UNIVERSITY OF CAUFORN.A, SAN ^ 3 1822 0172989^ i<^M •:-^i :^ >* — -- ^^K?i^ ^i?l^^ .(9:^k^ / \ Ll^RARY^ UNiVE.-SiJV OF CAUFOKNIA SAN DIEGO \J { ^k UNIVERSITY OF CALIFORNIA, SAN DIEGO 3 1822 01729 8977 HB' CONVERSATIONS 0¥ POLITICAL ECONOMY; Wr WHICH THE ELEMENTS OF THAT SCIENCE FAMILIARLY EXPLAINED. BY THE AUTHOR OF " CONVEttSATIONS ON CHEMISTRT.'^ SECOND EDITION. LONDON: PRINTED FOR LONGMAN, HURST, UEES, ORME, •■VND DROWN, PATE RNOSTE R-RO^\^ LS17. Printed by A. Strahan, Printers-Street, London. ADVERTISEMENT. The uneo'pected rapidity with which this second edition has followed the first publica- tion of this work, has scarcely afforded time for any material alteration or improvement. Yet tlie Author has availed herself of a few useful hints from her friends, and of some recent valuable publications on Political Eco- nomy, which have enabled her to throw some additional light upon a few particular subjects, London, July 11 th, 181 7. A ^ PREFACE. In offering to the Public this small work, in which it is attempted to bring within the reach of young persons a science which no English writer has yet presented in an easy and familiar form, the author is far from inferring, from the unexpected success of a former elementary work, on the subject of Chemistry, that the present attempt is likely to be received with equal favor. Political Economy, though so immediately connected with the happi- ness and improvement of mankind, and the object of so much controversy and speculation among men of knowledge, is A 3 VI PREFACE. not yet become a popular science, and is not generally considered as a study essen- tial to early education. This work, there- fore, independently of all its defects, will have to contend against the novelty of the pursuit with young persons of either sex, for the instruction of whom it is especially intended. If, however, it should be found useful, and if, upon the whole, the doc- trines it contains should appear sound and sufficiently well explained, the author flat- ters herself that this attempt will not be too severely judged. She hopes it will be remembered that in devising the plan of this work, she was in a great degree obliged to form the path she has pursued, and had scarcely any other guide in this popular mode of viewing the subject, than the re- collection of the impressions she herself experienced when she first turned her at- tention to this study ; though she has sub'- sec|uently derived great assistance from the PREFACE. VII kindness of a few friends, who revised her sheets as she advanced in the undertaking. As to the principles and materials of the work, it is so obvious that they have been obtained from the writings of the great masters who have treated this subject, and more particularly from those of Dr. Adam Smith, of Mr. Malthus, M. Say, M. Sis- mondi, Mr. llicardo, and Mr. Blake, that the author has not thought it necessary to load these pages with repeated acknowledg- ments and incessant references. It will immediately be perceived by those to whom the subject is not new, that a few of the most abstruse questions and contro- versies in Political Economy have been en- tirely omitted, and that others have been stated and discussed without any positive conclusion being deduced. This is a de- fect unavoidably attached not only to the VIU PREFACE. author's limited knowledge, but also to the real difficulty of the science. In general, however, when the soundness of a doctrine has appeared well established, it has been stated conscientiously, without any excess of caution or reserve, and with the sole object of diffusing useful truths. It has often been a matter of doubt among the author's literary advisers, whe- ther the form of dialogues, which was adopted in the Conversations on Chemistry, should be preserved in this Essay. She has, however, ultimately decided for the affirm- ative ; not that she particularly studied to introduce strict consistency oi' character, or uniformity of intellect, in the remarks of her pupil,— an attempt which might have often impeded the elucidation of the sub- ject ; but because it gave her an opportu- nity of introducing objections, and placing in various points of view questions and 14 PREFACE. IX answers as they had actually occurred to her own mind, — a plan which would not have suited a more didactic composition. It will be observed accordingly, that the colloquial form is not here confined to the mere intersection of the argument by ques- tions and answers, as in common school- books : but that the questions are generally the vehicle of some collateral remarks con- tributing to illustrate the subject ; and that they are in fact such as would be likely to aiise in the mind of an intelligent young person, fluctuating between the impulse of her heart and the progress of her reason, and naturally imbued with all the preju- dices and popular feelings of uninformed benevolence. TABLE OF CONTENTS. Conversation I. Introduction Page 1 — — — — — II. Introduction — continued 17 III. On Property - - - 30 _— — . IV. Property — continued - 52 « V. On the Division of La- bour ----- 67 VI. On Capital - - - 87 I. VII, Capital — continued - 105 — — VIII. On W^ages and Popula- tion ----- 119 — — — IX. Wages and Population — continued - - - 140 — — — — — . X. On THE Condition of THE Poor 159 Xll CONTENTS. Conversation XI. On Revenue Page 1 80 — : XII. Revenue FROM Land- ed Property 199 . ■ I XIII. Revenue from the Cultivation of Land - - - 232 ; . «- XrV. Revenue from Ca- pital lent - - 267 XV. On Value AND Price 289 XVL On Money - - 315 , XVII. Money — continued 340 . XVIII. Commerce - - - 364 XIX. On Foreign Trade 384 _ XX. Foreign Trade — continued - ~ - 405 — r.- . XXI. Foreign Tkade — continued - - - 419 n . I ., XXII. On Expenditure 441 CONVERSATION I. INTRODUCTION. ERRORS ARISING FROM TOTAL IGNORANCE OF PO- LITICAL ECONOMY. ADVANTAGES RESULTING FROM THE KNOWLEDGE OF ITS PRINCIPLES. — - DIFFICULTIES TO BE SURMOUNTED IN THIS STUDY. MRS. B. We differ so much respecting the merit of the passa^ you mentioned this morning, that I cannot help suspecting some inaccuracy in the quotation. CAROLINE. Then pray allow me to read it to you ; it is im- mediately after the return of Telemachus to Sa- lentum, when he expresses his astonishment to Mentor at the change that has taken place since his former visit ; he says, " Has any misfortune happened to Salentum in my absence? the magni- ficence and splendour in which I left it have dis- JB I INTRODUCTION. appeared. I see neither silver, nor gold, nor jewels ; the habits of the people are plain, the build- ings are smaller and more simple, the arts lan- guish, and the city is become a desert." — " Have you observed," replied Mentor with a smile, " the state of the country that lies round it ?" — " Yes," said Telemachus, " I perceive that agriculture is become an honourable profession, and that there is not a field uncultivated." — " And which is best," replied Mentor, " a superb city, abounding with marble, gold, and silver, with a steril and neglected country; or a country in a state of high cultiva- tion, and fruitful as a garden, with a city where decency has taken place of pomp ? A great city full of artificers, who are employed only to effe- minate the manners, by furnishing the superfluities of luxury, surrounded by a poor and uncultivated country', resembles a monster with a head of enor- mous size, and a withered, enervated body, with- out beauty, vigour, or proportion. The genuine strensfth and true riches of a kingdom consist in the number of people, and the plenty of provisions ; and innumerable people now cover the whole ter- ritory of Idomeneus, which they cultivate with un- wearied diligence and assiduity. His dominions may be considered as one town, of which Salentum is the centre ; for the people that were wanting in the fields, and supei-fluous in the city, we have re- moved from the city to the fields." INTRODUCTION. S Well, must I proceed, or have I read enough to convmcc you that Mentor is right ? MRS. B. I still persist in my opinion ; for though some of the sentiments in this passage are perfectly just, yet the general principle on which they are founded, that town and country thrive at the expense of each other, I believe to be quite erroneous ; I am convinced, on the contrary, that flourishing cities are the means of fertilising the fields around them. Do you see any want of cultivation in the neigh- bourhood of London ? or can you name any highly improved country which does not abound with wealthy and populous cities ? On the other hand, what is more conmion than to observe de- cayed cities environed by barren and ill-cultivated lands ? The purple and gold of Tyre during the prosperity of the Phoenicians, far from depriving the fields of their labourers, obliged that nation to colonise new countries as a provision for its excess of population. CAROLINE. That is going very far back for an example. MRS. B. If you wish to come down to a later period, compare the ancient flourishing state of Phoenicia, B 2 4 INTRODUCTION. with its present wretchedness, so forcibly described by Volney in his travels. CAROLINE. Has not this wretchedness been produced by violent revolutions, which during a course of ages have impoverished that devoted counti'y, and does it not continue in consequence of the detestable policy of its present masters? But in the natural and undisturbed order of things, is it not clear that the greater number of labourers a sovereign should, after the example of Idomeneus, compel to quit the town in order to work in the country, the better that country would be cultivated ? MRS. B. I do not think so ; I am of opinion, on the con- trary, that the people thus compelled to quit the town, would not find work in the country. CAROLINE. And why not ? MRS. B. Because there would already be as many labour- ers in the country as could find employment. CAROLINE. In England that might possibly be the case, but would it be so in badly-cultivated countries ? 6 INTRODUCTION. S MiflS. B. I ihink it would. CAROLINE. Do you mean to say that if a country which is ill- cultivated were provided with a greater number of labourers it would not be improved ? You must allow that this requires some explanation, MRS. B. It does so, and perhaps even more than you imagine ; for you cannot well understand this ques- tion without some knowledge of the principles of political econom3\ CAROLINE. I am very sorry to hear that, for I confess that I have a sort of antipathy to political economy. MRS. u. Are you sure that you understand what is meant by political economy ? CAROLINE. I believe so, as it is so often the subject of con- versation at home ; but it appears to me the most uninteresting of all subjects. It is about custom- houses, and trade, and taxes, and bounties, and smuggling, and paper-money, and the bullion- committee, &c. which I cannot hear named without B 3 C INTRODUCTION. yawning. Then there is a perpetual reference to the works of Adam Smith, whose name is never uttered witliout such a respectful, and almost reli- gious veneration, that I was induced one day to look into his work on Political Economy to gain some information on the subject of corn, but what with forestalling, regrating, duties, drawbacks, and limiting prices, I was so overwhelmed by a jargon of uninteUigible terms, that after running over a few pages I threw the book away in despair, and re- solved to eat my bread in humble ignorance. So if our argument respecting town and country relates to political economy, I fancy that I must be con- tented to yield the point in dispute without under- standing it. MRS. B. Well then, if you can remain satisfied with your ignorance of political economy you should at least make up your mind to forbear from talking of it, since you cannot do it to any purpose. CAROLINE. Oh ! that, I assure you, requires very little effort ; I only wish that I was as certain of never hearing the subject mentioned as I am of never talking upon it myself. MRS. B. Do you recollect how heartily you laughed at INTRODUCTION. 7 poor Mr. Jourdain in the Bourgeois Gcntilhomme, when he discovered that he had been speaking in prose all his Hfe without knowing it? — Well, my dear, you frequently talk of political economy without knowing it. But a few days since I heard you deciding on the very question of the scarcity of corn ; and it must be confessed that your ver- dict was in perfect unison with your present pro- fession of ignorance. CAROLINE. Indeed I only repeated what I had heard from very sensible people, that the farmers had a great deal of corn ; that if they were compelled to bring it to market there would be no scarcity, and that they kept it back with a view to their own interest, in order to raise the price. Surely it does not re- quire a knowledge of political economy to speak on so common, so interesting a subject as this first necessary of life. MRS. B. The very circumstance of its general interest renders it one of the most important branches of political economy. Unfortunately for your resolu- tion, this science spreads into so many ramifications that you will seldom hear a conversation amongst liberal-minded people without some reference to it. It was but yesterday that you accused the Birming- B 4 O INTRODUCTION. ham manufacturers of cruelty and injustice towards their workmen, and asserted that the rate of wages should be proportioned by law to that of pro- visions ; so that the poor might not be sufferers by a rise in the price of bread. I dare say you thought that you had made a very rational speech when you so decided ? CAROLINE. And was I mistaken ? You begin to excite my curiosity, Mrs. B. ; do you think I shall ever be tempted to study this science ? MRS. B. I do not know ; but I have no doubt that I shall convince you of your incapacity to enter on most subjects of general conversation, whilst you remain in total ignorance of it ; and that however guarded you may be, that ignorance will be betrayed, and may frequently expose you to ridicule. During the riots at Nottingham I recollect hearing you con- demn the invention of machines, which, by abridg- ing labour, throw a number of workmen out of employment. Your opinion was founded upon mis- taken principles of benevolence. In short, my dear, so many things are more or less connected with the science of political economy, that if you persevere in your resolution, you might almost as well condemn yourself to perpetual silence. INTRODUCTION. » CAROLINE. I should at least be privileged to talk about dress, amusements, and such lady-like topics. MRS. B. I have heard no trifling degree of ignorance of po- litical economy betrayed in a conversation on dress. *' What a pity," said one lady, " that French lace should be so dear ; for my part I make no scruple of smuggling it; there is really a great satisfaction in clieatin politics, and our attention is to be particularly directed to political economy, which is but a branch of it, and treats especially of the means of promoting social happiness so far as relates to the acquisition, possession, and use of the objects which constitute national wealth. Political economy tends to mode- rate all unjustifiable ambition, by showing that the surest means of increasing national prosperity are peace, security, and justice; that jealousy between nations is as prejudicial as between individuals; that each finds its advantage in reciprocal benefits; and that far from growing rich at each other's ex- pense, they nuitually assist each other by a liberal system of commerce. Political economy is par- ticularly inimical to the envious, jealous, and ma- lignant passions ; and if ever peace and moderation should flourish in the vvorld, it is to enlightened views of this science that we should be indebted for the miracle. But, my dear Caroline, I suspect that there is some error in your idea of riches. What do you call riches ? CAROLINE. Of course to be rich is to have a great income ; to be able to spend a great deal more than other people. iMRS. B. You speak of the riches of individuals; of com- parative wealth. A rich man in one class of so- c 2li INTRODICTIOK. ciety might be poor in another. But this; is not the definition that I asked for — what do you un- derstand by riches in general — in what docs wealth consist ? CAROLINE. Oh, I suppose you mean money ? — I should say wealth consists in gold and silver. MRS. B. Consider what would be the situation of a coun- try which possessed no other wealth than money. Do you recollect in what estimation Robinson Crusoe held his bag of gold when he was wrecked upon a desert island ? CAROLINE. True: but in an island whlcli is not desert, money will purchase whatever you want. MRS. B. Then I should say that the things which we arc desirous to procure with money, such as land, houses, furniture, clotlies, foocl,&c. constitute riches, as well as the money by which they are obtained. CAROLINE. Certainly : these arc clearly the things which constitute real wealth ; for unless we could pro- cure the necessaries of life with gold and silvec^ I ij INTRODUCTION. 2 J they would be of no more use to us than lead or iron. MRS. B. We may therefore say that wealth comprehends every article of utiHty, convenience, or luxury. This includes every object of our wishes which can become an article of commerce; such as landed estates, houses, the products of agriculture, those of manufactures, provisions, domestic animals, in a word, whatever can contribute to the welfare and enjoyment of man. CAROLINE. Why should you confine your definition of wealth to things that can become articles of com- merce ? MRS. B. Because there are many countries where the earth spontaneously produces things which can neither be consumed nor sold ; and however valu- able such things would be to us, could we obtain them, they cannot, under those circumstances, be considered as wealth. The herds of wild cattle, for instance, which feed on the rich pastures called the Pampas, in South America, arc of this descrip- tion. Many of those large tracts of land are unin- habited, and the cattle that range at large over them are of no value. Parties of hunters occasion- ally make incursions, and destroy some of them for c 2 28 INTRODUCTION. the sake of their hides and fat, whilst the flesh, whicli wc should esteem most valuable, is either left to putrify on the ground, or is used as fuel to melt the fat for the purposes of tallow, which being transported to places where it can be sold and con- sumed, it acquires value and becomes wealth. In other parts of America the grass of rich pas- tures is burnt on the ground, there being no cattle to consume it. CAROLINE. This may be the case in wild and uncultivated countries : but in those which are civilised, any land yielding unsaleable produce would be con- verted by the proprietor to some other use. MRS. B. I have heard that the fruit of many of the vine- yards in France was not gathered a few years ago, the grapes bemg so much reduced in value in con- sequence of a decree prohibiting the exportation of French wines, that the price at which they could be sold would not pay the expense of ga- thering them. In England, also, when all kinds of colonial produce wore excluded from the con- tinent of Europe, coffee is said to have been thrown into the sea, because it would not pay the charges on being landed. You see, therefore, that the effects of war, or other circumstances, may for a INTRODUCTION. 29 time, in any countrvs destroy the value of com- modities. CAROLINE. How very much you have ah'eady extended my conception of the meaning of wealth ! And yet I can perceive that all these ideas were floating confusedly in my mind before. In speaking of wealth we ought not to confine ourselves to the consideration of the relative wealth of individuals, but extend our views to whatever constitutes riches in general, without any reference to the inequality of the division. All this is perfectly clear : no one can be really ignorant of it; it requires only reflection ; and yet at first I was quite at a loss to explain the nature of wealth. MRS. B. The confusion has arisen from the common practice of estimating riches by money, instead of observing that wealth consists in such commodities as are useful or agreeable to mankind, of which gold and silver constitute but a very small portion. € S CONVERSATION III. ON PROPERTY. LABOUR THE ORIGIN OF WEALTH. — LEGAL INSTI- TUTION OF PROPERTY. — OF LANDED PROPERTY. SECURITY THE RESULT OF PROPERTY. — OB- JECTIONS TO LANDED PROPERTY ANSWERED. ORIGIN OF NATIONS IN A SAVAGE OR PASTORAL LIFE. THEIR PROGRESS IN AGRICULTURE. CULTIVATION OF CORN. — RECAPITULATION. CAROLINE. ^Vell, my dear Mrs. B., since you have recon- ciJed me to wealth, and convinced me how essential it is to the happiness and prosperity of nations, I begin to grow impatient to learn what are the best means of obtaining this desirable object. MRS. B. Do not leave every thing to me, Caroline, I have told you that you were not without some I ON PROPERTY. 31 general notions of political economy, though they are but ill arranged in your mind. Endeavour, therefore, to unravel the entangled thread, and discover yourself what are the principal causes of the production of wealth in a nation. CAROLINE. I assure you that I have been reflecting a great deal upon the subject. I do not know whether I am right, but I think it is labour which is the cause of wealth. Without labour the earth would yield but very little for our subsistence. How in- significant are its spontaneous productions com- pared with those derived from agriculture ! The crab with the apple; the barren heath with the rich pasture of the meadow ! MRS. B. It is very true that labour is a most essential re- quisite to the creation of wealth, and yet it Joes not necessarily insure its production. The la- bour of the savage who possesses no wealth is often more severe than that of our common ploughman, whose furrows team with riches. The long and perilous excursions of savages in search of prey, ti\e difliculty which, from want of skill, they must encounter in every process of industry, in con- structing the simplest habitations, fabricating the rudest implements ; — all concur to increase their c 1 32 ON PROPERTY. toil. Labour is the lot of man ; whether in a bar- barous or a civilised state he is destined to earn his bread by the sweat of his brow. But how is it that in the one case labour is productive of great wealth, whilst in the other it affords barely the necessaries of life? CAROLINE. You have observed that the labour of the savage is less advantageous on account of his ignorance and want of skill ; besides he works neither with the activity and zeal, nor with the steady per- severance of men in civilised society. Savages, you know, are proverbially noted for their idleness. MRS. B. Inducements must then be found to rouse them from that idleness; motives to awaken their in- dustry and habituate them to regular labour. Men are naturally disposed to indolence; all exertion requires effort, and efforts are not made without an adequate stimulus. The activity we behold in civilised life is the effect of education ; it results from a strong and general desire to share not only in the necessaries of life, but in the various com- forts and enjoyments with which we are surrounded. The man who has reaped the reward, as well as undergone the fatigues of daily exertion, willingly renews his efforts, as he thus renews his enjoyments. ON PROPERTY. 33 But the ignorance of" a savage precludes all desires which do not lead to the immediate gratification of his wants ; he sees no possessions which tcm})t his ambition — no enjoyments which inflame his de- sires ; nothing less than the strong impulse of want rouses him to exertion ; and, having satisfied the cravings of hunijcr, he lies down to rest without a tliouijlit of the future. CAROLINE. But if the desires of savages are so few and so easily satisfietl, may not their state be happier than that of the labouring classes in civilised countries, who wish for so nmch, and obtain so little ? MRS. B. The brutish apathy which results from gross ig- norance can scarcely deserve the name of content, and is utterly unworthy that of happiness. Gold- smith, in his Traveller, justly as well as beautifully observes, that " Every want tiiat stimulates the breast Becomes a source of pleasure when redress'd." Besides, it is only occasionally that a savage can indulge in this state of torpid indifference. If you consult any account of travels in a savage country, you will be satisfied that our peasantry enjoy a comparative state of affluence and even of luxury. c 5 34 ON PROPERTY. But let US suppose a civilised being to come among a tribe of savages, and succeed in teach- ing some of them the arts of life — he instructs one how to render his hut more commodious, an- other to collect a little store of provisions for the winter, a third to improve the construction of his bows and arrows ; what would be the consequences ? CAROLINE. One might expect that the enjoyment derived from these improvements would lead their country- men to adopt them, and v,odld introduce a general spirit of industry. MRS. B. Is it not more probable that the idle savages would, either by force or fraud, wrest from the in- dustrious their hard-earned possessions; that the one would be driven from the hut he had con- structed with so much care, another robbed of the provisions he had stored, and a third would see his well-pointed arrows aimed at his own breast ? Here then is a fatal termination to all improvement. Who will work to procure such precarious pos- sessions, which expose him to danger, instead of ensuring his enjoyment? CAROLINE. But all this would be prevented if laws were made for the protection of property. 13 ON PROPERTY. ^5 MRS. B. True ; but the right of property must be esta- blished, before it can be protected. For nature has given mankind every thing in common, and property is of human institution. It takes place in such early stages of society that one is apt to imagine it of natural origin ; but until it has been established by law, no man has a right to call any thing his own. CAROLINE. What, not the game he has killed, the hut he has built, or the implements he has constructed? These may be wrested from him by force ; but he who thus obtains them acquires no right to them. MRS. B. When a man has produced any thing by his labour, he has, no doubt, in equity the fairest claim to it ; but his right to separate it from the common stock of nature, and appropriate it to his own use, depends entirely upon the law of ihe land. In the case of property in land, for instance, it ■>5 the law which decrees that such a piece of ground shall belong to Thomas, such another to John, and a third to James ; that these men shall have an exclusive right to the possession of the land and of its produce; that they may keep, sell, or exchange it; give it away during their lives, or c 6 •^<> «)\ P.ROPERTY. bequeatli it after their deaths. And, in order that this law should be respected, punishments are enacted for those who should transgress it. It is not until such laws have been made for the in- stitution and protection of property, of whatever description it be, that the right of property is established. CAROLINE. You astonish me ! I thought that property in land had always existed ; I had no idea that it was a legal institution, but imagined that it had ori- ginated from the earliest period of the world. We read that in the time of the ancient patriarchs, when families became too numerous, they separated; and that those who went to settle elsewhere, fed their flocks, and occupied the land without molest- ation. There was no one to dispute their right to it; and after their deaths the children inhabited and cultivated the land of their fathers. If we were to found a colony in a desert island, every man would cultivate as much ground as he wanted for his own use, and each having an equal interest in the preservation of his possessions, pro- perly would thus be established by general agree- ment, without any legal institution. MRS. B. This o-eneral agreement is a kind of law, a very imperfect one it is true, and which was perhaps 10 ON PIlOPiiUTY. •• 37 originally fouiuled on the relative strength of inili- vitluals. It" one man attempts to carry off the cat- tle or the fruits of another, the latter opposes force to force; if he is stronger or betteV armed, he eitlier kills liis antagonist or drives him away ; if weaker, he is despoiled, or he calls in his neighbours to liis succour, shows them the common danger, and may induce them to unite with him in taking vengeance on the aijo-ressor. Many incidents of this nature must occur before regular laws are instituted ; tliat is to say, before a public authority is established, which shall protect individuals against those who attack, them, and punish the offenders. It is then only that a man may say, " This is my field ; this is my house ; this seed which I cast into the ground will bring forth an abundant jirovision for me and my family ; these trees, which I plant, will every year yield us fruit, which we alone shall have a right to gather." CAROLINE. I now comprehend perfectly the advantage of such laws — it is security — before they were esta- blished, the strong might wrest every thing from the weak ; and old men, women, and children who had no means of defence, were exposed to their rapine and violence. The idle and improvident, when in want of subsistence, became the natural enemies of the hiborious and industrious. So that 38 ox PROPERTT. \^ithout this law the men who had toileoth the virtues and vices of mankind tend to destroy this equality ; the laborious, the intel- ligent, and skilful, will raise plentiful harvests. Nature thus rewards their exertions. The posses- sions of the idle, the careless, and the ignorant, will, on the contrary, gradually degenerate. Nature has annexed this penalty to their neglect. Shall we then counteract this wise dispensation by giving ON PROPERTY. 41 to the idle tlie reward of industry, and making the industrious bear a punishment due to the idle ? CAROLINE. But poverty frequently arises from sickness and misfortune, whicli render men unable to work, and, under such circumstances, it is hard to suffer the penalty incurred by idleness. MRS. B. These evils are greatly mitigated by the virtues and humane feelings of the more prosperous part of the community. 71ie benevolence, generosity, compassion, charity, Avhich they call forth, purify and refine the enjoyment of wealth, and are among its highest gratifications. Nature, for equally wise purposes, has dispensed lier blessings with various degrees of munificence ; in some instances she bestows them with unbounded and inexhaustible profusion ; it is thus that she has given us light and air, whicli are alike pos- sessed and enjoyed by all ; no one ever thought of converting these elements into private property; and ii'food were as easily obtained, and the human frame as readily supplied with nourishment as it is with the air we breathe, no one would ever have conceived the idea of separating from the common stock, and converting into private pro- perty, either the food he required, or the land on which it was produced. 12 ON PROPERTY. CAROLINE. How delitrhtful that would be ! Mankind would be transformed into a race of contemplative philo- sophers, whose only occupation would be to study and admire the works of nature ! MRS. B. You must not trust your judgment so readily when it leads you to conclusions so different from the established course of nature. We must bear in miud that the dispensations of Providence are always wise and good, though it is not always in our power to trace their beneficial effects. In the present instance, however, the design of Providence appears sufficiently obvious. Were mankind not under the necessity of labouring for a subsistence, so far from becoming philosophers, I am inclined to think that they would degenerate into a race of indolent savages, scarcely raised above the brute creation. What motive would they have for ex- ertion, what incentive to awaken their faculties, and rouse them from the apathy and indolence so natural to man ? The necessity of regular industry to secure subsistence appears to be the first step towards the development of their faculties, both physical and mental. But we have observed that men will not be induced to cultivate the earth, so long as it is possessed in common, when the idle may reap the harvest sown by the hand of industry. ON PROPERTY. 13 Property in land is therefore of necessity a pre- liminary step to cultivation, and we have seen that cultivation could not take place were the earth unlimited in extent and powers of production. Let us then reflect, that when nature confeired this blessing upon us with a more sparing hand, than she has bestowed the other elements, it was doubtless with a view of rousing the latent faculties of man, and calling them into action ; it was in order to raise him from a state of animal nature in which he is assimilated to the beasts that perish, and urge him through a progressive course of improvement, during which new ideas are succes- sively formed, the character is developed by reason, the mind strengthened by trials, chastened by ad- versity, elevated by piety, softened by social affec- tions, enlarged by science, refined by literature, and brought at length to that state in which we discern the traces of a being destined for immor- tality. CAROLINE. I am glad we arrive at the same satisfactory con- clusion, the happiness of my fellow-creatures, by a safer road than that in which my imagination had first wandered. There remains no rational doubt in my mind of the advantages resulting from the division of land, and the accumulation of landed property; nor am I disposed to murmur at the larger share you have assigned to the moro 44 ON PROPERTY. inclustrious and better part of mankind. I see that soon after the division of land they must infalhbly become the only possessors ; that their property should t)c secured to them and to their heirs, and that in their hands it will be the most highly culti- vated, and yield the greatest produce. MRS. B. The institution of property in land augments the wealth not only of the proprietors, but likewise of all other classes of men. Land may be considered as the instrument by which alone wealth is created ; and we have just seen that the security of its possession gives life and vigour to industry : it is this security which raises the condition of our peasantry so much above that of a savage jieople who possess the land in common, CAROLINE. An institution of such evident and general utility cannot then be considered as unjust. MRS. B. Certainly not. It is by the test of general utility that the justice of all laws should be tried ; for there are nonc'which do not impose some restraint on the natural liberty of man, and which, in that point of view, might not be deemed objectionable. But without the control of laws, we have seen that ON PROPERTY. 45 neither the lives, the property, the reputation, nor even the liberty of men are secure ; \vc sacrifice therefore some portion of that liberty to the law ; and, in return, it secures to us the remainder, to- gether with every blessing which security can give. Blackstone, in his Conunentaries, says, " Every *' man, when he enters into society, gives up a part ** of his natural liberty, as the price of so valuable " a purchase ; and in consideration of receiving " the advantages of mutual commerce, obliges " himself to conform to those laws which the com- " munity has thought proper to establish. For no " man who considers a moment would wish to " retain the absolute and uncontrolled power of " doing whatever he pleases, the consequence of " which is, that every other man would also have " the same power, and there would be no security " to individuals in any of the enjoyments of life : " political, therefore, or civil liberty, which is that " of a member of society, is no other than natural " liberty, so far restrained by human laws (and no " farther) as is necessary and expedient for the " general advantage of the public. *' That constitution or form of government, that " system of laws, is alone calculated to maintain " civil liberty, which leaves the subject entire " master of his own conduct, except in those points " wherein the public requires some direction or " restraint." 46 ON PROPERTV. CAROLINE. Vou have completely removed all my scruples respecting the institution of landed property, Mrs. B., let us now, therefore, return to the pro- gress of vealth and civilisation. MRS. B. We must not proceed too rapidly ; for the pro- gressive steps in the history of civilisation are ex- tremely slow, and we must learn to view the development of human intellect and the progress ^ human industry in successive and almost insensi- ble degrees. Civilised nations generally originate from the settlement of a colony; they seldom arise from a savage state. It was in this state we found the Indians on the discovery of America; they were mere hunters ; and so long as men behold an un- limited space before them, in which they may wander without obstacle or control, it is difficult to conceive any circumstances which should lead them to adopt a settled mode of life, and apply themselves to tillage. In countries abounding with large plains, the pastoral mode of life has prevailed; but for this purpose there must have been established proper*}' in cattle, though the land were possessed in common. Such was the case with the ancient Scythians who inhabited the vast plains of Tartary, and with the ON PROPERTY. 47 modern Tartars and Arabs, who, to this day, are wandering tribes, and, like the patriarchs of old, live in tents, and travel about with their flocks and herds in search of pasture. We have observed that men were by nature dis- posed to idleness, and this disposition is necessarily a great obstacle to the introduction of agriculture ; for it requires a considerable degree of foresight and knowledge, and a firm reliance on the security of property, to labour at one season in order to reap the fruits at another. But we may suppose agri- culture to be a progressive step from pastoral life; that a tribe of shepherds may have met with ene- mies in their wandering excursions, and the appre- hensions of losing their flocks may have induced them to settle ; they would probably choose a spot defended by nature from attacks of wild beasts, or the incursions of savage neighbours. Thus Cecrops pitched upon the rock on which the citadel of Athens is founded, to build a town. Or they may have been tempted by the attractions of some fruit- ful spot, under the protection of a neighbouring government able to defend them. Volney, in his account of the wandering tribes in Syria, says: " As often as they find peace and security, and a ■*' possibility of procuring sufficient provisions in *' any district, they take up their residence in it, " and insensibt)' adopt a settled life and the arts of *' cultivation." These arts they must have attained 48 ON PROPERTY. by very slow degrees — they observed that fruii- trees may be multiplied ; that nutritious plants may be propagated ; that there are seeds Axhich repro- duce every year; and that a great variety of ani- mals may be tamed and domesticated. Thus sup- plied with a new fund of subsistence, their children are better fed, their families increase, and age and infancy are protected and provided for. But these people arc yet acquainted with only the first elements of agriculture ; how many fortu- nate chances must have occurred before they reached the important era of the cultivation of corn ! Wild corn has no where been found, and the Greeks imagined that a divinity descended on earth, to introduce it, and to instruct them in the cultivation of this valuable plant. Athens, Crete, Sicily, and Egypt, all claim the merit of being the original cultivators of corn ; but whoever are the people to whom we are indebted for this important discovery, or whatever are the means by which it was accomplished, there is none which has had so great an influence on the welfare of mankind. Feeble as it appears, this ))lant can resist the sum- mer's heat and the winter's cold. It flourishes in almost every climate, and is adapted not only for the food of man, but for that of a great variety of domestic animals, and it yields by fermentation a pleasant and salubrious beverage. The grain will keep many years, and affords such a durable means ON PROPEllTV. 4^) of subsistence, that danger could no longer be apprehended in trusting to futurity, and plenty was secured during the longest and most unpro- tfuctive winters. But the cultivation of this inestimable plant cannot be undertaken without considerable funds, fixed habitations, implements of husbapdiy *, do- mestic animals; in a word, establishments which could neither be created nor maintained without the institution of property. Savages have no corn, no cultivation, no domestic animals; they consume and destroy every thing without ever considering re-production ; — and how different are the results ! We now see millions of men and animals in- habiting an extent of country which would scarcely have sufficed for the maintenance of two or thretf hundred savages. CAROLINE. Let us rest a little, my dear Mrs. B. I am al- most bewildered with the number and variety of * These are at first of a very rude and imperfect construc- rion. In some parts of India the plough of a Hindoo, even lo this day, is formed of a crooked stick very inartificially ;.harpened, and not unfrequently drawn by his wife. The use of domestic animals in agriculture is anotlier step to- wards civilisation; but no farming establishment whatever could either be created or maintained without the institution of property. D 50 ON PROPERTY. ideas that you have presented to my niind. I won- der that these things never occurred to me before r but I have been so accustomed to see the world in its present improved state, that my attention was never drawn to the many obstacles and difficulties it must have encountered, and the laborious pro- gressive steps it must have made before society could have attained its present state of perfection. MRS. B. Perfection ! comparatively speaking I suppose you mean; for it is not long since you were making lamentable complaints of the actual state of society; in which indeed I could not entirely agree with you, though I think that we are still far removed fi-om perfection. But let us continue to trace the progress of wealth and civiHsation up to their pre- sent state, before we begin to find any fault with existing institutions. CAROLINE. I think I have now a very clear idea of the im- portant consequences wliich result inhn the estab- lishment of property. It puts an end to the wandering life of barbarians, induces men to settle, and enures them to regular labour ; it teaches them prudence and foresight; induces them to em- bellish the face of the earth by cultivation ; to mul- tiply the useful tribes of animals and nutritious ON PROPERTY. 51 plants; and in short, it enables them so prodi- giously to augment the stock of subsistence, as to transform a country which contained but a few poor huts and a scanty population into a great and wealthy nation. ij _-• ( 52 ) CONVERSATION IV. ON PROPERTY --co«jfmM5 vWvours to grasp at, and enjoy what is immediately Nvithin his reach. The following passage will shew you what sufferers they all are by such a mistaken system of policy. CAROLINE (t^eadhig). *' In consequence of the wretchedness of the go- *' vernment, the greater part of the pachalics are '•' impoverished and laid waste. In the ancient " registers of imports upwards of 3200 villages " were reckoned in that of Aleppo, but at present " tl>e collector can scarcely find 400. Such of our *' merchants as have resided there 20 years, have •' themselves seen the greater part of the environs " of Aleppo become depopulated. The traveller •' meets with nothing but houses in ruins, cisterns " rendered useless, and fields abandoned. Those " who cultivated them are fled into the towns, " where the population is absorbed, but where at " least the individual conceals himself among the " crowd from the rapacious hands of despotism. In " other countries the cities are in some measure " the overflow of the population of the country; in *' Syria they are the effect of its desertion. The " roads in the mountains are extremely bad, as the " inhabitants are so far from levellinnr them that ■' they endeavour to render them more rugged, in •' order, as they say, to cure the Turks of their *♦ desire to introduce their cavalry. D 4 5G ON PROPEnrv', " The Pacha may applaud himself for penetrat- " ing into the most secret sources of private pro- *' perty, but what are the consequenceis* ? The *' people, denied the enjoyment of the fruits of " their labour, restrain their industry to the supply " of their necessary wants ; the husbandman sows ** only to prevent himself from starving, the arti- ** ficer labours only to maintain his family ; if he *' makes any savings he strives to conceal them. ** The people live therefore in poverty and distress, *' but at least they do not enrich their tyrants, ** and the rapacity of despotism is its own punish- <' ment." MRS. B. The degeneracy of the mighty Persian and In- dian monarchies since the conquest of those coun- tries by the Mahometans, is also clearly deducible from the insecurity of property, and aflbrds the most tremendous examples of national decline. Trott, in his History of Hindostan, informs us that dur- ing the disastrous times of the latter monarchs of India, the cruelties and oppressions of the agents of government were such that the farmers burnt their houses, utensils, and crops, and took refuge in the woods and mountains, where those who could neither excite charity nor maintain them- selves by the sword, perished through want. CAROLINE. What a melancholy picture this is, my dear 05r PROPERTY'. 5f Mrs. B. ! it is, I think, even more painful to con- template than the wretchedness of savages ; for to their actual misery these people must add the regret of having known better times. MRS. B. Dr. Clarke's Travels abound with similar in- stances of insecurity of property, and legal oppres- sion, which subvert society, and degrade the human species. " In Circassia," he observess, that " the " sower scattering seed, or the reaper who gathers " the sheaves, are constantly liable to an assault; and " the implements of husbandry are not more es- " sential to the harvest than the carbine, the pistol, " and the sabre." Speaking of the Isle of Cyprus, he says : " The soil every where exhibited a white marly " clay, said to be exceedingly rich in its na- " ture, although neglected. The Greeks are so " oppressed by their Turkish masters, that they " dare not cultivate the land ; the harvest would " instantly be taken from them if they did. Their " whole aim seems to be, to scrape together barely " sufficient, in the course of the whole year, to " pay their tax to the governor. Tiie omission of " this is punished by torture or by death : and in *' case of their inability to supply the impost, the *' inhabitants fly from the island. So many emi- " grations of this sort happen during the year that D 5 58 ON PROPERTY. " the population of Cyprus rarely exceeds 60,000 " persons, a number formerly insufficient to have " peopled one of its towns." CAROLINE. You have made me sensible of the advantages of civilisation ; but yet I confess that my mind is not fully satisfied. Is there no medium between a savage life and the extreme inequality of con- dition which we see in the present state of society ? Can we not have conveniencies without luxuries ; plenty without superfluity ? I think I have met with an example of such a people, Mrs. B. ; but I dare not venture to mention my authority, as you have once before rejected it. MRS. B. If you allude to Telemachus, there are many sound doctrines of political economy in that work ; though it must be acknowledged that it is not free fi-om error. But let me hear the sentiments of Fenelon on this subject. CAROLINE. Do you remember that delightful picture which he draws of the inhabitants of Boctica ? There is an irresistible charm in the description of their hap- piness ; and if fabulous, it is certainly meant at least to delineate what ought to constitute the hap- 6 ON PROPERTY. Sy pjness of nations ; equality, community of goods, but few arts and few wants ; an ignorance or con- tempt of luxury, and manners perfectly conformed to the simplicity of nature. I must read you the passage, and you will tell me whether it is not a satire on political economy : — " They live in common without any partition of " lands, the head of every family is its king. They *' have no need of judges, for every man submits *' to the jurisdiction of conscience. They possess " all things in common ; for the cattle produce " milk, and the fields and orchards fruit and grain " of every kind in such abundance, that a people " so frugal and temperate have no need of pro- " perty. They have no fixed place of abode ; but " when they have consumed the fruits, and ex- *' hausted the pasturage, of one part of the paradise *' which they inhabit, they remove their tents to " another: they have, therefore, no opposition of *' interest, but are connected by a fraternal affcc- " tion which there is nothing to interrupt. This *' peace, this union, this liberty, they preserve by " rejecting superfluous wealth, and deceitful plea- " sure; they are all free, they are all equal. " Superior wisdom, the result either of long ex- •' perience, or uncouDnon abilities, is the only mark *' of distinction among them ; the sophistry of fraud, " the cry of violence, the contention of the bar, ** and the tumult of battle, are never heard in this D 6 60 ON PROPERTY. " sacred region, m hich the gods have taken under '•' their immediate protection ; this soil has never *' been distaincd with human blood, and even that *' of a lamb has rarely been shed upon it. When *' we first traded with these people, we found gold *' and silver used for ploughshares ; and, in ge- ** neral, employed promiscuously with iron. As *' they carried on no foreign trade, they had no *' need of money ; they were, almost all, either " shepherds or husbandmen ; for as they suffered *' no arts to be exercised among them, but such ** as tended immediately to answer the necessities *' of life, the number of artificers was consequently *' small : besides, a greater part, even of those that *' live by husbandry, or keeping of sheep, are skil- " ful in the exercise of such arts, as are necessary " to manners so simple and frugal." MRS. B. This, my dear Caroline, is a representation of what the poets call the Golden age, and requires only truth to make it perfect. If it were an his- torical account, all the conclusions you deduce from it would be just; but it is fiction, which you must allow makes an essential difference. Supposing that the earth yielded spontaneously all that is now produced by cultivation ; still with- out the institution of property it could not be en- joyed : the IVuit would be gathered before it was ON rKOrLKlT. Gl ripe, aninmls killed before they came lo maturity; for who would protect what was not his own ; or who would economise when all the stores of nature w ere open to him ? There would be a strange mixture of plenty, waste, and famine. In this country, for instance, where the only common property consists in hedge-nuts and black- berries, how seldom are they allowed to ripen ? In some parts of Spain, where the beauty of the climate produces a considerable quantity of good wild fruit, it is customary for the priest to bestow a blessing upon it before any is allowed to be gathered, and this ceremony is not performed till t})e fruit is considered to be generally ripe; by which means it is prevented from being prematurely gathered. It is with the same view that our game- laws prohibit shooting, till the season when the birds have attained their full growth. CAROLINE. But though the Boeticans had all their goods in common, they were not without laws for protecting them. MRS. B. If the earth were possessed in common, who would set about cultivating this or that spot of ground? Government must allot to every man liis daily task, and say to the one. You must work in this spot ; to another, You must work in that. C2 ON PROPERTY. Would these nion labour with the same activity and zeal as if they worked on tlieir own account — that is to say, received wages equivalent to their exertions? certainly not. Such a system woultl transform independent men into slaves, into mere mechanical engines. There would be no inequality of condition, it is true, but the earth would not yield one-tenth part of its actual produce, the po- pulation would necessarily be diminished in the same proportion, and if all escaped the distresses of poverty, none would enjoy the acquisition of riclies, an enjoyment which, when derived from the exer- cise of our talents and our industry, is a just and virtuous feeling; it raises men not only in the scale of wealth, but in that of the power of doing good, of enlarging the sphere of human knowledge, with all the inestimable benefits which result from it. There have, Ijowever, really existed establish- ments founded on a community of goods. That of the Jesuits in Paraguay was of this description. The influence of religion enabled these priests to exer- cise a despotic sway over the poor Indians whom they had converted to Christianity; it must be allowed that they tempered their power by a patri- archal care of their docile subjects. Such a species of government might perhaps be well adapted to a tribe of ignorant uncivilised Indians, but it would never make a free, a happy, an independent, and a wealthy people. I must again repeat it, the in- ON PROPFRTY. fi.S Justry of man requires the stimulus of exclusive possession and enjoyment ; and will always be pro- portioned to the personal advantage which he de- rives from it. There is, indeed, still existing a sect of the same description called Moravians ; but it is their religi- ous tenets alone which enable them to keep up sudi an artificial system of community, and it should be compared rather to a convent of Monks and Nuns, than to a great nation. CAROLINE. I find 1 must give up the point of community of goods; but still I cannot help thinking that the great inequality of conditions which exist in the present state of society is a serious evil. In Switzerland, where there is much less inequa- lity of fortune than in this country, I have often admired and almost envied the innocent and simple manners of the people. They seem not to know half our wants, nor to suffer half our cares. MRS. B. The Swiss are governed by mild and equitable laws, which render them a virtuous and a liapjiy people : and if they arc not a rich and populous nation, it proceeds not from any want of inchistrv, but from the obstacles opposed both to agriculture and trade by the jiature of their country ; for they 64 ON PROPIiRTY. are on the contrary uncommonly active and enter- prising. I have often seen men carry on their slioulders baskets of manure up steep ascents inac- cessible to beasts of burden, and this for the purpose of cultivating some little insulated spot of ground, which did not appear worth any such labour. The country-women wear their knitting fastened round their waists, in order to have it at hand to fill up every little interval that occurs in their domestic employments. If a Swiss woman goes to fetch water from the fountain, or faggots from the wood, her burden is skilfully poised on her head, whilst her fingers busily ply the needles. But industrious as they are, the resources of the country are too limited to enable a father of a family to provide for all his children ; some of them are therefore obliged to emigrate, and seek their fortune in a foreign land, which offers greater re- sources to their industry. Hence the number of Swiss merchants, governesses, shopkeepers, and servants, that are to be met with in almost all countries: would not these people be happier if they found means of exercising their industry and their talents in a country to which they are all so much attached, and which they have so much rea- son to love. In the energy of youthful vigour men may often quit their own country, and live happily in a foreign land ; but enquire of the parents who are on the point of separating from their children ON PROrERTY. 65 as soon as they have attained the hopeful age of manhood, whether their country would be less liappy for offering them the means of employment and maintenance at home. The Swiss cannot afford to support a standing army for the defence of their territory ; they arc therefore under the necessity of engaging their troops in the service of foreign potentates, in order to provide for a part of their population, and to have a resource by calling them home in times of danger. Would not these soldiers be happier in defending their own country, than in shedding their blood as mercenaries in the cause of foreigners? We have a remarkable proof of it, in the effect which their patriotic songs are said to produce on them ; when these simple airs recal to their minds their beloved and regretted country, it either drives them to desertion, or renders their lives misei'able ; and so deep is the impression made by these na- tional airs, that it was found necessary to forbid their being sung by the troops in foreign service. CAROLINE. There is no withstanding your attacks, Mrs. B. You drive me from all my strong holds. I ex- pected to have found a safe asylum in the moun- tains of Switzerland, but I see that I must once more take refuge in London, where I am sure you will admit that the contrast between the luxuries of (iG OV PRoPERITt'. the rich and the wretchedness of the poor is shock- ing to every person of common feeling. MRS. B. If the wretchedness of the poor were the effect of the luxuries of the rich, I should certainly agree with you on that point ; but I believe it to be other- wise. However, as the people, whose progress towards wealth and civilisation we have been tracing in our two last conversations, are yet far from being sufficiently advanced in their career to be guilty of any great excess in luxury, we must patiently follow them in their advancement in knowledge and the acquisition of wealth before wc treat of the subject of luxury. ( «7 ) CONVERSATION V. ON THE DIVISION OF LABOUR. ORIGIN OF BARTER. DIVISION OF LABOUR. EXTRACTS FROM SMITH's WEALTH OF NATIONS- ON THE DIVISION OF LABOUR. ADVANTAGES OF MACHINERY. EFFECTS OF THE DIVISION OF LABOUR ON THE MORALS AND INTELLECTS OF THE PEOPLE. — RECAPITULATION. MRS. B. We have ascertained that the establishment and security of property were the chief causes of the emancipation of mankind from the shackles of sloth and ignorance ; but there are other subordinate causes which tend greatly to promote the progress of industry and civilisation. The first of these is the introduction of exchange or barter. We observed that when men found they could place u reliance on the security of their possessions^ f)8 ON THE DIVISION OF LABOUR. they laboured with redoubled activity, and far from being satisfied with a scanty and temporary main- tenance, they provide for the future, they accumu- late a little store not only of the necessaries, but of the comforts and conveniencics of life. The one has a stock of arrows for the chace, another of provisions for the winter, a third of clothes or or- naments for his person, lliey will remain in undis- turbed possession of this little property ; but those who can no longer obtain it by force or fraud will endeavour to procure it by other means. In the hunting season they will apply to the fabricator of arrows; but they will not go to him with empty hands ; they must be provided with some- thing to offer in exchange for the arrows, some- thing which they think will tempt him to part with them ; whilst those who have nothing to give in return will wish in vain to obtain them. Here then is a new incitement to a spirit of in- dustry. Whoever has accumulated more than he wants of any commodity, may find means of ex- changing the surplus for something that will gratify other desires. As objects of desire increase, the wish to possess and the effort to obtain them increase also; and the industry of man is exerted either in producing them himself, or in producing something by means of which he may obtain them. Thus the torpid apathy and languid indolence of a savage ON THE DIVISION OF LABOUR. 69 yields to the curiosity, the admiration, the desire, the activity, and industry of a civihsed being. Tlie man, for instance, who first cultivates a little spot of ground, may be said to produce in time a general harvest ; not only by introducing the art of tillage, but by the powerful impulse which it gives to industry in general. He cannot himself con- sume the whole produce of his little garden, but he exchanges the surplus for other things of which he stands in need. CAROLINA:. Besides, he would not have had sufficient time to bestow on the cultivation of his garden, if he had been, at the same time, obliged to provide for all his other wants. MRS. B. Very true ; those therefore who mean to partake of the fruits of his gai'den must contribute towards the supply of those other wants ; some will bring him fish from the river, others game from the woods ; when his immediate necessities are supplied lie will be induced to exchange his vegetables for articles of conveniency, such as baskets to contain his fruit, or some of the rude implements of hus- bandry; or he may finally be tempted to part with some for mere luxuries, such as rare shells, feathers, and other personal ornaments. His neighbours 5^0 UN THE DlVIbiON 01 LABOUH. will therefore be eager to produce or procure ar- ticles, which, either from necessity, conveniency, or merely from pleasure, will induce the gardener to part with the produce of his garden ; for this pur- pose invention will be stimulated, new commodities will be fabricated, skill will be acquired, and ii general spirit of industry developed. CAROLINE. So far the introduction of barter seems to an- swer a very useful purpose; but when once industry is roused, why should not every one exert his abili- ties to supply his own wants, and gratify his de- sires, without the intervention of barter? If a man happens to be possessed of a superfluous quantity of any commodity, it is no doubt desirable to ex- change it for something more wanted : but it seems to me to be an unnatural and circuitous mode of proceeding, to produce something which we do not want, in order afterwards to exchange it for some- thing which wc do want. MRS. B. Would you then have the baker kill his own rneat as well as bake his own bread, brew his own beer, build liis own house, and make his own clothes, instead of procuring these various article;- in exchange through the sale of his bread? Ols THE DIVISION OF LABOUR. 7i CAROLINE. Oh no, it would be impossible to undertake so many occupations ; and then he can do one thing better than he can do many : but this separation of trades and employments cannot take place in a savage state. MRS. B. No, but it begins to operate as soon as barter is introduced ; and it is to this circuitous mode that we owe all our improvements in skill and dexterity ; the advantages of which are much more important than you imagine. When barter became common, it was soon dis- covered that the more a man confined Jiimself to any one single branch of industry, to the fabri- cation of bows and arrows for instance, the greater the skill and dexterity he acquired in that particu- lar art; so that he could make bows and arrows not only quicker, but of better workmanship than another man who followed a variety of pursuits. CAROLINE. Now 1 begm to understand the advantage that results from barter, independently of its inspiring a spirit of industry and a taste for a variety of en- joyments. The artist who has acquired a superior degree of excellence in the fabrication of bows and arrows, would gain more, by confining himself entirely to that occupation, and txclianging his 72 ON THE DIVISION OF LABOUR. merchandize for whatever else he was desirous ot obtaining than by turning his attention to a variety of pursuits. MRS. B. No doubt he would, provided he were sure of being able to dispose of all the bows and arrows he could make ; for it would be useless to fabricate more than he could sell or exchange; and as no one could become a purchaser unless he had some- thing to offer in return, a long period of time must elapse before the progress of industry would create a sufficient number of purchasers to enable an indi- vidual to earn a livelihood by the fabrication of bows and arrows. It is therefore only in a more advanced stage of society that the demand for commodities is so great that men find it advantageous to devote themselves wholly to one particular art. Adam Smith observes, that " in lone houses and *' very small villages which are scattered about in " so desert a country as the Highlands of Scotland, " every farmer must be butcher, baker, and brewer " for his own family. In such situations we can »* scarcely expect to find even a smith, a caqienter, " or a mason within less than twenty miles of an- '• other of the same trade. The scattered families *' that live at eight or ten miles distant from the " nearest of them, must learn to perform for thera- " selves a great number of little pieces of work, for i6 ON THE DIVISION OF LABOUR. /S ** which, in more populous countries, they call in ** the assistance of these workmen." Tliis separation of employments, which, in poli- tical economy, is called the division of labour^ can take place only in civilised countries. In the flou- rishing states of Europe we find men not only exclusively engaged in the exercises of one particular art, but that art subdivided into numerous branches, each of wliich forms a distinct occupation for dif- ff-'rent workmen. Here is a beautiful passage in Adam Smith, the merits of wliich you will now be able to appreciate. t'AROLiN'E reads. " Observe the accommodation of the most com- "•* mon artificer or day-labourer in a civilised and '" thriving country, and you will perceive that the '• mniiber of people of whose industry a part, " though but a small part, has been employed in *' procuring him this accommodation, exceeds all " computation. The woollen coat, for example, '• which covers the day-labourer, as coarse and '' rough as it may appear, is the produce of the " joint labour of a great mullitude of workmen. " The shepherd, the sorter of the wool, the wooi- " comber or carder, the dyer, the scribbler, the " spinner, the weaver, the fuller, the dresser, with " many others, nmst all join their different arts in " order to complete even this homely production. E 74 ON THE DIVISION OF LABOUR. " How many merchants and carriers, besides, must " have been employed in transporting the materials *' from some of those workmen to others who often " live in a very distant part of the country ! How *' much commerce and navigation in particular, *' how many ship-builders, sailors, sail-makers, *' rope-makers, must liave been employed in order ** to bring together the different drugs made use " of by the dyer, which often come from the re- " motest corners of the world ! What a variety of *' labour too is necessary in order to produce the *' tools of the meanest of those workmen ! To say *' nothing of such coni{)licated machines as the ship *' of the sailor, the mill of the fuller, .or even the *' loom of the weaver, let us consider only what a ** variety of labour is requisite in order to form that *' very simple machine, the shears with which the *' shepherd clips the wool. The miner, the builder *' of the furnace for heating the ore, the seller of " the timber, the burner of the charcoal to be made *' use of in the smelting-housc, the brickmaker, the *' bricklayer, the workmen who attend the furnace, ** the mill-wright, the forger, the smith, must all of *' them join their different arts in order to produce " them. Were we to examine, in the same man- *' ner, all the different parts of his dress and house- " hold furniture, the coarse linen shirt which he ** wears next his skin, the shoes which cover his " feet, the bed which he lies on, and all the differ- ON THE DIVISION OF LABOUR. 75 ** cut parts which compose it, the kitchen-grate, at ** which he prepares his victuals, the coals which *' he makes use of for that purpose, dug from the " bowels of the earth, and brought to him by a long " sea and a long land carriage, all the other uten- " sils of his kitchen, all the furniture of his table, " the knives and forks, the earthen or pewter plates " upon which he serves up and divides his victuals, " the different hands employed in preparing liis " bread and his beer, the glass window wliich lets " in tlie heat and the liglit, and keeps out the wind " and rain, with all the knowledge and art requisite " for preparing that beautiful and happy invention, *' without which these northern parts of the world <' could scarce have afforded a very comfortable " habitation, together with the tools of all the dif- " ferent workmen employed in producing those " different conveniences ; if we examine, I say, all " these things, and consider what a variety of la- " bour is employed about each of them, we shall " be sensible that without the assistance and co- *' operation of many thousands, the very meanest " person in a civilised country could not be pro- " vided, even according to what we very falsely " imagine the easy and simple manner in which lie " is commonly accommodated. Compared, indeed, " with the more extravagant luxury of the great, " his accommodation must no doubt appear ex- " tiemely simple and easy ; and yet it may be true, E 2 /(> ON THE DIVISION Of LABoLK. ^' perhaps, that the accommodation of an European " prince does not always so much exceed that of" an " industrious and frugal peasant, as the accommo- " dation o)' the latter exceeds that of many an " African king, the absolute master of the lives '• and liberties of ten thousand naked savoges." It is very true, certainly; and it reminds mc ol an observation ('f Dr. Johnson in the Rambler, " That not a was^herwoniiui s-its down to break- " fast, without tea from the East Indies, and sugar " from the West." I now comprthciul your rclerencc U) the little story of the cherry-orchard : it was by dividing amongst the children the different parts of the pio- ccss of plaiting slravi-, that they succeeded so much better than the boy who was kfi to perform the whole of his i)lait alone. MRS. c. I will now point out to ycu some examples re- marked by Adam S'niitli in illustration of the be- nefits derived from the division of labour. That of the pin-manufactory I shall give you in his own words. He observes, that " A woikman not edu- " cated to this business, nor acquainted with the " use of the machinery employed in it, could " scarce, perhaps, with liis utmost industry, make " one pin in a day, and certainly could not make " twenty. But in the way in which this business 7 ON* THE DIVISION' OP LABOUR. / t •* is now carried on, not only the whole work is a *• peculiar trade, but it is divided into a number of *• branches, of which the greater part are likewise •' peculiar trades. One man draws out the wire, *• another straightens it, a third cuts it, a fourth " points it, a fifth grinds it at the top for receiv- *' ing the head. To make the head requires two or " three distinct operations ; to put it on is a pecu- " liar business, to whiten the pins is another ; it is " even a trade by itself to put them into the '• paper ; and the important business of making a " pin is, in this manner, divided into about *' eighteen distinct operations, which, in some ma- '* iiutactorics, are all performed by distinct hands, *' though in others the same man will sometimes " perform two or three of them. I have seen a " small manufactory of this kind where ten men " only were employed, and where some of them *' consequently performed two or three distinct " operations : but though they were very poor, '' and therefore but indifferently accommodated *' with the necessary machinery, they could, when " they exerted themselves, 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, thcre- *• fore, could make among them upwards of forty- -• eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight E 3 I 78 ON THE DIYISION OF LABOUR. " thousand pins, might be considered as making *' four thousand eight hundred pins in a day. But " if they had all wrought separately and inde- " pendently, and without any of them having been *' educated to this peculiar business, they certainly *' could not each of them have made twenty, per- *' haps not one pin in a day ; that is, certainly, " not the two hundred and fortieth, perhaps not *' the four thousand eight hundredth part of what <' they are at present capable of performing, in " consequence of a proper division and combin- *' ation of their different operations." CAROLINE. These effects of the division of labour are really wonderful ! MRS. B. The instance which Adam Smith quotes in proof of the dexterity acquired by men, whose labour is reduced to one simple operation, is also very strik- innr. After observing that a man unaccustomed to a blacksmith's forge can with difficulty make three hundred nails in a day, he says that a common black- smith can forge one thousand, but that he has seen boys v/ho have been brought up to the art of nail- making exclusively, acquire such a degree of dex- terity as to complete two thousand three hundred in a day. ON THE DIVISION OF LABOUR. / ^> CAROLINE. The difference is prodigious : but I can on- ccive it when I observe with what awkwardness a man handles tlie tools of an art with which he is unacciuainted, whilst they are used with ease and dexterity by those who are accustomed to them. MRS. B. Tiien we must consider that when a man's whole attention and talents are turned to one particular object, there is a much greater probability of his discovering means of improving his workmanship, or facilitating and abridging his labour, than if his mind were engaged in a variety of pursuits. It is most frequently to workmen, that we are indebted for improvements in the process and instruments of labour. Another advantage derived from the division of labour is the regular and uninterrupted manner in which it enables tiie work to proceed. A labourer who has many diversified occupations not only loses time in going from one to another, but also in settling himself to his different employ- ments ; and as soon as his hand is in, as the workmen say, he must quit his work to take up another totally different. Thus he must go from his plough to his loom, from his loom to his forgo, from his forge to his mill, — but no — there could be neither plough, nor loom, nor forge, nor mill, E 4 so ON THE OIVISIOX OF I.ABOl'K, before a divisicm of labour had taken jilnce; Ibr no man could cither find time or acquire skill to construct such machines, unless they could bestow tlie whole of their labour and attention upon them. The construction of machines, therefore, we may consider as a refined branch of the division of labour. Their effect in facilitating and abridging labour is; almost incredible. How easy, for instance, the operation of grinding corn is rendered by so simple a machine as a windmill ! Were this to be done by manual labour, by bruising it between stones, it would be almost an endless task; whilst in a windmill the natural motion of the air performs nearly the whole of the work. CAROLINE. But the cotton-mills we have lately seen are a much more wonderful example of the effect of ma- chinery. In these a steam-engine sets all the wheels and spindles in motion, and performs the work of hundreds of people. MRS. B. The great efficacy of machinery in the hands of man depends upon the art of compelling natural agents, such as wind, steam, and water, to per- form the task which he would otherwise be obliged to execute himself; by which means labour is very much abridged, a great deal of human effort is ox TJIF. DIVISION OF LAUOUR. 81 savoil, and tlie work is often accomplished in a more uniform and accurate manner. \Vc noticed the skill that coukl be acquired in the art of forging nails: but the utmost efforts of manual labour fall far short of machineiy. A ma- chine lias been invented in the United States of America for the purpose of cutting nails out of iron, the operation of which is so rapid that it forms 250 perfect nails in the space of one minute, or 15,000 in an hour. CAROLINE. The metals, I suppose, could not have been lirought into use, till a considerable progress had been made in the division of labour? MRS. B. Certainly not; for it recjuires the exclusive la- bour of a great number of men to work a mine. The Mexicans and Peruvians in America, though they had made some progress towards civilisation, had never sought for gold in the bowels of the earth, but contented themselves with what they could pick up in the beds of rivers. In Britain, the Cornish mines were worked in very ancient times, and it is even supposed that the Plioenicians had introduced this art among the ancient Britons, with whom they are said to have tialHcked Ibr tin ind other metals. E 5 i^- ON riu: division of labour. CAROLINE. I am perfectly satisfied that the division of labour is a necessary step towards the accumulation of na- tional wealth : but may it not have an injurious cfibct on the mental faculties of individuals? A man who is confined to one simple mechanical operation, how- ever oreat the facility and perfection he may acquire in the performance of it, is shut out from all other improvement; his mind will never be roused to exertion by difliculty, interested b}' variety, or en- lightened by comparison. His ideas will be con- fined within the narrow limits of his monotonous employment, and his rational powers will become so degraded as to render him scarcely superior to the macliinery at which he works. Whilst a com- mon husbandman, whose occupations are diver- sified, and but little aided by machinery, acquires knowledge by experience in his various employ- ments, and, having a much wider range of observ- ation, enjoys a corresponding development of intellect. MRS. B. The knowledge of a ploughman is often remark- ably distinct in his limited sphere; but yet I have usually found that in conversing upon general topics with ^ ploughman and with a mechanic, the latter has dis^vered more intelligence, and that his mind lias appeared more active and accustomed to reflec- lion. I conceive this to be owing to the facility ^3 ON Tirr DIVISION OF LABOUR. ^3 which the arts aflbrcl of bringing men together in society. Tlicy are carried on in towns, where neighbourhood renders social intercourse much more easy than in scattered liamlets in the country. \Vlien they meet together tliey talk over each other's concerns, read the newspapers, and discuss the politics of the parish, or of the state. This observation is particularly ap{)licable to manufac- tories, where a number of persons generally work together in the same room, and their employment seldom prevents conversation. Social intercourse, in whatever class of the community it takes place, cannot lUil to promote the diffusion of knowledge; they become acquainted with the comforts and conveniences which have been acquired by the more skilful and industrious; they learn to appre- ciate the value, and are stimulated to acquire the means of obtaining them ; a mode of instruc- tion which we have observed to be the most essential step towards dispelling ignorance, and ex- citing industry. CAROLINE. But is there not some danger that the advantages obtained in the improvement of the mind by this state of constant intercourse amongst the lower classes in manufacturing towns, will be more than counterbalanced by the corruption of morals ? How much more vice appears to prevail amongst the E 6 84 ON THE DIVISION OK LABOUR. lower orders in crowded cities, than in the cot- tages of the peasantry I MRS. B. You do not consider the difference of the pojiu- lation ; there are often a greater number of people collected toijether in a manufacturinsr town than there are scattered over a space of thirty square miles of country : were their morals, therefore, the same, vice would appear much more conspicuous in the town than in the country. Admitting, how- ever, the comparative amount of crimes to bo greater in the former, I believe that it is com{)eu- sated by a more considerable proportion of virtue. ( AKOLIXE. Vet you must allow that we hear nuich more oi the vices than of the virtues of manufacluriufr towns and great cities. MRS. B. Because crimes, from being amenable to the law.s, are necessarily made known, whilst virtue seldom receives any public testimony ot approbation. P^very act of fraud or violence is sounded in our ears, whilst the humanity, the sympathy foi- sufleriiigs, the sacrifices wiiich the jioor make to relieve each other's distresses, are known only to those who enter into their domestic concerns, -rhis has been fie- ON THE DIVISION OF LABOUR. ft5 ()uontly noticed by medical men wlid have attended the lower classes of people in sickness at their own houses. CAROLINE. Yet, upon the whole, do you not think that the situation of the poor in the country is better than it is in towns? MRS. B. They have each their advantages and disadvan- tages, and I should imagine that good and evil are pretty eciually balanced between them. If the inha- bitants of towns are better informed, and can more easily acquire some of the comforts of life, the in- Jiabitants of the country are more vigorous and liealthy, more cleanly, and they have the advantage of a more constant and re as amply compensated by its prodigious effect in the nuillipliealion of wealth, a circumstance which not only increases the com- forts of the poor, but by facilitating the means of acquiring knowledge, ultimately promotes its diflfusion among all classes of men. It is to 86 ON THE DIVISION OF LABOUR. the division of labour that we are indebted for improvements in the processes of art, and amongst others for the invention of printiiif», which has proved the means of so wonderfully extending all kinds of knowledge. We have now, I think, brought our savages to a considerable degree of advancement in civilisation; I would wish you briefly to recapitulate the causes which have produced this happy change, and at our next interview we will continue to trace their progress. CAROLINE. Labour seems to be the natural and immediate cause of wealth ; but it will produce little more than the necessaries of life until its benefits are ex- tendetl by the establishment of such a government as can give security to property. The spirit of industry will then be rapidly developed. The sur- plus produce of one individual will be exchanged for that of another. The flicilities llius offered to barter will naturally introduce the division of la- bour or of employment ; and will soon give rise to the invention of machinery, the merits of which we have just discussed. MHS. B. Extremely well, Caroline. We shall now take leave of this improved state of society for the pre- sent, with a conviction, I hope, that we leave man- kind much hap})icr than we found it. CONVERSATION VT. ON CAPITAL. DISTINCTION OF RICH AND POOR. ACCUMULATION OF WEALTH. HOW IT IS DISPOSED OF. THE POOR LABOUR FOR IT. CONTRACT BETWEEN THE CAPITALIST AND THE LABOURER. THE RICH UNDER THE NECESSITY OF EMPLOYING THE POOR. DEFINITION OF CAPITAL. — HOW CAPITAL YIELDS AN INCOME. — PROFITS MADE BY THE EMPLOYMENT OF LABOURERS. PRODUCTIVE LA- BOURERS. — INDEPENDENCE OF MEN OF CAPITAL INDUSTRY LIMITFTD BY EXTENT OF CAPITAL. INDUSTRY INCREASES IN PROPORTION TO CAPI- TAL. CAPITAL AUGMENTED BY THE ADDITION OF SAVINGS FROM INCOME. HAPPINESS RESULT- ING RATHER FROM THE GRADUAL ACQUISITION, THAN THE ACTUAL POSSESSION OF WEALTH. MRS. B. In tracing tlic progress of society towards civilisa- tion, we noticed the happy effects resulting from tlie security of property and the division of labour. 88 ON CAPITAL. From til is period we may also elate the diversity o\ ranks, and the general distinction between rich and poor. CAROLINE. And all the evils that arise from inequality ot condition. This, alas ! is the dark side of the picture. MRS. B. So far from viewing the diversity of rank and condition as an evil, I consider it as productive of much general benefit, as it is that state of society best calculated to stimulate the industry, and bring into action the various faculties of mankind. If it does not exist in a savage state, it is because indi- gence is universal ; for no one being able to acquire more than what is necessary for his immediate maintenance, every one is poor. When civilisa- tion takes place, the advantages arising from the security of property and the division of labour enable an industrious skilful man to acquire more ■wealth than will suffice to gratify his wants or de- sires. By continued exertion this sur))lus produce of his industry in the course of time accumulates, and he becomes rich, whilst the less industrious, who acquires merely a daily subsistence, remains poor or possessed of nothing, and the idle are re- duced to positive indigence. CAROLINE. I cannot perceive what advantage arises from the ON CAPITAL. Hi) accumulation of wealth, for it must either be spent or hoarded; if spent, the iiuKistrious man is eventu- ally no richer than his idle neighbours ; and if I hoarded, the accumulation is of no use to any one. MRS. B. Your dilemma is put with some ingenuity, but you must at least allow that, where more is spent, there is a greater scope for enjoyment ; and in re- gard to hoarding, I hope you arc not recurring to vour notions about riches and money, and forget that the wealth of which we have been speaking consists of exchangeable connnodities, either agri- cultural or manufactured, many of which arc Jiot of a nature to be kept, were men inclined to hoard them. A much better mode of disposing of them has been devised ; one which not only secures, but augments them. CAROLINE. What can that be ? MRS. B. This you will hardly understand without some previous explanation. In civilised society men cannot, sis in a state of nature, obtain a subsistence by hunting, or from the spontaneous produce of the earth ; because the wilderness has been destroyed by cultivation, and the land has become private property. 90 ON CAPITAL. CAROLINE. And when the land is occupied by the rich, there seems to be no resource left for the poor ? iMRS. B. What do you suppose the rich do with their wealth r CAROLINE. The poor, I am sure, partake but little of it, for the sums the most charitable give away are but trifling compared to what they spend upon them- selves. MRS. B. I am far from wishing that the ])oor should be dependent on the cliarity of the rich for a subsis- tence. Is there no other mode of partaking of their wealth but as beggars ? CAROLINE. Not that I know of, unless by stealing. Oh no, I guess now — you mean they may earn it by their labour ? MRS. B. Certainly. The poor man may be supposed to say to the rich one, " You have more than you want, whilst I am destitute. Give mc some little share of your wealth for a subsistence; I have nothing to offer in exchange but my labour ; but with that I will undertake to procure you more than ON CAPITAL. 91 you part with — if you will maintain mc, I will work for you." CAROLINE. But is it not usual to pay wages to labourers in- stead of maintaining them ? MRS. B. It i3 in effect the same ; for the wages purchase a maintenance; the money merely represents the things of wliich the labourer stands in need, and for which he may exchange it. CAROLINE. The labourer may then be supposed to say to the rich man, " Give me food and clothing, and I by my labour will produce for you other things in return." • MRS. B. Precisely ; the rich man exchanges with the la- l)ourer the produce or work that is already done, for work that is yet to be done. It is thus that he acquires a command over the labour of the poor, and increases his wealth by the profits he derives from it. CAROLINE. This is a resource for the poor, I own ; but not enough to satisfy me entirely, for they are left at the mercy of the rich, and if these did not clioos;e to employ them, they would starve. 9J ON. rAlMTAl,. MRS. B. True; but what could the licli do without llieir assistaiici- ? CAROLINE. Tlieir ucallh woultl furnisli thcni a plentiful sub- sistence. MRS. B. At first it might, but in time it would be con- sumed. Their harvebts and their cattle would be eaten, their clotlics worn out, antl tlieir houses fallen into decay. CAROLINE. But you know that the harvests are annually re- produced, new clothes are purchased, and houses repaired or rebuilt: riches easily obtain all tliese things. MRS. B. But who is it that rc-produces tlie harvests? Who manufactures new clothes, and builds new houses, but the poorer classes of men ? V/ithout their aid you could spend only what you actually possessed, and when it was gone you would be destitute. CAROLINE. True; that is an idea that often })erplexed me when I was a child. I thought that in jiroportion as my father spent his money he must be impo- verished; but now I understand that wealth is re- produced by the labour of the poor, and that ihence arises an annual income. ox CAPITAL. 93 MRS. I!. l\ the value protluced by the hiboiirer excccd> what he has coiisuniocl, tlic excess will constitute an income to his employer ; and observe, that an income can be obtained by no other means than by the employment of the poor. CAROLINE. Indeed, I was perfectly aware that it was neces- 5-ary to employ labourers for this purpose; but I cUd not consider that it created reciprocity of benefit, by rendering llie poor in a gieat mcabure indepen- dent of the will of the rich. -MRS. 15. The rich and poor are necessary to each other; it is precisely the fable of the belly and the limbs; without the rich the poor would starve; without the poor the rich would be compellcil to labour for iheir own subsistence. CAROLINF.. It is very true, Mrs. 13.; and this is, 1 suppose, what you alluded to, vAwix you said that the rich had a means of securing their wealth \\ithout hoarding it. MRS. II. Yes ; the labouring classes consume and re- produce it. Wealth, thus destined for rc-produc- 94 ON CAPITAL. tion by the employment of labourers, is called capital. You have heard of capital before, no doubt ? CAROLINE. Oh yes; a man of fortune is said to be a man of capital : I always considered these as synonimous terms. MRS. B. So they are ; and you may have heard also that to spend a capital is very ruinous ; that it should be placed in some profitable line, so as to yield an in- come ; that is to say, it must be employed to set labourers to work, and the profit derived from their labour is called revenue or income. CAROLINE. If capital is employed in paying the wages of labourers, it is spent and consumed by them, and is lost to the capitalist as much as if he spent it. MRS. B. No ; capital employed is consumed, but not de- stroyed : it is at least no more destroyed than the seed sown in the ground, which is re-produced with increase. Thus the capital consumed by labourers is re-produced with increased value in the articles of their workmanship. CAROLINE. I know that a capital produces an income ; and ON CAPITAL. 95 thiuk 1 have a clear idea how this is effected. Yet I have some scruples respecting the mode of ob- taining it, which I am not altogether able to re- move. If the labourer re-produces for the capi- talist only as much as he consumes, or, in other words, commodities equal in ralue to his wages, the income is only equivalent to the oiit-gomg ,- he restores therefore exactly what the capitalist has advanced him, the latter being neither a loser nor a gainer by the bargain ; any farther, at least, than that, by re-production, perishable produce is made to last ; and that if more is produced, it seems but fair that the labourer should have the whole of his earnings. MRS. B. No capitalist would consent to such an agree- ment. When the poor man applies to the rich one for a maintenance, offering his labour in return, he does not say — for the food you give me during the present year, I will produce an equal quantity of food next year — because he knows that he would not be employed on such terms ; he must by the prospect of some advantage induce the capitalist to exchange food that is already produced for some- thing that is yet to be produced. He therefore says — for the food you give me now, I will raise you a greater or more valuable supply next year. 9G ON CAPITAL. CAROLINE. It appears to me a liardship, notwithstaiuliiig, that after the rich have engrossed the whole prt)- pcrty of the land, nothing should be left to the |)oor beyond their own labour, and that they should m^t be allowed to reap the whole of the advantages it affords. If 1 were a legislator, I should be disposed at all events to establish a law compelling the ca- pitalist to allow the labourer the whole of the pi-ofit arising from his work. Such a regulation would surely tend to improve the condition of the jioor. You smile, Mrs. B., I am afraid you will not allow of my plan? -MRS. B. I would suggest an addition to it, which is a law to compel the capitalist to employ the labourers ; for on your terms none would give them work. The farmer, were he obliged to j);iy his husband- men the value of the crojis they raiseil, would ile- rive no pi-ofit from their sale; he would, therefore, leave his fields uncultivated, the land would lie waste, and the hu.-baudnicn starve. INIanufaclurers for the sauie reason would discharge their work- men, merchants their clerks; in a word, industry would be paralyzed ; and were you to devise a system of certain and inevitable ruin to a country, I do not think you could adopt a more efficacious mode of promoting your design. ON CAPITAL. i^7 CAROLINE. So much for the wisdom of my laws ! I cer- tainly ought to have foreseen these consequences, since, as you observed before, the inducement for the rich to employ the poor is the advantage the former derive from the latter. MRS. fi. Undoubtedly. The profits the rich reap from the employment of their capital constitutes their income; without such income the capital, it is true, might, by your compulsatory laws, be re- produced annually; but yielding no income, the capitalist would gradually consume it in the main- tenance of his family; and thus his means of em- ploying labourers would annually diminish. So far from considering the profits which the capitalist derives from his labourers as an evil, 1 have always thought it one of the most beneficent ordiuations of Providence, that the employment of the poor should be a necessary step to the increase of the wealth of the rich. Thus the rich man has the mcauK of augmenting his capiUil, not by hoarding, but by distributing it among hi? labourers, wjio consume it, and re- produce another and a larger capital — hence have they obtained the name of productive labourers. J)8 ON CAPITAL. CAROLINE. When a man, therefore, becomes po.s.sf.>i;'ccl ol w capital, whether by accuniuhition of his savings or by inheritance, it is no longer requisite for him to work for a maintenance, as others will labour for him? MRS. B. It depends on the amount of his capital, and the extent of his desires. If it will yield an income sufficient to maintain him and his family with the degree of comfort or affluence which satisfies his ambition, he may live in idleness ; if not, he will work himself; or at least superintend his labourers. This is the case with the fiirmer, the merchant, the master-manufacturer, each of whom super- intends his respective concerns. Do you understand now, that no productive en- terprise can be undertaken without capital ? Ca- pital is necessary to pay labourers, to purchase materials to work upon, instruments to work with ; in short, to defray the whole expense attached to the employment of labourers. CAROLINE. But a man may undertake a productive enter- prise without employing labourers: for instance, if he gathers mushrooms on a common, he requires no capital for that purpose ; no tools are used, the earth produces mushrooms spontaneously, and 12 , ON CAPITAL. Ui) every one has a light to gather them. The same may be said of nuts and wild strawberries. MRS. B. These are small remnants of the resources of a savage state, in which subsistence is derived from the spontaneous produce of the earth: but the employments which require no capital, are very in- considerable, and occur only during a short season of the year. CAROLINE. There is one, which appears to me of great Im- portance — fishing. Fishermen are in no want of captal ; the fish costs them merely the trouble of catching. Oh no ! I am mistaken ; I forgot the nets and the boats that are necessary for fishing ; besides, the men must have something to subsist on, when the weather will not allow them to venture on the water. But there is another case, Mrs. B. ; I have own persons who were worth nothing, and yet o set up in business on credit. MRS. B. That is no exception ; for credit is the employ- citnt of tlie capital belonging to another. CAROLINE. Well, it is a melancholy reflection that one must ¥ 2 100 ON CAl'Il AL. always possess something in order to gain more. He then who has nothing to begin with, has no means of escaping from poverty. MRS. B. Poverty is a word of vague signification. If you mean to express it by a state of positive indigence, the labourer who earns a subsistence from day to day cannot come under that description. But if you use the word poverty in opposition to wealth, that is to say, to the possession of capital, labourers, though usually in that state, are not necessarily condemned to it. A healthy and hard-working man may, if he be economical, almost always lay aside something as the beginning of a little capital, which by additional savings accumulates. CAROLINE. That is true. Thomas, our undcr-gardener, who is a very intelligent, industrious man, was saying the other day to one of his fellow-labourers, that as soon as he had laid by a little money to begin the world with, he intended to marry. But it seems to me that if my father would give him a cottage, and an acre or two of ground, he might raise vegetables for market, and by these means support himself and his family. MRS. fi. In that case your father would supply the capital. 13 OK CAPITAL, 101 The cottage and the land is a capital, but they will not do alone. Thomas would besides require garden tools to work with, and an assistant, if not several, to prepare the ground. Then he must not only subsist himself, but maintain his family till the produce of his garden can be brought to market. In the course of three or four years, from the earnings of his daily labour he may have amassed a little capital sufficient to enable him to under- take this ; he will then no longer be a labourer for hire, but will work on his own account. It is thus every thing has a beginning ; the largest fortunes have often had no greater origin. Now, supposing Thomas to be able to rent an acre of land when he is worth lOo/., hf- may reiit ten acres when he is worth 1000/., but he cannot rent more ; he cannot increase his farm, beyond his means of paying for it ; his industry, therefore, is limited by the extent of his capital. CAROLINE. I do not quite understand that MRS. B. Let us imagine a tradesman, a shoe-maker for instance, to be master of a capital which will en- able him to maintain ten workmen, and that the following year he finds that he has gained 100/. by the profits derived from their labour. This F .i W'2 ON CAPITAL. 100/. constitutes his income; if he spend it, his capital remains what it was before : but if he adds it to his capital it will enable him to maintain and provide work for a greater number of journeymen. Let us say that he can now employ twelve instead of ten men ; these will make him a greater quan- tity of shoes, and the additional profits arising from their sale will, if added to his capital, still farthex" increase his means of employing workmen. Thus the demand for labour, or, in other words, employment for the poor, will ever increase with the increase of capital, and be limited only by its deficiency. CAROLINE. But we must not forget that the master shoe-maker and his family are to be maintained out of these profits ; the whole of thtm cannot, therefore, be added to his capital. MRS. B. Certainly not. The expenses of his family con- sume, in general, by far the greater part of a man's income ; but, if he is puudent, he wiU lay aside as much as can be spared, and these savings will enable bim to enlarge and improve his business, of what- ever description it may be. CAROLINE. Thus a fai'mer would be able to extend and im- ON CAPITAL. 105 prove the cultivation of his farm by increasing the nnmber of his labourers — and a merciiant propor- tionally to extend his commercial dealings — so that the richer a man becomes, the more it will be in his power to increase his wealth ? MRS. B. Yes ; the second thousand pounds is often ac- quired with less diflficulty than the first hundred. CAROLINE. That is hard upon those who have nothing. The i ich have too many advantages over the poor. MRS. B. The man who accumulates a large fortune by his industry injures no one ; on the contrary, he con- fers a benefit on the community. You will under- stand this better by-and-by. In the mean time I must observe to you, that happiness, so far as it is dependant on wealth, consists less in the pos- session of riches than in the pleasure of acquiring them. Every degree of increasing prosperity is at- tended with its enjoyment. Your gardener, who •^aves his earnings with the prospect of settling at the end of two or three years, has probably more satisfaction in the anticipation of his future wealth than he will have in the possession of it ; iis long as he continues making annual additions to his ai- F 4 104 ON CAPITAL, pltal, the same source of enjoyment wiH be pre* served, but will never excite so strong an interest as at first. Merchants will tell you that their first gains gave tltem greater pleasure than all their subsequent accumulations. Nature has wisely attached happiness to tin? gradual acquisition, ra- ther than to the actual possession of wealth, thus rendering it an incitement to industry; and we shall hereafter see that this progressive state of prosperity is most conducive also to the happiness of nations. CONVERSATION VII. ON CAPITAL— contimied. OF FIXED CAPITAL. — DISTINCTION BETWEEN FIXED AND CIRCULATING CAPITAL. — EXAMPLES OF THE DIFFERENT KINDS OF CAPITAL. OF SLAVES. FIXED CAPITAL AND CIRCULATING CAPITAL EQUAL- LY BENEFICIAL TO THE LABOURING CLASS. MACHINERY ADVANTAGEOUS TO THE LABOURING CLASSES. — QUOTATION FROM MACPHERSON ON THE ADVANTAGES OF MACHINERY. QUOTATION FROM MR. say's TREATISE ON POLITICAL ECO- NOMY. MRS. B. I HAVE some further remarks to make to you on the nature of capital. A land-owner, when he increases his wealth by savings from his income, may probably, instead of employing the whole of his additional capital on husbandmen, find it more advantageous to lay out some part of it on workmen to build barns and outhouses, to store his crops and shelter his cattle ; F 5 106 ON CAl'lTAL. he may plant trees to produce timber, build cot- tages, and bring into cultivation some of the waste land on his farm. A manufacturer also, in proportion as he in- creases the number of his workmen, must enlarge his machinery or implements of industry. CAROLINE. But the capital laid out in buildings, tools, and machinery will not yield a profit like that which is employed in the payment of workmen, the pro- duce of whose labour is brought to market ? MRS. B. The farmer and manufacturer would not lay out tlieir capital in this way, did they not expect to reap a profit from it. If a farmer has no barn or granary for his corn, he will be compelled to sell his crops immediately after the harvest, although he might probably dispose of them to greater advantage by keeping them some time longer. So a manufac- turer, by improving or enlarging his machinery, can, with less labour, perform a greater quantity of work, and his profits will be proportionate. Thus, for instance, when a manufacturer can afford to establish a steam-engine, and employ a stream of vapour as a substitute for the labour of men and horses, he saves the expense of more than half the number of hands he before employed. ON CAPITAI„ 107 The capital laid out in this manner is called fxed capital ; because it becomes fixed, either in land, in buildings, in machinery or implements of art ; it is by keeping this capital in possession, and usijig it, that it produces an income. Whilst the capital employed in the maintenance of productive labourers, whose work is sold and affords an im- mediate profit, is distinguished by the name of circulating capital. The produce of a farm, or the goods of a manu- facturer, afford no profit until they arc brought to market, and sold or exciiangcd for other things. This description of capital is, therefore, constantly circulating. It is transferred first from the master to the labourer, in the form of wages and raw ma- terials, then from the labourer it is returned to the master, in the form of produce or workmanship of increased value ; but the latter does not realise his profits until this produce is sold to the public, by which it is consumed. CAROLINE. I think 1 understand the difference between fixed and circulating capital perfectly. A farmer derives profit from his implements of husbandry by their use, while kept in his possession ; and from his crops by parting with them. But to which kind ^)f capital should the farming cattle be rcfcnal ? F 6 1C6 ON CAPITAI<, MRS. B. It depends upon the nature of thr cattle. Tlic value of the labouring cattle is fixed capital, like the implements of agriculture ; thus, the horses which draw the plough, as well as the plough itself, are fixed capital. But sheep and oxen intended for market are circulating capital. CAROLINE. But should the plough be drawn by oxen, Mrs. B., how would you settle the point then? for whilst they labour for the farmer they are fixed capital ; but when they are sold to the butcher they become circulating capital. MRS. B. They alternately belong to each of these descrip- tions of capital; because the farmer makes his profit, first by keeping, and afterwards by selling them. CAROLINE. I do not imderstand why you should call the maintenance of labouring men circulating capital, whilst you consider that of labouring cattle as fixed capital : they appear to me to be exactly similar. MRS. B. And so they are. The maintenance of cattle as well as that of labourers is circulating capital ; that maintenance is in both cases consumed and re- ON CAPITAL. 100 produced with advantage : it i8 therefore by parting with it that profits are derived. But the value of the cattle themselves is fixed capital, and if labour- ers, like cattle, were purchased, instead of being hired, thus becoming the property of their employ- ers, they also would be fixed capital. CAROLINE. And this, I suppose, is the case with the poor Africans in the West Indies ? MRS. B. Yes, and with slaves of every description. Even the peasantry of Russia and Poland are in genei-al considered as fixed capital, because their state of vassalage is such as to amount to slavery, the pro^- prietors of the land having a right to their labour without remuneration : and the value of an estate in Russia is not estimated by the number of acres, but the number of slaves upon it ; in the same man- ner as a West-Indian plantation. A similar state of vassalage prevailed throughout most parts of Europe some centuries ago; but in later times the progress of civilisation has been such, that I believe every country, excepting Russia and Poland, has emancipated the labouring classes ; experience hav- ing proved that the more free and independent men are, the more industrious they become, and the better the land is cultivated. i 10 ON CAPITAL. CAnOHNE. I wish that tlie West-Indian planters could be induced to adopt this opinion. MRS. B. Tlie time will no doubt arrive when slavery will be abolished in every civilised country. But im- portant changes ought not to be introduced without extreme caution. The minds of men should be freed from the degrading fetters of ignorance, be- fore they can reap advantage from personal eman- cipation. An ingenious author observes, " that liberty is an instrument with which men may either make their fortune or destroy themselves ; that they should therefore be taught the use of it before it is inti'usted to their hands." In all cases we shall find that gradual and progressive improvement is invariably conducive to the happiness of mankind, whilst sudden and violent revolutions are always attended with danger. But we ai*e deviating fi:om our subject. CAROLINE. Well then, to return to it. I thought at first that I understood the difference of fixed and circu- lating capital perfectly; but I find upon reflection, that I am at a loss to determine to which kind of capital several articles of property belong. For instance, does the money laid out in the improve- ment of land constitute fi.\ed or circulating capital 1 I ON CAPITAL. 1 1 1 MRS. B. The money laid out on waste land to bring it into a state fit for cultivation, such as inclosing, draining, ditching, preparing the soil, &c. ^is fixed capital ; and so is that which is employed in the improvement of land already cultivated. If it is the proprietor who lays out capital on land which he lets, he receives in remuneration an increase of rent : if the farmer, he makes greater profits. But the money laid out in the regular course of cultiva- tion, such as ploughing, sowing, reaping, &c., consists, as we have before observed, partly in fixed and partly in circulating capital. CAROLINE. I must say that I prefer the employment of wealth in the form of circulating, rather than in that of fixed capital. Granaries, barns, machinery, &c. may be advantageous to the proprietors, but they must be injurious to the labouring classes; for the more a man lays out as fixed capital, the less re- mains to be employed as circulating capital, and therefore the fewer labourers he can maintain. MRS. B. You must always remember that the greatest good you can do the labouring classes, is to increase the consumable produce of the country. Whilst plenty of the necessaries of life is raised, it signifies Ill ON CAPITAL. little to whom it bclongn ; for whoever may be the proprietorn of" this wealth, tliey can derive no aii- vantago from it but by employing it ; that is to say, by maintaining with it productive labourers. The more abundant, thcjcfore, this wealth is, the more people will be employed. Now it is evident that whatever tends to improve or facilitate labour increases the protluctions of the country; and if fixed capital should eventually oc- casion the raising a greater protluce than circu- lating capital, it must be more beneficial to the labourers as well as to the capitalist. CAROLINE. So it appears ; and yet I cannot understand how this operates with regard to machinery. We can- not substitute the powers of nature for human industry without throwing peoj)le out of work. How then can the poor derive any benefit from inventions and improvements which prevent their being employed ? MRS. B. It may ap})ear paradoxical, but it is nevertheless true, that whatever abridges and facilitates labour will eieyitiudlij increase the demand for labourers. ( AROLINE. Or, in other words, to turn people out of work is the most certain raeans of procuring them em- J ON CAPITAL, 113 ploymcnt ! — This is precisely the objection I was making to the introduction of new macliincry. MRS. B. Tlie invention of machinery, I allow, is often attendee! with much partial and temporary inconve- nience and liardship ; but on the other hand, the advantages rcsultuig from it are almost incalculable both in extent and duration. When any new ma- chine or process whatever which abridges or facili- tates labour is atlopted, the commodity being produced at less expense falls in price, the low price enables a greater number of persons to become purchasers, the demand for it increases, and the supply augments in proportion ; so that it frequently happens that more hands are eventually employed in its fabrication than there were previous to the adoption of the new process. When, for instance, the machine for weaving stookings was first in- vented, it was considered as a severe hard.'-hip on those who hatl earned a maintenance by knitting them; but the superior facility with which stock- ings were made in the loom, rendered them so much cheaper, that those, who before were unable to purchase them, could now indulge in the com- fort of wearing them, and the prodigious incrcaso of demand for stockings enabled all the knitters to gain a livelihooaravant de copistes. Et " si a present on pouvoit calculer exactement non " seulement le nombre des ouvriers imprimeurs, " mais encore des industrieux que Timprimerie " fait travailler, comnie graveurs de poin^ons, " fondeurs de caracteres, relieurs, libraires, on " trouveroit peut-etre que le nombre des personnes " occupees par la fabrication des livres est cent " fois j)lus grand que celui qu'elle occupoit avant " I'invention de I'imprimerie." CAROLINE. And the number of readers must have increased in a still greater proportion. You msxy recollect observing, in our conversation on the division of labour, that the invention of printing was a cir- cumstance most favourable to the diffuiiion of knowledge. But a considerable increase would not, in the case of every commodity produced by raachiftery, be required ? 118 ON CAPITAL. MUS. B. Certainly not. It is not a n£?cessary consequence of the invention of nmcliinery, that more hands should he required in the manufacture where it is applied ; the additional quantity of the commodity produced by the same number of hands will in some instances be sufficient to supply the increased de- mand. But supposing even that no augmentation of the commodity should be require AND t'Ol'LLATION. IJl and rear a family; but as the capitalist wHl always keep wages as low as he can, the labourer and his taniily can bcldom command more than the neces- saries of hfe. CAROLINE. Hy the necessaries of life do you mean such things only as are indispensably necessary tor its support ? MRS. B. N\) ; I mean such foini, clothing, and general accommodation as the climate and custom of the country have rendered essentia) to the preservation of the life, health, and decent appearance of the lowest classes of the people. Fuel, for instance^ and warm clothing are necessary articles in this country; but they are not so in Africa. Civilisa- tion and the progress of wealth and manufactures have greatly extended the scale of necessaries ; tlie use of linen is now considered as necessary by ail classes of people, and shoes and stockings in Eng- land, at least, almost equally so. Houses with glazed windows and a chimney arc become neces- -?rics; for if our poor were deprivctl of such ac- iimodation it would very materially increase iiiillty amongst them. In Ireland the peasantry Miig up their children in a mud-cabin, the door "t \\liich answers also the purposes of window and liinncy. G 122 ON WAGES AND rOPULATION. CAROLINE. Then would it not be better that the hibouring classes here should, like the Irish, accustom them- selves to hardships and inconveniencies, rather than indulge in a degree of comfortable accommodation, the privation of which, in a season of distress, is attended with so much misery ? MRS. B. No ; I would on the contrary wish rather to ex- tend than contract the scale of the necessaries of life. There is more health, more cleanliness, more intellect, and more happiness developed in an English cottage than in an Irish cabin. There is more strength, vigour, and industry in an English peasant, who feeds on meat, bread, and vegetables, than in an Irish one, who subsists on potatoes alone. CAROLINE. No doubt I would wish the lower classes every comfort which they can afford, but their wages will not always allow them such gratifications. What is it that determines the rate of wages ? MRS. B. It depends upon the proportion which capital bears to the labouring part of the population of the country. Oy WAGES AND POPULATION. 123 CAKOLINE. Oi-, in other woVds, to tlic proportion which sub- sistence bears to the number of people to be main- tained by it ? MRS. B. Yes, it is this alone which regulates the rate of wages, when they are left to pursue their natural course. It is this alone which creates or destroys the demand for labour. In ordet* to render it more clear to you, let us simplify the question by examin- ing it on a small scale — let us suppose, for instance, that we have founded a colony in a deport island ; tliat the settlers have divided the land amongst them, and cultivated it for their own subsistence, and that being both jiroprietors and labourers, they reap the whole reward of their industry. Thus situated, should a ship be wrecked on the coast, and some of the crew effect their escape to shore, what would ensue ? They would furnish a supply of labourers, who would be dependent on the original settlers for maintenance anil employment. tAI^OLINE. Ikit if those settlers have not raisetl a greater <]uantity of subsistence than is necessary for their own use, how can they maintain the new comers? Without capital, you know, ihcy cannot employ Jjibourers. o 2 12\ ON WAtJLS AND POl'L LATION. You are perfectly right. But it is probable that the most industrious of them will liavc raised some- what more subsistence than is absolutely necessary for their own consumption. They will possess some little stock in reserve, which will enable them to maintain and employ at least a few of the ship- wrecked crew. Yet as these poor destitute men will all be anxious to share in this little surplus, each will offer his labour in exchange for the smallest pittance that will support life. Thus the capital of the island being inadequate to the maintenance of its [)opulation, the competition amongst the la- bourers to get employment will render wages ex- tremely low, and the capitalist will derive a high profit from the industry of his labourers. A small capital, therefore, creates but a small demand for labour. CAROLINE. By demand for labour do you mean the demand of the poor for work, or of the capitalist for work- men ? MRS. B. Certainly the latter. The demand for labour means the demand for labourers, by those who have the means of paying them for their work, whether it be in the form of wages, maintenance, or any other kind of remuneration. But what will happen in our colony, when the 7 ON WAr.Eii AND I'orri.ATION. 125 labourers shall have richly repaid their employers h\ the fruits of their industry ^ CAROLINE. By raising a more |)lenliful harvest they would of course have a more plentiful subsistenee. MRS. B. The iiarvest, you must observe, belongs, not to the men wlio produced it, but to their masters ; how, therefore, docs it follow of course that the la- bourers obtain a larger share of it ? CAROLINE. I suppose that their masters having more capital, are willing to bestow a larger proportion of it on their labourers. MRS. B. I believe that the capitalist will always make as high a profit as he can upon the work of hi? laboin*- crs; and that when his capital increases, he will choose rather to increase the number of his workmen than the rate of their wages. But the power of employing more labourers increases the demand for labour; and this, as I shall explain to you, eventually raises the wages or reward of labour. The cajiital of the settlers will probably be so much augmented by the industry ot the labourers, that there will no longer be any difficidty in main- i2('> ON wa<;ks and roruLAT/oN- taining the new comers. Tlic possessors ol tins increased capital will be eager to procure the services of the labourers ; one perhaps to build a hut, another to fence a field, a third to construct a boat, and so on. For the surplus, unless em- ployed, will yield no prolit; tlie competition thcie- fore will no longer be amongst the labourers to obtain work, but amongst the masters to obtain %vorkmen; and this will necessarily raise the price of wages, and consequently diminish the profits of the capitalist. CAItOLINI. Oh, that is very clear. If John offers a man a shilling a day to work at his liouse, and Thomas gives eighteen-pence to those who will build his boat, while James pays two shillings for fencing his field; wages must rise to two shillings a day : for if John and Thomas did not give as much as James, the latter would monopolise all the labourers. iMKS. B. You sec therefore that it is the additional capital produced by the labour of these men, which by in- creasing the demand for labour raises their wages. 'Huis whenever capital for the maintenance of la- bourers abounds, the capitalist must content him- self with smaller profits, and allow his workmen o nvjre liberal remuneration. 14 ON WAGES AM) POrULATlON. 12/ CAROLINE. Oil, that is charming! that is exactly what I ^ ^ish. But, Mrs. B., if, during tlie second year, our colonists employ their labourers in building houses and fencing fields, instead of cultivating them, sub- sistence will again fall short, and the labourers will be reduced to their former necessitous condition ; unless having once experienced such distress, they guard against it in future. MRS. B. rhat docs not depend on the choice of the la- bourers who must do the work they arc hired to jxjrform, of whatever nature it may be. 13ut their employers will be careful to provide for their main- tenance, for they know that those who should neglect to make such a provision for their future services would be deprivePULATION. 1 2f) 111 xs}t:ii manner the rediiotion would takf» pflfect I (In nnl clearly sec. MRS. B. In order to trace its consequences step by step, Hf may suppose that John, finding his capital will not maintain more than one half of the number ol labourers he before employed, reluctantly discharges the other half. These poor men wander about the. colony seeking for work, but instead of finding any, they meet only witli companions in distress who have lost tlieir employment for similar reasons; ihu-. without resource they return to their masters, and intreat to be employed on lower terms. John, wlio had discharged these men, not for want of ^M»rk to give them, but for want of funds to pay them, i:» happy in his rciluced circumstances to employ labourers at lower vvagi'>. I le therefore makes a new agreement with them, and determines to di^charge those wliom ho had originally retained in hii» service unless they will convent to work for him on the same terms. 'I'hesc men, aware of the ciifTiculty of finding employment elsewhere, are compelled by necessity to accept the condition-, and thus wage* arc reduced to one hidf their former le throughout the colony. CAROLINF,. li appears as evident as possible. I have only (i 5 IMO ON WAGES AND POPULATION. one objection to make, which is, that though this jnay be the case in our colony, it certainly is not so in other places. Wages, so far from being re- duced, are, I believe, frequently raised during a scarcity : at least there are great complaints amongst the poor if that is not done. MRS. B. In countries where money is used, it is unneces- saiy to make any change in the rate of wages during a scarcity, because the high price of provisions produces a similar effect. If you continue to pay your labourer the same wages when the articles of provision on which he subsists have doubled in price, his wages are less efficient by one half, be- cause he can procure with them only one half of what he did before the scarcity. CAROLINE. But this is a kind of imposition upon the poor labourers, who, I suppose, are at least as ignorant as I am of political economy, and arc not aware that a shilling can purchase more at one time than it can at another, and therefore during a scarcity continue to work at the usual rate of wages for want of knowing better. MRS. B. T Knowledge in this instance would only teach UN WAGES AND rOPULATION. 1.51 iheni that tlicy must bear with patience an un- avoidable evil. The alternative, for capitalists when capital is diminished, is to reduce, either the number of their labourers, or the rate of their wages — or rather, I should say, the remuneration of their labour ; for the money-wages remain the same. Now is it not more equitable to divide the maintenance amongst the whole of the lubour- ig class, than to feed some of them amply, whilst ilic remainder starve? CAROIJNE. \o doubt it is; but would it not, in this instance, he allowable for the legislature to interfere, and blige the capitalist to raise the rate of wages in proportion to the rise of price of provisions, so as to afford the labourers their usual (juantity of subsistence? I think the rate of wages ought to bo regulated by the price of bread, as that is the principal subsistence of the poor ; so as to enable thcnj to purchase the same quantity of bread what- ever its price may be. MRS. B. Or, in other words, that every man may eat his usual quantity of bread, however deficient the har- vest is in its produce; for unless you could find means to increase the quantity of subsistence, it will avail nothing to raise the rate of wjigcs. .. I'SS ON WAGES AND POPULATIONr CAROLINF. Very true; yet two shillings will purchase twice the quantity of bread that one will : is not that true also Mrs. B. ? and yet these truths appear in- compatible. nms. B. One of them must therefore be an error ; two Uiillings would not purchase twice the quantity of bread that one did if wages were doubled, because provisions would continue to rise in price in pro- portion to the advance on wages. CAROLINE. But I would prohibit the farmer from raising the price of his corn and his cattle, and then there wcnild bo no necessity for the butcher and the baiicr raising the price of meat and bread. It is not just that the farmer, when he has a bad crop, should throw his misibrtunc on the public, antl \n- the only person who doch notsufler from it; which is the case if he raises the price of his produce in proportion to its scarcity. MILS. B. The farmer consumes as well as j)roduccs pro- tisionsv and as a consumer he partakes of the evil of the advance of price. If he sell his corn for twice tlic u>ual price, what he consumes at home stand- ON H'A(.rs AM) FOPll.ATION. I.S.j him in the samevahic, for sucli is the jitit c ii would t'rtch at market. But supposing it possible to prevent the rise in price (luring a scarcity, what consccjiiences wdhIcI irisue !'' Keep in mind the important point, that tiie harvest has yielded but half its usual product; that vvhiUt the wa^es of labour and the price of pro- visions undergo no alteration, the labourers pur- i hasc and consume the usual quantity of food, and it the end of six months .... CAROLINE. ^'^JU need not finish the sentence, Mrs. B. ; at ihc end of six months the whoie stock of provisions would be consumed, and the people who excitod mv commiseration would be starved. MRS. n. 'I'his would infullibK be the case, were such ,i measure perscvercil in ; but though it has often been attempted by sovertigns more benevolent than wise, to set limits to the price of jirovisions, I he consequences voon became so formidable as to compel the legislature to put a stop to a remedy which was as ineffectual as it was pernicu)us. • " In the year \Mr> England was afllictiHl by a " famine, grievous bcyt)nil all that ever were known " before, which raised the price of provisions far Mncphcrsoirs Annali of Commerce^ l.M ON WAGES AND POPILATION. " above the reach of the people of miildliii^ classes. '* The parliament, in compassion to the general *' distress, ordered that all articles ol" food should " be sold at moderate prices, which they took *' upon themselves to prescribe. The consccjuence " was that all things, instead of being sold at or " undir the maximum price fixed by them, be- " came dearer than before or were entirely with- " held from the market. Poultry were rarely to '' be seen. Butchers' meat was not to be found at »' all. The sheep were dying of a pestilence, and »' all kinds of grain were selling at most enormous " prices. Early the next year the parliament, " finding their mistake, left provisionts to find their " own price." Thus you see that the rise in the price of pro- visions is the natural rcmetly to the evil of scarcity. It is the means of husbanding the short stock of food, and making it last out to the ensuing harvest. Government should never interfere, either with the price of provisions or the rate of wages ; they will each find their respective level if left uncon- trolled. But to return to our colony. What effect would it [Produce on wages, were some contagious maladv to carry off one half of the labourers ? CAROLINE. It would increase the demand for the labour of I i ON WAGES AND POPULATION. IM') iliobc Mhicli remained, and consequently raise their wages. MRS. B. We may generally state, therefore, that when the number of labourers remains the same, the rate of wages will increase with the increase of capital, and lower with the diminution of it; and that if the amount of capital remain the same, the rate of wages will fall as the number of labours increase, and rise as the number of labourers diminish; or, as mathematicians would express it, the rate of wages varies directly as the quantity of capital, and inversely as the number of labourers. Macpherson mentions that " a dreadful pesti- lence, which originated in the eastern regions, began its ravages in England in the year l.S-18, and is said to have carried o(T the greater part of the people, especially in the lower ranks of litV'. The surviving labourers took advantage of the demand for labour and the scarcity of hands to raise their prices. Tlie king, Edward I., I «* thereupon enacted the statute of labourers, which • ordainetl that all men and women under <'.() year^ • of age, whcilurof free or -ervile condition, hav- '• ing no occupation or property, should serve any '• person of whom they s-hould be required, and • should receive only the wages which were usual •' before the year 1316, or in the five or six j>re- •' ceding years, on pain of imprisonment, the cm- l:if» ON WAGES AND POPULATION. " ployers being also punishable for giving greater " wages. Artificers wore also proliibited from de- " manding more than the old wages ; and butchers, " bakers, brewers, &c. were ordered to sell their " provisions at reasonable prices. The ' ser- " vants having no regard to the said ordinance, " but to their ease and singular covetise,' refused " to serve unless for hi"her waijes than the law " allowed them. Therefore the parliament, by " another statute, fixed the yearly and daily wages " of agiicultural servants, artificers, and labourers, " the payment of threshing corn by the quarter, " and even tli'j price of shoes. They also forbad " any person to leave the town in summer wherein " he had dwelt in the winter, or to remove from " one shire to another. " Thus were the lower classes debarred by laws, *' which in their own nature must be inefficient, *' from making any effort to improve their situation « in life." CAROLINE. I had always imagined that a great demand for labour was occasioned by some great work that was to be executed, such as digging a canal, making new roads, cutting through hills, &c. ; but it seems that the demand for labour (Upends, not so much on the quantity of work to be done as on the quan- tity of subsistence provided for the workmen. ON ua(;es wr) poi'i'i.aiion. I.ij" .MRS. H. W Drk U) Ik,* pcrlbrmcd is ilie imnuiluite cause il the deniuiul for labour; but however great or important is the work which a man may wis!) to undertake, the execution of it must always be li- mited by the extent of his capital ; that is to say, by the funds he possesses for the maintenance or- payment of his labourers. The same observation applies to the ca})ital of a country, which is only an agf^rcgate of the capital of individuals ; it cannot employ more people than it has the means of main- taining. All the waste land capable of cultivation in the country might l>e called work to be done, but one must have, not only labourers to do that work, but a suHicient quantity of subsistence to support them. In our conversation on capital we observed, that in countries of large capital great works were undertaken, such as public buililings, bridges, iron rail- ways, canals, &c. All these things are u sif^n of redundance of wcaltii. CAROLINE. In Ireland 1 understand that the wages of coni- Ynou labourers are much lower than in Enghuul : i» it on account of the capital ot that country In-ing less adequate to the maintenance of its population ? MRS. B. 'J'hal is, no doubt, om' of the piliicipal causes 138 ON WAGES AND POPULATION. of the low price of labour in that country ; but there are many other causes which affect the price of labour, arising from the imperfection of its go- vernment. The Irish are far less industrious than the English. Arthur Young, in his travels through Ireland, observes, that '* husbandry-labour is *' very low priced, but not cheap. Two shillings " a-day in Suffolk is cheaper than sixpence a-day " in Cork. If a Huron would dig for two-pence " a-day, I have little doubt but that it might be " dearer than the Irishman's sixpence." CAROLINE. But, Mrs. B., the price of labour does not only vary in different countries, but very considerably in different parts of the same country. In pur- chasing some cutlery a few days ago, I was shown country and town made knives and forks, appa- rently the same, yet the difference in price was considerable. Upon enquiring the cause, I was^ informed that it was owing to wages being so mucli higher in London than in the country. JIRS. B. And if you had enquired the cause of the high rate of wages of London workmen, you would have heard that it was on account of their being better workmen; the ablest artificers' generally resort to London, as the place where their skill will be most ON WAGES AND POPULATION. 139 duly appreciated, and where their employers can best afford to reward it. It is but just to remunerate labourers according to their ability. Your liead gardener does less work than any of the men under him ; yet he has the highest wages, on account of the skill and ex- perience he has acquired. A working silversmith has on this account higher wages than a taylor or a carpenter. But where skill is not requisite, the hardest and most disagreeable kinds of labour are best paid : this is the case with blacksmiths, iron-founders, coal- heavers, &c. A consideration is also had for arts of an un- wholesome, unpleasant, or dangerous nature, such as painters, miners, gunpowder makers, and a variety of other analogous employments. I I CONVERSATION IX. ON WAGES AND POPULATION. Coutinued. HIGH WAGES NOT INVAllIADLY ACCOMPANYING GREAT CAPITAL. (iREAT CAPITAL AND LOW WAGES IN CHINA. SMALL CAPITAL AND HIGH WAGES IN AMERICA. ADVANTAGES OF NEW SETTLED COUNTRIES. POVERTY THE NATl'RAL CHECK TO POPULATION. GREAT POPLLATION ADVANTAGEOUS ONLY WHEN RESULTING FROM PLENTY. INCREASING WEALTH PREFERABLE TO ANY STATIONARY CAPITAL. MISTAKE IN ENCOU- RAGING POPULATION. POPULATION OF MANU- FAlTl KINc; TOWNS. INDUSTRY. PIECE WORK. CAROLINE. I HAVE been reflectin<( a great deal on our last conversation, Mr:-. B., and the conclusions I liavc drawn from it arc, that the greater the capital a countrA' possesses, the greater number of people it can maintain, and the higher the wages ol' lal)onr will be. AM» J'KI-L 1 A 1 ION. Ill MRS. U. Mic greater the stock oi" subsistence-, tlie inorc jM.<»j)lc may be nuiintaiiied by it, no doubt; but your second iurerence is not at all a necessary con- clusion. China is a very rich country, and yet wages arc I believe no where so low. The accounts which travellers give of the miserable state of the inferior classes are painful to hear; and their poverty i«> not the result of idleiie.ss, for they run about the streets with tools in their hands, Ingging for woik. CAROLINE. That is owing to the immense population of China; so that, though the capital t>f the country may be very considerable, still it is insufticicnt for the maintenance of ail its inhabitants. MRS. B. You should therefore always remember that the rate of wages dtK-s not depend upon the absolute r|uaniity of capital, but upon its (juantity relative to the number of people to be maintained by it. This i.s a truth which, however simple, is continually U»>1 sight of, and hence arise errors without nuin- r in political economy. If China had ten times • wcallh it actually pos>ek8e>, and its |)opulatio(i ^ I re at the same time tenfold as numerous, the- people would not be better fetl. America, on the other hand, is a coimtrv of vcrr 1 !_' ON W.vr.ES AM) POl'l I.ATIOK. small capital, ami yet wages arc remarkably lii^li there. CAROLINE. How do you account for that ? for the demaiul for labour, you know, can be only in proportion to the extent olcajiital. MRS. B. The capital of America, though small when com- pared with those of the countries of Europe, is very considerable in proportion to the number of people to be maintained by it. In America, and in all newly-settled countries as yet thinly inhabited, the wages of labour are high, because capital increases with prodigious rapidity. WTiere land is plentiful and productive, antl the labourers to cultivate it scarce, the competition amongst the landholders to obtain labourers is so great as to enable this class to raise their deniaiuls, anil the higher the wages the \\ labourer receives, the sooner he has it in his power to purcliase a piece of" land and become landholder himself Thus the class of labourers is continually passing into the class of proprietors, and making room for a fresh influx of labourers, both from the rising generation and from emigrations from foreign countries. CAROr.IN'L. 31 America has then the double advantage, of high wages and low price of land ; no wonder that it is so thriviiifj a country OS WAGES AND I'OITLATIO.V. I l.i MRS. It. The progress of wealth and impruviiiiLiiL i^ no *hcrc so rapid as in the settlement of a civilised people in a new country ; provided they establish laws for the security of their property, they require no other incitement to industry. In the new set- tlements of America, where the experienced farmer with his European implements of husbandry is con- tinually encroaching on the barren wilderness, want IS almost unknown, and a state of universal pros- perity prevails. We may form some judgment of the rapiil increase of their capital by that of their population. The facility with which the Ameri- cans accjuire a maintenance suflicient to bring up a family cncournges early marriages, and gives rise to nunjorous families ; the children arc well fed, thriving, and healthy; you may imagine how small arc the proportion that die in comparison to the number born, when I inform you that their popu- lation doubles itself in about 2a years ! CAROLINE. But docs not such an immense increase of popu- lation reduce the rate of wages? MRS. It. Ko, beiause their capital increases in a still greater proportion; and a*, long as that i»; the case, wages, you know, will rise rather than fall. But I 144 ON WAGES AND POPULATION. what I have said relative to America refers only to the United States of* that country; which have the advantage of a tree government protecting the pro- perty of all classes of men. In the Spanish settle- ments, where the government is of a very different description, the condition of the people is far less flourishing. The population of Mexico, one of the finest provinces of Spanish America, docs not double itself in less than 48 years. CAllOLINE. Yet I do not well understand why the poor should be worse oft" in England where there is a large capital, than in America where there is a small one. MRS. B. Because you are again forgetting the fundamental rule which I have laid down fbr you, that capital must always be considered with reference to the nunibcr of people to be employed and maintained by it. In England, and all the old-established countries of Europe, the population has gradually increased till it has equalled the means of subsistence ; and as Europe no longer aflbrds the same facility fbr the growth of capital as a newly-settled country, if the population goes on augmenting, it may exceed the means of subsistence, and in that case the wages of labour will fall instead of rising, and the con- . for all undertakings ; the colonists must be provided with implements of husbandry and of art ; and sup- \i\\n\ with food and clothing until they shall have 164 ON THE CONDITION OF THE POOR. succeeded in producing such necessaries tor tlicni- selves. Were emigration therefore encouraged, instead of being checked, scarcely any would abandon their country but those who could not find a mainte- nance in it. But should emigration ever become so great as to leave the means of subsistence easy and plentiful to those who remain, it would natur- ally cease, and the facility of rearing children, and maintaining i'amilies, would soon fill the vacancy in population. There are, it is true, some emigrations which are extremely detrimental to the wealth and pros- perity of a country ; these, however, are not occa- sioned by poverty, but result from the severity and hardships imposed by arbitrary governments on particular classes of men. Want of toleration in religion has caused the most considerable and nu- merous emigrations of this description. Such was that of the Huguenots from France at the x'evoca- tion of the edict of Nantz. They were a skilful and industrious people, who carried their arts and manufactures into Germany, Prussia, Holland, and England, and deprived France of some of her most valuable subjects. Spain has never recovered the blow which her industry received by the expulsion of the Moors, under Ferdinand and Isabella; not all the wealth of America has repaid her for this loss. ON THE CONDITION OF THE POOR. Ki'i But to return to the population of England; the more we find ourselves unable to provide for an overgrown population, the more desirous wc should be to avail ourselves of those means which tend to prevent the evil ; — such, for instance, as a genei'al diffusion of knowledge, which would excite greater attention in the lower classes to their future interests. CAROLINE. Surely you would not teach political economy to the labouring classes, Mrs. B. ? MRS. B. No ; but I would endeavour to give the rising generation such an education as would render them not only moral and religious, but industrious, fru-« gal, and provident. In proportion as the mind is informed, we are able to calculate the consefjuences of our actions : it is the infant and the savage who live only for the present moment; those whom in- struction has taught to think, reflect upon the past and look forward to the future. Education gives rise to prudence, not only by enlarging our under- standings, but by softening our feelings, by hu- manising the heart, and promoting amiable affec- tions. The rude and inconsiderate peasant marries without either foreseeing or caring for the miseries he may entail on his wife and children ; but he who has been taught to value the comforts and decencies \6G ON THE CONDITION OV TIIL FOOK. of life, will not heedlessly involve himself aiul all that is dear to him in poverty) mu] its \ong train of miseries. CAROLINE. I am very happy to hear that you think instruc- tion may produce this desirable end, since the zeal for the education of the poor that has been dis- played of late years gives every prospect of success; and in a few years more, it may perhaps be impos- sible to meet with a child who cannot read and write. MIIS. B. The highest advantages, both religious, moral, and political, may be expected to result from this general ardour for the instruction of the poor. No great or decided improvement can be effected in the manners of the people but by the education of the rising generation. It is difficult, if not impos- sible, to change the habits of men whose characters arc formed and settled; the prejudices of ignorance that have grown up with us, will not yield to new impressions ; whilst youth and innocence may be moulded into nny form you choose to give them. This has been remarkably well expressed in a foreign periodical work. * " Tout est lie dans " les dispositions morales et dans les habitudes " de I'homme. Un travail qui met de I'ordi-c * La Bibliothcquc Universelle. ON THE CONDITION OF THE POOU. ! G7 ** dans les idees, prepare a I'ordre dans hi con- " duitc. L'excrcise dc I'atlention Ja fbrtifit-, et " par elle le jugenient ct la meiuoire, les deux " tiicultes les plus usuelles dans les affaires de la " vie. L'instruction relimeusc et morale infusees " dans I'esprit et dans le coeur dcs enfans, a mesure " que les notions elementaires des lettres leur " dcviennent faniilieres; la discipline et la regie " qu'il est facile d'introduire dans les ecoles, les *' fa9onnent aux devoirs dont I'accomplissement " assure le maintien de I'ordre social, en mcme " temps que le bonheur des individus qui s'y " soumettent. Des hommes eleves de cette ma- *' niere sont non-seulement plus intelligens, plus '* aptes a saisir ct appliqucr les idi'cs utiles, plus " cconomes, plus laborieux, que ceux qui sont " demeures ignorans ; mais ils sont aussi plus " moderes, plus patiens, plus sages, plus jlistes. " Tous les rapports, dans I'interieur des families, " en ont plus de douceur ct deforce; rinfluence *' des parens est plus marquee et plus durable; " le loisir n'est point acconipagnc des inconve- " niens qu'il a pour lis hommes illitcrds ; les rc- " lations de voisinage sont signak'is par plus " d'egards, et cclles de rinteret par plus d'equite," But independently of schools, and the various insti- tutions for the education of youth, there is an esta- blishment among the lower classes which is pecu- liarly calculated to inculcate lessons of prudence and His ON THK CONDITION OF THE POOR. L'couoniy. I mean tlie Benefit Clubs, or PVieiully Societies ; the members of which, by contributing a small stipend monthly, accunmlate a fund which furnishes them relief and aid in times of sickness ov distress. These associations have spread through- out the country, and their good effects are rendered evident by comparing the condition of such of the labouring classes as belong to them with those of the same district who have no resource in times of distress, but parochial relief or private charity. The former are comparatively cleanly, industrious, sober, frugal, respecting themselves, and respected by others; depending in times of casual sickness or accident on funds created by their own industr};, they maintain an honourable pride and independ- ence of character ; whilst the latter, in a season of distress, become a prey to dirt and wretchedness ; and being dissatisfied with the scantiness of parish- relief, they arc ollen driven to the commission of crimes. It is above a century since these clubs were first instituted; they received encouragement both from government and individuals, and have spread throughout the country. I dare say that your prudent gardener Thomas is a member of one of them. » CAROLINE. Yes ; and he belongs to one which can boast of peculiar advantages, as most of the gentlemen in I ON THL CONDiTlON OF Till: I'OOll. WJO the neighbourhood subscribe to it; in order by in- creasing the fund, and consequently the amount of the relief which the distressed members can receive, to encourage the poor to belong to it. MRS. B. That is an excellent mode of bestowing charity, for you are not only sure that you relieve the ne- cessitous, but also the industrious poor. A similar plan has been adoj)ted, within these few years, in a village in the neighbourhood of London, and has been attended with the jrrcatest success. Various schemes had been devised by the charitable inha- bitants of this village to relieve the necessities of their poor, and so much was done for them by the opulent, that they found little need to exert their own industry; whilst the poor in the neighbouring parishes, attracted by the munificence of the cha- ritable donations, flocked to tlie place ; so that, notwithstanding all their bounty, the rich still found themselves surrounded by objects of penury and distress. Convinced at lenj^th that they created as much poverty as they relieved, they came to a re- .solution of complelely changing their system. They established benefit clubs, and the sums which they before gave away in alms, were now subscribed to these societies, so as to afford very ample relief to its members in cases of distress. The consequence I 170 ON THE lONDITlON OF THl. POOR. was, that the idle poor abiiiidoiied ihe pluce, and the industrious poor were so well provided lor, thai the village lias assumed (jiiite a new aspect, and })enury and want are scarcely any more to be seen. An institution has within a short time been e.-i- tablishetl in Scotland, and is, I understand, now rapidly spreading in England, which is likely to prove still more advantageous to tlie lower classes than the benefit clubs. " The object of this in- " stitution," says the Edinburgli Review, No. 4U., " is to open to the lower orders a place of deposit " for their small savings, with the allowance of a " reasonable monthly interest, and with full liberty " of withdrawing their money, at any time, either " in whole or in part, — an accommodation which *' it is impracticable for the ordinary banks to fur- " nish. Such an establishment lias been called a " Saving Bank" These institutions afford the greatest encourage- ment to industry, by securing the property of the labouring poor. How fre(jucntly it happens that an industrious man, after having toiled to accumu- late a small sum, is tempted to lay it out in a lottery ticket, is inveigled by sharpers to a gambling table, or induced by adventurers to engage in some ill- judged and hazardous speculation ; to lend it to a distressed or a treacherous friend, — not to mention the risk of its being lost or stolen. If wc succeed 7 ON TIIL CONDITION OK THt TOOK. 17^ in ciitablishiiig banks in dilVcrent districts in Eng« land, where the poor may without difficulty or trouble deposit the trifle they can spare from their earnings, and wlicrc, aa an additional inducement, some interest is allowed them for their money, all this mischief will be avoided, and we may hope that the influence of prudential habits will help to raise the poor above the degrading resource of parochial assistance, and prepare the way for the abolition of the poor-rate — a tax which falls so heavily on the middling classes of people, and which is said to give rise to still more poverty than it relieves. CAROLINE. I cannot understand that. MRS. B. The certainty that the parish is bound to succour their wants, renders the poor less apprehensive of in- digence than if they were convinced that they must suffer all the wretchedness it entails. When a young man marries without having the means of* supporting his family by his labour, and without having made some little provision against accidents or sickness, he depends upon the parish ;is a never- failing resource. A profligate man knows that if he spend his wages at the public-house instcatl of pro- viding for his family, his wife and children can at worst but go to the poor-house. rarish-reU«i thus 12 172 ON THE COND/TION OF THE I'OOR. becomes the very cause of the miscbict' which, it professes to retncdy. CAROLINE. It appears to me to encourage the worst species of poverty, that arising from idleness and ill conduct. JMus. n. The greatest evil that resuhs from this provision for the poor is, tiiat by encroachin*!; on the funds destined for the maintenance of hibourers, it tii- minishes the demand for laiiour, and consc(juently lowers wages. \\' hilst therefore, on the one hantl, the poor-rate raises up a population wliich requires work to maintain it, on the other, it curtails the means by which it is employed. The poor-rate be- stows in the form of alms, and but too frcijuently on the idle and profligate, that wealth which should be the reward of active industry; if the amount of the poor-rate were added to the circlating capital of the country, the independent labourer might earn a better livelihood for himself and his family than he can now do; and, without the degrading resource of parish relief, might lay by a portion to provide for sickness and old age. When it was once proposed to establish a poor's rate in France, the committee of mendicity, in re- jecting it, thus expressed themselves on that of England : ON THE CONDIIIO.V (»F TMl. POOR. 1 7.'^ •* C'c't cxenipK' est iiiicgraiitlc el iinportantc lero)> ' pour nous, car iiKlcpcndamment ilcs vices qu'elle • nous {ircseute ct d'une dcpensc nioiistreusc, et *' d'un encouragement neccssaire d la laineantisc, •' elle nous decouvre la plaic politique de I'Angle- ** terre la plus devorante, (ju'ii est egalenient dan- *' gereux pour sa tranquillite, ct son bonhcur, de *' detruire ou de laisscr subsister." CAUOLINE. But wliat is to be done; the poor cannot be al- lowed to starve, even when idle anti \!(ious? MRS. K. Certainly not ; and besides the wife and cliil- dren of a profligate man are otten the innocent victims of his misconduct. Then there are fre- (juentlv cases of casual tlistress, which no prutience could foresee nor guartl again.sl; under these cir- cumstances the poor-rate could not be al^olished •without occasioning the nio.-t cruel distre!«^. I know therefore of no other remedy to this evil than the slow and gradual effect of education. By enlightening the minds of the lower classes their moral habits are improved, and they rise above that state of degradation in which all feelings of dignitv and independence are extinguished. CAROLINE. J3ut, ala> ! how many years will eJapsi- b«'lorc J A 17 i ON THE CONDITION Of THF. POOR. these liappy results can take pUce. I am impa- tient that benefits should be immediately and uni- versally diffused ; their progress is in general so slow and partial, that there is but a small chance of our living to see their effects. MRS. B. There is some gratification in looking forwani to an improved state of society, even if we should not live to witness it. CAROLINE. Since it is so little in our power to accelerate its progress, we must endeavour to be contented: but I confess that 1 cannot help regretting the want ot sovereign power to forward measures so conducive to the happiness of mankind. MRS. B. Vou might possibly fail in your projects by at- tempting too much. The Emperor Joseph II. endeavoured at once to transform a bad govern- ment into a good one, and by adopting arbitrary and violent measures to accomplish his jiurpose, without paying any regard to the habits and manners, the prejudices and ignorance of his subjects, created ill-will and opposition, instead of co-operation ; and ended by leaving them but little more ad- vanced than he found them. I cannot too often ON THK lONDiriOS Ol THli POOH. I 75 repeat to you that gradual improvement is always pretcrablc, aiul more likely to be i>ernianent than that wliich is effected by sudden revolution. But of" all juodes ot" bestowing charity, that of indiscriminate alms is the most injudicious. It en- courages both idleness and imposition, and gives the bread which should feed the industrious poor, to the indolent and profligate. By affording cer- tain support for beggars, it trains up people to those wretched means of subsistence as regularly as men are brought up to any respectable branch of industry. This is more especially notorious in Ca- tholic countries, where alms-giving is universally considered as a religious duty ; and })articularly in those towns in which richly endowed convents and religious establishments dispense large and indis- criminate tlonations. Townsend, in his travels in Spain, tells us, that *' The Archbishop of Grenada once had the cu- *' riosity to count the number of beggars to whom "' he daily distributes bread at his doors. Ho " found the men 2000, the women 3024, but at " another time the women were 4000. " Leon, destitute of commerce, is supported by " the church. Beggars abound in every street, all " ted by the convents and at the bishop's palace. '• Here they get their breakfast, there they dine. • Beside food at St. Marca's, they receive every ■ other day, the men a farthing, the women and i 1 l/n ON THE ( ONDITION OF THK POOR/ " cliildren half ae much. On this provision they " hve, they marry, and they perpetuate a miserable " race. Were it possible to banish poverty and " wretchedness by any otlier means than by in- " dustry and unremitted application, benevolence " might safely be permitted to stretch forth the " hand, and without distinction to clothe the naked, " feed the hungry, give drink to the thirsty, and " furnish habitations to the desolate. But the " misfortune is, that undistinguished benevolence *< offers a premium to indolence, prodigality, and " ^ice." CAROLINE. All this is very true : but you must allow that it is extremely painful to pass, so frequently as we do, objects of distress in the streets, without affording them some triflinrj assistance. MR». B. I cannot blame any one for indulging feelings of humanity ; to pity and relieve the sufferings of our fellow-creatures is one of the first lessons which nature teaches us : but our actions sshouid be regulated by good sense, not blindly directed by undistinguishiug compassion. \Vc should cer- tainly consider it as a duty to ascertain whether the object whom we relieve is in real want, and we should proportion our charity not only to his dis- tress, but also to hi> merits. We ought to do much ON run CONDITION OF TUF, POOH. 17! Jiiove for ail industrious family, whom unforeseen or unavoidable accidents have reduced to poverty, than for one who has broufjht on distress through want of a well-i-egulated conduct. When we relieve objects of this latter description, it would be well at the same time to bestow^ a trifling reward on some individual amonfj the Jabourinfj classes of the neighboiirhood distinguished for his industry and good conduct. This would counteract the perni- cious effect which cannot fail to be produced by assisting the indolent, whilst wo suffer the indus- trious to remain without reward. CAROLINE. But the advantaj^os and comforts derived from industry constitute its natural recompense, and it seems to require no other reward. MRS. B. Nor would it, if a similar result could not be ob- tained without effort; but when a hard-wcrkins: labourer observes that the family of his idle neigh- bour is as well provided for as his own — that the hand of charity supplies them with what he earns by the sweat of his brow — such reflections are apt to produce discontent, and tend to check his in- dustry. While, therefore, we tacitly encourage idleness by relieving the (fistress it produces, we ^t the same time discourage that laborious industn'^ I 5 178 ON THE CONDITION OF THE POOK, which passes unnoticed. The vahie of pecuniary rewards is increased by their being bestowed as a mark of approbation ; so far from exciting a sense of humiHating depcndance, they produce a feeling of a very opposite nature, which raises and improves the character — a consciousness of merit seen and approved by those to whom the poor look up. Such sentiments soften whilst they invigorate the labours of the industrious. Thus if help for the distressed, and rewards for the meritorious poor were to go hand in hand, the one would do as much towards the prevention of poverty as the other towards relieving it. CAROLINE. I had an opportunity last siunmer of witnessing a mode of improving the condition of the labour- ing poor, in which the system of rewards was intro- duced with the happiest effect. An extensive jiiece of ground was laid out in gardens by a great landed proprietor in Hertfordshire, for such of his la- bourers as had none attached to their cottages. He let the ci'ound to them at the low rate of six- pence a-year each. These gardens were sufficiently laige to provide an ample supply of common ve- getables for the labourer's family, and to employ his leisure hours in its cultivation ; but not so ex- tensive as to tempt him to withdraw his attention from his daily labour, and render the produce an OV TIIF, CONDITION OF THE POOR. 1 Jt* article of sale. As a further means of exciting industry, the proprietor annually distributes three prizes as rewards to those whose gardens are found to be in the highest state of cultivation. This judicious mode of rewarding industry has been beneficial also in producing a spirit of emulation amongst the rival gardeners, whose grounds being separated only by paths, the comparative state of t*ach is easily determined. MRS. B. This is indeed an excellent plan ; the leisure hours which tlie labourers might probably have passed at the alehouse are occupied in raising an additional stock of wholesome food, and the money which would have been spent in drinking is saved for a better purpose — it may form perhaps the beginning of a capital, and in process of time secure a little independence for himself and his family. 1 G CONVERSATION XL ON REVENUE. MODES OF EMPLOYING CAPITAL TO PRODLCE REVE- NUE. WHICH OF THESE IS MOST ADVANTAGEOUS. VARIES ACCORDIN(i TO THE STATE OF THF. COUNTRY GARNIER's OBSERVATIONS ON THE EMPLOYMENT OF CAPITAL. Ei^UALlTY OI PROFITS AFFORDS A CRITERION OF THE DUE DIS- TRIBUTION OF CAPITAL. NATURAL ARRANGE- MENT OF THE DISTRIBUTION OF CAPITAL. EQUALTY OF PROFITS IN AGRICULTURE, MANU- FACTURES, AND TRADE WHY THOSE PROFITS APPEAR UNEQUAL. MRS. B. In oiir Ja^t conversation we have in some mea- sure digressed from our subject; but I trust thai you liave not forgotten all we have said upon the accumulation of capital. Let us now proceed to examine more specifically the various modes in which it may be employed in order to produce a revenue or income. Capital may be invested ; ON REVENUE. ^^i In Agriculture, Mines, Fisheries, Manufactures, utiJ Trade. CAROLINE. Of all these ways of employing capital, agricul- ture, no doubt, must be the most advantageous to the country, as it produces the first necessaries of life. iMRS. B. In these northern climates it is almost as essen- tial to our existence to be clothed and lodged as to be fed ; and manufactures are, you know, requisite for these purposes. CAROLINE. True; but then agriculture has also the ndvan- Umc of furnishirm the raw materials for nianufac- turcs ; it is the earth which supplies the produce with which our cloaths are made and our houses built. MRS. B. Yet without manufactures these mp.tcrials would not be produced ; it is the demand of the manufac- turer for such articles which causes them to be raised by the farmer; agriculture and manufactures thus re-act on each other to their mutual advantage. 1S2 ox REVENUE. CAROLINi:. It may be so; but still it does not appear to nie tliat they can be equally beneficial to the country. Manufactures do not, like agriculture, actually increase the produce of the earth ; they create nothing new, but merely put together under an- other form the materials with which they are suj)- plied by agriculture. MRS. B. True : but by such operations they frequently in- crease the value of these materials an hundred fold. The powers of man in processes of art, are unques- tionable inferior to those of nature, in the produc- tion of vegetation ; for its operations consist not merely in a new system of chemical or mechanical combinations, but in the formation of organised bodies, endowed with the principles of life and of reproduction. You are mistaken, however, if you suppose that, in agriculture, any more than in ma- nufactures, a single new particle of matter is created ; it is merely by a new system of arrangements per- formed in that great laboratory of nature, the bo- som of the earth, in a manner which eludes our observation, that the wonders of vegetation are de- veloped. CAROLINE. But in agriculture nature f.icilitatcs the labours of man ; she seems to work together with the hus- \ ON HF.vrNirE. \S3 Uandiuan; ami pioviclt-d iliat lie but ploughs the fjeki Hiul sows the seed, she performs all tiie re- mainder of the task. It is nature that unfolds the f^erm, and raises up the plant out of the ground; she nourishes it with genial flowers, she ripens it with sun-beams, and leaves the farmer little more to do than to gather in the fruits of her labours. How different is the case in manufactures ! T/iere man must perform the whole of the work himself; and notwithstanding the aid he derives from his mechanical or chemical inventions, it is all the result of his own toil ; whether it be the la- bour of the head or the hands, it is all art. .MKS. B. We are accustomed to speak of art in opposition to nature, without consitlering that art itself is natural to man. A state of nature in the human species, is a course of progressive improvement. Man is endowed with the faculties of invention and contrivance, which give him a considerable degree of command over the powers of nature, and i-cnder them in a great measure subservient to his use. He studies the peculiar properties of bodies in order to turn them to his advantage; he observes that light bodies float on the surface of the water, and he builds himself a boat ; he feels the strength of the wind, and he raises sails ; he discovers the powers of the magnet, and he directs his course by IHl UN REVENUF.. it to the most distant shores: but the water which supports the vessel, the wip.d which wafts it on, and the magnet which guides it, are all natural agents compelled by the art of" man to serve his purposes. We cannot, therefore, say that it is in agricul- ture alone that nature lends us her assistance. The miller is as much indebted to nature for grinding his corn as the farmer is for raising it. In manu- factures her share of the labour is sometimes even more considerable than in agriculture. You may recollect our observing that the effect of machinery in facilitating labour, consisted chiefly in availing ourselves of the powers of nature to perform the principal part of the work ; and there arc some chemical j/i'ocesses of art for which we seem almost wholly indebted to nature. In bleaching, it is the air and light which perform the entire process; in the preparation of fermented li(juors, we are igno- rant even of the means which nature employs to accomplish this wonderful operation. In short, it would be difficult to appoint out any species of labour in which nature did not perform a share of the task. CAROLINE. That is very true ; and it requires only a little reflection to discover how much we owe to her assistance in every work of art. We could not make a watch without the property of elasticity ON REVENUE. ISTi natural to steel, which enables us to construct a spring; nor could the spring be fabricated without the natural agency of fire, rendered subservient * > art. But, Mrs. B., in agriculture we avail ourselves of machinery as well as of those secret operatior>s of nature which produce vegetation. MRS. B. Undoubtedly we do; for every tool which fa- cilitates manual labour is a machine — the spade and hoe, which save us the trouble of scratching up the earth with our hands — the plough and harrow, which still more facilitate the process — the flail, which prevents the necessity of rubbing lut the corn — and the threshing-machine, whicli .igain diminishes the labour. Machinery is, iiowever, not susceptible of being applied to rural occupations with the same degree of perfection as to the arts, because the processes of agriculture are extremely diversified, carried on over an extensive space, and dependant to a very considerable degree OH the vicissitudes of the seasons, over which we have no control. Agriculture, manufactures, ;uui commerce, are all essential to the well being of a country ; ai\d the question is not whether an exclusive preference sluiuld be given to any one of iliesi' luvinchos of iu- dustrv, but what are tlie pr()poriit)us which they 186 0\ REVENUE. slioukl bear to each otlier in order to coiulucc most to the prosperity of" the commuity. CAROLINE. That is all I ask. I never imagined that every other interest sliould be sacrificed to that of agri- culture ; but I feel persuaded that in this country at least, trade and manufactures meet with greater encouragement than agriculture. MRS. B. That is a point on which I cannot pretend to decide; and when you are a little better acquainted with the subject, you will be more aware of its difficulties. CAROLINE. But surely political economists ought to know in what proportions the capital of a country should be distributed among these different branches of industry ? MR9. B. It is not easily ascertained ; because those pro- portions vary exceedingly in different countries, according to their local situation or pecuUar circum- stances. In America, for instance, or any new country in which land is cheap, population but thinly scattered, and capital scarce, the prevailing branch of industry will be agriculture. For in such countries, when a labourer accumulates a little ON REVENUE. 187 money, which (where wages are so high) he is soon enabled to do, he is immediately tempted by the cheapness of land, to lay it out in a farm ; and though the wealth of the Americans is so rapidly increasing, they have hitherto found it more advan- tageous to import the greater part of their manu- factured goods, than to establish manufactures at home, a circumstance not so much to be ascribed to a deficiency of capital, as to their having a more profitable use for it. CAROLINE. And in England, where the population is abun- dant, and land comparatively scarce, we must find it advantageous to take their corn in excliange for our manufactures. MRS. B. No doubt ; if old countries were not to purchase elsewhere some part of the agricultural produce they consume, new countries would not raise more than they required for their own consumption, for want of a foreign market to dispose of it. In this country where land is dear, if a labourer make a little money, he never thinks of purchasing land ; he cannot even afford to rent a farm ; but he may set up a shop, or invest his capital in a manufacture. There are other circumstances which affect the 188 ON REVENUE. destination of capital ; such as the local situation oi a country: if it abound with rivers and sea-ports, as is the case witii England, so great a facility lor the disposal of its manufactures in foreign parts, will render that branch peculiarly advantageous. CAROLINE. So then if agriculture suits one couuti-y be^t, manufactures are more profitable to another, and thus they mutually accommodate each other .'' MRS. B. Exactly. If in England the prc>portion of capi- tal employed in maiuifactures be more than is requisite for our own use, it is because we find our advantage in suj)plying other countries with manu- factui'cs in exchange for their produce, and that advantage arises from our being able to import it cheaper than we could produce it at home. Agri- culture thus leads to manufactures and trade, as youth leads to manhood ; the progress of the former is the most rapid, the latter adds the vigour and stability of mature growth. Gamier, in his intro- duction to his French edition of Adam Smith's Essay, remarks on this subject, ihat, " It is almost in every in lance an idle refine- " ment to distinguish between the labour of those " employed in agriculture, and those employed " in manufactures and commerce; for wealth is ON llEVENUE. 18d " necessarily the result of both descriptions of la- " hour, and consumption can no more take place " independently of the one tiian of the other. It " is by their simultaneous concurrence that any *' thing becomes consumable, and of course that " it comes to constitute wealth. The materials of " all wealth originate in the bosom of the earth, " but it is only by the aid of labour that they can " ever truly constitute wealth ; it is industry and " labour which modify, divide, and combine the " various productions of the soil, so as to rentier "' them fit for consumption." CAROLINE. But, Mrs. B., though political economists cannot specify the proportion of capital which should be employed in these several branches of industry, have they no means of judging whether it is ac- tually distributed in that proportion which is most conducive to the welfare of a country ? Men follow their own taste and inclination in the employment of their capital, and I fear the public benefit has very little weight in the scale. MRS. li. Fortunately there is a better i/crcs/. Men arc' in- duced to invest their capital in those branches o( lf)0 ON REVENUE. industry which yield tlie greatest prufits; and ilic greatest profits are afforded by those employnieiil> ol' which the country is the most in need. CAROLINE. I do not exactly understand why there should be such a perfect coincidence between the wants ot" the public and the interest of the capitalist ? MRS. B. 1l\\c public are willing to give the highest price for things of which they stand in greatest need. Let us suppose there is a deficiency of clothing for the people ; the competition to obtain a portion of it raises the price of clothing, and increases the profits of the manufacturer of clothes. What will follow ? Men who are making smaller profits by the cultivation of land will transfer some of their capital to the more advantageous employment of manufacturing clothes ; in consequence of this more clothes will be made, the deficiency will no longei' exist, the eager competition to purchase them will subside, they will fall in price, and reduce the pro- fits of the manufacturer to those of agriculture — or should these profits fall still lower, the farmer Avill take back the capital he had placed in manu- factures to restore it to agriculture. ON REVENirr:. i;u CAllOLINL. But a total cliaiiiie of business is not easily ac- coniplished, the skill and experience acquired in one branch of industry might be quite useless in another; then the machinery of manufactures can no more be converted into implements of husbandry, than the latter could be rendered serviceable to the ma- nufacturer. I should suppose that a farmer could not transfer his capital to manufactures or trade, nor a manufacturer or merchant to agriculture, but under disadvantages almost insuperable. MRS. B. Nor is this requisite in order to restore the level of profits when its variations are slight or tempo- rary. In all rich countries there arc many persons who live on the income produced by lending their mo- ney at interest, and there arc few merchants or manufacturers who limit their dealings to the em- ployment of their own capital without having re- course to the loans of these monicd men. When the profits of any particular branch of industry arc found to be rising above the common level, those engaged in it are induced to borrow more in order to enlarge their dealings, whilst some other branch of industry which experiences u diminution of profit^ contracts its dealings and discontinues borrowing. ly2 ON REVENUE. Mr. Ricardo observes*, that " When the demand *' for silks increases, and that lor cloth diniini^iics. " the clothier does not remove with his capital to " the silk trade, but he dismisses some ofhiswork- " men, he discontinues his demand for the loan " from bankers and monied men ; while tiie ca>e " of the silk manufacturer is the reverse : he " wishes to employ more workmen, and thus his *' motive for borrowing is increased: he borrows *' more, and thus capital is transferred from one " employment to another, without the necessity *' of a manufacturer discontinuing his usual occu- '* pation." CAROLINE. Then the profits of agriculture and manufactures will always be, or at least tend to be, upon a footing of equality ? MRS. B. Yes; tend tv be ; that is a very i)ropcr qualifica- tion, for these changesare not produced on a sudden. The tendency to equalisation of profits takes place not only in agriculture and manufactures, but in every other branch of industry. In a country where capital is allowed to follow its natural course, it will always flow into that channel which affords the highest ]nofits, till all employments of capital are nearly upon the same level. * Principles of Political Economy, p. 84. 14 ON JAEVENUC. l!>3 CAllOHNE. You say nearly, why not exactly the siitue / MRS. B. Because, generally speaking, agricultural piu- suits are more congenial to the tastes of the majority of mankind than manufactures or commerce : and hence in countries where fertile land is to be ob- tained at an easy rate, a man no sooner acquires a little capital than he is desirous of purchasing land, and retiring even to remote and almost unpeopled districts, where he can live as the lord of his little domain; as is the case in America at present. Yet this preference will not lead beyond a certain limit, therefore it may be stated that the profits of different employments of capital are nearly upon .1 level. CAROLINE. How admirably nature makes all her arrange- ments ! The more I learn of pohtical economy, the more it appears to me, that the institution of laws which control her operations are generally pro- ductive of greater evil than good. MRS. B. That may frequently be the case, but gcnnally i> too conij)rehensivc a term. Every law that is jnaclcd infringes more or less upon the natural K 191 ON REVENUK. order of things; and yet I should not liesitate to say that the worst system of laws is preferable to no government at all. Art, wc have observed, is natural to man ; it is the result of reason, and leads him onwards in the progressive path of im- provement. Instead of being chained down like the brute creation by instinct, he is free to follow where inclination leads. But as soon as he enters into a state of society he feels the necessity of a control which nature has not imposed, and his reason enables him to devise one. He enacts laws, which are more or less conducive to his good in proportion as his rational faculties are developed and cultivated. Many of these laws, no doubt, arc inimical to his welfare; yet the balance upon the whole is in their favour ; the advantages resulting irom the single law of the institution of property has confewcd a greater benefit on mankind than all the evils which spring from the worst system of government. CAROLINE. But this level — this equality of profit to which you say every branch of industry naturally tends, cannot yet have taken place in England, sincij nuuiufactures and trade are here allowed to yield greater profits than agriculture. MRS. n. ^'ou arc mistaken hi that opinion. It is true ON REVENUE. 195 tliat it is more common to see merchants and nisi- nutacturcrs accumulate large and rapid tbrtunes than farmers. They are a class who generally em- ploy capital upon a more extensive scale, hence their riches make a greater show. Yet, upon the whole, trade and manufactures do not yield greater profits than agriculture. CAROLINE. I cannot understand why the merchant and nui- nufacturer should grow richer than the farmer un- less they make larger profits. MRS. B. You must observe that though a farmer does not so frequently and rapidly amass wealth an a mer- chant, neither is he so often ruined. The risks a man encounters in trade are much greater than in farming. The merchant is liable to severe losses arising from contingencies in trade, such as war, changes of fashion, bad debts, which scaicely aflect the farmer ; he must thcrelbre have a chance of making proportionally greater profits. CAROLINE. That is to say, that the chances of gain jiiu>t balance the chances of loss ? MRS. B. Yes; the merchant plays for a larger stake. If K 2 \'J6 ON REVENUE. therefore he be so skilful or so fortunate as to make more than his average share of gains, he will accumulate wealth with greater rapidity than a farmer ; but should either a deficiency of talents or of fortunate circumstances occasion an uncommon share of losses, he may become a bankrupt. CAROLINE. But, Mrs. B., you should, on the other hand, consider that the farmer is exposed to the risk attending the uncertainty of the seasons, a cause which is continually operating, and over which we have no control. MRS. B. Yet, in these climates, the loss occasioned by such causes are seldom attended with ruinous con- sequences ; for seasons which prove unfavourable to one kind of produce are often advantageous to an- other. And besides, the produce of agriculture consisting chiefly of the necessaries of life, the de- mand for it cannot well be diminished, and the price rises not only in proportion to the scarcity, but even higher, so that farmers frequently make the greatest gains in a bad harvest. We may then conclude that though agriculture, manufactures, and trade, do upon the whole afford similar profits, these profits arc, amongst fiirmcrs, more equally shared than amongst merchants and ON REVENUE. 197 nwnufacturcrs, some of whom amass immense wealth, whilst others become bankrupts. The rate of profit, therefore, upon any employ- ment of capital is proportioned to the risks with which it is attended ; but if calculated during a sufficient period of time, and upon a sufficient number of instances to affiard an average, all these diffisrent modes of employing capital will be found to yield similar profits. It is thus that the distribution of capital to the several branches of agriculture, manufactures, and trade, preserve a due equilibrium, which, though it may be accidentally disturbed, cannot, V>hllst allowed to pursue its natural course, be perma- nently deranged. If you are well convinced of this, you will never wish to interfere with the natural distribution of capital. You must not, however, consider this general equality of profits as being fixed and invariable, even in countries where government does not in- terfere with the direction of capital. A variety of circumstances occasion a temporary derangement of it. The invention of any new branch of in- dustry, or the improvement of an old one, will raise the profits of capital invested in it; but no sooner is this discovered, than others, who have capital that can be diverted to the new employ- jnent, engage in this advantageous concern, niul competition reduces the profits to their due pro- K 3 19S ON KEVENUE. portion. A remarkably bad harvest may occa- sionally raise the rate of agricultural profits, or a very abmidant season reduce them below their level. The opening of a trade with a new country, or the breaking out of a war which inipedes foreign com- merce, will affect the profits of the merchant : but these accidents disturb the equal rate of profits, as the winds disturb the sea ; and when they cease, it returns to its natural level. CONVERSATION XII. (3N REVENUE DERIVED FROM PRO- PERTY IN LAND. RENT THE EFFECT, NOT THE CAUSE, OF THE HIGH I'RICE OF AGRICULTURAL PRODUCE. CAUSES OF KENT; 1. THE FERTILITY OF THE EARTH; 2. DI- VERSITY OF SOIL AND SITUATION REQUIRING DIFFERENT DEGREES OF EXPENSE TO RAISE SIMILAR PRODUCE. ORIGIN OF RENT. RENT INCREASES POSITIVELY IN A PROGRESSIVE COUN- TRY, AND DIMINISHES RELATIVELY. HIGH PRICE OF RAW PRODUCE NECESSARY TO PROPORTION THE DEMAND TO THE SUPPLY. CAROLINE, I HAVE been rcflecliiig much upon the subject of revenue, Mrs. B. ; but I cannot comprehend how larmers can afford to pay their rent if they do not make more than the usual profits of capital. 1 had imagined that tliey began by raising greater proiluce from the same capital than merchants or K 4 •200 UEVENUE FROM LANDED morERTV. manufacturers, but that the deduction of their rent eventually reduced their profits below those ot -other branches of industry. MRS. B. You were right in the first part of your conjec- ture, but how did you account for the folly of farmers in chusing a mode of employing their capi- tal which after payment of their rent yielded them less than the usual rate of profit ? CAROLINE. I believe that I did not consider that point. I had some vague idea of the superior security of landed property ; and then I thought they might be influenced by the pleasures of a country life. MRS. B. Va2ue ideas will not enable us to trace inferences with accuracy, and to guard against them we should avoid the use of vague and indeterminate expres- sions. For instance — when you speak of the secu- rity of landed property being advantageous to a farmer, you do not consider that in the capacity of farmer a man possesses no landed property ; he rents his farm ; if he purchases it, he is a landed proprie- tor as well as a farmer. It is not therefore the security of landed property which is beneficial to a REVENUE FROM LANDED PROPERTY. 201 farmer, but the security or small risk in the raising and disposing of his crops. A fanner, when he reckons his profits, takes his rent into consideration ; he calculates upon making so much by the produce of his farm as will enable him to pay his rent besides the usual profits of his capital ; he must expect therefore to sell his crops so as to afford that profit, otherwise he would not engage in the concern. Farmers then really pro- duce more by the cultivation of land than the usual rate of profit ; but they are not greater gain- ers by it, because the surplus is paid to the landlord in the form of rent. CAROLINE. So then they are obliged to sell their produce at a higher price than they would otherwise do, in order to pay their rent ; and every ]ioor labourer who eats bread contributes towards the mainte- nance of an idle landlord? MRS, B. You may spare your censure, for rent does not increase the price of the produce of land. It is because agricultural produce sells for more than it cost to produce, that the farmer pays a rent. Rent is therelorc the cjfcct and not the cuiise of the high price of ngricultural produce. K 5 202 REVENUE FROM LANDED PROPERTY. CAROLINE. That is very extraordinary ! If landed proprie- tors exact a rent for their farms, how can farmers afford to pay it, unless they sell their crops at a tigher price for that purpose ? MRS. B. A landlord cannot exact what a tenant is not willing to give ; the contract between them is volun- tary on both sides. If the produce of the farm can be sold for such a price as will repay the farmer the usual rate of profit on the capital employed, and yet leave a surplus, farmers will be found who will willingly pay that surplus to the landlord for the use of his land. CAnoLixi:. But if the profits of agriculture are not the efJect of rent, M'hy are they not reduced by competition, and brought dovni to the usual rate of profit ? Why does not additional capital flow into that channel, and by increasing the supply of agricultu- ral produce reduce its price ? MRS. B. Agriculture is not susceptible of an unlimited augmentation of supply, like manufactures. If hats and shoes are scarce, and sell at extraor- dinarily high prices, a greater number of men will ^ct up in the hat and shoe making business, and by REVENUE FROM LANDED PROPERTY. 203 increasing the quantity of those commodities re- duce their price. But land being limited in extent, larniers cannot with equal facility increase the quantity of corn and cattle. It might however be done to a very considerable extent by improvements in husbandry, and bringing new lands into cultiva- tion. But to whatever extent this were accom- plished, it would not have the effect of permanently diminishing the price of those commodities which constitute the necessaries of life, because population would increase in the same proportion, and the additional quantity of subsistence would therefore be required to maintain the additional number of people ; so that there would remain (after allowing a short period for the increase of population) the same lelative proportion between the supply and the demand of the necessaries of life, and, conse- (juently, no permanent reduction of price would take place. The necessaries of life therefore differ in this respect from all other commodities ; if hats or shoes increase in plenty they fall in price, but the necessaries of life have the peculiar property of creating a demand in proportion to the augment- uion of the supply. CAROLINE. But what is it that makes agricultural produce sell at so high a price as to afford a rejit? If it is K 6 204 RFVENUK rnOM LANDF.D PROrERTY. jiot rent that occasions tlic high price, there must be some other cause for it. MRS. B. There are several circumstances which concur to raise and maintain tlie price of agricultural pro- duce above its cost of production, and enable the farmer to pay rent. Its first source is what upon a superficial view would seem to have the effect of diminishing price; it is that invaluable quality with which Providence has blessed the earth, of bring- ing forth food in abundance: an abundance more than sufficient to maintain the people who cultivate it. For if those who occupy the land and raise the crops, consumed the whole of them, there would be no surplus to sell at any price to others ; and under such circumstances it would be impossible that the cultivator of the soil should pay rent. But the natural fertility of the earth is such as to render almost all soils capable of yielding some surplus produce which remains after the farmer has de- frayed all the expenses of cultivatioD, including the profits of his capital. It is from this fund that he pays his rent. The quantity of this surplus produce varies extremely, according to the degree of fer- tility of the soil, and enables a farmer to pay a higher or a lower rent. CAROLINE. But, Mrs. B., in countries newly settled, where REVENUE FROM LANDED PROPERTY. 205 the greatest choice of fertile land is to ho had, and where we are told that the harvests are so produc- tive, as in many parts of America, no rent is paid ? MRS. B. Wherever land is so plentiful that it may be cul- tivated by any one who takes possession of it, no man will pay a rent. But the cultivator, never- theless, makes such a surplus produce as would enable hiin to pay rent. The only difference is, that instead of transferring it to a landlord, he keeps the whole himself. This is the reason that such rapid fortunes are made by new settlers, in a fine climate and a fertile soil. It is the fertility of the soil, then, which enables the cultivator to pay a rent; but we must look for another cause which induces him to do so. CAROLINE. You speak as if it were left to his option, Mrs. B. ; and if that Avcrc the case, 1 do not think that rent would ever be paid. MRS. B. We shall see presently how far you are right. — When a newly settled country, such as the island in which we established a colony, augments its capital and population, the demand for food will increase, its price will rise, and more land will be taken into cultivation ; and when all the most fertile 20C JIEVENUE FROM LANDED PHOPERTV. neighbouring districts arc occupied, soil of an in- ferior qualify, or less advantageously situated, will be brought under tillage. Now, corn, or any agri- cultural produce, rai>ed uj)on less lertile soils, will stand the farmer in a greater expense ; more labour, more manure, and more attention will be required to raise a less abundant crop, and the cost of its production will, upon the whole, be greater. CAROEINE. Tlie original settlers who had the first choice of the land have, then, an advantage over the others : they will make the greatest prohts, and accumulate fortunes soonest. For the several crops, when brought to market, if of the same quality, will sell for the same price, whatever cliHerence there may have been in the cost of their production. Nay, it is even likely that the crops which cost the least to the farmer, may fetch the highest price ; for the rpost fertile soil will, in all probability, yield the finest produce. WKt>. D. The first settlers have also another advantage ,' they will have selected the most favourable situ- ations as well as tiie most fruitful soil ; their fields will flourish on the borders of a navigable river, or surround the town which they have built; afford- ing them a resource both for a home and a foreign market. Whilst those who cultivate land in more i REVENUE FROM LANDED PROPERTY. 207 rcnioic parts must add all the charges of convey- ance to the market where the produce is sold, or the port from whence it is exported. Let us sup- pose that the first settlers make 30 per cent., whilst the latter make only 25 per cent, of their capital. With tl>e double advantaire of the most fertile soil, and free from rent, it is no wonder if the first set- tlerti should rapidly amass large capitals, and it is not iniprobable that towards the decline of life they may be desirous of retiring from the fatigues of an active life, yet without wishing to sell their property. Under these circumstances, do you not think that they would reatlily find new settlers, who, rather than undertake to cultivate remote districts, of perhaps a still inferior soil, would pay an annual sum for the use of their land, and be- come their tenants ? CAUOLINE. That is very true : it would answer to the new comers to give the 5 per cent, which the first set- tlers make above the others, in consequence of having the most eligible land. MRS. n. This, then, is the origin ot" licnl. Il" the tenant pay 5 per cetjt., which is ecjaal to one-^ixth of what tlie proprietor made by cultivjition, his pro- fits will be reiluced to 2"> per cent., anil will consc- 208 REVENUE FROM LANDED PROPERTY. quently be upon a level with those of the second settlers, who remain both proprietors and farmers ; and thus the profits of agriculture are reduced from 30 to 25 per cent. CAROLINE. And those of other branches of industry will, I suppose, be reduced to the same rate, in order to maintain the level of equality of profits? MRS. B. No doubt. In what manner this is effected, I shall explain presently. When the profits of agri- culture are 25 per cent., accumulation will still pro- ceed with rapidity; ami as the country grows rich and po})ulous, the demand for corn will increase, and fresh land will be required to be brought into cultivation. The new land being either more re- mote, or of an inferior quality, will be cultivated imdcr still greater disadvantages, and will not yield, let us su})pose, above 20 per cent, profits.. As soon as this happens, the second settlers will be able to obtain a rent for their land. For it will be as advantageous to a farmer to pay 5 per cent, whilst he makes 25, as to give nothing for the use of the land when he makes only 20 per cent, of his capital. The goicral profits of capital are thus again re- duced, from 25 to 20 per cent. _J nEVENUE FROM LANDED PROPERTY. 209 CAROLINi:. lint do not those who first rented land continue making 2r> jier cent, by cuhivating it .'^ Mils. B. On\y as long as their leases last; tor as soon as their landlords find that the profits of capital are reduced to 20 per cent, they will not allow their tenants to make more, but require all the surplus profits above that sum to be paid them in the form of rent. Thus every fresh portion of land that is taken into cultivation, cither of inferior quality or less favourably situated, produces the double effect of creating additional rents on the land before cultivated, and of reducing the profits of capital. CAROLINE. That I perfectly understand; but how does it affect the price of agricultural produce — the high price of which, you say, is not owing to rent. MRS. B. In proportion as recourse is had to land of an inferior quality, to provide food for an increasing population, the difficulty and consequently the ex- pense of producing it is increased. Every new tract of inferior soil, therefore, brought mulcr til- lage, which raises rents and diminishes profits, will also raise the price of raw produce; lor every quartern of corn, and loaf of bread, whether growr\ t?10 IIEVJ'NUE FROM LANDED PROPERTY. on the finest soils at the least cost of production, or yielded by land the most unfavourably circum- stanced, will fetch the same price in the market. CAROLINE* That is undoubtedly true; we had already ob- served it : but it is curious enough to think that of two similar loaves of bread brought on table, the cost of production of one of them may perhaps have been nearly twice as much as that of the other; and that one may have paid three-pence, whilst the other has only paid a half-penny towards the rent. I'he price of raw produce in general is, then, re- gulated by the expense of producing it on soils of the worst quality, or the most disadvantageously situated, which are incapable of paying a rent ? MRS. B. Yes; provided you include in the cost of pro- duction the profits of the farmer, for though the worst soils cultivated may not afford a rent, they must bring the cultivator a profit ; and if the pro- duce of such land ceased to afford him profits, it would be thrown out of cultivation. CAROLINE. l^he high price of agricultural produce results, then, from the necessity of raising some portion of it at an additional expense on inferior soils? REVENUi: FROM LANDED PnOPERTY. I'll MRS. B. Yes ; and as this has at the same time the eflect ' of producing a rent on land of superior quality, wc may define rent to be that part of the surplus produce of the land which remains after all the expenses of cultivation are deducted. CAROLINE. I think I understand it now perfectly ; when po- pulation increiiscs, the new people will eat as hear- tily and consume as much as the others, but the new land will not yield so much as that before cul- tivated; therefore, a greater qhantit)^ of land must be turned up to feed a given number of men, more labourers will be required to work it, and the cost of production being dearer, the price of its crops must rise. Under such disadvantages, I only wonder that the price of corn, and of raw produce, should not be higher than it is. MRS. B. The natural rise in the price of raw produce, owing to the cultivation of inferior soils, is in a great measure counterbalanced by other circum- stances. If the j)ro(luctive powers of nature diminish as we proceed in the cultivation of inferior soils, those of art increase, with the progress of wealth. Every year improvements are made in agriculture, which augment the produce without |)roportioiially in- 212 REVENUE FROM LANDED PROPEnTV. creasing the expenses of cultivation, and enal)lc corn to be brought cheaper to market. Besides, though land of an inferior quality is at first culti- vated at an additional expense, it improves by til- lage, so that the cost of production gradually diminishes, and by draining, manuring, and other ameliorating processes of agriculture, an ungrateful soil is in the course of time not unfrequently ren- dered fertile. Disadvantages of situation are also remedied with the progress of society, the neigh- bourhood increases in population, new towns are built and new markets opened; if therefore it were not indispensably necessary to continue bringing fresh land into cultivation to provide for an ever growing population, corn would be produced at less expense, and would fall instead of rising in price. CAROLINE. But if all the surplus produce which remains, after the expenses of production are deducted, go to the landlord in the form of rent, improvements in agriculture will not lower the price of raw pro- duce, but will increase the rent. MRS. B. I beg your pardon ; you have just observed that the price of raw produce in general is regulated by the expense of producing it on soils of the poorest quality, and the most disadvantageously situated; REVENUE FROM LANDED PROPERTV. 213 therefore, the more wc diminish the expense of raising it on such soils, and the more we can re- medy the disadvantages of situation, the lower we shall fix the standard price of raw produce. T'hc cost of production of a loaf of bread raised on land of the lowest description is now one shilling ; if by improvements in agricultural labour we could reduce it to ten-pence, bread in general would sell at that price. CAROLINE. But, Mrs. B., if the profits of the farmer are gradually diminished by the natural increase of rent, as inferior land is brought into cultivation, arc they not on the other hand augmented by the enhanced price of agricultural produce? If the land- lord require more rent, it is because the farmer .sells his crops for more money. One of these effects, of increasing cultivation, appears exactly to counterbalance the other, and therefore one does not see why the farmer's profits should not remain stationary. MRS. B. It is perfectly true that the enhanced price of the farmer's crojjs remunerates him for the rise of rent. But it is not rent, it is the increased expense of production on poorer soils which diminishes his profits. You may recollect my explaining to you how this occasioned a diminution of profits previous to the introduction of rent. 214 REVENUE FROM LANDED PROPERTY, CAROLINE. But this circumstance affects only the cultivator of new and inferior land. What is it that dimi- nishes the profits of the cultivator of superior soils, if it is not the increase of rent ? MRS. B. The bringing inferior soils into cultivation pro- duces a general diminution of profits in all employr mcnts of capital, as I will now explain to you. The wages of labour, we have observed, arc always kept by the capitalist as low as the circum- stances of the country will admit. A rise of price of agricultural produce, constituting the chief necessaries of life, will therefore be followed by a rise of wages; provided (you must observe), that the rise of price does not proceed from any defi- ciency of supply J but from increased expense of production. This rise of wages will be permanent, because its cause is so; it will affect all those who employ labourers, of whatever description ; and it is this which occasions a general diminution of the profits of capital in all its branches. CAROLINE. This rise of wages is, then, analogous to that produced by accumulation of capital ? J REVENUE FROM LANDEO rnOPICRTV. 21^ MRS. B. It is not followed by similar consequences; tor it neither increases the demand for labour, nor does it improve the condition of the labouring class. If the labourer receive more wages from his employer, it is not because capital abounds, but because his maintenance is dearer ; — observe also, that the necessaries of life arc dear, not in conse- quence of scarcity, but on account of the additional labour bestowed on their production. CAROLINE. I understand that perfectly well ; but as 1 ad- vance in the subject, fresh difficulties occur to me. So \n ascending a mountain path, we expect on rcachinjr the fust eminence that all our difficulties will be over; but as we proceed, wc find new sum- mits rise in succession, till wc almost despair of attaining the highest. MRS. B. If your metaphor alludes to perfect knowledge, it is an eminence we can never expect to attain ; but we arc well rewarded for the difficulty of the ascent by the enlarged horizon which expands bo- fore our view in proportion as we rise. But what arc the difficulties which just now impede your progress "^ 216 REVENUE FUOM LANDED PROPERTY. CAROLINE. Slioula not tlie rbe of price of agricultural pro- duce precede, instead of follow the cultivation of inferior soils ; for when an increasing population augments the demand for food, their wants would not prove a sufficient inducement to the farmer to turn up new land, if the price of corn did not rise to tempt him to do so. MRS. JB. That is actually the case : but this rise of corn, the effect of a deficiency of supply, would be tem- porary, for corn would fall again as soon as the additional crops were brought to market, it the expense of producing these crops was not greater than that of corn raised on land previously culti- vated ; but if more labour has been bestowed upon them, if they cost the farmer more, they must continue to sell higher. This, then, is the cause of the permanent continuation of high price of raw produce after the demand has been supplied. It proceeds from no deficiency of supply, but from an increase in the cost of production. The new corn will, however, fall in price, if its cost of production does not greatly exceed that of land previously cultivated; but the price can never fall so low as it was before the deficiency of supply, if the land on which it is raised be.in any respect inferior to that which was previously cultivated. I REVENUE FHOM LANDED PROPERTY. -' I 7 CAROLINE. Then do not wages as well as corn rise previously to the cultivation of inferior soils? MRS. B. Tlicy do ; but they rise not in consotjuence of the enhanced price of agricultui al })roiluce, but some considerable time previous to it. This rise is owing to accumulation of capital and increa>ed demand for labour, and it is followed by an augmentation of population, an increased demand for corn, and the rise of its price, to which we have just alluded. CAROLINE. But since capital consists of food, i)f clothing, in a word, of all that can supply the wants of man, if it is increased before new land is brought into cul- tivation, it seems to supersede the necessity of tliat measure. Is it not rather inconsistent to say, that because the augmenting population is supplied by an increased capital, it requires a still further 'ad- dition to it? MRS. B. Capital does not consist solely of the necessaries t life, but includes also its conveniencics, its com- forts, and its luxuries ; capital may increase, there- fore, without an augment;Ulon of food. Mi-. Uicardo has so clearly explained this, in his recent L 21 d REVENUE FROM LANDLO PROPERTV. treatise on Political Economy, that I will read you the passage : " When a high price of corn is the effect of an " increasing demand, it is always preceded by an *' increase of wages ; for demand cannot increase *' without an increase of means in the people to pay " for that which they desire. An accumulation of *' capital naturally produces an increased competi- *' tion among the employers of labour, and a *' consequent rise in its price." CAROLINE. Yes, I recollect that was the case in our colony. MRS. B., reading. " The increased wages are not immediately ex- '' pended on food, but are first made to contribute " to the other enjoyments of the labourer. His *' improved condition, however, induces and en- *' ables him to marry, and then the demand for *♦ food for the support of his family naturally super- •' sedcs that of those other enjoyments on which •* his wages were temporarily expended. Corn ♦' rises, then, because the demand for it increases, *• because there are those in the society who have " improved means of paying for it ; and the profits ** of the farmer will be raised above the general " level of profits, till the requisite quantity ofcapi- *' tal has been employed on its production^ REVENUE FROM LANDSO PROPERTV. 219 " Whether, after the supply lias taken place, " corn shall again fall to ils former price, or sliall " continue permanently higher, will depend on the *' quality of the land fronx which the increased *' quantity of corn has been supplied. If it be ob- " tained from land of the same fertility as that *' which was last in cultivation, and with no *' greater cost of labour, the price will fall to it* " former state ; if from jworcr land, it will con- " tinue permanently higher." Vou see, therefore, that your observation, that th€ rise of raw produce should precede the cultiva- tion of inferior soils, is perfectly just. But you must remember that the cause ot the original rise of price, and tliat which subsequently produces its permanent continuation, are perfectly distinct ,* the li'rst ceases, and the second commences as soon as the new crops are brought to market. Every time that inferior land is brought into culture, the price of raw produce, and consecjuently the profits of farming, must have previously risen. This occurs more or less at every progressive step made in agriculture. No new land can be cultivated till ipital has accumulated to maintain and employ u ;rcater number of labourers. And no new laud ill be cultivated till jH>pulati()n has so far increased .lo to raise the price of corn, and make it answer to the ogricidturist to break pp new land for Milage. I, i! ■220 REVENUE 1 HOM LANDED PROPERTY. CAROLINE. Since my Inst observation lias proved just, I will venture to make another. 'I'lie rise of wajres in consequence of accumulation of" capital shouiil be followed by a diminution of profits; this, there- fore, would also precede the cultivation of inferior soils. MRS. u. And it does so. But the diminution of profits arising from abundance of capital and consequent increase of wages, is, like its cause, but temporary. It is soon followed by an increasing population and demand for food. The enhanced price of raw pro- duce then repays the farmer the expense of high wages, and his profits are for a time even higher than those of other employments of capital. CAROLINE. Then will not also the landlord come upon him for rent, previously to the cidtivation of inferior soils y MRS. IJ. No, not any more than he would for having liad a remarkably productive crop, his extraordinary profits being only temporary. If, as we have al- ready obscrvi'd, the incrcjised demand for coi^n is supplied by land of i\s good quality as that pre- viously cultivated, corn will fall to its former price, just as cloth or linen would iirst rise in price by an REVENUE FROM LANDED PROPERTY. 22\ increasing demand, and fall again when that de- mand was supplicital could never produce a perma- nent tiill of profits, tor as soon ;ts population increasetl to correspond with the capital, labour would tall, and profits be resioretl to their former rate. It is only when the cost of protluction of food is increase present (wicc of corn it is not worth cultivating iiulcpend- ontly of rent, it is not natural to suppose that from such very poor land wc should suddenly rise to that of so good a quality that it will yield both rent and profit; there must undoubtedly be some of an in- termediate nature, which will afford the usual rate of profit to the cultivator, but will produce no rent. The inclosure of commons may afford us an ex- ample of land of this quality : they are, I believe, usualv irrantod in lots to the parishioners, free of cost, wiio cultivate it on their own account ; but I do not think they could obtain a rent for it, unless *hcy pnvii)u>ly laid out capital upon it in fencing, ditching, draining, manuring, &c., which are part of the necessary expenses of cultivation, and which, if the proprietor undergoes for the tenant, he na- turally requires to be repaid. For it must be un- derstood, that by the rent of land I do not mean the total rent of a farm, com|)rclu'n(liiig a dwelling- house, barns, stables, ami farming-stock of various descriptions, but simply the use of the re-pro- Jiutive power* of the land. REVENUE 1 HUM LANDF.D I'ROPF.RTY. 223 C A no I. INK. Commons newly cultivated, in the course of time, will in their tuni, I supjwse, affonl a rent? MRS. B. No doubt they will, when an incrcaw; of popula- tion shall have forced soils of still inferior (juality into cultivation. But 1 conceive that a consider- able quantity of hmd, for which rent is actually jjaid, may be incapable of afl'urding it. A farm generally consists of a variety of soils; one field may yield double or quadruple the proiluce that an- other will. On farms of poor land there are pro- bably some fields that yield no rent at all ; that is to say, if taken separately, their })roduce would not more than repay the expenses of cultivation, and yield the usujd rate of profit, whilst oihtr fields may be of so superior a (jualily, as to atford a greater proportion of rent than is paid per acre for the farm ; an average is therefore taken, and the farmer pays more rent for the worbt, and less for the best, than they would afford. The total rent of the farm includes also the rent of the various buildings and improvements made on the premiscf. CAROLINE. All this is perfectly clear; but I am not at all pleased to learn that as a country advances in the L 4 ■22 i UEVENUE FROM LANDED I'KOPERTY. Kccimiulation oi wealth, rent, the portion of the •idle landlord, augments, ^^\n\c pto/iiSj the portion of the itjdustrious farnicr, dhninishes. MRS. B. These idle landlords, of whom you complain^ neithei lower the profits of capital nor raise the price of agricultural produce. Both these eflects result from the diversity of soils successively brought into cultivation. Were rents, therefore, to be ftbolislicd, the only effect produced would be to enable farmers to live like gentlemen, as they would be enriched by that share of the produce of their farms which before fell to the lot of the landlord. CAROLINE. And would not that be a very desirable change ? Is it not better that those who labour should grow rich, rather than those who live upon the fruits of the labour of others ? MRS. B. The yeomanry are a class of farmers who cul- tivate their own property ; and if you wish to en- courage their industry, you must allow them to reap the full reward of their labours, — to accu- iiuilatc wealth, ^nd, when wealthy, to indulge in ease and repose, and to let their land to others, if they prefer this plan to that of cultivating it them- UEVENUE KUOM LANDED I'UOPERTY. 225 selves. Were landed proprietors prohibited from letting their land when rich, they would nevertheless become idJc, and would neglect tlic farming busi- ness, which being left to the care of servants, the cultivation would sufler, anil the country, as well as the proprietor, be injured by the diminution of produce. In civilised countries, lantletl property has been obtained by industry, or by wealth, the fruits of industry, and should be secured in its full value, not only to the individual who has earned it, but to his heirs for ever. Besides, though it is true that rents rise as a country advances in prosperity, this rise is not in proportion to the increasing produce of the soil, owing to the additional capital laid upon it. Kent formerly used to bring in to the landlord one-third of tlie prcnluce of his land; it has since fallen to one-fourth, aiul has lately been estimated as low as ont^fifth; so that the laiullord, whilst he receives a higher rent, has a smaller share of the whole produce. CAROLINE. 'riiut is some consolation. But could no means be devised to abolish rents, and compel farmers to reduce in consefjuence tlie price of their produce, so that neither tlie landlord nor the farmer, but Uie public, should enjoy the benefit of the surplus pro- duce, wbicii constitutes rent ? Surely this would L .5 22G REVENUE FROM LANDED PROPFRTy. reduce the price of provisions, and ot all agricul- tural produce. MRS. B. Since the price of raw produce is regulated by the expense of producing it on the poorest soils under cultivation, which can aiforil no rent, how could it fall in consequence of the abolition of rents? But supposing that it did so, what advan- tages would you expect to result from the reduc- of prices so produced? CAROLINE. If food were cheaper, people would be able to consume more, and the poor would iiave plenty. MRS. B. How so? would the land be more productive in consccjuence of the abolition of rent ? and if mon? .shouUl not be produced, how could the people con- aume more? An increased consumption without an increasetl supply will, ns we have remarked on a former occasion, lead to a famine. The price of a quartern loaf is now one shilling; I conclude, therefore, that at that price the consumption of bread will be so proportioned to the quantity wanted, that the stock of wheat will last till the next harvest. The adoption of your compulsory jucasures might reduce the price of a quartern loaf lo ninc-j^cncc, and every poor family being REVENUE FROM LANDF.D PROPERTY. 2i.'7 thin ennblcd to increase their consumplion ol bread, tlie i.lock of wheat would not lost out till the en>uing harvtst. Then the following year, inbteuil of raising more corn to make up the dv- liciency, the poorest land, which yields no rent, and but just ufibrds the profits of capiuU at tlie present price of raw produce, would, by such a diminution of price, be thrown out of cultivation ; and the produce of the country would thus be con- siderably diminished. CAROLINE. Very true. I did not foresee that consequence. And a scarcity woulil perhaps raise the price of bread higher than it was before .'' MR8. B. How uiiich would it be necessary for bread to rise in price in order to make the corn last till the next crops came in ? CAROLINE. To the price at which it now sells, one shilling. MKS. n. We return then to the rent-price, though no rent is paid : y«»i» we, therefore, the fallacy of your |)roposctl measures. The high price, of which you ^o bitterly complain, is the price necessary to pro- L t; 228 REVENUE 1 KO.M LANDED PROPERTY. portion the consumption to the supply, so as to make it last till the ensuing harvest. CAROLINE. S<) far Irouj being nioriificd, Mrs. B., I am delighted with my disappointment, as it has been the means of convincing me that it" the poor are obliged to pay a high price for the necessaries of iile^ it Is for their own benefit, as well as that of the mighty lords of the land ; since it ensures them a uniform sujiply throughout the year. iMRS. B. The labouring classes are besides in a great measure relieved from the burthen of high prices, as their \vagc< rise in proportion ; but observe, that this is the case only when high prices are occa- sioned by increased cost of production, not by scarcity. "A high price" (Mr. Ricardo observes), " is by no means incompatible with an abundant " supply ; the price is permanently high, not be- " cause the (juantity is deficient, but because there " has been an increased cost in producing it," CAROLINE. 1 the more willingly acquit rent of the accu- sation of creating high prices, since I see that iljere are two other sources from whence that evil REVENUt VKO.M LANDED PKOPEKTV. 229 may How, the tlivcrsity of soi), and the necessity of proportioning the consumption to the supply. .Mils. B. Since yon acknowletljrf that \ng\i prices arc ne- cessary to prevent scarcity, you should, I ihiniv, uo longer consider them as an evil. An enquiry into the cflTect-s of human laws and institutions often discovers error ; but whatever flows in the course of nature springs from a pure source, and the more accurately we examine it, the more admiration we feel tor its Author. Thus though rent cannot in itself be considered as an evil, sinee we have iracetl its cause to the natural tiiM'tility of the earth, and the diversity of soil ; and have ascertained its effect to be to reccies of raw produce, which raises the price of those articles at home, is takuig an adilitional sum out of llu" pockets of the con- '«umer to })ut into that of the landlord. For rent may be considered as a necessary tax which the consumer pays to the landlord; the fariiicr is merely the vthiclc of conveyance from the one to the lather. '2M) UF.VENUE FROM LANDED I'llOPEIlTY. CAROLINE. And has such u measure immediately ihe cfiecl of raising rents ? MRS. B. Not until the leases are expired; during their existence the farmer enjoys all the adventitious gains or suffers all the looses that may occur ; but when his lease is renewed, it nmst corrcspoi»d with the rate of profit, and rise or fall in proportion to the gnins which the farmer expects to make, so as to give the whole of the surplus produce to the landlord, and leave oidy the usual profits of capital to the farmer. It may happen, indeed, either from ignorance or carelessness, and sonieiimcs from motives of lumianity, that the landlord docs not exact all that the farmer can afford to pay ; but these are accidental circumstances, and the whole of the surplus jiroduce is consideretl as the fair and usual vent. This theory of the origin and progress of rent, which 1 hope I have now explaine*! to your satis- faction, was first developed by Mr. Malthus, and its consefjuences have since been more fully traced, and some important inferences deduced from it, in a late publication by Mr. Ricardo, some passages of which 1 have reatl to you. CAROLINE. I hope I have miderstootl all you have said on I RtVENtE rUOM LANDLD I'ROPLRTV. :i-' 1 the subject, hut I beg that you will allow me to rc- capitulatJ" th-' principal luads, in order to see if I am not misiakeii. In proportion as capital accu- mulates, Uie demand for latx)ur increasi>s. which raises wages, improves the condition of the poor, and enables them to rear a greater number of children — this increases the demand for subsist- ence, raises the price of corn, and induces the farmer to take more land into cultivation — if the new land be of inferior quality, the crops are pro- duced at an increasetl expense, which raises the price of raw j)ruduce gcin rally, anti creates rent on superior soils. Corn, now become permanently dearer, causes a permanent rise of wages, and a t(»rresponding fall of profits. MRS. B. Your recapitulation is very correct, and I am glad to find you have understood n)e so well, for tlie subject of rent having been but lecently in- vestigated with accuracy, it is neither so thoroughly developed, nor so well understood, as uuM other parts of jX)litical economy. CONVERSATION XIII. ON REVENUE DERIVED FROM THE CULTIVATION OF LAND. TWO CAPITALS EMPLOYED ON LAND. TWO IlEVE- NUES DERIVED FROM IT. — OF THE CAPITAL AND PROFITS OF THE FARMER. OF THE DURATION AND TERMS OF LEASES. OF TITHES. EX- TRACT FROM PALEY. — OF PROPRIETORS FARMINC. THEIR OWN ESTATES. EXTRACT FROM TOWNS- END's TRAVELS. FARMS HELD IN ADMINISTRA- TION. ADVANTAGE OF AN OPULENT TENANTRY. METAYER SYSTEM OF FARMING. SMALL LANDED PROPERTIES. EXTRACT FROM ARTHUR young's TRAVELS. — DAIRY ESTABLISHMENTS IN SWITZERLAND. SMALL FARMS. SIZE OF FARMS IN BELGll'M AND TUSCANY. OF MINES. OF FISHERIES. CAROLINE. FnoM the subject of our last conversation 1 have learnt that agriculture yields two distinct incomes; one to the proprietor, the other to the cultivator of the land. REVENUE FROM CULTIVATION OF LAND. -.'.>.< .MRS. H. And it employs also two capitals to produce those incomes; the one to purchase, the other to cultivate the land. A man who lays out money in the purchase of land becomes a landed proprietor, and obtains a revenue in the form of rent. He who lays out capital in the cultivation of land, becomes a farmer, and obtains a revenue in the torm oi' produce. CAROLINE. i thought that the land was the capital from vhich the farmer derivctl his profits. MRS. B. \'ou mistake ; the land is the capital of its pro- prietor, and as such yields him a revenue ; what- ever the farmer obtains Iroin it, is derived from cultivation; that is to say, from the labour and ex- pense he bestows on the soil. The cultivation ol land is to the farmer what the operation of machi- nery is to the manufacturer. A farmer requires capital to pay his labourers, and to purchase his furming-ivtoek, such as cattle, waggons, ploughs, ^c. It is the bare land and the farming buildings which he rents. The crops which are upon the Ljround when the agreement is made arc paid for inilependently, and become the property of the 2M HK VENUE FROM CULTIVATIOK OF LAND. farmer. Unless tlicrcfove lie has a capital to defray these expenses, he cannot take the lease of a farru. CAROLINE. I always supposed that the produce of a farm was suflicient to defray its expenses ; nor can I understand how profits are to be derived from a farm, if tlie cultivation and rent cost more than its produce will repay. MRS. B. It is not so. Tlie capital of the farmer is em- ployed as the means of cultivating his farm ; and when at the end of the year, after paying his rent, his labourers, and keeping his stock in repair, he finds himself in possession not only of his original capital, but also of a surplus or profit, it is a proof that the farm produces more than the cost of its rent and cultivation. The case is similar in all employment of capital. The manufacturer who lays it out in the purchase of raw materials, nnd hi paying the labour which is afterwards expended on them ; or the merchant whose capital is employed in the purchase of goods for sale, could not carry on their respective occupations without first laying out their capital : but it is returned to them, toge- ther with the profits that have accrued by its em- ployment. Each of these occupations bring in UEVENUE FROM CULTIVATION OF LAND. 235 more tliuii is laid out, but none of tlicm could be carried on without a cnpital. CAROLINE. Oh yes ; I recollect the labourer produces tor his employer more than he receives from him as wages, and this surplus is the source of his master's profit ; but if the farmer had not wherewithal to )niy lii-> labourers' wages, he could not set them to ^v^|^k. It is then upon the ca|)ilal which a farmer em- ploys on his land, that he calculates his profits? MRS. B. Yes. Let us suppose that a farmer employs a ipital of the value of 3000/. on his farm : he may, ossibly, after deducing the rent and the exj)enses I cultivation, make ten per cent, or 300/. j.rofit. CAROLINE. That is to say, that at tlic end of the year he uould find himself 300/. richer than he was before? MRS. B. Provided that he had spent none of his gains (luring the course of the year. But as his family .lie commonly maintained by the j)roduce of the- rm, he will at the end of the year be actually i.cI:l'. or poorer according to the proportion which -'3(5 REVENUE FROM CULTIVATION OF LAND. \u< domestic expenses liavi^borne to his gains. But these cannot be considered as a deduction from liis profits, as the expense of the maintenance of his family nmst fall upon liis revenue in whatever way it is obtained. CAROLINE. And what is the usual rent paid for such a farm ? MRS. B. It depends in a great measure upon the extent and condition of the land. A considerable farm, in a good state of cultivation, and possessing the advantage of a fertile soil, may not require a capital of more than ;K)00/. to carry it on ; whilst a farm of only half that extent, if in a bad condition, and with an ungrateful soil, may require as large a capital to be laid out on it. But a very different rent would be paid for these two farms. CAROLINE. The large productive farm will naturally pay a higher rent than the smaller ill-conditionetl one ? MRS. n. And the difference of rent will equalise the profits which a farmer would derive from emj^loying the same (juantity of capital on each of these farms. Taking an average of the state of culture, a farm which requires 4000/. capital may pay a rent ct Ul.VLNUi: KIU)>! <.:l I.Ti\ ATION or I.AM). -.$7 about J()()/., tlie .slmrc ot ilic I'aiiucr being nearly double that ofthe lancUonl. cakoi.ini:. Vou said in our last conversation, that tlie rent of land had lately been estimated as low as 'tli of the produce. A farm, such as you have de- scribed, would therefore yield produce worth KKX)/., in which case the profits of the farmer would be above three times as great as those ofthe lamllord ? MRS. B. You forget that from the total or gross produce must be deducted not only the rent, but also the expenses of cultivation : these are generally esti- mated at one half of the produce, after deducting the rent; there will remain therefore -100/., which is 10 per cent, profit on the lOOO/. capital em- ployed on the farm. If from this sum the farmer saves 50/., he may lay it out in the improvement of his land, which wi|l render the produce more plentiful the following year; an advantiigc of which he will (It rive the full benefit, as his rent will remain the siinie to the end ot the lease. CAROLINE. Hut on granting a new lease, the proprietor, 1 stipposc, would expect a higher rent for a farm that had been thut; improved ? 238 RE?ENUE FROM CULTIVATION OF LAND. MRS. U. No doubt; it is therefore desirable that land should Dot be let on short leases, because farmers would have no inducement to improve the condi- tion of their land without the prospect of reaping the benefit of it for some years to come. CAROLINE. But towards the end of the lease, this objection would remain in force ? MRS. B. True: but to prevent this, farmers generally ob- tain a renewal of their leases some time before they are elapsed. Besides it would be contrary to the interest of the landlord to deal hardly with his tenants on such occasions, as it would dis- courage them from improving their farms; an ad- vantage in which the landlord must eventually partake. In Staffordshire, Nottinghamshire, and some other parts of the country, it is not customary to grant leases; the tenants hold their farms at the will of the landlord. There is, however, a sort of conventional agreement between the parties, that except in cases of misconduct, the farmer shall not be removed, nor have his rent raised during a cer- tain period. Some people are of opinion that this mode of letting land is preferable to granting a nEVKNUE PROM CULTIVATION OF LAND. J.VJ lease; because tliey say the industry of the farmer is stimulated both by hope and feur ; the hope of profit from his labours, and the fear of being turned out should he neglect the improvement of his farm : but in arguing thus they do not consider that this fear must operate in two ways; for in proportion to the improvement which the farmer make^, so is the temptation to the landlord, if he be needy or illiberal, to turn him out, or to exact an increase of rent. In short, there can be no greater check to industry than the insecurity of the profits its produces; and how can a farmer feel his interests secure whilst he is dependant on the will of his landlord ? CAROLINE. Besides, though a farmer may repose great con- fidence in the character of the individual whose land he holds, the uncertainty of life renders him dependent also upon his heir, and this may perhaps be some wild extravagant youth, who, witliout re- gard to his ultimate interest, will exact the highest rents from his tenants. MRS. B. Security is, no doubt, the most important point >b» the encouragement of industry ; and the greatest, indt^ the only encouragement which government can give to agriculture, is to secure to the farmer alt the power over the soil that is nccc55ory for its 240 REVENUE FROM CULTIVATION OF LAND. perfect cultivation, and to ensure to him the profits of every improvement he may make. I will reail you a passage from Paley on this subject: " The principal expedient by which laws can " promote the encouragement of agriculture, is to *' adjust the laws of property as nearly as possible " by the following rules: 1st, To give to the oc- " cupier all the power over the soil which is neces- " sary for its perfect cultivation. 2dly, To assign ** the whole profit of every improvement to the " persons by whom it is carried on. Now it is in- " different to the public in whose hand this power *' of the land resides, if it be rightly used ; it mat- '< ters not to whom the land belongs if it be well " cultivated. " Agriculture is discouraged by every constitu- " tion of landed })roperty which lets in those who " have no concern in the improvement to a parti- " cipation of the profit. This objection is appli- " cable to all such customs oi" manors as subjects " the proprietor, upon the death of the lord or " tenant, or the alienation of the estate, to a fine *' apportioned to the improved value of the land. " But of all institutions which are in this way ad- " verse to cultivation and improvement, none is so " noxious as that of tithes. When years perhaps " of care and toil have matured an improvement, " when the husbandman sees his new crops ripen- " ing to his industry, the moment he is ready to 1 REVENUE IIIOM CULTIVATIOK OF LAND. 241 " put his sickle to the grain, he finds himself com- *' polled to divide his harvest with a stranger. '• Tithes are a tax not only upon industry, which *' feeds mankind, but upon that species of exertion ** which it is the aim of all wise laws to cherish ** and promote." CAROLINE. It is indeed much to be regretted that a pro- vision for the clergy should not bo raised in some other manner. MRS. B. Since all right of property is derived from legal institution?, the clergy have an equal right to their tithes as the landed proprietors to their estates; yet so severely does this law fall upon the culti- vators of land, that I believe few of the clergy ven- ture to levy tithes to the extent of their rights; they cannot do it without incurring the ill will and opposition of their parishioners. Haw defective, then, must that institution be, which dispossesses one man of the fruits of his industry, whilst it will not allow another to take, without exciting vex- ation and disturbance, that which the law has assignetl to him as his property. lliis opposition of interests is prejudicial both to religion and morals, by creating an endless source of contention between the clergy and tluir parish- ioners; and the vexation which the farmer cannot ^ 242 REVENUE FROM CULTIVATION OF LAND. fail to experience on seeing part of the fruits of lus labours gathered by another, acts as a constant check upon his industry. CAROLINE. Tithes appear to me very analogous to rent ; may they not be considered, like rent, as a portion of the surplus produce of the land ? MRS. B. No; because, whether a farm yields a surplus produce for rent or not, it is equally obliged to pay tithes. The farmer, therefore, in order to pay tithes, is compelled to sell his crops at an advanced price, and it is eventually the consumer who pays the tithes; whilst, if they were a portion of the surplus produce of the farm, the whole burden of them would fill on the landlord. CAROLINE. But, supposing that the consumer refused to pay the advanced price requisite to relieve the farmer from the burden of tithes, the landlord would be obliged to lower the rent for tliat purpose? MRS. B. Who, then, would pay the tithes on lands which afford no rent? They must fall on the cultivator; and as he cannot afford to pay the/n without en- REVENUE FROM CULTIVATION (»K i.aND. 2■^ i hancing the price of his crops for that purpose, he would no longer find it answer to cultivate soil of !>o poor a quality ; he would throw up his farm, in consequence of which tlie supply of corn would be diminished, its price would rise, and the farmer would again find it expedient to resume the culti- vation of his land ; it is thus that the consumer is compelled to pay tithes, or any other arbitrary tax laid on the land. CAROLINE. That is certainly true with respect to land which pays no rent ; but I cannot understand why tithes should not be deilucted from the surplus produce, where the soil is of a nature to afford it ? MRS. B. The price of raw produce, you must recollect, is regulated by the expense of producing it on soils of the worst quality under cultivation; tithes must increase that expense, and enhance generally the price of raw produce. The farmer being thus repaid by the consumers, the iiame surj^lus produce will remain to the landlord as previous to ihc introduction of tithes. CAnOLINK. But if it ih not the faimcr who p.nys ihc tithes, M 2 2ii REVLNL'E FROM Cl'LTlVATION OF LAND. why is he willing to give a higher rent lor land tithe free? MBS. B. Because he has the advantage of selling liis crops at the advanced price vvhicli tithes occasion, whether his land is tithe free or not : if he is exempted from this tax, therefore, it will increase the surplus produce which remains for the land- lord after the expenses of cultivation are deducted. CAROLINE. Farmers, 1 suppose, are not aware, that the price of their crops is raised in consequence of tlie tithes, otherwise this tax Avould not produce so much dis- content among them ? MRS B. Probably not. Tithes, therefore, do not consti- tute a portion of the surplus produce of the soil, they must be considered as part of the expenses of cultivation; they add to the cost of production of the crops, and consecjucntly raise the price of all raw produce. This, you know, is not the case with rent, which is the surplus produce of the land, after deducting the expenses of cultivation. CAROLINE. Since it is so desirable for the cultivator to have unlimited power over the soil, I should hare thought that it would have been particularly ad- 12 UEVRNUE FROM CULTIVATFON OF LAND. J I i vaiuageous for landed proprietors to cultivate their own estates, instead of letting them to fanners ; and vet it is a common observation tiiat gentle- men make the least profits by agriculture. Tiiis is the more unaccountable, because, being botli landlord and farmer, the proprietor must receive the two incomes comprised in the produce of the land, rent and profit. MRS. B. But recollect that he also employs two capitals, in order to make the two incomes; the one to purchase the land, the other to cultivate it. The reason why gentlemen who cultivate their own estates do not usually make profits equal to those of a common farmer, is either because they do not understand the business so well, or that they do not bestow the same care and attention upon it. The common farmer usually devotes the whole of his time to his farm, either in the ca})acity of bai- liff, or that of labourer ; while the gentleman farmer never earns the wages of labour, and gene- rally leaves the important oflicc of bailiff to be performetl by a substitute; therefore were the gen- tleman to raise as plentiful crops ns the farmer, they would be produced at a more considerable expense, and his gains would be proportionally diminished. As to the value of the rent, it must J Hi REVENUE FROM CULTIVATION OF LAND. 1)0 reckoned independently, as lie receives it in his quality of landlord. CAROLINE. It would then probably increase the agricultural produce of the country, if gentlemen were always to let their land instead of farming it themselves. MRS. B. On the contrary, I believe it to be very desirable that some few gentlemen, in different parts of the country, should cultivate their own estates. Being generally men of greater information than common farmers, they are more willing to make experi- ments, and adopt any new mode in the various agricultural processes which may appear eligible. Besides, the land is frequently better improved in the hands of the proprietor than in those of a labouring farmer ; as the proprietor has usually the advantage of a larger capital to lay out on his land, and then he is not restrained by the apprehension that his rent will be ultimately raised in propor- tion to the additional value which he gives to the land. Townsend, in his Travels in Spain, has made some very judicious observations on English gen- tlemen farmers. " By residing," he says, " on their own estates, " they not only spend money among their tenants. nEVENUE FUOM CULTIVATION OF LAND. 247 '' which by its circulation sets every thing in ino- '' tion, and becomes productive of new wealth, but " their amusement is to make improvements. By " planting, draining, and breaking up lands which " would Imve remained unprofitable, they try new '* experiments, which their tenants could not af- *" ford, and which, if successful, are soon adopted " by their neighbours. They introduce the best '• breed of cattle, the best implements of hus- '• bandry, and the best mode of agriculture; they " excite emulation, they promote the mending of "■ the roads, and secure good police in the villages '• around tliem. Being present, they prevent their " tenants from being plundered by their stewards. " TJiey encourage those who are sober, diligent, *' and skilful ; and they get rid of those wli© would " impoverish their estates. Their farmers, too, " finding a ready market for the produce of the " soil, become rich, increase their itock, and by " their growing wealth make the land more pro- " ductive than it was before." CAROLINE. Vou have cnumeratetl so many advantages o)i the opposite side of the question, that I begin to think that it would br move beneficial to the coun> try that all landetl proprietors should cultivate their own estates; for though they might not be great gainers by it themselves, yet the country would M \ 24S REVENUE FROM CULTIVATION OF LAND. derive all the advantage from tlie improvement of the soil, aiid the introduction of scientific agri- culture. MRS. B. A few gentlemen farmers in each county will be sutlicitiit for the latter purpose. Were it common for proprietors to farui their own estates;, I am con- vinced that it would be extremely injurious to agricultural produce ; for no command of capital, no scientific knowledge, can, in a general point of view, compensate for the keen and vigilant eye of the industrious farmer, who sees that every thing is turned to the best account. CAROLINE. I shdftid suggest as a medium between these two modes, that a landed proprietor should neither farm his estate, nor let it, but employ an agent to cultivate it for him, whose salary should be pro- portioned to the produce which he raises on the land. MRS. B. Such I believe was the species of tenure by which farms were held by the vassals of the nobles when they were fii st emancipated from slavery, and that military services were no longer, as in feudal times, considered as a sufficient remuneration for the occupancy of land. To give the cultivator any in- terest in the pro; OF LAND. 24\) spur to his Industry; but it is one mucli less power- ful than the security and independence of tlie leuse- ijold-fariner, who after paying a stipulated rent enjoys the whole advantage of the efl'orts of his industry. Town«>i'nd informs us, that most of the great estates in Spain are held in administration, that is, cidtivated by agents or stewards for the account of the proprietor; and it is principally to this cause that he attributes the low state of agriciliture. " No country," he observes, " can suffer more than '* Spain for want of n rich tenantry, and perhaps *' none in this respect can rival England. We find ** universally that wealth produces wealth, but then " to prcnhice it from the earth, a due proportion '• of it inu>t be in the pocket of the farmer. Many •* gentlemen among us, either for amusement, or *' with a view to gain, have given attention to agri- *' culture, and have (iccii[)ie(l much land ; they •' have produced hixuinmt crops, and have intro " duced good husl>an(hy ; hut I apprehcnil few can "• lx)a^t of having made much profit ; and most are •' ready to confess that they have sutFereti some " loss. If, then, residing on tlu-ir own estates, " with all their attention, they are losers, how " great would be the loss if in distant provinces " they eniployed only stewards to plough, to sow, •' to sell, and to eat up the produce of their lands.'* M 5 250 REVENUF, FROM CULTIVATION OF LAND. There are, however, in warmer cHmates, some species of produce, which from their pecuhar nature farmers would not venture to undertake to cultivate on their own account, and proprietors would be unwilling to trust entirely to their management. Such is the culture of the vine and the olive, plants which require the utmost care and attention durijig a number of years before they begin to yield any fruit, and farmers are seldom sufficiently opulent to engage in a species of husbantlry, the profits of which arc so long protracted. On the other hand, as these plants may be very materially injured by being allowed to bear fruit either prematurely or too luxuriantly ; and as the interest of the farmer looks rather to immediate than remote profits, it is not considered safe to trust such plantations entirely to his care. Vineyards and olive-grounds are there- fore, I am informed, cultivated by the I'armer in half account with the proprietor, who shares with him equally the expenses and the profits. This is called the Mclaijcr system of cultivation : it was formerly very common on the continent for all kinds of produce, and still prevails in Italy, where the land is so extremely subdivided, that the me- tayer farmers, frequently subsisting upon half the produce of not more than three or four acres of land, are scarcely superior in condition to our pea- santry. In France and Switzerland this system of fiurming is confined almost exclusively to the culture . J RETENUE FROM CULTIVATION OP LAND. -^'>l of ilic vine arul the olive. But how requisite so- ever the system may be for parliculur plantations, the usual mode in this country ot granting lenses, I eonceive to be, not only most advantageous to the farmer, but uhimately so to the landed proprietor, who can procure the highest rent tor llic land best cultivated; and it is also most beneficial to the ountry by yielding the greatest jiroduce. But in ^pain this mode could not be atloptod tor want ot II affluent tenantry. The wealth of the country is hicfly engrossed by the nobles and clergy; there i> a total deficiency of yeomen, or farmers who cul- tivate their own land ; and the middling classes are few in number, and so destitute of capital, that they re incapable of taking a lease of land. CAROLINE. I often wish that the property of land was more "•ubtlivided in this country. How delightful it would t)e to see every cottage surrounded by a few acres belonging to the cottager, which would enable him to keep a cow, a few pigs, and partly at least to support his family on the produce of his little form. Do you recollect Goldsmith's lines? " A time there was, e'er Ent^land's griefs began, " When every rood of ground maintain'd its man : " But now, nlas ! " Along the lawn where scattcr'd hamlets rose, " Unwieldy wiallh and cumb'rous pomp repose, *' And every want to luxury allied." 252 REVENUE FROM CULTIVATION OF LAND. MRS. B. I shall point out to you a passage in Arthur Young's Travels in France, in which this question appears to be ably discussed. CAROLINE reads. <' I saw nothing respectable in small properties, " except 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 was as bad as can well be " conceived, yet the industry of the possessors was " so conspicuous and meritorious that no com- " mendations would be too great for it. It was " sufficient to prove that property in land is the " most active instigator to severe and incessant " labour. And this truth is of such force and ex- " tent that I know no way so sure of carrying tillage " to a mountain-top as by permitting the adjoining " villagers to acquire it in property ; in fact we " see that in the mountains of Languedoc they " have conveyed earth in baskets on their backs to " form a soil where nature has denied it." MRS. B. Land that is too poor to afford a rent, you will recollect, may still yield sufficiently to pay the proprietor for its cultivation ; it is therefore the REVENUE FROM CULTIVATION OF LAND. 253 property of such soils alone which will ensure their being cultivated. — But go on. CAROLINE reads. " But great inconveniency arises in small pro- " perties from the universal division which takes " place after the death of the proprietor. Thus I " have seen some farms which originally consisted " of 10 or 50 acres reduced to half an acre, with a ** family as much attached to it as if it were an " hundred acres- The population flowing from *' this extreme division is often but the multiplica- " tion of wretchedness. Men increase beyond the " demand of towns and manufactures, and the " consequence is distress and numbers dying of " diseases arising from insufficient nourishment. " Hence small properties much divided form the " greatest source of misery that can be conceived. " In England small properties are exceedingly " rare ; our labouring poor are justly emulous of " being the proprietors of their cottagta, and that •' scrap of land which forms the garden; but they " seldom think of buying land enough to employ " themselves. A man that has two or three *' hundred pounds with us, docs not buy a field but " stocks a farm. In every part of England in " which I have been, there is no comjiarison be- " tween the case of a day-labourer and of a very *' little farmer : we liavc no people that fare so 2[*4 REVENUE FROM CULTIVATION OF LAND. " hard and work so ill as the latter. No labour i^ ♦' so wretchedly i)Lrfunnc(l ami so dear as that ol' " hired hands accustomed to work for themselves ; " there is a disgust and listlessness that cannot " escape an intelligent observer, and nothing but " real distress will drive such little proprietors to " work at all for others. Can any thing be appa- " rently so absurtl as n strong, hearty man walking " some miles and losing a day's work in order to " sell a dozen of eggs or a chicken, the value of " which would not be equal to the labour of con- " veying it, were the people usefully employed?" CAROLINE. This reminds me of a poor woman in Savoy, who kept a few cows among the mountains two or three leagues distant from Geneva. Having no other market for her milk, she carried it regularly every day to that town for sale; thus the greater part of her time was spent upon the road, whilst it might certainly have been much more profitably employed had she been dairy-maid to some con- siderable fanner, who, having milk enough to turn it to butter and cheese, could in that state send it ■wholesale to market. MR8. D. The inconvenience you allude to has of late years been obviated in many of the villages of Switzer- M KLVKM L riiO.M t I L I I \ A I I C».N Ol LAND. .'J.» laiul, especially in the neiglibourliood of Geneva, by llu' inlroiluction of a peculiar species of public tlairy cs>tabli>limeiU.s which, 1 uiulersiaiicl, origi- nated in the plains of Lonibardy. To these dairies, calletl Fruit icri'Sy the larmers in the vicinity bring their daily stock of milk, which is converted into butter and chee^', and returned to them in that form, the establishment retaining only such a })or- tion a& k nece>s;iry to ilefray its expenses. There arc also considerable dairy estaUlishment(> in the iswiss mountains, but these are commi>nly private property ; the proprietor of llu.- mountain- pasture usually hiring cows of tlie neighbouring farmers, who are commonly repaid in the manu- tactured produce ot the dairy. Small landed properties are extremely common in Switzerland. The canton De \'aud consists chiefly of such, and they do not seem to be attended with the mischievous consequences which Arthur Young describes; for the country is well ciiltivaied, antl landed property is not reduced to that minute divi- sicn which entails wretcheilness. CAIlOl.rN'E. 1 heard a genlleniiin who is recently returned from France say, that three servants, whom he hat! hire capital. MRS. B. He does not cngajje an agent on his own ac- count, but he lends his capital to some person who invests it either in agriculture, manufactures, or trade, and who pays him so much per cent, for the use of it. This is called lending money at interest. CAROLINE. Is it then simply monet/ that is lent ; or capital consisting ol produce? N i 2/0 ON REVENUE FROM CAPITAL LENT. MRS. B. It is eventually the same ; for money gives the borrower a command over a proportional share of the produce of the country. If the money would not purchase the things which the borrower wanted, it would not answer his purpose ; but it will procure him either materials or implements for work, mauitenance for labourers, stock for farming, or merchandise for trade. In a word, it will enable him to exert his industry in what« ever way he chooses. CAROLINE. I should have imagined that it would have been more advantageous to the capitalist to have en- gaged an agent at a stipulated salary, for the pur- pose of undertaking the use of his capital ? MRS. B. Your plan would probably not answer so well j for if, instead of lending his capital at interest, a man of property paid an agent to employ ^it for him, the agent would be less cautious what risks he engaged in, as he would not be a sufferer by lossee. CAROLINE. But is not the loan of capital at interest liable to the same objection ? If the employer of capital be ruined, the proprietor of it must share the same fete. ON REVENUE FROM CAPITAL LENT. '271 MRS. B. This not unfrcquently happens ; yet there is less risk incurred in this mode than if the employer of capital could injure the proprietor without being himself involved in the same ftite ; and it would be so if he acted as clerk or agent, as he would lose only his salary, although the proprietor might be utterly ruined. Prudent men seldom lend capital without good security. If the loan is made to a merchant, it is usual to reiing; in the former, to be low, or falling. 282 ON REVENUE FROM CAPITAL I.tNT. CAROM NL. But since government spends the capital boi- rowed instead of deriving any profit from it, In >vhat means is the interest paid ? MRS. li. It is paid by taxes levied expressly for that piwposc. CAROLINE. If, then, government spends what is borrowed, the capital no longer exists, and the stockholder remains possessed of only an imaginary or iictitious capital. MRS. B. He remains possessed of the right to receive an annual payment, or annuity, equal to the stipulated interest, till the government pays him back the principal. And this annuity (where the government can be depended upon) will always sell for its value to such persons as have capital that they wish to lend at interest. It is thus that the stockholder is enabled to realize this fictitious capital, whenever he chooses, by selling his stock. The capital is, therefore, not lost to the individual; but it is en- tirely lost to the country. The stock may be sold, but the sale doca not re-create the capital that has been spent ; it merely transfers to the seller capital already existing in the hands of the buyer, and which would equally have existed whether the stock ON REVENUE FROM CAPITAL LENT. 283 Were sold or not. So long, however, as it can he cxchangc- inodity to dispose of, rather than allow a surplus to I ON VALUE AND PRICE. 30i> be left unsold, will lower its price, so as to render it attainable to a class of people who could not otherwise afford to purchase it. Hence the demand is increased, and becomes by degrees proportional to the redundant suj)ply. To illustrate this, let us suppose that, by the breaking out of a continental war, our foreign trade should meet with such obstructions, that great part of the manufactured goods we had prepartxl for exjwrtation will remain at home and overstock the market. The supply in this case exceeding the demand, the goods will fall in price below their natural value, in order to attract a greater num- ber of purchasers ; the consumption will thus be increased, but the manufacturers and dealers, having been obliged to sell the goods for less than they cost to produce, will be losers instead of gainers by their industry. CAnoLiNE. I recollect that callicoes and English muslins were much cheaper during the last war than they arc at present ; and the shopkeepers then said that, at the price at which they sold them, they did not pay for the workmanship, independently of tlic materials. MRS. B. The cheapness of these goods, although it arose from plenty, so far from being a sign of prospc- 310 ON VALUE AND PRICE. rity, entailed ruin on the manufacturers and ilieir labourers. CAROLINE. But you observed that if the price of a commo- dity would not defray all the expenses of produc- tion, it would not be made ? MRS. B. In the case we have alluded to, the fall in price did not take place till after the production of the commodities ; and the expense of labour having been already bestowed on them, it is better to sell them at any price than to lose entirely their value. But the manufacturers would in future take care to fabricate a smaller quantity, in consequence of which many of their labourers would be deprived of work, and part of their capital be thrown owt of employ. Plenty and cheapness are really advantageous only when they arise from a diminution of the cost of production. Thus when the use of any new machinery, or other improvement in the process of labour, enables farmers or manufacturers to pro- duce commodities at less expense, the reduction of price is beneficial both to the producer and the consumer; to the former, because cheapness in- creases the number of purchasers ; to the latter, because he obtains the commodity at less expense. ON VALUE AND'pRICE. 311 CAROLINE. But when nature gives us a superabundant sup- ply of corn, the fall in price it occasions is not, I suppose, attended with disadvantage? MRS. B. If the supply should be so great as to produce a glut in the market, and that the farmer should be under the necessity of selling his crops below the cost of production, the low price is not a benefit ; for the evil arising from the check given to industry sur- passes the immediate advantage of cheapness of corn. Tlic farmers and their labourers would be the first sufferers ; but it is probable that, in the end, the whole community would feel the effects the following season. CAROLINE. True; for fiirmers would grow cauti(?*is, and cultivate less wheat, in order that it might not sell below its natural value; and, whilst they would be endeavouring exactly to proportion the supply to the demand, the season might chance to be less pro- ductive than usual, so as to occasion a scarcity of com, which would be followed by a rise in the price of bread above the expense of its production. MRS. B. 'I'hus, you see, when the supi>ly equals the dc- 312 ON VALUE AND PRICE. mand, the commodity is sold for its natural value, the producer making just the usual rate of profit. If the supply exceed the demand, it is sold below tiiat value, the competition of producers or dealers, to dispose of their goods, lowering the price. II the supply is less than the demand, the competition of purchasers raises the price of the commodity above its natural value, and the dealers make ex- traordinary profits. CAROLINE. It must, then, be the interest of the farmer that corn should sell above its natural value; and the interest of the people that it should sell below it ? MRS. B. If we extend our views beyond the present mo- ment, it will appear that the interest of the pro^ ducer and' consumer of any commodity are the same; and that it is for the advantage of both that the price and natural value should coincide. If the consumer pay less for a commodity than its cost of production, the producers will take care to diminish the quantity in future, in order that com- petition may raise the price; for they could not, without exposing themselves to ruin, continue to supply the public with a commodity which did not repay them. If, on the other hand, the consumers pay more for an article than its natural value, the ON VALLK AND VRICE. 3 I .i producers will be encourngcd by their great })rofits to increase tlie supplvj iind the price will coitsc- quently fall until it is reduced to the natural vahic. CAROLINE. I do not understand why the jiroducere of a commodity .should increase the sui)ply, if the con- sequence is to lessen their profits ? -MRS. B. We are arguing under thesuppositioji that com- petition is free and open, and in that case, you know, capital will immediately flow towards any branch of industry that aHords extraordinary pro- fits. If, therefore, the original producers of the profitable commodity did not increase the suppl}', they would soon meet with competitors, which would compel them to lowei- their j)rice without increasing their sale. " Price," Mr. Buchanan observes, with great happiness of expression, " is the nicely poised " balance with which nature weighs and distributes *' to her children their respective shares of her " gifts, to prevent waste, and make them last out " till re-produced." We have dwelt a long time upon the subject of value; and we may now conclude, that though a fluctuation in the exchangeable value of commo- dities may be occasioned by various circumstances, r 314 ON VALUE ASU PRlCt.. it will seldom deviate much from the natural valuo, or cost of production, which is a variable quantit)', to which (when the employment of capital is left open) the exchangeable value will always tend to approximate. CONVERSATION XVI. ON MONEY. OF THE USE OF MONEY AS A MEDIUM OF EX- CHANGE. OF COINING. USE OF MONEY AS A STANDARD OF VALUE. OF THE VARIATION OF THE EXCHANGEABLE VALUE OF GOLD AND SIL- VER. IN WHAT MANNER IT AFFECTS THE PRICE OF COMMODITIES. OF NOMINAL AND REAL CHEAPNESS. WHAT CLASSES OF PEOPLE ARE AFFECTED BY THE VARIATION IN THE VALUE OF GOLD AND SILVER. HOW FAR MONEY CON- STITUTES A PART OF THE WEALTH OF A COUN- TRY. OF THE EXPORTATION OF MONEY. — OF THE MEANS BY WHICH THE VALUE OF THE PRECIOUS METALS EQUALISES ITSELF IN ALL PARTS OF THE CIVILISED WORLD. MRS. B. H.AViN(i ohUiincil some knowIeJ^c of the na- ture of viiluc, wc may now proceed to examine the use ol money. p *J 316 ON MONEV. Without this general medium of exchange, trade could never have made any considerable progress ; for as the subdivisions of labour increased, insuj^er- able difficulties would be experienced in the adjust- ment of accounts. The butcher perhaps would want bread, at a time that the baker did not want meat ; or they might each be desirous of exchanging their respective commodities, but these might not be of equal value. CAROLINE. It would be very difficult, I believe, at any time to make such reckonings exactly balance each other. MRS. B. In order to avoid this inconvenience, it became necessary for every man to be provided with a com- modity which would be willingly taken at all times in exchange for good<. Hence arose that useful re- presentative of commodities, money^ which, being exclusively appropriated to exchanges, every one was ready either to receive or to part with for that purpose. CAROLINE. When the baker did not want meat he would take the butcher's money in exchange for his bread, because that money tvould enable him to obtain from others what he did want. ON MONEY. 317 MRS. B. Various commodities have been employed to an- swer the purpose of money. Mr. Salt, in his Travels in Abyssinia, informs us, that wedges of salt are used in that country for small currency, coined money being extremely scarce. A wedge of rock- salt, weighing between two and three pounds, was estimated at l-30th of a dollar. CAROLINE. How extremely inconvenient such a bulky ar- ticle must be as a substitute for money coined ; the can-iage of it to any distance would cost almost as much as the salt was worth. MRS. B. A commodity of this nature could be used for the purpose of money in tho the invcnlion of coining, the use of ihc metals as a medium of exchange was attended witli great in- convenience; it being necessary not only to weigh, but also to assay the metal, to ascertain both its quantity and its degree of purity. The invention of coining superseded this incon- venience; for coining money is affixing to a piece oi metal a particular stamp or impression, which declares that it is of a certain weight and quality. Thus the impression on a guinea signifies that it is a piece of gold of a certain fineness, weighing 107 grains nearly. CAROLINE. Money must also be of great use in fixing the value of commodities ; before its introduction the butcher and the baker might dispute which was worth most, the joint of meat or the loaf of bread which they wished to exchange. MRS. B. Ves; money became useful not only as a medium of exchange, but also as a common measure of value. You will learn hereafter that it is not, any more than laboin-, a very accurate measure, when the values of one perii>d are compared with tlie values of another distant period ; but for the com- mon purposes of traflic it answers sufficiently well. Previous to the invention of money, men were much at a loss how to estimate the value of their 1' 1 320 ON MONEY. property. In order to express thnt value they wevo necessarily obliged to compare it to something elac, and having no settled standard, they would natur- ally choose objects of known and established value. Accordmgly we read both in Scripture and in the ancient poets, of a man's property being worth so many oxen and so many flocks anil herds. Dr. Clarke informs us, that even at the present day tiie Calmuc Tartars reckon the value of a coat of mail from six to eight, and up to the value of fifty liorscs. In civilised countries every one estimates his capital by the quantity of money it is worth; — he does not really possess the sum in money, but Iiis property, whatever be its nature or kind, Ls equivalent to such a sum of money. CAROLINE. For instance, a man who is worth a capital of 20,000/. may perhaps not be possessed of 20/. in money; but his pro{)crty whether land or commo- dities, if sold, would bring him 20,000/. \\'lien gold is brought into this country, pray how is it paid for? Something must be given in exchange for it ; and yet that something cannot bo money ? .MRS. B. Certainly not. A bullion merchant would derive no advantage from a trade in which he would be employed hi exchanging a certain weight of gold ON" MONEY. S21 and silver in one country, i'or a similar weight of gold and silver in another country : he would lose not only all the profits of trade, but the expenses (if the freight, 6cc. ; so that in fact he would be ex- changing 100/., for 90/., or 95/. We pay for gold and silver in woolltn cloths, hardware, callicoes, and linens, and a variety of other commodities. CAUOLINE. Then we purchase gold with goods just as we purchase goods with gold ? MRS. B. Exactly; those who take out goods in exchange for goUl bullion, buy goods with gold; only as the gold is not coined, it may rather be called an ex- change of commodities than a purchase. CAROLINE. And if the mines should prove less productive than usual, or any circumstance should render gold scarce, and thus raise its exchangeable value, we must export a greater quantity of goods to exchange lor the same quantity of gold ? MRS. B. Undoubtedly. The natural value of gold bullion, like that of any otiier commodity, may be estimated by the labour bestowed upon it, both to extract 322 ON MONEY. it from the mines, and bring it to the place where it is to be sold ; and its exchangeable value fluc- tuates according to the proportion of the supply to the demand. This fluctuation, however, can be discovered only by the greater or smaller quantity of goods for which the same quantity of gold will exchange. For as gold and silver may be bought with any kind of goods, they are not sus- ceptible of a standard of value like that of other commodities which is estimated in one particular article — money. CAROLINE. As ffold and silver are the standard of value of o all other commodities, all other commodities, I con- ceive, must be affected by an alteration in the ex- changeable value of gold and silver? * MRS. B. And this is the reason why money is not an ac- curate standard of the value of commodities: for if money by its plenty diminish in value, more goods will be given in exchange for it ; it therefore enhances the price of commodities, that is to say, their exchangeable value estimated in moncij^ and renders them cheaper. Whilst if money by its scarcity increase in value, more goods will be given in exchange for it : it therefore lowers the price of commodities, and renders them cheaper. ON MONEY. 323 CAROLINE. A deficiency of any article raises its exchange- a4>Ie value, and consequently its price, above its natural value: thus a deficiency of gold or silver would make a smaller quantity exchange for the same quantity of goods as before ; and therefore a loaf of bread would sell for less money, or, in other words, would be cheaper. MRS. B. Yes; and not only bread, but meat, clothes, fur- niture, houses ; ill short, every thing would be cheaper, in consequence of the scarcity of the precious metals. CAROLINE. It would appear, then, that a scarcity of money is advantageous to a country by rendering things cheap ? MRS. B. When tlie cheapness of commodities arises from that plenty which results from a reduction of the cost of production, it is very advantageous; but not when it proceeds from a scarcity of money. In the latter case, the supjjly not being increased, commodities are lower in price, without any altera- tion in their general exchangeable value. They may, therefore, be considered rather as nomiually p G 324 ON MONEY. than really clieaper. If, for instance, a loaf of breatl should sell for a penny, though there should not be a single loaf more in the country than when it sold for a shilling, the cheapness would not make bread more plentiful. CAROLINE. But if the price of bread were so low as a penny, though the supply shoukl not be increased, the la- bouring classes would increase their consumption of it so considerably as to produce a scarcity, if not a famine, before the next harvest. This nominal^ or I would call \i false, cheapness, must therefore be prejudicial instead of being beneficial to a country. MRS. B. The consequence you have drawn from it is erroneous ; for the labouring classes would not be able to pul'chasc a greater quantity of bread than usual, owing to the scarcity of money. The wages of labour would not be exempted from the general fall in price which this scarcity would produce : the labourers, as well as the bread they eat, would be paid in pence instead of shillings, and their power of purchasing bread would neither be increased nor diminished. CAROLINE. True \ I did not consider that. I suppose then o\ >toM;\'. 325 that if the contrary case occurrecl, that i<, if the quantity of money were considerably augmented, either by the discovery of a mine in the country, or by any other means, a u^eneral rise in the price of commodities would be the consequence ? MKS. B. Undoubtedly ; but without producing any scarcity. Therefore, though commodities would rise in price, their value would not be increased, and the commodities being the same in quantity, the public would be equally well supplied; but as money fell or became depreciated in value from its excess, fewer connnodities would be given in ex- change for the same sum ; or more money must be paid for the same conmioiiity. A loaf of bread might cost two shillings instead of one, but as the wages of labour would at the same time be doubled, the labourer would sufler no privation from the increase of price. You now scm3 the propriety of making the distinction ijctween the value anil the jmce of a commodity. It is very possible for the price ol' a commotlitv to rise, whilst its value falls. A loaf of bread may rise in price from one to two shillings; but money may be so ilejneciatcd by excess that t\i.() shillings jnay not procure so much meat, butter, and cheese as one shilling did before; therefore a loaf of bread would no longer exchange for so nuich of those 326 ON MONEY. commodities, and its exchangeable value compared with other things generally would have fallen ; while its 'price or exchangeable value estimated in monei) only would have risen. CAROLINE. And when the price alters, how can we distin- guish whether it is the goods or the money which changes in value ? MRS. B. There is no point so difficult to ascertain as a variation of value, because we have no fixed standard measure of value ; neither nature nor art furnishes us with a commodity whose value is incapable of change ; and such alone would afford US an accurate standard of value. CAROLINE, How useful such a commodity would be ; for we cannot estimate the value of any thing without comparing it with the value of something else; and if that something else is liable to variation, it is but of little assistance to us : it is supporting the earth by the elephant, and the elephant by the tortoise; but we still remain in the same dilemma. When a man says he is worth 500 acres of land, we can form scarcely any judgment of his wealth, unless he tells us what the acres are worth ; his ON MONEY. 327 land may be situated in tlie most IViiitliil parts of England, or it may be in the wilds of America, or the deserts of Arabia ; and if he values his land in money, and says my acres are worth, or would sell for 1000/., we can form some notion of their real value, but not an accurate one; for we do not know what is the real value of the money, wliether it is plentiful or scarce, cheap or dear ; nor can we ever learn it unless we had some invariable standard by which to measure it. MRS. B. Now supposing money to be depreciated in value 25 percent., and that the expense of manufacturing a piece of muslin, from some improvement in the process, fell from four to three shillings a-yard, at what price would the muslin sell ? CAROLINE. It would retain its original price of four shillings though it would really be*chcapcr ; for the diminu- tion of the value of money would exactly counter- balance the diminution of the cost of production of the muslin. MRS. B. Very well. And if, on the contrar}', money should become scarce at the same time as the cost of production of a commodity diininishcd, then these two causes, acting in conjunction instead of 328 ON MONEY. opposition, the commodity would be both no- minally and realler cheaper. CAROLINE. The muslin in that case would fall from four to two shillings a-yard.* MRS. B. In order still furtlier to reduce the price of the muslin, we may suppose the supply to exceed the de- mand, so as to oblige the manufacturer to sell it below its cost of production ; and thus the price might fall so low as one shilling or even sixpence a-yard. But of all these reductions of price, that which proceeds from a diminished cost of production is the only one from which general advantage is de- rived. That arising from the depreciation of mo- ney producing merely a nominal cheapness ; and that which results from an excess of supply being decidedly an evil, inasmuch as it creates distress and disourages industry. CAROLINE. It appears, then, from what you have said, that an increase or diminution of money in a country docs not really affect the pecuniary circumstances of any one ? * Accurately calculated it would be is. od. ON MONF.Y. 32J) MRS. n. I beg your pardon ; all classes of men are tcm- ))orarily affected when the change is abrupt ; be- cause the due level is not immediately ascertained, and until that takes place, the pressure falls un- equally. But independently of this, there are many classes of people who would be very sensibly and permanently injured by an alteration in the exchangeable value of money. Let us suppose, for instance, that the proprietor of a field lets it for a lontr lease at a rent of 20/. a-year ; and that some years afterwards, money having risen in value, and he being in want of hay for his horses, purchases the crop of hay for 15/. In this case the landlord will continue to receive 20/. a-year for the rent, and yet pay but 15/. for the produce, so that the farmer will lose 5/., be- sides the profits of his capital. Is not this a very serious injury ? CAROLINE. » No doubt; and this would be the case with all leases; for it is immaterial to whom the farmer sells his crops ; if the market-price luib fallen, he must be a loser. I\IUS. IJ. Yes. Were money raised to ilouble its former value, the rent would purchase double the (|uantity of commodities that it did before: for 100/. in mo- ney would exchange for a (luunlity of good?? which 330 ON MONEY. was reckoned worth 200/. previous to the alter- ation ; so that rent, though nominally the same, would in reality be doubled, and it would be so much unjustly taken out of the pocket of the tenant to put into that of the landlord. CAROLINE. This evil, however, admits of a remedy when a new lease is made ? MRS. B. True ; but should the old one have several years to run, the farmer may be ruined first; and though it is true that it does not violate any law, it is a manifest infraction on the security of property, which we have observed to be the foundation of all wealth, and the strongest motive for its accu- mulation. There is no more active and steady sti- mulus to industry than the certainty of reaping the fruits of our labour. CAROLINE. Then I suppose that when money is depreciated in value, in consequence of being more plentiful, the case would be reversed ; the farmer would be benefited and the landlord would be the loser ; for the rent would not be really worth so much as it was before? MR.S. B. Undoubtedly. Another class of people who arc i ON iMONEY. 381 materially affected by an alteration in the value of money, are the unproductive labourers. Their pay is generally a regular stipend, not liable to the same variation as the wages of productive labourers. The pay of the army and navy, of all the officers under government, and ot" the learned professions, is fixed; those persons must therefore suffer all the evil, or enjoy all the benefit arising from an alter- ation in the value of money. CAUOLINE. The higher classes of the unproductive labourers might be able to support the hardship resulting from a depreciation of the value of money; but how can the common sailor or soldier do so ? It is absolutely necessary that their pay should enable them to procure a suitable subsistence. MTIS. B. They are usually paid, partly in money and partly in provisions and clothing, and arc not therefore such sufferers by a depreciation of money as they would be if paid entirely in currency. It has nevertheless been found necessary of late to augment the pay of both army and navy. CAROLINE. The value of money has then fallen ? 332 ON Money. MRS. B. Yes, it has; but I must defer explaining the reason of this fall till our next interview. A third class of people who are considerably injured by a depreciation of the value of money, are those who have lent money at interest for a long period of time, persons who live on annuities, and parti- cularly the stockholders in the public funds. Not only is the interest they receive depreciated, but also the value of their capital. The interest they receive for their stock remains nominally the same, whatever diminution may have taken place in the value of money ; and their income being thus ap- parently stationary, they partake in the general disadvantage of the rise of prices, without being enabled to avail themselves of the compensation arising from the greater abundance of money. Professional men, and all those who receive sala- ries, have ultiniately the remedy of an increase of pay ; but the stockholder kas no resource : his income wastes away, and he perceives his means of procuring his accustomed enjoyments gradually diminish, without being able to trace the source from whence the evil springs ; for as his income remains nominally the same, he is not aware of any diminution of wealth. CAROLINE. How very much I have been mistaken in my ON MONEV. 333 idea of money ! Instead of being the only, or at least the princi})al article which (as I thought) con- stituted wealth ; it seems, on the contrary, to be tlie only one which is unworthy of that title, since it does not contribute to the riches of a country. An excess of money renders other things dear; a deficiency of it make them cheaj) ; but it apjiears to me that a country is not one atom the richer for all the money it possesses. Money, therefore, I think, cannot be called wealth, but merely its re- presentative, like the counters at cards ; and its chief use seems to consist in its affording us a con- venient medium of exchange, and a useful, though imper/cct standard of value. MRS. B. Money cannot with justice be compared to counteis, for it is not, like them, a sign or repre- sentative of value, but really possesses (or ought to possess) the value for which it cxclianges. A bank- note, which lias no intrinsic value, is simply a sign of value; but when you purchase goods for a guinea, you give a piece of gold of equivalent value in exchange. In order to judge whether money forms any |>art of the wealth of a nation, let us refer to our de- finition of wealth. I believe we said that every article, either of utility or luxury, constituted wealth. Now I leave you to judge whether mo- 384 ON MONEY. ney, considered either as a medium of exchange, or as a standard of value, is not eminently useful : since by facilitating the circulation of commoditic> it indirectly contributes to their multiplication. CAROLINE. That is true certainly with regard to the money actually required for circulation ; but should it ex- ceed that sum, the surplus would be of no value to us. MRS. B. The same might be said of a superfluous quan- tity of any kind of wealth ; more tables and chairs, or a greater quantity of gowns and coats than are wanted, would be equally useless, and would equally be depreciated in value. CAROLINE. But then we could export such commodities, and exchange them for goods which we did want. MRS. B. And why should we not do the same with money ? When we have more money than is required for the purpose of circulation, we should export it, by purchasing foreign goods; without this resource, a superfluity of money is perfectly useless, and will no more contribute to the production of wealtli, M 1 ON MONEY. 335 than a superfluous number of mills would contri- bute to the production of flour. CAROLINE. I had always imagined that the more money a country possessed, the more affluent was its con- dition. MRS. B. And that usually is the case. The error Hes in mistaking the cause for the effect. A great quan- tity of money is necessary to circulate a great quan- tity of commodities. Rich flourishing countries require abundance of money, and possess the means of obtaining it ; but this abundance is the co?ise- quciice, not the cause of their wealth, which con- sists in the commodities circulated, rather than in the circulating medium. Specie, we have just said, constitutes wealth, so far as it is required for cir- culation ; but if a country possess one guinea more than is necessary for that purpose, the wealth which purchased that guinea has been thrown away. CAROLINE. Yet wliat a common observation it is, that plenty of money animates the industry of a country, and encourages commerce; and this seems to be proved by the miserable and barbarous state of Europe previous to the discovery of the American mines. 336" ON MONEV. MHS. B. The discovery of America was certainly a very efficient cause in rousing the industry of Europe from the state of stagnation into which it was sunk b}' ignorance and barbarism. But had America possessed no mines, I doubt whether the advantages we have derived from our connection with that country would not have been equally great : we could easily find a substitute for the specie with which she supplies us, but never for the abundance and variety of wealth which she is incessantly pour- ing in upon us. The increase of European com- forts, of affluence, of luxury, is attributed to the influx of the treasures of the new world — and with reason ; but those treasures ai*e the sugar, the coffee, the indigo, the tobacco, the drugs, &c. which A^merica exports, to obtain which we must send her commodities that have been produced by the employment of our poor. Gold and silver, though they have greatly excited our avarice and ambition, have eventually contributed but little to stimulate our industry. It is not to the multiplication of the precious metals that we are indebted for our improved agri- culture, our prosperous commerce, and the variety and excellence of our manufactures: nor do I be- iieve that it was their scarcity which deprived our ancestors of these advantages. It was because they were ignorant and barbarous, and that we are com- '3 ON MONEY. 337 paratively enlightened and civilised ; — compara- tively I may indeed say, for error is still active in retai'ding the progress of improvement, and this is no where more evident than in the anxiety of go- vernments to prevent the exportation of specie, although it is now above thirty years since Adam Smith fully proved the impolicy of this prohibition. CAROLINE. If the exportation of specie be prohibited, the only use that can be made of a superfluous quan- tity of it, is to melt it down and re-convert it into bullion. MRS. B. But melting the coin is, in this country, equally illegal. A superfluous quantity of money, there- fore, (were these laws never infringed,) would be necessarily added to the circulation, and depreciate the value of the whole. How different is the situation of a country where no such prohibitory laws exist ! There, no sooner does money accumulate so as to occasion a depre- ciation of its value, or, in other words, an advance in the price of commodities, than the merchants of that country export specie, and purchase with it foreign goods; while at the same time foreign merchants send their goods to the country where prices have risen, and exchange them, not for 338 ON MONEY. Other goode, which are dear, but for money, wlncli is cheap. CAROLINE. That is to say, they will sell, but not purchase ? MRS. B. Precisely : — it is thus that a country is drained of its superfluous specie; as this traffic goes on, money rises in value, commodities fall in price, and foreign merchants again exchange their goods for commodities of the country, instead of receiving payment for it in specie. No apprehension need therefore be entertained of ill consequences arising either from the melting down or exporting the coin of the country. This exportation will take place secretly wiiencver there is a superfluity, however severe the law may be against it ; the only diffc'rcnce is, that instead of being carried on in an open and regular manner by merchants of respectability, it is thrown into the hands of men of despicable character, who arc tempted by extraordinary profits to engage in this illicit traflic. • Could iSpain and Portugal, countries which re- ceive all the precious metals imported from America to Europe, have caiTicd into effect the absurd re- strictive laws, by which they attempted to keep their irold and silver at houic, those metals would 10 ON MOtS'EY. 359 eventually have become of little more value to them than lead and coi)pcr. If vou have understood what I liavc said, you will now be able to tell me what effect will be pro- duced in the mercantile transactions of a country, which is not shackled by restrictive laws, when a scarcity of money produces a fall in the price of <'onnnodities. CAROLINE. In that case the very reverse will happen of what wc before observed. Foreign merchants will come and buy goods, and instead of offering merchandise in exchange, will bring money in payment; for they will be willing to make purchases, but not sales at a cheap market. MRS. B. It is thus that gold and silver is diffused through- out all parts of the civilised world ; whei'ever tl^ere - a deficiency, it flows in from every fjuartcr; and >herever there is a redundancy, the tide sets in an opposite direction. It is the regular diffusion of die precious metals, and their constant tendency to .in ecjuahty of value, which renders them so pe- culiarly calculated for a general standard. \\'^crc money as liable to variation of value as the com- modities for which it serves as a medium of exchange, iL would be totally unfit for a standard. CONVERSATION XVII. Subject of MONEY continued. OF THE DEPRECIATION OF GOLD AND SILVER. OF THE ADULTERATION AND DEPRECIATION OF COINED MONEY. OF BANKS. OF PAPER MO- NEY. EFFECTS OF PAPER MONEY WHEN NOT PAYABLE IN SPECIE ON DEMAND. OF THE PRO- PORTION OF CURRENCY TO THE COMMODITIES TO BE CIRCULATED BY IT. CAROLINE. I HAVE been reflecting much upon the subject of our last conversation, Mrs. B. ; and it has occurred to me that though there may be no permanent excess and depreciation of specie in any particular country, yet it must gradually decrease in value throughout the world : for money is very little liable to wear ; a great quantity of the precious metals is annually extracted from the mines, and though a considerable portion of it may be con- verted into plate and jewellery, yet the greater 13 _. ON MONEY. 341 part, I suppose, goes to the mint to be coined, and this additional quantity must produce a de- preciation of value ? MRS. B. An increase of supply will not occasion depre- ciation of value, if there should at the same time be a proportional increase of demand, and we must recollect that the consumable produce of the eartli increases as well as that of the mines — the commodities to be circulated as well as the medium of circulation ; and it is not the actual quantity of money, but the proportion which it bears to the quantity of commodities for which it is to serve as a medium of exchange, that regulates the price of those commodities. Let us suppose the price of a loaf of bread to be one shilling; and say, if 1000 more loaves of bread be produced every year by agriculture, and such an additional number of shillings be obtained from the mines as will be necessary to circulate them, the price of a loaf will then remain the same, and the value of money will not, by this additional quantity of specie, be depreciated, CAROLINE. But, Mrs. B., you do not consider that when the thousand additional loaves are eaten, the additional shillings will remain. 342 ON MONEY. MRS. £. The greater part of these loaves will be eaten by those who will not only reproduce them, but pro- bably ncrease the number the following year. CAROLIKE. In that case it would be very possible that the progress of agriculture and manufactures should keep pace with, or even precede that of the mines. MRS. B. If the quantity of the precious metals annually extracted from the mines be exactly what is re- quired for the arts, and for the additional specie necessary to circulate the increasing produce of the land, there will be no change in the value of money, and commodities will continue to be bought and sold at their former prices. If less gold and silver be extracted than is requisite for these purposes, goods will fall in price ; and if, on the contrary, a greater quantity be produced, goods will rise in price, the fluctuations in the price of commodities gradually and constantly conforming to the varia- tions of the scale by which their value is measured. Dr. Adam Smith was of opinion that lor many years past the supply of gold and silver did not exceed the demand ; but several later writers con- ceive that he was mistaken on this point. I am very far from being a competent judge of such a ON MONEY. ^^43 question, but I confess that 1 feel inclined to favour the opiivion of a general depreciation. Previous to the discovery of America the ex- changeable value of money was certainly much greater than It has been since that period. Some notion may be formed of the difference of the value of money in ancient and in modern times from the amount of the revenue which Xerxes, King of Persia, derived from l\is wealthy and ex- tensive empire, and which enabled him to maintain his mighty fleets and armies; it Is said in history to have amounted to only three millions sterUng. CAROLINE^ The prodigality and extravagance of the Romans was then in fact still greater than It appears, since the immense sums thoy expended upon luxuries were then more valuable than they would be at the present times. MRS. B. As the wealth of the Romans arose in a great measure from the spoliation of the countries they conquered, gold and silver formed an essential part of their plunder ; specie, therefore, might possibly l)e of less value there than in other parts of the world at the same period. Independently, however, of the increase of quan- tity which produces a depreciation in tlie value of the precious metals themselves, there aiv causes quite foreign to this, which have considerable eflcct (> 1 344 ON MONEY. Oil the value ol the money into which they have been coined. One of these is the adulteration of the coin. A pound sterling, or twenty shillings, originally weighed a pound of silver ; hence its de- nomination. But sovereigns, in making new coinages, frequently found it convenient to adul- terate the metal by mixing it with alloy. It was a means of increacing the value of their treasures, by paying their debts with a much less quantity of the jirecious metals, and thus defrauding their creditor- subjects, who in the first instance were not aware of the change. In the year 1351, Edward the Fourth, distressed by the debts he had incurred in his chimerical at- tempts to conquer France, adopted this mode of paying his creditors with less money than he bor- rowed of them. He ordered a pound of silver to be coined into 26G, instead of 240 pennies. Having experienced the beneficial effects of this expedient, he soon after coined 270 pennies out of the same pound. By this imposition, not only the creditors of the crown, but all other creditors were defrauded of about a tenth of their property ; being compelled to receive in payment money of less value than that they had lent. Considerable inconvenience was also experienced from the alteration in the standard of value; as soon as it was discovered, it produced a general rise in the price of commodities, and the poor w^cre greatly distressed by the enhancement of prices of the necessaries of life. ON MONEY. 345 CAROLINE. But did not wages rise in the same proportion ? MRS. B. Eventually they did, no doubt ; but after sucli a revolution in prices as an event of this nature pro- duces, a length of time is required to restore the due level ; and the rich always resist the rise of wages as long as they can. In the instance I have mentioned it docs not appear that the labouring class made any effort to obtain a compensation by a rise of wages, until a dreadful pestilence, which originated in the east, extended its ravages to Eng- land, and carried off the greater part of the lower classes. Tlie survivors then took advantage of the scarcity of hands to raise their terms ; but the king, instead of allowing the remedy to pursue its natural course, considered this attempt of the labourers to raise their wages as an unwarrantable exaction ; and in order to prevent it, enacted the statute of labourers. This statute* ordained that labourers should receive no more than the wages which were paid previous to the adulteration of the coin. It would be diflicult to conceive a law more calculated to repress the effljrts of industry. But Edward, urged by the weight of his accumulated debts, continucil to depreciate the value ol the coin ; endeavouring to conceal the fraud by the introduc- tion of a new silver coin called a groat, but in value C 5 34G ON MONEY. only 3irf. : and in 1358 he made 'J 5 groats, or 300 pennies, outof a pound of silver. CAROLINE. What a prodigious depreciation in the course of so short a period of time ! and have similar expe- dients been resorted to by successive sovereigns ? MRS. B. Yes ; so repeatedly that 20 shillings, or a pound sterling, instead of containing, as formerly, a pound of silver, now weighs rather less than foui: ounces of that metal. CAROLINE. But this is but a partial depreciation, which ftff'ects only the coin of Great Britain. Have other countries also adopted so unjust and perni- cious a measure ? MRS. B. It is so tempting an expedient for sovereigns, that it has been resorted to in almost all countries where money is used. In the time of Charlemagne the French livrc weighed a pound, of 12 ounces. Philip the First adulterated it with one-third of alloy. Philip of Valois practised the same fraud on gold coin, and it has been repeated by successive sovereigns till the depreciation of the French louis is even greater than thatof our pound sterling, and their livre is now worth not more than ten-pence. ON MONEY. S47 As far back as the time of the Romans this sur- reptitious motle of obtaining wealth had been (Jis- covered, and was practised. The llonmn as, which originidly contained a pound of brass, was in ttie course of time diminished to half an ounce. tAUOI.lNE. But now that the world must be fully aware of the im|K>sition, I should think that governments would not venture to have recourse to such ex- pedients. MRS. B. This country has increased so much in wealth, that in the present times less difiiculty is expe- rienced in raising taxes, and the facility of making loans has induced government to give the pryfer^- ence to that mode of obtaining money during a time of war, or whenever any remarkable expenses are incurrcxl. Of late years a new inodc of augmenting the currency of the country hag been invented; by sub- stituting lor the precious metals a more convenient and more economical medium of exchange, under tlic form o{ jiapcr'Vioncy. ( AROLINE. Paper-money ! What value can there be in money made of paper ? o n 348 ON MONEY. MRS. B. None whatever intrinsically, yet it lias been found to answer most of the purposes of specie. — You remember that money was first invented to avoid the inconvenience of barter. When a commodity is sold for money, it is under a confidence, on the part of the seller, that he will be able with the money to purchase any other commodity of equal value that he may want. It is of no consequence to him of Avhat material the money be made, pro- vided it have this quality. CAROLINE. True ; but paper can never have that quality : who would part with any thing of value for a bit of paper ? MRS. B. Suppose I were to give you a paper containing iny promise to pay you 100/. in money whenever you demanded it ; would you not consider the pro- mise so formally given, nearly of the same value as the money itself ? CAROLINE. Yes ; because I have perfect confidence in you ; but a stranger would not. MRS. B. Suppose that instead of my promise to pay you 1 00/., I should give you a piece of paper contain- ON MONEY. 349 ing a promise to the same effect of some of the weahhicst and best known merchants in London ? CAROLINE. My confidence in the value of such paper would be in proportion to the reliance I could place on the promise of such merchants. MRS. B. Exactly so. Such confidence is the foundation of all banking establishments, which are in general a partnership of wealthy and respectable merchants, in whom the public repose so great a confidence that they are willing to take their promissory note, commonly called a bank-note, instead of money. CAROLINE. A bank-note then is a written engagement, or promise, to pay the sum, whatever it be, that is specified in the note ? MRS. B. It is; and these notes become current as a me- dium of exchange; having no intrinsic value, they are merely the sign or representative of wealth ; but are received by the public under the persuasion that they will be paid in money by the bank when- ever required. CAROLINE. This is indeed an excellent invention ; what a 350 ON MONEY. saving of expense ! The establishment of a bank of paper-money appears to me very simihir to tl>e discover^' of a mine of gold in the country: or in- deed the bank has even some advantages over the mine, for it is certain of being productive, and yet it is attended with much less expense. Is the in- vention of paper-money quite of modern date ? MRS. B. There is, I believe, no vestige of any thing of the kind in ancient history; unless we should con- sider, as such, a species of stamped leather used as money by the Carthaginians ; and as they had also coined money, it is possible that their stamped lea- ther might be considered merely as a sign or repre- sentative of real value, analogous to our paper- money. CAROLINE. ITic leather was probably a species of parchment, the substance commonly used for writing on, be- fore the invention of paper, and the impression stamped on it might signify the sum of money which the piece of leather was to represent, or pass for. MRS. B. Tliese arc points upon which, in the imperfect state of our knowledge of Carthaginian currency, it would be diflicult to determine; it is fortunate, therefore, that they are questions more of curiosity than of utility. I ON ivro>rSY. 351 The first bank we are cIi^;tillctly acquainted with was cstabhshed at Amsterdam iii the year 1 60'J * ; but this institution was rather of a different kind from what I have been dcscribijig. It issued no pajjor, but received the deposit ot" coined money, an account of which was taken in the books of the bunk ; and through the medium of these books, transfers of property were made from one inchvidual to another, as occasion required, without the money being once removed from the stronjj chests in whicli it was originally deposited. CAROMNE. There does not «eem to be any economy In this species of bank ; whilst those that issue bank-notes, by the substitution of a cheap circulating medium, render that of gold and silver superfluous, and enable it to be sent abroad to purchase foreign commodities. MR^. B. And, should foreign countries adopt the same economical expedient, and send us their super- fluous specie ? CAROLINE. True, I did not consider that. If paper mo- ney were generally adopted, every coinitry would be overstocked with specie; for though the cstab- ♦ It is said, liowcvcr, tliat a bank, was established at Tcnicc at least two centuries bcibrc. 252 ON MONEY. lislimcnt of a bank in any one country may force the superfluous money into otliers, this cannot hap- pen if banks are set up in eveiy country. They are far therefore from being attended with the advantages I at first imagined. MRS. B. By issuing paper-money, so much is, in fact, added to the circulation tliroughout tlie civiHsed world ; and inasmuch as it supersedes the use of the precious metals, and therefore lessens the demand, it must to a certain degree lessen their value. The im- mediate effect of opening a new bank is certainly to drive some portion of the specie out of the coun- try ill which the bank is established. It does not, however, force out the whole quantity which the paper represents, for independently of the general excess to which we have alluded, a bank must keep a certain quantity of specie in reserve to be enabled to fulfil the promise of paying its notes on demand. CAROLINE. You do not mean to say that a bank will keep a fund of ii^pccic, like that of Amsterdam, equal to the value of its notes, for that purpose; for if so, no saving would result from the use of paper- money ? MRS. B. Certainly not. The profits of the bank arise from the employment of the capital thus saved, ON MONEY. 'irtA which consists of the difTcrcnce between tiie amount of notes issued and tiie specie reserved in the bank. It is so impfobable that every person possessctl of notes should apply at once for payment, that there is no necessity for providing a fund equal to the amount of the notes in circulation in order to fulfil the engagement. Banks discover from experience what is the proportion of specie rctjuisite to enable them to answer the average demand made upon them; and they regulate the quantity of notes they issue accordingly : for if they failed in their engage- ment to pay them in cash on demand, they would become bankrupt. CAROLINE. Yet I understand that the Bank of England no longer pays its notes in specie ? MRS. B. Tliat is true; but it is owing to an act of parlia- ment liaving been passed* purposely to grant this privilege to the Bank of Eiiglaud ibr a specified time. CAROLINE. And if a Bank of Eufjlaiul note can no louijer be exchanged at pleasure for specie, in what does its value consist ? MRS. IJ. In the expectation that it will one day be paid in specie: this opinion renders b;iiik-nolcs still current: were such confidence deslroved, their 354 ON MOKEY. value would be redurced to that of the papcv of which tliey are made. CAROLINE. But since the Bank of England is not obliged to pay its notes in cash, it is at liberty to issue any quantity however great. In short it seems to have discovered the philosopher's stone, for though it may not have found the means of making gold, it possesses a substitute which answers the purpose equally well. MRS. B. Excepting that, having no intrinsic value, it cannot be exported in case of excess ; and j'ou may recollect our observing, that no use could be made of any superfluous quantity of money but to ex- diange it for foreign goods. An excess of currency produced by an over issue of bank-notes must therefore remain in the country, and cause a de- preciation in the value of money, which would be discovered by a general rise in the prices of com- modities, and would be attended with all the evils eniin\erated in our last conversation. CAROLINE. And is there not great danger of a bank issuing an excess of notes when it is not restricted by the obligation of paying them in specie ? ON MONEY. 355 MRS. B. A very considerable risk is certainly incurred by such an exomption. When a bank issues more notes tlyin are required for the purpose of circulation, its effect in depre- ciating the value of the currency, and raising the price of commodities, is at first very trifling, because as soon as that effect is perceived, the coined money begins to disappear. Notwithstanding the prohibition of law, it never fails to make its escape out of the country. It is either clandestinely sent abroad, or privately melted, and exported in bullion. As long therefore as an over-issue of notes serves to replace the coin which it forces out of the country, there is but little augmentation of the circulating currency ; but if after the specie has disappeared, the bank still continue to force an additional quantity of notes into circulation, the excess will be absorbed in it, the value of the cur- rency will be proportionally depreciated, and will produce a corresponding rise in the price of com- modities. CAROLINE. But Is it known whether the Bank of Enfrland o has materially increased its issue of notes since it has been exonerated from the obligation of payin"- them in cash ? MRS. B. Of that there is no doubt; but it is the opinion 356 ON MONEY. of many people that the supply of notes has not exceeded the demand ; — that the paper-mine (as you call it) has increased its produce only in pro- portion to the increase of the produce of the country, and the peculiar exigencies of the times, political circumstances having deranged the natural order of things, and rendered, during the late re- volutions of Europe, a more than usual quantity of currency necessary. CAROLINE. But was it not during the late war that all our gold coin disappeared, and was supposed to be melted down or exported ? And was there not a general rise in the price of provisions and all com- modities at the same period ? MRS. B. That is true ; and the question is very much dis- puted whether these circumstances were owing to the war, and the taxes it entailed upon us, or to an over-issue of bank-notes. England was under the necessity of paying her troops on the Continent, and of subsidising foreign sovereigns ; this, some people are of opinion, was a sufficient reason to account for the disappearance of our specie, and to render an additional issue of bank-notes necessary. Then the rise in the price of provisions they attri- buted to the difficulty of importing foreign agricul- tural produce, which naturally raises the price of ON MONEY. 357 the home supply. Foreign commodities also be- came dear from their scarcity, and this enhanced the price of such goods as would serve as a substi- tute for them at home. CAROLINE, And commodities of English manufacture, so far from rising in price, were, I recollect, much cheaper during the last war. Now if the currency were depreciated, it should produce a general rise in the price of all commodities. I begin therefore to think that the bank may not have issued more notes than were required. MRS. B. The rise of price produced by a depreciation of the value of money is general, but not universal ; for other circumstances may not only counter- balance the effect of the depreciation of currency, in regard to particular commodities, but even render them cheaper notwithstanding. You must recollect that there are other causes which affect the price of goods. CAROLINE. True, the proportion of the supply to the de- mand ; but we have just been observing, that during a war there is a deficiency of supply, which in- creases instead of counteracting the effect of the depreciation of currency, a:? it would niake commo- dities still dearer. 358 ON MONEY. MRS. r. During a war there is generally a deficiency of foreign commodities, and there may also be of agricultural produce for our own consumption ; but of English manufactures intended for export- ation, there must, as we have before observed, be a redundancy, owing to the difficulty of expoiting them. Supposing, therefore, that a depreciation of the value of money should produce a general rise in the value of commodities of 1 per cent., whilst on the other hand the excess of the supply occasioned a reduction of value of English manu- factures of 20 per cent., at what rate would such goods sell? CAROLINE. Ten per cent, must be added on account of the depreciation of money, and 20 per cent, deducted on account of the excess of supply ; the goods w ould therefore sell 10 per cent, lower than before. The cheapness of our own manufactures, then, affords no proof against a depreciation of the currency. This makes me again waver in my opinion, Mrs. B., and I feel at a loss which side of the question to adopt. MRS. B. The strongest argument in favour of a depreci- ation of the currency is, that guineas no longer passed for the same value as gold bullion, which is the natural standard of the value of coined money. ON MONEY. 359 CAROLINE. Was the gold then adulterated, and an ouncQ of gold coined into more than 3/. IJi'. I0\d. r jMRS. b. No ; but gold bullion partook of the general rise of commodities, and instead of selling for 3/. 17^. lOjd. it sold for four, and even once as high as 51. an ounce. CAROLINE. But why did not guineas rise in the same pro»» portion ? I cannot conceive how they can be less valuable than a similar weight of the gold of which they are made. MRS. B. The coined and the uncoined gold remain in reality of the same value, but as it is not lawful for a guinea to pass for more than a pound-note and a shilling, the guineas are compelled to share the fate of the paper-currency ; and if that be depreci- ated, all the coined money of the couatry, whether gold or silver, must be so likewise. CAROLINE. Then, if it were not illegal, every one mouIiI melt his depreciated guineas and shillings, and con- vert them into gold and silver bulh'on ? 3f)0 ON MONEY. MRS. U. Certainly. It is this which causes our specie to disappear, and transports it to foreign countries, where it is freed from the shackles of a depreciated paper-currency, and enabled to fetch its real value in exchange for goods ; it is this also which, as we before observed, brings foreign goods to be sold at our market, because it is dear ; and sends our money to purchase goods at foreign markets, because they are cheap. CAROLINE. But if an ounce of gold rises in price from 31. 17 s. lO^d. to 5/., is it not rather the value of the bullion that has risen than the currency that has fallen ? MRS. B. Gold bullion, like every other commodity, rises in price only, not in value ,- and that rise is owing to the depreciation of the currency in which its price is estimated ; were there no depreciation, bul- lion and guineas would both be worth 3/. 1 7^. lOjU. an ounce. CAROLINE. Thi?, then, I think seems to decide the point of depreciation. MRS. B. You must recollect that when I undertook to assist you in acquiring a knowledge of the prin- ciples of political economy, we agreed to confine ON MONEY. :Uii our enquiries to such points as were well esta- blished. We cannot, therefore, venture to decide iij)on questions which are yet in dispute. It is very easy to acquire some knowledge of the principles of a science, but extremely difficult to know how to apply them. I would particularly caution you against hasty conclusions or inferences; the erroi*s arising from the misapplication of sound ])rinciples are scarcely less dangerous than those that proceed from total ignorance. Let us now conclude our observations on cur- rency, which wc may henceforth consider as con- sisting not merely of specie, but of coined and of } taper- money. CAROLINE. Pray is it necessary that the value of the cur- rency of a country should be equal to the value of the commodities to be circulated by it ? MRS. B. By no means. The same guinea or hank-note vill serve the purposr of transferring liom one iii- ■dividual to another several hundred jjounds worth of goods in the course ola short time. There arc besides many expedients for economising money, the most remarkable of which is an arrangement made amongst bankers. Their clerks meet every day after the hours of business to exchange the draughts made on eaeji other for the preceding day. n H62 ON MONEY. If, ior instance, the banking-house A. has drauglitfe to tlie amount of 20,000/. on the banking-house B., the latter has also, in all probability, draughts upon the former, though they may not be to tlie same amount ; the two houses exchange these draughts as far as they will balance each other, and are thus prevented the necessity of providing money for the payment of the whole. By this economical expedient, which is carried on amongst all the bankers in London east of St. Paul's, I understand that about 200,000/. performs the function of four or five millions. CAROLINE. And what do you suppose to be the proportion of the money to the value of the commodities to be circulated by it ? MRS. a. That, I believe, it would be impossible to ascer- tain. Mr. Sismondi, in his valuable Treatise on Commercial Wealth, compares these respective quantities to mechanical powers, which, though of different weights, balance each other from the equality of their momentum ; and, to follow up the comparison, he observes that though commodities are by far the most considerable in quantity, y( t that the velocity with which currency circulates compensates for its deficiency. ON MONL\. JJ63 CAROLINE. This is an extremely ingenious comparison, and 1 should suppose the analogy to be perfectly cor- rect; for the less money there i^ in circulation the more frequently it will be transferred from one to another in exchange for goods. MRS. B. Perfectly correct is rather too strong a term. The analogy will only bear to a certain extent, otherwise, whatever were the proportions of cur- rency and of commodities, they would always ba- lance each other, and the price of commodities would never be affected by the increase or diminu- tion of the quantity of currency. R 2 CONVERSATION XVllI. ON COMMERCE. "DIFFERENCE OF M'HOLESALE AND RETAIL TRADE. — GENERAL ADVANTAGES OF TRADE. — HOW IT ENRICHES A COUNTRY. ADVANTAGES OF RETAIL TRADE. GREAT PROFITS OF SMALL CAPITALS EXPLAINED. ADVANTAGES OF QUICK RETURN OF CAPITAL TO FARMERS AND MANUFACTURERS. ADVANTAGES OF ROADS, CANALS, &C. DIF- FERENCE OF THE HOME TRADE, FOREIGN TRADE, AND CARRYING TRADE. OF THE HOME TRADE : IT RETURNS CAPITAL QUICKER. MRS. B. We mentioned commerce as one of the modes of employing capital to produce a revenue ; but deferred investigating its effects until you had ac- (juired some knowledge of the nature and use of money. We may now, tlierefore, proceed to cxa I OV COMiMERCE. SG'y mine in what manner commerce enriches indivi- duals, and augments the wealth of a country. Those who engage their capitals in commerce or trade act as agents or middle-men between the pro- ducers and the consumers of the fruits of the earth ; they purchase them of the former, and sell them to the latter; and it is by the profits on the sale that capital so employed yields a revenue. There are two distinct sets of men engaged in trade : — merchants, who purchase commodities (either in a rude or a manufactured state) of those ■who produce them, — this is called wholesale trade; and shopkeepers, who purchase goods in smaller quantities of the merchants, and distribute them to the public according to the demand, — this consti- tutes the retail trade. CAROLINE. Trade will no doubt bring a revenue to those who employ their capital in it ; but I do not con- ceive how it contributes to the wealth of the country : for neither merchants nor shopkeepers produce any thing new; they add nothing to the general stock of wealth, but merely distribute that which is {)roduccd by others. It is true, that mercantile men form a considerable part of the community ; but if their profits are taken out of the pockets of their countrymen, they may make lorlnnes without enriching their country. 'Mid ON COMMERrE- MRS. B. Trade increases the wealth of a nation, not bj raising produce, like agriculture, nor by working up raw materials, like manufactures; but it gives an additional value to commodities by bringing them from places where they are plentiful to those where they are scarce ; and by providing the means of a more extended distribution of commodities, it gives a spur to the industry both of the agricul- tural and manufacturing classes. CAROLINE. Do you mean to say that the merchant and trftdesmen encourage farmers and manufacturers to Increase their productions, by finding purchasers for them ? MRS. B. Yes. It would be impossible, you know, for every town or district to produce the several kinds of commodities required for its consumption ; dif- ferent soils and climates, and various species of skill and industry are requisite for that purpose. Some lands are best calculated for corn, others for pas- ture ; some towns are celebrated by their cotton manufactures, others for their woollen cloths. Every place has, therefore, an excess of some kind of commodities and a deficiency of others; which renders a system of exchanges necessary, not only between individuals (as we observed in treating of ON COMMERCE. 36'7 ihe origin ol barter), but between towns and coun- tries to the most distant regions of the earth. Now it is the business of merchants to exchange the surpUis produce of one place for that of an- other. A man who deals in any particular com- modity makes it his business to find out in what parts that commodity is most abundant, and will be sold at the lowest price ; and in what parts it is most scarce, and will fetch the highest price, and then to ascertain the least expensive mode of con- veying it from the one to the other market. CAROLINE, In this they consult their own interest; since to purchase at the cheapest and sell at the dearest market will give them the greatest profits. MRS. B. No doubt; but it is wisely and beneficially or- dained, that by consulting their own interest they are at the same time favouring that of the com- munity. When merchants hasten to send their goods to a market where they will sell at a high price, they supply those who are in want of such goods : the higher the price, the more urgent is the demand ; it is a deficiency that has rendered them dear, and by furnishing the market with an ample supply, merchants not only satisfy the wants B 4 .JG» ON COMMERCE. of the purchasers, but ultimately lower the price of the commodity. Do you think that manufacturers would be able to dispose of an equal quantity of goods without the intervention of mercantile men ? In such a case Manchester would be reduced to distribute its cot- tons merely within its own precincts and environs, instead of supplying, as it now does, not only the demand of all England, but even that of the ruost iemote provinces of America. Trade encourages industry, in the second place^ by rendering commodities cheaper. The merchant, by dealing in large quantities, is enabled to bring goods to market at a less expense of conveyance, and can therefore afford to sell them on lower terms than if the consumer were obliged to send for them to the places where they are produced* CAROLINE. Yet things may gerrerally be bought at the lowest price where they arc produced or manufactured ? MRS. B. True; but if you add the charges of a private conveyance, they will cost you much dearer. Had we no means of procuring coals, than by sending a waggon to Newcastle, though we should pay less for them there than in London, they would, from the expense ol carriage, cost us more. Merchants OS COMMERCE. 'AGU uho deal in large quantities liave a regular system of conveyance for their goods, which considerably diminishes the charges. The coals are by them transported in ships to the different sea-ports, and thence conveyed in barges to the inland parts of the country wherever water-carriage is practicable. CAROLINE. It would, to be sure, not only be very expensive, but extremely inconvenient, were we obliged to send to distant parts for the commodities they pro- duce. If, for instance, it were necessary to send to ShefTicld to purchase a set of knives and forks; to Leeds for a coat, and to Norwich for a shawl ; — or, without going so far, were it requisite to send into the country for corn, meat, hay, in short, every thing which the country produces, these things would cost us much more than if we bought them of shopkeepers. But admitting that trade, by facilitating the dis- tribution of commodities, promotes their consump- tion, I cannot undcrsUind how that can conduce to the wealth of a country : it increases its comforts and enjoyments, but it seems to me to encourage expenditure rather than production. MRS. B. I'o increase the comforts and cnjovments of a country is the ultimate aim of national wealth; and R 5 370 ON COMMERCE. \ whilst trade promotes consumption, by rendering commodities cheaper, it does not engender prodi- gality in the consumer, but encourages industry in the producer, to augment the supply. A reduc- tion of price brings a commodity within the reach of a greater number of persons, which increases the demand for it ; the man who could afford to wear only a linen frock, will, when commodities are cheaper, be able to wear a coat. He who could allow himself but one coat in the year, can now without extravagance wear two. This increasing demand for commodities spurs the industry of the farmer and manufacturer, and they enrich themselves by furnishing the requisite supplies. With their wealth thefr consumption also augments ; for the wants of men increase with their means of satisfying them ; and when they add to their income, they usually add also to their ex- penditure. The farmer has more to satisfy the dcvsires of the manufacturer; and the manufacturer produces more to supply the demands of the farmer : so that each is enabled to give and receive a greater quantity of things in exchange. These exchanges, it is true, are made through the agency of mer- chants, and by the means of money, but they are effectually exchanges of commodities, as really as it the manufacturer supplied the farmer with cloth- ing in exchange for provisions. The increase of saleable commodities affects in a similar manner all ON COMMERCE. 371 classes of people. The proprietor of land improves his fortune by the increasinjT value of his rents, which the prosperous state of agriculture enables the farmer to pay ; and the labourer betters his con- dition by the rise in the rate of wages resulting from the increased demand for labour. The whole may be summed up by saying, that, the quantity of commodities being increased, a larger portion will fall to the lot of every consumer who has any share in their production. CAROLINE. I now bemn to understand the general advon- tages resulting from commerce. The retail trade carried on by shopkeepers must be attended with the same happy effects. It would be extremely in- convenient to the rich, and impracticable for the poor, to purchase the commodities they wanted in such large quantities as are disposed of by mer- chants and wholesale dealers. Were there no such trade as a butcher, for instance, every family would be obliged to purchase a whole sheep or a whole ox of the farmer. MRS. B. Retail trade is one of the most useful subdivisions of labour. Nothing can be moie dcbirable than that the poor, who arc maintained by daily or R 6 372 ON COMMtRCE. weekly wages, should be able to purchase their provisions in as small quantities as possible. CAROLINE. Yet r have often regretted the high price whiclt the lower orders of people are obliged to pay for fuel, candles, grocery, and various little articles with which they are supplied by the chandlers' shops ; whilst the higher ranks, who can afford to> purchase the same goods in larger quantities, ob- tain them of more extensive dealers, at a cheaper rate. MRS. B. You must consider that were there no small shopkeepers, the lower classes would be reduced to the utmost distress ; and th^se petty dealers cannot afford to sell their pennyworths, without being paid for the additional labour and trouble such kind of traffic requires. Their profits cannot be exorbi- tant, otherwise competition would in time reduce them to their natural standard. CAROLINE. But by selling very small quantities at a higher price, they must make more than the usual rate of profit ; and how do you reconcile this to the com- mon level of profit in all employment of capital ? MRS. B. By reckoning whatever gains they make above ihe usual profits of capital, as iscages, that is to say. ON COMMERCE. 373 the reward of their personal labour. The smaller is the capital which a man employs, the greater is the proportion which his wages will bear to the profits of his capital. A man who sells oranges in the streets has laid out perhaps a capital of 20 or 30 shillings on the goods in which he deals, the usual profits of trade on such a sum is two or three shillings a year ; but if he did not carry about oranges for sale, he would work as a labourer, and get perhaps two shillings a day wages ; these two shillings a day, or 62G shillings a-year, the man must make by the sale of his oranges, in addition to the usual profits of trade ; the whole of his gains go however under the name of profits, because the dlstinctioQ can be made only in theory, CAROLINE. But all tradesmen and mercantile men devote their time and attention to their business : should not, therefore, a portion of their gains be con- sidered as the reward of their personal labour, which must be valuable in proportion to the ex- tent and importance of the concern in which they are engaged. MRS. B. No doubt; yet it will bear but a small pro- portion to their profits, compared with that of petty dealers. A merchant who makes in trade an income of 5000/. a-year, were lie to engage himself 374 ON COMMERCE. as clerk, would probably not obtain a salary of above 500/. ; his wages would therefore be equal to only one-tenth of his profits, whilst those of the man who sold oranges would be above 200 times the amount of the profits of his capital. Another advantage resulting to the farmer and manufacturer, from the disposal of their goods to merchants, is the quick return of the capital they have employed in their production ; for they receive the price of their goods from the merchant much sooner than they would, were they obliged to col- lect it gradually from the consumers. Let us suppose a cotton-manufacturer who de- votes a capital of a thousand pounds to the employ- ment of as many labourers as it will maintain, and sells their work to a wholesale dealer for 1 J 00/. With this money he immediately sets his men and his mills to work again ; whilst, if he retailed the goods himself, though instead of 1100/. he might perhaps get 1200/. or even 1300/. for them ; yet, as the money would come in very slowly, he and his workmen would necessarily be kept a long time out of employ. CAROLINE. To the farmer such delays would prove ruinous, if he could not sell his crops in time to proceed with the necessary cultivation of the farm for the ensuing season. ON COMMERCE. 375 MRS. B. In order to .ivoid such extremities, both the farmer and manufacturer would be obliged to divide their capital into two parts, and employ the one in raising or manufacturing commodities, and the other in disposing of them. To the occupations of agriculture or nianuflictures, they would find it necessary to add that of trade, a complication which would be equally injurious to each of the concerns. Commerce is one of the economical divisions of labour; if it sets apart a certain number of men, for the purpose of circulating and distributing the produce of the earth, it is in order that those who are engagetl in raising and manufacturing that pro- duce should be able to devote the whole of their capital, their time, and their talents, to their re- spective employments. It is worthy of observation, too, that none of these divisions are enforced by law, but exist under the choice of the parties, and have been adopted from a view to their general interest. But although it is advantageous to separate commerce from other branches of industry, it is desirable that its operations should be facilitated as much iis possible, both in order that the agricul- ture and manufactures should not be deprived of too many labourers, and that commodities should be brought to market with the least possible ex- 376 ON COMMERCE. peiise. Good and numerous roads and navigable canals are extremely conducive to this end, as they enable the produce of the country to be conveyed with ease and expedition to the several markets ; for ease and expedition economise time and labour^ and economy of time and labour is productive of cheapness. CAnOLlNE. Were there no roads, the farmer being without means of sending his crops to market would not produce more than could be consumed by his family, and perhaps some few customers in his neighbourhood, and he must be content to clothe himself with the fleecds of his flocks and the skins of his herds, for he would be unable to procure manufactured articles. Nor would the manufac- turers be better off, as the market for the disposal of their goods would be ecjually limited. MRS. B. Neither towns nor manufactures could exist in such a state of things, because they could not be supplied with the produce of the country, which is still more necessary to their existence, than the workmansliip of the towns is to the farmer. It is the surplus produce of the country wiiich pays for the workmanship of the towns, and the surplus vvorkraanship of the towns that pays for the pro- ON COMMERCE. 377 iluce of the country. The greater, therefore, the intercourse between town and country, the greater is the encouragement given to the industry of both. History teaches us that in all old settled coun- tries no material improvement has taken place in the cultivation of the lands without a considerable advance in the state of manufactures and commerce ; and Adam Smith even goes so far as to say, that " through the greater part of Europe the com- " raerce and manufactures of cities, instead of " being the effect, have been the cause and oc- " casion of the improvement and cultivation of the *' country." But as the forms of governments, and the man- ners and customs o( our barbarous ancestors, have constantly interfered with and restricted the pro- gress of wealth and civilisation of Europe, tiic natural order of things has frcnjuently been re- versed, and towns have arisen, not from the surplus wealth of the country, but as citadels and fortresses in which the people found shelter from the oppres- sion of their superiors, and the incursions of their warlike neighbours. We must look to America for tiie natural cfTect of the progress of wealth and civilisation, and we shall there behold the habita- tions of farmers scattered over the face of the country, and town*^ built only after cultivation wa^ far advanced. 8/8 ON COMMERCE. CAROLINE. In expatiating on the advantages of facility ot conveyance, it must not, however, be forgotten, that the land whicli is converted into roads is taken from tillage ; and could we calculate the quantity of corn and hay which the roads, in a state of culture, jnight have produced, it would perhaps be found that some of thorn have occasioned more loss than gain. To take land from cultivation for the purpose of roads appears to mc very analogous to taking la- bourers from agriculture for the purpose of trade. ' MRS. B. The result is in both cases similar ; for there can be no doubt but that the general effect of roads and canals is to increase the produce of the country. If we arc indebted to merchants for the advantages of trade, roads and canals are the instruments with which they carry it on. Deprived of such means, liieir operations would be very circumscribed ; there would be no trade but at sea-ports, and along the course of rivers. The charges of conveyance from Liverpool to Manchester on the Duke of Bridgewater's canal is six shillings a ton, whilst the price of land-carriage i-. forty shillings. CAROLINE. It there had been a river from one of thor*? ON COMMERCE. '^7^ towns to ilie other the expense of carriaj^e would have been stili less tlian that of ^he canal. MRS. B. 1 beg your pardon ; a river is seldom uniformly navigable, and is always more or less circuitous in its course; and where the stream is powerful, it will admit of navigation only in one direction, as is the case in some of the American rivers. Before the Bridgewatcr canal was dug, the usual mode of con- veyance of goods was along the Mersea and the Trevcll, and the cost was twelve shillings a ton, just double that of conveyance on the canal. Macpher- son observes, that " this spirited and patriotic en- " terprisc of the Duke of Bridgewater is rewarded *» by a vast revenue, arising from his water-carriage " and his formerly useless coal-mine; and the sur- *' rounding country is benefited a pound at least in ** every shilling paid to the Duke." CAROLINE. This reminds me of a circumstance that occurr( d during a tour in Wales ; we were adiniring a neat fountain which oupplied a village with water, and were informed by the landlord of the inn, that he had constructed it, and had had the water conveyed from a distant spring, whence the people of the village had formerly been under the nece!.sity of itiching it. A trifling sum was annually i)aid by 380 ON COMMERCE. each family lor liberty to use this water, and the landlord thought it necessary to make many apo- logies for not allowing it them free of expense, and talked much of the money he had laid out in the enterprise. My father assured him that lie was convinced the s{K?culation was still more beneficial to the village than it was to himself; that as the inhabitants had the option of fetching water for themselves, the payment proved that it was because they could turn the time and labour they bestowed on the conveyance of water to better account ; and upon enquiry we found the village had been in an improving state ever since the erection of this foun- tain. It had not only become more opulent, but had acquired habits of cleanliness, which had proved very beneficial to the health of the people. MRS. B. There are three species of commerce in v.hich merchants engage their capitals. The home trade^ foreign trade, and the carrying trade. The home trade comprehends all the internal and coasting trade of a country. The foreign trade is that in which we exchange our commodities for those of foreign countries ; and the carrying trade consists in conve}'ing the commodities of one fo- reign country to another. Let us at present con-^ fine our observations to the home trade. ON COMMERCE. 38 I CAROLINE. The home trade, I conclude, must be the most advantiigeous to the country, because it encourages the industry ot our own people. MRS. B. But what difference can it make whether our la- bourci-s are em})loyed to work for us, or for fo- reigners? For if we export EngHsh goods, we receive an equal amount of foreign goods in ex- change ; so that foreign labourers work equally for us in return. The only advantage of the home trade is that it usually affords a quicker return of capital, which is a further means of promoting industry. The nearer is the market at which the merchant disposes of hiu goods, the sooner will his capital be re- turned to him, and the sooner will he be able to take other goods from the hands of the farmer or manufacturer. If a London merchant trades with Sheffield or Manchester, his capital may be re- turned to him in the course of a few weeks; if witii America or the East-Indies, it may be a year or two, or more, before he gets it back. The greater the vicinity of the market, therefore, the greater the number of sales and purchases he will be able to make in a given time. A capital of 1000/., for instance, might in the home trade be returned once a-month, and enable the merchant, dining 38'2 ON COMMEIlce. the course of the year, to purchase 1 2,000/. worll» of goods; whilst, if he sent his merchandise to India, two years would probably elapse before he got his capital returned. In the first case, there- fore, the 1000/. capital would afford 24 times more encouragement to industry than it would in the latter. CAROLINE. You do not thence mean to infer, that in the first case the profits would be twenty-four times greater ? MRS. B. Certainly not. Competition is, you know, per- petually tending to equalise the profits of capital, in whatever way it is employed. Profits will con- sequently be proportioned to the slow return of capital ; and must, therefore, be reckoned annually, and not calculated upon every time the capital is returned. CAROLINE. The period of the return of capital applies, then, not so much to the home or foreign trade, as to the distance of the market; for capital might be returned quicker in trading with Calais or Dunkirk than with Edinburgh and Cork ? MRS. B. It is very true ; and how nmch it is to be re- gretted that jealousies and dissensions should so ON COMMLRCt. 383 rrc(|U('ntly impede and restrict the trade between ni'ighbouring nations, which wcnild otlierwise be carried on with such great and reciprocal advantage I But we sliall reserve till our next interview the ob- servations we have to make on foreign trade. CONVERSATION XIX. ON FOREIGN TRADE. ADVANTAGES OF FOREIGN TRADE. IT EMPLOYS THE SURPLUS OF CAPITAL, AND DISPOSES OF A SURPLUS OF COMMODITIES. OF BOUNTIES. EFFECTS OF RESTRICTIONS ON FOREIGN TRADE. EXTRACT FROM SAY's POLITICAL ECONOMY. EXTRACT FROM FRANKLIN's WORKS. CAROLINE. At our last interview, Mrs. B., you were regret- ting that any restraint should be imposed on our trade with foreign countries ; yet I cannot help thinking that every measure tending to discourage foreign commerce, and promote our own industry, would be extremely useful. MRS. B. You would iind it difficult to accomplish both those objects ; for in order to encourage our own industry we must facilitate the means of selling the ON FOREIGN TRADE. 385 produce of our manufactures, and extend their market as much as possible. On the other hand, if we prohibit exportation, we limit the production of our manufactures to the supply which can be consumed at home. If the woollen manufacturers of Leeds, after having supplied the whole demand of England for broad cloths, have any capital left, they \vill use it in the preparation of woollen goods for exportation. CAROLINE. Why not rather employ it in the fabrication of other commodities which may be consumed at home ? MRS. B. If there were a deficiency of capital in any other bianch of industry at home, the redundancy would naturally be drawn to that branch ; but if all the tl'ade, that is, all the exchanges that could be made at home, have been made, we send the residue of our commodities to foreign markets for sale. CAROLINE. Yet it appear? a great hardship on the poor to send goods abroad, which so many of them are in want of at home. Mils. i;. The poor are lirst sujiplieil with whatever they can afford to purchase: and without tiic means of 386 ON FOREIGN TRADE. purchase you must recollect that there can be no effectual demand. It is not to be expected that farmers and manufacturers should labour for them merely from charitable motives, and were they so disposed, they would not long possess the means of continuing their benevolence. It would be very wrong, therefore, to consider this surplus produce as taken from the poor ; for it would not have been produced had there been no demand for it in fo- reign countries. CAROLINE. That is very true. In all employment of capital men labour with a view to profit ; they work, there- fore, only for those who will pay them the value of their produce. And it is easy to conceive that those who have no further want of English commodities may yet wish to procure foreign goods. The Eng- lish merchant will therefore say, " Since there is no more demand for the goods I deal in, I will export the remainder, which will be purchased abroad, and I shall get foreign commodities in exchange; — though my countrymen do not require any more cotton goods, I know that they will purchase wines, coffee, sugar, &c." MRS. B. Vei'y well. Let us examine now what would be the effect of confining the employment of ON FOKEIGN TRADE. 387 commercial capital to the lionic trade. If the inhabitants of the West-Indian islands, Jamaica, for instance, were to prohibit tlie exportation of coffee and sugar, and the planters were obliged to trade only within the island, the consequence would be, that the demand for coffee and sugar would be very insignificant, and that an incon- siderable part only of the capital of the colony would find employment. The same effect would take place in Russia, if foreign merchants were not allowed to purchase the hemp and flax so abund- antly produced in that countxy. If in Peru and Chili the exportation of indigo, bark, and other drugs was prohibited, the Europcan.s, who pur- chase them, would not be the only sufferers; the Americans would be impoverished for want of em- ployment for their capital. CAROLINE. All this is very clear, I admit. But what security have we that merchants will not employ their ca- pital in foi'eign commerce, before the demand for it in the home trade is fully supplied ? MRS. B. That security is derived from the natural distri- bution of capital according to the rate of profit. If foreign commerce employed more capital than the country could spare, the demand for it at home s 2 388 ON rORLIGN TilADr.. would raise the profits of the home trade, and the temptation of these increased profits would soon restore that portion of capital which had been un- necessarily withdrawn from it. CAROLINK. The rate of profit, then, affords an excelleut cri- terion of the employment of capital most advan- tageous to the community. When foreign com- merce offers greater profits than the home trade, it proves that there is a greater demand for capital in that branch of industry? MRS. B. Yes ; it proves that the country possesses a sur- plus quantity of produce either agricultural or manufactured, which cannot be disposed of in the home market ; and if the owners of this surplus were prevented from exchanging it for foreign commodities, it would not in future be produced, and those who produced it would be thrown out of em]iloyment. The first commodities a country usually exports is agricultural produce, which she exchanges for manufactured goods ; this is still the case with America, on account of its being a newly settled nation ; it is also the case with Poland and Russia, those countries having made slower progress in wealth and population than the other communities OS FOREIGN TRADi:. 389 of Europe. W'lic'ii nations are considerably ad- vanced in wcaltli and population, all the food they raise is retjuired at home, and uianulactures are established in order to employ the increased num- bers of people ; in the course of time they find it expedient to export manvifacturcd ^oods in return for corn, which the}' can obtain cheaper by im- portation than by raising it on inferior soils at liome. And it is at this point that England h Slow arrived. CAROLINE. I am surprised that foreign commerce witli dis- tant countries should ever oH'er sufficient profits to afford a compensation to the merchant for the dis- ixdvantages arising from the slow return of capital. MRS. B. If it did not, no merchant woukl enfra£0 in it. The greater the distance of the market to which lie sends his goods, the greater must be the profits on their sale, to make up not only for the tardy leiurn of his capital, but also for the charges of convevancc of the m)ods. I'reijjht and insurance from sea risks arc bodi to be deducted from the piofits of the merchant in foreign trade. CAROLINE. Tlieii since wi- arc obliged to sell our goods at hucli high prices in distant markets, 1 wonder tliat s 3 :^!)0 ON FOREIGN TRADE. wc should find purchasers for them : would it not answer better for those countries to produce them at home? iMRS. B. You may be assured that no ration will pur- chase from abroad what may be procured of the same quality and for less expense at home. But ail countries are not equally capable of producing the same kind of commodities, either rude or mar nufactured. The gifts of nature are still more diversified in the different climates of the earth, than the habits and dispositions of men. It would be impossible for us at any expense to produce the wines of Portugal, on account of the coldness of our climate. We can procure them only by an exchange of commodities : the Portuguese take our broad cloth in return : this, it is true, they might manufacture at home ; but as our climate is pecu- liarly favourable to pasturage, and our workmen particularly skilful in manufactures, broad cloths could not be made in Portugal equally good at the same expense, including the charges of freight and insurance ; and whilst the Portuguese can purchase them of us for less than they can fabricate them at home, it is certainly their interest to procure them in exchange for commodities the culture or fabri- cation of which is more suited to the nature of their climate and the habits of the people. But the difference of price of our manufactured ON FOREIGN TRADE. 391 goods at home or abroad is not so great as you would imagine; in articles of small bulk it is very trifling. I recollect some years since purchasing an English pocket-book at Turin for nearly the same price that it would have cost in London. CAROLINE. How, then, was the expense of conveyance de- frayed ; and what compensation was there for the slow return of capital ? MRS. B. These expenses probably did not more than counterbalance the high rent and taxes paid by London shopkeepers, which I believe are com- paratively insignificant at Turin. There might, perhaps, also be some bounty on the exportation of such goods, which would enable the merchant to sell them at a lower price. CAROLINE. Pray what is a bounty on goods? MRS. B. It is a pecuniary reward given by government for the exportation of certiiin goods. Govern- ments, so far from partaking of your prejudices against foreign trade, often think it right to encou- rage the exportation of their manufactures by such iinificial measures. s 4 3})2 ON FOREIGN TRADE. CAROLINE. A bounty, then, on any commodity has the effect of inducing merchants to export more of it than they would otherwise do, as it raises their profits. But in consequence of this, capital will be drawn into that trade beyond its due proportion? MItS. B. Certainly ; a bounty often tempts merchants to invest capital in a trade which otherwise would not answer ; that is, to export goods which would not yield a profit, after paying the expenses of con- veyance, without such encouragement ; and this capital, were it not artificially drawn out of its natural course, would flow into channels which would yield profits, without any expense to go- vernment. CAROM NE. Here, then, my apprehension of foreign trade is well-founded ; for more capital is drawn into it than is required to preserve the equality of profits. MRS. IJ. That is sometimes the case ; but it may also be unduly drawn liom one branch of foreign com- merce to another. The effect of bounties, how- ever, is generally counteracted by the nations with whom we trade. Alarmed at our thus forcing our goods upon them, and dreadfully apprehensive of ox FOREIGN TRADE. 393 its inteiTeriiig wkh the sale of their own iiianuftic- tures, they inmicdiatcly lay a duty on the commo- dity Oil which we grant a bounty, and oblige it to pay, on entei'ing their territory, a sum at least equivalent to that which we bestow on it on quit- ting our own. CAROLINE. What a pity that either party should interfere to check, and restrain the natural course of commerce ! The disease, however, seems to call for the re- medy ; as it is sometimes expedient to take one poison as an antidote to another. MRS. B. If we are so generous, or so ab>urd, as to en- able foreigners to purchase our connnotlitics at a cheaper rate, by paying a part of the price for them, are we not doing them a service, and our-r selves an injury ? And is it wise in them to en- deavour to counteract such a measure ? CAROLINE. True; I did not consider it in that point of view. It is really laughable to see two nations, the one strenuously endeavouring to injure itsclti whilst the other studiously avoids receiving a bcr nefit ; and thus, by the mutual counteraction of each other's artifice, they leave the trade to loH.ovv its natural cotn'sc. s 5 394 ON FOREIGN TRADE. I am now perfectly satisfied of the advantage ot obtaining, by means of foreign commerce, sucl: articles as cannot be produced at home; but I confess I do not feel the same conviction with re- gard to commodities which might be produced at liome, though with some additional expense. MRS. B. "Why should it not be the interest of a country as well as that of an individual to purchase com- modities wherever they can be procured cheapest? It might be very possible, as it has been observed by an ingenious writer *, for England to produce at a great expense of labour the tobacco wliich we now import from Virginia : and the Virginians, with no less difficulty, might fabricate the broad cloths with which we furnish them. But if our climate is better adapted to pasturage, and that of Virginia to the culture of tobacco, it is evident that the ex- change of these commodities is a mutual advan- tage. CAROLINE. But are not the goods exchanged in trade of equal value ? If we send the Virginians a thousand pounds worth of broad cloths, they will send us only a thousand pounds worth of tobacco in return. * Sir Francis Divernois. n ON FOREIGN TRADE. 395 It may be a convenient measure, and the ex- chang'mg merchants will each make their profits; but 1 cannot perceive how the country can derive any accession of wealth from such traflic. MRS. B. Recollect that we said trade gives an additional value to commodities by bringing them from places where they are plentiful to tiiose where they are scarce. When we ship off 1000/. worth of broad cloths for Virginia, and the Virginians export 1000/. worth of tobacco for England, the com- modities are of equal value; but they each acquire an additional value during the transport; the to- bacco was not worth so nuich in Virginia as it is when it arrives in England, because, not being cultivated here, it is more scarce and in greater demand with us. The broad cloth was not worth so nmch in England as it is when it reaches Virginia, because, not being fabricated in that country, it is more scarce and in greater demand there. CAROLINE. Very true ; but if we both cultivated tobacco and fabricated broad cloths ; and if the Virginians did the same, each country would be supplied at home, and the expense of conveyance of tiic two cargoes exchanged would be saved. s a 3f)(> ON FOREIGN TRADE. MRS. B. If we could raise tobacco at as little expcu?c as it is (lone in Virginia, and the Virginians could ukiiiu- facturo broad clotiis as clieap as they can purchase them of us, your argument would be just; but that is not the case. To make this clear to you, let us examine what quantity of labour is bestowed upon the production of these several commodities. If the bix)ad cloth which we send to Virginia cost us the labour of one man we will say for 1000 days, while the tobacco which we receive in exchange would have cost us 2000 days' labour to produce at home, do we not save a thousand days' labour ? and is not the advantage to the Virginians similar, if the tobacco which cost them 1000 days* labour to raij;.e, will exchange for English broad cloth which they could not have manufactured under 2000 days' labour ? CAROLINE. By such an exchange, then, each country saves 1000 days' labour? MRS. B. Yes ; and to save is to gain ; for the thousand days' labour thus economised arc emplo^-ed in the production of some other connnodity, which is so inuch clear gain to each country. 10 ON FOUEIGN TRADE. :V.)7 CAROLINE. Then each country procures the commodity it wants at lialf the expense which would have been rwjuircd to produce it at home? MRS. B. Just so. To jnit the question in other words, we may say, if by the cmploynient of 50,000/. in tjje \'irginia trade we can obtain as much tobacco as would require 1 00,000/. if cultivated at home, there is 50,000/. cconomise, will find it answer better to import some portion of the corn they consume, and to convert their inferior lands into pasture. This would not only lower the price of bread, but also that of meat, milk, butter, and cheese, the supply of which would be increased by the conversion of corn land into pasture. When the home crops proved abundant, they would import let^s; when scanty, they would T 2 412 ON iOREIGN TKADL. import more. Thus without difficulty they would pi'oportion the supply to the demand, and keep botli bread and wages steadily at moderate prices. CAROLINE. But with the additional expenses of freight and insurance, can we import corn from America cheaper than we can produce it at home ? MRS. B. In ordinary seasons we certainly can ; but not at the present price of corn. CAROLINE. And do you suppose that the present low price of corn, and the distressed state of agriculture, are owing to our producing too much corn at home ? MRS, B. I have no doubt but that it is one of the causes, but it is connected with many others, which render the question so complicated and intricate that we must leave it to wiser heads than our own to un- ravel it. The system of growing a home supply of corn, in countries where great capital affords the means of maintaining a very large population, is attended not only with the disadvantage of keeping the price pf corn high, in average seasons, but likewise occa- # * ON FOREIGN TRADE, 413 slons greater fluctuations of" price, in times of dearth or abundance, than if those casualties were dimi- nished by a free corn-trade with otlier countries. It would perhaps be difficult to say whether we have -suffered most from a high or a low price of corn, within these last twenty years ; but we have acquired sufficient experience of the evils arising from both these extremes to think, that the wisest measures we could pursue, would be to adopt such as would prevent great fluctuations of price. Nothing is more injurious to the interests of the labouring classes than great and sudden fluctuations in the price of bread : they are either distressed by unexpected poverty, or intoxicated by sudden pros- perity ; but if that prosperity is the effect but of one fruitful season, it gives rise to expenses they are un- able to maintain. It is but a gleam of sunshine on a wintry day, and the buds it untimely developes are nipped by the succeeding frost. CAROLINE. Well, Mrs. B., I see that you will not allow of ajiy exception in favour of the corn-trade, and that I must consent to admit of the propriety of leaving all trade whatever perfectly free and open. MRS. B. That is certainly the wisest way. Instead ot ;3iruggling against the dictates of reason and nature, T 3 •Hi- ON FOUEIGN THADE. and madly attemptiiii,^ to produce every tiling at home, coimtries should study to direct their labours to those departments of industry for which their situation and circumstances are best adapted, CAROLINE. Yet you must allow me to observe, tliat there are numerous instances of our liavin^ established flourishing manufactures of goods which we formerly procured entirely from foreign commerce ; such, for instance, as china-wave, muslins, damask linen, and a variety of others. Now docs not this imply that we may sometimes direct our labour to a new branch of industry with greater advantage than by importing the goods from foreign countries ? MRS. B. It certainly does ; and it shews also, that as soon as we are able to cultivate or fabricate the commo- dities Ave have been accustomed to procure from foreign parts as cheap as we can import them, we never fail to do so. But the period for the intro- duction of any new branch of industry should be left to the experience and discretion of the indivi- duals concerned in it, and not attempted to be regulated or enforced by government. James I. attempted to compel his subjects to dye their woollen cloths in this country, instead of sending them to the Netherlands, as had been the usual practice ; OM FOUEIGN TRADE. tl5 but the English-dyed woollen cloths provcil both of worse quality and dearer tlian those of the Ne- therlands, and James was obliged to abandon his plan. Had the sovereign not interi'ered, dyers would have establisiied themselves in this country as soon as the peoj)le had acquired sufficient skill to undertake the business; but the discouragement proiluccnl by an unsuccessful attempt probably re- tarded the natund period of adopting it. If it were possible for a country both to cultivate and manufacture all kinds of produce with as little labour as it costs to purchase them from other countries, there would be no occasion for foreign -commerce: but the remarkable manner in which Providence has varied the productions of nature in ditFcrcnt climates, appears to indicate a design to promote an intercourse between nations, even to the most distant reijions of the earth; an intercourse which would ever prove a source of reci|)rocal be- nefit and happiness, were it not often perverted by the bad passions and blind policy of man. CAROLINE. And independently of the diversity of soils, cli- mates, and natural jjroihiclions, I do not suppose that it would be possible for any single country to succectl in all branches of industry, any more than for a single individual to ac(juire any considerable skill in a great variety of pursuits? r 1 416 ON FOREIGN TRADE. MRS. B. Certainly not. The same kind of division ot labour which exists among the individuals of a community, is also in some degree observable among different countries; and when particular branches of industry are not formed by local cir* cumstances, it will generally be found the best po- licy to endeavour to excel a neighbouring nation in those manufactures in which we are nearly on a par, rather than to attempt competition in those in which by long habit and skill they have acquired a decided superiority. Thus will the common stock of productions be most improved, and all countries most benefitted. Nothhig can be more illiberal and short-sighted than a jealousy of the progress of "neighbouring countries, either in agriculture or manufactures. Their demand for our commodities, so far from diminishing, will always be found to increase with the means of purchasing them. It is the idleness and poverty, not the wealth and in- dustry of neighbouring nations, that should excite alarm. CAROLINE. A tradesman would consider it more to his in- terest to set up his shop in the neighbourhood of opulent customers than of poor people who could not afford to purchase his goods ; and why should not countries consider trade in the same point of view ? ON FOREIGN TRADE. i\7 MRS. B. Mirabeau, in his " Monarchif Pnissienne" has carried this principle so far, that it has made him doubt whether tlie trade of France was injured by the revocation of the edict of Nantz, which drove so many skilful manufacturers and artificers out of the country. " II est en general un principe sur en commerce; " plus vos acheteurs seront riches, plus vous leur " vendrez ; ainsi les causes qui enrichissent un ** peuple augmente toujours I'industrie de ceux qui *' ont des affaires a negocier avec lui. Sans doute " c'est unc demence frc-nctique de chasser 200,000 *♦ individus de son pays pour enricher celui des " autres ; mais la nature qui veut conserver son *' ouvrage ne cesse de reparer, par des compensa- *' tions insensibles, les erreurs des hommes, et les " fautes les plus desastreuses ne sont pas sans " remedes. La grande verite que nous offre cet *' exemple memorable, c'est qu'il est insense de " detruire I'industrie et le commerce de ses voisins, ■" puisqu'on aneantit en meme tems chez soi merae ** ces tresors. iSi de tels efforts pouvoient jamais ** produire leur effet, ils depeupleroient le monde, « et rendroient tres infortunee la nation qui auroit *' eu le malhcur d'engloutir toute I'industrie, tout " le commerce du globe, et de vendre toujours '' sans jamais achetcr. Heureuscment la Provi- *' dencc a tcUemcnt dispose les choscs que les dchrcs T 5 418 ON rOREIGN TRADE. *' des souverains nc sauroient arreter entieremcnt *' ses vues de bonheur pour notre espece." CAROLINE. The more I learn upon this subject, the more I feel convinced that the interests of nations, as well as those of individuals, so far from being opposed to each other, are in the most perfect unison. MRS. E. Liberal and enlarged viev.s will always lead to similar conclusions, and teach us to cherish senti- ments of universal benevolence towards each other ; hence the superiority of science over mere practical knowledge. CONVERSATION XXI. Suhjcd of FOREIGN TRADE conti7iucd. OF BILLS OF EXCHANGE. OF THE BALANCE OP TRADE. CAUSE OF THE REAL VARIATION OF THE EXCHANGE. DISPROPORTION OF EXPORTS AND IMPORTS. — CAUSE OF THE NOMINAL VA-, IIIATION OF THE EXCHANGE. DEPRECIATION OF THE VALUE OF THE CURRENCY OF THE COUNTRY. MRS. B. I HOPE that you are pow quite satisfied of the advantages which result from foreign commerce ? CAROLINE. Perfectly so; but there is one thing that per- plexes me. In a general point of view I conceive Uiat trade consists in an exchange of commodities ; but I do not understand how this exchange takes place between merchants. The winc-mcrchant, for instance, who imports wine from Portugal, docs T f> 420 ON FOREIGN TRADE. not export goods in retjwn for it ; his trade is con- fined to the article of wine ? MRS. B. There are many general merchants wl>o both export and import various articles of trade. Thus the Spanish merchant, the Turkey merchant, and the West-Indian merchant, import all the diiFerent commodities which we receive from those countries, and generally export English goods in return. It is, however, the countries, rather than the indi- viduals, who exchange their respective productions ; for both the goods exported and imported are in all cases bought and sold, and never actually exchanged. CAROLINE. But since the merchants of the respective coun- tries do not literally exchange their goods, they must each of them send a sum of money in pay- ment; and these sums of money will be nearly equivalent. If the London merchant has lOCK)/. to pay for wines at Lisbon, the Lisbon merchamt will have nearly the same sum to pay for broad cloth in London. It is to be regretted, therefore, that the goods should not be actually exchanged, or that some mode should not be devised of reci- procally transferring the debts, in order to avoid so much useless expense and trouble. ON FOREIGN TRADL. 4 J I MRb. B. Such a mode has been devised, and these pur- chases and sales arc usually made without the in- tervention of money, by means oi written orders called bills of exchaiige. CAROLINE. Is not then a bill of exchange a species of paper- money like a bank-note ? MRS. B. Not exactly ; instead of being a promissory note, it is an order addressed to the person abroad to whom the merchant sends his goods, directing him to pay the amount of the bill, at a certain date, to some third person mentioned in the bill. Thus when a woollen merchant sends broad cloths to Portugal, he draws such a bill on the merchant to whom he consigns them ; but instead of sendijig it with the goods to Portugal, he disposes of it in London : that is to say, he enquires whether any person wants such a bill for the j)nrpose of dis- charging a debt in Portugal. lie accordingly ap- plies to some wine-merchant who owes a sum of money to a mercantile house at Lisbon for wines imported from that country, and who finds it con- venient to avail himself of this mode of payment, in order to avoid the expense of sending money to Portugal. He therefore gives the woollen-merchant 4'22 ON FOREIGN TRADE. tlie value of his bill, and having his own name or that of his correspondent in Portugal inserted in the bill as the third person to whom the amount of the bill is to be paid, transmits it to his corre- spondent in Portugal, who receives the money from the person on whom it is drawn. CAROLINE. The same bill then is the means of paying for both commodities, the broad cloth and the wine ; and it supersedes the necessity of transmitting two sums of money for that purpose. A bill of ex- change is a most convenient and economical con- trivance, and I feel very much inclined to avail myself of it. A friend of mine at York owes me a sum of money for purchases I have made for her in London ; and my sister Emily is indebted about the same sum to a glover at York. I might, therefore, draw a bill of exchange on my friend, Avhich Emily would buy of me, and forward it to the glover at York for the purpose of discharging her debt for the gloves ; and he would receive the money from my friend on whom it was drawn. It is, if I understand you right, by such transfers of debts that commodities are really exchanged be- tween merchants ? MRS. B. I am glad to see that you understand the use of ON FORKIGNT TRADE. 423 a bill of exchange so well. It will therefore be evident to you that if, when two countries are trading together, the value of the goods exported and imported be equal, the amount of the bills of exchange in payment of those goods will be so likewise ; and the debts will be mutually settled without the necessity of transmitting money. CAROLINE. That is quite clear: but it must, I suppose, frequently happen, that the value of the goods exported and imported is not equal, and in that case the bills of exchange will not settle the whole of the respective debts, and some balance or sum of money will remain due from one cpuntry to the other. MRS. B. This is called the balance of trade. In order to explain to you in what manner such a debt is settled, let us take, for example, our trade with Russia : — if, in trading with that country, our ex- ports and imports are exactly equal in value, the cxchan MRS. B. It the business of the bill-merchant could be transacted with the same celerity and regularity as that of the bankers in London, who meet together every day, after the hours of business, to settle their respective accounts, it might influence the exchanges in the manner you suppose. But the speculations of the bill-merchant embrace so wide a sphere, and so many circumstances occur in the course of trade, or of political events, by which the exchanges are affected, that no individual pru- dence or foresight can prevent great fluctuations. CAROLINE. Are then merchants often reduced to the necesr sity of sending abroad money in payment of foreigQ goods ? MRS. B. Scarcely ever, I believe, excepting where there is a greater demand for money than for goods ; for inde- pendently of the operations of the bill-merchants, there isyet another means of preventingthatexpense. When the English merchants who export goods to Russia, find that the excess of imports over ex- ports, produces a scarcity of their bills on Russia, which enables them to sell them to the importing merchants at a premium, such an addition to their usual profits of trade, induces them to increase their exportations, and has, in fact, the effect of a bounty. 4:iO ON rOREIGN TRADE. Ibr tlicy can now afford to export gootlswliicli, be- fore, did not yield sufficient profits to enable tlieni to do it. M'liiist, on the contrary, our importini^ merchants of Russian commodities, who are obliged to purchase these bills at u premium, (which lias the effect of a duty, since it is a clear deduction from their profits,) will confine their importations to such commodities only as will leave them their usual profits, after deducting the premium upon the bills with which they were to be paid. CAROLINE. The premiums, then, which our importing mer- chants lose, our exporting merchants gain. This must undoubtedly have a considerable effect in en- couraging exportation, and restraining importation, and tend rapidly to restore the equality of the exchange. MRS. B. The evil, then, of an unfavourable exchange im- mediately gives rise to the remedy which corrects it, and actually tends to equalise the exports and imports. But in order to have completely that efU'ect, it would be necessary that the country with whom the exchange is unfavourable should require as much of our productions as we do of theirs, which is not always the case. The unfavourable exchange, however, enables the exporting mer- chant to af!brd his goods abroad at a lower rate, 15 ON FOREIGN TRADK. 431 becauiiC a part of his profit is derived from the pre- mium on the exchange, and thus more persons abroad being able to purchase at the reduced price, the market for the goods is enlarged, and a much greater quantity consumed. CAROLINE. All these circumstances, then, together must nearly supersede the necessity of sending money to balance the account? MRS. li. Very nearly so, I believe, except with such coun- tries as, having mines of their own, may be said to produce money. If Spain and Portugal were to retain all the gold and silver which they ilerivefrom their mines, it would fall so umch in value in those countries that no laws could prevent its conveyance to others where its value was greater. It woidd be the most pro(ital)le article a Spanish or Portuguese mo'rchant could export in payment for the goods imported; and indeetl we find that they supply Kurope with gold and silver, in the same manner as we supply it with the produce of our West-In- dian colonies, coflee and sugar. We have, in a former conversation, observed how the precious metals were diflused throughout all civilised na- tions, and the supply every where so proportioned to the demand, as to admit of no other variation ol iA2 ON FOREIGN TRADE. value than the small difference arising IVoiii the expense of bringing them from the mines to the different countries where they are wanted. CAROLINE. But have I not heard of the exchange having been much below what it would cost to send money abroad ? MRS. B. That is true ; but I believe it is principally to be ascribed to another and a totally different cause, wliich nominally influences the exchanges to a very great extent. We formerly observed, that a de- preciation of value of the currency of a country raises the price of commodities in that country. Whether the depreciation arises from an unneces- sary increase of currency, from an adulteration of the coin, or from any other cause, it invariably produces this effect. Let us suppose the currency of England to be depreciated 25 per cent.; that is to say, that a sum worth 100/. previous to the depreciation, is now really worth only 7^i-9 though it retains its nominal value of 1 00/. An English bill of exchange, which represents a certain portion of the currency, will partake of this depreciation, and will no longer be equal in value to a foreign bill of the same amount. It would require an English bill of 133/. 6s. 8d. to exchange for a foreign one of 1 00/. ; therefore if ON FOREIGN COMMERCE. 433 before the depreciation the exchange were at par, this circumstance would make it immediately fall 25 per ceot. CAROLINE. Would not the evil, then, be remedied by increas- ing the exports, and diminishing the imports, as when the unfavourable state of the exchange arises from the unequal balance of trade ? MRS. B. Certainly not. For though it is true that in both cases the exporting merchant can sell his bills at a premium, yet when this premium arises from a depreciation of the currency, it cannot be con- sidered as any gain to him, because it is exactly balanced by the advanced price of the goods he exports, which operates as a loss. CAROLINE. I think I understand it. The depreciation of currency which produces the premium on the bill of exchange produces also an increase in the price of the merchandise, and these effects, resulting from the same cause, must always correspond and be felt in the same proportion. Thus if a merchant ex- ports cloth to Hamburgh which costs him 200/., whatever profits he might expect under the ordinary state of the currency must be diminished 25 per cent., in consequence of his giving 50/, more for his u 434 ON FOREIGN COMMERCE. cMlli than he would otherwise have done. Yet as he will sell the bill of exchange which he draws on Hamburgh for the payment of his cloth at a pre- mium of 50/., his profits will remain precisely the same, upon the whole transaction, as if every thing had gone on in its regular way. MRS. B. You have explained it perfectly well. Remember therefore that when the exchange is unfavourable in consequence of the depreciation of the currency, it is only nominally, not really unfavourable; for it may take place when the exports and imports are perfectly equal. And recollect also that the differ- ence the exchange produces in the sale or purchase of bills is neither a loss nor a gain to the parties, and that it has no effect either on exportation or im- portation. CAROLINE. But is it easy to distinguish between two causes which are so similar in their effects, and to ascer- tain at any time which, of them it is that influences the exchange? MRS. B. Far from it : this has been a subject of much discussion, particularly during the late war. If it be true that the currency of the country has been increased beyond what was required, it must be \ ON FOREIGN COMMERCE. iSS considered as depreciated, and as having nominally affected the exchange. On the other hand, as the system of warfare was remarkably unfavourable to our exportations, the balance of foreign debt was very much against us, and the expense of transmitting gold considerably increased ; so far the exchange may be said to have been realli/ unfavourable. It is probable that both these causes contributed to the very low rate of our exchange during the late war. Notwithstanding all the investigation which these subjects have undergone, there still prevails, even amongst our legislators, the old popular error re- specting the balance of trade. Even at this day we find persons congratulating the country, that the exports exceed the imports, and that in conse- quence a balance of money remains due to us, whichf is considered as so much gain to the country. CAROLINE. But do those who maintain such an opinion know, that this money would not be due to us, unless we had exported a surplus of merchandise to an equal amount ? MRS. B. It is from that circumstance they conceive the advantage arises. They assert that since the poor are maintained by labour, the more work we poi- u 2 436 ON FOREIGN COMMERCE. form for other countries, and the more money we receive for our work, the richer we must be. CAROLINE. Not if we export the fruits of their labour and receive only gold in return : for the poor are main- tained not by the act of labour, but by its pro- duce ; and if all that produce were exported, and nothing but gold received in exchange, we should be much in the situation of King Midas, who was starved because every thing he touched was con- verted into gold. But do not the bill- merchants prevent this im- portation of gold, by transferring the bills of ex- change from one country to another ? for if our balance of trade is favourable with one country, it must be unfavourable with another. MRS. B. No doubt they do. If it were possible to have what is called a favourable balance of trade with every country, we should accumulate a quantity of the precious metals which would answer no other purpose than to depreciate our currency. The most advantageous trade for both parties concerned is when the exports and imports are equal, so that the balance does not preponderate on either side ; for it is as injurious to one country to part with money which is wanted at home for the ON FOREIGN COMMERCE. 437 oiirposes of currency, as it is to the other to receive it when it is not wanted. When a country receives bullion, it should not be in payment of a balance of debt, but as a com- moditj' for which there is a demand. This demand will always take place in thriving countries, not only because gold and silver bullion are wanted by jewellers and silversmiths for the purposes of luxury ; but also because, as the saleable produce of the country increases, an additional quantity of cur- rency is required for its ciiculation. CAROLINE. According to this theory of the balance of trade, it should always be against Spain and Portugal, and favourable to every other country ; because it is through Spain and Portugal that all the treasures of the new world flow into Europe ? MRS. B. True ; but they are not sent immediately from those countries to the most distant parts of Europe, but are transferred through the intermediate coun- tries. Thus France sends Louis to Geneva to pay for the watches she imports from that ])lace ; or to Italy, in payment of raw silks, olive oil, &c. So that the countries most distant from Spain and Por- tugal would constantly have what is absurdly called the balance of trade in their favour; whilst the in- ij :' 438 ON FOREIGN COMMERCE. teiniediatc countries would liavc it favourable with those which were nearer Spain than themselves, and unfavourable with those which were more distant. This, however, is a general principle, which, though true in theory, requires modification, if applied to practice. A great variety of circum- stances occasion fluctuations in the regular distri- bution of the wealth of America. However extra- ordinary it may appear, it is not very long since we sent considerable quantities of specie to Spain and Portugal, to maintain our troops in those countries : so much does war reverse the natural order of things. Instead of exporting our manu- factures to bring back gold, we were obliged to drain our circulation to send money in order to support our troops, whilst our manufacturers were either starving, or became members of that very army which caused their ruin. CAROLINE. But if Spain, from the abundance of her gold and silver, imports such large quantities of manu- factured goods, is it not a check to her industry at iiome ? MRS. B. It certainly is ; though not so much as you would imagine, because she does not obtain the gold and silver of America free of cost : she obtains it partly ON FOREIGN COMMERCE. 439 in the form of a tax imposed by the mother-country, or rent for the royal mines ; and tlie rest by pay- ment in produce or manufactured goods. But these goods are not necessarily manufactured in Spain or Portugal. A Spanish merchant having imported goods from England and sent them to America, receives back gold and silver in payment, which are transmitted to England, if wanted there. Spain and Portugal being the entrepot, in conse- quence of the strict regulations by which the gold and silver are compelled to be brought to the mother- country. The want of industry in Spain, though it pro- ceeds in a great measure from the nature of its religion and government, is also in part attributable to the effect which the influx of the precious metals has produced. In Townsend's Travels in Spain, which abound ,vith philosophical observations, it is stated " that * the gold and silver of America, instead of * animating the country and promoting industry, * instead of giving life and vigour to the whole ' community, by tlie increase of arts, of manufac- * tures, and of commerce, had an opposite effect, ' and produced in the event weakness, poverty, * and depopulation. The wealth which proceeds ' from industry resembles the copious yet tranquil * stream, which passes silent, and almost invisible, * enriches the whole extent of country througli u 4 HO ON FOREIGN COMMERCE. " wliich it flows ; but the treasures of the new " world, like a swelling torrent, were seen, were " heard, were felt, were admired : yet their first " operation was to desolate and lay waste the spot " on which they fell. The shock was sudden; the " contrast was too great. Spain overflowed with " specie, whilst other nations were comparatively "■' poor in the extreme. The price of labour, of " provisions, and of manufactures, bore proportion " to the quantity of circulating cash. The conse- " quence is obvious ; in the poor countries industry " advanced; in the more wealthy it dechned. " Even in the present day (1806), specie being " about G per cent, less valuable in Spain than it " is in other countries, operates precisely in the " same proportion against her manufactures and *' her population." We may here, I think, conclude our observe ations on the principles of trade ; and having now explained the different sources from which a reve- nue may be derived, we shall at our next meeting make a few enquiries into the nature and effects of expenditure. CONVERSATION XXI. ON EXPENDITURE. OF THE DISPOSAL OF REVENUE. OF THE EXPENDI- TURE OF INDIVIDUALS. EFFECTS OF CONSUM- ING CAPITAL. — INCREASE OF REVENUE OF A COUNTRY BENEFICIAL TO ALL CLASSES OF PEOPLE. — EXCEPT IN CASES WHERE GOVERNMENT INTER- FERES WITH THE DISPOSAL OF CAPITAL. OF SUMPTUARY LAWS. OF LUXURY. INDUSTRY PROMOTED BY LUXURY. PASSAGE FROM PALEY ON LUXURY. SUDDEN INCREASE OF WEALTH PREJUDICIAL TO THE LABOURING CLASSES. PASSAGE FROM BENTHAM ON LEGISLATION. LUXURY OF THE ROMANS NOT THE RESULT OF INDUSTRY. OF THE DISADVANTAGES ARISING FROM EXCESS OF LUXURY. MRS. B. I TRUST that you now understand both the manner in which capital is accumulated, and the various modes ot employing it to produce a icvenue. It u 5 442 ON EXPENDITURE, remains for us to examine how this revenue may be disposed of. CAROLINE. I liave already learnt that revenue may either be spent, or accumulated and converted into capital ; and that the more a man economises for the latter purpose, the richer he becomes. MRS. B. Tliis observation is equally applicable to the capital of a country, which may be augmented by industry and frugality, or diminished by prodi- gality. CAROLINE. Tlie capital of a country, I think you said, con- sisted of the capital of its inhabitants taken col- ,-iectively? MRS. B. It does ; but you must be careful not to estimate the revenue of a country in the same manner, for it would lead to very erroneous calculations. Let us, for instance, suppose my income to be 10,000/. a-year, and that I pay 500/. a-year for the rent of my house — it is plain that this 500/. constitutes a portion of the income of my landlord ; and since therefore the same property, by being transferred IVom one to another, may successively form the in- come of several individuals, the revenue of the country cannot be estimated by the aggregate in- come of the people. ON EXPENDITURE. 4-13 CAROLINE. And does not the same reasoning apply to the expenditure of a country ; since the 500/. a-year which you spend in house-rent will be afterwards spent by your landlord in some other manner ? MRS. B. True, because spending money is but exchanging one thing against another of equal value ; — it is giving, for instance, one shilling in exchange for a loaf of bread, five guineas in exchange for a coat ; instead of a shilling we are possessed of a loaf of bread ; instead of five guineas, of a coat ; we are therefore as rich before as after these purchases are made. CAROLINE. If so, how is it that we are impoverished by spend- ing money ? MRS. n. It is not by purchasing, but by consuming the things we have purchased, that we are impoverished. When we have eaten the bread and worn out the coat, we are the poorer by five guineas and a shilling than we were before. A baker is not poorer for purchasing a hundred sacks of flour, nor a clothier for buying a hundred pieces of cloth, because they do not consume these commodities. u 6 444 ON EXPENDITURE. When a man purchases commodities with a view of re-selling them, he is a dealer in such commodi- ties, and it is capital which he lays out. But when he purchases commodities for the purpose of using and consuming them, it is called expenditure. Ex- penditure therefore always implies consumption. CAROLINE. I understand the difference perfectly. The one lays out capital with the view of re-selling his goods with profit. The other spends money with the view of consuming the goods with loss; — that is to say, the loss of the value of the goods he con- sumes. MRS. B. Just so. Thus though the sum of money you spend will serve the purpose of transferring com- modities successively from one pei:son to another, yet the commodities themselves can be consumed but once. Therefore the consumption of a country may, like its capital, be estimated by the aggregate con- sumption of its inhabitants ; and the great question relative to the prosperity of the country, is, how far that consumption takes place productively, and how far unproductively. CAROLINE. That certainly is a very important point ; for in ON EXPENDITURE. 445 the former case it increases wealth, in the latter it destroys it. Yet, Mrs. B., supposing a man were so prodigal as to spend not only the whole of his income, but even the capital itself, provided that it were spent in the maintenance of productive labourers, though it would ruin the individual, I do not conceive that it would injure the country ; for whether a man lay out his capital in the maintenance of produc- tive labourers with a view to profit, or whether he spend it in purchasing the fruits of their industry for the purpose of enjoyment, I can perceive no difference relative to the country ; in both cases an equal number of people would be employed, and consequently an equal quantity of wealth pro- duced. MRS. B. I have a strong suspicion that the difficulty you feel in understanding clearly the distinction be- tween the employment and expenditure of capital, arises from confounding capital with money ? CAROLINE. Indeed I think not ; my notion of capital is, that it consists of any kind of commodity useful to man. JMRS. B. Well, then, suppose that two persons are possessed of such commodities to the value of 5000/. each: 44G ON EXPENDITURE. that the one distributes them out to industrious workmen, furnishing them with food and materials to work upon, and that by the time the various commodities have been finally distributed, the workmen have fashioned them into objects of an- other form, but of superior value to what has been consumed. Let the other distribute his capital amongst his servants, who in return amuse their employer with theatrical representations, fireworks, or any other species of enjoyment, which, by the time the commodities have been consumed, leave no other traces than the recollection that they Jiave existed. Can you see no difference in these two instances? CAROLINE. Oh yes ; I see a very material difference : one of the capitals of 5000/. is destroyed, and the person who has consumed it thus idly is reduced to beg- gary. But this is not the case I put. Let the prodigal, instead of consuming his capital in the way you have described, spend it amongst trades- men, who will furnish him with articles for his en- joyment, such as magnificent apparel, splendid equipages, sumptuous entertainments. He will then replace the capital that those tradesmen have been consuming, in order to produce these commo- dities, which capital will again be usefully employed in producing more. 13 ON EXPENDITURE. 447 MRS. B. That is very true ; and so far the prodigal has done no harm. In spending his capital amongst tradesmen, he has exchanged his various commo- dities for others of equal value, and the same quan- tity of capital exists as before the exchange took place; but what is the prodigal to do with the new stock that he has acquired ? CAEOLINE. It will be applied to the gratification of his de- sires : he will regale with his friends at the sump- tuous feasts, he will use the equipages, and clothe himself and his servants in the rich apparel. MRS. B. Then do not you see that you have only removed the evil one step farther? He and his friends will consume amongst servants and dependants, in fetes and splendid entertainments, what the trades- men furnished him with, instead of that which he gave in exchange for it; and that as much capital will be lost to himself and to the community in the one case as in the other. The spending of ca- pital is a sterile consumption of it, whilst its em- jiloyment is a reproductive consumption. CAROLINE. But if nioney were not thus spent, what would ^148 ON KXPENDITURE. the tradesman do with the luxuries which lie had prepared tor the purpose of supplying the derriand of persons who spend in order to enjoy ? MRS. B. Such tradesmen would certainly find less em- ployment ; but you would not thence conclude that the community would be injured. You have al- ready seen that capital cannot produce revenue unless it is consumed ; if it be consumed by in- dustrious persons, who work whilst they are con- suming it, something of superior value will be produced, and that product, whatever it may be, will be exchanged against other productions ; it will be distributed amongst another order of tradesmen, and will afford precisely the same amount of en- couragement, though of a different kind. What- ever is saved from the extravagant consumption of the rich, is a stock to contribute to the comforts of the middling and lower ranks of society. CAROLINE. Yet how often has it been said that a generous and libcial expenditure, however injurious to the individual, was a source from which the middling and lower classes drew their principal means of subsistence. MRS. B. There is not a more fatal delusion in political 14 ON EXPENDITURE. -149 economy. By such wanton extravagance as we have been describing, the capital, which should annually furnish a subsistence to labourers, is wasted and destroyed, and the industrious are re- duced to idleness and want. They are covered with rags, because the prodigal has clothed him- self in gorgeous apparel; they "wander without a home, because the prodigal has erected a palace ; they must starve, because the wealth that should have fed them has been squandered in sumptuous feasts. It is easy to comprehend that the j)revalence of such conduct in a state must be followed by the gradual decay of its wealth and population. CAROLINE. This is a most painful reflection ; but on the other hand it would not, I suppose, be possible for a country to make any progress in wealth by which the poor were not more or less benefitted ? MRS. B. Certainly not, if things are allowed to follow their natural course. Where property is secure, there is a general tendency to accunuilation of ca- pital. The great majority are governed by good sense and prudence, and their efforts to save and better their condition more than counterbalance the occasional loss that arises from the extrava- 450 ON EXPENDITURE. gance of spendthrifts. Besides, if expenditure were directed in too large a proportion towards the pro- duction of mere luxuries, and the number of per- sons employed in producing them were to be in- creased without at the same time augmenting the number of persons employed in producing articles of subsistence, the same quantity of provisions must be divided amongst a greater number of consumers; and as provisions, in consequence of being more scarce, would increase in price, the profits of agri- culture would become so great, that the capital which had been applied to the production of luxuries would flow to the more advantageous employment of agriculture, and thus the natural distribution of capital would be restored. CAROLINE. The more I hear on this subject, and the better I understand it, the greater is my admiration of that wise and beneficent arrangement which has so closely interwoven the interests of all classes of men ! MRS. B. We are accustomed to trace the hand of Provi- dence chiefly in the natural world, but it is no less conspicuous in moral life, and cannot be more strongly exemplified than in that order of things which renders it essential to the interests of the rich not to turn the labour of the poor to the produc- ON EXPENDITURE. 451 tion of superfluities until they have provided an ample supply of the necessaries of life. But these Avise dispensations arc often in a great measure subverted by the folly and ignorance of man. An injudicious interference of government, for instance, may give peculiar advantages to the employment of capital in one particular branch of industry, to the prejudice of others, and thus de- stroy that natural and useful distribution of it, which is so essential to the prosperity of the com- munity. CAROLINE. If ever the legislature could interfere with ad- vantage, I should think it would be in some regu- lations respecting expenditure. I should be strongly tempted to restrain the use of luxuries, in order to induce the owners of capital to employ it in agri- culture, and such homely manufactures as are suited to the consumption of the poor: such a measure could not fail to produce a more equal distribution of the comforts of life. MRS. B. Sumptuary laws have been instituted with that view in many countries. But after all we have said of the benefits resulting from the natural dis- tribution of capital when unrestrained and unin- fluenced by political regulations, I am surprised at 452 ON EXPENDITURE. your wishing to compel people to employ it in one way rather than in another. CAROLINE. But if that one way should prove the right way .'* MRS. B. Then capital will follow that direction by its natural impulse, without requiring any foreign aid. Be assured that the only right way is to leave the use of capital to the care of those to whom it be- longs ; they will be the most likely to discover in what line it can be employed to the greatest ad- vantage. CAROLINE. Of their own advantage they are no doubt the best judges; but are you sure that they will be equally attentive to the advantage of the poor ? Sumptuary laws appear to me to afford peculiar encouragement to the production of the neces- saries of life. But the principal use of sumptuary laws would be to repress the expenditure of re- venue. And since it is so desirable that capital should not be dissipated, surely the same prin- ciples will apply to revenue ; would it not be ad- vantageous to save that also, in order to convert it into capital ? MRS. B. Capital, you know, has arisen solely from savings ON EXPENDITURE. 453 from revenue ; but you are aware that there must be a limit to such savings. CAROLINE. Certainly tliere is a limit, because we could not live without consuming some part of it ; but the less we consume, and the more we save, the better. MRS. B. That is pushing the principle too far : we accu- mulate wealth for the purpose of enjoying it; and if by a liberal though prudent expenditure, social affections are cultivated, and the happiness of mankind promoted and extended, I see no reason why we should be debarred from indulging in some of the best feelings of our nature. The two extremes of parsimony and prodigality are perhaps equally pernicious ; the one as de- structive of the social and benevolent affections, the other as wasting the provision which nature has destined for the maintenance and employment of the poor. But there is another point of view in which sumptuary laws have a dangeixjus tendency. By diminishing objects of desire you run some risk of i^iving a general check to industry. Tell me why do the rich employ the poor ^ 454 ON EXPENDITURE. CAROLINE. In order to derive an income from the profits of their labour. MRS. B. And what use do the rich make of this income ? CAROLINE. ITiey either spend the whole, or they economise part in order to augment their capital. MRS. B. But why should they be desirous of increasing their capital ? CAROLINE. There are so many reasons for wishing to be rich, that I scarcely know how to enumerate them. The pride of wealth is a motive^ith some men, the love of independence with others ; the appre- hension of future reverses incites a third to accu- mulate; the wish to increase his means of doing good stimulates the industry of another; the desire of providing for a family, and leaving them in afflu- ence, is a powerful inducement with many ; but the ambition of improving their situation in life, and of increasing their enjoyments by a more liberal ex- penditure, is, I think, the most general, and per- haps the strongest of all the motives for accu- mulating riches. ON EXPENDITURE. 455 MUS. B. If, then, laws be enacted which restrain a man from spending any part of his income in luxuries, you take away one of his motives for wishing to augment his capital : and a growing capital is, you know, an increase of subsistence for the poor. CAROLINE. I would wish to prohibit only that excess of luxury which you have censured as pernicious. MRS. B. It is extremely difficult to draw the line between necessaries and luxuries; these form a scale which comprehends all the various comforts and con- veniencies of life, the graduations of which are too numerous and too minute to be distinct. We have considered as necessaries whatever the rate of wages of the lowest ranks of people have enabled them to command ; they would consider as luxuries whatever they have not been accustomed to enjoy ; though when they can afford it there is no excess. Excess, I conceive, depends not so much on the quantity or nature of the luxury, as upon its relative proportion to the means of the individual. A daily meal of meat is an excess of luxury to the family of a common labourer, because they arc not used to it, and their wages will not enable them to command it ; .15G ON EXPENDITURE. whilst a -table abounding with expensive delicacic* can scaFcely be called excess of luxury to a man whose income is so large that such gratifications do not prevent his making considerable savings. CAIIOLINE. Since, then, it is impossible to define what are and what are not luxuries, no general line of pro- hibition can be drawn. MRS. B. The ruin which extravagance entails on the prodigal is his natural punishment, and serves as a warning to deter others from similar imprudence. Any attempt to prevent such partial evil by sump- tuary laws, would, generally, tend to depress the efforts of industry. The desire of increasing our enjoyments, and of improving our situation in life, as it is one of the strongest sentiments implanted in our nature, so I conceive it to be essentially conducive to the general welfare. It is the active zeal of each individual exerted in his own cause, which, in the aggregate, gives an impulse to the progressive improvement of the world at large. The desire of bettering his condition is justly con- sidered as a laudable disposition in a poor man, and it is a feeling dangerous to repress in any classet; of society. ON EXPENDITUllE. 457 CAROLINE. " The man of wealth and pride " Takes up a space that many poor supply'd ; " Space for his lake, his park's extensive bounds ; " Space for his horses, equipage, and hounds ; " The robe that wraps his limbs in silken sloth, " Has robb'd the neighbouring fields of half their growtii ; " His seat, where solitary sports are seen, '* Indignant spurns the cottage from the green." What can you reply to these beautiful lines, Mrs. B. ? I fear they are but too faithful a repre- sentation of the state of society. MRS. B. I must first enquire whether this man of wealth and pride either spends or produces capital in order to procure these gratifications. If the former, he deserves all the censure we have bestowed upon the spendthrift. If the latter, his wealth may possibly be more increased by his industry than diminished by his luxury. CAROLINE. In all probability he does neither ; but being possessed of a considerable property, he lives upon his income ; and such an expensive style of living must greatly diminish, if not wholly absorb what he might otherwise economise. MRS. B. Still I cannot approve of compulsory measures 458 ON EXPENDITURE. to lessen his expenses. If it be desirable to stimu- late and encourage the industry of man, and induce him to accumulate wealth, he must be at full liberty to dispose of it according to his inclinations. It is unquestionably true, that unless the rich impoverish themselves by spending their capital, they cannot impoverish their country. CAROLINE. That is not enough ; the question is, what are the best means of enriching their country ? MRS. B. One man sits down contented with his little property ; brings up his children with humble views and desires, and every year lays by something to provide for their future support in life. Another of a more ambitious character rises early and labours hard, exerting every faculty of his mind to turn his capital to the best account ; he likewise makes savings from his income, but they do not prevent his growing wealth from enabling him to spend more liberally, and enjoy more freely; and none of his enjoyments is more heartfelt, than that of having raised his family in the work! by the exertions of his industry. CAROLINE. Every man who is striving to acquire wealth is _J1 ON EXPENDITURE. \5'J certainly more or less actuated by the prospects of tlie various enjoyments which he hopes his increasing income will enable him to command. One wishes to become rich enough to marry ; another to keep a carriage, or a country-house ; a third to be able to settle his children respectably in the world. MRS. B, Such motives are strong incitements both to industry and ft-ugality ; and these useful habiis often remain when the cause which gave rise to them no longer exists ; it is far from uncommon to see men retain the taste for accumulatinir lonir after they have lost the inclination for spending. Dr. Adam Smith observes, that before the intro- duction of refined luxuries, the English nobles had no other means of spending their wealth, than by maintaining in their houses a train of dependants, either in a state of absolute idleness, or whose (^nly business was to indulge the follies or flatter the vanity of their patron ; and this is in a great mea- sure the case in Russia, Poland, and several other parts of Europe, even at the present day. We find that the consumption of provisions by the household of an English nobleman some centuries ago was perhaps a hundred times greater than ii .is at present. But you nuist not thence infer that the estate, which maintained such numerous rc- X 2 460 ON EXPENDITURE. tainers, produces less now than it did in those times ; on the contrary, it is perhaps as much increased as the consumption of the household is diminished. The difference is, that the produce, instead of sup- porting a number of lazy dependants, maintains probably a hundred times that number of indus- trious independent workmen, part of whom are employed in raising the produce of the estate, and part in supplying the nobleman with all the luxuries he requires: it was to obtain these luxuries, that he dismissed his train of dependants, that he im- proved the culture of his land, and that, whilst studying only the gratification of his wishes, he contributed so essentially to the welfare of his country. Here is a passage in Paley's Political Philosophy on the subject of luxury, extremely well worth your reading. CAROLINE reads. " It appears that the business of one half of " mankind is to set the other half at work; that is, " to provide articles, which, by tempting the de- " sires, may stimulate the industry, and call forth *' the activity of those upon the exertion of whose " industry, and the application of whose faculties, *' the production of human provision depends. " It signifies nothing to the main purjjose of trade *' how superfluous the articles which it furnishes " are, whether the want of them be real or imagin- ON EXPENDITURE. 4(>1 ary; whether it be founded in nature or in opinion, in fashion, habit, or emulation ; it is enough that they be actually desired and sought after. Flourishing cities are raised and supported by trading in tobacco; populous towns subsist by the manufactory of ribbons. A watch may be a very unnecessary appendage to the dress of a peasant, yet if the peasant will till the ground in order to obtain a watch, the true design of trade is answered ; and the watchmaker, whilst he po- lishes the case, and files the wheels of his machine, is contributing to the production of corn, as effectually, though not so directly, as if he handled the spade or the plough. If the fisherman will ply his nets, or the mariner fetch rice from foreign countries, in order to procure the indulgence of the use of tobacco, the market is supplied with two important articles of provision by the instru- mentality of a merchandise which has no other apparent use than the gratification of a vitiated palate." This reminds me of an anecdote in Dr. Frank- lin's works. He describes the admiration which was excited by a new cap worn at church by one of the young girls of Cape May. This piece of finery had come from Piiiladelphia ; and with a view of obtaining similar ornaments, the young girls had all set to knitting worsted mittens, an article X 3 462 ON EXPENDITURE. iji request at Philadelphia, the sale of which enabled them to gratify their wishes. MRS. B. We often hear the poor reproached for aiming at things above their situation ; but I own that I delight in seeing them strive to ornament their cottages, to raise a few flowers amongst the nutri- tious vegetables in their gardens, to deck their room, though it be but with rows of broken china, cups, and plates, or a few gaudy prints ; it shows a desire of creditable appearance, and of aiming at something beyond the bare means of subsistence. CAROLINE. The desire of improving their condition is not, however, in all cases a sufficient motive to rouse the industry of the lower classes. I once knew an easy indulgent landed proprietor, who having no ambi- tion to increase his income could never be induced to raise his rents ; his tenants, finding that they could pay their landlord and maintain their families as well as their neighbours, with much less labour, neglected their farms, and became so idle and dis- orderly, that the estate was the least productive of any in the county. MRS. B. The country thus suffered from the well-meant, but ill-judged indulgence of this landlord. ON EXPENDITURE. 463 CAROLINE. But why was not the industry of these tenants stimulated by the desire of raising themselves in the world, which the forbearance of their landlord enabled them so easily to do ? MRS. B. In the course of time it probably would have had that eflfect ; but when uneducated men obtain an increase of wealth, the first use they generally make of it is to procure indulgences and exemption from labour ; it is only after becoming sensible that idleness leads them back to poverty, that they think of turning their wealth to better account. Well-educated people seldom require the experi- ence of so severe a lesson, but amongst the lower classes it is not uncommon to find that a great, and especially a sudden accession of riches, terminates in ruin. CAROLINE. There are frequently instances of poor people being ultimately ruined by a high prize in the lottery. MRS. B. And the lower the state of ignorance and de- gradation of mind of the poor man wlio gains the prize, the more certain is his ruin. The different state of improvement of the lower classes in Eng- land, in Scotland, and in Ireland, are strongly ex.- x 4 464 ON EXPENDITURE. exemplified in this respect. If you were to give a guinea to a Scotch peasant, he would consider long how he could turn it to the best account ; he would perhaps buy a pig, or something that would bring a future profit. An English peasant is not quite so long sighted, yet he would contrive to derive some substantial advantages from the gift of a guinea; he would probably lay it out in repairing his cottage, or in purchasing some new clothes for his children. But the Irishman, whose joy would be the greatest of the three at such an unexpected acquisition of wealth, would in all likelihood spend the whole of it in drinking whiskey with his friends, and thus disable himself for the labour of the following day. CAROLINE. And do you suppose that a sudden and consider- able increase of wages would be attended with mischievous effects to the labouring poor ? MRS. B. In the first instance it probably would. In ma- nufactures it is generally found that an accidental increase of wages, arising from a sudden demand for workmen, is productive of intemperance and disorderly conduct ; and this has been urged as a general objection to high wages ; but this bad effect seldom takes place unless the augmentation be sudden and unlooked for, and it discontinues when ON EXPENDITURE. 4G5 the high wages become regularly established. ^ ou may almost consider it as certain, that uneducated men will deriveno advantage from such an augment- ation of income as raises them suddenly above their accustomed habits of life. The beneficial effects I have described to you in one of our preceding con- versations as arisinfj from increasing wealth and de- mand for labour, must be gradual in order to prove useful to the lower classes. CAROLINE. All that you have said reconciles me, in a great measure, to the inequality of the distribution of wealth ; for it proves that, however great a man's possessions may be, it is decidedly advantageous to the country tliat he should still endeavour to augment them. Formerly I imagined that VA'hat- ever addition was made to the wealth of the rich was so much subtracted from the pittance of the poor, but now I see that it is, on the contrary, an addition to the general stock of wealth' of the country, by which the poor benefit equally with the rich. MRS. B. Yes j every accession of wealth to a country must have not only employed labourers to produce it, but will in future employ other labourers in order that the proprietor may derive an income from it. For every increase of capital is the result of a past and the cause of a future augmentation of produce; X 5 iGG ON EXPENDITURE therefore whatever a man's property may be, he should be encouraged to improve it. I will read you an eloquent passage in Bentham's Thecn'ie de la Legislation on the subject of luxury. " L'aitrait du plaisir, la successions des besoins, " le desir actif d'ajouter au bien etre, produiront *' sans cesse, sous le regime de la surete, de nou- " veaux efforts vers des nouvelles acquisitions. Les " besoins les jouissances, ces agens universels de la " societe apres avoir fait eclore les premieres gerbes " dc blcs, clevcront peu a peu les magazins de " I'abondance toujours croissans et jamais remplis. " Les desirs s'etendant avec les moyens ; I'horizon " s'aggrandit, a mesure qu'on s'avancc, et chaque " besoin nouvcau egalemcnt acconipagne de sa " peine ct de son plaisir devient un nouvcau prin- " cipe d'action ; I'opulcnce qui n'est qu'un terme " comparatif n'arrete pas meme ce mouvement, " une fois qu'il est imprime, au contraire plus '* on opere en grand, plus la recompense est " grande, et par consequent plus est grande " aussi la force du inotif qui aninie I'homme au " travail. " On a vu que I'abondance se forme peu a " peu par r operation continue des memcs causes " qui ont produit la subsistence. II n'}' a done " point d'apposition cntrc ces deux buts. Au con- " trairo plus I'abondance augmente plus on est sur " dc la substance. Ceux qui blament i'abondance 6 ON EXPENDITUUE. 467 *' SOUS le nom de Luxe u'ont jamais saisi cette con- " sideratioii. " Lcs inteniperies, les gucrrcs, les accidens de " toute espece attaquent souvcnt le fond de la sub- " sistciice; ensortequ'une society (|ui n'auroit pasde " superflu et nicmc bcaiicoup de siiperiiu seroit su- "jette a nianqucr souvcnt de luccssaire; c'est ce " qu'onvoit chcz les pcuplcs sauva^es. C'est ce qu'on " a vu tVequeuinient chcz toutcs les nations dans " les terns de I'antique pauviete. C'est ce qui " arrive encore de nos jours dans les pays peu " favorises de la nature, tel que la Suede, et dans " ceux ou le gouvcrnemcnt contrarie les operations " du commerce au lieu de se borner a le proteger. " Mais les pays ou le luxe abonde ct ou I'adniinis- " tration est eclairce, sont i\ I'abri de la famine. " Telle est I'heureuso situation dc I'Angletcrre. " Des manufactures dc luxe dcvicnncnt des bu- " reaux d'assuranccs contre la (!i?5ette. Une fa- " brique de bierre ou d'amidon se convortira cu " moyen de subsistence. Que de fois n'a t'on pas " dcclame contre les chevaux et les cliiens conmie *' ddvorant la subsistence des honnnes ! Cts pro- " fonds politiques ne s'elevcnt (jue d'un dtgre " au dcssus de ccs apotrcs du desinteressment (jui " pour ramcner I'abondancc des bJes courent in- " cendier les magazins." CAROLINE. Wc had not yet considered luxury undii- tiiis X 6 468 ON EXPENDITURE. point of view; I confess I was of the opinion of those who thought that dogs and horses devoured the subsistence of man, but I am much better pleased to think that the food which luxury raises for the nourishment of those animals may, in case of ne- cessity, become nourishment for the human species ; and, if a famine should take place, even the ani- mals themselves would afford a resource. MRS. B. Hair-powder we may consider as a kind of granary for the preservation of wheat, for though the powder would not, unless in cases of very great urgency, be converted into food, the quantity of corn annually grown for the purpose of making hair-powder would, during a moderate scarcity, find its way more readily to the baker's than to the perfumer's shop. CAROLINE. And pray, Mrs. B., what do you think of the luxury of the Romans? We read in Pliny of a Roman lady who was dressed in jewels to the amount of 300,000/. I recollect, also, an account of a 4i«h of fish having cost 641. MRS. B. These are but trifling instances of profusion, in comparison of some others related of the Romans. ON EXPENDITURE 46*9 Marc Antony expended 60,000/. in an entertain- ment given to Cleopatra. And the supper of He- liogabalus cost 6000/. every night. But nothing can be said in apology for the luxuries of the Ro- mans; they were extremely ohjcctiouable, because their wealth did not proceed from industry, but from plunder. Their extravagance and profusion, therefore, far from being a spur to industry, acted in a contrary direction ; it encouraged the love of rapine in themselves, whilst it depressed the spirit of industry in the countries subject to their power, by destroying the strongest of all inducements to labour, the security of property. It has been well observed by Macpherson, that " the luxuries of " the Romans cannot be considered as the summit " of a general scale of prosperity; it was a scale " graduated but by one division, which separated " immense wealth and power from abject slavery, " wretchedness, and want." In considering the advantages to be derived from luxury, we must, however, carefully remember, that it acts in a twofold manner ; whilst on the one hand it encourages industry, on the other it increases ex- penditure ; so far as its productive powers prevail over its prodigal effects, it is beneficial to mankind ; but in the contrary case it becomes an evil, and when it encroaches on capital we have seen that it is an evil of the greatest magnitude. The grand object to be kept in view in order to 470 ON EXPENDITURE. promote the general prosperity of the country, is the increase of capital. But it is not in the power of the legislature to promote this end in any other way than by providing for the security of property; any attempts to interfere either with the disposal of capital or with the nature and extent of expendi- ture, are equally discouraging to industry. CAROLINE. Whoever, I conceive, augments his capital by savings from his income, increases the general stock of subsistence for the labouring classes; whilst he who spends part of his capital diminishes that stock of subsistence, and consequently the means of em- ploying the labouring classes in its reproduction. Every man ought, therefore, to consider it as a moral duty, independently of his private interest, to keep his expenditure so far within the limits of his income that he may be enabled every year to make some addition to his capital. MRS. B. And the question what that addition should be, must depend entirely upun the extent of his in- come, and his motives for expenditure. We can only point out illiberal parsimony, and extravagant prodigality as extremes to be avoided; there are so many gradations in the scale between them, that every man must draw the line fox himself, accord- ON EXPENDITURE. 471 ing to the dictates of his good sense and his con- science, and in so doing should consult, perhaps, the moral philosopher as well as the political eco- nomist. He who has a large family to maintain and establish in the world, though more strict eco- nomy be required of him, cannot be expected to make savings equal to those of a man of a similar income, who has not the same calls for expenditure. But however large a man's income may be, he has no apology for neglect of economy. Economy is a virtue incumbent on all ; a rich man may have sufficient motives to authorise a liberal expendi- ture, but he can have none for negligence and waste ; and however immaterial to himself the loss which waste occasions, he should consider it as so much taken from that fund which provides main- tenance and employment for the poor. INDEX. A CCUMULATION of wealth, 88. Adulteration of the coin of the country, 344. its effect on wages, 345. has been adopted in almost all countries, 346. Agriculture, introduction of, 19. 42. 181. whether preferable to other branches of industry, 181. of the proportion it should bear to manufactures and commerce, 185. most advantageous to newly settled countrie«, 186. yields two incomes, 232. Metayer system of, 250. state of, in France, 252. Agricultural produce, high price of, 201. not susceptible of unlimited increase, 202. causes of its high price, 204. causes wh'.ch lower its price, 211. high price of, necessary to proportion the consumption to the supply, 226. the first commodity whichacountry exports,388. 411. Alms-giving, effects of, 175, 176. America, increase of population in, 143. exports corn, 388. agriculture of, 411. effects of its discovery on Uie industry of Europe, 336. 174 INDEX. America, the produce of its mines liow distributed throughout the world, 458. Annuitants, affected by the exchangeable value of money, 327. Art, advantages it has over the powers of nature, 185. B Balance of trade, 423. popular error respecting it, 435. Banks, saving, advantages of, 1 70. Banks, issuing notes, 549. of Amsterdam, 551. of England, 555. restrifction of paying in specie, 354. Barter, origin of, 67. Benefit clubs, or friendly societies, advantages resulting from, 168. Bentham's Theorie de Legislation, extract from, on the effects of luxury, 466. Bills of exchange, their use in foreign commerce, 421. Blackstone's Commentaries, extract from, on civil liberty, 45. Bounty, on the exportation of goods, 391. Buchanan's edition ofAdam Smith's passage from, on price, 5 13. C Canals, advantages arising from, 376. 379. Capital, origin o.'', 88. tmploynitnt of, 90. 105. profits derived from, 93. 97. necessary for iill productive enterprises, 98. 296. fixed and circuhiting, distinction of, 107. definition of, lis. of a country, 118. 442. effect of its increase on profit and wages, 125 effect of its diminution, 128. increase of, in Europe, 148. INDEX. A75 Capital, increase of, in America, 143. various modes of employing it, 181. required for agriculture, '235, 234. lent at interest, 269. quicii return of, in the home-trade, 381. expenditure of, 444. increase of, always advantageous, 470. Cheapness, beneficial only when it arises from a low cost of production, 310,311. only nominal when arising from scarcity of money, 325. 527. Circulating capital explained, 107. Civilisation, progress of, 46. Civilised state of society, 20. Clarke's(Dr,) Travels, extractfrom, oninsecurity of property,57. Coined money, antiquity of, 318. advantages of, 319. Coin, adulteration of, 344. Colonies, establishment of, 163, Commerce, a mode of employing capital, 364. foreign, 380.384. advantages of, 387. 390. Competition of sellers reduces prices, 399. Consumption, distinguished from expenditure, 443. of a country, 444. productive and unproductive, 444. Corn, unknown crigin of, 48. -trade, 405. home and foreign supply of, 406. exportation of, 411. natural high price of, 204. Cost of production of commodities, 395. 298. component parts of, 298. diminished, cause of cheapness, 310. Creditor, public, how repaid. 282. 476 INDEX. D Dairy, establishments of Fruitieres in Switzerland, 255. Debt, national, 283. Demand, definition of, 124. for labour, on what it depends, 142. for the necessaries of life, 203. and siippl}', 306. Depreciation of money, its effect on price, 341. Division of labour, 73. passages from Adam Smith on, 72, 73. 76. its effect on the moral and intellectual faculties, 83. its effect in the multiplication of wealth, 88. E Economy, 470. Edinburgh Review, extract from, on small farms, 260, Education of the poor, advantages of, 165. Emigration, a resource for redundant population, 162. impolicy of restraining it, 163. under some circumstances injurious to a country, 164. Employment of capital, 94. 120. Exchange, bill of, its use in trade, 421. unfavourable, or below par, 424. premium on, 424. unfavourable, promotes exportation, 429. how affected by depreciation of currency, 432. nominal, 434. Exchangeable value, 293. 314. definition of, 294. and natural value do not always coincide, 308. of money, what classes of men affected by its variations, 329. Expenditure, 102.441. distinguished from consumption, 445. INDEX. 477 Expenditure of capital, its consequences, 282. 44-;. Exportation of corn, under what circumstances advantageous, 411. Farmers, exposed to small risks, 195. require capital, 253. gentlemen, 246, 247. Farms, small, objections to, 253. what size most advantageous, 259. size of, in Belgium and Tuscany, 259. Fisheries, rent of, 265. Fishing, capital required for it, 99. Fixed capital, 107. Foreign trade, 384. advantages of, 387, 388. advantageous to both countries engaged in it, 398. Franklin, passage from, on prohibitions in trade, 402. anecdote from, on the effects of luxury, 461. Friendly societies, or benefit-clubs, 168. Gardens, for cottagers, 178. Gamier, extract from, on the employment of capital, 188. Gold, how paid for, 321. -coins, antiquity of, 318. -bullion, the standard of value of coined money, 359. -bullion, high price of, 360. and silver, effect of its influx in Spain, 438, 439. Goldsmith'sDeserted Village, passages from, on small farms, 251. on inclosures, 161. on emigration, 163. on luxury, 457. Goods, community of, 59. 478 INDEX. Governments, origin of, 19. errors of, in political economy, 22. despotic, effects of, 55, 54, 55. 51. H Happiness, how influenced by wealth, 103. Home trade, 380, 381. I Ignorance of savages, 52. Importation of com, 411, Income, or revenue, origin of, 93. derived from profits, 101. Industry, encouraged by security, 38. of the Swiss, G3. limited by extent of capital, 101, 160. encouraged by emancipation, 110. by high wages, 153. by piece-work. 154. Interest of money, 269. diminishes, as wealth and population increase, S75. varies in different countries, 276, 277. low rate of, a sign of prosperity, 277. impolicy of fixing it by law, 279. in ancient times and countries, 278. in the public funds, 281. J Jesuits, their establishment in Paraguay, 62. Labour, its effect in the production of wealth, 31. considered as a cause of value, 295. Labourers, productive, 9. INDEX. l/y Labourers, unproductive, 284. Land mortgaged, 271. Landed property, 55. .58. Laws, utility of, 40. Leases, their terms and duration, 337. Loans, to individuals, 269. to government, 280, 281. Luxury, a relative term, 455. its excess only pernicious, 456. promotes industry, 456. a resource in scarcity, 468. of the Romans, objections to, 468. when beneficial, and when injurious, 469. M Machines, their effect in abridging labour, 75. Machinery, objections to it, 112. advantages derived from it, 113. Macpherson's History of Commerce, extract from, on ma- chiner}', 115. on fixing the price of provisions, 133. 135. Manufactures, their influence on population, 151. rate of their profits, 190. Measures of value, all imperfect, 302 — 326, Merchants, rate of their profits, 190. Metals, used only in civilised countries, 81. Metayer system of farming, 250. in Belgium and Tuscany, 259. Mines, first worked in England, 81. in general, 262. of coal, 262. of metal, 263. great risk attending them, 263. 480 INDEX. Mirabeau's Monarchic Prussienne, passage from, on free trade, 417. Money, lent at interest, 269. in general, 315. its use as a medium of exchange, 516. various articles used for this purpose, 317. coined, antiquity of, 318. advantages of, 319. ' its use as a standard of value, 319. not an accurate standard of value, 322. cheapness of commodities arising from its scarcity, 325. dearness of commodities arising from its abundance, 325. depreciation of, 527. 340. variation in the exchangeable value of, 328. has of late years fallen in value, 331. 342. has real value, not merely a sign, 333. impolicy of preventing its exportation, 534. 537. effects of its free exportation, 558. how it regulates price, 542. its value in ancient times, 343. adulteration of, 344. of paper, no real value, 547. excess of, creates depreciation, 355. expedients for economising it, 356. 362. Moravians, their institution, 63. Mortgage of land, 271. N National debt, 285. Natural value, 289. of gold bullion, 321, Natiu-e, of the variety and profusion of her gifts, 40, 41. 45. assists the labours of man, ) 82. INDEX. 481 Necessaries of life, definition of, varies in different countries, 121. effects of redundancy of, 409. Nominal cheapness, 324. exchange, 454. Paley's Moral Philosophy, passage from, on accumulation of wealth, 148. o!i agriculture, 240. on luxury, 460. Paper money, no real value, 347. its effect in driving specie out of the country, 352. excess of, creates depreciation, 355. Pastoral life, 19. 47. Piece-work stimulates industry, 154. Poor-rates, objections to, 171. lowers the price of labour, 172. Political economy, errors arising from ignorance of its prin- ciples, 7. advantages arising from some of its principles, 1 1. difficulties to be surmounted in this study, 14. definition of, 18. Population, wages how affected by it, 124. 128. rapid increase of, in America, 143. in Europe, 144. great, under what circumstances advantageous, Hff. effects of its increase beyond the means of subsist- ence, 147. naturally increases with capital, 155. redundant, relieved by emigration, 162. Poverty, 100. Price, impolicy of the legislature interfering with it, 1 33. 482 INDEX. Price of raw produce, how regulated, 210, and value, 289. defined, 291. generally equivalent to cost of production, ^5, how afit'cted by scarcity of money, 323. how affiected by depreciation of monc)', 525* various circumstances affecting it, 328. how regulated, 338. reduced by free competition of sellers, 399. Prodigality, its pernicious effects, 449. Production, cost of, 295. Productive labourers, 97. 284. Profits, derived from the employment of capital, 97. of capital, 126. decrease with decrease of capital, 128. tending to equality in all employments of capital, 192. proportioned to the degrees of risk, 195. circumstances which derange the equality of profits, 197. of agriculture diminish as inferior soils ate culti- vated, 208. of the farmer, how calculated, 235, of mining, 264. a component part of cost of production, 298. great, of small dealers, 372, Promissory notes, 349. Property, security of^ 37. in land, 38, 39. consequences of its establishment, 48, 49. cpnsequenccs of its insecurity, 53. iu common, objections to it, 59. in land, effects of its extreme division, 253. R Rent, 199. effect of the high price of agricultural produce, aoi. ISDEX. ^83 Rent, deriretl from tlic mrpliis produce of agriculture, '20i. why not paid in new settlements, 205. origin of, *J07. definition of, 211, consequences of its abolition, 224, 225, 226. rise positively, but not relatively, 225. of farms, '236. of mines, 262. of fisheries, 26'5. a component part of cost of production, 297. Revenue, or income, origin of, 93. 102, 105. modes of employing capital to produce it, 181- derived from property in land, 199. derived from cultivation of land, 2S2. of those who do not employ their capital themselves, 267. Rewards, advantages of, 178. Uicbes, of what they consist, 26. Rich and poor, distinction between, 89. contract between, 90. 95, Saving banks, 170. Say's Political Economy, extract from, on the invention uf printing, 116. on prohibitions in trade, 401. Scarcity, its etiect on wages, 128. its ctlc'tt on price, 505, Seciu-ity, stimulus to industry, .3". Skill, acquired by the division of labour, 7.5. higher wages paid for it, l.>9. Slavss, fixed capital, 109. Slavery, discouraging to industi-y, 1 10. Smith, Adam, passage from, on the division of labour, 75. 76. Y 2 484 INDEX. Smith, Adam, on forging nails, 78. on value, 292. Soils of inferior quality increase the cost of production, 210. Spain, her industry affected by the American mines, 438. Spinning jennies, invention of, 114, 115. Statute of labourers, 135. Stockholders, fictitious capital of, 282. affected by variations in the value of money, 332. Sumptuary laws, 452. effects of, 456. Telemachus, passage from, on Salentum, i. on Bcetica, 59. Tenants at will, 238. Townsend's Travels ip Spain, passage from, on alms-giving^ 175. on gentlemen-farmers, 246. on farms held in administration, 249. on the influx of gold and silver in Spain, 439. Trade, wholesale and retail, distinction of, 365. general advantages of, 366. wholesale, 567. retail, 371. home, 350, 331. policy of freedom of, 415. U Unproductive labourers, 284. how affected by fluctuations in the value of money, 331. Usury, 277. Utility considered as essential to value, 291. 296. INDEX, 4B5 ValiK; and price, 2SP. in exchange, 292. 309. its competent parts, 298. ."00. natural, oOO. .~08. anil price, distinction between theui, 291. no accnrate measure of, .'502. 326. Vineyards and olive-grounds, tenure of, 302. Volncy's Travels, passages from, on the effects of despotic governments, 53, 54, 55. W Wages, origin of, 91. of labour, their limits, 120. liow regulated, 123. 143. increase witii increase of cai)ital, 126. decrease with increase of population, 128- diniinish with diminution of capital, 128. impolicy of being fixed by law, 131. low in Ireland, 157. - proportioned to skill, 139. proportioned to the severity and disagrecableness of the labour, 139. how affected by scarcity, 155. high, not always accompanying great capital, 141. in China, HI. in America, 142. rise of, in England, 1 18. high, encourage industry, 153. lovrereil by i)Oor-rates, 172. component |)art of saluc, 296. affected by ailulteration of the coin, .'-r". effects of sudden increase of, 464. Wealth, definition of, 26. 274. y ,7 486 INDEX. Wealth, accumulation of, 90. reproduction of, 94. 101. incitements to increase it, 459. 462. efiects of sudden increase of, 463. Y Yeomanry, 224. Young's, Arthur, Travels in France, passage from, on the extreme d Dertv. 252. issage from, on the extreme division of landed pro- perty, 252. THE END. Printed by A. Strahan, Priuiers-Stieet, London. Central University Library University of California, San Diego j Please Note: This item is subject to recall. Date Due UCSD MAY r 6^^b iTERLlBI^Akr LOA^ MAR 1 ■ ^' "'^ CI 39 (7/93) UCSD Lib. ia,m>^: \*. .-^-.Ati^, .«/.,* *.~:u V