, and on newspapers, 
 which are taxes on the communication 
 of information. 
 
 The common mode of levying a tax 
 on the conveyance of letters, is by 
 making the government the sole au- 
 thorized carrier of them, and demand-
 
 MISCELLANEOUS TAXES. 
 
 519 
 
 ing a monopoly price. When this 
 price is so moderate aa it is in this 
 country under the uniform penny post- 
 age, scarcely if at all exceeding what 
 would be charged under the freest 
 competition by any private company, it 
 can nardly be considered as taxation, 
 lut rather as the profits of a business ; 
 whatever excess there is above the 
 crdinary profits of stock being a fair 
 result of the saving of expense, caused 
 by having only one establishment and 
 one set of arrangements for the whole 
 country, instead of many competing 
 ones. The business, too, being one 
 which both can and ought to be con- 
 ducted on fixed rules, is one of the few 
 businesses which it is not unsuitable to 
 a government to conduct. The post 
 office, therefore, is at present one of the 
 best of the sources from which this 
 country derives its revenue. But a 
 postage much exceeding what would 
 be paid for the same service in a system 
 of freedom, is not a desirable tax. Its 
 chief weight falls on letters of business, 
 and increases the expense of mercan- 
 tile relations between distant places. 
 It is like an attempt to raise a large 
 revenue by heavy tolls : it obstructs all 
 operations by which goods are con- 
 veyed from place to place, and dis- 
 courages the production of commodities 
 in one place for consumption in an- 
 other ; which is not only in itself one 
 of the greatest sources of economy of 
 labour, but is a necessary condition of 
 almost all improvements in production, 
 and one of the strongest stimulants to 
 industry and promoters of civilization. 
 
 A tax on advertisements is not free 
 from the same objection, since in what- 
 ever degree advertisements are useful 
 to business, by facilitating the coming 
 together of the dealer or producer and 
 the consumer, in that same degree, if 
 the tax be high enough to be a serious 
 discouragement to advertising, it pro- 
 longs the period during which goods 
 remain unsold, and capital locked up 
 in idleness. 
 
 A tax on newspapers is objection- 
 able, not so much where it does fall as 
 where it does not, that is, where it 
 prevents newspapers from being used. 
 To the generality of those who buy 
 
 them, newspapers are a luxury which 
 they can as well afford to pay for as 
 any other indulgence, and which is as 
 unexceptionable a source of revenue. 
 But to that large part of the commu- 
 nity who have been taught, to read, but 
 have received little other intellectual 
 education, newspapers are the source 
 of nearly all the general information 
 which they possess, and of nearly all 
 their acquaintance with the ideas and 
 topics current among mankind ; and 
 an interest is more easily excited in 
 newspapers, than in books or other 
 more recondite sources of instruction. 
 Newspapers contribute so little, in a 
 direct way, to the origination of useful 
 ideas, that many persons undervalue 
 the importance of their office in dis- 
 seminating them. They correct many 
 prejudices and superstitions, and keep 
 up a habit of discussion, and interest 
 in public concerns, the absence of which 
 is a great cause of the stagnation of 
 mind usually found in the lower and 
 middle, if not in all, ranks, of those 
 countries where newspapers of an irn 
 portant or interesting character do not 
 exist. There ought to be no taxes 
 which render this great diffuser of in- 
 formation, of mental excitement, and 
 mental exercise, less accessible to that 
 portion of the public which most needs 
 to be carried into a region of ideas 
 and interests beyond its own limited 
 horizon. 
 
 3. In the enumeration of bad 
 taxes, a conspicuous place must be 
 assigned to law taxes ; which extract 
 a revenue for the state from the various 
 operations involved in an application 
 to the tribunals. Like all needless 
 expenses attached to law proceedings, 
 they are a tax on redress, and there- 
 fore a premium on injury. Although 
 such taxes have been abolished in thin 
 country as a general source of revenue, 
 they still exist in the form of fees of 
 court, for defraying the expense of the 
 courts of justice ; under the idea, ap- 
 parently, that those may fairly be re- 
 quired to bear the expenses of tha 
 administration of justice, who reap the 
 benefit of it. The fallacy of this doc- 
 trine was powerfully exposed by Ben*
 
 520 
 
 fham. As he rerharked, those who are 
 under the necessity of going to law, 
 nrc those who henefit least, not most, 
 by the law and its administration. To 
 them the protection which the law 
 affords has not been complete, since 
 they have heen obliged to resort to a 
 court of justice to ascertain their rights, 
 or maintain those rights against in- 
 fringement : while the remainder of 
 the public have enjoyed the immunity 
 from injury conferred by the law and 
 the tribunals, without the inconveni- 
 ence of an appeal to them. 
 
 4. Besides the general taxes of 
 the State, there are in all or most 
 countries local taxes, to defray any ex- 
 penses of a public nature which it is 
 thought best to place under the control 
 or management of a local authority. 
 Some of these expenses are incurred 
 for purposes in which the particular 
 locality is solely or chiefly interested ; 
 as the paving, cleansing, and lighting 
 of the streets ; or the making nd re- 
 pairing of roads and bridges, which 
 may be important to people from any 
 part of the country, but only in so far 
 as they, or goods in which they have 
 an interest, pass along the roads or 
 over the bridges. In other cases again, 
 the expenses are of a kind as nation- 
 ally important as any others, but are 
 defrayed locally because supposed more 
 ikely to be well administered by local 
 bodies; as, in England, the relief of 
 the poor and the support of gaols, and 
 in some other countries, of schools. 
 To decide for what public objects local 
 superintendence is best suited, and 
 what are those which should be kept 
 immediately under the central govern- 
 ment, or under a mixed system of local 
 management and central superintend- 
 ence, is a question not of political 
 economy, but of administration. It is 
 an important principle, however, that 
 taxes imposed by a local authority, 
 being less amenable to publicity and 
 discussion than the acts of the govern- 
 ment, should always be special laid 
 on for some definite service, and not 
 exceedingthe expense actually incurred 
 
 BOOK V. CHAPTER V. 4. 
 
 in rendering the service. Thus limited, 
 it is desirable, whenever practicable, 
 that the burthen should fall on those 
 to whom the service is rendered ; that 
 the expense, for instance, of roads and 
 bridges, should be defrayed by a toll 
 on passengers and goods conveyed by 
 them, thus dividing the cost between 
 those who use them for pleasure or 
 convenience, and the consumers of the 
 goods which they enable to be brought 
 to and from the market at a diminished 
 expense. When, however, the tolls 
 have repaid with interest the whole of 
 the expenditure, the road or bridge 
 should be thrown open free of toll, that 
 it may be used also by those to whom, 
 unless open gratuitously, it would be 
 valueless ; provision being made for 
 repairs either from the funds of 
 the state, or by a rate levied on the 
 localitiea which reap the principal 
 benefit. 
 
 In England, almost all local taxes 
 are direct, (the coal duty of the City of 
 London, and a few similar imposts, 
 being the chief exceptions,) though the 
 greatest part of the taxation for gene- 
 ral purposes is indirect. On the con- 
 trary, in France, Austria, and other 
 countries where direct taxation is much 
 more largely employed by the state, 
 the local expenses of towns are princi- 
 pally defrayed by taxes levied on com- 
 modities when entering them. These 
 indirect taxes are much more objec- 
 tionable in towns than on the frontier, 
 because the things which the country 
 supplies to the towns are chiefly the 
 necessaries of life and the materials of 
 manufacture, while of what a country 
 imports from foreign countries, tlio 
 greater part usually consists of luxuries. 
 An octroi cannot produce a large reve- 
 nue, without pressing severely upon 
 the labouring classes of the towns ; 
 unless their wages rise proportionally, 
 in which case the tax falls in a great 
 measure on the consumers of town 
 produce, whether residing in town or 
 country, since capital will not remain 
 in the towns if its profits fall below 
 their ordinary proportion as compared 
 with the rural districts.
 
 DIRECT AKD INDIRECT TAXES COMPARED. 
 
 621 
 
 CUAPTER VI. 
 
 COMPARISON BETWEEN DIRECT AND INDIRECT TAXATION. 
 
 1. ARE direct or indirect taxes 
 the most eligible ? This question, at 
 all times interesting, has of late excited 
 a considerable amount of discussion. 
 In England there is a popular feeling, 
 of old standing, in favour of indirect, 
 or it should rather be said in opposition 
 to direct, taxation. The feeling is not 
 grounded on the merits of the case, and 
 is of a puerile kind. An Englishman 
 dislikes, not so much the payment as 
 the act of paying. He dislikes seeing 
 the face of the tax-collector, anl being 
 subjected to his peremptory demand. 
 Perhaps, too, the money which he is 
 required to pay directly out of his 
 pocket is the only taxation which he is 
 quite sure that he pays at all. That a 
 tax of one shilling per pound on tea, or 
 of two shillings per bottle on wine, 
 raises the price 01 each pound of tea 
 and bottle of wine which he consumes, 
 by that and more than that amount, 
 cannot indeed be denied ; it is the fact, 
 and is intended to be so, and he him- 
 self, at times, is perfectly aware of it ; 
 "out it makes hardly any impression on 
 his practical feelings and associations, 
 serving to illustrate the distinction be- 
 tween what is merely known to be true 
 and what is felt to be so. The un- 
 popularity of direct taxation, contrasted 
 with the easy manner in which the 
 public consent to let themselves he 
 fleeced in the prices of commodities, 
 has generated in many friends of im- 
 provement a directly opposite mode of 
 thinking to the foregoing. They con- 
 lend that the very reason which makes 
 direct taxation disagreeable, makes it 
 preferable. Under it, every one knows 
 now much he really pays ; and if he 
 votes for a war, or any other expensive 
 national luxury, he does so with his 
 eyes open to what it costs him. If all 
 laxes were direct, taxation would be 
 much more perceived than at present ; 
 nd there would be a security which 
 
 now there is not, for economj in the 
 public expenditure. 
 
 Although this argument is not with- 
 out force, its weight is likely to be 
 constantly diminishing. The real in- 
 cidence of indirect taxation is every 
 day more generally understood and 
 more familiarly recognised : and what- 
 ever else may be said of the changes 
 which are taking place in the tenden- 
 cies of the human mind, it can scarcely, 
 I think, be denied, that things are more 
 and more estimated according to their 
 calculated value, and less according to 
 their non-essential accompaniments. 
 The mere distinction between paying 
 money directly to the tax-collector, and 
 contributing the same sum through 
 the intervention of the tea-dealer or 
 the wine-merchant, no longer makes 
 the whole difference between dislike or 
 opposition, and passive acquiescence. 
 But further, while any such infirmity, 
 of the popular mind subsists, the argu- 
 ment grounded on it tells partly on 
 the other side of the question. If 
 our present revenue of about seventy 
 millions were all raised by direct 
 taxes, an extreme dissatisfaction would 
 certainly arise at having to pay so 
 much ; but while men's minds are so 
 little guided by reason, as such a 
 change of feeling from so irrelevant a 
 cause would imply, so great an aver- 
 sion to taxation might not be an un- 
 qualified good. Of the seventy millions 
 in question, nearly thirty are pledged, 
 under the most binding obligations, to 
 those whose property has been bor- 
 rowed and spent by the state : and 
 while this debt remains unredeemed, a 
 greatly increased impatience of taxa- 
 tion would involve no little danger of 
 a breach of faith, similar to that 
 which, in the defaulting states of 
 America, has been produced, and in 
 some of them still continues, from the 
 fame cause. That part, indeed, of the
 
 BOOK V. CHAPTER VI. 1. 
 
 523 
 
 public expenditure, which is devoted 
 to the maintenance of civil and mili- 
 tary establishments, (that is, all ex- 
 cept the interest of the national debt) 
 aflbrds, in many of its details, ample 
 r-cope for retrenchment. But while 
 much of the revenue is wasted under 
 the mere pretence of public sen-ice, so 
 much of the most important business 
 of government is left undone, that 
 whatever can be rescued from useless 
 expenditure is urgently required for 
 useful. Whether the object be educa- 
 tion ; a more efficient and accessible 
 administration of justice ; reforms of 
 any kind which, like the Slave Eman- 
 cipation, require compensation to indi- 
 vidual interests ; or what is as im- 
 portant as any of these, the entertain- 
 ment of a sufficient staff of able and 
 educated public servants, to conduct 
 in a better than the present awkward 
 manner the business of legislation and 
 administration ; every one of these 
 ihings implies considerable expense, 
 and many of them have again and 
 ngain been prevented by the reluc- 
 tance which existed to apply to Par- 
 liament for an increased grant of 
 public money, though (besides that 
 the existing means would be more 
 than sufficient if applied to the proper 
 purposes) the cost would be repaid, 
 often a hundred-fold, in mere pecuniary 
 advantage to the community generally. 
 If so great an addition were made to 
 the public dislike of taxation as might 
 be tne consequence of confining it to 
 the direct fonn, the classes who profit 
 by_ the misapplication of public money 
 might probably succeed in saving that 
 by which they profit, at the expense 
 of that which would only be useful to 
 the public. 
 
 There is, however, a frequent plea 
 in support of indirect taxation, which 
 must be altogetherrejected, asgrounded 
 on a fallacy. We are often told that 
 taxes on commodities are less burthen- 
 fiome than other taxes, because the 
 contributor can escape from them by 
 ceasing to use the taxed commodity. 
 He certainly can, if that be his object, 
 deprive the government of the money; 
 but he does so by a sacrifice of his own 
 indulgences, which (if he chose to 
 
 undergo it) would equally make up to 
 him for the same amount taken from 
 him by direct taxation. Suppose a tax 
 laid on wine, sufficient to add five pounds 
 to the price of the quantity of wine which 
 he consumes in a year. He has only 
 (we are told) to diminish his consump- 
 tion of wine by 51., and he escapes the 
 burthen. True : but if the 5/., instead 
 of being laid on wine, had been taken 
 from him by an income-tax, he could, 
 by expending 5Z. less in wine, equally 
 save the amount of the tax, so that 
 the difference between the two cases 
 is really illusory. If the government 
 takes from the contributor five pounds 
 a year, whether in one way or another, 
 exactly that amount must be retrenched 
 from his consumption to leave him as 
 well off as before ; and in either way 
 the same amount of sacrifice, neithei 
 more nor less, is imposed on him. 
 
 On the other hand, it is some ad- 
 vantage on the side of indirect taxes, 
 that what they exact from the con- 
 tributor is taken at a time and in a 
 manner likely to be convenient to him. 
 It is paid at a time when he has at 
 any rate a payment to make ; it causes, 
 therefore, no additional trouble, nor 
 (unless the tax be on necessaries) any 
 inconvenience but what is inseparable 
 from the payment of the amount. He 
 can also, except in the case of very 
 perishable articles, select his own time 
 for laying in a stock of the commodity, 
 and consequently for payment of the 
 tax. The producer or dealer who ad- 
 vances these taxes, is, indeed, some- 
 times subjected to inconvenience ; but, 
 in the case of imported goods, this in- 
 convenience is reduced to a minimuir 
 by what is called the Warehousing 
 System, under which, instead of paying 
 the duty at the time of importation, h 
 is only required to do so when he take? 
 out the goods for consumption, which 
 is seldom done until he has eithe' 
 actually found, or has the prospect oi 
 immediately finding, a purchaser. 
 
 The strongest objection, however, to 
 raising the whole or the greater part 
 of a large revenue by direct taxes, is 
 the impossibility of assessing them 
 fairly without a conscientious co-ope- 
 ration on the part of the contributors,
 
 DIRECT AND INDIRECT TAXES COMPARED. 
 
 523 
 
 not to be hoped for in the present low 
 state of public morality. In the case 
 of an income-tax, we have already 
 seen that unless it be found practicable 
 to exempt savings altogether from the 
 tax, the burthen cannot be apportioned 
 with any tolerable approach to fairness 
 upon those whose incomes are derived 
 from business or professions ; and this 
 is in fact admitted by most of the 
 advocates of direct taxation, who, I 
 am afraid, generally get over the diffi- 
 culty by leaving those classes untaxed, 
 and confining their projected income- 
 tax to " realized property," in which 
 form it certainly has the merit of 
 being a very easy form of plunder. 
 Bui enough has been said In condem- 
 nation of this expedient. \Vo have 
 Been, however, that a house-tax is a 
 form of direct taxation not liable to 
 the same objections as an income-tax, 
 and indeed liable to as few objections 
 of any kind as perhaps any of our indi- 
 rect taxes. But it would be impossible 
 to raise, by a house-tax alone, the 
 greatest part of the revenue of Great 
 Britain, without producing a very ob- 
 jectionable over-crowding of the popu- 
 lation, through the strong motive 
 which all persons would have to avoid 
 the tax by restricting their house ac- 
 commodation. Besides, even a house- 
 tax has inequalities, and consequent 
 injustices ; no tax is exempt from 
 them, and it is neither just nor politic 
 to make all the inequalities fall in the 
 same places, by calling upon one tax 
 to defray the whole or the chief part 
 of the public expenditure. So much 
 of the local taxation, in this country, 
 being already in the form of a house- 
 tax, it is probable that ten millions a 
 year would be fully as much as could 
 beneficially be levied, through this 
 medium, for general purposes. 
 
 A certain amount of revenue may, 
 as we have seen, be obtained without 
 injustice by a peculiar tax on rent. 
 Besides the present land-tax, and an 
 equivalent for the revenue now derived 
 from stamp duties on the conveyance 
 of land, Borne further taxation might, 
 1 have contended, at some future 
 period be imposed, to enable the state 
 to participate in the progressive in- 
 
 crease of the incomes of landlords from 
 natural causes. Legacies and inheri- 
 tances, we have also seen, ought to be 
 subjected to taxation sufficient to yield 
 a considerable revenue. With these 
 taxes, and a house-tax of suitable 
 amount, we should, I think, havo 
 reached the prudent limits of direct 
 taxation, save in a national emergency 
 so urgent as to justify the government 
 in disregarding the amount of in- 
 equality and unfairness which may 
 ultimately be found inseparable from 
 an income-tax. The remainder of the 
 revenue would have to be provided by 
 taxes on consumption, and tbe ques- 
 tion is, which of these are the least 
 objectionable. 
 
 2. There are some forms of indi- 
 rect taxation which must be peremp- 
 torily excluded. Taxes on commodi- 
 ties, for revenue purposes, must not 
 operate as protecting duties, but must 
 be levied impartially on every mode in 
 which the articles can be obtained, 
 whether produced in the country itself, 
 or imported. An exclusion must also 
 be put jtppn all taxes on the neces- 
 saries of life, or on the materials or 
 instruments employed in producing 
 those necessaries. Such taxes are 
 always liable to encroach on what 
 should be left untaxed, the incomes 
 barely sufficient for healthful exist- 
 ence ; and on the most favourable 
 supposition, namely, that wages rise 
 to compensate the labourers for the 
 tax, it operates as a peculiar tax on 
 profits, which is at once unjust, and 
 detrimental to national wealth.* What 
 remain are taxes on luxuries. And 
 these have some properties which 
 
 * Some argue that the materials and in- 
 struments of all production should be exempt 
 from taxation ; but these, when they do not 
 enter into the production of necessaries, seem 
 aa proper subjects of taxation as the finished 
 article. It ia chiefly with reference to 
 foreign trade, that such taxes have been 
 considered injurious. Internationally speak- 
 ing, they may be looked upon as export 
 duties, and, unless in cases in which an ex- 
 port duty is advisable, they should be accom- 
 panied with an equivalent drawback on ex- 
 portation. But there is no sufficient reason 
 against taxing the materials and instruments 
 used in the production of anything which ia 
 itself a fit object of taxation.
 
 524 
 
 BOOK V. CHAPTER VI. 
 
 strongly recommend them. In the 
 first place, they can never, by any 
 possibility, touch those whose whole 
 income is expended on necessaries ; 
 while they do reach those by whom 
 what is required for necessaries, is ex- 
 pended on indulgences. In the next 
 place, they operate in some cases as 
 an useful, and the only useful, kind of 
 sumptuary law. I disclaim all asceti- 
 cism, and by no means wish to see dis- 
 couraged, either by law or opinion, any 
 indulgence (consistent with the means 
 and obligations of the person using it) 
 which is sought from a genuine incli- 
 nation for, and enjoyment of, the thing 
 itself; but a great portion of the ex- 
 pense of the higher and middlo classes 
 in most countries, and the greatest in 
 tin's, is not incurred for the sake of 
 the pleasure afforded by the things on 
 which the money is spent, but from 
 regard to opinion, and an idea that 
 certain expenses are expected from 
 them, as an appendage of station ; 
 and I cannot but think that expendi- 
 ture of this sort is a most desirable 
 subject of taxation. If taxation dis- 
 courages it, some good is done, and if 
 not, no harm ; for in so far as taxes 
 are levied on things which arc desired 
 and possessed from motives of this 
 description, nobody is the worse for 
 them. When a thing is bought not 
 for its use but for its costliness, cheap- 
 ness is no recommendation. As Sis- 
 mondi remarks, the consequence of 
 cheapening articles of vanity, is not 
 that less is expended on such things, 
 but that the buyers substitute for the 
 cheapened article some other which 
 is more costly, or a- more elaborate 
 quality of the same thing ; and as the 
 inferior quality answered the purpose 
 of vanity equally well when it was 
 equally expensive, a tax on the article 
 is really paid by nobody : it is a crea- 
 tion of public revenue by which nobody 
 loses.* 
 
 " Were we to suppose that diamonds 
 could only be procured from one particular 
 and distant country, and pearls from another, 
 and were the produce of the mines in the 
 former, and of the fishery in the latter, from 
 the operation of natural causes, to become 
 doubly difficult to procure, the effect would 
 merely be that in time half the quantity of 
 
 3. In order to reduce as much as 
 possible the inconveniences, and in- 
 crease the advantages, incident to 
 taxes on commodities, the following 
 are the practical rules which suggest 
 themselves. 1st. To raise as large a 
 revenue as conveniently may be, from 
 those classes of luxuries which have 
 most connexion with vanity, and least 
 with positive enjoyment ; such as the 
 more costly qualities of all kinds of 
 personal equipment and ornament. 
 2ndly. Whenever possible, to demand 
 the tax, not from the producer, but 
 directly from the consumer, since when 
 levied on the producer it raises the 
 price always by more, and often by 
 much more, than the mere amount of 
 the tax. Most of the minor assessed 
 
 diamonds and pearl* would be sufficient to 
 mark a certain opulence aud rank, that it 
 had before been necessary to employ lor that 
 purpose. The same quantity of gold, or 
 some commodity reducible at last to labour, 
 would be required to produce the now re- 
 duced amount, as the former larger amount. 
 Were the difficulty interposed by the regula- 
 tions of legislators it could 
 
 make no difference to the fitness of these 
 articles to serve the purposes of vanity." 
 Suppose that means were discovered whereby 
 the physiological process which generates the 
 pearl might be induced ad libitum, the result 
 being that the amount of labour expended in 
 procuring each pearl, came to be only the 
 five hundredth part of what it was before. 
 "The ultimate effect of such a change would 
 depend on whether the fishery was free or 
 not. Were it free to all, as pearls could be 
 got simply for the labour of fishing for them, 
 a string of them might be had for a few 
 pence. The very poorest class of society 
 could therefore allbrd to decorate their per- 
 sons with them. They would thus soon be- 
 come extremely vulgar and unfashionable, 
 and so at last valueless. If however we sup. 
 pose that instead of the fishery being free, 
 the legislator owns and has complete com- 
 mand of the place, where alone pearls are to 
 be procured; as the progress of discovery 
 advanced, he might impose a duty on them 
 equal to the diminution of labour necessary 
 to procure them. They would then be as 
 much esteemed as they were before. What 
 simple beauty they have would remain un- 
 changed. The difficulty to be surmounted 
 in order to obtain them would be different, 
 but equally great, and they would therefore 
 equally serve to mark the opulence of those 
 who possessed them." The net revenue ob- 
 tained by such a tax "would not cost the 
 society anything. If not abused in its ap- 
 plication, it would be a clear addition of so 
 much to the resources of the community." 
 Eae, .AVic Principlet of Political Economy, 
 pp. 309-71.
 
 DIRECT AN'D INDIRECT TAXES COMPARED. 
 
 525 
 
 taxes in this country are recommended 
 by loth these considerations. But 
 with regard to horses and carriages, as 
 there are many persons to whom, from 
 health or constitution, these are not so 
 much luxuries as necessaries, the tax 
 paid by those who have but one riding 
 horse, or but one carriage, especially 
 of the cheaper descriptions, should be 
 low; while taxation should rise very 
 rapidly with the number of horses 
 and carriages, and with their cost- 
 liness. Srdly. But as the only in- 
 direct taxes which yield a large re- 
 venHe are those which fall on articles 
 of universal or very general consump- 
 tion, and as it is therefore necessary 
 to have some taxes on real luxuries, 
 that is, on things which afford pleasure 
 in themselves, and are valued on that 
 account rather than for their cost; 
 these taxes should, if possible, be so 
 adjusted as to fall with the same pro- 
 portional weight on small, on moderate, 
 and on large incomes. This is not an 
 easy matter ; since the things which 
 are the subjects of the more produc- 
 tive taxes, are in proportion more 
 largely consumed by the poorer mem- 
 bers of the community than by the 
 rich. Tea, coflee, sugar, tobacco, fer- 
 mented drinks, can hardly be so taxed, 
 that the poor shall not bear more than 
 their due share of the burthen. Some- 
 thing might be done by making the 
 duty on the superior qualities, which 
 are used by the richer consumers, 
 much higher in proportion to the value, 
 (instead of much lower, as is almost 
 universally the practice under the pre- 
 sent English system) ; but in some 
 cases the difficulty of at all adjusting 
 the duty to the value, so as to prevent 
 evasion, is said, with what truth I 
 know not, to be insuperable ; so that 
 it is thought necessary to levy the 
 same fixed duty on all the qualities 
 alike : a flagrant injustice to the 
 poorer cksAs of contributors, unless 
 compensated by the existence of other 
 taxes from which, as from the present 
 income-tax, they arealtogetherexemnt. 
 4thly. As far as is consistent with the 
 preceding rules, taxation should rather 
 be concentrated on a few articles than 
 diffused over many, in order that the 
 
 expenses of collection may be smaller, 
 and that as few employments as pos- 
 sible may be burthensomely and vexa- 
 tiously interfered with. 5thly. Among 
 luxuries of general consumption, tax- 
 ation should by preference attach 
 itself to stimulants, because these, 
 though in themselves as legitimate 
 indulgences as any others, are more 
 liable than most others to be used in 
 excess, so that the check to consump- 
 tion, naturally arising from taxation, 
 is on the whole better applied to them 
 than to other things. 6thly. As far ai 
 other considerations permit, taxation 
 should be confined to imported articles, 
 since these can be taxed with a less 
 degree of vexatious interference, and 
 with fewer incidental bad effects, than 
 when a tax is levied on the field or on 
 the workshop. Custom duties are, 
 cteteris paribug, much less objection- 
 able than excise : but they must be 
 laid only on things which either can- 
 not, or at least will not, be produced 
 in the country itself; or else their 
 production there must be prohibited 
 (as in England is the case with to- 
 bacco,) or subjected to an excise duty 
 of equivalent amount. 7thly. No tax 
 ought to be kept so high as to furnish 
 a motive to its evasion, too strong to 
 be counteracted by ordinary means of 
 prevention: and especially no com- 
 modity should be taxed so highly as 
 to raise up a class of lawless characters, 
 smugglers, illicit distillers, and the like. 
 Of the excise and custom duties 
 lately existing in this country, all 
 which are intrinsically unfit to form 
 part of a good system of taxation, 
 have, since the last reforms by Mr. 
 Gladstone, been got rid of. Among 
 these arc all duties on ordinary articles 
 of food,* whether for human beings or 
 for cattle ; those on timber, as falling 
 on the materials of lodging, which is 
 one of the necessaries of life ; all 
 duties on the metals, and on imple- 
 ments made of them ; taxes on soap, 
 which is a necessary of cleanlin -ss, 
 and on tallow, the material both of 
 that and of some other necessaries , 
 
 Except the shilling per quarter duty on 
 corn, ostensibly for registration, and scarcely 
 felt as a burthen.
 
 526 
 
 BOOK V. CHAPTER VII. 1 1. 
 
 the tax on paper, an indispensable 
 instrument of almost all business and 
 of most kinds of instruction. The 
 duties which now yield nearly the 
 whole of the customs and excise re- 
 venue, those on sugar, coft'ee, tea, 
 wine, beer, spirits, and tobacco, are in 
 themselves, where a large amount of 
 revenue is necessary, extremely pro- 
 per taxes ; but at present grossly un- 
 just, from the disproportionate weight 
 with which they press on the poorer 
 classes ; and some of them (those on 
 spirits and tobacco) are so high as to 
 cause a considerable amount of smug- 
 gling. It is probable that most of 
 these taxes might bear a great reduc- 
 tion without any material loss of 
 revenue. In what manner the finer 
 articles of manufacture, consumed by 
 the rich, 'jnight most advantageously 
 
 be taxed, I must leave to be decided 
 by those Avho have the requisite prac- 
 tical knowledge. The difficulty would 
 be, to effect it without an inadmissible 
 degree of interference with production. 
 In countries which, like the United 
 States, import the principal part of 
 the finer manufactures which they 
 consume, there is little difficult v in 
 the matter : and even where nothing 
 is imported but the raw material, 
 that may be taxed, especially the 
 qualities of it which are exclusively 
 employed for the fabrics used by the 
 richer class of consumers. Thus, in 
 England a high custom duty on raw 
 silk would be consistent with prin 
 ciple ; and it might perhaps be prac- 
 ticable to tax the finer qualities of 
 cotton or linen yarn, whether spun in 
 the country itself or imported. 
 
 CHAPTER VH. 
 
 OF A NATIONAL DEBT. 
 
 1. THE question must now be 
 considered, how far it is right or ex- 
 pedient to raise money for the purposes 
 of government, not by laying on taxes 
 to the amount required, but by taking 
 a portion of the capital of the country 
 in the form of a loan, and charging the 
 public revenue with only the interest. 
 Nothing needs be said about providing 
 for temporary wants by taking up 
 money ; for instance, by an issue of 
 exchequer bills, destined to be paid off, 
 at furthest in a year or two, from the 
 proceeds of the existing taxes. This 
 jg a convenient expedient, and when 
 the government does not possess a 
 treasure or hoard, is often a necessary 
 one, on the occurrence of extraordinary 
 expenses, or of a temporary failure in 
 the ordinary soui'ces of revenue. What 
 we have to discuss is the propriety of 
 contracting a national debt of a per- 
 manent character ; defraying the ex- 
 penses of a war, or of any season of 
 difficulty, by loans, to be redeemed 
 
 either very gradually and at a distant 
 period, or not at all. 
 
 This question has already been 
 touched upon in the First Book.* We 
 remarked, that if the capital taken in 
 loans is abstracted from funds either 
 engaged in production, or destined to 
 be employed in it, their diversion from 
 that purpose is equivalent to taking 
 the amount from the wages of the 
 labouring classes. Borrowing, in this 
 case, is not a substitute for raising the 
 supplies within the year. A govern- 
 ment which borrows does actually take 
 the amount within the year, and that 
 too by a tax exclusively on the labour- 
 ing classes : than which it could have 
 done nothing worse, if it had supplied 
 its wants by avowed taxation ; and in 
 that case the transaction, audits evils, 
 would have ended with the emergency; 
 while by the circuitous mode adopted, 
 the value exacted from the labourers it 
 gained, not by the state, but by the 
 Supra, p. 40.
 
 A NATIONAL DEBT. 
 
 527 
 
 employers of labour, the state remain- 
 ing charged with the debt besides, and 
 with its interest in perpetuity. The 
 system of public loans, in such circum- 
 stances, may be pronounced the very 
 worst which, in the present state of 
 civilization, is still included in the 
 catalogue of financial expedients. 
 
 We however remarked that there 
 are other circumstances in which loans 
 are not chargeable with these per- 
 nicious consequences : namely, first, 
 when what is borrowed is foreign capi- 
 tal, the overflowings of the general ac- 
 cumulation of the world ; or, secondly, 
 when it is capital which either would 
 not have been saved at all unless this 
 mode of investment had been open to 
 it, or after being saved, would have 
 been wasted in unproductive enter- 
 prises, or sent to seek employment in 
 foreign countries. When the progress 
 of accumulation has reduced profits 
 either to the ultimate or to the practi- 
 cal minimum, to the rate, less than 
 which would either put a stop to the 
 increase of capital, or send the whole 
 of the new accumulations abroad ; 
 government may annually intercept 
 these new accumulations, without 
 trenching on the employment or wages 
 of the labouring classes in the country 
 itself, or perhaps in any other country. 
 To this extent, therefore, the loan 
 system may be carried, without being 
 liable to the utter and peremptory con- 
 demnation which is due to it when it 
 overpasses this limit. What is wanted 
 is an index to determine whether, in 
 any given series of years, as during 
 the last great war for example, the 
 limit has been exceeded or not. 
 
 Such an index exists, at once a cer- 
 tain and an obvious one. Did the 
 government, by its loan operations, 
 augment the rate of interest? If it 
 only opened a channel for capital 
 which would not otherwise have been 
 accumulated, or which, if accumulated, 
 would not have been employed within 
 the country; this implies that the 
 capital, which the government took 
 and expended, could not have found 
 employment at the existing rate of in- 
 terest. So long as the loans do no 
 more than absorb this surplus, they 
 
 prevent any tendency to a fall of the 
 rate of interest, but they cannot occa- 
 sion any rise. When they do raise the 
 rate of interest, as they did in a most 
 extraordinary degree during the French 
 war, this is positive proof that the go- 
 vernment is a competitor for capital 
 with the ordinary channels of produc- 
 tive investment, and is carrying off, 
 not merely funds which would not, but 
 funds which would, have fou^d produc- 
 tive employment within the country. 
 To the full extent, therefore, to which 
 the loans of government, during the 
 war, caused the rate of interest to ex- 
 ceed what it was before, and what it 
 has been since, those loans are charge- 
 able with all the evils which have been 
 described. If it be objected that in- 
 terest only rose because profits rose, I 
 reply that this does not weaken, but 
 strengthens, the argument. If the 
 government loans produced the rise of 
 profits by the great amount of capital 
 which they absorbed, by what means 
 can they have had this effect, unless 
 by lowering the wages of labour ? It 
 will perhaps be said, that what kept 
 profits high during the war was not the 
 drafts made on the national capital by 
 the loans, but the rapid progress of in- 
 dustrial improvements. This, in a 
 great measure, was the fact ; and it no 
 doubt alleviated the hardship to the 
 labouring classes, and made the finan- 
 cial system which was pursued less 
 actively mischievous, but not less con- 
 trary to principle. These very im- 
 provements in industry, made room for 
 a larger amount of capital ; and the 
 government, by draining away a great 
 part of the annual accumulations, did 
 not indeed prevent that capital from 
 existing ultimately, (for it started into 
 existence with great rapidity after the 
 peace,) but prevented it from existing 
 at the time, and subtracted just so 
 much, while the war lasted, from dis- 
 tribution among productive labourers. 
 If the government had abstained from 
 taking this capital by loan, and had 
 allowed it to reach the labourers, but 
 had raised the supplies which it re- 
 quired by a direct tax on the labouring 
 classes, it would have produced (in 
 every respect but the expense and IB-
 
 5-28 
 
 BOOK V. CHAPTER V r II. 2. 
 
 convenience of collecting the tax^ the 
 very same economical effects which it 
 did produce, except that we should not 
 now have had the debt. The course it 
 actually took was therefore worse than 
 the very worst mode which it could 
 possibly have adopted of raising the 
 supplies within the year : and the only 
 excuse, or justification, which it admits 
 of, (so far as that excuse could be truly 
 pleaded) was hard necessity; the im- 
 possibility of raising BO enormous an 
 annual sum by taxation, without re- 
 sorting to taxes which from their odi- 
 ousness, or from the facility of evasion, 
 it would have been found impracticable 
 to enforce. 
 
 When government loans are limited 
 to the overflowings of the national 
 capital, or to those accumulations 
 which would not take place at all un- 
 less suffered to overflow, they are at 
 least not liable to this grave condem- 
 nation : they occasion no privation to 
 any one at the time, except by the 
 payment of the interest, and may even 
 be beneficial to the labouring class 
 during the term of their expenditure, 
 by employing in the direct purchase of 
 labour, as that of soldiers, sailors, &c., 
 funds which might otherwise have 
 quitted the country altogether. In 
 this case therefore the question really 
 is, what it is commonly supposed to be 
 in all cases, namely, a choice between 
 a great sacrifice at once, and a small 
 one indefinitely prolonged. On this 
 matter it seems rational to think, that 
 the prudence of a nation will dictate 
 the same conduct as the prudence of 
 an individual ; to submit to as much of 
 the privation immediately, as can 
 easily be borne, and only when any 
 further burthen would distress or cripple 
 them too much, to provide for the re- 
 mainder by mortgaging their future 
 income. It is an excellent maxim to 
 make present resources suffice for pre- 
 sent wants ; the future will have its 
 own wants to provide for. On the 
 other hand, it may reasonably be taken 
 into consideration that in a country 
 increasing in wealth, the necessary ex- 
 bensei sf government do not increase 
 in the same ratio as capital or popula- 
 tion ; ai.y burthea, therefore- : " *4ways 
 
 less and less felt : and since those ex- 
 traordinary expenses of government 
 which are fit to be incurred at all, ar 
 mostly beneficial beyond the existing 
 generation, there is no injustice in 
 making posterity pay a part of tha 
 price, if the inconvenience would bo 
 extreme of defraying the whole of it by 
 the exertions and sacrifices of the 
 generation which first incurred it. 
 
 2. When a country, wisely or 
 unwisely, has burthened itself with a 
 debt, is it expedient to take steps for 
 redeeming that debt ? In principle it 
 is impossible not to maintain the af- 
 firmative. It is true that the payment 
 of the interest, when the creditors are 
 members of the same community, is 
 no national loss, but a mere transfer. 
 The transfer, however, being compul- 
 sory, is a serious evil, and the raising 
 a great extra revenue by any system 
 of taxation necessitates BO much ex- 
 pense, vexation, disturbance of the 
 channels of industry, and other mis- 
 chiefs over and above the mere pay- 
 ment of the money wanted by the 
 government, that to get rid of the 
 necessity of such taxation is at all 
 times worth a considerable effort. The 
 same amount of sacrifice which would 
 have been worth incurring to avoid 
 contracting the debt, it is worth while 
 to incur, at any subsequent time, for 
 the purpose of extinguishing it. 
 
 Two modes have been contemplated 
 of paying off a national debt : either 
 at once oy a general contribution, or 
 
 Gradually by a surplus revenue. The 
 rst would be incomparably the best, 
 if it were practicable ; and it would 
 j be practicable if it could justly be 
 j done by assessment on property alone. 
 ! If property bore the whole interest of 
 ! the debt, property might, with great' 
 i advantage to itself, pay it off ; since 
 ' this would be merely surrendering to 
 ; a creditor the principal sum, the whole 
 | annual proceeds of which were already 
 his by law ; and would be equivalent 
 to what a landowner does when he 
 sells part of his estate, to free the re- 
 mainder from a mortgage. But pro- 
 perty, it needs hardly be said, doe* 
 not pay, and csnnot justly be required
 
 A NATIONAL DEBT. 
 
 529 
 
 to pay, the whole interest of the debt. 
 Some indeed affirm that it can, on the 
 plea that the existing generation is 
 only bound to pay the debts of its pre- 
 decessors from the assets it has re- 
 ceived from them, and not from the 
 produce of its own industry. But has 
 no one received anything from pre- 
 vious generations except those who 
 have succeeded to property? Is the 
 whole difference between the earth as 
 it is, with its clearings and improve- 
 ments, its roads and canals, its towns 
 and manufactories, and the earth as it 
 was when the first human being set 
 foot on it, of no benefit to any but 
 those who are called the owners of the 
 soil ? Is the capital accumulated by 
 the labour and abstinence of all former 
 generations of no advantage to any 
 but those who have succeeded to the 
 legal ownership of part of it? And 
 have we not inherited a mass of ac- 
 quired knowledge, both scientific and 
 empirical, due to the sagacity and 
 industry of those who preceded us, 
 the benefits of which are the common 
 wealth of all ? Those who are born to 
 the ownership of property have, in 
 addition to these common benefits, a 
 separate inheritance, and to this differ- 
 ence it is right that advertence should 
 be had in regulating taxation. It be- 
 longs to the general financial system 
 of the country to take due account of 
 this principle, and I have indicated, as 
 in my opinion a proper mode of taking 
 account of it, a considerable tax on 
 legacies and inheritances. Let it be 
 determined directly and openly what 
 is due from property to the state, and 
 from the state to property, and let the 
 institutions of the state be regulated 
 accordingly. Whatever is the fitting 
 contribution from property to the ge- 
 neral expenses of the state, in the 
 same, and in no greater proportion 
 should it contribute towards eithor 
 the interest or the repayment of the 
 national debt. 
 
 This, however, if admitted, is fatal 
 to any scheme for the extinction of the 
 debt by a general assessment on the 
 community. Persons of property could 
 pay their share of the amount by a 
 aacrifice of property, and have the 
 P.K. 
 
 same net income as before ; but it 
 those who have no accumulations, but 
 only incomes, were required to make 
 up by a single payment the equivalent 
 of the annual charge laid on them by 
 the taxes maintained to pay the inte- 
 rest of the debt, they could only do so 
 by incurring a private debt equal ta 
 their share of the public debt ; while, 
 from the insufficiency, in most cases, 
 of the security which they could giro, 
 the interest would amount to a much 
 larger annual sum than their share of 
 that now paid by the state. Besides, 
 a collective debt defrayed by taxes, 
 has over the same debt parcelled out 
 among individuals, the immense ad- 
 vantage, that it is virtually a mutual 
 insurance among the contributors. If 
 the fortune of a contributor diminishes, 
 his taxes diminish ; if he is ruined, 
 they cease altogether, and his portion 
 of the debt is wholly transferred to the 
 solvent members of the community. 
 If it were laid on him as a private 
 obligation, he would still be liable to 
 it even when penniless. 
 
 When the state possesses property, 
 in land or otherwise, which there are 
 not strong reasons of public utility for 
 its retaining at its disposal, this should 
 be employed, as far as it will go, in 
 extinguishing debt. Any casual gain, 
 or godsend, is naturally devoted to the 
 same purpose. Beyond this, the only 
 mode which is both just and feasible, 
 of extinguishing or reducing a na- 
 tional debt, is by means of a surplus 
 revenue. 
 
 3. The desirableness, per se, of 
 maintaining a surplus for this purpose 
 does not, I think, admit of a doubt. 
 We sometimes, indeed, hear it said 
 that the amount should rather be left 
 to " fructify in the pockets of the 
 people." This is a good argument, as 
 fur as it goes, against levying taxes 
 unnecessarily for purposes of unpro- 
 ductive expenditure, but not against 
 paying off a national debt. For, what 
 is meant by the word fructify ? If it 
 means anything, it means productive 
 employment ; and as an argument 
 against taxation, we must understand 
 it to assert, that if the amouat were 
 M M
 
 530 
 
 left -with the people they would save 
 it, and convert it into capital. It is 
 probable, indeed, that they would save 
 a part, but extremely improbable that 
 they would save the whole : while if 
 taken by taxation, and employed in 
 paying off debt, the whole is saved, 
 and made productive. To the fund- 
 holder who receives the payment it is 
 already capital, not revenue, and he 
 will make it " fructify," that it may 
 continue to afford him an income. 
 The objection, therefore, is not only 
 groundless, but the real argument is 
 on the other side : the amount is much 
 more certain of fructifying if it is not 
 " left in the pockets of the people." 
 
 It is not, however, advisable in all 
 cases to maintain a surplus revenue 
 for the extinction of debt. The ad- 
 vantage of paying off the national 
 debt of Great Britain for instance, is 
 that it would enable us to get rid of 
 the worse half of our taxation. But 
 of this worse half some portions must 
 be worse than others, and to get rid of 
 those would be a greater benefit pro- 
 portionally than to get rid of the rest. 
 If renouncing a surplus revenue would 
 enable us to dispense with a tax, we 
 ought to consider the very worst of all 
 our taxes as precisely the one which 
 we are keeping up for the sake of ulti- 
 mately abolishing taxes not so bad as 
 itself. In a country advancing in 
 wealth, whose increasing revenue gives 
 it the power of ridding itself from time 
 to time of the most inconvenient por- 
 tions of its taxation, I conceive that 
 the increase of revenue should rather 
 be disposed of by taking off taxes, than 
 by liquidating debt, as long as any 
 very objectionable imposts remain. In 
 the present state of England, there- 
 fore, I hold it to be good policy in the 
 government, when it has a surplus of 
 an apparently permanent character, 
 to take off taxes, provided these are 
 lightly selected. Even when no taxes 
 remain but such as are not unfit to 
 form part of a permanent system, it is 
 wise to continue the same policy by 
 experimental reductions of those taxes, 
 until the point js discovered at which 
 a given amount of revenue can be 
 raised with the smallest pressure on 
 
 BOOK V. CHAPTER VH. 8. 
 
 the contributors. After this, such sur- 
 plus revenue as might arise from any 
 further increase of the produce of the 
 taxes, should not, I conceive, be re- 
 mitted, but applied to the redemption 
 of debt. Eventually, it might be ex- 
 pedient to appropriate the entire pro- 
 duce of particular taxCs to this pur- 
 pose ; since there would be more assu- 
 rance that the liquidation would bo 
 persisted in, if the fund destined to it 
 were kept apart, and not blended with 
 the general revenues of the state. The 
 succession duties would be peculiarly 
 suited to such a purpose, since taxes 
 paid as they are, out of capital, would 
 be better employed in reimbursing 
 capital than in defraying current ex- 
 penditure. If this separate appropria- 
 tion were made, any surplus afterwards 
 arising from the increasing produce of 
 the other taxes, and from the saving 
 of interest on the successive portions 
 of debt paid off, might form a ground 
 for a remission of taxation. 
 
 It has been contended that some 
 amount of national debt is desirable, 
 and almost indispensable, as an in- 
 vestment for the savings of the poorer 
 or more inexperienced part of the 
 community. Its convenience in that 
 respect is undeniable ; but (besides 
 that the progress of industry is gradu- 
 ally affording other modes of invest- 
 ment almost as safe and untrouble- 
 some, such as the shares or obligations 
 of great public companies) the only 
 real superiority of an investment in 
 the funds consists in the national 
 guarantee, and this could be afforded 
 by other means than that of a public 
 debt, involving compulsory taxation. 
 One mode which would answer the 
 purpose, would be a national bank of 
 deposit and discount, with ramifica- 
 tions throughout the country ; which 
 might receive any money confided to 
 it, and either fund it at a fixed rate of 
 interest, or allow interest on a floating 
 balance, like the joint stock banks ; 
 the interest given being of course 
 lower than the rate at which indi- 
 viduals can borrow, in proportion to 
 the greater security of a government 
 investment ; and the expenses of tha 
 establishment being defrayed by the
 
 ORDINARY FUNCTIONS OF GOVERNMENT. 
 
 531 
 
 difference between the interest which 
 the bank would pay, and that which it 
 would obtain, by lending its deposits 
 on mercantile, landed, or other se- 
 curity. There are no insuperable ob- 
 jections in principle, nor, I should 
 think, in practice, to an institution of 
 this sort, as a means of supplying the 
 same convenient mode of investment 
 
 now afforded by the public funds. It 
 would constitute the state a great in- 
 surance company, to insure that part 
 of the community who live on the 
 interest of their property, against the 
 risk of losing it by the bankruptcy of 
 those to whom they might otherwise 
 be under the necessity of confiding 
 it. 
 
 CHAPTER 
 
 OF THE OHDIHARY FUNCTIONS OF GOVERNMENT, CONSIDERED AS TO 
 
 THEIE ECONOMICAL EFFECTS. 
 
 1. BEFORE we discuss the line of 
 demarcation between the things with 
 which government should, and those 
 with which they should not, directly 
 interfere, it is necessary to consider the 
 economical effects, whether of a bad or 
 of a good complexion, arising from the 
 manner in which they acquit them- 
 selves of the duties which devolve on 
 them in all societies, and which no one 
 denies to be incumbent on them. 
 
 The first of these is the protection 
 of person and property. There is no 
 need to expatiate on the influence ex- 
 ercised over the economical interests 
 of society by the degree of complete- 
 ness with which this duty of govern- 
 ment is performed. Insecurity of person 
 and property, is as much as to say, un- 
 certainty of the connexion between all 
 human exertion or sacrifice, and the 
 attainment of the ends for the sake of 
 which they are undergone. It means, 
 uncertainty whether they who sow 
 shall reap, whether they who produce 
 shall consume, and they who spare to- 
 day shall enjoy to-morrow. It means, 
 not only that labour and frugality are 
 not the road to acquisition, but that 
 violence is. When person and pro- 
 perty are to a certain degree insecure, 
 all the possessions of the weak are at 
 tne mercy of the strong. No one can 
 keep what he has produced, unless he 
 is more capable of defending it, than 
 others who give no part of their time 
 
 and exertions to useful industry are of 
 taking it from him. The productive 
 classes, therefore, when the insecurity 
 surpasses a certain point, being un- 
 equal to their own protection against 
 the predatory population, are obliged 
 to place themselves individually in a 
 state of dependence on some member 
 of the predatory class, that it may be 
 his interest to shield them from all de- 
 predation except his own. In this 
 manner, in the Middle Ages, allodial 
 property generally became feudal, and 
 numbers of the poorer freemen volun- 
 tarily made themselves and their pos- 
 terity serfs of some military lord. 
 
 Nevertheless, in attaching to this 
 great requisite, security of person and 
 property, the importance which is 
 justly due to it, we must not forget 
 that even for economical purposes there 
 are other things quite as indispensable, 
 the presence of which will often make 
 up for a very considerable degree of 
 imperfection in the protective arrange- 
 ments of government. As was ob- 
 served in a previous chapter,* the freo 
 cities of Italy, Flanders, and the 
 Hanseatie league, were habitually in 
 a state of such internal turbulence, 
 varied by such destructive external 
 wars, that person and property enjoyed 
 very imperfect protection ; yet during 
 several centuries they increased rapidly 
 in wealth and prosperity, brought many 
 * Supra, p. 70. 
 
 M M2
 
 535 
 
 BOOK V. CHAPTER VIII. 2. 
 
 of the industrial arts to a high degree 
 of advancement, carried on distant and 
 dangerous voyages of exploration and 
 commerce with extraordinary success, 
 became an overmatch in power for the 
 greatest feudal lords, and could defend 
 themselves even against the sovereigns 
 of Europe : because in the midst of 
 turmoil and violence, the citizens of 
 those towns enjoyed a certain rude 
 freedom, under conditions of union and 
 co-operation, which, taken together, 
 made them a brave, energetic, and 
 high-spirited people, and fostered a 
 great amount of public spirit and 
 patriotism. The prosperity of these 
 and other free states in a lawless age, 
 allows that a certain degree of in- 
 security, in some combinations of cir- 
 cumstances, has good as well as bad 
 effects, by making energy and prac- 
 tical ability the conditions of safety. 
 Insecurity paralyzes, only when it is 
 such in nature and in degree, that no 
 energy, of which mankind in general 
 are capable, affords any tolerable means 
 of self-protection. And this is a main 
 reason why oppression by the govern- 
 ment, whose power is generally irre- 
 sistible by any efforts that can be 
 made by individuals, has so much 
 more baneful an effect on the springs 
 of national prosperity, than almost 
 any degree of lawlessness and turbu- 
 lence under free institutions. Nations 
 have acquired some wealth, and made 
 Borne progress in improvement, in 
 states of social union so imperfect as 
 to border on anarchy: but no coun- 
 tries in which the people were exposed 
 without limit to arbitrary exactions 
 from the officers of government, ever 
 yet continued to have industry or 
 wealth. A few generations of such a 
 government never fail to extinguish 
 both. Some of the fairest, and once 
 the most prosperous, regions of the 
 earth, have, under the Roman and 
 afterwards under the Turkish domi- 
 nion, been i educed to a desert, solely 
 by that cause. I say solely, because 
 they would have recovered with the 
 utmost rapidity, as countries always 
 do, from the devastations of war, or 
 any other temporary calamities. Dif- 
 ficulties and hardships are often but 
 
 an incentive to exertion : what is fatal 
 to it, is the belief that it will not be 
 suffered to produce its fruits. 
 
 2. Simple over-taxation by go- 
 vernment, though a great evil, is not 
 comparable in the economical part of 
 its mischiefs to exactions much more 
 moderate in amount, which either 
 subject the contributor to the arbi- 
 trary mandate of government officers, 
 or are so laid on as to place skill, in- 
 dustry, and frugality at a disadvantage. 
 The burthen of taxation in our own 
 country is very great, yet as every one 
 knows its limit, and is seldom made to 
 pay more than he expects and cal- 
 culates on, and as the modes of taxa- 
 tion are not of such a kind as much to 
 impair the motives to industry and 
 economy, the sources of prosperity are 
 little diminished by the pressure of 
 taxation ; they may even, as some 
 think, be increased, by the extra exer- 
 tions made to compensate for the pres- 
 sure of the taxes. But in the bar- 
 barous despotisms of many countries 
 of the East, where taxation consists in 
 fastening upon those who have suc- 
 ceeded in acquiring something, in 
 order to confiscate it, unless the pos- 
 sessor buys its release by submitting 
 to give some large sum as a com- 
 promise, we cannot expect to find 
 voluntary industry, or wealth derived 
 from any source but plunder. And 
 even in comparatively civilized coun- 
 tries, bad modes of raising a revenue 
 have had effects similar in Kind, though 
 in an inferior degree. French writers 
 before the Revolution represented the 
 taille as a main cause of the back- 
 ward state of agriculture, and of the 
 wretched condition of the rural popu. 
 lation ; not from its amount, but be 
 cause, being proportioned to the visible 
 capital of the cultivator, it gave him a 
 motive for appearing poor, which suf- 
 ficed to turn the scale in favour of in- 
 dolence. The arbitrary powers also of 
 fiscal officers, of intcndants and sitb- 
 dti(jues, were more destructive of pros- 
 perity than a far larger amount of 
 exactions, because they destroyed se- 
 curity: there was a marked superiority 
 in the condition of the districts pos-
 
 ORDINARY FUNCTIONS OF GOVEPxNMENT. 
 
 533 
 
 scssing Provincial States, which were 
 exempt from this scourge. The uni- 
 versal venality ascribed, to Russian 
 functionaries, must be an immense 
 drag on the capabilities of economical 
 improvement possessed so abundantly 
 by the Russian empire ; since the emo- 
 luments of public officers must depend 
 on the success with which they can 
 multiply vexations, for the purpose of 
 being bought off by bribes. 
 
 Yet mere excess of taxation, even 
 when not aggravated by uncertainty, 
 is, independently of its injustice, a 
 Berions economical evil. It may be 
 carried so far as to discourage industry 
 by insufficiency of reward. Very long 
 before it reaches this point, it prevents 
 or greatly checks accumulation, or 
 causes the capital accumulated to be 
 sent for investment to foreign coun- 
 tries. Taxes which fall on profits, 
 even though that kind of income may 
 not pay more than its just share, ne- 
 cessarily diminish the motive to any 
 saving, except for investment in foreign 
 countries where profits are higher. 
 Holland, for example, seems to have 
 long ago reached the practical mini- 
 mum of profits : already in the last 
 century her wealthy capitalists had a 
 great part of their fortunes invested in 
 the loana and joint-stock speeulatious 
 of other countries : and this low rate 
 of profit is ascribed to the heavy taxa- 
 tion, which had been in some measure 
 forced on her by the circumstances of 
 her position and history. The taxes 
 indeed, besides their great amount, 
 were many of them on necessaries, a 
 kind of tax peculiarly injurious to in- 
 dustry and accumulation. But when 
 the aggregate amount of taxation is 
 very great, it is inevitable that recourse 
 must be had for part of it to taxes of an 
 objectionable character. And any taxes 
 on consumption, when heavy, even if 
 not operating on profits, have some- 
 thing of the same effect, by driving 
 persons of moderate means to live 
 nbroad, often taking their capital with 
 them. Although I by no means join 
 with those political economists who 
 think no state of national existence 
 desirable in which there is not a rapid 
 iiKvease of wealth, I cannot overlook 
 
 the many disadvantages to an inde- 
 pendent nation from being brought 
 prematurely to a stationary state, 
 while the neighbouring countries con- 
 tinue advancing. 
 
 3. The subject of protection to 
 person and property, considered as af- 
 forded by government, ramifies widely, 
 into a number of indirect channels. It 
 embraces, for example, the whole sub- 
 ject of the perfection or inefficiency of 
 the means provided for the ascertain- 
 ment of rights and the redress of in- 
 juries. Person and property cannot bo 
 considered secure where the adminis- 
 tration of justice is imperfect, cither 
 from defect of integrity or capacity in 
 the tribunals, or because the delay, 
 vexation, and expense accompanying 
 their operation impose a heavy tax on 
 those who appeal to them, and make 
 it preferable to submit to any en- 
 durable amount of the evils which they 
 are designed to remedy. In England 
 there is no fault to be found with the 
 administration of justice, in point of 
 pecuniary integrity ; a result which the 
 progress of social improvement may 
 also be supposed to have brought about 
 in several other nations of Europe. 
 But legal and judicial imperfections of 
 other kinds are abundant ; and, in 
 England especially, are a large abate- 
 ment from the value of the services 
 which the government renders back to 
 the people in return for our enormous 
 taxation. In the first place, the in- 
 cognoscibility (as Bentham termed it) 
 of the law, and its extreme uncer- 
 tainty, even to those who best know it, 
 render a resort to the tribunals often 
 necessary for obtaining justice, when, 
 there being no dispute as to facts, no 
 litigation ought to be required. In the 
 next place, the procedure of the tri- 
 bunals is so replete with delay, vexa- 
 tion, and expense, that the price at 
 which justice is at last obtained is an 
 evil outweighing a very considerable 
 amount of injustice ; and the wrong 
 side, even that which the law considers 
 such, has many chances of gaining its 
 point, through the abandonment of 
 litigation by the other party for want 
 of funds, or through a compromise in
 
 534 
 
 BOOK V. CHAPTER VIII. 3. 
 
 which a sacrifice is made of just rights 
 to terminate the suit, or through some 
 technical quirk, whereby a decision is 
 obtained on some other ground than 
 the merits. This last detestable inci- 
 dent often happens without blame to 
 the judge, under a system of law, of 
 which a great part rests on no rational 
 principles adapted to the present state 
 of society, hut was originally founded 
 partly on a kind of whims and conceits, 
 and partly on the principles and inci- 
 dents of feudal tenure, (which now sur- 
 vive only as legal fictions;) and has 
 only been very imperfectly adapted, as 
 cases arose, to the changes which had 
 taken place in society. Of all parts of 
 the English legal system, the Court of 
 Chancery, which has the best substan- 
 tive law, has been incomparably the 
 worst as to delay, vexation, and ex- 
 pense ; and this is the only tribunal 
 for most of the classes of cases which 
 are in their nature the most compli- 
 cated, such as cases of partnership, 
 and the great range and variety of 
 cases which come under the denomina- 
 tion of trust. The recent reforms 
 in this Court have abated the mis- 
 chief, but are still far from having 
 removed it. 
 
 Fortunately for the prosperity of 
 England, the greater part of the mer- 
 cantile law is comparatively modern, 
 and was made by the tribunals, by the 
 simple process of recognising and 
 giving force of law to the usages which, 
 from motives of convenience, had 
 grown up among merchants them- 
 selves : so that this part of the law, at 
 least, was substantially made by those 
 who were most interested in its good- 
 ness: while the defects of the tribu- 
 nals have been the less practically 
 pernicious in reference to commer- 
 cial transactions, because the im- 
 portance of credit, which depends on 
 character, renders the restraints of 
 opinion (though, as daily experience 
 proves, an insufficient) yet a very 
 powerful, protection against those 
 forms of mercantile dishonesty which 
 are generally recognised as such. 
 
 Ihe imperfections of the law, both 
 in its substance and in its procedure, 
 fall heaviest upon the interests con- 
 
 nected with what is technically called 
 real property ; in the general language 
 of European jurisprudence, immoveablo 
 property. With respect to all this 
 portion of the wealth of the community, 
 the law fails egregiously in the pro- 
 tection which it undertakes to pro- 
 vide. It fails, first, by the uncertainty, 
 and tha maze of technicalities, which 
 make it impossible for any one, at 
 however great an expense, to possess a 
 title to land which he can positively 
 know to be unassailable. It fails, 
 secondly, in omitting to provide due 
 evidence of transactions, by a proper 
 registration of legal documents. It 
 fails, thirdly, by creating a necessity 
 for operose and expensive instruments 
 and formalities (independently of fiscal 
 burthens) on occasion of the purchase 
 and sale, or even the lease or mortgage, 
 of immoveable property. And, fourthly, 
 it fails by the intolerable expense and 
 delay of law proceedings, in almost all 
 cases in which real property is con- 
 cerned. There is no doubt that tho 
 greatest sufferers by the defects of the 
 higher courts of civil law are the land- 
 owners. Legal expenses, either those 
 of actual litigation, or of the prepara- 
 tion of legal instruments, form, I 
 apprehend, no inconsiderable item in 
 the annual expenditure of most per- 
 sons of large landed property ; and the 
 saleable value of their land is greatly 
 impaired, by the difficulty of giving to 
 the buyer complete confidence in the 
 title ; independently of the legal ex- 
 
 ?mses which accompany the transfer, 
 et the landowners, though they have 
 been masters of the legislation of 
 England, to say the least, since 1688, 
 have never made a single move in the 
 direction of law reform, and have 
 been strenuous opponents of some of 
 the improvements of which they would 
 more particularly reap the benefit; 
 especially that great one of a regis- 
 tration of contracts affecting land, 
 which when proposed by a Commis- 
 sion of eminent real property lawyers, 
 and introduced into the House of 
 Commons by Lord Campbell, was so 
 offensive to the general body of land- 
 lords, and was rejected by so large a 
 majority, as to have long discouraged
 
 ORDINARY FUNCTIONS OF GOVERNMENT. 
 
 any repetition of the attempt.* This 
 irrational hostility to improvement, in 
 a case in which their own interest 
 would be the most benefited by it, 
 must be ascribed to an intense timi- 
 dity on the subject of their titles, 
 go ni.- rated by the defects of the very 
 law which they refuse to alter ; and 
 to a conscious ignorance, and inca- 
 pacity of judgment, on all legal sub- 
 jects, which makes them helplessly 
 defer to the opinion of their profes- 
 sional advisers, heedless of the fact 
 that every imperfection of the law, in 
 proportion as it is burthensome to 
 them, brings gain to the lawyer. 
 
 In so far as the defects of legal 
 arrangements are a mere burthen on 
 the landowner, they do not much 
 affect the sources of production ; but 
 the uncertainty of the title under 
 which land is held, must often act as 
 a great discouragement to the expen- 
 diture of capital ia its improvement; 
 and the expense of making transfers, 
 operates to prevent land from coming 
 into the hands of those who would use 
 it to most advantage ; often amount- 
 ing, in the case of small purchases, to 
 more than the price of the land, and 
 tantamount, therefore, to a prohibition 
 of the purchase and sale of land in 
 Email portions, unless in exceptional 
 circumstances. Such purchases, how- 
 ever, are almost everywhere extremely 
 desirable, there being hardly any 
 country in which landed property is 
 not either too much or too little sub- 
 divided, requiring either that great 
 estates should be broken down, or 
 that small ones should be bought up 
 and consolidated. To make land as 
 easily transferable as stock, would be 
 one of the greatest economical improve- 
 ments which could be bestowed on a 
 country ; and has been shown, again 
 and again, to have no insuperable 
 difficulty attending it. 
 
 resides the excellences or defects 
 that belong to the law and judicature 
 of a country as a system of arrange- 
 ments for attaining direct practical 
 
 * Lord Westbury's recent Act is a ma- 
 terial mitigation of this grievous defect in 
 English law, and will probably lead to fur- 
 ther improvements. 
 
 ends, much also depends, even in an 
 economical point of view, upon the 
 moral influences of the law. Enough 
 has been said in a former place,t on 
 the degree in which both the indus- 
 trial and all other combined opera- 
 tions of mankind depend for efficiency 
 on their being able to rely on one 
 another for probity and fidelity to 
 engagements ; from which we see how 
 greatly even the economical prosperity 
 of a country is liable to be affected, by 
 anything in its institutions by which 
 either integrity and trustworthiness, or 
 the contrary qualities, are encouraged. 
 The law everywhere ostensibly favours 
 at least pecuniary honesty and the 
 faith of contracts; but if it afforda 
 facilities for evading those obligations, 
 by trick and chicanery, or by the un- 
 scrupulous use of riches in instituting 
 unjust or resisting just litigation; if 
 there are ways and means by which 
 persons may attain the ends of roguery, 
 under the apparent sanction of the 
 law ; to that extent the law is demo- 
 ralizing, even in regard to pecuniary 
 integrity. And such cases are, un- 
 fortunately, frequent under the English 
 system. If, again, the law, by a mis- 
 placed indulgence, protects idleness or 
 prodigality against their natural con- 
 sequences, or dismisses crime with 
 inadequate penalties, the effect, both 
 on the prudential and on the social 
 virtues, is unfavourable. When the 
 law, by its own dispensations and in- 
 junctions, establishes injustice between 
 individual and individual ; as all laws 
 do which recognise any form of slavery , 
 as the laws of all countries do, though 
 not all in the same degree, in respect 
 to the family relations; and as the 
 laws of many countries do, though in 
 still more unequal degrees, as between 
 rich and poor ; the effect on the moral 
 sentiments of the people is still more 
 disastrous. But these subjects intro- 
 duce considerations so much larger 
 and deeper than those of political 
 economy, that I only advert to them 
 in order not to pass wholly unnoticed 
 things superior in importance to those 
 of which I treat. 
 
 t Supra, p. 68.
 
 533 
 
 BOOK V. CHAPTER IX. 1. 
 
 CHAPTER IX. 
 
 THE SAME SUBJECT CONTINUED. 
 
 1. HAVING spoken thus far of the 
 effects produced by the excellences or 
 defects of the general system of the 
 law, I shall now touch upon those re- 
 sulting from the special character of 
 particular parts of it. As a selection 
 must be made, I shall confine myself 
 to a few leading topics. The portions 
 of the civil law of a country which are 
 of most importance economically (next 
 to those which determine the status of 
 the labourer, as slave, serf, or free), 
 are those relating to the two subjects 
 of Inheritance and Contract. Of the 
 laws relating to contract, none are 
 more important economically than the 
 laws of partnership, and those of 
 insolvency. It happens that on all 
 these three points, there is jus>t ground 
 for condemning some of the provisions 
 of the English law. 
 
 With regard to Inheritance, I have, 
 in an early chapter, considered the 
 general principles of the subject, and 
 suggested what appear to me to be, 
 putting all prejudices apart, the best 
 dispositions which the law could adopt. 
 Freedom of bequest as the general 
 rule, but limited by two things : first, 
 that if there are descendants, who, 
 being unable to provide for themselves, 
 would become burthensome to the 
 state, the equivalent of whatever the 
 state would accord to them should be 
 reserved from the property for their 
 benefit : and secondly, that no one 
 person should be permitted to acquire 
 by inheritance, more than the amount 
 of a moderate independence. In case of 
 intestacy, the whole property to escheat 
 to the state : which should be bound 
 to make a just and reasonable provi- 
 sion for descendants, that is, such a 
 provision as the parent or ancestor 
 ought to have made, their circum- 
 stances, capacities, and mode of bring- 
 ing up being considered. 
 
 The laws of inheritance, however, 
 have probably gcveral phases of im- j 
 
 provement to go through, before ideas 
 so far removed from present modes of 
 thinking will be taken into serious con- 
 sideration : and as, among the recog- 
 nised modes of determining the suc- 
 cession to property, some must be 
 better and others worse, it is necessary 
 to consider which of them deserves 
 the preference. As an intermediate 
 course, therefore, I would recommend 
 the extension to all property, of the 
 present English law of inheritance 
 affecting personal property (freedom of 
 bequest, and, in case of intestacy, equal 
 division) : except that no rights should 
 be acknowledged in collaterals, and 
 that the property of those who have 
 neither descendants nor ascendants, 
 and make no will, should escheat to 
 the state. 
 
 The laws of existing nations deviate 
 from these maxims in two opposite 
 ways. In England, and in most of 
 the countries where the influence of 
 feudality is still felt in the laws, one 
 of the objects aimed at in respect to 
 land and other immoveable property, is 
 to keep it together in large masses : 
 accordingly, in cases of intestacy, it 
 passes, generally speaking (for the 
 local custom of a few places is dif- 
 ferent), exclusively to the eldest son. 
 And though the rule of primogeniture 
 is not binding on testators, who in 
 England have nominally the power of 
 bequeathing their property as they 
 please, any proprietor may so exercise 
 this power as to deprive his successors 
 of it, by entailing the property on one 
 particular line of his descendants : 
 which, besides preventing it from 
 passing by inheritance in any other 
 than the prescribed manner, is at- 
 tended with the incidental conse- 
 quence of precluding it from being 
 sold ; since each successive possessor, 
 having only a life interest in the pro- 
 perty, cannot alienate it for a longer 
 period than his own life. In some
 
 INHERITANCE. 
 
 537 
 
 other countries, such as Franco, the 
 law, on the contrary, compels division 
 of inheritances ; not only, in case of 
 intestacy, sharing the property, both 
 real and personal, equally among all 
 the children, or fit' there are no 
 children) among all relatives in the 
 same degree of propinquity ; but also 
 not recognising any power of bequest, 
 or recognising it over only a limited 
 portion of the property, the remainder 
 being subjected to compulsory equal 
 division. 
 
 Neither of these systems, 1 appre- 
 hend, was introduced, or is perhaps 
 maintained, in the countries where it 
 exists, from any general considerations 
 of justice, or any foresight of economi- 
 cal consequences, but chiefly from poli- 
 tical motives ; in the one case to keep 
 up large hereditary fortunes, and a 
 landed aristocracy ; in the other, to 
 break these down, and prevent their 
 resurrection. The first object, as an 
 aim of national policy, I conceive to be 
 eminently undesirable : with regard to 
 the second, I have pointed out what 
 seems to me a better mode of attaining 
 it. The merit, or demerit, however, of 
 cither purpose, belongs to the general 
 (science of politics, not to the limited 
 department of that science which is 
 hero treated of. Each of the two 
 systems i.s a real and efficient instru- 
 ment for the purpose intended by it ; 
 but each, as it appears to me, achieves 
 that purpose at the cost of much mis- 
 chief. 
 
 2. There are two arguments of 
 an economical character, which are 
 urged in favour of primogeniture. One 
 is, the stimulus applied to the industry 
 and ambition of younger children, by 
 leaving them to be the architects of 
 their own fortunes. This argument 
 was put by Dr. Johnson in a manner 
 more forcible than complimentary to 
 an hereditary aristocracy, when he said, 
 by way of recommendation of primo- 
 geniture, that it " makes but one fool 
 in a family." It is curious that a de- 
 fender of aristocraticinstituiions should 
 be the person to assert that to inherit 
 Buch a fortune as takes away any 
 necessity for exertion, is generally fatal 
 
 to activity and strength of mind : in 
 tlio present state of education, how- 
 ever, the proposition, with some allow- 
 ance for exaggeration, may be admitted 
 to be true. JJut whatever force there 
 is in the argument, counts in favour of 
 limiting the eldest, as well as all the 
 other children, to a mere provision, and 
 dispensing with even the " one fool" 
 whom Dr. Johnson was willing to 
 tolerate. If unearned riches are so 
 pernicious to the character, one docs 
 not see why, ia order to withhold the 
 poison from the junior members of a 
 family, there should be no way but to 
 unite all their separate potions, and 
 administer them in the largest possible 
 dose to one selected victim. It cannot 
 be necessary to inflict this great evil on 
 the eldest son, for want of knowing 
 what else to do with a large fortune. 
 
 Some writers, however, look upon 
 the effect of primogeniture in stimulat- 
 ing industry, as depending, not so much 
 on the poverty of the younger children, 
 as on the contrast between that poverty 
 and the riches of the elder ; thinking 
 it indispensable to the activity and 
 energy of the hive, that there should 
 be a huge drone here and there, to im- 
 press the working bees with a due sense 
 of the advantages of honey. " Tlieii 
 inferiority in point of wealth," says 
 Mr. M'(Julloch,8peakingofthe younger 
 children, " and their desire to escape 
 from this lower station, and to attaii. 
 to the same level with their e'de. 
 brothers, inspires them with an energy 
 and vigour they could not otherwise 
 feel. But the advantage of preserving 
 large estates from being frittered down 
 by a scheme of equal division, is not 
 limited to its influence over the younger 
 children of their owners. It rr.ues 
 universally the standard of competence, 
 and gives new force to the springs 
 which set industry in motion. Ihe 
 manner of living among the great land- 
 lords is that in which every one is am- 
 bitious of being able to indulge ; and 
 their habits of expense, though FOUIC- 
 timcs injurious to themselves, act as 
 powerful incentives to the ingenuity 
 and enterprise of the other classes, who 
 never think their fortunes sufficiently 
 ample, unless they will enable them to
 
 538 
 
 BOOK V. CHAPTER IX. 2. 
 
 emulate the splendour of the richest 
 landlords; so that the custom of pri- 
 mogeniture seems to render all classes 
 more industrious, and to augment at 
 the same time, the mass of wealth and 
 the scale of enjoyment." * 
 
 The portion of truth, 1 can hardly 
 say contained in these observations, 
 but recalled by them, I apprehend to 
 be, that a state of complete equality of 
 fortunes would not be favourable to 
 active exertion for the increase of 
 wealth. Speaking of the mass, it is as 
 true of wealth as of most other distinc- 
 tions of talent, knowledge, virtue 
 that those who already have, or think 
 they have, as much of it as their neigh- 
 bours, will seldom exert themselves to 
 acquire more. But it is not therefore 
 necessary that society should provide a 
 set of persons with large fortunes, to 
 fulfil the social duty of standing to be 
 looked at, with envy and admiration, 
 by the aspiring poor. The fortunes 
 which people have acquired for them- 
 selves, answer the purpose quite as 
 well, indeed much better; since a 
 person is more powerfully stimulated 
 by the example of somebody who has 
 earned a fortune, than by the mere 
 sight of somebody who possesses one ; 
 and the former is necessarily an ex- 
 ample of prudence and frugality as well 
 as industry, while the latter much 
 oftener sets an example of profuse ex- 
 pense, which spreads, with pernicious 
 effect, to the very class on whom the 
 sight of riches is supposed to have so 
 beneficial an influence, namely, those 
 whose weakness of mind, and taste for 
 ostentation, make " the splendour of 
 the richest landlords" attract them 
 with the most potent spell. In Ame- 
 rica there are few or no hereditary 
 fortunes; yet industrial energy, and 
 the ardour of accumulation, are not 
 supposed to be particularly backward 
 in that part of the world. When a 
 country has once fairly entered into 
 the industrial career, which is the 
 principal occupation of the modern, as 
 
 * Principles of Political Economy, ed. 
 J843, p. 264. There is much more to the 
 enme effect in the more recent treatise by 
 the same author, On the Succession to Pro- 
 perty vacant by Death. 
 
 war was that of the ancient and me- 
 diaeval world, the desire of acquisition 
 by industry needs no factitious stimu- 
 lus : the advantages natural!}' inherent 
 in riches, and the character they as- 
 sume of a test by which talent anJ 
 success in life are habitually measured, 
 are an ample security for their beii g 
 pursued with sufficient intensity a a 
 zeal. As to the deeper consideration, 
 that the diffusion of wealth, and not its 
 concentration, is desirable, and th t 
 the more wholesome state of society is 
 not that in which immense fortunes 
 are possessed by a few and coveted by 
 all, but that in which the greatest 
 possible numbers possess and are con- 
 tented with a moderate competency, 
 which all may hope to acquire ; I refer 
 to it in this place, only to show, how 
 widely separated, on social questions, 
 is the entire mode of thought of the 
 defenders of primogeniture, from that 
 which is partially promulgated in the 
 present treatise. 
 
 The other economical argument in 
 favour of primogeniture, has special 
 reference to landed property. It is 
 contended, that the habit of dividing 
 inheritances equally, or with an ap- 
 proach to equality, among children, 
 promotes the subdivision of land into 
 portions too small to admit of being 
 cultivated in an advantageous manner. 
 This argument, eternally reproduced, 
 has again and again been refuted by 
 English and Continental writers. It 
 proceeds on a supposition entirely at 
 variance with that on which all the 
 theorems of political economy are 
 grounded. It assumes that mankind 
 in general will habitually act in a 
 manner opposed to their immediate 
 and obvious pecuniary interest. For 
 the division of the inheritance does not 
 necessarily imply division of the land ; 
 which may be held in common, as is 
 not unfrequently the case in France 
 and Belgium ; or may become the pro- 
 perty of one of the coheirs, being 
 charged with the shares of the others 
 by way of mortgage ; or they may sell 
 it outright, and divide the proceeds. 
 When the division of the land would 
 diminish its productive power, it is the 
 direct interest of ihe heirs to adopt
 
 INHERITANCE. 
 
 539 
 
 some one of these arrangements. Sup- 
 posing, however, what the argument 
 assumes, that either from legal difficul- 
 ties or from their own stupidity and 
 barbarism, they would not, if left to 
 themselves, obey the dictates of this 
 obvious interest, but would insist upon 
 cutting up the land bodily into equal 
 parcels, with the effect of impoverish- 
 ing themselves ; this would be an ob- 
 jection to a law such as exists in 
 France, of compulsory division, but can 
 be no reason why testators should be 
 discouraged from exercising the right 
 of bequest in general conformity to the 
 rule of equality, since it would always 
 be in their power to provide that the 
 division of the inheritance should take 
 place without dividing the land itself. 
 That the attempts of the advocates of 
 primogeniture to make out a case by 
 facts against the custom of equal divi- 
 sion, are equally abortive, has been 
 shown in a former place. In all coun- 
 tries, or parts of countries, in which 
 the division of inheritances is accom- 
 panied by small holdings, it is because 
 small holdings are the general system 
 of the country, even on the estates of 
 the great proprietors. 
 
 Unless a strong case of social utility 
 can be made out for primogeniture, it 
 stands sufficiently condemned by the 
 general principles of justice ; being a 
 broad distinction in the treatment of 
 one person and of another, grounded 
 solely on an accident. There is no 
 need, therefore, to make out any case 
 of economical evil against primogeni- 
 ture. Such a case, however, and a 
 very strong one, may be made. It is 
 a natural e fleet of primogeniture to 
 make the landlords a needy class. 
 The object of the institution, or custom, 
 is to keep the land together in large 
 masses, and this it commonly accom- 
 plishes ; but the legal proprietor of a 
 large domain is not necessarily the 
 lona fide owner of the whole income 
 which it yields. It is usually charged, 
 in each generation, with provisions for 
 the other children. It is often charged 
 still more heavily by the imprudent 
 expenditure of the proprietor. Great 
 landowners are generally improvident 
 in their expenses ; they live up to their 
 
 incomes when at the highest, and if 
 any change of circumstances diminishes 
 their resources, some time elapses be- 
 fore they make up their minds to re- 
 trench. Spendthrifts in other classes 
 are ruined, and disappear from society ; 
 but the spendthrift landlord usually 
 holds fast to his land, even when ho 
 has become a mere receiver of its rents 
 for the benefit of creditors. The same 
 desire to keep up the " splendour'' of 
 the family, which gives rise to the 
 custom of primogeniture, indisposes 
 the owner to sell a part in order to set 
 free the remainder ; their apparent are 
 therefore habitually greater than their 
 real means, and they ar under a per- 
 petual temptation to proportion their 
 expenditure to the former rather than 
 to the latter. From such causes as 
 these, in almost all countries of great 
 landowners, the majority of landed 
 estates are deeply mortgaged; and 
 instead of having capital to spare for 
 improvements, it requires all the in- 
 creased value of land, caused by the 
 rapid increase of the wealth and popu- 
 lation of the country, to preserve the 
 class from being impoverished. 
 
 3. To avert this impoverishment, 
 recourse was had to the contrivance of 
 entails, whereby the order of succession 
 was irrevocably fixed, and each holder, 
 having only a life interest, was unable 
 to burthen his successor. The land 
 thus passing, free from debt, into the 
 possession of the heir, the family could 
 not be ruined by the improvidence of 
 its existing representative. The eco- 
 nomical evils arising from this dispo- 
 sition of property were partly of the 
 same kind, partly different, but on the 
 whole greater, than those arising from 
 primogeniture alone. The possessor 
 could not now ruin his successors, but 
 he could still ruin himself: he was not 
 at all more likely than in the former 
 case to have the means necessary for 
 improving the property : while, even if 
 he had, he was still less likely to em- 
 ploy them for that purpose, when the 
 benefit was to accrue to a person whom 
 the entail made independent of him, 
 while he had probably younger chil- 
 dren to provide for, in whose favour he
 
 540 
 
 BOOK V. CHAPTER IX. 4. 
 
 could not now charge the estate. 
 While thus disabled from being him- 
 self an improver, neither could he sell 
 the estate to somebody who would ; 
 since entail precludes alienation. In 
 general he has even been unable to 
 grant leases beyond the term of his own 
 life ; " for," says Blaclcstone, "if such 
 leases had been valid, then, under cover 
 of long leases, the issue might have 
 been virtually disinherited ;" and it 
 has been necessary in Great Britain to 
 relax, by statute, the rigour of entails, 
 in order to allow either of long leases, 
 or of the execution of improvements at 
 the expense of the estate. It may be 
 added that the heir of entail, being 
 assured of succeeding to the family 
 property, however undeserving of it, 
 and being aware of this from his ear- 
 liest years, has much more than the 
 ordinary chances of growing up idle, 
 dissipated, and profligate. 
 
 In England the power of entail is 
 more limited by law, than in Scotland 
 and in most other countries where it 
 exists. A landowner can settle his 
 property upon any number of persons 
 successively who are living at the time, 
 and upon one unborn person, on whose 
 attaining the age of twenty-one, the 
 entail expires, and the land becomes his 
 absolute property. An estate may in 
 this manner be transmitted through a 
 son, or a son and grandson, living when 
 the deed is executed, to an unborn 
 child of that grandson It has been 
 maintained that this power of entail is 
 not sufficiently extensive to do any 
 mischief: in truth, however, it is much 
 larger than it seems. Entails very 
 rarely expire ; the first heir of entail, 
 when of age, joins with the existing 
 possessor in resettling the estate, so 
 as to prolong the entail for a further 
 term. Large properties therefore, are 
 rarely free for any considerable period, 
 from the restraints of a strict settle- 
 ment; though the mischief is in one 
 respect mitigated, since in the renewal 
 of the settlement for one more genera- 
 tion, the estate is usually charged with 
 9 provision for younger children. 
 
 In an economical point of view, the 
 best system of landed property is that 
 in which land is most completely an 
 
 object of commerce ; passing readily 
 from hand to hand when a buyer can 
 be found to whom it is worth while to 
 offer a greater sum for tho land, than 
 the value of the income drawn from it 
 by its existing possessor. This of 
 course is not meant of ornamental pro- 
 perty, which is a source of expense, not 
 profit ; but only of land employed for 
 industrial uses, and held for the sake of 
 the income which it affords. What- 
 ever facilitates the sale of land, tends 
 to make it a more productive instru- 
 ment for the community at large ; 
 whatever prevents or restricts its sale, 
 subtracts from its usefulness. Now, 
 not only has entail this effect, but pri- 
 mogeniture also. The desire to keep 
 land together in large masses, from 
 other motives than that of promoting 
 its productiveness, often prevents 
 changes and alienations which would 
 increase its efficiency as an instru- 
 ment. 
 
 4. On the other hand, a law 
 which, like the French, restricts the 
 power of bequest to a narrow compass, 
 and compels the equal division of the 
 whole or the greater part of the pro- 
 perty among the children, seems to 
 me, though on different grounds, also 
 very seriously objectionable. The only 
 reason for recognising in the children 
 any claim at all to more than a pro- 
 vision, sufficient to launch them in life, 
 and enable them to find a livelihood, 
 is grounded on the expressed or pre- 
 sumed wish of the parent ; whose claim 
 to dispose of what is actually his own, 
 cannot be set aside by any pretensions 
 of others to receive what is not theirs. 
 To control the rightful owner's liberty 
 of gift, by creating in the children a 
 legal right superior to it, is to post- 
 pone a real claim to an imaginary one. 
 To this great and paramount objection 
 to the law, numerous secondary onus 
 may be added. Desirable as it is that 
 the parent should treat the children 
 with impartiality, and not make an 
 eldest son or a favourite, impartial 
 division is not always synonymous 
 with equal division. Some of the chil- 
 dren may, without fault of their own, 
 be less capable thau others of pro-
 
 PARTNERSHIP. 
 
 541 
 
 viding for themselves : some may, by 
 other means than their own exertions, 
 be already provided for: and impar- 
 tiality may therefore require that the 
 rule observed should not bo one of 
 equality, but of compensation. Even 
 when equality is the object, there are 
 sometimes better means of attaining it, 
 than the inflexible rules by which law 
 must necessarily proceed. If one of 
 the coheirs, being of a quarrelsome or 
 litigious disposition, stands upon his 
 utmost rights, the law cannot make 
 equitable adjustments ; it cannot ap- 
 portion the property as seems best for 
 the collective interest of all concerned ; 
 if there are several parcels of land, 
 and the heirs cannot agree about 
 their value, tho law cannot give a 
 parcel to each, but every separate 
 parcel must be either put up to sale or 
 divided : if there is a residence, or a 
 park or pleasure-ground, which would 
 be destroyed, as such, by subdivision, 
 it must be sold, perhaps at a great sa- 
 crifice both of money and of feeling. 
 But what the law could not do, the 
 parent could. By means of the liberty 
 of bequest, all these points might be 
 determined according to reason and the 
 general interest of the persons con- 
 cerned ; and the spirit of the principle 
 of equal division might be the better ob- 
 served, because the testator was eman- 
 cipated from its letter. Finally, it 
 would not then be necessary, as under 
 the compulsory system it is, that the 
 law should interfere authoritatively in 
 the concerns of individuals, not only on 
 the occurrence of a death, but through- 
 out life, in order to guard against the 
 attempts of parents to frustrate the 
 ]i Lral claims of their heirs, under colour 
 of u'ifi.s and other alienations intervivos. 
 in conclusion; all owners of pro- 
 perty should, I conceive, have power 
 to dispose by will of every part of it, 
 but not to determine the person who 
 should succeed to it after the death of 
 all who were living when the will was 
 made. Under what restrictions it 
 should be allowable to bequeath pro- 
 perty to one person for lite, with re- 
 mainder to another person already in 
 existence, is a question belonging to 
 general legislation, not to political 
 
 economy. Such settlements would l 
 no greater hindrance to alienation than 
 any case of joint ownership, since tho 
 consent of persons actually in existencs 
 is all that would be necessary for any 
 new arrangement respecting the pro- 
 perty. 
 
 5. From the subject of Inherit- 
 ance I now pass to that of Contracts, 
 and among these, to the important 
 subject of the Laws of Partnership. 
 How much of good or evil depends 
 upon these laws, and how important it 
 is that they should be the best pos- 
 sible, is evident to all who recognise 
 in the extension of the co-operative 
 principle in the larger sense of the 
 term, the great economical necessity 
 of modern industry. The progress of 
 the productive arts requiring that 
 many sorts of industrial occupation 
 should be carried on by larger and 
 larger capitals, the productive power of 
 industry must suffer by whatever im- 
 pedes the formation of large capitals 
 through the aggregation of smaller 
 ones. Capitals of the requisite magni- 
 tude, belonging to single owners, do 
 not, in most countries, exist in tho 
 needful abundance, and would be still 
 less numerous if the laws favoured th 
 diffusion instead of the concentration 
 of property : while it is most unde- 
 sirable that all those improved pro- 
 cesses, and those means of efficiency 
 and economy in production, which de- 
 pend on the possession of large funds, 
 should be monopolies in the hands of a 
 few rich individuals, through tho diffi- 
 culties experienced by persons of mo- 
 derate or small means in associating 
 their capital. Finally, I must repeat 
 my conviction, that the industrial eco- 
 nomy which divides society absolutely 
 into two portions, the payers of wages 
 and the receivers of them, the first 
 counted by thousands and the last by 
 millions, is neither fit for, nor capable 
 of, indefinite duration: and the possi- 
 bility of changing this system for one 
 of combination without dependence, and 
 unity of interest instead of organized 
 hostility, depends altogether upon the 
 future (IcvclopDxyjts of the Partnership 
 principle.
 
 542 
 
 Yet there is scarcely any country 
 whose laws do not throw great, and in 
 most cases, intentional obstacles in the 
 way of the formation of any numerous 
 partnership. In England it is already 
 a senous discouragement, that differ- 
 ences among partners are, practically 
 speaking, only capable of adjudication 
 by the Court of Chancery : which is 
 often worse than placing such questions 
 out of the pale of all law ; since any 
 one of the disputant parties, who is 
 either dishonest or litigious, can involve 
 the others at his pleasure in the ex- 
 pense, trouble, and anxiety, which are 
 the unavoidable accompaniments of a 
 Chancery suit, without their having 
 the power of freeing themselves from 
 the infliction even by breaking up the 
 association.* Besides this, it required, 
 until lately, a separate act of the legis- 
 lature before any joinkstock association 
 could legally constitute itself, and be 
 empowered to act as one body. By a 
 statute passed a few years ago, this 
 necessity is done away ; but the statute 
 in question is described by competent 
 authorities as a "mass of confusion," 
 of which they saythat there "never was 
 such an infliction" on persons entering 
 
 * Mr. Cecil Fane, tho Commissioner of 
 the Bankruptcy Court, in his evidence before 
 the Committee on the Law of Partnership, 
 says : " I remember a short time ago reading 
 a written statement by two eminent solici- 
 tors, who said that they had known many 
 partnership accounts go into Chancery, but 
 that they never knew one come out. . . 
 Very few of the persons who would be dis- 
 posed to engage in partnerships of this kind" 
 (co-operative associations of working men) 
 " have any idea of the truth, namely, that 
 the decision of questions arising amongst 
 partners is really impracticable. 
 
 " Do they not know that one partner may 
 rob the other without any possibility of his 
 obtaining redress ? The fact is so ; but 
 whether they know it or not I cannot under- 
 take to say." 
 
 This flagrant injustice is, in Mr. Fane's 
 opinion, wholly attributable to the defects of 
 the tribunal. " My opinion is, that if there 
 is one thing more easy than another, it is the 
 settlement of partnership questions, and for 
 the simple reason, that everything which is 
 done in a partnership is entered in the 
 books; the evidence therefore is at hand; if 
 therefore a rational mode of proceeding were 
 once adopted, the difficulty would altogether 
 vanish." Minutes of Evidence annexed to 
 the Report of tho Select Committee on the 
 Lw or Partnership (1851), pp. 65-7. 
 
 BOOK V. CHAPTER IX. 6. 
 
 into partnership.t When a number of 
 
 Persons, whether few or many, freely 
 esire to unite their funds for a com- 
 mon undertaking, not asking any pecu- 
 liar privilege, nor the power to dispos- 
 sess any one of property, the law can 
 have no good reason for throwing dif- 
 ficulties in the way of the realization 
 of the project. On compliance with a 
 few simple conditions of publicity, any 
 body of persons ought to have the 
 power of constituting themselves into 
 a joint-stock company, or sociiti en 
 nom collectif, without asking leave 
 either of any public officer or of parlia- 
 ment. As an association of many 
 partners must practically be under the 
 management of a few, every facility 
 ought to be afforded to tho body for 
 exercising the necessary control and 
 check over those few, whether they bo 
 themselves members of the association, 
 or merely its hired servants : and in 
 this point the English system is still at 
 a lamentable distance from the standard 
 of perfection. 
 
 6. Whatever facilities, however, 
 English law might give to associations 
 formed on the principles of ordinary 
 partnership, there is one sort of joint- 
 stock association which until the year 
 1855 it absolutely disallowed, and 
 which could only be called into exist- 
 ence by a special act either of the legis- 
 lature or of the crown. I mean, asso- 
 ciations with limited liability. 
 
 Associations with limited liability 
 are of two kinds : in one, the liability 
 of all the partners is limited, in tho 
 other that of some of them only. The 
 first is the Anonymous Society of the 
 French law, which in England had 
 until lately no other name than that of 
 " chartered company:" meaning there- 
 by a joint-stock company whose share- 
 holders, by a charter from the crown or 
 a special enactment of the legislature, 
 stood exempted from any liability for 
 the debts of the concern, beyond the 
 amount of their subscriptions. Tho 
 other species of limited partnership is 
 that known to the French law under 
 tho name of command Ite; of this, which 
 
 t Eeport, ut supra, p. 167.
 
 PARTNERSHIP. 
 
 643 
 
 in England is still unrecognised and 
 illegal, I shall speak presently. 
 
 It' a number of persons choose to as- 
 sociate for carrying on any operation 
 of commerce or industry, agreeing 
 among themselves and announcing to 
 those with whom they deal that the 
 members of the association do not un- 
 dertake to be responsible beyond the 
 amount of the subscribed capital ; is 
 there any reason that the law should 
 raise objections to this proceeding, and 
 should impose on them the unlimited 
 responsibility which they disclaim? 
 For whose sake ? Not for that of the 
 partners themselves ; for it is they 
 whom the limitation of responsibility 
 benefits and protects. It must there- 
 fore be for the sake of third parties ; 
 namely, those who may have transac- 
 tions with the association, and to whom 
 it may run in debt beyond -what the 
 subscribed capital suffices to pay. But 
 nobody is obliged to deal with the as- 
 sociation ; still less is any one obliged 
 to give it unlimited credit. The class 
 of persons with whom such associa- 
 tions have dealings are in general per- 
 fectly capable of taking care of them- 
 selves, and there seems no reason that 
 the law should be more careful of their 
 interest than they will themselves be ; 
 provided no false representation is held 
 out, and they are aware from the first 
 what they have to trust to. The law 
 is warranted in requiring from all 
 joint-stock associations with limited 
 responsibility, not only that the amount 
 of capital on which they profess to 
 carry on business should either be ac- 
 tually paid up or security given for it 
 (if, indeed, with complete publicity, 
 such a requirement would be neces- 
 sary) but also that such accounts should 
 be kept, accessible to individuals, and 
 if needful, published to the world, as 
 shall render it possible to ascertain at 
 any time the existing state of the 
 company's affairs, and to learn whether 
 the capital which is the sole security 
 for the engagements into which they 
 enter, still subsist unimpaired: the 
 fidelity of such accounts being guarded 
 by sufficient penalties. When the law 
 has thus afforded to individuals all 
 practicable means of knowing the cir- 
 
 cumstances which ought to enter into 
 their prudential calculations in dealing 
 with the company, there seems no 
 more need for interfering with indivi- 
 dual judgment in this sort of transac- 
 tions, than in any other par' of the 
 private business of life. 
 
 The reason usually urged for such 
 interference is, that the managers of 
 an association with limited responsi- 
 bility, not risking their whole fortunes 
 in the event of loss, while in case of 
 gain they might profit largely, are not 
 sufficiently interested in exercising 
 due circumspection, and are under the 
 temptation of exposing the funds of 
 the association to improper hazards. 
 It is, however, well ascertained that 
 associations with unlimited responsi- 
 bility, if they have rich shareholders, 
 can obtain, even when known to be 
 reckless in their transactions, improper 
 credit to an extent far exceeding what 
 would be given to companies equally 
 ill-conducted whose creditors had only 
 the subscribed capital to rely on.* To 
 whichever side the balance of evil in- 
 clines, it is a consideration of more 
 importance to the shareholders them- 
 selves than to third parties ; since, 
 with proper securities for publicity, 
 the capital of an association with 
 limited liability could not be engaged 
 in hazards beyond those ordinarily in- 
 cident to the business it carries on, 
 without the fact's being known, and 
 becoming the subject of comments by 
 which the credit of the body would bo 
 likely to be affected in quite as great 
 a degree as the circumstances would 
 justify. If, under securities for pub- 
 licity, it were found in practice that 
 companies, formed on the principle of 
 unlimited responsibility, were more 
 skilfully and more cautiously managed, 
 companies with limited liability would 
 be unable to maintain an equal compe- 
 tition with them ; and would therefore 
 rarely be formed, unless when such 
 limitation was the only condition on 
 which the necessary amount of capital 
 could be raised : and in that case it 
 would be very unreasonable to say that 
 their formation ought to be prevented. 
 
 * See the Keport already referred to 
 pp. 1 5-153.
 
 644 
 
 BOOK V. CHAPTER IX. 6. 
 
 It may further be remarked, that 
 although, with equality of capital, a 
 company of limited liability offers a 
 somewhat less security to those who 
 deal with it, than one in which every 
 shareholder is responsible with his 
 whole fortune, yet even the weaker of 
 these two securities is in some respects 
 stronger than that which an individual 
 capitalist can afford. In the case of 
 an individual, there is such security as 
 can be founded on his unlimited lia- 
 bility, but not that derived from pub- 
 licity of transactions, or from a known 
 and large amount of paid-up capital. 
 This topic is well treated in an able 
 paper by M. Coquelin, published in 
 the Revue des Deux Mondes for July 
 1843.* 
 
 " While third parties who trade 
 with individuals," says this writer, 
 " scarcely ever know, except by ap- 
 proximation, and even that most vague 
 and uncertain, what is the amount of 
 capital responsible for the performance 
 of contracts made with them, those 
 who trade with an anonymous society 
 can obtain full information if they seek 
 it, and perform their operations with a 
 feeling of confidence that cannot exist 
 in the other case. Again, nothing is 
 easier than for an individual trader to 
 conceal the extent of his engagements, 
 as no one can know it certainly but 
 himself. Even his confidential clerk 
 may be ignorant of it, as the loans he 
 finds himself compelled to make may 
 not all be of a character to require 
 that they be entered in his day-book. 
 It is a secret confined to himself ; one 
 which transpires rarely, and always 
 slowly ; one which is unveiled only 
 when the catastrophe has occurred. 
 On the contrary, the anonymous so- 
 ciety neither can nor ought to borrow, 
 without the fact becoming known to 
 all the world directors, clerks, share- 
 holders, and the public. Its operations 
 partake in some respects, of the nature 
 of those of governments. The light of 
 day penetrates in every direction, and 
 there can be no secrets from those who 
 
 * The quotation is from a translation pub- 
 lished by Mr. H. C. Carey, in an American 
 periodical, Hunt' ' Merchant' ' Magazine, for 
 May and June 1845. 
 
 seek for information. Thus all is fixed, 
 recorded, known, of the capital and 
 debts in the case of the anonymous 
 society, while all is uncertain and un- 
 known in the case of the individual 
 trader. Which of the two, we would 
 ask the reader, presents the most 
 favourable aspect, or the surest gua- 
 rantee, to the view of those who trade 
 with them ? 
 
 "Again, availing himself of the 
 obscurity in which his affairs are 
 shrouded, and which he desires to in- 
 crease, the private trader is enabled, 
 so long as his business appears pros- 
 perous, to produce impressions in re- 
 gard to his means far exceeding the 
 reality, and thus to establish a credit 
 not justified by those means. When 
 losses occur, and he sees himself 
 threatened with bankruptcy, the world 
 is still ignorant of his condition, and 
 he finds himself enabled to contract 
 debts far beyond the possibility of 
 payment. The fatal day arrives, and 
 the creditors find a debt much greater 
 than had been anticipated, while the 
 means of payment are as much less. 
 Even this is not all. The same ob- 
 scurity which has served him so well 
 thus far, when desiring to magnify his 
 capital and increase his credit, now 
 affords him the opportunity of placing 
 a part of that capital beyond the reach 
 of his creditors. It becomes dimi- 
 nished, if not annihilated. It hides 
 itself, and not even legal remedies, nor 
 the activity of creditors, can bring it 
 forth from the dark corners in which 
 
 it is placed Our readers can, 
 
 readily determine for themselves if 
 practices of this kind are equally easy 
 in the case of the anonymous society. 
 We do not doubt that such things are 
 possible, but we think tjiat they will 
 agree with us that from its nature, its 
 organization, and the necessary pub- 
 licity that attends all its actions, the 
 liability to such occurrences is very 
 greatly diminished." 
 
 The laws of most countries, England 
 included, have erred in a twofold man- 
 ner with regard to joint-stock com- 
 panies. While they have been most 
 unreasonably jealous of allowing such 
 associations to exist, especially with
 
 PARTNERSHIP. 
 
 limited responsibility, they have gene- 
 rally neglected the enforcement of 
 publicity ; the best security to the 
 public against any danger which might 
 arise from thi description of partner- 
 ships; and a security quite as much 
 required in the case of those associa- 
 tions of the kind in question, which, 
 by an exception from their general 
 practice, they suffered to exist. Even 
 in the instance of the Bank of Eng- 
 land, which holds a monopoly from the 
 legislature, and has had partial control 
 over a matter of so much public inte- 
 rest as the state of the circulating 
 medium, it is only within these few 
 years that any publicity has been en- 
 forced ; and the publicity was at first 
 of an extremely incomplete character, 
 though now, for most practical pur- 
 poses, probably at length sufficient. 
 
 7. The other kind of limited part- 
 nership which demands our attention, 
 is that in which the managing partner 
 or partners are responsible with their 
 whole fortunes for the engagements of 
 the concern, but have others associated 
 with them who contribute only definite 
 sums, and are not liable for anything 
 beyond, though they participate in the 
 profits according to any rule which 
 may be agreed on. This is called 
 partnership in commandite: and the 
 partners with limited liability (to 
 whom, by the French law, all inter- 
 ference in the management of the con- 
 cern is interdicted) are known by the 
 name commandltaires. Such partner- 
 ships are not allowed by English law : 
 in all private partnerships, whoever 
 shares in the profits is liable for the 
 debts, to as plenary an extent as the 
 managing partner. 
 
 For such prohibition no satisfactory 
 defence has ever, so far as I am aware, 
 been made. Even the insufficient 
 reason given against limiting the re- 
 sponsibility of shareholders in a joint- 
 stock company, does not apply here ; 
 there being no diminution of the 
 motives to circumspect management, 
 since all who take any part in the 
 direction of the concern are liable with 
 their whole fortunes. To third parties, 
 again, the security is improved by the 
 
 existence of commaddite ; since the 
 amount subscribed by commanditaircs 
 is all of it available to creditor's, the 
 commanditaires losing their whole in- 
 vestment before any creditor can lose 
 anything ; while, if instead of becoming 
 partners to that amount, they had lent 
 the sum at an interest equal to the 
 
 E refit they derived from it, they would 
 ave shared with the other creditors 
 in the residue of the estate, diminish- 
 ing pro rata the dividend obtained by 
 all. While the practice of commandite 
 thug conduces to the interest of cre- 
 ditors, it is often highly desirable for 
 the contracting parties themselves. 
 The managers are enabled to obtain 
 the aid of a much greater amount of 
 capital than they could borrow on 
 their own security ; and persons are 
 induced to aid useful undertakings, by 
 embarking limited portions of capital 
 in them, when they would not, and 
 often could not prudently, have risked 
 their whole fortunes on the chances of 
 the enterprise. 
 
 It may perhaps be thought that 
 where due facilities are afforded to 
 joint-stock companies, commandito 
 partnerships are not required. But 
 there are classes of cases to which the 
 commandite principle must always 
 be better adapted than the joint- 
 stock principle. " Suppose," says M. 
 Coquelin, " an inventor seeking for a 
 capital to carry his invention into 
 practice. To obtain the aid of capi- 
 talists, he must offer them a share of 
 the anticipated benefit ; they must as- 
 sociate themselves with him in the 
 chances of its success. In such a case, 
 which of the forms would he select? 
 Not a common partnership, certainly ;" 
 for various reasons, and especially the 
 extreme difficulty of finding a partner 
 with capital, willing to risk his whole 
 fortune on the success of the inven- 
 tion.* " Neither woidd he select the 
 
 * " There has been a great deal of com- 
 miseration professed," says Mr. Duncan, 
 solicitor, " towards the poor inventor ; he 
 has been oppressed by the high cost of 
 patents ; but his chief oppression has been 
 the partnership law, which prevents his 
 petting any one to help him to develop his 
 invention. He is a poor man, and therefore 
 cannot give security to a creditor ; no on 
 will lend him money; the rate of interest 
 
 N N
 
 546 
 
 BOOK V. CHAPTER IX. 7. 
 
 Anonymous Society," orany other form nomical point of view, of the imperative 
 of joint-stock company, " in which he 
 
 might be superseded as manager. He 
 would stand, in such an association, on 
 no better footing than any other share- 
 holder, and he might be lost in the 
 crowd ; whereas, the association ex- 
 isting, as it were, by and for him, the 
 management would appear to belong 
 to him as a matter of right. Cases 
 occur in which a merchant or a manu- 
 facturer, without being precisely an 
 inventor, has undeniable claims to the 
 management of an undertaking, from 
 the possession of qualities peculiarly 
 calculated to promote . its success. So 
 great, indeed, continues M. Coquelin, 
 " is the necessity, in many cases, for 
 the limited partnership, that it is diffi- 
 cult to conceive how we could dis- 
 pense with or replace it :" and in re- 
 ference to his own country he is pro- 
 bably in the right. 
 
 Where there is so great a readiness 
 as in England, on the part of the 
 public, to form joint-stock associations, 
 even without the encouragement of a 
 limitation of responsibility ; comman- 
 dite partnership, though its prohibition 
 is in principle quite indefensible, can- 
 not be deemed to be, in a merely eco- 
 
 offered, however high it may be, is not an 
 attraction. But if by the alteration of the 
 law he could allow capitalists to take an 
 interest with him and share the profits, while 
 the risk should be confined to the capital 
 they embarked, there is very little doubt at 
 all that he would frequently get assistance 
 from capitalists; whereas at the present 
 moment, with the law as it stands, he is com- 
 pletely destroyed, and his invention is useless 
 to him ; he struggles month after month ; he 
 applies again and again to the capitalist 
 without avail. 1 know it practically in two 
 or three cases of patented inventions ; espe- 
 cially one where parties with capital were 
 desirous of entering into an undertaking of 
 great moment in Liverpool, but five or six 
 different gentlemen were deterred from doing 
 so, all feeling the strongest objection to what 
 each one called the cursed partnership law." 
 
 Report, p. 155. 
 
 Mr. Fane says, "In the course of my pro- 
 fessional life, as a Commissioner of the Court 
 of Bankruptcy, I have learned that the most 
 unfortunate man in the world is an inventor. 
 The difficulty which an inventor finds in 
 getting at capital, involves him in all sorts 
 of embarrassments, and lie ultimately is for 
 the most part a ruined man, and somebody 
 else gets possession of his invention." Ib. 
 P. 8?. 
 
 necessity which M. Coquelin ascribes 
 to it. Yet the inconveniences are not 
 small, which arise indirectly from those 
 provisions of the law by which every 
 one who shares in the profits of a con- 
 cern is subject to the full liabilities of 
 an unlimited partnership. It is impos- 
 sible to say how many or what useful 
 modes of combination are rendered 
 impracticable by this state of the law. 
 It is sufficient for its condemnation 
 that, unless in some way relaxed, it is 
 inconsistent with the payment of wages 
 in part by a percentage on profits ; in 
 other words, the association of the 
 operatives as virtual partners with the 
 capitalist.* 
 
 It is, above all, with reference to the 
 improvement and elevation of the work- 
 ing classes, that complete freedom in 
 the conditions of partnership is indis- 
 pensable. Combinations such as the 
 associations of workpeople, described 
 in a former chapter, are the most 
 powerful means of effecting the social 
 emancipation of the labourers through 
 their own moral qualities. Nor is the 
 liberty of association important solely 
 for its examples of success, but fully 
 as much so for the sake of attempts 
 which would not succeed ; but by their 
 failure would give instruction more im- 
 pressive than can be afforded by any- 
 thing short of actual experience. Every 
 theory of social improvement, the worth 
 of which is capable of being brought to 
 an experimental test, should be per- 
 mitted, and even encouraged, to sub- 
 mit itself to that test. From such 
 experiments the active portion of the 
 working classes would derive lessons 
 which they would be slow to learn from 
 the teaching of persons supposed to 
 have interests and prejudices adverse 
 to their good ; would obtain the means 
 of correcting, at no cost to society, what- 
 ever is now erroneous in their notions 
 of the mean* of establishing their in 
 dependence; and of discovering the con- 
 ditions, moral, intellectual, and indua- 
 
 * It is considered possible to effect this 
 through the Limited Liability Act, by 
 erecting the capitalist and his workpeople 
 into a Limited Company : as proposed oy 
 Messrs. Briggs (supra, p. 465).
 
 PARTNERSHIP. 
 
 547 
 
 trial, which are indispensably necessary 
 for effecting without injustice, or for 
 effecting at all, the social regeneration 
 they aspire to.* 
 
 The French law of partnership is 
 superior to the English in permitting 
 coinmandite ; and superior, in having 
 no such unmanageable instrument as 
 the Court of Chancery, all cases arising 
 frpm commercial transactions being 
 adjudicated in a comparatively cheap 
 and expeditious mannei by a tribunal 
 of merchants. In other respects the 
 French system is far worse than the 
 English. A joint-stock company with 
 limited responsibility cannot be formed 
 without the express authorization of 
 the department of government called 
 the Council of State, a body of admi- 
 nistrators, generally entire strangers to 
 industrial transactions, who have no 
 interest in promoting enterprises, and 
 are aj)t to think that the purpose of 
 their institution is to restrain them; 
 whose consent cannot in any case be 
 obtained without an amount of time 
 and labour which is a very serious 
 hindrance to the commencement of an 
 enterprise, while the extreme uncer- 
 tainty of obtaining that consent at all 
 is a great discouragement to capitalists 
 who would be willing to subscribe. In 
 regard to joint-stock companies with- 
 out limitation of responsibility, which 
 in England exist in such numbers and 
 are formed with such facility, these 
 associations cannot, in France, exist at 
 all ; for, in cases of unlimited partner- 
 ship, the French law does not permit 
 the division of the capital into trans- 
 ferable shares. 
 
 The best existing laws of partner- 
 ehip appear to be those of the New 
 
 * By an act of the year 1852, called the 
 Industrial and Provident Societies Act, for 
 which the nation is indebted to the public- 
 spirited exertions of Mr. Slaney, industrial 
 associations of working people are admitted 
 to the statutory privileges of Friendly So- 
 cieties. This not only exempts them from 
 the formalities applicable to joint-stock com- 
 
 Sanies, but provides for the settlement of 
 isputes are on g the partners without recourse 
 to the Court of Chancery. There are still 
 Borne defects in the provisions of this Act, 
 which hamper the proceedings of the 
 Societies in several respects ; as is pointed 
 lea in the Almanack of the Kouhdale Equit- 
 obutPkmoers for 1861, 
 
 England States. According to Mr. 
 Carey, + " nowhere is association so 
 little trammelled by regulations as in 
 New England; the consequence of 
 which is, that it is carried to a greater 
 extent there, and particularly in M assa- 
 chusetts and Rhode Island, than in any 
 other part of the world. In these 
 states, the soil is covered with com- 
 pagnies anonymes chartered compa- 
 nies for almost every conceivable 
 purpose. Every town is a corporation 
 for the management of its roads, oridges, 
 and schools ; which are, therefore, under 
 the direct control of those who pay 
 for them, and are consequently well 
 managed. Academies and churches, 
 lyceums and libraries, saving-fund so- 
 cieties, and trust companies, exist in 
 numbers proportioned to the wants of 
 the people, and all are corporations. 
 Every district has its locaJ bank, of a 
 size to suit its wants, the stock of which 
 is owned by the small capitalists of 
 the neighbourhood, and managed by 
 themselves ; the consequence of which 
 is, that in no part of the world is the 
 system of banking so perfect so little 
 liable to vibration in the amount of 
 loans the necessary effect of which is, 
 that in none is the value of property 
 so little affected by changes in the 
 amount or value of the currency re- 
 sulting from the movements of their 
 own banking institutions. In the two 
 states to which we have particularly 
 referred, they are almost two hundred 
 in number. Massachusetts, alone, 
 offers to our view fifty-three insurance 
 offices, of various forms, scattered 
 through the state, and all incorporated. 
 Factories are incorporated, and ar 
 owned in shares ; and every one thai 
 has any part in the management o! 
 their concerns, from the purchase of 
 the raw material to the sale of the 
 manufactured article, is a part owner ; 
 while every one employed in them has 
 a prospect of becoming one, by the use 
 of prudence, exertion, and economy. 
 Charitable associations exist in large 
 numbers, and all are incorporated. 
 Fishing vessels are owned in shares by 
 those who navigate them; and the 
 
 t In a note appended to his translation of 
 M. Coquelin's pa^er,
 
 548 
 
 sailors of a whaling ship depend in a 
 great degree, if not altogether, upon 
 the success of the voyage for their 
 Compensation. Every master of a ves- 
 sel trading in the Southern Ocean is a 
 part owner, and the interest he pos- 
 sesses is a strong inducement to exer- 
 tion and economy, by aid of which the 
 people of New England are rapidly 
 driving out the competition of other 
 nations for the trade of that part of 
 the world. Wherever settled, they ex- 
 hibit the same tendency to combination 
 of action. In New Y,ork they are the 
 chief owners of the lines of packet 
 ships, which are divided into shares, 
 owned by the shipbuilders, the mer- 
 chants, the master, and the mates ; 
 which last generally acquire the means 
 of becoming themselves masters, and 
 to this is due their great success. The 
 system is the most perfectly democratic 
 of any in the world. It affords to 
 every labourer, every saifcr, every ope- 
 rative, male or female, the prospect of 
 advancement ; and its results are pre- 
 cisely such as we should have reason 
 to expect. In no part of the world are 
 talent, industry, and prudence, so cer- 
 tain to be largely rewarded." 
 
 The cases of insolvency and fraud on 
 the part of chartered companies in 
 America, which have caused so much 
 loss and so much scandal in Europe, 
 did not occur in the part of the Union 
 to which this extract refers, but in 
 other States, in which the right of as- 
 sociation is much more fettered by legal 
 restrictions, and in which, accordingly, 
 joint-stock associations are not compa- 
 rable in number or variety to those of 
 New England. Mr. Carey adds, " A 
 careful examination of the systems of 
 the several states, can scarcely, we 
 think, fail to convince the reader of 
 the advantage resulting from permit- 
 ting men to determine among them- 
 selves the terms upon which they will 
 associate, and allowing the associations 
 that may be formed to contract with 
 fce public as to the terms upon which 
 they will trade together, whether of 
 ftie limited or unlimited liability of the 
 partners." This principle has been 
 adopted as the foundation of all recent 
 English legislation on the subject. 
 
 BOOK V. CHAPTER IX. 8. 
 
 8. I proceed to the subject of In- 
 solvency Laws. 
 
 Good laws on this subject are im- 
 portant, first and principally, on the 
 score of public morals ; which arc on 
 no point more under the influence of 
 the law, for good and evil, than in a 
 matter belonging so pre-eminently to 
 the province of law as the preservation 
 of pecuniary integrity. But the sub- 
 ject is also, in a merely economical 
 point of view, of great importance. 
 First, because the economical well- 
 being of a people, and of mankind, de- 
 pends in an especial manner upon their 
 being able to trust each other's en- 
 gagements. Secondly, because one of 
 the risks, or expenses, of industrial 
 operations is the risk or expense of 
 what are commonly called bad debts, 
 and every saving which can be effected 
 in this liability is a diminution of cost 
 of production ; by dispensing with an 
 item of outlay which in no way con- 
 duces to the desired end, and which 
 must be paid for either by the con- 
 sumer of the commodity, or from the 
 general profits of capital, according as 
 the burthen is peculiar or general. 
 
 The laws and practice of nations 
 on this subject have almost always 
 been in extremes. The ancient laws 
 of most countries were all severity to 
 tho debtor. They invested the creditor 
 with a power of coercion, more or less 
 tyrannical, which he might use against 
 his insolvent debtor, either to extort 
 the surrender of hidden property, or to 
 obtain satisfaction of a vindictive cha- 
 racter, which might console him for 
 the non-payment of the debt. This 
 arbitrary power has extended, in some 
 countries, to making the insolvent 
 debtor serve the creditor as his slave : 
 in which plan there were at least some 
 grains of common sense, since it miulit 
 possibly be regarded as a scheme for 
 making him work out the debt by his 
 labour. In England, the coercion as- 
 sumed the milder form of ordinary im- 
 prisonment. The one and the other 
 were the barbarous expedients of a 
 rude age, repugnant to justice as well 
 as to humanity. Unfortunately ths 
 reform of them, like that of the crimi- 
 nal law generally, has been taken in
 
 INSOLVENCY. 
 
 549 
 
 hand as an affair of humanity only, not 
 of justice : and the modish humanity 
 of the present time, which is essen- 
 tially a thing of one idea, has in this 
 as in other cases, gone into a violent 
 reaction against the ancient severity, 
 and might almost be supposed to see 
 in the fact of having lost or squan- 
 dered other people's property, a pecu- 
 liar title to indulgence. Everything 
 in the law which attached disagreeable 
 consequences to that fact, was gradu- 
 ally relaxed, or entirely got rid of: 
 until the demoralizing effects of this 
 laxity became so evident as to deter- 
 mine, by more recent legislation, a 
 salutary though very insufficient move- 
 ment in the reverse direction. 
 
 The indulgence of the laws to those 
 who have made themselves unable to 
 pay their just debts, is usually de- 
 fended, on the plea that the sole object 
 of the law should be, in case of insol- 
 vency, not to coerce the person of the 
 debtor, but to get at his property, and 
 distribute it fairly among the creditors. 
 Assuming that this is and ought to be 
 the sole object, the mitigation of the 
 law was in the first instance carried so 
 far as to sacrifice that object. Impri- 
 sonment at the discretion of a creditor 
 was really a powerful engine for ex- 
 tracting from the debtor any property 
 which he had concealed or otherwise 
 made away with : and it remains to be 
 shown by experience whether, in de- 
 priving creditors of this instrument, 
 the law, even as last amended, has fur- 
 nished them with a sufficient equiva- 
 lent. But the doctrine, that the law 
 has done all that ought to be expected 
 from it, when it has put the creditors 
 in possession of the property of an in- 
 solvent, is in itself a totally inadmis- 
 sible piece of spurious humanity. It 
 is the business of law to prevent wrong- 
 doing, and not simply to patch up the 
 consequences of it when it has been 
 committed. The lav is bound to take 
 care that insolvency shall not be a good 
 pecuniary speculation ; that men shall 
 not have the privilege of hazarding 
 other people's property without their 
 knowledge or consent, taking the profits 
 of the enterprise if it is successful, 
 and if it fails, throwing the less upon 
 
 the rightful owners ; and that they 
 shall not find it answer to make them- 
 selves unable to pay their just debts, 
 by spending the money of their credi- 
 tors in personal indulgence. It is 
 admitted that what is technically called 
 fraudulent bankruptcy, the false pre- 
 tence of inability to pay, is, when 
 detected, properly subject to punish- 
 ment. But does it follow that insol- 
 vency is not the consequence of mis- 
 conduct because the inability to pay 
 may be real ? If a man has been a 
 spendthrift, or a gambler, with property 
 on which his creditors had a prior 
 claim, shall he pass scot-free because 
 the mischief is consummated and tho 
 money gone ? Is there any very mate- 
 rial difference in point of morality 
 between this conduct, and those other 
 kinds of dishonesty which go by tho 
 names of fraud and embezzlement ? 
 
 Such cases are not a minority, but 
 a large majority among insolvencies. 
 The statistics of bankruptcy prove the 
 fact. " By far the greater part of all 
 insolvencies arise from notorious mis- 
 conduct ; the proceedings of the In- 
 solvent Debtors Court and of the 
 Bankruptcy Court will prove it. Ex- 
 cessive and unjustifiable overtrading 
 or most absurd speculation in com- 
 modities, merely because the poor spe- 
 culator ' thought they would get up,' 
 but why he thought so he cannot tell ; 
 speculation in hops, in tea, in silk, in 
 corn things with which he is alto- 
 gether unacquainted ; wild and absurd 
 investments in foreign funds, or in 
 jointrstocks ; these are among the 
 most innocent causes of bankruptcy. 1 '* 
 The experienced and intelligent writer 
 from whom I quote, corroborates his 
 assertion by the testimony of several 
 of the official assignees of the Bank- 
 ruptcy Court. One of them says, 
 " As far as I can collect from tho 
 books and documents furnished by the 
 bankrupts, it seems to me that" in 
 the whole number of cases which 
 occurred during a given time in the 
 court to which he was attached, 
 " fourteen have been ruined by spe- 
 
 * From a volume published in 1815, en- 
 titled, Credit the L\fe of Commerce, by Mr 
 J. H. Elliott.
 
 550 
 
 BOOK V. CHAPTER IX. 8. 
 
 dilations in things with which they 
 were unacquainted ; three by neglect- 
 ing book-keeping; ten by trading 
 beyond their capital and means, and 
 the consequent loss and expense of 
 accommodation-bills ; forty-nine by ex- 
 pending more than they could rea- 
 sonably hope their profits would be, 
 though their business yielded a fair 
 return ; none by any general distress, 
 or the falling off of any particular 
 branch of trade." Another of these 
 officers says that, during a period of 
 eighteen months, " fifty-two cases of 
 bankruptcy have come under my care. 
 It is my opinion that thirty-two of 
 these have arisen from an imprudent 
 expenditure, and five partly from that 
 cause, and partly from a pressure on 
 the business in which the bankrupts 
 were employed. Fifteen 'I attribute 
 to improvident speculations, combined 
 in many instances with an extravagant 
 mode of life." 
 
 To these citations the author adds 
 the following statements from his per- 
 sonal means of knowledge. " M any 
 insolvencies are produced by trades- 
 men's indolence ; they keep no books, 
 or at least imperfect ones, which they 
 never balance ; they never take stock ; 
 they employ servants, if their trade 
 be extensive, whom they are too in- 
 dolent even to supervise, and then 
 become insolvent. It is not too much 
 to say, that one-half of all the persons 
 engaged in trade, even in London, 
 never take stock at all : they go on 
 year after year without knowing how 
 their affairs stand, and at last, like the 
 child at school, they find to their sur- 
 prise, but one halfpenny left in their 
 pocket. I will venture to say that not 
 one-fourth of all the persons in the 
 provinces, either manufacturers, trades- 
 men, or farmers, ever take stock ; nor 
 in fact does one-half of them ever keep 
 acccmnt-books, deserving any other 
 narr, than memorandum-books. I 
 know sufficient of the concerns of 
 five hundred small tradesmen in the 
 provinces, to be enabled to say, that 
 not one-fifth of them ever take stock, 
 or keep even the most ordinary ac- 
 counts. I am prepared to say of such 
 tradesmen, from carefully-prepared 
 
 tables, giving every advantage whera 
 there has been any doubt as to the 
 causes of their insolvency, that where 
 nine happen from extravagance or 
 dishonesty, one" at most "may be 
 referred to misfortune alone." * 
 
 Is it rational to expect among the 
 trading classes any high sense of 
 justice, honour, or integrity, if the law 
 enables men who act in this manner 
 to shuffle off the consequences of their 
 misconduct upon those who have bcon 
 so unfortunate as to trust them ; and 
 practically proclaims that it looks 
 upon insolvency thus produced, as 
 a " misfortune," not an offence? 
 
 It is, of course, not denied, that in. 
 solvencies do arise from causes beyond 
 the control of the debtor, and that, in 
 many more cases, his culpability is not 
 of a high order ; and the law ought to 
 make a distinction in favour of such 
 cases, but not without a searching in- 
 vestigation ; nor should the case ever 
 be let go without having ascertained, 
 in the most complete manner practi- 
 cable, not the fact of insolvency only, 
 but the cause of it. To have been 
 trusted with money or money's worth, 
 and to have lost or spent it, is primd 
 facie evidence of something wrong: 
 and it is not for the creditor to prove, 
 which he cannot do in one case out of 
 ten, that there has been criminality, 
 but for the debtor to rebut the pre- 
 sumption, by laying open the wholo 
 state of his affairs, and showing either 
 that there has been no misconduct, or 
 that the misconduct has been of an 
 excusable kind. If he fail in this, ho 
 ought never to be dismissed without a 
 punishment proportioned to the de.crroo 
 of blame which seems justly impotable 
 to him ; which punishment, however, 
 might be shortened or mitigated in 
 proportion as he appeared likely to 
 exeil himself in repairing the injury 
 done. 
 
 It is a common argument with thoso 
 who approve a relaxed system of in- 
 solvency laws, that credit, except in 
 the great operations of commerce, is 
 an evil; and that to deprive creditors 
 of legal redress is a judicious means of 
 preventing credit from being given. 
 * PP. 50-1.
 
 INSOLVENCY 
 
 551 
 
 That which is given by retail dealers 
 to unproductive consumers is, no 
 doubt, to the excess to which it is car- 
 ried, a considerable evil. This, how- 
 ever, is only true of large, and espe- 
 cially of long, credits ; for there is 
 credit whenever goods are not paid for 
 before they quit the shop, or, at least, 
 the custody of the seller; and there 
 would be much inconvenience in put- 
 ting an end to this sort of credit. But 
 a large proportion of the debts on 
 which insolvency laws take effect, are 
 those due by small tradesmen to the 
 dealers who supply them : and on no 
 class of debts does the demoralization 
 occasioned by a bad state of the law, 
 operate more perniciously. These are 
 commercial credits, which no one 
 wishes to see curtailed ; their existence 
 is of great importance to the general 
 industry of the country, and to numbers 
 of honest, well-conducted persons of 
 small means, to whom it would be a 
 great injury that they should be pre- 
 vented from obtaining the accommo- 
 dation they need, and would not abuse, 
 through the omission of the law to 
 provide just remedies against dishonest 
 or reckless borrowers. 
 
 But though it were granted that 
 retail transactions, on any footing but 
 that of ready money payment, are an 
 evil, and their entire suppression a fit 
 object for legislation to aim at; a 
 worse mode of compassing that object 
 could scarcely be invented, than to 
 permit those who have been trusted by 
 others to cheat and rob them with im- 
 punity. The law does not generally 
 select the vices of mankind as the ap- 
 propriate instrument for inflicting chas- 
 tisement on the comparatively inno- 
 cent : when it seeks to discourage any 
 course ofaction.it does so by applying 
 inducements of its own, not by outlaw- 
 ing those who act in the manner it 
 deems objectionable, and letting loose 
 the predatory instincts of the worthless 
 part of mankind to feed upon them. If 
 a man has committed murder, the law 
 condemns him to death; but it does 
 not promise impunity to anybody who 
 may kill him for the sake of taking his 
 purse. The offence of believing an- 
 other's word, even rashly, is not so 
 
 heinous that, for the sake of discourag- 
 ing it, the spectacle should be brought 
 home to every door, of triumphant ras- 
 cality, with the law on its side, mock- 
 ing the victims it has made. This 
 pestilent example has been very widely 
 exhibited since the relaxation of the 
 insolvency laws. It is idle to expect 
 that, even by absolutely depriving cre- 
 ditors of all legal redress, the kind of 
 credit which is considered objection- 
 able would really be very much checked. 
 Rogues and swindlers are still an ex- 
 ception among mankind, and people 
 will go on trusting each other s pro- 
 mises. Large dealers, in abundant 
 business, would refuse credit, as many 
 of them already do : but in the eager 
 competition of a great town, or the de- 
 pendent position of a village shop- 
 keeper, what can be expected from the 
 tradesman to whom a single customer 
 is of importance, the beginner, perhaps, 
 who is striving to get into business? 
 He will take the risk, even if it were 
 still greater ; he is ruined if he cannot 
 sell his goods, and he can but be ruined 
 if he is defrauded. Nor docs it avail 
 to say, that he ought to make proper 
 inquiries, and ascertain the character 
 of those to whom he supplies goods on 
 trust. In some of the most flagrant 
 cases of profligate debtors which have 
 come before the Bankruptcy Court, the 
 swindler had been able to give, and 
 had given, excellent references.* 
 
 * The following extracts from the French 
 Code of Commerce, (the translation is that 
 of Mr. Fane,) show the great extent to 
 which the just distinctions are made, and the 
 proper investigations provided for, by French 
 law. The word banqueroute, which can only 
 be translated by bankruptcy, is, however, 
 confined in France to culpable insolvency, 
 which is distinguished into timple bank- 
 ruptcy and fraudulent bankruptcy. The 
 following are cases of simple bankruptcy : 
 
 " Every insolvent who, in the investigation 
 of his affairs, shall appear chargeable with 
 one or more of the following offences, shall 
 be proceeded against as a simple bank- 
 rupt. 
 
 " If his house expenses, which he is bound 
 to enter regularly in a day-book, appear 
 excessive. 
 
 " If he has spent considerable sums at 
 play, or in operations of pure hazard. 
 
 " If it shall appear that he has borrowed 
 largely, or resold merchandize at a loss, or 
 below the current price, after it appeared by
 
 552 
 
 BOOK. V. CHAFTEB X. 1. 
 
 CHAPTER X. 
 
 OP IKTERFEREHCES OF GOVERNMENT GROUNDED ON F.RROKEOUfl 
 THEORIES. 
 
 1. FROM the necessary functions 
 of government, and the effects produced 
 on the economical interests of society 
 by their good or ill discharge, we pro- 
 ceed to the functions which belong to 
 what I have termed, for want of a 
 better designation, the optional class ; 
 those which are sometimes assumed by 
 governments and sometimes not, and 
 which it is not unanimously admitted 
 that they ought to exercise. 
 
 Before entering on the general prin- 
 ciples of the question, it will be ad- 
 visable to clear from our path all those 
 cases, in which government interfer- 
 ence works ill, because grounded on 
 false views of the subject interfered 
 with. Such cases have no connexion 
 with any theory respecting the proper 
 limits of interference. There are some 
 things with which governments ought 
 not to meddle, and other things with 
 which they ought ; but whether right 
 or wrong in itself, the interference 
 must work for ill, if government, not 
 
 bis last account-taking that his debt* ex- 
 ceeded his assets by one-half. 
 
 " If he has issued negotiable securities 
 to three times the amount of his avail- 
 able asset*, according to his last account- 
 taking. 
 
 "The following may nlso be proceeded 
 ugainst as simple bankrupts: 
 
 " He who has not declared his own insol- 
 vency in the manner prescribed by law : 
 
 " He who has not come in and surrendered 
 within the time limited, having no legitimate 
 excuse for his absence : 
 
 " He who either produces no books at all, 
 or produces such as have been irregularly 
 kept, and this although the irregularities may 
 not indicate fraud." 
 
 The penalty for "simple bankruptcy" is 
 imprisonment for a term of not less than one 
 month, nor more than two years. The fol- 
 lowing are cases of fraudulent bankruptcy, 
 of which the punishment is compulsory 
 laboar (the galleys) for a term : 
 
 " If he has attempted to account for his 
 property by fictitious expenses and losses, 
 or if he does not fully account for all his 
 receipts ; 
 
 understanding the subject which it 
 meddles with, meddles to bring about 
 a result which would be mischievous. 
 We will therefore begin by passing in 
 review various false theories, which 
 have from time to time formed the 
 ground of acts of government moie or 
 less economically injurious. 
 
 Former writers on political economy 
 have found it needful to devote much 
 trouble and space to this department of 
 their subject. It has now happily be- 
 come possible, at least in our own 
 country, greatly to abridge this purely 
 negative part of our discussions. The 
 false theories of political economy 
 which have done so much mischief in 
 times past, are entirely discredited 
 among all who have not lagged behind 
 the general progress of opinion ; and 
 few of the enactments which were once 
 grounded on those theories still help to 
 deform the statute-book. As the prin- 
 ciples on which their condemnation 
 rests, have been fully set forth in other 
 
 "If he has fraudulently concealed any 
 sum of money or any debt duo to him, or 
 any merchandize or other moveables : 
 
 " If he has made fraudulent sales or gifts 
 of his property : 
 
 " If he has uUotred fictitious debts to be 
 proved against his estate : 
 
 "If he has been entrusted with pro- 
 perty, either merely to keep, or with 
 special directions as to its use, and has 
 nevertheless appropriated it to his own 
 use: 
 
 " If he has purchased real property in a 
 borrowed name : 
 
 " If he has concealed bis books. 
 
 "The following may also be proceeded 
 agninst in a similar way : 
 
 " He who has not kept books, or whose 
 books shall not exhibit his real situation as 
 regards his debts and credits. 
 
 "Ho who, having obtained a protection 
 (naiif-couduit), shall not have duly aS 
 tendcd." 
 
 These various provisions relate only to 
 commercial insolvency. The laws in regard 
 to ordinary debts are considerably nioro 
 rigorous to the debtor,
 
 PROTECTIONISM. 
 
 553 
 
 parts of this treatise, we may here 
 content ourselves with a few brief in- 
 dications. 
 
 Of these false theories, the most 
 notable is the doctrine of Protection to 
 Native Industry ; a phrase meaning 
 the prohibition, or the discouragement 
 by heavy duties, of such foreign com- 
 modities as are capable of being pro- 
 duced at home. If the theory involved 
 in this system had been correct, the 
 practical conclusions grounded on it 
 would not have been ^unreasonable. 
 The theory was, that fb buy things 
 produced at home was a national bene- 
 fit, and the introduction of foreign 
 commodities, generally a national loss. 
 It being at thu same time evident that 
 the interest of the consumer is to buy 
 foreign commodities in preference to 
 domestic whenever they are either 
 cheaper or better, the interest of the 
 consumer appeared in this respect to 
 be contrary to the public interest ; he 
 was certain, if left to his own inclina- 
 tions, to do what according to the 
 theory was injurious to the public. 
 
 It was shown, however, in our 
 analysis of the effects of international 
 trade, as it had been often shown by 
 former writers, that the importation of 
 foreign commodities, in the common 
 course of traffic, never takes place, ex- 
 cept when it is, economically speaking, 
 a national good, by causing the same 
 amount of commodities to be obtained 
 at a smaller cost of labour and capital 
 to the country. To prohibit, therefore, 
 this importation, or impose duties 
 which prevent it, is to render the labour 
 and capital of the country less efficient 
 in production than they would other- 
 wise be ; and compel a- waste, of the 
 difference between the labour and 
 capital necessary for the home produc- 
 tion of the commodity, and that which 
 is required for producing the tilings 
 with which it can be purchased from 
 abroad. The amount of national loss 
 thus occasioned is measured by the 
 excess of the price at which the com- 
 modity is produced, over that at which 
 it could be imported. In the case of 
 manufactured goods, the whole diffe- 
 rence between the two prices is ab- 
 sorbed in indemnifying the producers 
 
 for waste of labour, or of the capital 
 which supports that labour. Those 
 who are supposed to be benefited, 
 namely the makers of the protected 
 articles, (unless they form an exclusive 
 company, and have a monopoly against 
 their own countrymen as well aa 
 against foreigners,) do not obtain 
 higher profits than other people. All 
 is sheer loss, to the country as well as 
 to the consumer. When the protected 
 article is a product of agriculture the 
 waste of labour not being incurred on 
 the whole produce, but only on what 
 may be called the last instalment of it 
 the extra price is only in part an 
 indemnity for waste, the remainder 
 being a tax paid to the landlords. 
 
 The restrictive and prohibitory 
 policy was originally grounded on what 
 is called the Mercantile System, which 
 representing the advantage of foreign 
 trade to consist solely in bringing 
 money into the country, gave artificial 
 encouragement to exportation of goods, 
 and discountenanced their importation. 
 The only exceptions to the system 
 were those required by the system 
 itself. The materials and instruments 
 of production were the subjects of a 
 contrary policy, directed however to 
 the same end ; they were freely im- 
 ported, and not permitted to be ex- 
 ported, in order that manufacturers, 
 being more cheaply supplied with the 
 requisites of manufacture, might be 
 able to sell cheaper, and therefore to 
 export more largely. For a similar 
 reason, importation was allowed and 
 even favoured, when confined to the 
 productions of countries which were 
 supposed to take from the country still 
 more than it took from them, thus en- 
 riching it by a favourable balance of 
 trade. As part of the same system, 
 colonies were founded, fcr the supposed 
 advantage of compelling them to buy 
 our commodities, or at all events not 
 to buy those of any other country : in 
 retxirn for which restriction, we were 
 generally willing to come under an 
 equivalent obligation with respect to 
 the staple productions of the colonists. 
 The consequences of the theory were 
 pushed so far, that it was not unusual 
 even to give bounties on exportation,
 
 554 
 
 BOOK V. CHAPTER X. 1. 
 
 and induce foreigners to buy from us 
 rather than from other countries, by a 
 cheapness which we artificially pro- 
 duced, by paying part of the price for 
 them out of our own taxes. This is a 
 stretch beyond the point yet reached 
 by any private tradesman in his com- 
 petition for business. No shopkeeper, 
 I should think, ever made a practice of 
 bribing customers by selling goods to 
 them at a permanent loss, making it 
 up to himself from other funds in his 
 possession. 
 
 The principle of the Mercantile 
 Theory is now given up even by 
 writers and governments who still 
 cling to the restrictive system. What- 
 ever hold that system has over men's 
 minds, independently of the private 
 interests exposed to real or appre- 
 hended loss by its abandonment, is 
 derived from fallacies other than the 
 old notion of the benefits of heaping 
 up money in the country. The most 
 effective of these is the specious plea 
 of employing our own countrymen and 
 our national industry, instead of feed- 
 ing and supporting the industry of 
 foreigners. The answer to this, from 
 the principles laid down in former 
 chapters, is evident. Without revert- 
 ing to the fundamental theorem dis- 
 cussed in an early part of the present 
 treatise,* respecting the nature and 
 sources of employment for labour, it is 
 sufficient to say, what has usually been 
 said by the advocates of free trade, 
 that the alternative is not between em- 
 ploying cur own people and foreigners, 
 cut between employing one class and 
 another of our own people. The im- 
 ported commodity is always paid for, 
 directly or indirectly, with the produce 
 }f our own industry : that industry 
 being, at the same time, rendered 
 more productive, since, with the same 
 labour and outlay, we are enabled to 
 possess ourselves of a greater quantity 
 of the article. Those who have not 
 well considered the subject are apt to 
 suppose that our exporting an equiva- 
 lent in our own produce, for the foreign 
 articles we consume, depends on con- 
 tingencies on the consent of foreign 
 
 Supra, pp. 49-55. 
 
 countries to make some corresponding 
 relaxation of their own restrictions, 01 
 on the question whether those from 
 whom we buy are induced by that cir- 
 cumstance to buy more from us ; and 
 that, if these things, or things equiva- 
 lent to them, do not happen, the pay- 
 ment must be made in money. Now, 
 in the first place, there is nothing 
 more objectionable in a money pay- 
 ment than in payment by any other 
 medium, if the state of the market 
 makes it the most advantageous re- 
 mittance ; and the money itself was 
 first acquired, and would again be re- 
 plenished, by the export of an equiva- 
 lent value of our own products. But, 
 in the next place, a very short interval 
 of paying in money would so lower 
 prices as either to stop a part of the 
 importation, or raise up a foreign de- 
 mand Cor our produce, sufficient to pay 
 for the imports. I grant that this dis- 
 turbance of the equation of interna- 
 tional demand would be in some de- 
 gree to our disadvantage, in the pur- 
 chase of other imported articles ; and 
 that a country which prohibits some 
 foreign commodities, does, cceteris 
 paribus, obtain those which it does 
 not prohibit, at a less price than it 
 would otherwise have to pay. To ex- 
 press the same thing in other words ; 
 a country which destroys or prevents 
 altogether certain branches of foreign 
 trade, thereby annihilating a general 
 gain to the world, which would be 
 shared in some proportion between 
 itself and othei countries does, in 
 some circumstances, draw to itself, at 
 the expense of foreigners, a larger 
 share than would else belong to it of 
 the gain arising from that portion of 
 its foreign trade which it suffers to 
 subsist. But even this it can only be 
 enabled to do, if foreigners do not 
 maintain equivalent prohibitions or re- 
 strictions against its commodities. In 
 any case, the justice or expediency of 
 destroying one of two gains, in order 
 to engross a rather larger share of the 
 other, does not require much discus- 
 sion : the gain, too, which is destroyed, 
 being, in proportion to the magnitude 
 of the transactions, the larger of the 
 two, since it is the one which capital,
 
 PROTECTIONISM. 
 
 555 
 
 lei to itself, is supposed to seek by 
 nee. 
 
 /.neral theory, the 
 Protectionist doctrine finds support in 
 some particular cases, from considera- 
 tions which, when re-ally in point, in- 
 volve greater interests than mere sav- 
 ing of labour ; the interests of national 
 subsistence and of national defence. 
 The discussions on the Com Laws 
 have familiarized everybody with the 
 pica, that we ought to be independent 
 of foreigners for the food of the 
 people ; and the Navigation Laws 
 were grounded, in theory and profes- 
 sion, on the necessity of keeping up a 
 " nursery of seamen" for the navy. 
 Oa this last subject I at once admit, 
 that the object is worth the sacrifice ; 
 and that a country exposed to inva-iuii 
 by yea, if it cannot otherwise have suf- 
 ficient ships and sailors of its own to 
 secure the means of manning on an 
 emergency an adequate fleet, is quite 
 right in obtaining those means, even 
 at an economical sacrifice in point of 
 cheapness of transport. When the 
 English navigation laws were enacted, 
 the Dutch, from their maritime skill 
 and their low rate of profit at home, 
 were able to cany for other nations, 
 England included, at cheaper rates 
 than those nations could carry for 
 themselves : which placed all other 
 countries at a great comparative dis- 
 advantage in obtaining experienced 
 seamen for their ships of war. The 
 Navigation Laws, by which this de- 
 was remedied, and at the 
 game time a blow struck against the 
 maritime power of a nation with which 
 England was then frequently engaged 
 in hostilities, were probably, though 
 economically disadvantageous, politi- 
 cally expedient. But English, ships and 
 sailors can now navigate as cheaply as 
 those of any other country ; maintain- 
 ing at least an equal competition with 
 the other maritime nations even in 
 their own trade. The ends which may 
 once have justified Navigation Laws, 
 require them no longer, and afforded 
 no reason for maintaining this in- 
 vidious exception to the general rule 
 cf free trade. 
 With regard to subsistence, the plea 
 
 of the Protectionists has been 
 and so triumphantly met, that it re- 
 quires little notice here. That country 
 is tho most steadily as well as the 
 most abundantly supplied wit'. 
 which draws its supplies from the 
 largest surface. It is ridiculous to 
 found a general system of policy on go 
 improbable a danger as t; 
 at war with all the natii :!; <'!' the 
 world at once ; or to suppose that, 
 even if inferior at sea, a whole country 
 could be blockaded like a town, or thai 
 the growers of food in other countries 
 would not be as anxious not to lose an 
 advantageous market, as we should be 
 not to be deprived of their corn. On 
 the subject, however, of subsistence, 
 there is one point which deserves more 
 especial consideration. In cases of 
 actual or apprehended scarcity, many 
 countries of Europe are accustomed to 
 stop the exportation of food. Is this, 
 or not, sound policy ? There can be 
 no doubt that in the present state ot 
 international morality, a people can- 
 not, any more than an individual, bo 
 blamed for not starving itself to feed 
 others. But if the greatest amount of 
 good to mankind on the whole, were 
 the end aimed at in the maxims ot 
 international conduct, such collective 
 churlishness would certainly be con- 
 demned by them. Suppose that in 
 ordinary circumstances the trade in 
 food were perfectly free, so that the 
 price in one country could not habitu- 
 ally exceed that in any other by more 
 than the cost of carriage, together with 
 a moderate profit to the importer. A 
 general scarcity ensues, affecting all 
 countries, but in unequal degrees. If 
 the price rose in one country more 
 than in others, it would be a proof that 
 in that country the scarcity was se- 
 verest, and that by permitting food to 
 go freely thither from any other coun 
 try, it would be spared from a less 
 urgent necessity to relieve a greater. 
 When the interests, therefore, of all 
 countries are considered, free exporta- 
 tion is desirable. To the exporting 
 country considered separately, it may, 
 at least on the particular occasion, be 
 an inconvenience : but taking into ac- 
 count that the country which is now
 
 556 
 
 BOOK V. CHARTER X. 1. 
 
 the giver, will in some future season 
 be the receiver, and the one that is 
 benefited by the freedom, I cannot but 
 think that even to the apprehension of 
 food-rioters it might be made apparent, 
 that in such cases they should do to 
 others what they would wish done to 
 themselves. 
 
 In countries in which the system of 
 Protection is declining, but not yet 
 wholly given up, such as the United 
 States, a doctrine has come into notice 
 which is a sort of compromise between 
 free trade and restriction, namely, that 
 protection for protection's sake is im- 
 proper, but that there is nothing ob- 
 jectionable in having as much protec- 
 tion as may incidentally result from a 
 tariff framed solely for revenue. Even 
 in England, regret is sometimes ex- 
 pressed that a " moderate fixed duty" 
 was not preserved on corn, on account 
 of the revenue it would yield. Inde- 
 pendently, however, of the general 
 impolicy of taxes on the necessaries of 
 life, this doctrine overlooks the fact, 
 that revenue is received only on the 
 quantity imported, but that the tax is 
 paid on the entire quantity consumed. 
 To make the public pay much that the 
 treasury may receive a little, is not an 
 eligible mode of obtaining a revenue. 
 In the case of manufactured articles 
 the doctrine involves a palpable incon- 
 sistency. The object of the duty as a 
 nieans of revenue, is inconsistent with 
 its affording, even incidentally, any 
 protection. It can only operate as 
 protection in so far as it prevents im- 
 portation ; and to whatever degree it 
 prevents importation, it affords no 
 revenue. 
 
 The only case in which, on mere 
 principles of political economy, pro- 
 tecting duties can be defensible, is 
 when they are imposed temporarily 
 (especially in a young and rising na- 
 tion) in hopes of naturalizing a foreign 
 industry, in itself perfectly suitable to 
 the circumstances of the country. The 
 superiority of one country over another 
 in a branch of production, often arises 
 only from having begun it sooner. 
 There may be no inherent advantage 
 on one part, or disadvantage on the 
 other, but only a present superiority of 
 
 acquired skill and experience, A 
 country which has this skill and ex- 
 perience yet to acquire, may in other 
 respects be better adapted to the pro- 
 duction than those winch were earlier 
 in the field : and besides, it is a just 
 remark of Mr. Rae, that nothing has a 
 greater tendency to promote improve- 
 ments in any branch of production, than 
 its trial under a new set of conditions. 
 But it cannot be expected that indi- 
 viduals should, at their own risk, or 
 rather to their certain loss, introduce 
 a new manufacture, and bear the 
 burthen of carrying it on until the 
 producers have been educated up to 
 the level of those with whom the pro- 
 cesses are traditional. A protecting 
 duty, continued for a reasonable time, 
 will sometimes be the least inconve- 
 nient mode in which the nation can 
 tax itself for the support of such an 
 experiment. But the protection should 
 be confined to cases in which there is 
 good ground of assurance that the in- 
 dustry which it fosters will after a 
 time be able to dispense with it ; nor 
 should the domestic producers ever be 
 allowed to expect that it will be con- 
 tinued to them beyond the time neces- 
 sary for a fair trial of what they are 
 capable of accomplishing. 
 
 The only writer of any reputation aa 
 a political economist, who now adheres 
 to the Protectionist doctrine, M>\ H. 
 C. Carey, rests its defence, in an 
 economic point of view, principally on 
 two reasons. One is, the great saving 
 in cost of carriage, consequent on pro- 
 ducing commodities at or very near to 
 the place where they are to be con- 
 sumed. The whole of the cost of car- 
 riage, both on the commodities im- 
 ported and on those exported in ex- 
 change for them, he regards as a 
 direct burthen on the producers, and 
 not, as is obviously the truth, on the 
 consumers. On whomsoever it falls, 
 it is, without doubt, a burthen on tho 
 industry of the world. But it is ob- 
 vious (and that Mr. Carey does not 
 see it, is one of tnc many surprising 
 things in his book) that the burthen 
 is only borne for a more than equi- 
 valent advantage. If the commodity 
 is bought in a foreign country with
 
 PROTECTIONISM. 
 
 557 
 
 domestic produce in spite of the double 
 cost of carriage, the fact proves that, 
 heavy as that cost may be, the saving 
 in cost of production outweighs it, and 
 the collective labour of the country is 
 on the whole better remunerated than 
 if the article were produced at home. 
 Cost of carriage is a natural protecting 
 duty, which free trade has no power 
 to abrogate : and unless America 
 gained more by obtaining her manu- 
 factures through, the medium of her 
 corn and cotton, than she loses in cost 
 of carriage, the capital employed in 
 producing corn and cotton in annually 
 increased quantities for the foreign 
 market, would turn to manufactures 
 instead. The natural advantage at- 
 tending a mode of industry in which 
 there is less cost of carriage to pay, 
 can at most be only a justification for 
 a temporary and merely tentative pro- 
 tection. The expenses of production 
 being always greatest at first, it may 
 happen that the home production, 
 though really the most advantageous, 
 may not become so until after a certain 
 duration of pecuniary loss, which it is 
 not to be expected that private specu- 
 lators should incur in order that their 
 successors may be benefited by their 
 ruin. I have therefore conceded that 
 in a new country, a temporary pro- 
 tecting duty may sometimes be econo- 
 mically defensible ; on condition, how- 
 ever, that it be strictly limited in 
 point of time, and provision be made 
 Jhat during the latter part of its 
 existence it be on a gradually de- 
 creasing scale. Such temporary pro- 
 tection is of the same nature as a 
 patent, and should be governed by 
 similar conditions. 
 
 The remaining argument of Mr. 
 Carey in support of the economic 
 benciits of Protectionism, applies only 
 to countries whose exports consist 
 of agricultural produce. He argues, 
 that by a trade of this description they 
 actually send away their soil; the dis- 
 tant consumers not giving back to the 
 land of the country, as home consumers 
 would do, the fertilizing elements 
 which they abstract from it. This 
 argument deserves attention, on ac- 
 count of the physical truth on which 
 
 it is founded ; a truth which has only 
 lately coine to be understood, but 
 which is henceforth destined to be a 
 permanent element in the thoughts of 
 statesmen, as it must always have 
 been in the destinies of nations. To 
 the question of Protectionism, how- 
 ever, it is irrelevant. That the im- 
 mense growth of raw produce in Ame- 
 rica to be consumed in Europe, is pro- 
 gressively exhausting the soil of the 
 Eastern, and even of the older Western 
 States, and that both are already far 
 less productive than formerly, is cre- 
 dible in itself, even if no one bore wit- 
 ness to it. But what I have already 
 said respecting cost of carriage, is truo 
 also of the cost of manuring. Free 
 trade does not compel America to ex- 
 port corn ; she would cease to do so, if 
 it ceased to be to her advantage. As, 
 then, she would not persist in export- 
 ing raw produce and importing manu- 
 factures, any longer than the labour 
 she saved by doing so, exceeded what 
 the carriage cost her ; so, when it be- 
 came necessary for her to replace in 
 the soil the elements of fertility which 
 she had sent away, if the saving in 
 cost of production were more than 
 equivalent to the cost of carriage and 
 of manure together, manure would bo 
 imported, and if not, the export of corn 
 would cease. It is evident that one of 
 these two things would already have 
 taken place, if there had not been near 
 at hand a constant succession of new 
 soils, not yet exhausted of their fer- 
 tility, the cultivation of which enables 
 her, whether judiciously or not, to 
 postpone the question of manure. As 
 soon as it no longer answers better to 
 break up new soils than to manure 
 the old, America will either become a 
 regular importer of manure, or will 
 without protecting duties grow corn 
 for herself only, and manufacturing for 
 herself, will make her manure, as 
 Mr. Carey desires, at home.* 
 
 To this Mr. Carey would reply (indeed, 
 he has already so replied in advance), that 
 of all commodities, manure is the least sus- 
 ceptible of being conveyed to a distance. 
 This is true of sewage, and of stable manure, 
 but not true of the ingredients to which those 
 manures owe their efficiency. These, on the 
 contrary, are chiefly substances containing
 
 559 
 
 BOOK V. CHAPTER X. 2. 
 
 For these obvious reasons, I hold 
 Mr. Carey's economic arguments for 
 Protectionism to be totally invalid. The 
 economic, however, is far from being 
 the strongest point of his case. Ame- 
 rican Protectionists often reason ex- 
 tremely ill, but it is an injustice to 
 them to suppose that their Protec- 
 tionist creed rests upon nothing su- 
 perior to an economic blunder: many 
 of them have been led to it much more 
 by consideration for the higher inte- 
 rests of humanity, than by purely eco- 
 nomic reasons. They, and Mr. Carey 
 at their head, deem it a necessary 
 condition of human improvement that 
 towns should abound ; that men should 
 combine their labour, by means of in- 
 terchange, with near neighbours with 
 people of pursuits, capacities, and 
 mental cultivation different from their 
 own, sufficiently close at hand for mu- 
 tual sharpening of wits and enlarging 
 of ideas rather than with people on 
 the opposite side of the globe. They 
 believe that a nation all engaged in 
 the same, or nearly the same, pursuit 
 a nation all agricultural cannot at- 
 tain a high state of civilization and 
 culture. And for this there is a great 
 foundation of reason. If the difficulty 
 can be overcome, the United States, 
 with their free institutions, their uni- 
 versal schooling, and their omnipresent 
 press, are the people to do it ; but 
 whether this isjpossible or not, is still 
 a problem. So far, however, as it is 
 an object to check the excessive dis- 
 persion of the population, Mr. Wake- 
 field has pointed out a better way : to 
 
 great fertilizing power in small bulk ; sub- 
 stances of which the human body requires but 
 a small quantity, and hence peculiarly suscep- 
 tible of being imported ; the mineral alkalies 
 and the phosphates. The question, indeed, 
 mainly concerns the phosphates ; for of the 
 alkalies, soda is procurable everywhere, 
 while potass, being one of the constituents 
 of granite and the other feldspathic rocks, 
 exists in many subsoils, by whose progressive 
 decomposition it is renewed ; a large quan- 
 tity also being brought down in the deposits 
 of rivers. As for the phosphates, they, in the 
 very convenient form of pulverised bones, are 
 a regular article of commerce, largely im- 
 ported into England, as they are sure to be 
 into any country where the conditions of 
 industry make it worth ^Yhile to pay the 
 price. 
 
 modify the existing method of di* 
 posing of the unoccupied lands, by 
 raising their price ; instead of lower- 
 ing it, or giving away the land gratui- 
 tously, as is largely done since the 
 passing of the Homestead Act. To 
 cut the knot in Mr. Carey's fashion, by 
 Protectionism, it would be necessary 
 that Ohio and Michigan should bo 
 protected against Massachusetts aa 
 well as against England : for the 
 manufactories of New England, no 
 more than those of the old country, 
 accomplish his desideratum of bring-' 
 ing a manufacturing population to the 
 doors of the Western farmer. Boston 
 and New York do not supply the want 
 of local towns to the Western Prairies, 
 any better than Manchester ; and it is 
 as difficult to get back the manure 
 from the one place as from the other. 
 
 There is only one part of the Pro- 
 tectionist scheme which requires any 
 further notice : its policy towards colo- 
 nies, and foreign dependencies ; that 
 of compelling them to trade exclusively 
 with the dominant country. A country 
 which thus secures to itself an extra 
 foreign demand for its commodities, 
 undoubtedly gives itself some advan- 
 tage in the distribution of the general 
 gains of the commercial world. Since, 
 however, it causes the industry and 
 capital of the colony to be diverted 
 from channels, which are proved to be 
 the most productive, inasmuch as they 
 are those into which industry and ca- 
 pital spontaneously tend to flow ; there 
 is a loss, on the whole, to the produc- 
 tive powers of the world, and the 
 mother country does not gain so much 
 as she makes the colony lose. If, 
 therefore, the mother country refuses 
 to acknowledge any reciprocity of obli- 
 gation, she imposes a tribute on the 
 colony in an indirect mode, greatly 
 more oppressive and injurious than the 
 direct. But if, with a more equitable 
 spirit, she submits herself to corre- 
 sponding restrictions for the benefit of 
 the colony, the result of the whole 
 transaction is the ridiculous one, that 
 each party loses much, in order that 
 the other may gain a little. 
 
 2. Next to the system of Protec-
 
 USUKY LAWS. 
 
 559 
 
 tion, among mischievous interferences 
 \\ith tlio spontaneous course of indus- 
 trial transactions, may be noticed cer- 
 tain interferences with contracts. One 
 instance is that of the Usury Laws. 
 These originated in a religious preju- 
 dice against receiving interest on 
 money, derived from that fruitful source 
 of mischief in modern Europe, the at- 
 tempted adaptation to Christianity of 
 doctrines and precepts drawn from the 
 Jewish law. In Mahomedan nations 
 the receiving of interest is formally in- 
 terdicted, and rigidly abstained from ; 
 and Sismondi has noticed, as one 
 among the causes of the industrial in- 
 feriority of the Catholic, compared with 
 the Protestant parts of Europe, that 
 the Catholic church in the Middle 
 Ages gave its sanction to the same pre- 
 judice ; which subsists, impaired but 
 not destroyed, wherever that religion is 
 acknowledged. Where law or con- 
 scientious scruples prevent lending at 
 interest, the capital which belongs to 
 persons not in business is lost to pro- 
 ductive purposes, or can be applied to 
 them only in peculiar circumstances of 
 personal connexion, or by a subterfuge. 
 Industry is thus limited to the capital 
 of the undertakers, and to what they 
 can borrow from persons not bound by 
 the same laws or religion as them- 
 selves. In Mussulman countries the 
 bankers and money dealers are either 
 Hindoos, Armenians, or Jews. 
 
 In more improved countries, legisla- 
 tion no longer discountenances the re- 
 ceipt of an equivalent for money lent ; 
 but it has everywhere interfered with 
 the free agency of the lender and bor- 
 rower, by fixing a legal limit to the 
 rate of interest, and making the re- 
 ceipt of more than the appointed maxi- 
 mum a penal offence. This restriction, 
 liiough approved by Adam Smith, has 
 Ken condemned by all enlightened 
 fersons since the triumphant onslaught 
 ihade upon it by Bentham in his 
 "Letters on Usury," which may still 
 fce referred to as the best extant writing 
 on the subject. 
 
 Legislators may enact and maintain 
 Usury Laws from one of two motives : 
 idoas of public policy, or concern for 
 the interest of the parties in the con- 
 
 tract ; in this case, of one party only, 
 the borrower. As a matter of policy, 
 the notion may possibly be, that it is 
 for the general good that interest 
 should be low. It is however a mis- 
 apprehension of the causes which in- 
 fluence commercial transactions, to sup- 
 pose that the rate of interest is really 
 made lower by law, than it would be 
 made by the spontaneous play of supply 
 and demand. If the competition of 
 borrowers, left unrestrained, would 
 raise the rate of interest to six per 
 cent, this proves that at five there 
 would be a greater demand for loans, 
 than there is capital in the market to 
 supply. If the law in these circum- 
 stances permits no interest beyond five 
 per cent, there will be some lenders, 
 who not choosing to disobey the law, 
 and not being in a condition to employ 
 their capital otherwise, will content 
 themselves with the legal rate : but 
 others, finding that in a season of press- 
 ing demand, more may be made of 
 their capital by other means than they 
 are permitted to make by lending it, 
 will not lend it at all ; and the loan- 
 able capital, already too small for the 
 demand, will be still further dimi- 
 nished. Of the disappointed candi- 
 dates there will be many at such 
 periods, who must have their neces- 
 sities supplied at any price, and these 
 will readily find a third section ot 
 lenders, who will not be averse to join 
 in a violation of the law, either by cir- 
 cuitous transactions partaking of the 
 nature of fraud, or by relying on the 
 honour of the borrower. The extra 
 expense of the roundabout mode of pro- 
 ceeding, and an equivalent for the risk 
 of non-payment and of legal penalties, 
 must be paid by the borrower, over 
 and above the extra interest which 
 would have been required of him by 
 the general state of the market. The 
 laws which were intended to lower the 
 price paid by him for pecuniary accom- 
 modation, end thus in greatly increasing 
 it. These- laws have also a directly 
 demoralizing tendency. Knowing the 
 difficulty of detecting an illegal pecu- 
 niary transaction between two persons, 
 in which no third person is involved, s 
 long as it is the interest of both to keep
 
 560 
 
 the secret, legislators have adopted 
 the expedient of tempting the borrower 
 to become the informer, by making the 
 annulment of the debt a part of the 
 penalty for the offence ; thus rewarding 
 men for obtaining the property of 
 others by false promises, and then not 
 only refusing payment, but invoking 
 legal penalties on those who have 
 helped them in their need. The moral 
 sense of mankind very rightly in- 
 famizes those who resist an otherwise 
 just claim on the ground of usury, and 
 tolerates such a plea only when re- 
 sorted to as the best legal defence 
 available against an attempt really 
 considered as partaking of fraud or 
 extortion. But this very severity of 
 public opinion renders the enforce- 
 ment of the laws so difficult, and the 
 infliction of the penalties so rare, that 
 when it does occur it merely victimizes 
 an individual, and has no effect on 
 general practice. 
 
 In so far as the motive of the re- 
 striction may be supposed to be, not 
 public policy, but regard for the in- 
 terest of the borrower, it would be diffi- 
 cult to point out any case in which 
 such tenderness on the legislator's part 
 is more misplaced. A person of sane 
 mind, and of the age at which persons 
 are legally competent to conduct their 
 own concerns, must be presumed to be 
 a sufficient guardian of his pecuniary 
 interests. If he may sell an estate, or 
 grant a release, or assign away all his 
 property, without control from the law, 
 it seems very unnecessary that the 
 only bargain which he cannot make 
 without its intermeddling, should be a 
 loan of money. The law seems to 
 presume that the money-lender, dealing 
 with necessitous persons, can take ad- 
 vantage of their necessities, and exact 
 conditions limited only by his own plea- 
 sure. It might be so if there were 
 only one money-lender within reach. 
 Bat when there is the whole monied 
 capital of a wealthy community to re- 
 sort to, no borrower is placed under 
 any disadvantage in the market merely 
 kj tfca urgency of his need. If he can- 
 not borrow at the interest paid by 
 other people, it must be because he 
 cannot give such good security : and 
 
 BOOK V. CHAPTER X. 2. 
 
 competition will limit the extra de. 
 niand to a fair equivalent for the risk 
 of his proving insolvent. Though tho 
 law intends favour to the barrower, it 
 is to him above all that injustice is, 
 in this case, clone by it. What can bo 
 more unjust than that a person who 
 cannot give perfectly good security, 
 should be prevented from borrowing of 
 persons who are willing to lend money 
 to him, by their not being permitted to 
 receive the rate of interest which 
 would be a just equivalent for their 
 risk ? Through the mistaken kindness 
 of the law, he must either go without 
 the money which is perhaps necessary 
 to save him from much greater losses, 
 or be driven to expedients of a far 
 more ruinous description, which the 
 law either has not found it possible, or 
 has not happened, to interdict. 
 
 Adam Smith rather hastily ex- 
 pressed the opinion, that only two 
 kinds of persons, " prodigals and pro- 
 jectors,'' could require to borrow money 
 at more than the market rate of in- 
 terest. He should have included all 
 persons who are in any pecuniary diffi- 
 culties, however temporary their ne- 
 cessities may be. It may happen to 
 any person in business, to be disap- 
 pointed of the resources on which he 
 had calculated for meeting some en- 
 gagement, the non-fulfilment of which 
 on a fixed day would be bankruptcy. 
 In periods of commercial difficulty, this 
 is the condition of many prosperous 
 mercantile firms, who become compe- 
 titors for the small amount of dispos- 
 able capital which, in a time of general 
 distrust, the owners are willing to part 
 with. Under the English usury laws, 
 now happily abolished, the limitations 
 imposed by those laws were felt as a 
 most serious aggravation of every com- 
 mercial crisis. Merchants who could 
 have obtained the aid they required at 
 an interest of seven or eight per cent 
 for short periods, were obliged to give 
 20 or 30 per cent, or to resort to forced 
 sales of goods at a still greater loss. 
 Experience having obtruded these evils 
 on the notice of Parliament, the sort 
 of compromise took place, of which 
 English legislation affords so many in- 
 stances, and which helps to make oar
 
 REGULATION OF THE PRICE OF FOOD. 
 
 561 
 
 laws and policy the mass of incon- 
 sistency that they are. The law was 
 reformed as a person reforms a tight 
 shoe, who cuts a hole in it where it 
 pinches hardest, and continues to wear 
 it. Retaining the erroneous principle 
 as a general rule, Parliament allowed 
 nn exception in the case in which the 
 
 Jractical mischief was most flagrant, 
 t left the usury laws unrepealed, hut 
 exempted hills of exchange, of not 
 more than three months' date, from 
 their operation. Some years afterwards 
 the laws were repealed in regard to all 
 other contracts, but left in force as to 
 all those which relate to land. Not a 
 particle of reason could be given for 
 making this extraordinary distinction ; 
 but the " agricultural mind" was of 
 opinion that the interest on mort- 
 gages, though it hardly ever came up 
 to the permitted point, would come up 
 to a still higher point ; and the usury 
 laws were maintained that the land- 
 lords might, as they thought, be en- 
 abled to borrow below the market rate, 
 as the corn-laws were kept up that the 
 same class might be able to sell corn 
 above the market rate. The modesty 
 of the pretension was quite worthy of 
 the intelligence which could think that 
 the end aimed at was in any way for- 
 warded by the means used. 
 
 With regard to the " prodigals and 
 prqjectori" spoken of by Adam Smith; 
 no law can prevent a prodigal from 
 ruining himself, unless it lays him or 
 his property under actual restraint, 
 according to the unjustifiable practice 
 of the Roman Law and some of the 
 Continental systems founded on it. 
 The cnly effect of usury laws upon a 
 prodigal, is to make his ruin rather 
 more expeditions, by driving him to a 
 disreputable class of money-dealers, 
 and rendering the conditions more 
 onerous by the extra risk created by 
 the law. As for projectors, a term, in 
 its unfavourable sense, rather unfairly 
 applied to every person who has a 
 project ; such laws may put a veto 
 upon the prosecution of the most pro- 
 mising enterprise, when planned, as it 
 generally is, by a person who does not 
 possess capital adequate to its success- 
 ful completion. Many of the greatest 
 M, 
 
 improvements were at first lookc 
 shyly on by capitalists, and had to wai 
 long before they found one sufficient!.? 
 adventurous to be the first in a ne\i 
 path : many years elapsed before Stc- 
 phenson could convince even the en- 
 terprising mercantile public of Liver 
 pool and Manchester, of the advantagf 
 of substituting railways for turnpike, 
 roads ; and plans on which great labour 
 and large sums have been expended 
 with little visible result, (the epoch in 
 their progress when predictions of 
 failure are most rife,) may be indefi- 
 nitely suspended, or altogether dropped, 
 and the outlay all lost, if, when tb.8 
 original funds are exhausted, the law 
 will not allow more to be raised on the 
 terms on which people are willing to 
 expose it to the chances of an enter- 
 prise not yet secure of success. 
 
 3. Loans are not the only kind of 
 contract, of which governments have 
 thought themselves qualified to regu- 
 late the conditions Ibetter than the 
 persons interested. There is scarcely 
 any commodity which they have not, 
 at some place or time, endeavoured to 
 make either dearer or cheaper than it 
 would be if left to itself. The most 
 plausible case for artificially cheapen- 
 ing a commodity, is that of food The 
 desirableness of the object is in this 
 case undeniable. But since the ave- 
 rage price of food, like that of other 
 things, conforms to the cost of produc- 
 tion with the addition of the usual 
 profit ; if this price is not expected by 
 the farmer, he will, unless compelled 
 by law, produce no more than ho re- 
 quires for his own consumption : and 
 the law therefore, if absolutely deter- 
 mined to have food cheaper, must sub- 
 stitute, for the ordinary motives to 
 cultivation, a system of penalties. If 
 it shrinks from doing this, it has no 
 resource but that of taxing the whole 
 nation, to give a bounty or premium to 
 the grower or importer of corn, thus 
 giving everybody cheap bread at the 
 expense of all : in reality a largess to 
 those who do not pay taxes, at the ex- 
 pense of those who do ; one of the forms 
 of a practice essentially bad, that of 
 converting the working classes into 
 00
 
 562 
 
 BOOK V. CHAPTER X. 4 
 
 unworking classes by making them a 
 present of subsistence. 
 
 It is not however so much the gene- 
 ral or average price of food, as its 
 occasional high price in times of emer- 
 gency, -which governments have studied 
 to reduce. In some cases, as for ex- 
 ample the famous " maximum" of the 
 revolutionary government of 1793, the 
 compulsory regulation was an attempt 
 by the ruling powers to counteract the 
 necessary consequences of their own 
 acts; to scatter an indefinite abun- 
 dance of the circulating medium with 
 one hand, and keep clown prices with 
 the other; a thing manifestly impos- 
 sible under any regime except one of 
 unmitigated terror. In case of actual 
 scarcity, governments are often urged, 
 as they were in the Irish emergency of 
 1847, to take measures of some sort 
 i'or moderating the price of food. But 
 the price of a thing cannot be raised 
 by deficiency of supply, beyond what 
 is sufficient to make a corresponding 
 reduction of the consumption ; and if a 
 government prevents this reduction 
 from being brought about by a rise of 
 price, there remains no mode of effect- 
 ing it unless by taking possession of 
 all the food, and serving it out in 
 rations, as in a besieged town. In a 
 real scarcity, nothing can afford gene- 
 ral relief, except a determination by 
 the richer classes to diminish their own 
 consumption. If they buy and consume 
 their usual quantity of food, and con- 
 tent themselves with giving money, 
 they do no good. The price is forced 
 up until the poorest competitors have 
 no longer the means of competing, and 
 the privation of food is thrown exclu- 
 sively upon the indigent, the other 
 classes being only affected pecuniarily. 
 When the supply is insufficient, some- 
 body must consume less, and if every 
 rich person is determined not to be that 
 Kmebody, all they do b^ Subsidizing 
 their poorer competitors is to force up 
 *he price so much the higher, with no 
 iffect but to enrich the corn-dealers, 
 Ihe very reverse of what is desired by 
 those who recommend such measures. 
 All that governments can do in these 
 emergencies, is to counsel a general 
 moderation in consumption, and to in- 
 
 terdict such kinds of it as arc not of 
 primary importance. Direct measures 
 at the cost of the state, to procure food 
 from a distance, are expedient when 
 from peculiar reasons the thing is not 
 likely to be done by private speculation. 
 In any other case they are a great 
 error. Private speculators will not, in 
 such cases, venture to compete with 
 the government ; and though a govern- 
 ment can do more than any one mer- 
 chant, it cannot do nearly so much as 
 all merchants. 
 
 4. Governments, however, art 
 oftener chargeable with having at- 
 tempted, too successfully, to make 
 things dear, than with having aimed 
 by wrong means at making their 
 cheap. The usual instrument for pro- 
 ducing artificial dearness is monopoly. 
 To confer a monopoly upon a producer 
 or dealer, or upon a set of producers or 
 dealers not too numerous to combine, 
 is to give them the power of levying 
 any amount of taxation on the public, 
 for their individual benefit, which will 
 not make the public forego the use of 
 the commodity. When the sharers in 
 the monopoly are so numerous and so 
 widely scattered that they are pre- 
 vented from combining, the evil is 
 considerably less : but even then the 
 competition is not so active among a 
 limited, as among an unlimited num- 
 ber. Those who feel assured of a fair 
 average proportion in the general 
 business, are seldom eager to get a 
 larger share, by foregoing a portion of 
 their profits. A limitation of competi- 
 tion, however partial, may have mis- 
 chievous effects quite disproportionecj 
 to the apparent cause. The mere ex- 
 clusion of foreigners, from a branch of 
 industry open to the free competition 
 of every native, has been known, even 
 in England, to render that branch a 
 conspicuous exception to the general 
 industrial energy of the country. The 
 silk manufacture of England remained 
 far behind that of other countries of 
 Europe, so long as the foreign fabrics 
 were prohibited. In addition to th 
 tax levied for the profit, real or imagi- 
 nary, of the monopolists, the consumer 
 thus pays an additional tax for their
 
 MONOPOLIES. COMBINATION LAWS. 
 
 563 
 
 laziness and incapacity. When re- 
 lieved from the immediate stimulus of 
 it ion, producers and dealers 
 gn>\v indifferent to the dictates of their 
 ultimate pecuniary interest ; }>; 
 to the most hopeful prospects, the pre- 
 sent case of adhering to routine. A 
 person who is already thriving, seldom 
 puts himself out of his way to com- 
 mence even a lucrative improvement, 
 unless urged by the additional motive 
 of fear lest some rival should supplant 
 him by getting possession of it before 
 him. 
 
 The condemnation of monopolies 
 ought not to extend to patent*, by 
 \vliich the originator of an improved 
 process is allowed to enjoy, fora limited 
 period, the exclusive privilege of using 
 his own improvement. This is not 
 making the commodity dear for his 
 benefit, but merely postponing a part 
 of the increased cheapness which the 
 public owe to the inventor, in order to 
 compensate and reward him for the 
 service. That he ought to be both 
 compensated and rewarded for it, will 
 not be denied, and also that if all were 
 at once allowed to avail themselves of 
 his ingenuity, without having shared 
 the labours or the expenses which he 
 had to incur in bringing his idea into 
 a practical shape, either such expenses 
 and labours would be undergone by 
 nobody, except very opulent and very 
 public-spirited persons, or the state 
 must put a value on the service ren- 
 dered by an inventor, and make him a 
 pecuniary grant. This has been done 
 in some instances, and may be done 
 without inconvenience in cases of very 
 conspicuous public benefit ; but in 
 general an exclusi ;a privilege, of tem- 
 porary duration, is preferable ; because 
 it leaves nothing to any one's dis- 
 cretion ; because the reward conferred 
 by it depends upon the invention's 
 being found useful, and the greater the 
 usefulness the greater the reward ; and 
 because it is paid by the very persons 
 to whom the service is rendered, the 
 consumers of the commodity, ^o de- 
 cisive, indeed, arc those considerations, 
 that if the system of patents were 
 abandoned for that of rewards by the 
 itate, the best shape which these could 
 
 assume wou\l be that of a small tem- 
 porary tax, imposed for the inventor's 
 benefit, on all persons making use of 
 the invention. To this, however, or to 
 any other system which would vest in 
 the state the power of deciding whether 
 an inventor should derive any pecu- 
 niary advantage from the public benefit 
 which he confers, the objections arc 
 evidently stronger and more funda- 
 mental than the strongest which can 
 possibly be urged against patents. It 
 is generally admitted that the present 
 Patent Laws need much improvement ; 
 but in this case, as well as in tho 
 closely analogous one of Copyright, it 
 would be a gross immorality in the law 
 to set everybody free to use a person's 
 work without hia consent and without 
 giving him an equivalent. I have 
 seen with real alarm several recent 
 attempts, in quarters carrying some 
 authority, to impugn the principle of 
 patents altogether ; attempts which, if 
 practically successful, would enthrone 
 free stealing under the prostituted 
 name of free trade, and make the men 
 of brains, still more than at present, 
 the needy retainers and dependents of 
 the men of money-bags. 
 
 5. I pass to another kind of go- 
 vernment interference, in which the 
 end and the means are alike odious, 
 but which existed in England until 
 not so much as a generation ago, and 
 in France up to the year 1864. I 
 mean the laws against combinations 
 of workmen to raise wages ; laws en- 
 acted and maintained for the declared 
 purpose of keeping wages low, as tho 
 famous Statute of Labourers was passed 
 by a legislature of employers, to pre 
 vent the labouring class, when ila' 
 numbers had been thinned by a pesti- 
 lence, from taking advantage of tho 
 diminished competition to obtain higher 
 wages. Such laws exhibit the infernal 
 spirit of the slave master, when to re- 
 tain the working classes in avowed 
 slavery has ceased to be practicable. 
 
 If it were possible for the working 
 classes, by combining among them- 
 selves, to raise or keep up tho general 
 rate of wages, it needs hardly be said 
 that this would be a thing not to be 
 2
 
 564 
 
 punished, but to be welcomed and re- 
 joiced at. Unfortunately the effect is 
 quite beyond attainment by such 
 means. The multitudes who compose 
 the working class are too numerous 
 and too widely scattered to combine at 
 all, much more to combine effectually. 
 If they could do so, they might doubt- 
 less succeed in diminishing the hours 
 of labour, and obtaining the same 
 wages for less work. But if they 
 aimed at obtaining actually higher 
 wages than the rate fixed by demand 
 and supply the rate which distributes 
 the whole circulating capital of the 
 country ajnong the entire working po- 
 pulation this could only be accom- 
 plished by keeping a part of their 
 number permanently out of employ- 
 ment. As support from public charity 
 would of course be refused to those 
 who could get work and would not 
 accept it, they would be thrown for 
 support upon the trades union of which 
 they were members ; and the work- 
 people collectively would be no better 
 off than before, having to support the 
 same numbers out of the same aggre- 
 gate wages. In this way, however, 
 the class would have its attention for- 
 cibly drawn to the fact of a superfluity 
 of numbers, and to the necessity, if 
 they would have high wages, of pro- 
 portioning the supply of labour to the 
 demand. 
 
 Combinations to keep up wages 
 are sometimes successful, in trades 
 where the workpeople are lew in num- 
 ber, and collected in a small number of 
 local centres. It is questionable if com- 
 binations ever had the smallest effect 
 on the permanent remuneration of spin- 
 ners or weavers ; but the journeymen 
 type-founders, by a close combination, 
 are able, it is said, to keep up a rate of 
 wages much beyond that which is usual 
 in employments of equal hardness and 
 skill ; and even the tailors, a much more 
 numerous class, are understood to have 
 had, to some extent, a similar success. 
 A rise of wages, thus confined to par- 
 ticular employments, is not (like a rise 
 of general wages) defrayed from profits, 
 but raises the value and price of the 
 particular article, and falls on the con- 
 sumer; the capitalist who produces the 
 
 BOOK V. CHAPTER X. 5, 
 
 commodity being only injured in so far 
 as the high price tends to narrow tha 
 market; and not even then, unless it 
 does so in a greater ratio than that of 
 the rise of price : for though, at higher 
 wages, he employs, with a given capital, 
 fewer workpeople, and obtains less of 
 the commodity, yet, if he can sell the 
 whole of this diminished quantity at 
 the higher price, his profits are as great 
 as before. 
 
 This partial rise of wages, if not 
 gained at the expense of the remainder 
 of the working class, ought not to be 
 regarded as an evil. The consumer, 
 indeed, must pay for it ; but cheapness 
 of goods is desirable only when the 
 cause of it is that their production 
 costs little labour, and not when occa- 
 sioned by that labour's being ill remu- 
 nerated. It may appear, indeed, at 
 first sight, that the high wages of the 
 type-founders (for example) are ob- 
 tained at the general cost of the labour- 
 ing class. This high remuneration 
 either causes fewer persons to find em- 
 ployment in the trade, or, if not, must 
 lead to the investment of more capital 
 in it, at the expense of other trades : 
 in the first case, it throws an additional 
 number of labourers on the general 
 market ; in the second, it withdraws 
 from that market a portion of the de- 
 mand: effects, both of which are inju- 
 rious to the working classes. Such, 
 indeed, would really be the result of a 
 successful combination in a particular 
 trade or trades, for some time after its 
 formation ; but when it is a permanent 
 thing, the principles so often insisted 
 upon in this treatise, show that it can 
 have no such effect. The habitual 
 earnings of the working classes at largo 
 can be affected by nothing but the 
 habitual requirements of the labouring 
 people : these indeed may be altered, 
 but while they remain the same, wages 
 never fall permanently below the stan- 
 dard of these requirements, and do not 
 long remain above that standard. If 
 there had been no combinations in par- 
 ticular trades, and the wages of those 
 trades had never been kept above tha 
 common level, there is no reason to 
 suppose that the common level would 
 have been at all higher than it now is.
 
 COMBINATION LAWS. 
 
 565 
 
 There \vonld merely have been a greater 
 number of people altogether, and 
 smaller number of exceptions to the 
 ordinary low rate of wages. 
 
 If, therefore, no improvement were 
 to be hoped for in the general circum- 
 stances of the working classes, the suc- 
 cess of a portion of them, however .small, 
 in keeping their wages by combination 
 above the market rate, would be wholly 
 a matter of satisfaction. But when 
 the elevation of the character and con- 
 dition of the entire body has at last 
 become a thing not beyond the reach 
 of rational effort, it is time that the 
 better paid classes of skilled artisans 
 should seek their own advantage in 
 common with, and not by the exclusion 
 of, their fellow labourers. "While they 
 continue to fix their hopes on hedging 
 themselves in against competition, and 
 protecting their own wages by shutting 
 out others from access to their employ- 
 ment, nothing better can be expected 
 from them than that total absence of 
 any large and generous aims, that al- 
 most open disregard of all other objects 
 than high wages and little work for 
 their own small body, which were so 
 deplorably evident in the proceedings 
 and manifestoes of the Amalgamated 
 Society of Engineers during their quar- 
 rel with their employers. Success, even 
 if attainable, in raising up a protected 
 class of working people, would now be 
 a hindrance, instead of a help, to the 
 emancipation of the working classes at 
 large. 
 
 IJut though combinations to keep up 
 wages are seldom effectual, and when 
 effectual, are, for the reasons which I 
 have assigned, seldom desirable, the 
 right of making the attempt is one 
 which cannot be refused to any portion 
 of the working population without great 
 injustice, or without the probability of 
 fatally misleading them respecting the 
 circumstances which determine their 
 condition. So long as combinations to 
 raise wages were prohibited by law, 
 the law appeared to the operatives to 
 be the real cause of the low wages 
 which there was no denying that it 
 had done its best to produce. Experi- 
 ence of strikes has been the best teacher 
 of the labouring classes on the subject 
 
 of the relation between wages and the 
 demand and supply of labour : and it 
 is most important that this course of 
 instruction should not be disturbed. 
 
 It is a great error to condemn, j>er 
 te and absolutely, either trades unions 
 or the collective action of strikes. 1 
 grant that a strike is wrong whenever 
 it is foolish, and it is foolish whenever 
 it attempts to raise wages above that 
 market rate which is rendered possible 
 by the demand and supply. Jiut de- 
 mand and supply are not physical 
 agencies, which thrust a given amount 
 of wages into a labourer's hand without 
 the participation of his own will and 
 actions. The market rate is not fixed 
 for him by some self-acting instrument, 
 but ia the result of bargaining between 
 human beings of what Adam Smith 
 calls "the higgling of the market;" 
 and those who do not " higgle" will 
 long continue to pay, even over a coun- 
 ter, more than the market price for 
 their purchases. Still more might poor 
 labourers who have to do with rich 
 employers, remain long without the 
 amount of wages which the demand 
 for their labour would justify, unless, 
 in vernacular phrase, they stood out for 
 it : and how can they stand out for 
 terms without organized concert? What 
 chance would any labourer have, who 
 struck singly for an advance of wages ? 
 How could he even know whether the 
 state of the market admitted of a rise, 
 except by consultation with his fellows, 
 naturally leading to concerted action? 
 I do not hesitate to say that associa- 
 tions of labourers, of a nature similar 
 to trades unions, far from being a hin- 
 drance to a free market for labour, are 
 the necessary instrumentality of that 
 free market ; the indispensable means 
 of enabling the sellers of labour to 
 take due care of their own interests 
 under a system of competition. There 
 is an ulterior consideration of much 
 importance, to which attention was lor 
 the first time drawn by Professor Faw- 
 cett, in an article in the Westminster 
 Iteview. Experience has at length 
 enabled the more intelligent trades to 
 take a tolerably correct measure of tho 
 circumstances ou which the success of 
 a strike for an advance of wages de-
 
 506 
 
 pcnds. The workmen arc now nearly 
 as well informed as the master, of the 
 state of the market for his commodi- 
 ties ; they can calculate his gains and 
 his expenses, they know when his trade 
 is or is not prosperous, and only when 
 it is, are they ever again likely to strike 
 for higher wages ; which wages thoir 
 known readiness to strike makes their 
 employers for the most part willing, in 
 that case, to concede. The tendency, 
 therefore, of this state of things is to 
 make a rise of wages, in any particular 
 trade, usually consequent upon a rise 
 of profits, which, as Mr. Fawcett ob- 
 serves, is a commencement of that 
 regular participation of the labourers 
 in the profilJ derived from their labour, 
 every tendency to which, for the rea- 
 sons stated in a previous chapter,* it 
 is so important to encourage, since to 
 it we have chiefly to look for any radi- 
 cal improvement in the social and eco- 
 nomical relations between labour and 
 capital. Strikes, therefore, and the 
 trade societies which render strikes 
 possible, are for these various reasons 
 not a mischievous, but on the contrary, 
 a valuable part of the existing ma- 
 chinery of society. 
 
 It is, however, an indispensable con- 
 dition of tolerating combinations, that 
 they should be voluntary. No severity, 
 Necessary to the purpose, is too great 
 3> be employed against attempts to 
 compel workmen to join a union, or 
 take part in a strike, by threats or 
 violence. Mere moral compulsion, by 
 the expression of opinion, the law 
 ought not to interfere with ; it belongs 
 to more enlightened opinion to restrain 
 it, by rectifying the moral sentiments 
 of the people. Other questions arise 
 when the combination, being voluntary, 
 proposes to itself objects really con- 
 trary to the public good. High wages 
 and short hours are generally good ob- 
 jects, or, at all events, may be so : but 
 in many trades unions, it is among the 
 rules that there shall be no task work, 
 or no difference of pay between the 
 most expert workmen and the most un- 
 Bkilful, or that no member of the union 
 hall earn more than a certain sum per 
 week, in order that there may be more 
 * Supra, book v. chap. vii. 
 
 BOOK V. CHAPTER X. 6. 
 
 employment ibr the rest ; and the abo- 
 lition of piece work, under more or less 
 of modification, held a conspicuous 
 place among the demands of the Amal- 
 gamated Society. These are combina- 
 tions to effect ohjects which are perni- 
 cious. Their success, even when only 
 partial, is a public mischief; and were 
 it complete, would be equal in magni- 
 tude to almost any of the evils aris- 
 ing from bad economical legislation. 
 Hardly anything worse can be said o/ 
 the worst laws on the subject of in- 
 dustry and its remuneration, consistent 
 with the personal freedom of the la- 
 bourer, than that they place the ener- 
 getic and the idle, the skilful and the 
 incompetent, on a level : and tin's, in 
 so far as it is in itself possible, it is 
 the direct tendency of the regulations 
 of these unions to do. It docs not, 
 however, follow as a consequence that 
 the law would be warranted in making 
 the formation of such associatii ns il- 
 legal and punishable. Independently 
 of all considerations of constitutional 
 liberty, the best interests of the hu- 
 man race imperatively require that 
 all economical experiments, voluntarily 
 undertaken, should have the fullest 
 license, and that force and fraud should 
 be the only means of attempting to 
 benefit themselves, which are inter- 
 dicted to the less fortunate classes of 
 the community .f 
 
 6. Among the modes of undue 
 exercise of the power of government, 
 on which I have commented in this 
 
 t Whoever desires to understand the ques- 
 tion of Trade Combinations as seen from tha 
 point of view of the working people, should 
 make himself acquainted with a pamphlet 
 published in I860, under the title "Trades 
 Unions and Strikes, their Philosophy and 
 Intention, by T. J. Dunning, Secretary to 
 the London Consolidated Society of Book- 
 binders." There are many opinions in this 
 able tract in which I only partially, and some- 
 in which I do not at all, coincide. But there 
 are also many sound arguments, and an in- 
 structive exposure of the common fallacies 
 of opponents. Headers of other classes will 
 see with surprise, not only how great a por- 
 tion of truth the Unions have on their side, 
 but how much less flagrant and condemnable 
 even their errors appear, when seen under 
 the aspect in which it is only natural thai 
 the working classes should themselves regard 
 them.
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 567 
 
 chapter, I liavo included only such, as 
 theories which have .still more 
 I of footing in the most en- 
 ; d countries. I have not spoken 
 of SOUK; which have done still greater 
 mischief in times not long past, but 
 which are now generally given up, at 
 least in theory, though enough of them 
 still remains in practice to make it im- 
 possible as yet to class them among 
 exploded errors. 
 
 The notion, for example, that a go- 
 vernment should choose opinions for 
 the people, and should not suffer any 
 doctrines in politics, morals, law, or 
 religion, but such as it approves, to be 
 printed or publicly pivi'-s~i'd, may be 
 said to be altogether abandoned as a 
 general thesis. It is now well under- 
 stood that a regime of this sort is fatal 
 to all prosperity, even of an econo- 
 mical kind : that the human mind, 
 when prevented either by fear of the 
 lav.- or by fear of opinion from exer- 
 cising its faculties freely on the most 
 important subjects, acquires a general 
 torpidity and imbecility, by which, 
 when they reach a certain point, it is 
 disqualified from making any consi- 
 derable advances even in the common 
 affairs of life, and which, when greater 
 still, make it gradually lose even its 
 previous attainments. There cannot 
 be a more decisive example than Spain 
 rtugal, for two centuries after 
 the Reformation. The decline of those 
 countries in national greatness, and 
 cvca in matt-rial civilization, while al- 
 most all the other nations of Europe 
 
 were uninterruptedly advancing, has 
 been ascribed to varioo causes, but 
 there is one which lies at the founda- 
 tion of them all : the Holy Inquisi- 
 tion, and the system of mental slavery 
 of which it is the symbol. 
 
 Yet although these truths are very 
 widely recognised, and freedom both of 
 opinion and of discussion is admitted 
 as an axiom in all free countries, this 
 apparent liberality and tolerance has 
 acquired so little of the authority of a 
 principle, that it is always ready to 
 give way to the dread or horror in- 
 spired by some particular sort of 
 opinions. Within the last ten or 
 fifteen years several individuals have 
 suffered imprisonment, for the public 
 profession, sometimes in a very tern, 
 perate manner, of disbelief in religion ; 
 and it is probable that both the public 
 and the government, at the first panic 
 which arises on the subject of Chartism 
 or Communism, will fly to similar 
 means for checking^ the propagation of 
 democratic or anti-property doctrines. 
 In this country, however, the effective 
 restraints on mental freedom proceed 
 much less from the law or the govern- 
 ment, than from the intolerant temper 
 of the national mind ; arising no longer 
 from even as respectable a source as 
 bigotry or fanaticism, but rather from 
 the general habit, both in opinion and 
 conduct, of making adherence to cus- 
 tom the rule of life, and enforcing it, 
 by social penalties, against aii persons 
 who, without a party to back them, 
 assert their individual independence. 
 
 CHAPTER XI. 
 
 OF THE GROUNDS AND LIMITS OF THE LATSSER-PA1RE O 
 UOX-IXTERFEKEXCE PRINCIPLE. 
 
 1. WE have now reached the last 
 part of our undertaking ; the discus- 
 sion, so far as suited to this treatise 
 (that is, so far as it is a question of 
 principle, not detail) of the limits of 
 the province of government ; the ques- 
 
 tion, to what objects governmental 
 intervention in the affairs of society 
 may or should extend, over and abovf. 
 those which necessarily appertain tr 
 it. No subject has been more keenly 
 contested in the present age : the coiv
 
 568 
 
 BOOK V. CHAPTER XI. 2. 
 
 test, however, has chiefly taken place 
 round certain select points, with only 
 flying excursions into the rest of the 
 field. Those indeed who have dis- 
 cussed any particular question of go- 
 vernment interference, such as state 
 education (spiritual or secular), regu- 
 lation of hours of labour, a public pro- 
 vision for the poor, &c., have often 
 lealt largely in general arguments, far 
 outstretching the special application 
 made of them, and have shown a suffi- 
 ciently strong bias either in favour of 
 letting things alone, or in favour of 
 meddling ; but have seldom declared, 
 or apparently decided in their own 
 minds, how far they would carry either 
 principle. The supporters of inter- 
 ference have been content with assert- 
 ing a general right and duty on the 
 part of government to intervene, wher- 
 ever its intervention would be useful : 
 and when those who have been called 
 the laisser-faire school have attempted 
 any definite limitation of the province 
 of government, they have usually re- 
 stricted it to the protection of person 
 and property against force and fraud ; 
 a definition to which neither they nor 
 any one else can deliberately adhere, 
 since it excludes, as has been shown 
 in a preceding chapter,* some of the 
 most indispensable, and unanimously 
 recognised, of the duties of govern- 
 ment. 
 
 Without professing entirely to sup- 
 ply this deficiency of a general theory, 
 on a question which does not, as I 
 conceive, admit of any universal solu- 
 tion, I shall attempt to afford some 
 little aid towards the resolution of this 
 class of questions as they arise, by 
 examining, in the most general point 
 of view in which the subject can be 
 considered, what are the advantages, 
 and what the evils or inconveniences, 
 of government interference. 
 
 We must set out by distinguishing 
 between two kinds of intervention by 
 the government, which, though they 
 may relate to the same subject, differ 
 widely in their nature and effects, and 
 require, for their justification, motives 
 of a very different degree of urgency. 
 The intervention may extend to con- 
 Supra, book v. ch. i. 
 
 trolling the free agency of individuals 
 Government may interdict all persona 
 from doing certain things ; or from 
 doing them without its authorization ; 
 or may prescribe to them certain things 
 to be done, or a certain manner of 
 doing things which it is left optional 
 with them to do or to abstain from. 
 This is the authoritative interference 
 of government. There is another kind 
 of intervention which is not authori- 
 tative : when a government, instead 
 of issuing a command and enforcing it 
 by penalties, adopts the course so 
 seldom resorted to by governments, 
 and of which such important use might 
 be made, that of giving advice, and 
 promulgating information ; or when, 
 leaving individuals free to use their 
 own means of pursuing any object of 
 general interest, the government, not 
 meddling with them, but not trusting 
 the object solely to their care, esta- 
 blishes, side by side with their ar- 
 rangements, an agency of its own for 
 a like purpose. Thus, it is one thing 
 to maintain a Church Establishment, 
 and another to refuse toleration to 
 other religions, or to persons professing- 
 no religion. It is one thing to provide 
 schools or colleges, and another to re- 
 quire that no person shall act as an 
 instructor of youth without a govern- 
 ment license. There might be a na- 
 tional bank, or a government manu- 
 factory, without any monopoly against 
 private banks and manufactories. 
 There might be a post office, without 
 penalties against the conveyance of let- 
 ters by other means. There may be a 
 corps of government engineers for 
 civil purposes, while the profession of 
 a civil engineer is free to be adopted 
 by every one. There may be public 
 hospitals, without any restriction upon 
 private medical or surgical practice. 
 
 2. It is evident, even at first 
 sight, that the authoritative form of 
 government intervention has a much 
 more limited sphere of legitimate ac- 
 tion than the other. It requires a 
 much stronger necessity to justify it 
 in any case ; while there are large 
 departments of human life from which 
 it must be unreservedly and iroperi-
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 569 
 
 onsly excluded. Whatever theory wo 
 adopt respecting the foundation of the 
 social union, and under whatever po- 
 litical institutions we live, there is a 
 circle around every individual human 
 being, which no government, be it that 
 of one, of a few, or of the many, ought 
 to be permitted t overstep : there is a 
 part of the life of every person who 
 has come to years of discretion, within 
 which the individuality of that person 
 ought to reign uncontrolled either by 
 any other individual or by the public 
 collectively. That there is, or ought 
 to be, some space in human existence 
 thus entrenched around, and sacred 
 from authoritative intrusion, no one who 
 professes the smallest regard to human 
 freedom or dignity will call in question : 
 the point to be determined is, where 
 the limit should be placed ; how large 
 a province of human life this reserved 
 territory should include. I apprehend 
 that it ought to include all that part 
 which concerns only the life, whether 
 inward or outward, of the individual, 
 and does not affect the interests of 
 others, or affects them only through 
 the moral influence of example. With 
 respect to the domain of the inward 
 consciousness, the thoughts and feel- 
 ings, and as much of external conduct 
 as is personal only, involving no con- 
 sequences, none at least of a painful or 
 injurious kind, to other people ; I hold 
 that it is allowable in all, and in the 
 more thoughtful and cultivated often a 
 duty, to assert and promulgate, with 
 all the force they are capable of, their 
 opinion of what is good or bad, admi- 
 rable or contemptible, but not to com- 
 pel others to conform to that opinion ; 
 whether the force used is that of extra- 
 legal coercion, or exerts itself by means 
 of the law. 
 
 Even in those portions of conduct 
 which do affect the interest of others, 
 the onus of making out a case always 
 lies on the defenders of legal prohi- 
 bitions. It is not a merely constructive 
 or presumptive injury to others, which 
 will justify the interference of law with 
 individual freedom. To be prevented 
 from doing what one is inclined to, or 
 from acting according to one's own 
 judgment of what is desirable, is not 
 
 only always irksome, but always tends, 
 pro tanto, to starve the development 
 of some portion of the bodily or mental 
 faculties, either sensitive or active ; 
 and unless the conscience of the indi- 
 vidual goes freely with the legal re- 
 straint, it partakes, either in a great 
 or in a small degree, of the degrada- 
 tion of slavery. Scarcely any degree 
 of utility, short of absolute necessity, 
 will justify a prohibitory regulation, 
 unless it can also be made to recom- 
 mend itself to the general conscience ; 
 unless persons of ordinary good inten- 
 tions either believe already, or can be 
 induced to believe, that the thing pro- 
 hibited is a thing which they ought 
 not to wish to do. 
 
 It is otherwise with governmental 
 interferences which do not restrain in- 
 dividual free agency. When a govern- 
 ment provides means for fulfilling a 
 certain end, leaving individuals free to 
 avail themselves of different means if 
 in their opinion preferable, there is no 
 infringement of liberty, no irksome or 
 degrading restraint. One of the prin- 
 cipal objections to government inter- 
 ference is then absent. There is, how- 
 ever, in almost all forms of government 
 agency, one thing which is compulsory; 
 the provision of the pecuniary means. 
 These are derived from taxation ; or, 
 if existing in the form of an endow- 
 ment derived from public property, 
 they are still the cause of as much 
 compulsory taxation as the sale or the 
 annual proceeds of the property would 
 enable to be dispensed with.* And 
 the objection necessarily attaching to 
 compulsory contributions, is almost al- 
 ways greatly aggravated by the ex- 
 pensive precautions and onerous re- 
 strictions, which are indispensable to 
 prevent evasion of a compulsory tax. 
 
 The only cases in which government 
 agency involves nothing of a compulsory 
 nature, are the rare cases in which, without 
 any artificial monopoly, it pays its own ex- 
 penses. A bridge unfit with public money, 
 on which tolls are collected, sulHVient to pay 
 not only all current expenses, but tin; inte- 
 rest of the original outlay, is one case in 
 point. The government railways in Belgium 
 and Germany are another example. The 
 Post Office, if its monopoly were abolished, 
 ami it still paid its expenses, would be 
 another.
 
 BOOK V. CHAPTER XI. 3,4. 
 
 3. A second general objcctun to 
 government agency, is that every in- 
 crease of the functions devolving on 
 the government is an increase of its 
 power, both in the form of authority, 
 and still more, in the indirect form of 
 influence. The importance of this con- 
 sideration, in respect to political free- 
 dom, has in general been quite suffi- 
 ciently recognised, at least in Eng- 
 land ; but many, in latter times, have 
 been prone to think that limitation of 
 the powers of the government is only 
 essential when the government itself 
 is badly constituted ; when it does not 
 represent the people, but is the organ 
 of a class, or coalition of classes : and 
 that a government of sufficiently popu- 
 lar constitution might be trusted with 
 any amount of power over the nation, 
 since its power would be only that of 
 the nation over itself. This might be 
 true, if the nation, in such cases, did 
 not practically mean a mere majority 
 of the nation, and if minorities were 
 only capable of oppressing, but not of 
 being oppressed. Experience, however, 
 proves that the depositaries of power 
 who are mere delegates of the people, 
 that is of a majority, are quite as 
 ready (when they think they can count 
 on popular support) as any organs of 
 oligarchy, to assume arbitrary power, 
 and encroach unduly on the liberty of 
 private life. The public collectively is 
 abundantly ready to impose, not only 
 its generally narrow views of its inte- 
 rests, but its abstract opinions, and 
 even its tastes, as laws binding upon 
 individuals. And the present civiliza- 
 tion tends so strongly to make the 
 power of persons acting in masses the 
 only substantial power ia society, that 
 there never was more necessity for 
 surrounding individual independence 
 of thought, speech, and conduct, with 
 the most powerful defences, in order to 
 maintain that originality of mind and 
 individuality of character, which are 
 the only source of any real progress, 
 and of most of the qualities which 
 make the human race much superior 
 V> any herd of animals. Hence it is 
 (o less important in a democratic than 
 in any other government, that all ten- 
 dency on the part of public authorities 
 
 to stretch their interference, and as- 
 sume a power of any sort which can 
 easily be dispensed with, should be re- 
 garded with unremitting jealousy. 
 Perhaps this is even more important 
 in a democracy than in any other form 
 of political society ; because, where 
 public opinion is sovereign, an iiv'i- 
 vidual who is oppressed by the f-ovc- 
 reign does not, as in most other states 
 of things, find a rival power to which 
 he can appeal for relief, or, at all events, 
 for sympathy. 
 
 4. A third general object ion to 
 government agency, rests on the prin- 
 ciple of the division of labour. Every 
 additional function undertaken 1 y the 
 government, is a fresh occupation im- 
 posed upon a body already overcharged 
 with duties. A natural consequence 
 is that most things are ill done ; much 
 not done at all, because the govern- 
 ment is not able to do it without 
 delays which are fatal to its purpose ; 
 that the more troublesome, and less 
 showy, of the functions undertaken, 
 are postponed or neglected, and an ex- 
 cuse is always ready for the neglect ; 
 while the heads of the administration 
 have their minds so fully taken up with 
 official details, in however perfunctory 
 a manner superintended, that they 
 have no time or thought to spare for 
 the great interests of the state, and the 
 preparation of enlarged measures of 
 social improvement. 
 
 But these inconveniences, though 
 real and serious, result much more 
 from the bad organization of govern- 
 ments, than from the extent and va- 
 riety of the duties undertaken by them. 
 Government is not a name for some 
 one functionary, or definite number of 
 functionaries : there may be almost 
 any amount of division of labour within 
 the administrative body itself. The 
 evil in question is felt in great magni- 
 tude under some of the governments of 
 the Continent, where six or eight men, 
 living at the capital and known by the 
 name of ministers, demand that the 
 whole public business of the country 
 shall pass, or be supposed to pass, 
 under their individual eye. But the 
 inconvenience would be reduced to a
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 571 
 
 very mar.a;_val]e compass, in a- country 
 in which there was a. proper distri- 
 bution of functions between the central 
 and local officers of government, and 
 i:i which the central body was divided 
 :ifl5cicnt number of departments. 
 V/IK-II Parliament thought it expedient 
 to confer on the government an in- 
 specting and partially controlling au- 
 thority over railways, it did not add 
 railways to the department of the 
 Vomc Minister, but created a Railway 
 Board. When it determined to have a 
 central superintending authority for 
 ; ;ion, it established 
 the 1'oor Law Commission. There are 
 few countries in which a greater num- 
 ber of functions are discharged by pub- 
 lic officers, than in some states of the 
 American Union, particularly the New 
 England States : but the division of 
 labour in public business is extreme ; 
 most of these officers being not even 
 amenable to any common superior, but 
 performing their duties freely, under 
 the double check of election by their 
 townsmen, and civil as well as criminal 
 responsibility to the tribunals. 
 
 It is, no doubt, indispensable to good 
 g \vnnnent that the chiefs of the ad- 
 ministration, whether permanent or 
 temporary, should extend a command- 
 ing, though general, view over the 
 aggregate of all the interests confided, 
 in any degree, to the responsibility of 
 the central power. But with a skilful 
 internal organization of the adminis- 
 trative machine, leaving to subordi- 
 nates, and as far as possible to local 
 subordinates, not only the execution, 
 but to a great degree the control, of 
 details ; holding them accountable for 
 the results of their acts rather than for 
 the acts themselves, except where these 
 come within the cognizance of the tri- 
 bunals ; taking the most ellectual secu- 
 rities for honest and capable appoint- 
 ments ; opening a broad path to 
 promotion from the inferior degrees of 
 the administrative scale to the supe- 
 rior ; leaving, at each step, to the func- 
 tionary, a wider range in the origina- 
 tion of measures, so that, in the highest 
 grade of all, deliberation might he con- 
 lentrated on the great collective inte- 
 rests of the rx)untry in each depart- 
 
 ment ; if all this were done, the 
 government would not probably bo 
 ovcrburthened by any business, in other 
 respects fit to be undertaken by it ; 
 though the overburthening would re- 
 main as a serious addition to the in- 
 conveniences incurred by its under- 
 taking any which was unfit. 
 
 5. But though a better organiza- 
 tion of governments would greatly 
 diminish the force of the objection to 
 the mere multiplication of their duties, 
 it woidd still remain true that in all the 
 more advanced communities, the great 
 majority of things are worse done by 
 the intervention of government, than 
 the individuals most interested in the 
 matter would do them, or cause them 
 to be done, if left to themselves. The 
 grounds of this truth are expressed 
 with tolerable exactness in the popular 
 dictum, that people understand their 
 own business and their own interests 
 better, and care for them more, than 
 the government does, or can bo ex- 
 pected to do. This maxim hold.-i true 
 throughout the greatest part of th 
 business of life, and wherever it is true 
 we ought to condemn every kind of 
 government intervention that conflicts 
 with it. The inferiority of government 
 agency, for example, in any of the 
 common operations of industry or com- 
 merce, is proved by the fact, that it is 
 hardly ever able to maintain itself 
 in equal competition with individual 
 agency, where the individuals possess 
 the requisite degree of industrial enter- 
 prise, and can command the necessary 
 assemblage of means. All the facili- 
 ties which a government enjoys of 
 access to information ; all the nvtins 
 which it possesses of remunerating, 
 and therefore of commanding, the best 
 available talent in the market are 
 not an equivalent for the one great 
 disadvantage of an inferior interest in 
 the result. 
 
 It must be remembered, besides, 
 that even if a government were supe- 
 rior in intelligence and knowledge to 
 any single individual in the nation, it 
 must be inferior to all the individuals 
 of the nation taken together. It can 
 neither possess in itself, nor enlist in
 
 572 
 
 its service, more than a portion of the 
 acquirements and capacities which the 
 country contains, applicable to any 
 given purpose. There must be many 
 persons equally qualified for the work 
 with those whom the government cm- 
 ploys, even if it selects its instruments 
 with no reference to any consideration 
 but their fitness. Now these are the 
 very persons into whose hands, in the 
 cases of most common occurrence, a 
 system of individual agency naturally 
 tends to throw the work, because they 
 are capable of doing it better or on 
 cheaper terms than any other persons. 
 So far as this is the case, it is evident 
 that government, by excluding or even 
 by superseding individual agency, 
 cither substitutes a less qualified in- 
 strumentality for one better qualified, 
 or at any rate substitutes its own mode 
 of accomplishing the work, for all the 
 variety of modes which would be tried 
 by a number of equally qualified per- 
 sons aiming at the same end; a com- 
 petition by many degrees more pro- 
 pitious to the progress of improvement, 
 than any uniformity of system. 
 
 6. I have reserved for the last 
 place one of the strongest of the 
 reasons against the extension of go- 
 vernment agency. Even if the govern- 
 ment could comprehend within itself, 
 in each department, all the most emi- 
 nent intellectual capacity and active 
 talent of the nation, it would not be 
 the less desirable that the conduct of a 
 large portion of the affairs of society 
 should be left in the hands of the 
 persons immediately interested in them. 
 The business of life is an essential part 
 of the practical education of a people ; 
 without which, book and school in- 
 struction, though most necessary and 
 salutary, doss not suffice to qualify 
 them for conduct, and for the adapta- 
 tion of means to ends. Instruction is 
 only one of the desiderata of mental 
 improvement ; another, almost as in- 
 dispensable, is a vigorous exercise of 
 the active energies ; labour, contriv- 
 ance, judgment, self-control : and the 
 natural stimulus to these is the diffi- 
 culties of life. This doctrine is not to 
 be confounded with the complacent 
 
 BOOK. V. CHAPTER XI. 6. 
 
 optimism, which represents the evila 
 of life as desirable tilings, because they 
 call forth qualities adapted to combat 
 with evils. It is only because the dif- 
 ficulties exist, that the qualities which 
 combat with them arc of any vafue. 
 As practical beings it is our business 
 to free human life from as many as 
 possible of its difficulties, and not to 
 keep up a stock of them as hunters 
 preserve game, for the exercise of pur- 
 suing it. But since the need of activo 
 talent and practical judgment in the 
 affairs of life can only be diminished, 
 and not, even on the most favourable 
 supposition, done away with, it is im- 
 portant that those endowments should 
 be cultivated not merely in a select 
 few, but in all, and that the cultivation 
 should be more varied and complete 
 than most persons arc able to find in 
 the narrow sphere of their merely indi- 
 vidual interests. A people among 
 whom there is no habit of spontaneous 
 action for a collective interest who 
 look habitually to their government to 
 command orprompt them in all matters 
 of joint concern who expect to have 
 everything done for them, except what 
 can be made an affair of mere habit 
 and routine have their faculties only 
 half developed ; their education is de- 
 fective in one of its most important 
 branches. 
 
 Not only is the cultivation of the 
 active faculties by exercise, diffused 
 through the whole community, in itself 
 one of the most valuable of national 
 possessions : it is rendered, not less, 
 but more, necessary, when a high Je- 
 gree of that indispensable culture is 
 systematically kept up in the chiefs 
 and functionaries of the state. There 
 cannot be a combination of circum- 
 stances more dangerous to human wel- 
 fare, than that in which intelligence 
 and talent are maintained at a high 
 standard within a governing corpoia- 
 tion, but starved and discouraged out- 
 side the pale. Such a system, mor 
 completely than any other, embodies 
 the idea of despotism, by arming with 
 intellectual superiority as an additional 
 weapon, those who have already the 
 legal power. It approaches as nearly 
 as the organic difference betweep
 
 LIMITS OF THE PROVINCE OP GOVERNMENT. 
 
 573 
 
 human beings and other animals ad- 
 mits, to the government of sheep by 
 their shepherd, without anything like 
 BO strong an interest as the shepherd 
 lias in the thriving condition of the 
 llock. The only security against poli- 
 tical slavery, is tho check maintained 
 over governors, by the diffusion of in- 
 telligence, activity, and public spirit 
 among the governed. Experience 
 proves the extreme difficulty of per- 
 manently keeping up a sufficiently high 
 standard of those qualities ; a difficulty 
 which increases, as the advance of 
 civilization and security removes one 
 after another of the hardships, embar- 
 rassments, and dangers against which 
 individuals had formerly no resource 
 but in their own strength, skill, and 
 courage. It is therefore of supreme 
 importance that all classes of the com- 
 munity, down to the lowest, should 
 have much to do for themselves ; that 
 as great a demand should be made 
 upon their intelligence and virtue as it 
 is in any respect equal to; that tho 
 government should not only leave as 
 far as possible to their own faculties 
 the conduct of whatever concerns 
 themselves alone, but should suffer 
 them, or rather encourage them, to 
 manage as many as possible of their 
 joint concerns by voluntary co-opera- 
 tion : since this discussion and manage- 
 ment of collective interests is the great 
 school of that public spirit, and the 
 great source of that intelligence of 
 public affairs, which are always re- 
 garded as the distinctive character of 
 the public of free countries. 
 
 A democratic constitution, not sup- 
 ported by democratic institutions in de- 
 tail, but confined to the central govern- 
 ment, not only is not political freedom, 
 but often creates a spirit precisely the 
 reverse, carrying down to the lowest 
 grade in society the desire and ambi- 
 tion of political domination. In some 
 countries the desire of tho people is 
 for not being tyrannized over, but in 
 others it is merely for an equal chance 
 to everybody of tyrannizing. Unhap- 
 pily this last state of the desires la 
 fully as natural to mankind as the 
 former, and in many of the conditions 
 even of civilized humanity, is far more 
 
 largely exemplified. In proportion as 
 the people are accustomed to manage 
 their allairs by their own active inter- 
 vention, instead of leaving them to the 
 government, their desires will turn to 
 repelling tyranny, rather than to tyran- 
 nizing : while in proportion as all real 
 initiative and direction resides in tho 
 government, and individuals habitually 
 feel and act as under its perpetual 
 tutelage, popular institutions develope 
 in them not the desire of freedom, but 
 an unmeasured appetite for place and 
 power ; diverting the intelligence and 
 activity of tho country from its prin- 
 cipal business, to a wretched competi- 
 tion for the selfish prizes and the petty 
 vanities of office. 
 
 7. The preceding are tke prin- 
 cipal reasons, of a general character, 
 in favour of restricting to the narrowest 
 compass the intervention of a public 
 authority in the business of the com- 
 munity : and few will dispute the more 
 than sufficiency of these reasons, to 
 throw, in every instance, the burthen of 
 making out a strong case, not on those 
 who resist, but on those who recom- 
 mend, government interference. Let- 
 ting alone, in short, should be the 
 general practice : every departure from 
 it, unless required by some great good, 
 is a certain evil. 
 
 The degree in which the maxim, 
 even in the cases to which it is most 
 manifestly applicable, has heretofore 
 been infringed by governments, future 
 ages will probably have difficulty in 
 crediting. Some idea may be formed 
 of it from the description by M. 
 Dunoyer* of the restraints imposed on 
 the operations of manufacture under 
 the old government of France, by tho 
 meddling and regulating spirit of legis- 
 lation. 
 
 " The State exercised over manufac- 
 turing industry the most unlimited and 
 arbitrary jurisdiction. It disposed 
 without scruple of the resources of 
 manufacturers : it decided who should 
 be allowed to work, what things it 
 should be permitted to make, what ma- 
 terials should be employed, what pro- 
 
 * On the Liltrty of Labour, TO!, li, 
 pp. 3-53-i.
 
 BOOK V. CHAPTER XI. 7. 
 
 cesses followed, what forms should be 
 given to productions. It was not 
 enough to do well, to do better ; it was 
 necessary to do according to the rules. 
 Everybody knows the regulation of 
 1670 which prescribed to seize and 
 nail to the pillory, with the names of 
 the makers, goods not conformable to 
 the rules, and which, on a second repe- 
 tition of the offence, directed that the 
 inanufacturers themselves should be 
 fttaohed also. Not the taste of the 
 consumers, but the commands of the 
 law must be attended to. Legions of 
 inspectors, commissioners, controllers, 
 jurymen, guardians, were charged with 
 its execution. Machines were broken, 
 products were burned when not con- 
 formable to the rules : improvements 
 were punished; inventors were fined. 
 There were different sets of rules for 
 goods destined for home consumption 
 and for those intended for exportation. 
 An artizan could neither choose the 
 place in which to establish himself, nor 
 work at all seasons, nor work for all 
 customers. There exists a decree of 
 March 30, 1700, which limits to 
 eighteen towns the number of places 
 where stockings might be woven. A 
 decree of June 18, 1723, enjoins the 
 manufacturers at Eouen to suspend 
 their works from the 1st of July to 
 the 1 5th of September, in order to fa- 
 cilitate the harvest. Louis XIV., when 
 he intended to construct the colonnade 
 of the Louvre, forbade all private per- 
 sons to employ workmen without his 
 permission, under a penalty of 10,000 
 livres, and forbade workmen to work 
 for private persons, on pain for the first 
 offence, of imprisonment, and for the 
 second, of the galleys." 
 
 That these and similar regulations 
 were not a dead letter, and that the 
 officious and vexatious meddling was 
 prolonged down to the French Kevo- 
 lution, we have the testimony of 
 Roland, the Girondist minister.* " I 
 have seen," says he, " eighty, ninety, 
 a hundred pieces of cotton or woollen 
 stuff cut up, and completely destroyed. 
 I have witnessed similar srenes every 
 week for a number of years. I have 
 
 * I quote at second hand, from Mr. Carey's 
 on the Hate of Waget, pp. 195-0, 
 
 seen manufactured goods confiscated ; 
 heavy fines laid on the manufacturers ; 
 some pieces of fabric were burnt in 
 public places, and at the hours of 
 market : others were fixed to the pil- 
 lory, with the name of the manufac- 
 turer inscribed upon them, and he him- 
 self was threatened with the pillory, in 
 case of a second offence. All this was 
 done under my eyes, at Rouen, in con- 
 formity with existing regulations, or 
 ministerial orders. What crime de- 
 served so cruel a punishment ? Some 
 defects in the materials employed, or 
 in the texture of the fabric, or even in 
 some of the threads of the warp. 
 
 " I have frequently seen manufac- 
 turers visited by a band of satellites 
 who put all in confusion in their esta- 
 blishments, spread terror in their fami- 
 lies, cut the stuffs from the frames, tore 
 off the warp from the looms, and car- 
 ried them away as proofs of infringe- 
 ment ; the manufacturers were sum- 
 moned, tried, and condemned : their 
 goods confiscated ; copies of their judg- 
 ment of confiscation posted up in every 
 public place; fortune, reputation, credit, 
 all was lost and destroyed. And for 
 what offence ? Because they had mado 
 of worsted, a kind of cloth called t-hag, 
 such as the English used to manufac- 
 ture, and even sell in France, while the 
 French regulations stated that that 
 kind of cloth should be made with mo- 
 hair. I have seen other manufacturers 
 treated in the same way, because, they 
 had made camlets of a particular 
 width, used in England and Gerruann 
 for which there was a great deniana 
 from Spain, Portugal, and other coun- 
 tries, and from several parts of France, 
 while the French regulations prescribed 
 other widths for camlets." 
 
 The time is gone by, when such ap- 
 plications as these of the principle of 
 "paternal government' 1 would be at- 
 tempted, in- even the least enlightened 
 country of the European common- 
 wealth of nations. In such cases asi 
 those cited, all the general objections 
 to government interference are valid, 
 and several of them in nearly their 
 highest degree. But we must now 
 turn to tho second part of our task, 
 and direct our attention to caaes, ia
 
 LIMITS OF THE PROVINCE OP GOVERNMENT. 
 
 575 
 
 which some of those general objections 
 arc altogether absent, while those which 
 can never be got rid of entirely, are 
 overruled by counter-considerations of 
 Btill greater importance. 
 
 \\\- have observed that, as a general 
 rule, the business of life is better per- 
 formed when those who have an imme- 
 diate interest in it are left to take their 
 own course, uncontrolled cither by the 
 mandate of the law or by the meddling 
 of any public functionary. The per- 
 sons, or some of the persons, who do 
 the work, are likely to be better judges 
 than the government, of the means of 
 attaining the particular end at which 
 they aim. Were we to suppose, what 
 is not very probable, that the govern- 
 ment has possessed itself of the best 
 knowledge which had been acquired up 
 to a given time by the persons most 
 skilled in the occupation ; even then, 
 the individual agents have so much 
 stronger and more direct an interest in 
 the result, that the means are far more 
 likely to be improved and perfected if 
 left to their uncontrolled choice. But 
 if the workman is generally the best 
 selector of means, can it be affirmed 
 with the same universality, that the 
 consumer, or person served, is the most 
 competent judge of the end ? Is the 
 buyer always qualified to judge of the 
 commodity ? If not, the presumption 
 in favour of the competition of the 
 market does not apply to the case ; 
 and if the commodity be one, in the 
 quality of which society has much at 
 stake, the balance of advantages may 
 be in favour of some mode and degree 
 of intervention, by the authorized re- 
 presentatives of the collective interest 
 of the state. 
 
 <j 8. Now, the proposition that the 
 consumer is a competent judge of the 
 commodity, can be admitted only with 
 numerous abatements and exceptions. 
 He is generally the best judge (though 
 even this is not true universally) of the 
 material objects produced for his use. 
 These are destined to supply some 
 physical want, or gratify some taste or 
 inclination, respecting which wants or 
 inclinations there is no appeal from the 
 person who feels thorn ; or they are the 
 
 means and appliances of some occupa- 
 tion, for the use of the persons engaged 
 in it, who may be presumed to be 
 judges of tho things required in their 
 own habitual employment. But there 
 are other things of the worth of which 
 the demand of the market is by no 
 means a test ; things of which the 
 utility docs not consist in ministering 
 to inclinations, nor in serving the daily 
 uses of life, and the want of which is 
 least felt where the need is greatest. 
 This is peculiarly true of those things 
 which nre chiefly useful as tending ti 
 raise the character of human beings. 
 The uncultivated cannot be competent 
 judges of cultivation. Those who most 
 need to be made wiser and better, 
 usually desire it least, and if they de- 
 sired it, would be incapable of finding 
 the way to it by their own lights. It 
 will continually happen, on the volun- 
 tary system, that, the end not being 
 desired, the means will not be provided 
 at all, or that, the persons requiring 
 improvement having an imperfect or 
 altogether erroneous conception of what 
 they want, the supply called forth by 
 the demand of the market will be any- 
 thing but what is really required. Now 
 any well-intentioned and tolerably 
 civili/ed government may think wild- 
 out presumption that it does or ought 
 to possess a degree of cultivation above 
 the average of the community which 
 it rules, and that it should therefore be 
 capable of offering better education 
 and better instruction to the people, 
 than the greater number of them would 
 spontaneously demand. Education, 
 therefore, is one of those things which 
 it is admissible in principle that a 
 government should provide for tho 
 people. The case is one to which the 
 reasons of the non-interference prin- 
 ciple do not necessarily or universally 
 extend.* 
 
 * In opposition to these opinions, a 
 writer, with whom on many points I agree, 
 but whose hostility to government interven- 
 tion seems to mo too indiscriminate and 
 unqualified, M. Dunoyer, observes, that 
 instruction, however good in itself, can only 
 be useful to the public in so far as they are 
 willing to receive it, and that the best proof 
 that the instruction is suitable to their 
 wauls, ia its success as a pecuniary enter- 
 prise. This argument seems no more coo*
 
 576 
 
 BOOK V. CHAPTER XI. 8. 
 
 With regard to elementary educa- 
 tion, tho exception to ordinary rides 
 may, I conceive, justifiably be carried 
 still further. There are certain primary 
 elements and means of knowledge, 
 which it is in the highest degree de- 
 sirable that all human beings born into 
 the community should acquire during 
 childhood. If their parents, or those 
 on whom they depend, have the power 
 of obtaining for them this instruction, 
 and fail to do it, they commit a double 
 breach of duty : towards the children 
 themselves, and towards the members 
 of the community generally, who are 
 all liable to suffer seriously from the 
 consequences of ignorance and want of 
 education in their fellow-citizens. It 
 is therefore an allowable exercise of the 
 powers of government, to impose on 
 parents the legal obligation of giving 
 elementary instruction to children. This 
 
 elusive respecting instruction for the mind, 
 than it would be respecting medicine for the 
 body. No medicine will do the patient any 
 good if he cannot be induced to take it ; but 
 we are not bound to admit as a corollary 
 from this, that the patient will select the 
 right medicine without assistance. Is it not 
 probable that a recommendation, from any 
 quarter which he respects, may induce him 
 to accept a better medicine than he would 
 spontaneously have chosen ? This is, in 
 respect to education, the very point in de- 
 bate. Without doubt, instruction which is 
 BO far in advance of the people that they 
 cannot be induced to avail themselves of it, 
 is to them of no more worth than if it did not 
 exist. But between what they spontane- 
 ously choose, and what they will refuse to 
 accept when offered, there is a breadth of 
 interval proportioned to their deference for 
 the recommender. Besides, a thing of which 
 the public are bad judges, may require to be 
 shown to them and pressed on their attention 
 for a long time, ana to prove its advantages 
 by long experience, before they learn to 
 appreciate it, yet they may learn at last ; 
 which they might never have done, if the 
 thing had not been thus obtruded upon them 
 in act, but only recommended in theory. 
 Now, a pecuniary speculation cannot wait 
 years, or perhaps generations, for success ; 
 it must succeed rapidly, or not at all. Another 
 consideratien which M. Dunoyer seems to 
 have overlooked, is, that institutions and 
 modes of tuition which never could be made 
 sufficiently popular to repay, with a profit, 
 the expenses incurred on them, may lie in- 
 valuable to the many by giving the highest 
 quality of education to the few, and keeping 
 up theperpetual succession of superiormmds, 
 by whom knowledge is advanced, ;nul the 
 community urged forward in civilization. 
 
 however cannot fairly be done, without 
 taking measures to ensure that such 
 instruction shall be always accessible 
 to them, either gratuitously or at a 
 trifling expense. 
 
 It may indeed be objected that the 
 education of children is one of those 
 expenses which parents, even of the 
 labouring class, ought to defray ; that 
 it is desirable that they should feel it 
 incumbent on them to provide by their 
 own means for the fulfilment of their 
 duties, and that by giving education at 
 the cost of others, just as much as by 
 giving subsistence, the standard of 
 necessary wages is proportionally low- 
 ered, and tho springs of exertion and 
 self-restraint in so much relaxed. This 
 argument could, at best, be only valid 
 if the question were that of substi- 
 tuting a public provision for what indi- 
 viduals would otherwise do for them- 
 selves ; if all parents in the labouring 
 class recognised and practised the duty 
 of giving instruction to their children 
 at their own expense. But inasmuch 
 as parents do not practise this duty, 
 and do not include education among 
 those necessary expenses which their 
 wages must provide for, therefore the 
 general rate of wages is not high enough 
 to bear those expenses, and they must 
 be borne from some other source. And 
 this is not one of the cases in whicli 
 the tender of help perpetuates the state 
 of things which renders help necessary. 
 Instruction, when it is really such, does 
 not enervate, but strengthens as well 
 as enlarges the active faculties : in 
 whatever manner acquired, its effect on 
 the mind is favourable to the spirit of 
 independence : and when, unless had 
 gratuitously, it would not be had at all, 
 help in this form has the opposite ten- 
 dency to that which in so many other 
 cases makes it objectionable ; it is help 
 towards doing without help. 
 
 In England, and most European 
 countries, elementary instruction can- 
 not be paid for, at its full cost, from tho 
 common wages of unskilled labour, and 
 would not it' it could. The alternative 
 therefore is not between government 
 and private speculation, but between a 
 government provision and voluntary 
 charity Vetwcen interference by go-
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 577 
 
 vornment, ami interference by associa- 
 tions of individuals, subscribing their 
 own money for the purpose, like the 
 two great School Societies. It is, of 
 course, not desirable that anything 
 should be done by funds derived from 
 compulsory taxation, which is already 
 sufficiently well done by individual 
 liberality. How far this is the case 
 with school instruction, is, in each par- 
 ticular instance, a question of fact. 
 The education provided in this country 
 on the voluntary principle has of late 
 been so much discussed, that it is need- 
 less in this place to criticise it minutely, 
 and I shall merely express my convic- 
 tion, that even in quantity it is, and is 
 likely to remain, altogether insufficient, 
 while in quality, though with some 
 slight tendency to improvement, it is 
 never good except by some rare acci- 
 dent, and generally so bad as to be 
 little more than nominal. I hold it 
 therefore the duty of the government 
 to supply the defect by giving pecu- 
 niary support to elementary schools, 
 Buch as to render them accessible to all 
 the children of the poor, either freely, 
 or for a payment too inconsiderable to 
 be sensibly felt. 
 
 One thing must be strenuously in- 
 sisted on ; that the government must 
 claim no monopoly for its education, 
 either in the lower or in the higher 
 branches ; must exert neither autho- 
 rity nor influence to induce the people 
 to resort to its teachers in preference 
 to others, and must confer no peculiar 
 advantages en those who have been 
 instructed by them. Though the go- 
 vernment teachers will probably be 
 superior to the average of private in- 
 structors, they will not embody all the 
 knowledge and sagacity to be found in 
 all instructors taken together, and it is 
 desirable to leave open as many roads 
 as possible to the desired end. It is 
 not endurable that a government should, 
 cither in law or in fact, have a complete 
 control over the education of the people. 
 To possess such a control, and actually 
 exert it, is to be despotic. A govern- 
 ment which can mould the opinions 
 and sentiments of the people from their 
 youth upwards, can do with them what- 
 ever it pleases. Though a government, 
 
 P.K. 
 
 therefore, may, and in many cases 
 ought to, establish schools and col 
 leges, it must neither compel nor bribe 
 any person to come to them ; nor ought 
 the power of individuals to set up rival 
 establishments, to depend in any degrea 
 upon its authorization. It would bs 
 justified in requiring from all the peopla 
 that they shall possess instruction in 
 certain things, but not in prescribing 
 to them how or from whom they shall 
 obtain it. 
 
 9. In the matter of education, the 
 intervention of government is justi- 
 fiable, because the case is not one in 
 which the interest and judgment of tho 
 consumer are a sufficient security for 
 the goodness of the commodity. Let 
 us now consider another class of cases, 
 where there is no person in the situa- 
 tion of a consumer, and where the in- 
 terest and judgment to be relied on are 
 those of the agent himself; as in the 
 conduct of any business in which he 
 is exclusively interested, or in en- 
 tering into any contract or engage- 
 ment by which he himself is to be 
 bound. 
 
 The ground of the practical principle 
 of non-interference must here be, that 
 most persons take a juster and more 
 intelligent view of their own interest, 
 and of the means of promoting it, than 
 can either be prescribed to them by a 
 general enactment of the legislature, or 
 pointed out in the particular case by a 
 public functionary. The maxim is un- 
 questionably sound as a general rule ; 
 but there is no difficulty in perceivinj 
 j some very large and conspicuous ex- 
 I ceptions to it. These may be classed 
 under several heads. 
 
 First : The individual who is pre- 
 sumed to be the best judge of his own 
 interests may be incapable of judging 
 or acting for himself; may be a lunatic, 
 an idiot, an infant: or though not 
 wholly incapable, may be of immature 
 years and judgment. In this case the 
 foundation of the non-interference prin- 
 ciple breaks down entirely. The per- 
 son most interested is not the best 
 judge of the matter, nor a competent 
 judge at all. Insane persons arc every- 
 where regarded as proper objects of tho 
 P P
 
 678 
 
 BOOK V. CHAPTER XI. 0. 
 
 ^re of the state.* In the case of 
 children and young persons, it is com- 
 mon to say, that though they cannot 
 judge for themselves, they have their 
 parents or other relatives to judge for 
 them. But this removes the question 
 into a different category ; making it no 
 longer a question whether the govern- 
 ment should interfere with individuals 
 in the direction of their own conduct 
 and interests, but whether it should 
 leave absolutely in their power the 
 conduct and interests of somebody else. 
 Parental power is as susceptible of 
 abuse as any other power, and is, as a 
 matter of fact, constantly abused. If 
 laws do not succeed in preventing 
 parents from brutally ill-treating, and 
 even from murdering their children, far 
 less ought it to be presumed that the 
 interests of children will never be sa- 
 crificed, in more commonplace and less 
 revolting ways, to the selfishness or the 
 ignorance of their parents. Whatever 
 it can be clearly seen that parents 
 ought to do or forbear for the interest 
 
 * The practice of the English law with 
 respect to insane persons, especially on the 
 all-important point of the ascertainment of 
 insanity, most urgently demands reform. 
 At present no persons, whose property is 
 worth coveting;, and whose nearest relations 
 ere unscrupulous, or on bad terms with 
 them, are secure against a commission of 
 lunacy. At the instance of the persons who 
 'would profit by their being declared insane, 
 & jury may be impanelled and an investiga- 
 tion held at the expense of the property, in 
 which all their personal peculiarities, with all 
 the additions made by the lying gossip of low 
 ervants, are poured into the credulous ears 
 of twelve petty shopkeepers, ignorant of all 
 ways of life except those of their own class, 
 and regarding every trait of individuality in 
 character or taste as eccentricity, and all 
 eccentricity as either insanity or wickedness. 
 If this sapient tribunal gives the desired ver- 
 dict, the property is handed over to perhaps 
 the last persons whom the rightful owner 
 would have desired or suffered to possess it. 
 Some recent instances of this kind of inves- 
 tigation have been a scandal to the adminis- 
 tration of justice. Whatever other changes 
 in this branch of law may be made, two at 
 laast are imperative : first, that, as in other 
 legal proceedings, the expenses should not 
 So borne by the person on trial, but by 
 tho promoters of the inquiry, subject to 
 recovery of costs in case of success : and 
 secondly, that the property of a person 
 declared insane, should in no case be made 
 over to heirs while the proprietor is alive, 
 but should be managed oy a public officer 
 until his death or recovery. 
 
 of children, the law is warranted, if it 
 is able, in compelling to be done or for- 
 borne, and is generally bound to do so. 
 To take an example from tho peculiar 
 province of political economy ; it is 
 right that children, and young persons 
 not yet arrived at maturity, should be 
 protected, so far as the eye and hand 
 of the state can reach, from being 
 over-worked. Labouring for too many 
 hours in the day, or on work beyond 
 their strength, should not be permitted 
 to them, for if permitted it may always 
 be compelled. Freedom of contract, 
 in the case of children, is but another 
 word for freedom of coercion. Educa- 
 tion also, the best which circumstances 
 admit of their receiving, is not a thing 
 which parents or relatives, from indif- 
 ference, jealousy, or avarice, should 
 have it in their power to withhold. 
 
 The reasons for legal intervention 
 in favour of children, apply not less 
 strongly to the case of those unfortu- 
 nate slaves and victims of the most 
 brutal part of mankind, the lower 
 animals. It is by the grossest misun- 
 derstanding of the principles of liberty, 
 that the infliction of exemplary punish- 
 ment on ruffianism practised towards 
 these defenceless creatures, has been 
 treated as a meddling by government 
 with things beyond its province ; an 
 interference with domestic life. The 
 domestic life of domestic tyrants i& 
 one of the things which it is the most 
 imperative on the law to interfere 
 with ; and it is to be regretted that 
 metaphysical scruples respecting the 
 nature and source of the authority of 
 government, should induce many warm 
 supporters of laws against cruelty to 
 animals, to seek for a justification of 
 such laws in the incidental conse- 
 quences of the indulgence of ferocious 
 habits, to the interests of human 
 beings, rather than in the intrinsic 
 merits of the case itself. What it 
 would he the duty of a human being, 
 possessed of the requisite physical 
 strength, to prevent by force if at- 
 tempted in his presence, it cannot bo 
 less incumbent on society generally to 
 repress. The existing laws of England 
 on the subject are chiefly defective in 
 the trifling, often almost nominal,
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 57 y 
 
 maximum, to which the penalty even 
 in the worst cases is limited. 
 
 Among those members of the com- 
 munity whoso freedom of contract 
 ought to be controlled by the legisla- 
 ture for their own protection, on ac 
 count (it is said) of their de-pendent 
 ]>< -iti.>n, it is frequently proposed to 
 include women: and in the existing 
 Factory Act, their labour, in common 
 with that of young persons, has been 
 placed under peculiar restrictions. 
 J!nt the classing together, for this and 
 other purposes, of women and children, 
 appears to me both indefensible in 
 principle and mischievous in practice. 
 Children below a certain age cannot 
 judge or act for themselves; up to a 
 considerably greater age they are in- 
 evitably more or less disqualified for 
 doing so ; but women are as capable as 
 men of appreciating and managing 
 their own concerns, and the only hin- 
 drance to their doing so arises from 
 the injustice of their present social 
 position. So long as the law makes 
 everything which the wife acquires, the 
 property of the husband, while by com- 
 pelling her to live with him it forces 
 her to submit to almost any amount of 
 moral and even physical tyranny 
 which he may choose to inflict, there 
 is some ground for regarding every act 
 done by her as done under coercion : 
 but it is the great error of reformers 
 and philanthropists in our time, to 
 nibble at the consequences of unjust 
 power instead of redressing the injus- 
 tice itself. If women had as absolute 
 a control as men have, over their own 
 persons and their own patrimony or 
 acquisitions, there would be no plea 
 for limiting their hours of labouring 
 for themselves, in order that they might 
 Lave time to labour for the husband, in 
 what is called, by the advocates of re- 
 striction, his home. Women employed 
 in factories are the only women in the 
 labouring rank of life whose position is 
 not that of slaves and drudges : pre- 
 cisely because they cannot easily be 
 compelled to work and earn wages in 
 factories against their will. For im- 
 proving the condition of women, it 
 should, on the contrary, be an object to 
 give them the readiest access to inde- 
 
 pendent industrial employment, instead 
 of closing, either entirely or partially, 
 that which is already open to them. 
 
 10. A second exception to the 
 doctrine that individuals are the best 
 judges of their own interest, is when 
 an individual attempts to decide irre- 
 vocably now, what will be best for his 
 inteiv>t at some futuro and distant 
 time. The presumption in favour of 
 individual judgment is only legitimate, 
 where the judgment is grounded on 
 actual, and especially on present, per- 
 sonal experience; not where it is 
 formed antecedently to experience, and 
 not suffered to bo reversed even after 
 experience has condemned it. When 
 persons have bound themselves by a 
 contract, not simply to do some one 
 thing, but to continue doing some- 
 thing for ever or for a prolonged period, 
 without any power of revoking the en- 
 gagement, the presumption which their 
 perseverance in that course of conduct 
 would otherwise raise in favour of its 
 being advantageous to them, does not 
 exist ; and any suck presumption 
 which can be grounded on their having 
 voluntarily entered into the contract, 
 perhaps at an early age, and without 
 any real knowledge of what they un- 
 dertook, is commonly next to null. The 
 practical maxim of leaving contracts 
 free, is not applicable without great 
 limitations in case of engagements in 
 perpetuity ; and the law should be ex- 
 tremely jealous of such engagements ; 
 should refuse its sanction to them, 
 when the obligations they impose are 
 such as the contracting party cannot 
 be a competent judge of ; if it ever does 
 sanction them, it should take every 
 possible security for their being con. 
 tractcd with foresight and deliberation ; 
 and in compensation for not permit- 
 ting the parties themselves to revoke 
 their engagomen i, should grant them 
 a release from it, ou a sufficient case 
 being made out before an impartial 
 authority. These considerations aw 
 eminently applicable to marriage, the 
 most important of all cases of engage- 
 ment for life. 
 
 11. The third exception which I 
 P P 2
 
 580 
 
 BOOK V.- ClIAi'TI'U -U. 11. 
 
 shall notice, to the doctrine that go- 
 vernment cannot manage the affairs of 
 individuals as well as the individuals 
 themselves, has reference to the great 
 class of cases in which the individuals 
 ean only manage the concern by dele- 
 gated agency, and in which the so- 
 called private management is, in point 
 of fact, hardly better entitled to be 
 called management by the persons in- 
 terested, than administration by a 
 public officer. Whatever, if left to 
 spontaneous agency, can only be done 
 by joint-stock associations, will often 
 be as well, and sometimes better done, 
 as far as the actual work is concerned, 
 by the state. Government manage- 
 ment is, indeed, proverbially jobbing, 
 careless, and ineffective, but so like- 
 wise has generally been joint-stock 
 management. The directors of a 
 joint-stock company, it is true, are 
 always shareholders ; but also the 
 members of a government are invari- 
 ably taxpayers; and in the case of 
 directors, no more than in that of go- 
 vernments, is their proportional share 
 of the benefits of good management, 
 equal to the interest they may possibly 
 have in mismanagement, even without 
 reckoning the interest of their ease. 
 It may be objected, that the share- 
 holders, in their collective character, 
 exercise a certain control over the 
 directors, and have almost always full 
 power to remove them from office. 
 Practically, however, the difficulty of 
 exercising this power is found to be so 
 great, that it is hardly erer exercised 
 except in cases of such flagrantly un- 
 skilful, or, at least, unsuccessful ma- 
 nagement, as would generally produce 
 the ejection from office of managers 
 Appointed by the government. Against 
 the very ineffectual security afforded 
 by meetings of shareholders, and by 
 their individual inspection and en- 
 quiries, may be placed the greater 
 publicity and more active discus- 
 sion and comment, to be expected 
 in free countries with regard to 
 affairs in which the general govern- 
 ment takes part. The defects, there- 
 fore, of government management, do 
 not seem to be necessarily much 
 greater, if necessarily greater at all, 
 
 than those of management by joint- 
 stock. 
 
 The true reasons in favour of leaving 
 to voluntary associations all such things 
 as "they are competent to perform, 
 would exist in equal strength if it were 
 certain that the work itself would bo 
 as well or better done by public officers. 
 These reasons have been already 
 pointed out : the mischief of overload- 
 ing the chief functionaries of govern- 
 ment with demands on their attention, 
 and diverting them from duties which 
 they alone can discharge, to objects 
 which can be sufficiently well attained 
 without them ; the danger of unneces- 
 sarily swelling the direct power and 
 indirect influence of government, and 
 multiplying occasions of collision be- 
 tween its agents and private citizens ; 
 and the inexpediency of concentrating 
 in a dominant bureaucracy, all the 
 skill and experience in the manage- 
 ment of large interests, and all the 
 power of organized action, existing in 
 the community; a practice which keeps 
 the citizens in a relation to the govern- 
 ment like that of children to their 
 guardians, and is a main cause of the 
 inferior capacity for political life which 
 has hitherto characterized the over- 
 governed countries of the Continent, 
 whether with or without the forms ot 
 representative government.* 
 
 But although, for these reasons, most 
 things which are likely to be even 
 tolerably done by voluntary associa- 
 tions, should, generally speaking, be 
 
 * A parallel case may be found in the 
 distaste for politics, and absence of publio 
 spirit, by which women, as a class, are cha- 
 raeterizedin the present state of society, and 
 which is often felt and complained of by 
 political reformers, without, in general, 
 making them willing to recognise, or de- 
 sirous to remove, its cause. It obviously 
 arises from their being taught, both b} 
 institutions and by the whole of their educa- 
 tion, to regard themselves as entirely apart 
 from politics. Wherever they hava beeu 
 politicians, they have shown as great interest 
 in the subject, and as great aptitude for it, 
 according to the spirit of their time, as the 
 men with whom they were cotemporaries : 
 in that period of history (for example) in 
 which Isabella of Castile and Elizabeth ol 
 England were, not rare exceptions, but 
 merely brilliant examples of a spirit and 
 capacity very largely diffused among women 
 of high statiou and cultivation in Europe.
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 581 
 
 loft to them; it does not follow that 
 the manner in which those associations 
 perform their work should be entirely 
 uncontrolled by the government. There 
 are many cases in which the agency, 
 of whatever nature, by which a sen-ice 
 is performed, is certain, from the nature 
 of the case, to be virtually single ; in 
 which a practical monopoly, with all 
 the power it confers of taxing the com- 
 munity, cannot be prevented from ex- 
 isting. I have already more than once 
 adverted to the case of the gas and 
 vrater companies, among whi "to, though 
 perfect freedom is allowed to competi- 
 tion, none really takes place, and prac- 
 tically they are found to be even more 
 irresponsible, and unapproachable by 
 individual complaints, than the govern- 
 ment. There are the expenses without 
 the advantages of plurality of agency ; 
 and the charge made for services 
 which cannot be dispensed with, is, in 
 Bubstancu, quite as much compulsory 
 taxation as if imposed by law : there 
 are few householders who make any 
 distinction between their "water rate" 
 and their other local taxes. In the 
 case of these particular services, the 
 reasons preponderate in favour of their 
 being performed, like the paving and 
 cleansing of the streets, not certainly 
 by the general government of the state, 
 but by the municipal authorities of the 
 town, and the expense defrayed, as 
 even now it in fact is, by a local rate. 
 But in the many analogous cases 
 which it is beet to resign to voluntary 
 agency, the community needs some 
 other security for the fit performance 
 of the service than the interest of the 
 managers ; and it is the part of govern- 
 ment, either to subject the business to 
 reasonable conditions for the general 
 advantage, or to retain such power 
 over it, that the profits of the mono- 
 poly may at least be obtained for the 
 public. This applies to the case of 
 a road, a canal, or a railway. These 
 are always, in a great degree, prac- 
 tical monopolies ; and a government 
 which concedes such monopoly un- 
 reservedly to a private company, 
 does much the same thing as if it 
 allowed an individual or an association 
 o levy any tax they chose, for their 
 
 own benefit, on all the malt produced 
 in the country, or on all the cotton 
 imported into it To make the con- 
 cession for a limited time is generally 
 justifiable, on the principle which jus- 
 tifies patents for inventions : but the 
 state should either reserve to itself a 
 reversionary property in such public 
 works, or should retain, end freely ex- 
 ercise, the right of fixing a maximum 
 of fares and charges, and, from time to 
 time, varying that maximum. It is 
 perhaps necessary to remark, that the 
 state may be the proprietor of canals 
 or railways without itself working 
 them ; and that they will almost 
 always be better worked by means of 
 a company, renting the rail way or canal 
 for a limited period from the state. 
 
 12. To a fourth case of exception 
 I must request particular attention, it 
 being one to which, as it appears to 
 me, the attention of political economists 
 has not yet been sufficiently drawn. 
 There are matters in which the inter- 
 ference of law is required, not to over- 
 rule the judgment of individuals re- 
 specting their own interest, but to give 
 effect to that judgment ; they being 
 unable to give efiect to it except by 
 concert, which concert again cannot be 
 effectual unless it receives validity and 
 sanction from the law. For illustra- 
 tion, and without prejudging the par- 
 ticular point, I may advert to the 
 question of diminishing the hours of 
 labour. Let us suppose, what is at 
 least supposable, whether it be the fact 
 or not that a general reduction of the 
 hours of factory labour, say from ten to 
 nine, would be for the advantage of the 
 work-people : that they would receive 
 as high wages, or nearly as high, for 
 nine hours labour as they receive for 
 ten. If this would be the result, and 
 if the operatives generally are con- 
 vinced that it would, the limitation, 
 some may eay, will be adopted spon- 
 taneously. I answer, that it will not 
 be adopted unless the body of opera- 
 tives bind themselves to one another 
 to abide by it. A workman who re- 
 fused to work more than nkie hours 
 whilo there were others who worked 
 ten, would either not be employed at
 
 582 
 
 BOOK V. CHAPTER XI. 12. 
 
 jill, or if employed, must submit to lose 
 one-tenth of his wages. However con- 
 vinced, therefore, he may be that it is 
 the interest of the class to work short 
 time, it is contrary to his own interest 
 to set the example, unless he is well 
 assured that all or most others will 
 follow it. But suppose a general agree- 
 ment of the whole class : might not 
 this be effectual without the sanction 
 of law? Not unless enforced by 
 opinion with a rigour practically equal 
 to that of law. For however beneficial 
 the observance of the regulation might 
 be to the class collectively, the imme- 
 diate interest of every individual would 
 lie in violating it : and the more nume- 
 rous those were who adhered to the rule, 
 the more would individuals gain by de- 
 parting from it. If nearly all restricted 
 themselves to nine hours, those who 
 chose to work for ten would gain all 
 the advantage of the restriction, to- 
 gether with the profit of infringing it ; 
 they would get ten hours wages for 
 nine hours work, and an hour's wages 
 besides. I grant that if a large majo- 
 rity adhered to the nine hours, there 
 would be no harm done : the benefit 
 would he, in the main, secured to the 
 class, while those indiriduals who pre- 
 ferred to work harder and earn more, 
 would have an opportunity of doing so. 
 Tin's certainly would be the state of 
 things to be wished for ; and assuming 
 that a reduction of hours without any 
 diminution of wages could lake place 
 without expelling the commodity from 
 come of its markets which is in every 
 particular instance a question of fact, 
 not of principle the manner in which 
 it would be most desirable that this 
 effect should be brought about, would 
 Le by a quiet change in the general 
 custom of the trade ; short hours be- 
 coming, by spontaneous choice, the 
 general practice, but those who chose 
 to deviate from it having the fullest 
 liberty to do 60. Probably, however, 
 BO many would prefer the ten hours 
 work on the improved terms, that the 
 limitation could not be maintained as 
 n, general practice: what some did 
 from choice, others would soon be 
 obliged to do from necessity, and thope 
 who had chosen long hours for the 
 
 sake of increased wacres, would be 
 f-rccd in the end to work long hours 
 for no greater wages than before. As- 
 suming then that it really wouid bo 
 the interest of each to work only nino 
 hours if he could be assured that all 
 others would do the same, there might 
 Le no means of their attaining this 
 object but by converting their supposed 
 mutual agreement into an engagement 
 r.nd'.-r penalty, by consenting to have 
 it enforced by law. I am not express- 
 ing any opinion in favour of such an 
 enactment, which has never been de- 
 manded, and which I certainly should 
 not, in present circumstances, recom- 
 mend : but it serves to exemplify the 
 manner in which classes of persons 
 may need the assistance of law, to give 
 effe.-t to their deliberate collective 
 opinion of their own interest, by afford- 
 ing to every individual a guarantee 
 that his competitors will pursue the 
 same course, without which he cannot 
 safely adopt it himself. 
 
 Another exemplification of the same 
 principle is afforded by what is known 
 as the Wakefield system of coloniza- 
 tion. This system is grounded on the 
 important principle, that the degree of 
 productiveness oi' land and labour de- 
 pends' on their being in a due propor- 
 tion to one another; that if a few 
 persons in a newly settled country at- 
 tempt to occupy and appropriate a 
 large district, or if each labourer be- 
 comes too soon an occupier and culti- 
 vator of land, there is a loss of produc- 
 tive power, and a great retardation of 
 the progress of the colony in wealth 
 and civilization : that nevertheless the 
 instinct (as it may almost be called) of 
 appropriation, and the feelings asso- 
 ciated in old countries with landed 
 proprietorship, induce almost every 
 emigrant to take possession of as much 
 land as he has the means of acquiring, 
 and every labourer to become at once 
 a proprietor, cultivating his own land 
 with no other aid than that of his 
 family. If this propensity to the im- 
 mediate possession of land could bo 
 in some degree restrained, and each 
 labourer induced to work a certain 
 number of years on hire before he 
 became a landed proprietor, a per.
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 petual stock of hired labourers could 
 DO maintained, available for roads, 
 canals, works of irrigation, &c., and 
 for the establishment and carrying on 
 of the different branches of town in- 
 clu>try ; whereby the labourer, when he 
 did at last become a landed proprietor, 
 would find his land much more valu- 
 able, through access to markets, and 
 facility of obtaining hired labour. Mr. 
 Wakefield therefore proposed to check 
 the premature occupation of land, and 
 dispersion of the people, by putting 
 upon all unappropriated lands a rather 
 high price, the proceeds of which were 
 to be expended in conveying emigrant 
 labourers from the mother country. 
 
 This salutary provision, however, has 
 been objected to, in the name and on 
 the authority of what was represented 
 as the great principle of political eco- 
 nomy, that individuals are the best 
 judges of their own interest. It wag 
 said, that when things are left to them- 
 selves, land is appropriated and occu- 
 pied by the spontaneous choice of 
 individuals, in the quantities and at 
 the times most advantageous to each 
 person, and therefore to the community 
 generally; and that to interpose arti- 
 ficial obstacles to their obtaining land, 
 is to prevent them from adopting the 
 course which in their own judgment is 
 most beneficial to them, from a self- 
 conceited notion of the legislator, that 
 he knows what is most for their inte- 
 rest, better than they do themselves. 
 Now this is a complete misunderstand- 
 ing, either of the system itself, or of 
 the principle with which it is alleged 
 to conQict. The oversight is similar 
 to that which we have just seen exem- 
 plified on the subject of hours of labour. 
 However beneficial it might be to the 
 colony in the aggregate, and to each 
 individual composing it, that no one 
 should occupy more land than he can 
 pi. ji-Tiy cultivate, nor become a pro- 
 prietor until there are other labourers 
 ready to take his place in working for 
 hire ; it can never be the interest of an 
 individual to exercise this forbearance, 
 unless he is assured that others will do 
 so too. Surrounded by settlers who 
 have each their thousand acres, how is 
 he benefited by restricting himself to 
 
 fifty ? or what does a labourer gain by 
 deferring the acquisition altogether foi 
 a few years, if all other labourers rush 
 to convert their first earnings into 
 estates in the wilderness, several miles 
 apart from one another? If they, by 
 seizing on land, prevent the formation 
 of a class of labourers for wages, ho 
 will not, by postponing the time of his 
 becoming a proprietor, be enabled to 
 employ the land with any greater ad- 
 vantage when ho does obtain it; to 
 what end therefore should he place 
 himself in what will appear to him and 
 others a position of inferiority, by re- 
 maining a hired labourer wnen all 
 around him are proprietors ? It is the 
 interest of each to do what is good for 
 all, but only if others will do likewise. 
 
 The principle that each is the best 
 judge of his own interest, understood 
 as these objectors understand it, would 
 prove that governments ought not to 
 fulfil any of their acknowledged duties 
 ought not, in fact, to exist at all. It 
 is greatly the interest of the commu- 
 nity, collectively and individually, not 
 to rob or defraud one another : but 
 there is not the less necessity for laws 
 to punish robbery and fraud ; because, 
 though it is the interest of each that 
 nobody should rob or cheat, it is not 
 any one's interest to refrain from rob- 
 bing and cheating others when all 
 others are permitted to rob and cheat 
 him. Penal laws exist at all, chiefly 
 for this reason, because even an 
 unanimous opinion that a certain Hue 
 of conduct is for the general interest, 
 does not always make it people's indi- 
 vidual interest to adhere to that line of 
 conduct. 
 
 13. Fifthly; the argument against 
 government interference grounded on 
 the maxim that individuals are the 
 best judges of their own interest, can- 
 not apply to the very large class of 
 cases, in which those acts of individuals 
 with which the government claims to 
 interfere, are not done by those indi- 
 viduals for their own interest, but for 
 the interest of other people. This in- 
 cludes, among other tnings, the impor- 
 tant and much agitated subject of 
 public charity. Though individuals
 
 (584 
 
 should, in general, be left to do for 
 themselves whatever it can reasonably 
 be expected that they should be capable 
 of doing, yet when they are at any 
 rate not to be left to themselves, but to 
 be helped by other people, the question 
 arises whether it is better that they 
 should receive this help exclusively 
 from individuals, and therefore uncer- 
 tainly and casually, or by systematic 
 arrangements, in which society acts 
 through its organ, the state. 
 
 This brings us to the subject of Poor 
 Laws ; a subject which would be of 
 very minor importance if the habits of 
 r.ll classes of the people were temperate 
 and prudent, and the diffusion of pro- 
 perty satisfactory ; but of the greatest 
 moment in a state of things so much 
 the reverse of this, in both points, as 
 that which the British islands present. 
 
 Apart from any metaphysical con- 
 siderations respecting the foundation 
 of morals or of the social union, it will 
 be admitted to be right that human 
 beings should help one another; and 
 the more so, in proportion to the 
 urgency of the need : and none needs 
 help so urgently as one who is starving. 
 The claim to help, therefore, crecited 
 by destitution, is one of the strongest 
 which can exist ; and there is primd 
 facie the amplest reason for making 
 "the relief of so extreme an exigency as 
 certain to those who require it, as by 
 any arrangements of society it can be 
 made. 
 
 On the other hand, in all cases of 
 helping, there are two sets of conse- 
 quences to be considered; the con- 
 sequences of the assistance itself, and 
 the consequences of relying on the 
 assistance. The former are generally 
 beneficial, but the latter, for the most 
 part, injurious ; so much so, in many 
 eases, as greatly to outweigh the value 
 of the benefit. And this is never more 
 likely to happen than in the very cases 
 where the need of help is the most 
 intense. There are few things for 
 which it is more mischievous that 
 people should rely on the habitual aid 
 of others, than for the means of sub- 
 sistence, and unhappily there is no lesson 
 which they more easily learn. The 
 problem to be solved is therefore one 
 
 BOOK V. CHAPTER XI. 13. 
 
 of peculiar nicety as well as impor- 
 tance ; how to give the greatest amount 
 of needful help, with the smallest en- 
 couragement to undue reliance on it. 
 
 Energy and self-dependence are, how- 
 ever, liable to be impaired by the ab- 
 sence of help, as well as by its excess. 
 It is even more fatal to exertion to 
 have no hope of succeeding by it, than 
 to be assured of succeeding without it. 
 When the condition of any one is so 
 disastrous that his energies are para- 
 lyzed by discouragement, assistance is 
 atonic, not a sedative: it braces in- 
 stead of deadening the active faculties: 
 always provided that the assistance is 
 not such as to dispense with self-help, 
 by substituting itself for the person's 
 own labour, skill, and prudence, but is 
 limited to affording him a better hope 
 of attaining siiccess by those legiti- 
 mate means. This accordingly is a 
 test to which all plans of philanthropy 
 and benevolence should be brought, 
 whether intended for the benefit of in- 
 dividuals or of classes, and whether 
 conducted on the voluntary or on the 
 government principle. 
 
 In so far as the subject admits of 
 any general doctrine or maxim, it would 
 appear to be this that if assistance is 
 given in such a manner that the con- 
 dition of the person helped is as de- 
 sirable as that of the person who 
 succeeds in doing the same thing 
 without help, the assistance, if capable 
 of being previously calculated on, is 
 mischievous : but if, while available to 
 everybody, it leaves to every one a 
 strong motive to do without it if he 
 can, it is then for the most part bene- 
 ficial. This principle, applied to a. 
 system of public charity, is that of the 
 Poor Law of 1834. If the condition 
 of a person receiving relief is made as 
 eligible as that of the labourer who 
 supports himself by his own exertions, 
 the system strikes at the root of all 
 individual industry and self-govern- 
 ment ; and, if fully acted up to, would 
 require as its supplement an organized 
 system of compulsion, for governing 
 and setting to work like cattle, those 
 who had been removed from the in- 
 fluence of the motives that act on 
 human beings. But if, consistently
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 585 
 
 with guaranteeing all persons against 
 absolute want, the condition of those 
 who are supported by legal charity can 
 be kept considerably less desirable than 
 the condition of those who find support 
 for themselves, none but beneficial con- 
 sequences can arise from a law which 
 renders it impossible for any person, 
 except by his own choice, to die from 
 insufficiency of food. That in England 
 at least this supposition can be realized, 
 is proved by the experience of a long 
 period preceding the close of the last 
 century, as well as by that of many 
 highly pauperized districts in more 
 recent times, which have been dispau- 
 perized by adopting strict rules of poor- 
 law administration, to the great and 
 permanent benefit of the whole la- 
 bouring class. There is probably no 
 country in which, by varying the means 
 suitably to the character of the people, 
 a legal provision for the destitute might 
 not be made compatible with the obser- 
 vance of the conditions necessary to its 
 being innocuous. 
 
 Subject to these conditions, I con- 
 ceive it to be highly desirable, that 
 the certainty of subsistence should be 
 held out by law to the destitute able- 
 bodied, rather than that their relief 
 should depend on voluntary charity. 
 In the first place, charity almost 
 always does too much or too little : it 
 lavishes its bounty in one place, and 
 leaves people to starve in another. 
 Secondly, since the state must neces- 
 sarily provide subsistence for the cri- 
 minal poor while undergoing punish- 
 ment, not to do the same for the poor 
 who have not offended is to give a 
 premium on crime. And lastly, if the 
 poor are left to individual charity, a 
 vast amount of mendicity is inevitable. 
 What the state may and should aban- 
 don to private charity, is the task of 
 distinguishing between one case of 
 real necessity and another. Private 
 charity can give more to the more de- 
 serving. The state must act by general 
 rules. It cannot undertake to discrimi- 
 nate between the deserving and the 
 undeserving indigent. It owes no more 
 than subsistence to the first, and can 
 give no less to the last. "What is said 
 about the injustice of a law which has 
 
 no better treatment for the merelj 
 unfortunate poor than for the ill-con 
 ducted, is founded on a misconception 
 of the province of law and public au- 
 thority. The dispensers of public re- 
 lief have no business to be inquisitors. 
 Guardians and overseers are not fit to 
 be trusted to give or withhold othei 
 people's money according to their ver- 
 dict on the morality of the person so 
 liciting it ; and it would snow much 
 ignorance of the ways of mankind tc 
 suppose that such persons, even in the 
 almost impossible case of their being 
 qualified, will take the trouble of ascer- 
 taining and sifting the past conduct of 
 a person in distress, so as to form a 
 rational judgment on it. Private cha- 
 rity can make these distinctions ; and 
 in bestowing its own money, is en- 
 titled to do so according to its own 
 judgment. It should understand that 
 this is its peculiar and appropriate 
 province, and that it is commendable 
 or the contrary, as it exercises the 
 function with more or less discern- 
 ment. But the administrators of a 
 public fund ought not to be required 
 to do more for anybody, than that 
 minimum which is due even to the 
 worst. If they are, the indulgence 
 very speedily becomes the rule, and 
 refusal the more or less capricious or 
 tyrannical exception. 
 
 1 4. Another class of cases which 
 fall within the same general principle 
 as the case of public charity, are those 
 in which the acts done by individuals, 
 though intended solely for their own 
 benefit, involve consequences extend- 
 ing indefinitely beyond them, to inte- 
 rests of the nation or of posterity, for 
 which society in its collective capacity 
 is alone able, and alone bound, to pro- 
 vide. One of these cases is that of 
 Colonization. If it is desirable, as no 
 one will deny it to be, that the plant- 
 ing of colonies should be conducted, 
 not with an exclusive view to the pri- 
 vate interests of the first founders, but 
 with a deliberate regard to the perma- 
 nent welfare of the nations afterwards 
 to arise from these small beginnings ; 
 such regard can only be secured by 
 olacing the enterprise, from its com-
 
 586 
 
 BOOK V. CHAPTER XI. 14. 
 
 mencement, under regulations con- 
 structed with the foresight and en- 
 larged views of philosophical legis- 
 lators ; and the government alone has 
 power either to frame such regulations, 
 or to enforce their observance. 
 
 The question of government inter- 
 vention in the work of Colonization 
 involves the future and permanent in- 
 terests of civilization itself, and far 
 outstretches the comparatively narrow 
 limits of purely economical considera- 
 tions. But even with a view to those 
 considerations alone, the removal of 
 population from the overcrowded to 
 the unoccupied parts of the earth's sur- 
 face is one of those works of eminent 
 social usefulness, which most require, 
 and which at the same time lest re- 
 pay, the intervention of government. 
 
 To appreciate the benefits of colo- 
 nization, it should be considered in its 
 relation, not to a single country, but 
 to the collective economical interests 
 of the human race. The question is in 
 general treated too exclusively as one 
 of distribution ; of relieving one labour- 
 market and supplying another. It is 
 this, but it is also a question of pro- 
 duction, and of the most efficient em- 
 ployment of the productive resources 
 of the world. Much has been said of 
 the good economy of importing com- 
 modities from the place where they 
 can be bought cheapest ; while the 
 good economy of producing them where 
 they can be produced cheapest, is 
 comparatively little thought of. If to 
 tarry consumable goods from the 
 places where they are superabundant 
 to those where they are scarce, is a 
 good pecuniary speculation, is it not 
 an equally good speculation to do the 
 same thing with regard to labour and 
 instruments ? The exportation of la- 
 bourers and capital from old to new 
 countries, from a place where their 
 productive power is less, to a place 
 where it is greater, increases by so 
 much the aggregate produce of the 
 labour and capital of the world. It 
 adds to the joint wealth of the old and 
 the new country, what amounts in a 
 short period to many times the mere 
 cost of effecting the transport. There 
 needs bo no hesitation in affirming 
 
 that Colonization, in the present state 
 of the world, is the best affair of busi- 
 ness, in which the capital of an old 
 and wealthy country can engage. 
 
 It is equally obvious, however, that 
 Colonization on a great scale, can bo 
 undertaken, as an affair of business, 
 only by the government, or by some 
 combination of individuals in complete 
 understanding with the government ; 
 except under such very peculiar cir- 
 cumstances as those which succeeded 
 the Irish famine. Emigration on the 
 voluntary principle rarely has any 
 material influence in lightening the 
 pressure cf population in the old coun- 
 try, though as far as it goes it is doubt- 
 less a benefit to the colony. Thoso 
 labouring persons who voluntarily emi- 
 grate are seldom the very poor ; they 
 are small farmers with some little 
 capital, or labourers who have saved 
 something, and who, in removing only 
 their own labour from the crowded 
 labour-market, withdraw from tbo 
 capital of the country a fund which 
 maintained and employed more la- 
 bourers than themselves. Besides, this 
 portion of the community is so limited 
 in number, that it might be removed 
 entirely, without making any sensible 
 impression upon the numbers of tho 
 population, or even upon the annual 
 increase. Any considerable emigration 
 of labour is only practicable, when ita 
 cost is defrayed, or at least advanced, 
 by others than the emigrants them- 
 selves. Who then is to advance it? 
 Naturally, it may be said, the capital- 
 ists of the colony, who require the 
 labour, and who intend to employ it. 
 But to this there is the obstacle, that 
 a capitalist, after going to the expense 
 of carrying out labourers, has no se- 
 curity that he shall be the person to 
 derive any benefit from them. If & 
 the capitalists of the colony were tw 
 combine, and bear the expense by sub- 
 scription, they would still have no se- 
 curity that the labourers, when there, 
 would continue to work for them. After 
 working for a short time and earning a 
 few pounds, they always, unless pre- 
 vented by the government, squat on 
 unoccupied land, and work only for 
 themselves. The experiment has been
 
 LIMITS OF THE PROVINCE OP GOVERNMENT. 
 
 587 
 
 repeatedly tried whether it was pos- 
 sible to enforce contracts for labour, 
 or the repayment of the passage-money 
 of emigrants to those who advanced it, 
 and the trouble and expense have al- 
 ways exceeded the advantage. The 
 only other resource is the voluntary 
 contributions of parishes or individuals, 
 to rid themselves of surplus labourers 
 who are already, or who are likely to 
 become, locally chargeable on the poor- 
 rate. Were this speculation to become 
 general, it might produce a suflicient 
 amount of emigration to clear off the 
 existing unemployed population, but 
 not to raise the wages of the em- 
 ployed : and the same thing would re- 
 quire to be done over again in less than 
 another generation. 
 
 One of the principal reasons why 
 Colonization should be a national un- 
 dertaking, is that in this manner alone, 
 save in highly exceptional cases, can 
 emigration be self-supporting. Th 
 exportation of capital and labour to a 
 new country being, as before observed, 
 one of the best of all affairs of business, 
 it is absurd that it should not, like 
 other afl'airs of business, repay its own 
 expenses. Of the great addition which 
 it makes to the produce of the world, 
 there can be no reason why a sufficient 
 portion should not be intercepted, and 
 employed in reimbursing the outlay 
 incurred in effecting it. For reasons 
 already given, no individual, or body 
 of individuals, can reimburse them- 
 selves for the expense ; the govern- 
 ment, however, can. It can take from 
 the annual increase of wealth, caused 
 i>y the emigration, the fraction which 
 suffices to repay with interest what the 
 emigration has cost. The expenses of 
 emigration to a colony ought to be 
 1 orne by the colony; and this, in 
 general, is only possible when they are 
 Lome by the colonial government. 
 
 Of the modes in which a fund for the 
 .support of colonization can be raised in 
 the oolcny, none is comparable in ad- 
 vantage to that which was first sug- 
 gested, and has since been so ably and 
 perseveringly advocated, by Mr. Wake- 
 field: the plan of putting a price on all 
 unoccupied land, and devoting the pro- 
 ceeds to emigration. The unfounded 
 
 and pedantic objections to this plan 
 have been answered in a former part 
 of tins chapter : we have now to speak 
 of its advantages. First, it av 
 difficulties and discontents incident to 
 raising a large annual amount by taxa- 
 tion ; a thing which it is almost useless 
 to attempt with a scattered population 
 of settlers in the wilderness, who, as 
 experience proves, can seldom be com- 
 pelled to pay direct taxes, except at a 
 cost exceeding their amount ; while in 
 an infant community indirect taxation 
 soon reaches its limit. The sale of 
 lands is thus by far the easiest mode of 
 raising the requisite funds. But it has 
 other and still greater recommenda- 
 tions. It is a beneficial check upon 
 the tendency of a population of co- 
 lonists to adopt the tastes and inclina- 
 tions of savage life, and to disperse so 
 widely as to lose all the advantages of 
 commerce, of markets, of separation of 
 employments, and combination of la- 
 bour. By making it necessary for 
 those who emigrate at the expense of 
 the fund, to earn a considerable sum 
 before they can become landed pro- 
 prietors, it keeps up a perpetual suc- 
 cession of labourers for hire, who in 
 every country are a most important 
 auxiliary even to peasant proprietors : 
 and by diminishing the eagerness c< 
 agricultural speculators to add to their 
 domain, it keeps the settlers within 
 reach of each other for purposes of co- 
 operation, arranges a numerous body of 
 them within easy distance of each 
 centre of foreign commerce and non- 
 agricultural industry, and ensures the 
 formation and rapid growth of towns 
 and town products. This concentra- 
 tion, compared with the dispersion 
 which uniformly occurs when unoccu- 
 pied land can be had for nothing, 
 greatly accelerates the attainment of 
 i y, and enlarges the fund which 
 may be drawn upon for further emigra- 
 tion. Before the adoption of the Wake- 
 field system, the early years of all new 
 colonies were full of hardship and diffi- 
 culty : the last colony founded on tho 
 old principle, the Swan River settle- 
 ment, bring one of the most charac- 
 teristic instances. In nil subsequent 
 colonization, the WakelielJ principle
 
 BOOR V. CIIAPTEH XI. 14. 
 
 has been acted upon, though imper- 
 fectly, a part only of the proceeds of 
 the sale of land being devoted to emi- 
 gration : yet wherever it has been in- 
 troduced at all, as in South Australia, 
 Victoria, and New Zealand, the re- 
 straint put upon the dispersion of the 
 settlers, and the influx of capital caused 
 ~)y the assurance of being able to obtain 
 hired labour, has, in spite of many 
 difficulties and much mismanagement, 
 produced a suddenness and rapidity 
 of prosperity more like fable than 
 reality.* 
 
 The self-supporting system of co- 
 lonization, once established, would in- 
 crease in efficiency every year; its 
 effect would tend to increase in geo- 
 metrical progression: for since every 
 able-bodied emigrant, until the country 
 is fully peopled, adds in a very short 
 time to its wealth, over and above his 
 own consumption, as much as would 
 defray the expense of bringing out 
 another emigrant, it follows that the 
 greater the number already sent, the 
 greater number might continue to be 
 sent, each emigrant laying the founda- 
 tion of a succession of other emigrants 
 at short intervals without fresh ex- 
 pense, until the colony is filled up. It 
 would therefore be worth while, to the 
 mother country, to accelerate the early 
 stages of this progression, by loans to 
 the colonies for the purpose of emigra- 
 tion, repayable from the fund formed 
 by the sales of land. In thus ad- 
 vancing the means of accomplishing a 
 large immediate emigration, it would 
 be investing that amount of capital in 
 the mode, of all others, most beneficial 
 to the colony ; and the labour and 
 savings of these emigrants would 
 hasten the period at which a large 
 
 * The objections which have been made, 
 with so much virulence, in some of these 
 colonies, to the "\Vakefleld system, apply, in 
 so far as they have any validity, not to the 
 principle, but to some provisions which are 
 no part of the system, and have been most 
 unnecessarily and improperly engrafted on 
 it ; snch as the offering only a limited 
 quantity of land for sale, aud that by auction, 
 and in lots of not less than 610 acres, 
 instead of selling all land which is asked for, 
 and allowing to the buyer unlimited freedom 
 of choice, both as to quantity and situation, 
 at fixed price. i 
 
 sum would be available from sales of 
 land. It would be necessary, in order 
 not to overstock the labour-market, to 
 act in concert with the persons disposed 
 to remove their own capital to the 
 colony. The knowledge that a large 
 amount of hired labour would be avail- 
 able, in so productive a field of em- 
 ployment, would ensure a large emi- 
 gration of capital from a country, like 
 England, of low profits and rapid ac- 
 cumulation : and it would only be ne- 
 cessary not to send out a greatei 
 number of labourers at one time, than 
 this capital could absorb and employ at 
 high wages. 
 
 Inasmuch as, on this system, any 
 given amount of expenditure, once in- 
 curred, would provide not merely a 
 single emigration, but a perpetually 
 flowing stream of emigrants, which 
 would increase in breadth and depth 
 as it flowed on ; this mode of relieving 
 overpopulation has a recommendation, 
 not possessed by any other plan ever 
 proposed for making head against the 
 consequences of increase without re- 
 straining the increase itself: there is 
 an element of indefiniteness in it ; no 
 one can perfectly foresee how far its 
 influence, as a vent for surplus popu- 
 lation, might possibly reach. There is 
 hence the strongest obligation on the 
 government of a country like our own, 
 with a crowded population, and unoc- 
 cupied continents under its command, 
 to build, as it were, and keep open, a 
 bridge from the mother country to 
 those continents, by establishing tho 
 self-supporting system of colonization 
 on such a scale, that as great an 
 amount of emigration as the colonies 
 can at the time accommodate, may at 
 all times be able to take place without 
 cost to the emigrants themselves. 
 
 The importance of these considera- 
 tions, as regards the British islands, 
 has been of late considerably di- 
 minished by the unparalleled amount of 
 spontaneous emigration from Ireland; 
 an emigration not eolely of small 
 farmers, but of the poorest class of 
 agricultural labourers, and which is at 
 once voluntary and self-supporting, the 
 succession of emigrants being kept up 
 by funds contributed from the earnings
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 6B9 
 
 of their relatives and connexions who 
 had gone before. To this has been 
 added a large amount of voluntary 
 emigration to the seats of the gold dis- 
 coveries, which has partly supplied the 
 wants of our most distant colonies, 
 where, both for local and national in- 
 terests, it was most of all required. 
 But the stream of both these emigra- 
 tions has already considerably slack- 
 ened, and though that from Ireland has 
 since partially revived, it is not certain 
 that the aid of government in a sys- 
 tematic form, and on the self-sup- 
 porting principle, will not again be- 
 come necessary to keep the communi- 
 cation open between the hands needing 
 work in England, and the work which 
 needs hands elsewhere. 
 
 15. The same principle which 
 points out colonization, and the relief 
 of the indigent, as cases to which the 
 principal objection to government in- 
 terference does not apply, extends also 
 to a variety of cases, in which impor- 
 tant public services are to be per- 
 formed, while yet there is no indi- 
 vidual specially interested in perform- 
 ing them, nor would any adequate 
 remuneration naturally or spontane- 
 ously attend their performance. Take 
 for instance a voyage of geographical 
 or scientific exploration. The infor- 
 mation sought may be of great public 
 value, yet no individual would derive 
 any benefit from it which would repay 
 the expense of fitting out the expe- 
 dition ; and there is no mode of inter- 
 cepting the benefit on its way to those 
 who profit by it, in order to levy a toll 
 for the remuneration of its authors. 
 Such voyages are, or might be, under- 
 taken by private subscription ; but this 
 is a rare and precarious resource. In- 
 stances are more frequent in which the 
 expense has been borne by public com- 
 
 E uuies or philanthropic associations ; 
 ut in general such enterprises have 
 been conducted at the expense of go- 
 vernment, which is thus enabled to en- 
 trust them to the persons in its judg- 
 ment best qualified for the task. 
 Again, it is a proper office of govern- 
 ment to build and maintain light- 
 houses, establish buoys, &c., for the 
 
 security of navigation : for since it i? 
 impossible that the ships at sea which 
 arc benefited by a lighthouse, should 
 be made to pay a toll on the occasion 
 of its use, no one would build light- 
 houses from motives of personal inte- 
 rest, unless indemnified and rewarded 
 from a compulsory levy made by the 
 state. There are many scientific re- 
 searches, of great value to a nation 
 and to mankind, requiring assiduous 
 devotion of time and labour, and not 
 unfrequently great expense, by persons 
 who can obtain a high price for their 
 services in other ways. If the govern- 
 ment had no power to grant indemnity 
 for expense, and remuneration for time 
 and labour thus employed, such re 
 searches could only be undertaken by 
 the very few persons who, with an 
 independent fortune, unite technical 
 knowledge, laborious habits, and either 
 great public spirit, or an ardent desire 
 of scientific celebrity. 
 
 Connected with this subject is the 
 question of providing, by means of en- 
 dowments or salaries, for the mainte- 
 nance of what has been called a 
 learned class. The cultivation of 
 speculative knowledge, though one of 
 the most useful of all employments, is 
 a service rendered to a community 
 collectively, not individually, and one 
 consequently for which it is, priina 
 facie, reasonable that the community 
 collectively should pay ; since it gives no 
 claim on any individual for a pecuniary 
 remuneration ; and unless a provision 
 is made for such services from some 
 public fund, there is not only no en 
 couragement to them, but there is as 
 much discouragement as is implied in 
 the impossibility of gaining a living 
 by such pursuits, and the necessity 
 consequently imposed on most of those 
 who would be capable of them, to em- 
 ploy the greatest part of their time 
 in gaining a subsistence. The evil, 
 however, is greater in appearance than 
 in reality. The greatest things, it ha* 
 been said, have generally been done 
 by those who had the least time at 
 their disposal ; and the occupation ot 
 some hours every day in a routine em- 
 ployment, has often been found com- 
 patible with the most brilliant achieve-
 
 590 
 
 BOOK V. CHAPTER XI. 16. 
 
 ments in literature and philosophy. 
 Yet there are investigations and ex- 
 periments which require not only a 
 long but a continuous devotion of time 
 and attention : there are also occupa- 
 tions which so engross and fatigue the 
 mental faculties, as to he inconsistent 
 with any vigorous employment of 
 them upon other subjects, even in 
 intervals of leisure. It is highly de- 
 sirable, therefore, that there should be 
 a mode of ensuring to the public the 
 services of scientific discoverers, and 
 perhaps of some other classes of savans, 
 by affording them the means of sup- 
 port consistently with devoting a suf- 
 ficient portion of time to their peculiar 
 pursuits. The fellowships of the Uni- 
 versities are an institution excellently 
 adapted for such a purpose ; but are 
 hardly ever applied to it, being be- 
 stowed, at the best, as a reward for 
 past proficiency, in committing to 
 memory what has been done by others, 
 and not as the salary of future labours 
 in the advancement of knowledge. In 
 some countries, Academies of science, 
 antiquities, history, &c., have been 
 formed, with emoluments annexed. 
 The most effectual plan, and at the 
 same time the least liable to abuse, 
 seems to be that of conferring Pro- 
 fessorships, with duties of instruction 
 attached to them. The occupation of 
 teaching a branch of knowledge, at 
 least in its higher departments, is a 
 help rather than an impediment to the 
 systematic cultivation of the subject 
 itself. The duties of a professorship 
 almost always leave much time for 
 original researches, and the greatest 
 advances which have been made in 
 the various sciences, both moral and 
 physical, have originated with those 
 who were public teachers of them ; 
 from Plato and Aristotle to the great 
 lames of the Scotch, French, and 
 U erman Universities. I do not men- 
 tion the English, because, until very 
 .titely, their professorships have been, 
 as is well known, little more than 
 nominal. In the case, too, of a lec- 
 turer in a great institution of educa- 
 tion, the public at large has the means 
 Df judging, if not the quality of the 
 teaching, at least the talents and in- 
 
 dustry of the teacher; and it is more 
 difficult to misemploy the power of 
 appointment to such an office, than to 
 job in pensions and salaries to persons 
 not so directly before the public eye. 
 
 It may be said generally, that any- 
 thing which it is desirable should be 
 done for the general interests of man- 
 kind or of future generations, or for the 
 present interests of those members of 
 the community who require external 
 aid, but which is not of a nature to re- 
 munerate individuals or associations 
 for undertaking it, is in itself a suitable 
 thing to be undertaken by govern- 
 ment : though, before making the work 
 their own, governments ought always 
 to consider if there be any rational 
 probability of its being done on what 
 is called the voluntary principle, and if 
 so, whether it is likely to be done in a 
 better or more effectual manner by 
 government agency, than by the zeal 
 and liberality of individuals. 
 
 16. The preceding heads com- 
 prise, to the best of my judgment, the 
 whole of the exceptions to the practical 
 maxim, that the business of society 
 can be best performed by private and 
 voluntary agency. It is, however, 
 necessary to add, that the intervention 
 of government cannot always practi- 
 cally stop short at the limit which de- 
 fines the cases intrinsically suitable for 
 it. In the particular circumstances of 
 a given age or nation, there is scarcely 
 anything, really important to the gene- 
 ral interest, which it may not be de- 
 sirable, or even necessary, that the 
 government should take upon itself, 
 not because private individuals cannot 
 effectually perform it, but because they- 
 will not. At some times and places 
 there will be no roads, docks, harbours, 
 canals, works of irrigation, Hospitals, 
 schools, colleges, printing presses, un- 
 less the government establishes them ; 
 the public being either too poor to 
 command the necessary resources, 01 
 too littlo advanced in intelligence to 
 appreciate the ends, or not sufficiently 
 practised in joint action to be capable 
 :>f the means. This is true, more or 
 less, of all countries inured to d- spo- 
 tism, and particularly of those in which
 
 LIMITS OF THE PROVINCE OF GOVERNMENT. 
 
 591 
 
 there is a very wide distance in civili- 
 zation between the people and the 
 government: as in those which have 
 been conquered and are retained in 
 subjection by a more energetic and 
 more cultivated people. In many parts 
 of the world, the people can do nothing 
 for themselves which requires large 
 means and combined action ; all such 
 things are left undone, unless done by 
 the state. In these cases, the mode iu 
 which the government can most surely 
 Jemonstrate the sincerity with which 
 it intends the greatest good of its 
 subjects, is by doing the things which 
 are made incumbent on it by the help- 
 lessness of the public, in such a manner 
 as shall tend not to increase and per- 
 petuate but to correct that helpless- 
 ness. A good government will givo all 
 its aid in such a shape, as to encourage 
 and nurture any rudiments it may find 
 of a spirit of individual exertion. It 
 will be assiduous in removing obstacles 
 and discouragements to voluntary en- 
 terprise, and in giving whatever facili- 
 ties and whatever direction and guid- 
 ance may be necessary : its pecuniary 
 means will be applied, when practi- 
 cable, in aid of private efforts rather 
 than in supersession of them, and it 
 will call into play its machinery of re- 
 wards and honours to elicit such efforts. 
 
 Government aid, when given merely 
 in default of private enterprise, should 
 bo so given as to be as far as possible 
 a course of education for the people 
 in the art of accomplishing great 
 objects by individual energy and volun- 
 tary co-operation. 
 
 I have not thought it necessary here 
 to insist on that part of the functions 
 of government which all admit to be 
 indispensable, the function of prohibit- 
 ing and punishing such conduct on the 
 part of individuals in the exercise of 
 their freedom, as is clearly injurious to 
 otlu.T persons, whether the case be one 
 of force, fraud, or negligence. Even in 
 the best state which society has yet 
 reached, it is lamentable to think how 
 great a proportion of all the efforts and 
 talents in the world are employed in 
 merely neutralizing one another. It 
 is the proper end of government to re- 
 duce this wretched waste to the smallest 
 possible amount, by taking such mea- 
 sures as shall cause the energies now 
 spent by mankind in injuring one 
 another, or in protecting themselves 
 against injury, to be turned to the 
 legitimate employment of the human 
 faculties, that of compelling tho 
 powers of nature to be more and more 
 subservient to physical and moral 
 good.
 
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 Los Angeles 
 
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