OF m 
 
 SocuCi ECONOMY 
 
 
 UC-NRLF 
 
 
LIBRARY 
 
 OF THE 
 
 UNIVERSITY OF CALIFORNIA. 
 Accession 99466 Ctos 
 
PRINCIPLES 
 
 OF 
 
 SOCIAL ECONOMY 
 
 BY 
 
 YVES 
 
 Minister of Public Works and Hon. Member of the Cobden Club 
 
 TRANSLATED FROM THE FRENCH 
 
 BY C. EL D'EYNCOUET LEPPINGTON 
 
 SECOND 
 
 EDITION 
 
 LONDON 
 
 SWAN SONNENSCHEIN & CO. 
 
 NEW FORK : CHARLES SCRIBNER'S SONS 
 
 1892 
 
GENERAL 
 
PREFACE TO THE ENGLISH EDITION. 
 
 THE author of these pages on the Principles of Social Economy is 
 not insensible to the honour conferred on him by their presentation 
 to the English public ; nor is this honour the less gratifying because 
 he feels that in crossing the Channel his doctrines are returning, in 
 a sense, to the land of their birth the land of Adam Smith, the 
 land of Malthus, Bicardo, and John Stuart Mill ; of Pelham Yilliers, 
 of Cobden and John Bright, of Fawcett, Shaw Lefevre, and 
 Mundella. So much is his book an English book, that even where 
 he attacks the conclusions of these masters, it is largely on the 
 ground of facts taken from the economic development of their own 
 country. In the matter of Economy England leads the vanguard 
 of the nations ; and it is therefore on her experience that all 
 forward-looking eyes are fixed ; while, by the thoroughness of her 
 investigations and the accuracy of her statistics, she has opened a 
 mine of information to which we go for the material of our economic 
 studies, just as we go for coal to Newcastle or Cardiff, for iron to 
 Stockton, for steel to Sheffield, for engines to Birmingham, for 
 cloth to Leeds, for cottons to Manchester, for ships to the Thames, 
 the Clyde, and the Mersey. 
 
 In France we are as yet far behind. In spite of the labours of a 
 few clear-sighted and honest thinkers, like Jean Baptiste Say and 
 Bastiat, we are still ruled for the most part by what Buckle 
 called "the protective spirit;" what the Italian Menzotti calls 
 " Colbertism." 1 
 
 It would be saying too much if we were to charge the memory of 
 Colbert with the whole responsibility of a system not of his inven- 
 tion, and which in his day was more or less recognised and 
 practised in every country in Europe ; but it was undoubtedly he 
 who organised and consolidated it, expounded its theory, and 
 attempted a rigorous and extended application of it. The system 
 perfectly corresponded with the monarchic ideal of Louis Quatorze. 
 Regarding himself as being, by Divine investiture, the absolute 
 master of his subjects, the king claimed to direct all their actions 
 social, intellectual, and religious. This theory covered at once the 
 
 1 Memoirs of the Academy of Florence, 1797- 
 n ri A r* r* 
 
IV PREFACE TO THE ENGLISH EDITION. 
 
 revocation of the Edict of Nantes, the savage persecution of the 
 lampoonists, and the trade regulations of Colbert. 
 
 To Colbert the right to labour was itself a part of the domain of 
 the State, to be granted by it to certain privileged persons, to the 
 exclusion of all others ; and it then became the duty of the State to 
 protect the persons thus licensed from foreign or unauthorised 
 rivalry, and at the same time to protect the consumer against its 
 own licensee. In the exercise of his royal prerogative, the king 
 sold to such-and-such individuals or corporations, and no other, the 
 right of manufacturing and selling such-and-such articles, and no 
 other, in such-and-such places, and nowhere else. The fine for 
 weaving stuffs out of the trade was 150 livres. Wool dyers were 
 forbidden to dye silk or cotton ; silk and cotton dyers were for- 
 bidden to dye woollen goods. The shoemakers and the cobblers, 
 the booksellers and the bookstall-keepers, the tailors and the 
 secondhand-clothes men, were always accusing each other of 
 encroachment; always at strife, always at law. Colbert writes to 
 his son, the Marquis de Clergiselay, that " all sorts of manufactures 
 which do not at present exist in the kingdom must, if possible, be 
 introduced." In 1662 he bought the Gobelin tapestry manufacture, 
 getting the workmen for it from Flanders. In 1664 he granted a 
 thirty years' monopoly of tapestry representing foliage and figures 
 to one Sienr Hinaud, who founded the royal manufactory at 
 "Beauvais. At the same time an edict of 1664 decreed one million 
 a year for the encouragement of manufactures and navigation. In 
 1673 and 1675 public money was granted for the foundation of 
 privileged companies to carry on the slave-trade in Senegal and 
 Guinea. Colbert began with a premium of six livres a head on the 
 negroes taken, he ended by raising it to thirteen livres a head. He 
 also founded the companies of the North, the Levant, and the 
 Pyrenees. 
 
 But encouragement was not enough for the monopolists, they 
 required the protection of coercion. The production of " French 
 point " was made a monopoly, the industry being entirely displaced 
 where it already existed and given to certain privileged persons. 
 The making of it by private individuals for their own use was 
 forbidden ; and a contemporary says that Colbert carried out the 
 change by the most violent means, imprisoning the refractory, and 
 " dragging the young girls from their fathers' houses to toil like 
 slaves for their bread and water." l 
 
 Another part of the system was, that good workmen were for- 
 bidden to go abroad. Colbert writes to the Archbishop of Lyons 
 to arrest and bring to justice two embossed- velvet makers, who 
 were intending to settle in Florence ; and threatens the family of a 
 
 1 Quoted by Pierre Clement, History of the Protective System in France. 
 
PEEFACE TO THE ENGLISH EDITION. V 
 
 French manufacturer who had gone to Lisbon, and was proposing 
 to start, a clotli factory there. 
 
 Having thus organised industry at home, Colbert proceeded to 
 secure it from foreign competition. In a letter dated 166G to the 
 Intendant of Marine at Rochefort, he said, " We must always buy 
 in France rather than abroad, even though the articles be inferior 
 and somewhat dearer ; because, when the money does not go out of 
 the kingdom, the State gains a double advantage, since it is none 
 the poorer for spending it." 
 
 The terms of the formula may vary, but the substance is always 
 the same. In a memorandum addressed to the king, Colbert gives 
 the theory of the protective system ever since : "To reduce the 
 duty on all articles and manufactured products going out of the 
 kingdom, and on all articles coming in which may serve as the raw 
 material of industry, and to keep out foreign manufactures by means 
 of prohibitive duties." 
 
 These principles were carried out in the adjustment of the tariffs 
 of 1664 ; which, however, were soon found insufficient, and were 
 doubled three years later. 
 
 Nevertheless, all this was not enough to give the required start 
 to certain industries, and further means of encouragement had to 
 be found. " It being the king's wish that his subjects should apply 
 themselves to navigation," a duty of fifty sous per ton was laid on 
 Dutch vessels, and a premium was offered on all French-built ships 
 of more than a hundred tons. The dockyards, however, apparently 
 remained empty, for Colbert is obliged to break his rule by granting 
 a premium of five livres per ton to importers of ships of under 100 
 tons, and six livres per ton to importers of ships of over 100 tons. 
 
 Having made all these arrangements for fostering national 
 industry and protecting it from any influx of foreign products, 
 Colbert proceeded to protect the consumer against the manufacturer 
 by regulating the trade corporations. An edict of 1669 declares 
 that, the goldsmiths' and silversmiths' work having deteriorated, 
 and being no longer of the required quality, statutes and regulations 
 have been drawn up for the purpose of bringing it to the greatest 
 possible perfection. The length and width of cloth were determined 
 by authority. The cloth was to be inspected and marked on its 
 return from the fuller, and confiscated if it did not conform to the 
 prescribed conditions. Textile fabrics were to have so many threads 
 to the warp and so many to the woof. A code of instructions, 
 published in 1671, defined in 317 articles the composition of dyers' 
 colours. The manufacturers loudly complained ; but they were 
 informed that there were great advantages in this uniformity of 
 length and breadth in all the textile manufactures, and that the 
 rules would continue to be rigorously applied. In 1672 it was 
 ordained that defective goods should be exposed in the pillory with 
 
 b 
 
Vi PEEPACE TO THE ENGLISH EDITION. 
 
 the names of the manufacturers and workmen fonnd in default ; 
 and iu case of a repetition of the offence the offender was to be put 
 along with them. The State proved its infallibility by issuing an 
 extraordinary number of contradictory decrees forty-four between 
 1666 and 1683, and between 1683 and 1739 no less than 230. 
 
 To secure cheap bread, Colbert forbade the exportation of grain, 
 thus destroying a main source of profit to the agriculturists. 
 England and Holland answered his customs tariffs with a war tariff, 
 and ceased to buy French wines. The French peasantry were iu the 
 deepest misery ; the subsidised industries did not flourish ; Colbert 
 himself confesses that, multiply privileges as he would, he was 
 always asked for more. " They never attempt," he says, " to sur- 
 mount difficulties by their own efforts, as long as the king's 
 authority will do it for them." He describes the tariffs as the 
 " crutches " of industry, as if industry were a cripple. It had only 
 become a cripple by leaning on its crutches and making no effort 
 to walk alone. In spite of all his " encouragements " Colbert's 
 companies fell to pieces one after another, like so many houses of 
 cards. After bringing the country to the verge of desperation, he 
 himself died in despair, and was only saved by a secret funeral from 
 the last insults of the mob. 
 
 And yet this man had intellectual powers of the highest order ; 
 a faculty for organisation which could adapt itself equally to the 
 projecting of vast designs and the carrying out of the most minute 
 details, unwearying industry, unfaltering and ardent purpose. It 
 was the system that was to blame. It was the mistaken attempt 
 to substitute the action of the Government for individual initiative, 
 authoritative regulation for private contract, the responsibility of 
 the State for that of the individual, which spoilt all his fine 
 qualities, brought disaster on all his schemes, plunged the country 
 into distress and ruin, instead of giving it wealth and prosperity, 
 and provoked disorder in the very endeavour to secure absolute 
 order. 
 
 These results were enough to advertise the system as a failure. 
 The physiocrats opposed to it the formula of Gournay, " Laissez 
 faire, laissez passer; " and Tnrgot, on his accession to power, 
 attempted the practical application of the principles, but failed, and 
 fell in the struggle with the protectionist spirit. The Revolution 
 of 1789 abolished the corporations, with all their paraphernalia, in 
 a single night ; but a momentary burst of enthusiasm was not 
 enough to eradicate Colbertism from the French mind. It soon 
 reappeared, under the aegis of the Revolution itself, in measures 
 for limiting prices and preventing the buying-up of the market. It 
 showed itself under the Empire in the police regulations to which 
 workmen were subjected ; and it was worked out on a tremendous 
 scale in the Continental blockade. It was perpetuated under the 
 
PREFACE TO THE ENGLISH EDITION. Vll 
 
 Restoration, the Government of July, and the Second Empire. It 
 was supported, not only by the rich and powerful manufacturers 
 who were the immediate gainers by it, but by the ignorant public, 
 who, notwithstanding all the efforts of the Economists, allowed 
 themselves to be carried away by its plausibilities. During the 
 Revolution of 1848 it broke out afresh in the demands of the 
 Collectivists and State Socialists, who agitated for the right to 
 labour, for State credit, and sundry other equally indefinite 
 advantages. To this day, in spite of the enormous industrial 
 development which has within the last thirty years opened a new 
 channel for the economic progress of the nations, in spite of 
 multiplied facilities of transport and communication, and of the 
 experiments made and the gigantic results achieved in England 
 by the diminution of the customs, Colbertism is still endemic in 
 France. Cured in one form, it breaks out in another. Driven 
 from this point, it flies to that. Men of all parties agree in this 
 that protection is indispensable, only each has his own particular 
 Colbertism, which he wishes to set up at the expense of the rest, 
 since privilege necessarily implies privation. I wish to offer here 
 a few observations on the French Colbertism of to-day. 
 
 Colbertism is like a delirium the form of the spectre changes, 
 the agony of terror is the same. Once it was the influx of English 
 products that kept French Colbertism in panic fear, then it was 
 the influx of American products, now it is the Treaty of Frankfort. 
 Yet many of those who declaim the most loudly against this fatal 
 llth article, have never read its text. It amounts to nothing more 
 than what is known as the " most favoured nation " clause. 
 
 It runs as follows : 
 
 Art. 11. The French Government and the German Government 
 shall take as the basis of their commercial relations the system of 
 reciprocity, on the footing of the most favoured nation. Under this 
 rule are included the rights of ingress, egress, and transit, custom-house 
 formalities, and the admission and treatment of subjects of the two 
 countries and their agents. Provided that such favours as either of the 
 contracting parties may have accorded, or may accord, by treaties of 
 commerce, to States other than the following England, Belgium, the 
 Netherlands, Switzerland, Austria, Russia shall be excepted from the 
 above rule. 
 
 It is always the same old struggle of the producer to maintain 
 prices. He wants his rivals put down; and he never perceives that he 
 himself is a consumer to begin with, and a very large one, and that 
 in making things dear for other people he is making things dear for 
 himself. A manufacturer uses coal, iron, and other raw material, 
 such as soda, for instance, which, nevertheless, according to the 
 customhouse scale, are treated as manufactured products ; he con- 
 sumes, also, through the medium of his workmen, large quantities 
 
Vl'll PREFACE TO THE ENGLISH EDITION. 
 
 of manufactured goods clothes, furniture, utensils, food, fuel. 
 Every tax on any of these articles increases the expense of 
 production. He is, therefore, compelled to sell dear. This obliga- 
 tion might suit him well enongh if it were not that, across the 
 frontier, and even close at hand, he finds himself surrounded by 
 competitors, who are all doing their very best to undersell him. 
 And yet, in spite of all their efforts, the final result of the compe- 
 tition of producers and merchants among themselves, the need of 
 the consumer to buy cheap, and the general advance in mechanical 
 conveniences of all sorts and in the means of transport, is that the 
 price of circulating capital is constantly falling, while that of fixed 
 capital is as constantly rising. 
 
 The most recent statistics, published since the appearance of this 
 volume in France, show a steady continuance of this phenomenon ; 
 and every fresh investigation confirms the maxim, that " the wealth 
 of a nation is in inverse ratio to the value of its circulating capital, 
 and in direct ratio to the value of its fixed capital." 
 
 Bat if the value of lands and forests, houses and factories, and 
 above all, the value of man, the highest, kind of fixed capita], rises 
 in proportion to the fall of circulating capital, it follows that, instead 
 of trying to keep up prices by protective tariffs, we should make 
 every effort to assist their fall by freeing them from imposts, which 
 are a sort of inland customs. 
 
 But all the nations except England have followed a directlv 
 opposite course, and impeded the circulation of commodities by 
 weighting them with a factitious dearness. Each individual wishes 
 of course to buy at the best price for his own advantage, and to 
 sell at the best price for distancing his competitors; and societv. 
 the nation, the State what are they but collections of these sanL 
 individuals ? Yet it is held that, while it is the object of the indi- 
 vidual to bring down prices, it must be the object of the State to 
 keep them up. I have been speaking of the past ; but it is not a 
 question of the past; it is unhappily a question of the present, and 
 perhaps even of the future. 
 
 All industries are tributary one to another; if therefore all in. 
 dustries are protected, it is obvious that each is payino- for the 
 protection of the others. If, on the other hand, some industries 
 are protected and others not, then Peter is robbed, without compen- 
 sation, to pay Paul. The unprotected industries must still pay 
 protection prices for their raw material, their machinery, and their 
 labour. Before he can produce, the manufacturer must begin by 
 consuming ; and the greater the production the greater the con- 
 sumption ; and if he cannot buy cheap, how is he to sell cheap ? 
 
 The Colbertists have no idea of keeping the golden rule They 
 
 wish to exclude your produce ; but if they can they will make you 
 
 They claim protection that they may develop their 
 
PREFACE TO THE ENGLISH EDITION. IX 
 
 exports. It seems to have escaped their notice that, if they need 
 protection, it must be because, with every advantage of language, 
 taste, and proximity, they have been unable to compete with foreign 
 goods in their own country ; and that if, with all these advantages, 
 they cannot keep the home market, it is hardly to be supposed that 
 they can secure onte across the frontier. 
 
 One is ashamed to repeat such obvious truisms ; and yet, as long 
 as they are unaccepted in practice, we can but go on unfolding them 
 and presenting them in their various aspects. It seems that it is 
 easier to impose the tariffs than to master the theory of free trade ! 
 
 The worst is, that there is not even the excuse that the theory 
 has not been verified by experience. One nation has had the courage 
 to act on it ; and its experience has given abundant proof of the 
 soundness of the theory. 
 
 " But England is the market of the world." 
 
 Yes ; and why ? Because she has opened her frontiers to the 
 produce of all the world ; because [she buys, all the world over, at 
 the lowest price, augmented only by the cost of transport. It is she 
 herself who gains by the freedom she gives. Moreover, as every- 
 thing goes to the English market, it is the English market which 
 decides the current price ; and the English merchant or manu- 
 facturer is the first to profit by the rise or fall, while those of other 
 nations follow at a distance. It is not Havre that rules the price 
 of cottons ; it is Liverpool. 
 
 The English manufacturer, getting his raw material in the 
 cheapest possible market, can produce at the lowest possible price, 
 and at the same time afford the highest wages. The value of man, 
 like that of land and buildings, rises in proportion to the cheapness 
 and abundance of circulating capital. Yet this cheapness is the 
 terror of the French Colbertist. His ideal is the policy of dearness. 
 
 Now for the consequences : 
 
 The very manufacturers who, in the name of " national 
 labour," demand the exclusion of their foreign rivals, make no 
 scruple of themselves employing foreign labour. French workmen 
 have not perceived this inconsistency ; they are so simply pro- 
 tectionist that they need no argument of this kind against the com- 
 petition of the foreigner ! They are trying to obtain the insertion 
 of a clause in the contracts for public works forbidding the employ- 
 ment of foreign labour, or admitting it only under strict limitations. 
 They are consistent. The inconsistency rests with the employers, 
 who are willing enough to erect barriers against foreign products, 
 but object to barriers against foreign workmen, though the one is 
 but a corollary of the other. 
 
 I have said something of these inconsistencies in the Fourth Book 
 of this work ; but there is always more to say, for the evil goes on 
 increasing. 
 
X PREFACE TO THE ENGLISH EDITION. 
 
 The law on trade syndicates, recognising the right of the work- 
 men to hold meetings, form associations, and concert measures for 
 selling their labour wholesale, has not yet passed the Senate. On 
 the other hand, the workmen and most of the Radical deputies 
 are eagerly demanding the limitation of the working day for adults 
 to ten hours (which is really an application of the principle of the 
 maximum). The Senate rejects the measure ; not, however, in any 
 enlightened spirit, but on the same protectionist principles which 
 led to the rejection of the other Bill. And yet we keep our faith in 
 Government regulation of trade and labour ! The names of liberty 
 and equality are constantly in our mouths, but we are like liars pro- 
 testing our veracity. We " protest too much." And all the while 
 we are clamouring incessantly for new measures of tutelage and 
 new recognitions of caste. 
 
 Ever since Political Economy has been taught by the faculties of 
 law we have been witnessing the evolution of a new form of Col- 
 bertism. Once they despised Political Economy altogether ; now 
 many of its teachers, imbued with prepossessions derived from the 
 old Roman and French legists regarding the omnipotence of law, 
 adopt the doctrines of the Catheder-Socialisten. The example of 
 England, however, has always stood in their way. The successes 
 of the Catheder-SociaUsfen and of the State socialism, let alone those 
 of Colbert himself, have hardly been brilliant enough to be quoted 
 on the other side. They therefore hail such succour as that of 
 Prof. Cliffe, Leslie's Essays, Mr. Ingram's manifesto, Stanley 
 Jevon's The State and Labour, Mr. Goschen's late speech, and th 
 observations made by Mr. Chamberlain and the members of the 
 Philosophical Institute at Edinburgh, on " Laissez faire" and 
 Government interference. England herself, they say, is abandoning 
 the principle of non-intervention, and coming down to a sort of 
 State socialism, and hence the outburst of demands for protection 
 on behalf of all interests, the protection of the men against the 
 masters, and the masters against foreign competition, and the 
 mutual recriminations of commerce, industry, and agriculture, as if 
 they formed three hostile camps ! 
 
 The inquiry now on foot T before a committee of the Chamber of 
 Deputies will have the advantage of showing up the economic 
 prejudices and fallacies still in force among us. 
 
 If the Government loses here, it gains there; you cut away one 
 tentacle, and another buds out on the instant. Every day it loses 
 something of its religious, intellectual, or political influence over- 
 men to whom political liberty means the right to take part in the 
 affairs of the State, to whom the liberty of the press means the 
 right to choose your own reading, and liberty of conscience, the right 
 
 J February, 1886. 
 
PKEFACE TO THE ENGLISH EDITION. XI 
 
 to think and believe without asking permission. But, on the other 
 hand, it constantly finds a pretext for its activity in some new 
 domain. We see it in Paris to-day, under the plea of hygienic 
 necessity and through the medium of the municipal laboratory, 
 interfering with the provision trade in ways as vexatious as those 
 of Colbert himself including public advertisement, which is but a 
 modern form of the pillory. 
 
 This pretext of hygiene may go far. It has been used in Eng- 
 land from time to time to stop the importation of foreign cattle. 
 It has been used in France within the last two years to support the 
 prohibition, by a simple ministerial decree, of the importation of 
 American bacon. This is for fear of trichinae. It is not proved 
 that there has ever been a single case of trichinosis in France ; and 
 with the trenchant logic which is apt to characterise Government 
 measures, while prohibiting bacon in the barrel from across the 
 Atlantic, we were admitting live bacon from across the Rhine, 
 where trichinosis is endemic. The Academy of Medicine pro- 
 nounced, unanimously, but for a single vote, against the prohibition ; 
 but none the less a whole trade was destroyed by a nod of the 
 ministerial head. Who is to be held responsible for the bankruptcy 
 and ruin of the victims ? The modern Colbertism ends, like the 
 old, in a government by inspectors. They come into our houses 
 now to see if their sanitary condition is satisfactory ; soon we shall 
 have them coming to see if the children's faces are washed and they 
 are gone to school, and whether the kitchen utensils are clean or not. 
 We shall have them prescribing our hours of sleep, and our dishes 
 at table, like Sancho Panza's doctor absit omen ! forbidding 
 us this or that drink, as they did in some parts of America, and 
 sounding the curfew, as in the good old times, because we cannot 
 be allowed to reverse the order of Nature by turning night into day. 
 
 Let the partisans of the extension of State intervention, who are 
 distinguished, for the most part, by their distrust of its agents, 
 consider the consequences ! The State can only act through regu- 
 lations, the execution of which must be enforced by inspectors, 
 government officials, and the police ; and when these agents of the 
 Executive begin to come in contact with the daily life of the indi- 
 vidual, controlling his actions, intermeddling in all his affairs, the 
 very men who have been the foremost in calling the State to their 
 aid will be the first to turn against the system, to load its agents 
 with recriminations, to expose their tyranny, their incapacity, their 
 blunders; they will look back with regret on the part they have 
 taken in bringing about the evils from which they suffer, and 
 which, in the pursuit of their own supposed advantage, they have 
 inflicted on others besides themselves. 
 
 Nevertheless, I have faith in the future ; the encroachments of 
 the State and of th>> V<;al authorities are temporary ; they cannot 
 
Xll PEEPACE TO THE ENGLISH EDITION. 
 
 last long. As we go on, the consciousness of individual rights must 
 grow more distinct, and with it must come fresh outgrowths of self- 
 directing energy, and a more determined revolt against all measures 
 which tend to repress or frustrate human activity. With forces 
 like these in the field, it can be only a question of time, how soon 
 we are to witness the overthrow of a system under which more 
 time and strength are spent in getting leave to do a thing than in 
 actually doing it. A man's whole energy is spent in attempting to 
 alter the law, or to contrive that a law directed against him shall 
 in some way serve his purposes. We find this last form of activity 
 constantly at work among those who are subjected to indirect 
 taxation. 
 
 What, then, are the advantages of the system ? What is there 
 to say in its favour ? That the Government becomes responsible ? 
 In what way ? As regards political responsibility, a minister's re- 
 sponsibility to his country appears, notwithstanding some few cele- 
 brated instances, to be considerably lighter than that of a merchant 
 to those with whose money he is trading. But, to speak only of 
 economic responsibility when the State undertakes a department 
 of the public service, what is its first act ? To declare its irrespon- 
 sibility. The" Compagnie du Nord paid two million francs for a 
 railway accident ; if the State were to work the railways, it would 
 have a fixed price for human breakages, as it has for the loss of 
 registered letters. When a private person brings an action against 
 the State, he comes into conflict with the entire social and political 
 organisation, which fights him with his own money, paid to it in 
 taxes. The attempt to substitute corporate responsibility for pri- 
 vate responsibility ends in this, that there is no responsibility at 
 all. Mr. Goschen quotes a striking instance of this result. Mr. 
 Plimsoll's Merchant Shipping Act obliged the Government to un- 
 dertake the protection of the lives of seamen. Nothing has come 
 of it, or worse than nothing. Individual responsibility has dis- 
 appeared, and Government responsibility is totally ineffective. A 
 shipwreck occurs ; the shipowner cannot be blamed ; the Govern- 
 ment had passed the vessel. 
 
 Prof. Stanley Jevons, in his book on The State and Labour, says, 
 " The individual is not always the best judge of his own wants 
 and interests. He is not always able to judge for himself." We 
 may go further ; we may admit that he never is; for he is always 
 liable to be misled by prejudice, passion, or ignorance. But Govern- 
 ments also are composed of men; have they no prejudices, no 
 passions, no defects of knowledge ? What has made them infal- 
 lible ? Prof. Stanley Jevons admits the ignorance of the State in 
 matters of Economy ; but if its knowledge is inadequate it surely 
 ought to abstain from action. A private person may make a mis- 
 
PEEFACE TO THE ENGLISH EDITION. X11J 
 
 take in his calculations ; but the consequences of his mistake will 
 be limited to a very narrow area compared with the far-reaching 
 consequences of an error committed by the State. 
 
 The city of Paris has drawn up a scale of prices intended to 
 serve as a basis for the rate of its contracts. Little by little, this 
 scale of prices has come to be considered as an official standard, 
 giving the law to prices generally. The contractors take these 
 fixed prices as the basis of their estimates in contracting with pri- 
 vate persons. Consequently, the price of buildings goes up ; the 
 workmen, having consulted with their masters, quickly raised the 
 rate of wages. Then the contractors, finding others who will work 
 for lower pay, employ them, and the higher scale of wages is not 
 paid after all. In this way two classes of workmen have come to 
 be formed, those who work at par and those who work below par. 
 The former detest the latter ; and all demand that the city shall by 
 its rules compel the contractors to pay invariably according to the 
 fixed scale. The consequence will be, that the contractors will 
 secure themselves by raising their prices ; the ratepayer will pay 
 more for a less result; the workmen will find fewer workshops 
 open ; and the demand for labour will be diminished. This is only 
 another phase of the policy of dearness. 
 
 In France, we have before our eyes at this very moment an 
 instance of the danger of State intervention in matters of economy. 
 In 1878 M. Freycinet's Government, by large purchases of ma- 
 chinery, gave a sudden impetus to the metal-foundries and other 
 industries. Political difficulties supervened ; the Government was 
 obliged to close, or greatly reduce, its works ; a part of the ma- 
 chinery remains unproductive, and the purchasing power of the 
 capital sunk in it remains unrecovered. 
 
 In the recent discussions in the Chamber on the financial crisis, 
 two speakers only, M. Frederic Passy and M. Lalande, ventured 
 to take the ground of freedom of trade ; all the rest showed them- 
 selves more or less tainted with Colbertism. Consciously or un- 
 consciously, they implied the belief that a vote of the Chamber is all 
 that is necessary to change the nature of economic conditions. The 
 illusions I have referred to in the first chapter of this volume are 
 not yet dissipated. No sooner does a crisis occur than everybody 
 requires the State or the communes to set on foot great public 
 works. Whether the work will be of any use or not, is a secondary 
 consideration. No one seems to realise that the money spent on 
 these works is just so much withdrawn from employment in private 
 enterprise. The capital is sunk for the present; when will it re- 
 gain its purchasing power ? What if it never regains it ? The 
 supposed remedy only aggravates the evil. Yet not a voice was 
 lifted in the French Chamber of Deputies to demonstrate this 
 obvious truth. 
 
XlV PREFACE TO THE ENGLISH EDITION. 
 
 Latterly, the expedition to Tonquin lias been spoken of as a 
 remedy for the crisis. Unfortunately, our experience in Cochin 
 China goes to prove that our colonies serve rather as outlets for the 
 capital of the French taxpayers than for the products of French 
 industry. Colonised chiefly by Government officials, the purchases 
 they make in France are made with the money we have just sent 
 out to them in salaries. From this point of view they represent 
 one of the most desperate forms of Protectionist policy. 
 
 Every measure which bears the mark of Colbertigm has to be fed 
 in the first instance out of the budget. There may be a question 
 as to its subsequent advantages ; there can be no question at all as 
 to this preliminary sacrifice. 
 
 Again, a Protectionist measure, once adopted, is almost im- 
 possible to get rid of; it creates around it a group of vested inter- 
 ests which buttress it on every side, and a troop of functionaries 
 always in arms to defend it as a personal possession. " Gentle- 
 men," say these officers of the State, "we cannot allow the 
 authority which has been entrusted to us to suffer in our hands." 
 They regard the whole organisation, with all its vices and abuses. 
 as a sacred deposit, which they cannot see impaired without dis- 
 honour. 
 
 Under the bourgeois government of the Restoration and of Louis 
 Philippe, the nobility and the upper middle class had secured to 
 themselves certain privileges, by means of the Protectionist system. 
 The democracy, in attacking these privileges, took its stand on 
 the high ground of liberty. All Oppositions do. But now the 
 democrats are in power, and all this is changed. The privileges 
 they despised for others, they now wish to keep for themselves. It 
 is in the nature of things. 
 
 It is the inevitable tendency of every Colbertist measure to carve 
 out privileges for the governing party at the expense of the gov- 
 erned. Social equality is in inverse ratio to the intervention of the State. 
 
 In proportion as the animal develops, the organs differentiate, and 
 become more and more independent of each other. It is the same 
 witli species. The higher the type, the more marked are the indi- 
 vidual differences. Mussel resembles mussel ; but man differs from 
 man. Two natives of Tierra del Fuego are not very dissimilar in 
 thought and character ; but every unit of our Paris population has 
 ideas, tastes, capacities, that distinguish him from his neighbour. 
 Bat the Colbertist ideal would bring down all these diversities to a 
 dead level, would run them into a single mould, and fix the pattern 
 once for all. It is not life, not freedom, not progress ; it is mum- 
 mification. 
 
 It is an anachronism too. It is an attempt to superimpose the 
 military civilisation of a past age on the industrial civilisation of 
 our modern ti: 
 
PREFACE TO THE ENGLISH EDITION. XV 
 
 The system cannot but produce intellectual and moral depression. 
 JBased on privilege, it implies spoliation, provokes hatred or re- 
 bellion, leads to social warfare. If regulation affords room for 
 official tyranny, it positively invites corruption ; intrigue and fraud 
 are the safety-valves of repressed energies. 
 
 By increasing expenditure, by diminishing the productive power 
 of individuals, and by compelling them to struggle with obstacles 
 on every side, it creates clearness ; and dearness means famine, 
 destitution, misery. 
 
 Alas ! these things have frozen us to the very marrow of our 
 bones ; and yet we cannot give up our belief in the system, and in 
 its salutary influence on the production of wealth. In England no 
 one imagines that the production of wealth can gain by State inter- 
 vention, but only that State intervention is required to facilitate 
 its first distribution. 
 
 The figures recently published by Mr. Giffen, 1 and the statistics 
 quoted in the body of this book, suffice to prove that the existing 
 distribution is not so unjust, whatever complaint may be made of 
 the non-interference of the State with labour-contracts, and 
 of its refusal to protect the employers against the men, the 
 landlords against the manufacturers. The injustice is on the other 
 side. Colbertism, while it stimulates a factitious production, en- 
 forces a factitious distribution. It persistently sacrifices certain 
 classes of people to certain other classes. The English corn laws, 
 while they lasted, injured the workman by limiting the market in 
 which he could buy his bread. The French Customhouse injures 
 the manufacturer, by forbidding the paper-maker to buy his soda 
 and the spinner to buy his cotton at their natural price. 
 
 But even in England, they say the distribution of wealth is 
 unjust, and for this they blame the principle of non-intervention. 
 But where is there any such thing as non-intervention ? Does not 
 the State everywhere intervene with its system of taxation ? Is 
 not this State interference defeating human activity ? Does it not 
 weigh down a trade here, an industry there ? Does it not lay its 
 finger on every transaction, every transfer, every exchange ? 
 
 I will give an instance of one of its most flagrant inequalities. 
 
 A man's wealth may increase in two ways ; either directly, by 
 his own exertions, or incidentally, through the exertions of others. 
 It may be entirely the result of the latter. A man owns a house 
 on the Place de la Bourse in Paris. He has inherited it, by no 
 effort of his own ; he takes no trouble about it ; he only does not 
 sell it. Yet year by year the property rises in value. He hunts, 
 shoots, fishes, gives himself no concern ; and all the while the labour 
 of others is creating wealth for him. 
 
 1 Journal of the Statistical Society, December, 1883. 
 
xvi PREFACE TO THE ENGLISH EDITION. 
 
 Now, if we talce the average of the recent budgets in the city of 
 
 is, we find that the octroi and other duties have brought in more 
 
 than ' 180,000,000 fr. out of a budget of from 250,000,000 to 
 
 260,000,000. On whom are these duties levied for the most part ? 
 
 On the tenants. 
 
 Which brings us to this singular conclusion, that the tenants 
 pay almost the whole of the charges on everything that goes to 
 increase the value of the property, and consequently to raise their 
 own rent. They provide the rod for their own back. They pay for 
 the privilege of having to pay. 
 
 This mode of taxation presses them on two sides ; in the first 
 place it makes the necessaries of life dear to-day ; and in the second 
 'lace, it threatens them with a rise in their rent to-monow. 
 
 Then the collectivists take up the old theories as to the nationali- 
 sation of the land, which broke down so pitifully in 1848. In 
 France, the bulk of the small proprietors are too much attached to 
 their own plot of ground for the collectivists to think of including 
 rnral property in their schemes. They confine themselves to dis- 
 posing of town property ; though their arguments tell quite as 
 much in one direction as in the other. 
 
 The solution is to be looked for, not in the merging of individual 
 proprietorship of the soil, but in a fiscal reform such as that adopted 
 by the Municipal Council of Paris, 1 such as that proposed by the 
 Municipal Reform Association in England, such as that indicated 
 by John Bright in his speech at Liverpool on the 1st of December, 
 1879. It is to collective effort and expenditure that fixed capital 
 owes a great part of its advance in value ; fixed capital must make 
 good this advance, and seek recoupment for so doing indirectly by 
 repercussion. 
 
 But whence come these inequalities ? From the burdens im- 
 posed by State intervention. Remove taxation, and the inequality 
 disappears. It is not by the augmentation of fiscal charges that we 
 can rectify the distribution of wealth, but by their reduction. But 
 it is impossible at the same time to reduce taxation and to increase 
 the area of State intervention. 
 
 Then we are told that we have no pity for the ills of suffering 
 humanity, because we object to empirical remedies which cost much 
 and do no good. Because we refuse to raise up a new privileged 
 class, we are accused of buttressing the privileges of the old. In 
 France, and in many other countries, Governments, Chambers, and 
 people all prefer to try the charlatan's receipt. " We don't know 
 whether it will do any good," they say, " but we must do some- 
 thing." The doctor mast never go away without leaving a pre- 
 M-ription. The patient must have something to take, even though 
 the whole thing may be only a question of dieting, 
 1 See Book vi., ch. 2 
 
PREFACE TO THB ENGLISH EDITION. XVII 
 
 The schools, or rather the sects, which make it their business to 
 solve " the social question " offer us a Babel of nostrums. The 
 Anarchists are for liberty, all liberty, nothing but liberty ; only the 
 instruments of labour are to be collective property. They do not 
 tell us how the two ideas are to be reconciled. The revolutionary 
 Collectivists have a different vocabulary ; but there tbe difference 
 ends. The moderate Collectivists are content to work by the day, 
 line upon line, here a little and there a little ; but they accept the 
 whole principle of economic intervention with its maxima and 
 minima, its privilege here and privation there ; in fact, they hardly 
 deserve a name of their own, for their policy is simply the policy 
 of the French nation. They profess to be progressists ; they are 
 reversists. Collectivism is only another name for Colbertism. The 
 worst of it is, that nobody recognises this, any more than they re- 
 cognise the inconsistency in the claims of the more or less authorised 
 leaders of the democracy, who ask at once for political liberty and 
 economic leading-strings. 
 
 There are, however, a few who still faithfully follow the economic 
 traditions of English Radicalism, as understood by Cobden and 
 John Bright, by Fawcett, Mundella, and Shaw Lefevre. They 
 would give back to the public all that has been taken from it by 
 royal spoliation, by judicial artifice, by the greed of privileged 
 classes, including labour itself, which, if it is no longer seized by 
 the monarchy and parted among guilds and corporations, is still 
 chafed and restricted by an effete legislation, by custom-house ex- 
 tortion, and by vexatious and oppressive taxation. 
 
 This is our Collectivism. Far from wishing to add to the old 
 artificial restrictions, we consider it the most important part of 
 our work to destroy them. We hold, with Buckle, that all the 
 great reforms have consisted, not in doing something new, but in 
 undoing something old. We would limit the action of the State to 
 the registration and enforcement of contracts. For the rest, we ask 
 ifc only to abstain from hindering the development of rights kept 
 hitherto in the shade, but which are just stirring into consciousness 
 and claiming their place in the light of day. 1 We allow, in virtue 
 of what Herbert Spencer calls the law of the family, the protection 
 of children against careless or cruel parents ; but we consider the 
 protection of the sane and able-bodied adult, which can only be 
 undertaken at the cost of other adults, not only as a distinct act of 
 spoliation in regard to them, but as loading them with a dead 
 weight which must tend to repress their own energies. We hold, 
 through all contradictions, to the belief that man develops greater 
 strength and intelligence in managing his own affairs than in 
 working for other people's benefit ; and that of all civilisations, the 
 
 1 An interesting example of this sort of development in England is to be 
 found in the recent measure relating to Married Women's Property. 
 
XV111 PREFACE TO THE ENGLISH EDITION. 
 
 worst would be a civilisation in which everybody was administering 
 for everybody else. 
 
 In a very remarkable book, called " The Statics of Civilisation," 
 a French savant, M. Paul Mougeolle, works out these two laws : 
 
 " Alimentary substances diminish in quantity from the equator to 
 the pole." 
 
 " The evolution of civilisation has been in the opposite direction ; 
 it rises as it recedes from the equator towards the north." 
 
 The suggestion is very striking. At first sight we might be led 
 to conclude that man would be richest and most powerful where 
 food was most abundant. But it is not so ; because human energy 
 grows with the increase of difficulty in finding nourishment, and 
 with the need of a larger amount of nourishment to maintain the 
 body at its normal temperature. Civilisation, therefore, develops 
 first and in its most primitive form, where living is easiest ; but 
 gradually men acquire the habit of industry ; patience and energy 
 are accumulated through hereditary transmission ; they leave their 
 original centre and press northward, to found by their ever-increas- 
 ing energy a more and more advanced civilisation. For no wealth 
 of circumstance ever produces progress. It has but one factor 
 man. 
 
 Every measure -which tends to enfeeble the energy of man, and 
 to reduce his responsibility, is an arrest of development. Those 
 who promote measures which substitute the action of the State for 
 that of the individual, are not favouring the evolution of humanity ; 
 they are paralysing it. 
 
 Three years ago I pointed out, in the concluding chapters of this 
 volume, that the great question which presses on all the nations, 
 whatever their form of government, now, at the end of the nine- 
 teenth century, is the apportionment of the duties of the State and 
 the rights of the individual. All the movements of thought and of 
 events which have since been taking place around us drive me more 
 and more forcibly to the conviction that this is indeed the great 
 problem which lies before the thinkers of all nations. 
 (Signed) 
 
 YVES GTJYOT. 
 
 PARIS, 1884 
 
TABLE OF CONTENTS. 
 
 BOOK I. 
 ECONOMIC SCIENCE, ITS NATURE, OBJECTS, AND METHODS. 
 
 CHAPTKK PAG-B 
 
 I. ON METHOD IN ECONOMIC SCIENCE 1 
 
 II. THE MATERIALS OF ECONOMIC SCIENCE 18 
 
 III. ECONOMIC PSYCHOLOGY . ....... 26 
 
 IV. DEFINITIONS 29 
 
 V. VALUE 35 
 
 VI. THE OBJECT OF ECONOMIC SCIENCE 41 
 
 BOOK II. 
 THE CONSTITUENTS OF VALUE. 
 
 I. ECONOMIC TENDENCIES OF MAN 45 
 
 II. CAPITAL 48 
 
 III. FIXED AND CIRCULATING CAPITAL 50 
 
 IV. NOMENCLATURE OF FIXED CAPITAL AND CIRCULATING CAPITAL . . 53 
 V. THE PLACE OF FIXED AND CIRCULATING CAPITAL IN THE WORK OF 
 
 PRODUCTION 54 
 
 VI. SPACE 58 
 
 VII. TIME 60 
 
 VTII. EXCHANGE 64 
 
 IX. CIRCULATION 66 
 
 X. RESUME 67 
 
 BOOK in. 
 
 VALUE OF FIXED AND CIRCULATING CAPITAL. 
 
 I. AN ECONOMIC CONTRADICTION 68 
 
 II. THE MEASURE OF VALUE . 72 
 
 III. MONEY 77 
 
 IV. RELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL ... 94 
 V. THE RELATION OF SPACE TO THE VALUE OF CAPITAL .... 109 
 
 VI. THE RELATION OF TIME TO THE VALUE OF CAPITAL. PUICE OF CREDIT 117 
 
 xbc 
 
XX CONTENTS. 
 
 BOOK IV. 
 THE VALUE OF MAN. 
 
 CHAPTER PAGE 
 
 I. POPULATION 123 
 
 II. PROFKSSIONS AND OCCUPATIONS 142 
 
 HI. THE VALUE OF MAN 151 
 
 IV. THE ORGANISATION OP HUMAN INDUSTRY 177 
 
 V. THE PRIVILEGES OF MASTERS 180 
 
 VI. THE BIGHT TO LABOUR, AND THE ORGANISATION OF LABOUR , . 182 
 
 VII. EXCEPTIONAL CONDITIONS OF LABOUR 186 
 
 VIII. THE LABOUR MARKET 192 
 
 IX. CO-OPERATION 211 
 
 X. CONCLUSION 215 
 
 BOOK V. 
 EXPERIMENTAL ECONOMICS. 
 
 I. LANDED PROPERTY . 217 
 
 H. COMMERCE 230 
 
 III. COMMERCIAL CRISES 239 
 
 IV. BANKS 249 
 
 V. PUBLIC COMPANIES AND ASSOCIATIONS 262 
 
 BOOK VI. 
 THE FUNCTIONS OF THE STATE. 
 
 L STATE INTERVENTION IN ECONOMICS ....... 270 
 
 H. THE BEVENUES AND EXPENDITURE OF THE STATE . . 275 
 
 III. THE PROVINCE OF THE STATE 286 
 
 CONCLUSION. CHARACTERISTICS OF ECONOMIC PROGRESS .... 292 
 
BOOK I. 
 
 ECONOMIC SCIENCE, 
 
 ITS NATURE, OBJECTS, AND METHODS. 
 
 CHAPTER I. 
 
 ON METHOD IN ECONOMIC SCIENCE. 
 
 I AM led to treat of Method in Economic Science at the outset of 
 my work, partly by the confusion which, as we shall find, exists 
 in people's minds, and partly by some recent discussions on the 
 subject. 
 
 M. Courcelle Seneuil has rightly observed, that political economy, 
 or, more accurately, economic science, is the first branch of 
 social science which has been carefully, steadily, and successfully 
 studied. 1 
 
 It has existed as a science for only one century. Quesney, 
 Turgot, and the physiocrats had a glimpse of some of its laws. 
 The great work of Adam Smith appeared in 1776. Jean Baptiste 
 Say, in his " Traite d'Economie Politique " and his " Cours 
 d'Economie Politique," was the first to lay down clearly, though not 
 without some verbal inaccuracies, the method which economists 
 should follow. 
 
 " In political economy," he says, 2 " as in physics, as indeed in 
 everything, we have framed systems before establishing truths ; that 
 is, gratuitous conceptions and mere assertion have been given forth 
 as truth. Later on, we have applied to this science the method 
 which has contributed so much since the time of Bacon to the pro- 
 
 1 Journal des Economistes. " Situation de PEconomie Politique," Sept. 1877, 
 p. 326. 
 
 2 Discours Preliminaire. This did not appear till 1826. 
 
2 ON METHOD IN ECONOMIC SCIENCE. 
 
 gress of all the others, namely, the experimental method, 1 the 
 essential feature of which consists in admitting as true only those 
 facts the truth of which has been demonstrated by observation and 
 experiment, and as constant truths only such conclusions as can be 
 naturally drawn from them ; a method which altogether excludes 
 that deference to authority and precedent which, in science as in 
 morals, in literature as in government, interposes between man and 
 the truth. 
 
 " But do we really know all that is meant by this word ' facts,' 
 which is so often used ? 
 
 " It seems to me that it means both things which are, and things 
 which happen ; and this introduces at once two orders of facts ; it 
 is a fact that such and such a thing is thus, and it is a fact that such 
 and such an event has happened in such a manner. 
 
 " Things which are, if they are to serve as a basis for sound 
 reasoning, must be seen as they are, under all their aspects and 
 with all their properties. Otherwise, while thinking to discuss the 
 same thing, we may be discussing two different things under the 
 same name. 
 
 " To the second order of facts, namely, things which happen, 
 belong the phenomena which appear when we observe how things 
 take place. Thus it is a fact that when metals are exposed to a 
 certain amount of heat they melt. 
 
 " The way in which things are and happen constitutes what is 
 called the nature of things; and the correct observation of the 
 nature of things is the sole foundation of all truth. 
 
 "Hence spring two classes of sciences: the sciences which we 
 may call descriptive, and which consist in naming and classifying 
 things, like botany and natural history ; and the experimental 
 sciences, which inform us of the reciprocal action of things on each 
 other, or, in other words, the connection between cause and effect ; 
 such are physics and chemistry. 
 
 " These latter require the study of the inner nature of things, for 
 it is in virtue of their nature that they act and produce these effects ; 
 it is because it is in the nature of the sun to be luminous, and of the 
 moon to be opaque, that when the moon passes in front of the sun 
 the sun is eclipsed. Sometimes a careful analysis suffices to make 
 known to us the nature of a thing ; in other cases it is completely 
 revealed to us only by its effects ; and in any case observation is 
 
 1 Say ought to have said, method of observation. Claude Bernard has well 
 distinguished between the two methods in the following passage : " The name 
 of observer is given to one who employs simple or complex modes of investiga- 
 tion for the purpose of studying phenomena as they occur in nature ; the name 
 of experimenter is given to one who employs simple or complex modes of 
 investigation in order, for some purpose or other, to alter or modify natural 
 phenomena, and to reproduce them under circumstances or conditions under 
 which they do not occur in nature." 
 
Bk.i. Ch. i.] ON METHOD IN ECONOMIC SCIENCE. 3 
 
 cecessaiy, when we cannot have recourse to actual experiment, to 
 confirm what analysis has taught us. 
 
 " These guiding principles will help us to distinguish two sciences 
 which have almost always been confounded : political economy, 
 which is an experimental 1 science ; and statistics, which is only a 
 descriptive science. 
 
 " Political economy, as it is now studied, is altogether founded on 
 facts ; for the nature of a thing is as much a fact as its consequences. 
 The phenomena, the causes and consequences of which it seeks to 
 make known, may be considered either as general and constant facts, 
 which under like circumstances are always the same, or as isolated 
 facts, which, indeed also take place in obedience to general laws, 
 but where several laws, acting simultaneously, modify without 
 destroying each other ; like the fountains in our gardens, where we 
 see the laws of gravity modified by those of equilibrium, without 
 therefore ceasing to work. Science cannot pretend to reveal all 
 these modifications, in their daily repetition and infinite variety; 
 but it lays bare the general laws, and illustrates them by instances 
 which every reader can substantiate for himself. 
 
 " Statistics can only make us acquainted with facts which have 
 actually taken place. . . . They may gratify curiosity, but 
 cannot usefully satisfy it, so long as they do not indicate the origin 
 and consequences of the facts they record ; and when they do, then 
 they are not statistics, but political economy. 
 
 " Political economy is established on immovable foundations the 
 moment the principles which serve as its bases are proved to be 
 rigorous deductions from incontestable facts. 
 
 " In truth, general facts are founded on particular facts ; but we 
 can select those particular facts which have been the best observed 
 the best recorded, and of which we ourselves have been the witnesses, 
 and when the results have been found to be constantly the same, 
 and solid reasoning shows why they have been the same, when the 
 very exceptions are but the confirmation of other principles as 
 clearly proved, then we are justified in giving these results as 
 general laws. A new particular fact, if it be isolated, if the reason- 
 ing fails to show its connection with its antecedents and its conse- 
 quences, is insufficient to shake a general law ; for who can say but 
 that the difference observed between the two results may have been 
 due to some unknown circumstance ? ... In political economy 
 it is a general fact that the interest on money varies with the risk 
 run by the lender. Am I. to conclude that the principle is unsound 
 because I have seen hazardous loans at low interest ? The lender 
 may have been unaware of the risk ; gratitude or fear may have 
 compelled him to make a sacrifice : the general law, disturbed in a 
 
 1 Say meant, " inductive." 
 
4 ON METHOD IN ECONOMIC SCIENCE. 
 
 particular case, will have resumed its sway the moment the per- 
 turbing influences have ceased to act. 
 
 " Besides, how few individual facts are satisfactorily proved, and 
 how few of these have been observed with all their attendant cir- 
 cumstances ; and even supposing them to be well authenticated, 
 faithfully observed, and accurately described, how many there are 
 that prove nothing, or prove the reverse of what they were in- 
 tended to establish ! 
 
 " It is idle to oppose practice to theory. What is theory, if not 
 the knowledge of the laws which bind the effect to the cause, fact 
 to fact ? Who can be better acquainted with the facts than the 
 theorist, who knows them under all their aspects, and knows, too, 
 the relations which subsist between them ? And what is practice 
 without theory but the employment of means without knowing how 
 or why they exist ? It is simply a dangerous empiricism, by which 
 we apply the same methods to cases which are alike only in appear- 
 ance, and which tend to results quite other than those we are 
 
 " In order, then, to arrive at the truth, we must know, not many 
 facts, but the essential and influential facts, must regard them 
 under all their aspects, and, above all, must draw from them just 
 conclusions, and make sure that the effects ascribed to them are 
 really caused by them and by nothing else. 
 
 " Some persons, at home in other sciences, but strangers to this, 
 imagine that there are no positive ideas except the mathematical 
 verities, and the exact observations of natural science. They fancy 
 that in the moral and political sciences there are no constant facts 
 and indisputable truths, and that they are therefore not sciences 
 at all, but merely more or less ingenious individual hypotheses. 
 These men of science found their belief on the disagreements of 
 those writers who treat on these subjects, and on the real extrava- 
 gances of some of them. As to extravagances and hypotheses, 
 what science is without them ? Chemistry, physics, botany, 
 mineralogy, physiology, what are they but the lists in which opinions 
 encounter each .other, just as in political economy ? 
 
 " Each party sees indeed the same facts, but classifies and ex- 
 plains them in its own way ; and let it be observed that in these 
 debates we do not find all the true men of science on the one side, 
 and all the charlatans on the other. Leibnitz and Newton, Linnasus 
 and Jussieu, Priestley and Lavoisier, de Saussure and Dolomieu. 
 were all of them first-rate men, and yet they could not agree. Did 
 the sciences they professed not exist, because they disagreed ? 
 
 " In the same way, the general laws of which the political and 
 moral sciences are composed exist in spite of disputes. So much 
 the better for those who, by judicious and repeated observation, 
 can discover these laws, can show their connection and deduce their 
 
Bk.i. Ch.i.] ON METHOD TN ECONOMIC SCIENCE. 5 
 
 consequences. They spring from the nature of things as certainly 
 as do the laws of the physical world ; they are found, not imagined ; 
 they govern those who govern others, and they can never be 
 violated with impunity. 
 
 " The general laws which control the course of things, take, as 
 soon as they come to be applied, the name of principles. 
 
 " Political economy, like the exact sciences, is made up of a small 
 number of fundamental principles, and of a great number of corol- 
 laries or deductions from these principles. It is important to the 
 progress of the science that its principles should flow naturally from 
 observation; each author afterwards increases or diminishes at 
 pleasure the number of inferences, according to the end he has in 
 view. The more this science is extended and perfected, the fewer 
 the inferences it will be needful to draw, because they will be readily 
 apparent ; every one will be in a position to find them out and apply 
 them for himself. 
 
 " There are, no doubt, in the social state, evils which are in the 
 very nature of things, and from which it cannot be freed entirely ; 
 but there are many others which it is not only possible, but easy, 
 to remedy. Several passages in this book will go to prove this ; I 
 might even add that amongst almost all nations many abuses might 
 be rectified without the smallest sacrifice on the part of the privileged 
 persons who profit, or think they profit, by them." 
 
 In the whole of this passage there is hardly anything to repre- 
 hend. I have quoted it because, published in 1826, and written 
 probably still earlier, it has answered beforehand some of the 
 questions lately raised in England and Germany. 
 
 In England it has been affirmed that economic science has not, 
 up to the present time, been anything more than a deductive 
 science ; and the question has been seriously mooted whether it is a 
 science at all. 
 
 In Germany they claim to have invented a national economy 
 based on a so-called historic method. 
 
 Lastly, in France there are men deeply impressed with social 
 miseries, who think that in order to heal them, it suffices to sum up 
 their own aspirations in a maxim ; and men, on the other hand, who 
 refuse to acknowledge any sphere for the economist at all. 
 
 I will proceed to a brief statement and examination of these 
 questions. 
 
 Mr. Ingram, the President of the Economic Section at the meeting 
 of the British Association at Dublin in 1878, put forth a manifesto, 1 
 in which he declared that political economy had no future, practical 
 or scientific. He acknowledged meanwhile that it had a certain 
 utility. 
 
 1 The Present Position and Prospects, of Political Economy. 
 
6 ON METHOD IN ECONOMIC SCIENCE. 
 
 Mr. Ingram charges the economists, 
 
 1st. With having separated the study of facts relating to wealth 
 from other social phenomena ; 
 
 2nd. With having given to many of their conceptions a meta- 
 physical and dangerously abstract character ; 
 
 3rd. With having misused deduction in their researches ; 
 
 4th. With having been too positive in the enunciation of their 
 conclusions. 
 
 While, on the one hand, economic science is charged with being 
 deductive, on the other hand, M. Cournot, in a book published in 
 1838, entitled, Recherches sur les Principes Mathematiques de la 
 Theorie des Richesses, a German author, M. Hagen (1839), and 
 within these last few years, Mr. Stanley Jevons and M. Leon 
 Walras, have endeavoured to make it a mathematical science. 1 
 
 The mathematical process consists, as we know, in extracting and 
 isolating some extremely simple and general notions, which are 
 regarded as axioms, and then deducing, apart from any observation 
 or experiment, all the inferences which can be drawn from them. 
 But this leads us into the most monstrous errors. 2 Mathematics 
 may serve as accessory methods, as a system of checks, they may be 
 employed to define and formulate certain relations ; they may fill a 
 useful part analogous to diagrams. But it is a vain attempt to 
 substitute in economic science the mathematical for the inductive 
 method. 
 
 At the same time, in the course of his paper, Mr. Ingram aban- 
 dons his first charge, and he does well, for it will not stand exami- 
 nation. Economists have been in error, not in limiting themselves 
 too narrowly, but in not limiting themselves enough. A science, 
 to exist, must be specialised, otherwise everything includes all, and 
 you may build up an encyclopedia on a grain of salt. 
 
 As to the second charge, we have seen that the method indicated 
 by J. B. Say is the real inductive method. Mr. Ingram acknow- 
 ledges 3 that Adam Smith's work is full of facts, and that he assigns 
 an important place to induction. Senior says, " Political economy 
 is greedy of facts." It is true that Ricardo based his theories on 
 abstractions ; but J. B. Say had already, in 1826, pointed out this 
 vicious tendency. If Mr. Ingram thinks himself the first to have 
 discovered it, he is a little late in the field. Speaking of Bicardo, 
 J. B. Say said, " Condillac has judiciously remarked that a process 
 of abstract reasoning is an arithmetical calculation, only with other 
 symbols. But an argument does not furnish, any more than an 
 equation, the data which in the experimental sciences are indis- 
 
 1 The Journal of the Statistical Society published in June, 1878, a bibliography 
 of works applying mathematical theory to political economy. 
 
 2 See Yves Guyot, L'lnventeur, p. 264. 
 
 3 Page 23. 
 

 Bk.i. Ch. i.] ON METHOD IN ECONOMIC SCIENCE. 7 
 
 pensable for arriving at the truth." He accuses Quesnay and his 
 friends of having " begun by laying down abstract generalities." 
 
 That there may have been disciples of Ricardo who did nothing 
 but make deductions, is possible, but that is their own fault ; the 
 science itself is not involved in their error. 
 
 Still, after having complained of economic science as relying too 
 much on the deductive method, Mr. Ingram and Mr. Cliffe Leslie 
 are not fortunate in invoking the authority of Auguste Comte. 
 They are doubtless not aware that Comte, in his Politique Positive, 
 founds the whole science of sociology on the deductive method. He 
 has adopted the system of Gall, has assigned to man eighteen facul- 
 ties, without even attempting to verify this statement a posteriori, 
 has then divided these faculties into emotional and intellectual, and 
 has determined in favour of the subjection of the latter to the 
 former. Mr. Ingram, in rushing into the subjectivism of Comte 
 in order to escape the abstractions of Ricardo, has been simply an 
 unconscious Gribouille. 
 
 Mr. Bonamy Price has all at once been avised to propound to 
 himself this question, " Is political economy a science ? " and to 
 answer, " No." 
 
 This is modest on the part of a Professor who has long filled the 
 chair of political economy at Oxford, since it is virtually saying to 
 his pupils, " It is not a science I have taught you, it is not a science 
 I am teaching." l But is his reasoning equal to his modesty ? His 
 arguments are four in number. 
 
 1st. " Political economy has neither created nor discovered the 
 means of satisfying the wants of mankind." True ; but mankind ate 
 bread before chemistry had made known its composition, or physi- 
 ology had studied the phenomena of assimilation. Men walked, 
 built houses, raised weights with the lever, before they framed 
 physical theories or studied the laws of gravity. They blew glass 
 before they knew of silicates. Are we to say, that because men 
 have done all this without being chemists, physiologists, or physi- 
 cists, that therefore chemistry, physiology, and physics are not 
 sciences ? Science is everywhere preceded by empiricism. 
 
 2nd. " The object of political economy is to make common sense 
 the supreme controller of industry and commerce." 
 
 I quote this sentence because Mr. Bonamy Price attaches much 
 importance to it ; but it means nothing. Objective philosophy has 
 long since abandoned the idea of common sense. If Mr. Bonamy 
 Price means to say that the object of political economy is to formu- 
 late laws so exact that every one shall be obliged to accept and 
 apply them, he is contradicting his own thesis. This is the very 
 object of science as science, namely, to proclaim undeniable truths. 
 
 1 Chapters on Practical Political Economy, ch. i., 1878. 
 
8 ON METHOD IN ECONOMIC SCIENCE. 
 
 3rd. Mr. Bonamy Price says again, " The majority of men do 
 not study chemistry and astronomy. They know that these pur- 
 suits are above them. But they know too that these sciences con- 
 tain information extremely important to them, and they are ready 
 to follow the rules they lay down, without trying to account for 
 them. The dyer and the intelligent farmer go for help to the 
 chemist. The seaman takes observations of the sun and moon, and 
 consults his almanack. It is quite otherwise with political economy. 
 Every one thinks he understands economical questions as well as, or 
 rather better than, the economists." What does this prove ? Why, 
 the infatuation of ignorance under one of its forms. 
 
 4th. " The truths enunciated by political economy are truisms." 
 It is the same with all scientific laws. The legendary M. de la 
 Palisse is the patron of all men of science. They content them- 
 selves with recording facts as clear as this, "A quarter of an hour 
 before his death he was still alive." Those who are reckoned 
 greatest among them do but establish facts which every one might 
 have seen, but which they alone have seen. Their merit has lain in 
 substituting intentional for accidental observation. 
 
 In Germany, political economy has always ranked with the Par- 
 liamentary Sciences (those which have the State for their object). 
 It is one of the forms of administration, and nothing more. The 
 Germans may have made some statistical monographs, but until 
 the last few years they have played no part in economic science. 
 
 In the matter of jurisprudence, every one knows the characteris- 
 tics of the German historical school, represented by Savigny, Eich- 
 horn, Grimm, and Hugo. It is the fatalist school ; an institution 
 or a law exists, and, since it exists, it is right. This school con- 
 founds necessary and constant facts, without which humanity and 
 the world could not exist, with accidental and contingent facts, 
 which might very well never have taken place. 
 
 M. Roscher wishes to do for economic science what Savigny has 
 done for jurisprudence, and announces, with much sound of trumpet, 
 the application of the historic method to the study of economic 
 science. To hear him, one would think that no economist before 
 him had ever opened a volume of history, and yet Adam Smith did 
 not avoid the examination of historic facts. His work contains 
 elaborate historical analyses on banking, on the various agricultural 
 systems, and the difference in the increase of wealth among different 
 peoples. 
 
 We find the same in J. B. Say. So far from ignoring the past, 
 they have both of them testified to its frequent violation of economic 
 laws, and to the frightful disorders and miseries which have resulted 
 from it. Besides, are past facts only to be examined ? Do not 
 the facts which are passing under our eyes strike us still more 
 forcibly ? Are they not easier to examine, to estimate, and to con- 
 
Bk. i. Ch.i.] ON METHOD IN ECONOMIC SCIENCE. 9 
 
 trol ? Do not most of the facts of the past appear to us as shrouded 
 in a sort of mist ? Not only are we uncertain as to their causes 
 and effects, we hardly know the facts themselves. 
 
 But the Germans use the term " historical method " as a means 
 of exclusion. They will recognise none but individual facts ; they 
 imagine that they can thus find the happiest solution for such and 
 such a practical problem ; as to general facts, on which general 
 laws may be based, they refuse to admit them. 
 
 Professor Held, of the Bonn University, calls on the economists 
 to give up, once for all, the search after natural laws. 
 
 Then what are they to seek for ? The Catheder Socialisten, 1 
 the Socialists of the pulpit, admit no laws except those made by 
 Government ; and these they regard as having unlimited authority. 
 M. Schmoller, a Strasburg professor, puts it plainly, " The State 
 can do everything, since it can make the laws." 
 
 Such has indeed been the claim of all autocrats ; but it is hardly 
 worth while to be a professor, and assume an air of profundity, in 
 order to formulate an idea long ago mastered by the pettiest African 
 tyrant. 
 
 Messrs. Hildebrand of Jena and Knies of Heidelberg, and M. 
 Emile de Laveleye of Liege, who has made himself their spokesman 
 in France and Belgium, support the same theory in terms more or 
 less distinct. They all demand a stronger intervention of the State 
 in economic matters "in order to invigorate public spirit," says 
 M. Held, not perceiving that, generally speaking, the stronger the 
 State, the feebler is public spirit. M. Wagner goes so far as to 
 deny to the individual the right to come and go, to change his 
 residence from one commune to another, or to marry, without leave ; 
 with Mario and Schoffle, he would give the State power to fix the 
 number of households, and the number of children in each, though 
 he omits to say what course should be taken to bring about this, 
 last result. 
 
 Prince Bismarck, in his discussion on the German tariff, has 
 shown himself the most powerful of the Catheder- Socialisten. 
 
 They seem to me to resemble in some respects M. Kondelet, who 
 has published a book called Du Spiritualisme en Economie Politique, 
 and M. de Metz-Noblat, professor of the faculty of law at Nancy, 
 who has placed as a motto at the head of his Cours d'Economie 
 Politique? this text from St. Matthew, " Seek first the kingdom of 
 God and His righteousness, and all other things shall be added 
 unto you." Such absurdities discredit only their authors, they 
 prove nothing a?*ainst economic science. 
 
 What then it! thu difference between these Catheder- Socialisten, 
 
 1 The name waa applied to this school of economists by M. Oppenheim, a 
 member of the Prussian .parliament, in a pamphlet published in 1872. 
 
 2 2nd edition, 1880. 
 
10 ON METHOD IN ECONOMIC SCIENCE. 
 
 whose doctrines Prince Bismarck upholds in Parliament, and the 
 Socialists, whom he persecutes with prescriptive animosity ? 
 
 It is simply this, the former would apply the forces of the State 
 chiefly to the advantage of the governing classes, the latter to that 
 of the working classes. At bottom, both hold the same doctrine, 
 and are under the same illusions as to the functions of the State. 
 
 Prince Bismarck was not deceived on this point, as is clear from 
 his avowal of his relations with Lassalle. 1 Lassalle proposed to found 
 associations for production by the assistance of the State ; the 
 State was to regulate the labour of the nation, as labour is regu- 
 lated in a large factory. 
 
 It is always the substitution of the State, the collective entity, 
 for individual initiative and individual energy. The idea is not 
 new. The Catheder-Socialisten, with all their pretensions, have 
 said nothing that all the protectionists, all the communists and 
 socialists who rely on authority, had not said before. 
 
 I will take the latest representative of these last, in whom they 
 find their highest expression the late M. Louis Blanc. His sojourn 
 in England did not modify the ideas he held in 1848 ; and in his 
 speech at Nimes on the 28th Sept., 1879, he showed that he still 
 held to his idea of the Organisation of Labour. 
 
 I will not just now examine his speech further than as regards its 
 method, and in the very first lines I find the following assertion, 
 " Adam Smith, Turgot, and all the great economists were honest 
 enough men, but they made the mistake of studying economic 
 phenomena as they were, without concerning themselves with what 
 they should be." And then he is angry with Adam Smith and 
 J. B. Say because they say that the price of labour is fixed by the 
 relation of supply to demand ; that in the social relations this price 
 depends on the proportion subsisting between the number of 
 labourers and that portion of the general wealth which is destined 
 for the remuneration of labour. Certainly, this has been said ; and 
 M. Louis Blanc anathematises the economists who have said it ! 
 
 But either these facts are true or they are false, and it was M. 
 Louis Blanc's business to determine which. 
 
 Now, M. Louis Blanc does not dispute the truth of these facts, 
 he admits it. " The economists have explained very learnedly how 
 things actually happen, but they have not inquired how they ought 
 to happen. They have made political economy a purely descriptive 
 science. They have described, with much accuracy, how wealth is 
 created, distributed, and exchanged in modern societies ; but they 
 do not trouble themselves to inquire whether it is justly ap- 
 portioned." 
 
 Here we have a confusion between a statement of existing facts 
 
 1 Reichstag, 17th Sept., 1878. 
 
Bk.i. Ch. i.] ON METHOD IN ECONOMIC SCIENCE. 11 
 
 and a conception, more or less correct, of right and justice. If 
 economists had indeed arrived at the results indicated by M. Louis 
 Blanc, their task would be ended. Unfortunately, they are far 
 from having formulated all the laws which govern the production 
 and distribution of wealth. It is much to have formulated a few of 
 them. It may be that they are hard and cruel, but can we there- 
 fore deny that they exist ? No ; for M. Louis Blanc himself recog- 
 nises their existence, though he seems to insinuate that we should 
 disregard them. But what would he say of a mechanician who, in 
 constructing a machine, should disregard the laws of statics and 
 dynamics, under the plea that they only hindered him ? 
 
 The Germans are logical in their way, for they declare these laws 
 to be false ; though they have to confine themselves to the assertion, 
 for as soon as they begin to argue, they are compelled to admit that* 
 they are true. But has M. Louis Blanc any process for violating 
 these laws without entailing by their infraction the destruction ot^ 
 wealth itself ? Have the economists, in affirming the truths which 
 he himself admits, said that mankind should do nothing to better 
 its condition ? It is just the reverse ; whenever they have proposed 
 an application of economic science, that application has had for its 
 object the increase of the wealth and well-being of the majority. I 
 speak here of the masters of the science, without troubling myself 
 about some more or less reactionary economists, reactionary, not 
 because they were economists, but in spite of it ; for the first act of 
 political economy was the annunciation of human progress. l 
 
 M. Louis Blanc, and many of those who assume with him the 
 name of " Socialists," and make the extinction of the "proletariat" 
 the only social question, 2 create for themselves a very noble and 
 generous ideal of justice, but one very much beyond the reality. 
 They have the idea of a blissful future, analogous to that of the 
 millennialists. 3 In many of their conceptions there is a sort of 
 transformation of the religious idea. They dream of a future life 
 perfect as that of Paradise ; they speak of it with the enthusiasm of 
 faith ; they excommunicate those who doubt whether the negation 
 of economic laws is the best means of attaining it, as the faithful 
 excommunicated the philosophers; and they neglect the practical 
 means of bringing it about. 
 
 Let us distrust this social mysticism ; nothing can come of it but 
 mad enthusiasm and bitter disillusion. 
 
 It would be well if those who seek to appease the wants of 
 humanity with words representing more or less ambiguous subjec- 
 tive ideas, at least knew what they were talking about. 
 
 Did not M. Tolain once say that political economy does not 
 
 1 Turgot, Speech on Progress, 1750. 2 Speech at Nimes. 
 
 3 See Etudes sur les Doctrines Sociales du Christianisme, by Yves Guyot, 
 2nd edition. 
 
12 ON METHOD IN ECONOMIC SCIENCE. 
 
 concern itself with the distribution of wealth ? l Yet Adam Smith 
 declares that his book on The Wealth of Nations looks into 
 " the causes which have improved the productive faculties of 
 labour, and the order in which its products are naturally distributed 
 among the different classes of people." J. B. Say defines political 
 economy as, " The science which shows how wealth is made, dis- 
 tributed, and consumed." And Rossi says, " Political economy is 
 the science of wealth." 
 
 The law of supply and demand, the most indisputable ever for- 
 mulated by political economy, is one which concerns the appor- 
 tionment of wealth rather than its production. 
 
 Now let us turn to the other side. 
 
 Those who look on themselves as forming the ruling classes, 
 commonly speak of the ignorance of workmen ; and, in order to 
 promote their economic education, laws are made against associa- 
 tions, against meetings, and against the press ; a likely way to in- 
 struct the people, truly, to deprive them of the means of information 
 and experience ! Their " Socialist Utopias " are spoken of with dis- 
 dain, they are told that they do not know what they want, and, as 
 a last argument, they are threatened with force a convenient 
 mode of shortening the discussion. 
 
 Those who speak thus are Bachelors of Arts, perhaps, or Licen- 
 tiates of Law ; but is their knowledge of economy necessarily any 
 better than the workman's ? 
 
 A knowledge of Latin does not make an astronomer, nor a know- 
 ledge of Greek roots a chemist; and, to be an economist, it is not 
 enough to be what is called in polite society "a well-informed 
 person." 
 
 It is a very just remark of Herbert Spencer's, 2 that, as regards 
 economic science, the ignorance of ignorant people, and the ignor- 
 ance of people who are called well-informed, is just about equal. 
 " There is no connection between the ability to parse a sentence, 
 and a clear understanding of the causes that determine the rate of 
 wages. . . . By kings, peers, members of Parliament, mostly 
 brought up at Universities, trade had been hampered by protections, 
 prohibitions, and bounties. . . . Yet of all the highly-educated 
 throughout the nation during these centuries, scarcely a man saw 
 how mischievous such appliances were. Not from one who devoted 
 himself to the most approved studies came the work which set 
 politicians right on these points, but from one who left college 
 without a degree, and prosecuted inquiries which the established 
 education ignored, Adam Smith. ... In recent days those 
 who have most clearly understood the truths he enunciated, and by 
 persevering exposition have converted the nation to their views, 
 
 1 Conf. La Eepublique du Travail, 20th April, 1879. 
 
 2 Political Essays : Parliamentary Reform. 
 
Bk. i. Ch. i.] ON METHOD IN ECONOMIC SCIENCE. 13 
 
 have not been graduates of Universities. While, contrariwise, 
 those who have passed through the prescribed curriculum, have 
 commonly been the most bitter and obstinate opponents of the 
 changes dictated by politico-economical science. ... In all this 
 important direction right legislation was urged by men deficient 
 in the so-called best education ; and was resisted by the great 
 majority of men who had received this so-called best education ! " 
 
 This ignorance of economic questions on the part of politicians 
 is still more striking in France than in England. 
 
 In 1848 there were four chairs of political economy in France. 
 In England they were already numerous. The great Universities 
 have their professors of political economy, and extend their courses 
 of lectures all over the country. 1 In France, the lectures on political 
 economy given in the Faculties of Law are, for the most part, 
 utterly inadequate. And where else are there any given ? and by 
 whom ? 
 
 Our French statesmen, far from being troubled at this ignorance, 
 plume themselves on it. It is the old story ; the grapes are sour. 
 And then, to make up for it, they join with the Utopists in holding 
 the economists responsible for the difficulties in which they find 
 themselves. 
 
 The most intelligent assemblies are not free from this error. 
 Dupont (of Nemours) wrote to J. B. Say, "As soon as a ques- 
 tion of commerce or finance arises in the Assembly, they always 
 begin with some violent invective against the economists." The 
 habit has not been lost. Political financiers, who concern them- 
 selves very little with augmenting the general wealth, and very 
 much with serving private interests, find no contempt too great for 
 the economists. M. Claude (of the Vosges) has not hesitated to 
 make this solemn declaration : " In political economy there are no 
 principles, but only interests." M. Thiers' sarcasms on this " tedious 
 literature " were inexhaustible. 
 
 The attacks of Utopisfcs and Conservatives only serve to show 
 their ignorance, not only of economic science, but also of the aim 
 a i ' -ttiod of science itself. 
 
 It is not the astronomer's business to consider whether it would 
 be better if the sun were nearer or farther from the earth, or if he 
 turned round her, instead of her turning round him. Nor is it the 
 chemist's business to consider whether carbonic acid and carbonic 
 oxide are noxious gases that ought not to exist. It has never been 
 thought desirable to make Newton responsible for tiles falling on 
 people's heads. 
 
 Economists, however, are held answerable for the laws which 
 
 1 My friend James Stuart, Professor of Mechanics at Trinity College, Cam- 
 bridge, has organised lectures on political economy, with syllabus and examina- 
 tions, in almost all the manufacturing towns in England. 
 
J4 ON METHOD IN ECONOMIC SCIENCE. 
 
 they discover. Because they have discovered them, they are sup- 
 posed to have created and invented them, in order to enjoy the 
 satisfaction of aggravating the sufferings of the poor, or of annoy- 
 ing the parasites who regard their privileges as prescriptive rights. 
 
 Their fate is that of all -who tell unpleasant truths ; people bear a 
 grudge against them for their frankness. The position of sincere 
 economists is the more difficult, because they are placed between 
 two opposite classes of prejudices. We give two examples. 
 
 1st. The law of Malthus. It is false, as I shall easily show 
 further on ; but he thought it true. This law sums itself up into 
 this : population increases in geometrical progression 1, 2, 4, 8, 
 16, etc., while production increases in arithmetical progression 1, 
 2, 3, 4, 5, etc. 
 
 If this law were true, it must be received as such ; but without 
 considering whether it is right or wrong, many people make Mal- 
 thus out a monster, an ogre, an apostle of infanticide, and his name 
 is held in abhorrence. 
 
 It is true that Malthus gave certain directions as to the applica- 
 tion of his law ; but if his law were true, we could not do better 
 than follow them. 
 
 2nd. The economists have destroyed the notion of the balance of 
 trade, and demanded free trade. Many large manufacturers, who 
 treat workmen who ask for State protection as Socialists and 
 Anarchists, demand in their turn the levying of prohibitory duties 
 on foreign articles similar to those they produce. They admit the 
 operation of economic laws when it is in their favour, but oppose it 
 when it tells against them. Thus the economists stand between 
 two fires. Most people are still possessed with the idea of a social 
 alchemy ; they think that the economist must have the secret of 
 making gold, of creating wealth. If he modestly replies, that such 
 is not his business, and refuses to occupy himself with these 
 chimeras, he is charged with egoism, and held responsible for all 
 the ills inherent in our nature. There is nothing left for the econo- 
 mists but to adopt as their motto these words of La Mettrie, " Write 
 as though thou wert alone in the universe, and hadst nothing to 
 fear from the jealousy and prejudice of mankind ; else thou wilt 
 assuredly miss thine aim." 1 
 
 And in applying this maxim, they must bear in mind the rule 
 given by Benjamin Constant, " A principle admitted to be true 
 must not be abandoned, whatever may be its apparent danger." 
 
 Nearly every great step in the progress of science or art has been 
 the complete subversion of what was before believed. I will give 
 only a few instances. Science has advanced only by substituting the 
 inductive method for the scholastic, which was the exact opposite. 
 
 1 Preface to his (Euvres Philosophiques 
 
Bk.i. Ch. i.] ON METHOD IN ECONOMIC SCIENCE. 15 
 
 It was long believed that science consisted in seeking the why ; it 
 only began to have a well-defined existence when it confined itself 
 to seeking the how. Mankind thought for ages that the earth was 
 flat, and the heavens round, and the earth motionless, and the sun 
 turning round her. Science has proved just the contrary. 
 
 Let us take another subject. It is one of the glories of Voltaire 
 to have substituted for the history of Providence the history of 
 mankind, and to have shown that the golden age lies, not behind 
 us, but before. We might give similar instances in all classes of 
 knowledge. 
 
 With regard to economics, Montaigne did but give expression to 
 a general prejudice, when he said, " There is no gain to one, with- 
 out loss to another." Many still hold this to be true ; economic 
 science has proved it false. 
 
 Whenever our imports exceed our exports, we still hear it said, 
 " The balance of trade is against us." Now economic science proved 
 nearly a century ago that the wealth of a nation only grows while 
 the balance of trade is against it. 
 
 At the present day many economists and most financiers think 
 that commercial crises are owing to over-production. We shall see 
 that they are due to over-consumption. 
 
 Most publicists who have turned their attention to fiscal questions 
 have thought, up to the present time, that the best system of levy- 
 ing taxes is to tap the revenues of a country at the point where they 
 take the shape of articles of consumption. M. Menier has proved 
 that they must be tapped at their source, which is capital. 
 
 These examples will suffice to show that progress in economic 
 science for the most part implies the subversion of existing preju- 
 dices. But these prejudices are far-sighted enough to understand, 
 that each new economic law, as it is evolved, will receive applications 
 which will not only disturb erroneous ideas, but also interfere with 
 certain interests ; there is, therefore, against every fresh economic 
 truth, a coalition of prejudices and interests. In order to triumph 
 over this coalition, it must be enunciated with force and clearness ; 
 but the greater the force and clearness of the enunciation, the more 
 terrified will be the outcry against it. 
 
 Still, those who seek the truth alone have one satisfaction, and it 
 is this. Their assailants always rely in their attacks on the very 
 truths they have demonstrated. If you try to lessen or restrict 
 competition for your private benefit, you are not denying the truth 
 of an economic law ; you are only trying to turn it to your own 
 advantage. 
 
 There are others, equally numerous, who will say to you, " That 
 is good in theory, but bad in practice ; " and who oppose these 
 terms one to the other ; as if all practice were not the result of 
 theory ! Only, those who call themselves " practical people " 
 
16 ON METHOD IN ECONOMIC SCIENCE. 
 
 usually act according to some unconscious and inconsequent theory, 
 of which they perceive only fragments. 
 
 In mechanics also, we have theory and practice, but no mecha- 
 nician would think of saying, ' l I shall avail myself of a practice at 
 variance with theory." On the contrary, is it not his aim, by polish 
 of surface and accuracy of bearings, to make his machine as nearly 
 as possible theoretical ly perfect ? Are there two systems of chemistry 
 or physics, one practical and the other theoretical ? 
 
 If we say to these practical people, " You assert that the effect is 
 not to be traced to its cause, that all observation of the different 
 data of a problem is to be avoided, and that half its co-efficients 
 may be disregarded with impunity," they will of course repudiate 
 any such idea, and yet, this is just what their protests against theory 
 amount to. 
 
 In the beginning, arbitrary acts and despotic will alone were 
 recognised ; later on, laws were sought for in the physical as in the 
 social world ; it is now high time to formulate these laws. " Our 
 acts," says Mr. Brassey 1 himself a practical man, "have out- 
 stripped our knowledge and impede our progress. We must 
 generalise them, and put them in order." 
 
 In economic science, as in all others, we have to deal with 
 entities. Prejudice has taken this form in practice as in theory, 
 and it has come to this, that we fight as much over words as over 
 things. 
 
 Iii short, the great difficulty to be overcome is the confusion 
 which always exists between incidental and permanent interests. 
 
 Economic science is charged with never having set the whole 
 question at rest. But it is the same with all sciences. They solve 
 one question, only to put another. 
 
 2s o doubt economic science is still very imperfect ; yet no one 
 will say that the application of it has impoverished the people, or 
 that its object has been to increase their burdens, to check the 
 distribution of raw material and products, to diminish the public 
 wealth, or to encourage smuggling. Moreover, the men who call 
 themselves practical, while they denounce and abuse the conse- 
 quences of its teaching, are compelled to bow before them. 
 
 M. de Tocqueville has related, not altogether with approval, the 
 great part played by the economists in the French Devolution. 2 
 " These economists have left Jess conspicuous traces in history than 
 the French philosophers ; perhaps they contributed less to the 
 approach of the Revolution ; yet I think that the true character of 
 the Revolution may best be studied in their works. The French 
 philosophers confined themselves for the most part to very general 
 
 1 Work and Wages, p. 8. 
 
 - The State of Society in France before the Revolution, by A. de Tocquevilie, 
 translated by H. Keeve. 
 
Bk.i. Ch. i.] ON METHOD IN ECONOMIC SCIENCE. 17 
 
 and very abstract opinions on government ; the eoonomi-4 vrthont 
 abandoning theory, clung more closely to facts. The former said 
 what might be thought; the latter sometimes pointed out what 
 might be done. All the institutions which the Revolution was 
 about to annihilate for ever were the peculiar objects of their 
 attacks ; none found favour in their sight. All the institutions, 
 on the contrary, which may be regarded as the product of the 
 Revolution, were announced beforehand by these economical writers, 
 and ardently recommended. There is hardly one of these institu- 
 tions of which the germ may not be discovered in some of their 
 writings ; and those writings may be said to contain all that is most 
 substantial in the Revolution itself. . . . 
 
 " Yet these were men, for the most part, of gentle and peaceful 
 lives, worthy persons, upright magistrates, able administrators ; but 
 the peculiar spirit of their task bore them onwards. 
 
 " The past was to these economists a subject of endless contempt. 
 * This nation has been governed for centuries on false principles,' 
 said Lebronne ; ' everything seems to have been done by hap- 
 hazard.' Starting from this notion, they set to work ; no institu- 
 tion was so ancient or so well-established in the history of France 
 that they hesitated to demand its suppression, from the moment 
 that it incommoded them or deranged the symmetry of their plans. 
 One of these writers proposed to obliterate at once all the ancient 
 territorial divisions of the kingdom, and to change all the names of 
 the provinces, forty years before the Constituent Assembly executed 
 this scheme. 
 
 " They had already conceived the idea of all the social and ad- 
 ministrative reforms which the Revolution has accomplished." 
 
 Herbert Spencer, speaking from another point of view, says 
 without exaggeration, 1 "Adam Smith, from his chimney-corner, 
 dictated greater changes than prime ministers do. A General 
 Thompson who forges the weapons with which the Anti-Corn-Law 
 battle is fought a Cobden and a Bright who add to and wield 
 them, forward civilisation much more than those who hold sceptres. 
 Repugnant as the fact may be to statesmen, it is yet one which 
 cannot be gainsayed. Whoever, to the great effects already pro- 
 duced by Free-trade, joins the far greater effects that will be here- 
 after produced, not only on ourselves, but on all the other nations 
 who must adopt our policy, must see that the revolution initiated 
 by these men is far wider than has been initiated by any potentate 
 of modern times. As Mr. Carlyle very well knows, those who 
 elaborate new truths and teach them to their fellows, are now-a-days 
 the real rulers ' the unacknowledged legislators ' the virtual 
 kings. From afar off, those who sit on thrones and form cabinets 
 are perceived to be but the servants of such." 
 
 1 Political Essays, "Representative Government." 
 
 C 
 
18 THE MATERIALS OP ECONOMIC SCIENCE. 
 
 Economists have even been taunted with their want of practical 
 success. "You, who treat of the science of wealth, have you been 
 able to turn it to your own advantage ? " Figaro answered long 
 ago, " We need not own things in order to talk about them." 
 
 We are in a railway train. How many of us understand the 
 mechanism of the engine that drags us along ? The fireman who 
 feeds it could not take it to pieces. The driver, who knows that 
 raising a particular lever or opening a particular tap will stop or 
 start his engine, or send it backwards, is often ignorant of the 
 physical and mechanical laws he applies, while the man of science, 
 who, from the depths of his laboratory, can foretell the exact results 
 produced, would be much perplexed if he had the train to drive. 
 
 The little grocer and the great manufacturer, the petty money- 
 changer and the great financier, lose, gain, buy, sell, and speculate, 
 without taking account of what it is they are doing ; they succeed 
 or fail without so much as knowing what wealth is, any more than 
 M. Jourdain knew that he was talking prose. Most of them act 
 by instinct, that is to say, by incomplete reasoning. They could 
 not express their reasons, because they have never analysed them. 
 We see how confused their replies are when they are called upon to 
 give evidence. The masters of political economy, those who have 
 the decisive influence which De Tocqueville and Herbert Spencer 
 exert, are not Rothschilds ; it is a surgeon like Quesnay, a solitary 
 professor like Adam Smith, a journalist like J. B. Say or Charles 
 Dunoyer, or a man who has sacrificed his own to the public interest, 
 like Cobden, who ruined himself twice over, and was only saved by 
 public subscriptions of 70,000 and 40,000. Bentham himself, 
 who has exercised so immense an influence on the England of the 
 nineteenth century, had no place on the Treasury bench. 
 
 CHAPTER II. 
 
 THE MATERIALS OP ECONOMIC SCIENCE. 
 
 IT is useless to deny that the application of scientific method to 
 economic science, presenting, as it does, the greatest difficulties, 
 has often been achieved, even by the masters of political economy, 
 with little skill, and under the influence of preconceived ideas. 
 There are more sources of error in economic science than in any 
 other. J. B. Say, for instance, is wrong in saying " The compo- 
 nent parts of Society are not the result of artificial organisation, but 
 of natural structure." At the present moment they are the result 
 of both. The ideal pursued in the application of political economy 
 is to substitute a structure based on natural laws for a structure 
 
Bk. i. Ch.ii.] THE MATEEIALS OF ECONOMIC SCIENCE. 19 
 
 which, up to the present time, has been distorting and violating those 
 laws in order to benefit some at the expense of others. You make 
 a reservoir on a hill-top, and so prevent the water from flowing 
 down into the valley; yon do not thereby violate natural laws ; but 
 you apply them in order to arrive at an artificial result. It is thus 
 that governments and peoples have understood the application of 
 economic laws. They have everywhere set up barriers to hinder 
 the circulation of utilities. 
 
 When Quesnay, following De Gournay, repeated the formula 
 " Laissez faire, laissez passer," it meant, " Respect natural law. Do 
 not try to disturb the natural order of the production and distribu- 
 tion of wealth. It is the first formula of an art which, renouncing a 
 priori reasoning, has learnt to confine itself to the application of 
 existing laws. 
 
 I admit that some economists, with the best intentions, have come 
 to it with prepossessions foreign to the object of the science itself. 
 Instead of seeking truth, they have tried to establish theories. 
 Bastiat, for instance, wrote his " Harmonies economiques " in answer 
 to Proudhon's " Contradictions economiques." "In this work," he 
 said, " I have attempted to show the harmony of the laws of Provi- 
 dence which regulate human society." He endeavours to justify 
 Providence against the reproaches of malcontents by proving that 
 all is for the best, in the best of all possible worlds. Here Bastiat 
 is but a disciple of Pangloss. It reminds one of Sforza's ironical 
 saying, " How marvellously my cousin Charles VIII. and I agree ! 
 We both want the same thing Milan ! " 
 
 But have the physicists, the chemists, the physiologists, never 
 made similar declarations ? Have they never mixed up theological 
 prejudice with scientific research ? It seems to us that it was not 
 as a physiologist pure and simple that M. Pasteur combated the 
 theory of spontaneous generation ; he combated it also in the name 
 of morals and religion. Providence is not yet expelled from the 
 Academie des Sciences; and M. de Coste showed some courage 
 when, wishing to conciliate all opinions, he rendered homage " to 
 eternal matter and its eternal Author." It is true that economists 
 have not all been free from prejudice, bias, and passion; but 
 have other men of science been always free from them ? Their 
 errors tell against the men, not against the science. We should 
 study them for our warning ; and so much the more carefully, as 
 the investigation of economical questions is open to still greater 
 chances of error. 
 
 It must also be confessed that since the great works of Adam 
 Smith and J. B. Say, there has been a pause in political economy. 
 Far be it from me to deny the value of a number of excellent works 
 which have been written in France and in England ; but they have 
 been too often but paraphrases or commentaries on the works of the 
 
20 THE MATERIALS OP ECONOMIC SCIENCE. 
 
 masters. They lose themselves in subtle refinements, and have thus 
 fallen into an economic conventionalism, instead of acquiring fresh 
 vigour by observation. 
 
 What, then, are the materials which the economist has at his dis- 
 posal, and what is their value ? 
 
 The facts of history ? Shall we go back to the estimate made by 
 order of Charles VII., in which France, which at that time comprised 
 some 15,000 square leagues, is credited with 1,700,000 cities, towns, 
 and villages ? In England there is the same uncertainty. Edward 
 III. obtained from Parliament in 1340 a subsidy of 50,000 sterling. 
 It was reckoned that this sum, divided among the parishes, would 
 average 1 2s. 4d. per parish. Each parish actually paid 5 165. 
 For, instead of 45,000 parishes, there were only about 9,000 one- 
 fifth of the number! The error was repeated in 1775. In the 
 reign of George III., the House of Commons having rated each 
 parish at 1 2s., it was thought that the sum total would amount 
 to 50,000. It was afterwards found that there had been a mistake 
 of four-fifths ! 
 
 It is on Statistics that political economy must depend for the 
 greater part of the materials for its work. According to Achenwall, 
 who seems to have been the first to use the word in Germany (1749), 
 " the entire body of all that is really noteworthy in a State forms its 
 constitution in the most general sense of the word ; and statistics 
 are the summary of the constitution of one or more States." 
 
 Since then the meaning of the word has become more restricted. 
 " Statistics," s&ys^ :erry, "essentially consist in the methodical enu- 
 meration of varying elements, of which they determine the mean." 
 
 In reality, statistics are simply the record of certain phenomena. 
 J. B. Say truly says, that it is practically impossible to speak of 
 statistics without adding the limitation "in such a place" or "at 
 such a time." 
 
 According to M. Moreau de Jonnes, the science of statistics con- 
 sists in making the greatest possible number of similar observations 
 and taking the average of the numbers obtained. According to M 
 Guillard, it is "the science which is composed of all such observa- 
 tions as are capable of being reduced to an average numerically 
 expressed." 
 
 But what are the questions which can properly be dealt with by 
 statistics ? Nine congresses of statisticians have never yet been able 
 to decide. 
 
 No statistics are worth anything unless they are based on large 
 numbers. Quetelet goes so far as to say that "the accuracy of the 
 results varies as the square root of the number of observations ; " 
 so that the degree of accuracy is to the number of observations as 
 1, 2, 3, 4, etc., to 1, 4, 9, 16, etc. He ascertained this fact by a 
 ballot of black and white balls. There is a tendency among some 
 
Bk.i.0h.ii.] THE MATERIALS OP ECONOMIC SCIENCE. 21 
 
 statisticians to use averages a little too much. Michelet asked 
 Moreau de Jonnes for a description of the battle of the 10th of 
 August, 1792, of which he had been a witness. The statistician gave 
 the numbers of those killed by cannon, by gunshot, and by the 
 sword, and added " Average, a?," giving the figure. 
 
 Averages are all very well ; but how are we to know the limits of 
 variation of the figures on which they are based ? 
 
 We take the average price of grain for ten years. One of those 
 years may have been a year of actual famine, and yet the average may 
 have been no higher than usual. Look at the averages of French 
 commerce for the years 1867-1876. Who would ever have guessed 
 from this the frightful disasters of 1870 ? 
 
 In 1856 the Minister of Public Works asked the railway com- 
 panies what were the hours of work of their drivers and stokers. 
 The averages were given him. In 1865 the companies were called 
 upon, in a fresh circular, to give not only the average but also the 
 maximum. They evaded the question, in order to avoid confessing 
 that there were maxima of 18, 24, and even 38 hours ! 
 
 Averages do not take everything into account. Yet people who 
 are not accustomed to study these questions say, "Look at the 
 figures ! I go by the figures," as if there were nothing more to be 
 said. They assert the infallibility of figures, forgetting that they 
 are mere signs without any intrinsic value of their own. They 
 ought to ask " What lies beneath them ? Who groups them ? What 
 phenomena have really determined them ? " 
 
 The compilers of statistics have, so far, generally belonged to one 
 of two classes. Either they have been mere clerks, to whom the 
 work has been a weariness, and who have consequently done it 
 hap-hazard, troubling themselves very little about checking and 
 verifying the materials collected, or even correcting the misprints 
 and gross arithmetical errors which catch the eye of every one who 
 has the misfortune to consult official documents ; or else they have 
 been interested persons who, for the purpose of proving something 
 or other, have had recourse to the art of manipulating figures. 
 
 It was once discovered that the increase of population in France 
 was at its highest between 1802 and 1806. 1 In the same volume of 
 the " Annuaire du bureau des longitudes" it is perplexing to find 
 that the average length of life in France is at the same time thirty- 
 six years, and thirty-nine years seven months. 
 
 We are taught, at the most rudimentary stage of arithmetic, that 
 only like things can be added together. Yet in statistics we often 
 find the tonnage of sailing vessels and that of steamships added 
 together, though one of the latter would represent something like 
 four of the former. 
 
 1 See Guillard, Elements de Statistique Humaine, p. xvi. 
 
22 THE MATEEIALS OF ECONOMIC SCIENCE. 
 
 How are the agricultural statistics made up ? What value is it 
 possible to assign to them, -when so many cultivators do not know 
 the exact qnantity of their crops themselves ? Again, in compar- 
 ing the average prices of wheat per annum, it is necessary to know 
 whether they are calculated for the ordinary year or for the agri- 
 cultural year, which is reckoned from the 1st of August to the 31st 
 of July. 
 
 Statistics are useless unless the conditions are constant. But the 
 conditions often from quite unavoidable circumstances almost 
 always vary. For instance, in consulting the statistics of the 
 foreign commerce of France, we must, if we are to form a correct 
 estimate, take into consideration the increase of territory in 1859, 
 and the decrease of territory in 1870. Again, the advance in 
 articles of commerce is reckoned by millions of francs. But the 
 value of these articles varies, and if we are to have an accurate 
 estimate, we must take these variations into account. This little 
 consideration is for the most part overlooked. M. Keller, in a 
 great agricultural speech on the 14th of February, 1880, showed in 
 his own argument what consequences may be entailed by the 
 neglect of such considerations. " There has been a great loss on 
 silks," he said, " since 1860. This loss now amounts to 250,000,000 
 francs. There is a loss of about 100,000,000 francs on the exportation 
 of wines and brandies." Now, on examining the actual quantities, 
 this is what -we find : in 1857 the exportation of wines and brandies 
 amounted to 2,460,000 hectolitres; in 1876 it reached 3,245,000 
 hectolitres. In 1859 the hectolitre was reckoned at 104 francs ; in 
 1876 at 76 francs only. The same with silk : in 1859 it amounted 
 to 146 francs per kilogramme ; in 1876 to 105 francs only. For 
 ribbons, the estimate for 1879 was 178 francs; and for 1876, 111 
 francs. Taking into account the difference of prices, the amount 
 of our exports must be raised by more than 500,000,000 francs. 
 Besides, the figures are not always made up in the same way. In 
 1863 the cost of packing was deducted from the estimate, which 
 reduced it by about twenty per cent. 
 
 A table is drawn up with the view of proving a certain point, 
 and it appears to prove it. The unwary admit the evidence with- 
 out question. The sceptic, who has learnt by experience to dis- 
 trust statistics, says, " Let us see what lies beneath these figures, 
 and whether this result is not due to quite other causes than those 
 to which it is generally attributed." And he is seldom wrong. I 
 will cite but one example. The English Admiralty published tables 
 to show that where the Contagious Diseases Acts have been put in 
 force the diseases to which they relate have diminished. All at 
 once, from the beginning of 1873, a very noticeable diminution 
 began to be observed. The partisans of the Acts were triumphant. 
 " See how the Acts have diminished disease ! " they said. Not in 
 
Bk.i.Ch.ii.] THE MATERIALS OF ECONOMIC SCIENCE. J 23 
 
 X^4MfO^^ 
 the least. What the figures proved was notnJ"" dl Hi liitTtion , but only 
 
 a dissimulation of disease. For in that year they had adopted the 
 ingenious method of stopping the pay of soldiers and sailors who 
 confessed themselves diseased. 
 
 Suppose we show those gentlemen who believe in nothing but 
 figures the following table, which gives the number of houses and 
 the population of a certain town : 
 
 1801 .... 16,508 houses 128,833 inhabitants. 
 
 1861 .... 13,298 112,063 
 
 1871 .... 7,000 74,732 
 
 " The place is going to ruin," they would say. Not exactly, for 
 the table refers to the city of London, which can hardly be supposed 
 to be going to ruin. We must look not only at the figures, but at 
 what lies beneath them. Whence comes this apparent decadence 
 of the city of London ? It comes from the fact that public build- 
 ings, railway stations, banks, and offices of every description have 
 been erected, that wide streets have been opened and the means of 
 communication improved, so that more than two thousand houses, 
 full of noise and motion during the day, are deserted at night. The 
 greater the amount of business in the city the fewer are its in- 
 habitants ; and while the number of freemen possessing the city 
 franchise is ever on the increase, the number of residents is as 
 constantly decreasing. 
 
 Figures, then, assuming that they are accurate, and that the 
 conditions on which they are based remain invariable, may 
 indicate certain phenomena, but they do not indicate the causes of 
 those phenomena. They must be made to speak ; " we must open 
 their mouths," as Herr Kumelin says, with German boldness of 
 metaphor. 
 
 As a warm partisan of the use of diagrams, I am surprised that 
 they have not become more common since Playfair applied them, in 
 1789, to the phenomena of economics. I have myself used them in 
 popular lectures and scientific demonstrations ; and I use them 
 here, to make certain demonstrations more striking and evident, 
 and to give the reader a better grasp of certain proportions. But 
 it must be remembered that the expression of relative quantities by 
 relative lengths does not make the statement itself any the more 
 accurate ; it only expresses it in a particular manner. 
 
 Diagrams have in some cases the further advantage of indicating 
 the maxima and minima as well as the average, thus giving a 
 complete view of all the elements of the question, and showing at 
 a glance how the average has been obtained. 
 
 This is the extent of their functions. It is a misuse of language 
 to speak of their application to political economy or statistics as 
 " the diagrammatic method." 
 
24 THE MATERIALS OP ECONOMIC SCIENCE. 
 
 The physiologists have sphygmographs for registering pulsation, 
 pneunjographs for registering respiration, and myographs for re- 
 gistering muscular action ; the meteorologists have self-registering 
 rain-gauges ; the physicists register the intensity of electric currents 
 by means of the rheograph ; but the statistician has no such means 
 for the mechanical registration of phenomena. Oar diagrams only 
 serve to show more clearly relations which might be established, 
 though less plainly and easily, by long demonstrations ; but we 
 cannot make experiments like the physiologist ; we have to take 
 the facts as they come, and to content ourselves with the meagre 
 information too often given by indolent officials or by politicians 
 interested in falsifying it. 
 
 As to Committees of Inquiry, they are no doubt admirable 
 things, so long as you take them for what they are worth. Official 
 inquiries never can come to anything. How is the inferior to put 
 himself in opposition to his superior ? Unless he is dominated by 
 a passion which throws suspicion on his evidence, it would take 
 courage of the most difficult kind to venture to tell the truth in the 
 face of failure, suffering, and perhaps prospective ruin. We cannot 
 expect every man to be a hero. 
 
 As to Government inquiries, we know them well. When you see 
 an inquiry set on foot by the Ministry, or by some department of 
 the public service, you know pretty well what the object is. They 
 want to prove that all is going well in the best of governments. If, 
 notwithstanding every effort, the inquiry goes to prove just the con- 
 trary, nothing is easier than to break it off on the ground that it is 
 disorganising the service. I will cite but one case, because it was 
 so flagrant that it upset a minister the inquiry into the Prefecture 
 of Police, commenced by M. Gigot as a sop to public opinion, and 
 broken off by M. de Marcere because it proved just what it was 
 desirable not to reveal. A shorthand writer was present at its sit- 
 tings; but sure I am that its proceedings will never be published. 
 
 It is the same with economical inquiries. The committee charged 
 with the revision of the German customs tariffs was presided over 
 by Herr von Varnbiihler, who, not caring to fall foul of Prince 
 Bismarck, assigned the subjects for reports in such a manner that 
 those of least importance were entrusted to the free-traders, while 
 the more important were reserved for the Protectionists. Tn France, 
 the Chamber of Deputies appointed a committee to examine the 
 general customs tariff. The persons chosen to serve on it were 
 manufacturers and persons representing large industrial constituen- 
 cies. The persons interrogated by them were the representatives of 
 these industries. Their evidence came to this : that they met with 
 competition from abroad, and that they would rather be without it. 
 Whereupon the committee, some of whom were in exactly the same 
 
Bk. i. Oh.ii.] THE MATERIALS OF ECONOMIC SCIENCE. 25 
 
 position, while others had influential constituents similarly involved, 
 declared that the interest of the country demanded the suppression 
 of foreign competition, and the granting of privileges to certain 
 native producers. This they call protecting the national labour. 
 And then simple-minded people say, " These are practical men ; 
 they know what they are about." 
 
 Quite so. But then there is nobody more dangerous than the 
 practical man. He sees nothing but his own immediate interest, 
 which is, in this case, to get the duty raised so as to benefit by the 
 difference. He sees that every rise in the tariff is a net gain to him, 
 the amount of which he can approximately calculate. Do not de- 
 mand so much of his self-denial as to look a little farther and 
 inquire how these gains are to be reconciled with the general 
 interest ! 
 
 But, further, thoee very men who, like Dickens' hero in " Hard 
 Times," ask so freely for facts, commonly judge according to pre- 
 conceived theories. England is the very home of Committees of 
 Inquiry, and nowhere, I think, are they carried out with more 
 entire good faith or a sincerer desire to discover the truth. Here 
 is Herbert Spencer's estimate of them : l 
 
 " Before making or altering a lavr, it is the custom to appoint a committee of 
 inquiry, who send for men able to give information concerning the matter in 
 hand, and ask them some thousands of questions. These questions and the 
 answers given to them, are printed in large books and distributed among the 
 members of the Houses of Parliament, and I was told that they spent about 
 100,000 a year in thus collecting and distributing evidence. Nevertheless, it 
 appeared to me that the ministers and representatives of the English people, 
 pertinaciously adhere to theories long ago disproved by the most conspicuous 
 facts. They pay great attention to petty details of evidence, but of large truths 
 they are quite regardless. Thus, the experience of age after age has shown that 
 their State management is almost invariably bad. The national estates are so 
 miserably administered as often to bring loss instead of gain. The Government 
 ship-yards are uniformly extravagant and inefficient. The judicial system works 
 so ill, that most citizens will submit to serious losses rather than run risks of 
 being ruined by lawsuits. Countless facts prove the Government to be the worst 
 owner, the worst manufacturer, the worst trader: in fact, the worst manager, 
 be the thing managed what it may. Bui though the evidence of this is abund- 
 ant and conclusive though during a recent war the bunglings of officials were 
 as glaring and multitudinous as ever ; yet the belief that any proposed duties 
 will be satisfactorily discharged by a new public department appointed to them, 
 seems not a whit the weaker. Legislators, thinking themselves practical, cling 
 to the theory of an officially regulated society, spite of overwhelming evidence 
 that official regulation perpetually fails. 
 
 " Nay, indeed, the belief seems to gain strength among these fact-loving Eng- 
 lish statesmen ; notwithstanding the facts are against it. Proposals for btate 
 control over this and the other, have been of late more rife than ever. . . . 
 Suppose the shareholders in a railway company were to elect, as members of 
 their board of directors, the secretary, engineer, superintendent, and tramc- 
 
 1 Essay on Representative Government. 
 
26 ECONOMIC PSYCHOLOGY. 
 
 manager, and others such, should we not be astonished at their stupidity ? 
 Should we not prophesy that the private advantage of officials would frequently 
 over-ride the welfare of the company?" 
 
 Tell all these truths in a committee of the Chamber charged with 
 nominating a commissioner of customs, and see what great eyes they 
 will make at yon, and how impossible they will find it to understand 
 yon. 
 
 Bat setting aside human nature, and supposing that every man, 
 once made a deputy and put on a commission, will sacrifice his own 
 interests to those of his country, still there is one thing more to be 
 said ; the specialist sees nothing bat his own speciality. 
 
 Fix your eye on the field of a microscope. You will see very in- 
 teresting things quite imperceptible to the naked eye ; but then you 
 will not see a very long way round. 
 
 CHAPTER III. 
 
 ECONOMIC PSYCHOLOGY. 
 
 ANOTHER difficulty in the application of method in economic science, 
 is the pyschological question. 
 
 Whatever the Catheder-Socialisten may maintain, the study of 
 political economy cannot be limited to one nation. We might as 
 well say that natural phenomena could be limited to one nation, 
 and that the pressure of the air did not act on the barometer in 
 the same way in Germany as in England. Still, man himself is 
 not everywhere the same, and a native of Tierra del Fuego does 
 not think like a West European of the nineteenth century. 
 
 I do not dispute that there are in our centres of civilisation men 
 and women whose intellectual development is far superior to 
 the more primitive types of human civilisation, nor do I say with 
 Voltaire that " differences are external, man is everywhere man." 
 On the contrary, the differences are considerable, the human type 
 is susceptible of the widest variation. And yet Voltaire is not 
 wholly wrong. 
 
 Mr. Francis Gralton took the likenesses of six people on one nega- 
 tive, each of whom sat for only one-sixth of the time necessary for 
 taking a single portrait. The features common to two or more of 
 them came out with exaggerated clearness, the rest were more or less 
 dimly indicated. He then threw several distinct portraits on the 
 same screen, by means of magic lanterns, in such a manner that 
 they were exactly superposed one on another. The common fea- 
 tures came out so strongly, that the rest disappeared ; the image 
 obtained was extremely clear. He tried the experiment with faces 
 of different races, and a general human type was obtained. 
 
Bk. i. Ch. iii.] ECONOMIC PSYCHOLOGY. 27 
 
 This experiment substantiates an undeniable truth. The organi- 
 sation is the same in all men, their differences arise from a more or 
 less advanced development. Now this similarity of organisation 
 implies similarity of wants. Every man needs food and drink, 
 fears the inclemency of the seasons, is solicited by appetites, has 
 selfish and unselfish feelings of varying intensity, and, lastly, 
 has that instinct of self-preservation, without which he would soon 
 perish. 
 
 This instinct of self-preservation, this need of development 
 common to all organised beings, and which constitutes the power 
 of resistance in the struggle for existence, is called in man, egoism. 
 
 M. Held answers that man is not egoistic. If he were not, he 
 would long ago have ceased to be. M. Held adds that man does 
 not always know his best interests. Granted ; but the mistaken 
 form of the wish does not alter its egoistic nature. Economic 
 science, which deals, not with the morality of motives, but with 
 their effects as productive or destructive agents, necessarily regards 
 man as a purely egoistic being, notwithstanding the protest of 
 Lange, who takes exception to the view as materialistic. 
 
 But we are told that this conception is false, and that Adam 
 Smith was right in regarding sympathy as a motive equal to self- 
 interest. Is there not in man, alongside of his selfishness, some 
 unselfishness ? Does he never think of anything but buying, selling, 
 and balancing advantages, and even then does he always consult 
 his own interest as a buyer ? Is he not affected by other influences, 
 such as idleness, habit, affection, vanity, or vices such as drunken- 
 ness ? Is not idleness, in the eyes of a Neapolitan, a higher utility 
 than comfort, and does not the Irishman sacrifice future comfort 
 to the present enjoyment of gossiping, sauntering, and drinking, 
 while the Scotchman is happier at work than at rest ? In studying 
 commercial crises, must you not take into account the apathy, the 
 love of routine, which hinders the re-investment of capital ? On 
 the other hand, look at the history of railways in England a country 
 which is generally supposed to know its multiplication table. Did 
 they not have the railway mania there, which swallowed up such a 
 mass of capital ? How are you going to explain all these manias 
 for loans to bankrupt States which have swallowed up millions paid 
 down on 'Change in London and Paris, while bond-fide industries 
 in England and France were wanting investors ? or by what eco- 
 nomic law will you account for the gaming instinct which introduces 
 such uncertainties into economic relations ? 
 
 Even among manufacturers, bankers, men whose sole object in 
 life seems to be to make money, you will find, as among other men, 
 that what is usually looked upon as the chief motive of human 
 action is in truth but a secondary one. Does the great manufac- 
 turer, does the banker, worth his millions, risk his fortunes and his 
 
28 ECONOMIC PSYCHOLOGY. 
 
 peace of mind in new enterprises, simply in order to gain fresh 
 thousands ? With the one, it is an irrepressible restlessness of 
 activity, with the other it is the passion of specnlation, and with all 
 it is a motive infinitely higher than the desire to gain money for its 
 own sake. Again, do you count for nothing the influence of fashion, 
 which can ruin or create a manufacture at a stroke, or monomanias 
 for knick-knacks or pictures, which set a fictitious value on objects 
 neglected yesterday, and forgotten to-morrow ? 
 
 All this is true ; but, none the less, acquisition is a permanent 
 and universal law of human nature. "War, art, science, as well as 
 labour and commerce, are but different expressions of this need, 
 which is itself the result of the instinct of self-preservation. Its 
 intensity may vary with the individual and his surroundings. Each 
 is satisfied more or less easily, sets his ideal higher or lower, makes 
 greater or less efforts. The most capable of progress are those in 
 whom the satisfaction of one desire is the birth of another. 
 
 Ricardo has pointed out the other economic motive of man ; he is 
 not only eager to acquire, but he wishes to acquire with the least 
 possible trouble. In a word, from the economic point of view, man 
 obeys two impulses the desire for wealth, and the aversion to 
 labour. 
 
 This aversion to labour often puts him to much greater effort and 
 danger than the labour itself would have done. He makes war in 
 order to reap the fruits of others' labour, and to get slaves who may 
 do his own. A bad bargain, perhaps, but the two motives we have 
 just mentioned lie at the bottom of it. At another stage of civilisa- 
 tion, this aversion to labour impels him to invent machines, to gain 
 by saving, without labour, the possibility of enjoying accumulated 
 wealth. 
 
 In a word, every want is created by a wish. Utility is an es- 
 sentially subjective phenomenon. The pursuit of utility shows 
 itself in objective phenomena ; and it is with these phenomena that 
 economic science has to deal. 
 
 Utility being subjective, there is no need to inquire, with Lange, 
 whether man is always capable of discerning his true interest. I 
 think a thing is useful to me, and therefore it is so. Economic 
 science is essentially unmoral. It has not to concern itself with the 
 quality of human sentiments and needs and passions. It regards 
 with equal impartiality the passion of the black man for glass 
 beads, and of the white man for diamonds. It admits music as a 
 utility, because many people like the emotion it stirs up in them. 
 Every desire is a want, and everything that satisfies a want is a 
 utility. Economic science deals with the laws which govern the efforts 
 of man in the pursuit of utility. 
 
 It takes account, indeed, of the friction, the obstacles, the ap- 
 parent contradictions which have been introduced into the applica- 
 

 Uk. i. Ch. iv.] DEFINITIONS. 29 
 
 tion of these laws by contradictory habits, passions, and motives ; 
 but with these psychological phenomena themselves it does not con- 
 cern itself in the very least. 
 
 CHAPTER IY. 
 
 DEFINITIONS. 
 
 WE proceed to determine the phenomena which it is the object of 
 economic science to study. 
 
 Few economists have followed Voltaire's advice, " Define your 
 terms." Still, in order to be understood, it is necessary to have a 
 common language ! 
 
 My definitions will not always agree with those generally ac- 
 cepted ; an author has a right to use his terms as he pleases, only 
 he must comply with two conditions, he must offer definitions not 
 less, but more precise than those previously received, and he must 
 always use them strictly in the sense he has assigned to them. 
 
 Unfortunately, the terms which form as it were the keystone of 
 Economic Science are used in very different senses. Sometimes 
 their meaning varies in the same author. This is so with Adam 
 Smith* J. B. Say attempted a remedy, but some of his definitions 
 are extremely questionable. Mai thus observed the want of precise 
 definition. " There seems to be little agreement," says he, " on the 
 meaning to be given to the terms wealth, capital, productive 
 labour, and value, or on what is to be understood by real wages, 
 profit, labour, etc." He himself wrote a long monograph on Defi- 
 nitions in Political Economy, in the course of which he quite forgot 
 his subject. 
 
 That man has wants, is a matter of daily observation which hardly 
 needs be insisted on. 1 
 
 A want is a desire to procure enjoyment, and to avoid exertion 
 and suffering. 
 
 Nothing is created, nothing is lost such is the great formula of 
 modern science. Man does not create objects; but, in order to 
 satisfy his wants, he creates utilities. 
 
 According to M. Courcelle-Seneuil, who here follows Ricardo, 
 Malthus, and Sismondi, " A want in any economic sense is a desire 
 having for its object the possession and enjoyment of some material 
 thing." 2 But I "want" to be defended by an advocate. Is this 
 not a " want " in an economic sense ? 
 
 M. Courcelle-Seneuil says again, " All useful material things, 
 
 1 See for philosophical analysis of " want," Letourneau, Phyiologies des 
 Passions, la Sociologie ; Andre Lefdvre, La Philosophic, pp. 538-540. 
 2 Traite d 'Economic Politique, vol. i., p. 25. 
 
30 DEFINITIONS. 
 
 appropriated to the use of man, are wealth." But are not health, 
 strength, and intelligence, a sort of wealth ? 
 
 Besides natural agents appropriated to the use of man, there are 
 utilities resulting from a certain order established in the relations of 
 the individual, whether with himself or with others. Health is a 
 utility ; the public safety is a utility. 
 
 According to M. Courcelle-Seneuil's theory, the physician would 
 have no right to his fees, nor those who govern the country to their 
 salaries. It is true that the latter, instead of insuring the public 
 safety, are often the first to endanger it ; but the taxes are not paid 
 on that understanding. 
 
 M. Courcelle-Seneuil may answer that health and safety are both 
 very material things. I have no objection ; only he must define his 
 terms " possession and enjoyment of a material object," so as to 
 cover this somewhat extended meaning. 
 
 I need not here inquire how the individual can act on himself. 
 I shall content myself with saying what every one admits, that the 
 object of all education is to increase the power, muscular or intel- 
 lectual, of the individual. 
 
 The tournaments of the Middle Ages were fairs, where the knights 
 came to exhibit their strength and valour. Observe the propriety of 
 the word valour ; the stronger they were, the greater their value. 
 
 At the present time, what are we doing in our literary and 
 scientific meetings, in our art exhibitions, or even in addressing 
 ourselves directly to the public, but exhibiting the value which has 
 accrued to us from our intellectual exertions ? 
 
 I go one step further. Man finds a utility, not only when he 
 satisfies a want, but also when he saves himself a pain. Every 
 satisfaction of a desire, every alleviation of a pain, represents a 
 value. MacCulloch, 1 indeed, says that if political economy were to 
 treat of the production or the distribution of everything that is 
 agreeable to man, it would include all other sciences ; that the best 
 encyclopaedia would then be the best treatise on political economy. 
 Health is a useful and pleasant thing, medicine ought therefore to 
 be inserted in the catalogue of the science of wealth. Civil and 
 religious liberty are eminently useful ; political science must there- 
 fore be comprehended in the science of wealth. A great actor's 
 playing is agreeable ; therefore discussions on the stage must be 
 included; and so on. But MacCulloch has put his point badly. 
 It is not a question of medicine, or dramatic art, of civil or religious 
 liberty, but of their economic effects. The doctor has a value, the 
 actor has a value, civil and religious liberty themselves have a 
 value. No one will deny the economic effects of the revocation of 
 the Edict of Nantes. 
 
 1 " Political Economy," an article published in the supplement to the Encyclo- 
 paedia Britannica. 
 
Bk. . Ch.iv.] DEFINITIONS. 31 
 
 J. B. Say puts it perfectly. 1 "The industry of a physician, of a 
 public administrator, of a judge or an advocate, satisfies wants so 
 imperative, that without their labours society could not exist. The 
 fruit of their labours is so real, that they are procured at the 
 price of material products." In opposition to the term " material 
 product," he calls the outcome of the physician's industry a " non- 
 material product." The distinction is false, for we cannot create 
 matter itself, and therefore can only create non-material products ; 
 or rather there are DO products at all, but only utilities ; and utili- 
 ties include all kinds of interchangeable services. These services 
 have an exchange value ; they are bought or sold. The physician, 
 for instance, is a contractor for cures. 
 
 But Charles Dunoyer 2 has pointed out the contradiction which 
 exists among the maj6rity of authors, who speak of labour which 
 does not embody itself in a material object, as non-productive ; and 
 yet who all recognise the utility of the productive result of this so- 
 called non-productive labour. MacCulloch is no exception to this. 
 After the passage I have quoted, he nevertheless, in the same 
 treatise, includes under the name of productive labour all the differ- 
 ent kinds of advantages to which he had at first refused that title; 
 and in his Principles of Political Economy, he gives the following 
 definition of wealth 3 : " Wealth designates all articles or products 
 which are necessary, useful, or agreeable to man, and which, at the 
 same time, are endowed with an exchangeable value." " Products," 
 observe, not " material products," an error with which Mai thus 
 does not fail to reproach him. 
 
 J. S. Mill declares that " the skill, the energy, and perseverance 
 of the artisans of a country, are reckoned part of its wealth, no less 
 than their tools and machinery." 4 He defines wealth as " all useful 
 or agreeable things which possess exchangeable value. 5 But, with 
 an inconsequence not uncommon with him, he recurs to the matter 
 to say, 6 "I shall, therefore, in this treatise, when speaking of 
 wealth, understand by it only what is called material wealth, and 
 by productive labour, only those kinds of exertion which pro- 
 duce utilities embodied in material objects." 
 
 " Can services be called wealth? " asks M. Courcelle-Seneuil, and 
 he comes to the conclusion that " the idea of wealth everywhere 
 carries with it that of purely material objects." 
 
 Let us go back to the origin of the word. With the Germans, 
 Reich means power, and Reichthum, riches ; among the Latins, both 
 
 1 Traite d'Economie Politique, Book I., chap. xiii. 
 
 2 Dictionnaire d'Economie Politique, Art. " Production." 
 
 8 Principles of Political Economy (MacCulloch), Part I., p. 5. 
 
 4 Principles of Political Economy (Mill), Book I., Chap iii., par. 3. 
 
 5 Ibid. , Preliminary Bemarks. 
 
 6 Ibid., Book I., Chap, iii., par. 3. 
 
32 DEFINITIONS. 
 
 meanings were expressed by the word opes; in Spanish, rich and 
 powerful men are alike called ricos hombres ; while the English 
 word means, first welfare, and then riches. 
 
 " Wealth is power," says Hobbes. The two are synonymous. 
 He is rich who, having many services to exchange, can obtain many 
 utilities. The inventor is rich ; or the author is rich ; and their 
 wealth often shows itself in the most material manner. A people 
 which can render great services to other peoples is rich. Are not 
 the great French physicians, the great French actors, a part of the 
 wealth of the country ? 
 
 Lord Lauderdale gave a good definition of wealth when he included 
 under the term " all that man desires as likely to be useful or agree- 
 able to him." 1 
 
 It must be understood from henceforth, that wealth is utility. 
 
 This distinction is important, for we shall see further on to what 
 fantastic conclusions economists have been led who have made it 
 consist in value. 
 
 According to them, since natural utilities tend to diminish value, 
 the more a man has at his disposal, the poorer he is, economically 
 speaking. 2 Artificial utilities alone constitute wealth. 3 With a 
 curious application of the doctrine of final causes, they say, 
 "Nature grants freely to men certain utilities which all enjoy 
 equally." 4 "Nature places at the disposal of production, air, sun- 
 light, water ; these are unappropriated natural agents." 5 
 
 This is an error ; utility exists only in relation to man, it has no 
 meaning apart from him ; the term itself implies appropriation. 
 
 " Land," J. B. Say says, "is certainly not the only natural agent 
 endowed with productive energy, but it is the only one, or almost 
 the only one, which can be possessed. The water in the rivers 
 and sea, the air, the sun, are likewise productive forces, but 
 fortunately no one can say * They belong to me ; pay me for the 
 services they render you ! ' ' 
 
 Again an error; all is appropriated. Is the sunshine of no 
 account in the selling of houses or land, or in the letting of an 
 apartment or a garden ? Do not the hotel -keepers of Nice and 
 Pau make it pay ? Where would the vineyards be without it ? and 
 what do you mean when you speak of a plantation as being well 
 situated ? Is not the sea appropriated the whole length of its 
 shores, do not the very vessels appropriate its surface as they pass ? 
 Do not its harbours make the wealth of towns ? It is so thoroughly 
 appropriated that its appropriation forms the subject of complicated 
 agreements. Look at Newfoundland with its fisheries ! 
 
 1 An Inquiry into the Nature and Origin of Public Wealth, 1804. 
 
 2 See chap, v., Definition of Value. 
 
 3 See Passy's Dictionnaire d'Economie Politique, Art. " Utilites." 
 
 4 Ibid. 5 G. de Molinari, Cours d'Economie Politique, vol. i., p. 44. 
 
Bk. i. Ch. iv.] DEFINITIONS. 33 
 
 As to the air, it is appropriated jealously enough in the towns. 
 You prefer a house in an airy situation ; and building land varies in 
 value according as it is more or less exposed. 
 
 A nation counts its climate among its riches, and with the more 
 reason, as it often forms the principal item thereof. In defending 
 its territory, the nation defends its sunshine. 
 
 The term utility implies the idea of appropriation by means of 
 exchange. 
 
 Bat we spoke just now of health as a utility ; is health susceptible 
 of exchange ? Certainly. Do you not pay the doctor and the 
 druggist for it ? Granted, you say ; it has a value for me, but it 
 has no value for any one else, therefore it is not capable of exchange. 
 
 Well ; I admit that my health has no value for other people, but 
 it has for me; it is a utility which I have so appropriated, that it 
 has become a part of myself. I can buy it, and do buy it every day, 
 and that pretty dear. I can even sell it ; for my health forms part 
 of my powers, of which I can lend the use or sell the product. 
 
 Exchange does not imply identity, but reciprocity and diversity, 
 of services. Health is a utility to me, and I buy it of the doctor 
 for a sum of money, which is a utility to him. 
 
 Man acts in order to procure himself utilities. He even acts in 
 order to procure himself the negation of action sleep ; for he 
 buys opium. 
 
 All action, the object of which is to procure some utility, implies 
 effort more or less severe, more or less deliberate, more or less 
 agreeable. This effort is labour. 
 
 Sometimes the object to which the labour is applied is man him- 
 self, or rather certain parts of him. The wrestler develops his 
 biceps, the singer his voice, the dancer her legs ; those who give 
 themselves to intellectual work of any kind, mathematicians, 
 accountants, novelists, men of science, develop their brains. Some- 
 times it is something external. The labourer tills the ground, the 
 fisherman catches fish, the miner digs coal, and so on. 
 
 Labour has for its result, either a change, physical, chemical, 
 or physiological, in the condition of matter, or a change of place. 
 
 We must here guard against an error into which English 
 economists have fallen, which the Protectionists are always repeating, 
 and which does not seem to offend public opinion. It is this: "All 
 wealth is derived from labour." " Labour constitutes the wealth of 
 a people," said M. de Saint-Cricq, the Minister of Commerce; and 
 the phrase is still dinned into one's ears in every economic discus- 
 sion. 
 
 But if so, wealth should be proportionate to the amount of labour. 
 Now the less fertile the earth, and the ruder our contrivances, the 
 heavier is the labour needed to procure us utilities. Therefore 
 
34 DEFINITIONS. 
 
 wealth is in inverse proportion to the fertility of the soil and the 
 progress in mechanical arts. The surest way to wealth would be 
 the cultivation of the Sahara or Greenland. M. Cunin-Gridaine, 
 another Minister of Commerce, suggests a machine for increasing, 
 instead of diminishing, manual labour, in order to find employment 
 for the workmen ! 
 
 Every one is acquainted with Sismondi's hypothesis. He 
 imagines a machine, the handle of which should be placed in the 
 hand of the king or minister, who works it without effort, and it 
 performs the tasks which now take so many millions of men, and 
 the men have nothing to do but look on with folded arms. 
 
 Sismondi held that this would be the ruin of the country, and 
 many people think so still, in spite of the economists ; so that M. 
 Allain- Targe was not alone in his error when he said, " We are 
 a labouring democracy living by our work. Labour must be 
 defended." 1 
 
 It is a mere confusing of good and ill, pain and pleasure, the 
 means and the end. Labour is an effort having for its object 
 the giving of satisfaction. The effort is the ill, and the satisfaction 
 is the good. Mankind exerts itself to lessen effort and augment 
 satisfaction. This is why, the apologists of labour notwithstanding, 
 it has not ceased to invent machines the purpose of which is to put 
 an end to labour ; and every one finds himself the better for them. 
 We do not live by labour, but by the results of labour ; our ideal is to 
 procure the maximum of utility with the minimum of effort. 
 
 Under whatever form it presents itself, labour is the application 
 of our faculties to the satisfaction of our wants. It may be defined 
 as the effort necessary for the appropriation of utilities. 
 
 But we may procure utilities possessed by others by giving them 
 other utilities in exchange. The sick man cannot cure himself 
 singlehanded ; he buys of the physician the utility of which he is 
 the owner, namely, his skill and science, by the aid of another 
 utility, usually gold. Nobody makes his own coats and shoes. He 
 buys them in exchange for other utilities, of which he is the pos- 
 sessor. 
 
 Exchange is the relation of utilities among themselves. 
 
 SUMMARY. 
 
 Every desire is a want. Everything which conduces to the satisfac- 
 tion of a want is a utility. 
 
 Utility depends upon appropriation. 
 Wealth is the general mass of utilities. 
 
 Man appropriates utilities by his own exertions, or by exchange. 
 Exchange is the relation of utilities between themselves. 
 1 The Chamber of Deputies, Feb. 17, 1880. 
 
Bk. i. Oh. v.] VALUE. 85 
 
 CHAPTER V. 
 
 VALUE. 
 
 WE have now to find a definition of the term " value." 
 
 It is not without reason that Bastiat says that "the theory of 
 value is to political economy what numeration is to arithmetic." 1 
 Professor Perry says, " This word indicates and delimits the sphere 
 of Political Economy." Proudhon calls it the corner-stone of the 
 economic edifice. Stuart Mill is more reserved ; but he too says, 
 " The question of value is fundamental." 2 However, after saying 
 " We must begin by settling our phraseology," 3 he omits this 
 fundamental definition. 
 
 No other expression in the language of economy has provoked so 
 much discussion. This or that definition has even given rise to dis- 
 putes as to the question of priority. Nevertheless, the question is 
 so far from being settled, that the late Professor Stanley Jevons 
 declared he would give up the use of the word altogether ; but he 
 substituted for it another phrase, " rate of exchange," which he 
 confessed did not satisfy him after all. 
 
 Professor Thornton tells the following characteristic anecdote, 4 
 " Most members of the Political Economy Club must be familiar 
 with an anecdote of Sydney Smith, who, not many months after 
 joining the Club, announced his intention to retire ; and, on being 
 asked the reason, replied that his chief motive for joining had been 
 to discover what Value is, but that all he had discovered was, that 
 the rest of the Club knew as little about the matter as he did." 
 
 Adam Smith has not given a definition of the word, but has 
 accompanied it with two distinct qualifications which give it two 
 completely opposite meanings. 5 " The word value, it is to be 
 observed, has two different meanings, and sometimes expresses the 
 utility, of some particular object, and sometimes the power of 
 purchasing other goods which the possession of that object conveys. 
 The one may be called * value in use ' ; the other, ' value in ex- 
 change.' The things which have the greatest value in use have 
 frequently little or no value in exchange; and, on the contrary, 
 those which have the greatest value in exchange have frequently 
 little or no value in use." 
 
 Stuart Mill remarks on this last sentence, 6 that the word use is 
 there employed, not in the sense in which political economy is con- 
 
 1 Harmonies Economiques, chap. v. 
 
 3 Principles of Political Economy, Book III., chap, i., par. 1. 
 
 3 Ibid., par. 2. 
 
 4 Article in Contemporary Review, Oct., 1876, " Cairns on Value." 
 
 * Wealth of Nations, vol. i., p. 36, 5th edition. 
 
 Principles of Political Economy, Book III., chap. i. par. 2. 
 
36 VALUE. 
 
 cerned with it, but in that other sense in which use is opposed to 
 
 pleasure. 
 
 /But Adam Smith's definition is unsound all through. 
 
 If the value of a particular object means its utility, then air and 
 water, which are of the greatest utility, should be of the greatest 
 value. Now this is not the case, except under certain circum- 
 stances. This contradiction Adam Smith perceives, and introduces 
 the other term, exchange value, which in this case destroys the 
 first, since the two values are often contradictory. 
 
 Nevertheless, many economists have put up with this contradic- 
 tion, and amongst them M. Blanqui. According to him, the distinc- 
 tion established by Adam Smith has the advantage of bringing out 
 the peculiar character of exchange value, the only kind of any 
 importance in business transactions, because it is the product of 
 human labour. 
 
 This reasoning is wrong ; for we exchange things because they 
 are useful, not because they are the products of human labour. I 
 buy a hill where I can build a windmill. The hill has a value for 
 me, and yet its former owner had spent no labour on its construc- 
 tion. 
 
 Bicardo l perceived Adam Smith's error clearly enough ; bat he 
 himself fell into that of Blanqui. Speaking of utility, he says, 
 " This is not the measure of exchange value, although it is essential 
 to it." The reservation was wise ; but having made it, he goes on 
 to speak of labour alone as the basis of value. " The value of 
 a commodity," says he, " depends on the amount of labour neces- 
 sary to its production." Here crops up the error pointed out by 
 J. B. Say. You work thirty years to produce an epic poem. If 
 there is no demand for it, if it is of no use to anybody, it has 
 no value, notwithstanding the amount of labour you have expended 
 on it. There is no value without utility. 
 
 Bicardo's error springs from the confusion which we have 
 already pointed out between effort and utility, labour and its re- 
 sult. 
 
 In order to avoid the same difficulty, Storch makes value de- 
 pendent on opinion, and Senior, on rarity. 
 
 All these definitions are true in part; but none of them gives 
 the real and precise sense which ought to be attached to the word 
 " value." These economists have seen but one element in value, 
 whereas it is really composed of several. 
 
 I Value is neither labour, nor utility, nor rarity. 
 A has great muscular force, which he has developed by exercise. 
 He has a weight to lift. He lifts it unaided, by his own strength ; 
 his strength is a utility to him. B is weaker than A. He has the 
 
 1 Principles of Political Economy, chap. i. 
 
Bk.i.Ch.v.] VALUE. 37 
 
 same weight to lift. He cannot lift it alone, and he asks A's help. 
 A's strength, a utility possessed by him, is of value to B. 
 
 But B has a fountain, which supplies him with water. This 
 water is a utility to him. A has no water. He says to B, " In 
 exchange for the utility of my strength which I give you, give me 
 water, which has a value for me, as my strength has a value for you." 
 "Doutdes." \ 
 
 In a word, man possesses utilities. The mutual relations of men \ 
 alone lend value to these utilities. 
 
 Traffic is not a thing carried on by nerves and muscles, by air, 
 water, and the other natural forces and agents which serve the use I 
 of man ; it is a thing carried on between man and man ; therefore I 
 value is a human relation. 
 
 Rossi, who censures Adam Smith's definition, is mistaken in 
 saying, " Value is the relation which exists between things and 
 the wants of man. If a thing is adapted to our needs, there lies its 
 value." 1 
 
 Not so. There lies its utility. Its value is determined by ex- 
 change. 
 
 B is thirsty. He has water. He pays nothing to nature for 
 quenching his thirst. But A pays for the water he drinks, 
 because it belongs to B. 
 
 Adam Smith, Senior, and J. B. Say look on value as a relation I 
 between two objects. H. Passy says that value is " a relation of 1 
 quantity between exchanged products." 2 But why products ? I 
 Have services and exertions no value ? 
 
 Value is not a relation between two things; it is a relation i 
 between two individuals. Carey defines it thus : 3 " Value is the I 
 measure of the resistance to be overcome in order to procure the 1 
 articles necessary for our wants ; that is, the measure of the power 
 of nature over man." 
 
 If we were in the position of Robinson Crusoe, this definition* 
 would be correct ; but Crusoe's position was an exceptional one. He| 
 calculated the value of things by the effort it cost him to acquire 
 them ; we, on the other hand, calculate the value of things less by/ 
 the efforts we must make than by the utilities we must give in) 
 exchange. 
 
 MM. Bastiat, Charles Dunoyer, and R. de Fontenay, having 
 observed these facts, conclude from them that utilities furnished by . 
 natural agents have no value. Human services alone have value ; \ 
 and Bastiat sums up the theory in the following formula : Value is j 
 the relation of two interchanged services. 
 
 1 Cows d'Economie Politique, vol. i. , chap. iii. 
 
 2 Dictionnaire d? Economic Politique. 
 
 3 Principles of Social Science, vol. i., p. 177. 
 
38 VALUE. 
 
 But Bastiat and the non-materialist economists decline to admit 
 that every human service is composed of three things : 
 
 1st. Utilities furnished by nature, as nerves, muscles, brains, air, 
 water, etc. ; 
 
 2nd. The effort implied in doing these services ; 
 
 3rd. The want of the service on the part of the person served ; 
 for every service implies a want. 
 
 Having thus neglected to analyse the materials of which every 
 service is composed, MM. Bastiat and R. de Fontenay declare that 
 the sole basis of value is the exertion which the service rendered 
 costs or saves ; that value does not attach to the utility of things, but 
 always to that of human services; that "natural agents can lay 
 claim to nothing of the nature of value in the work of production." 1 
 
 In order to maintain this assertion, Bastiat launches into a series 
 of subtle demonstrations. He says, " I am in want of water, and 
 the spring is a league from the village. I, therefore, take the 
 trouble of going every morning to fetch a supply of water, for it 
 is in water that I find those useful qualities which have the property 
 of alleviating the form of suffering called thirst. Want, effort, 
 satisfaction, all are there. I recognise utility ; but as yet I know 
 nothing of value. But, as my neighbour also goes to the spring 
 every morning, I say to him, " Save me the trouble of the journey ; 
 do me the service of carrying the water for me. Meantime, I will 
 do something for you; I will teach your child to spell." He sees 
 that this is an advantage for both of us. Next, I say to him, 
 " Your child worries me, I would rather do something else for you: 
 you shall go on carrying the water for me, and I will give you five 
 sous." If this is agreed on, the economist may say, without fear of 
 mistake, " The service is worth five sous." Later on, my neigh- 
 bour no longer waits to be asked. He knows by experience that I 
 want the water every day, and he becomes a water- seller. Now we 
 begin to say, " The water is worth five sous." But has the nature 
 of the water really changed ? Has the value, which just now was 
 in the service rendered, become materialized, so as to be incorporated 
 with the water ? " 
 
 No ; but Bastiat here supposes the spring to belong to no one, so 
 that the only thing to be paid for is the labour of carrying. But 
 suppose some one appropriated the spring, and imposed a charge 
 on the water taken from it, will not the water itself have a value 
 as a utility, and will not this utility be paid for ? 
 
 Bastiat takes another example. " I am walking by the sea-side. 
 I light by chance on a superb diamond. I am now in possession 
 of an article of great value. Why of such value? Because I 
 am about to confer a great boon on humanity, or because I have 
 
 1 Harmonies Economiques, chap. v. 
 
Bk. i. Ch. v/l VALUE. 39 
 
 devoted myself to long and hard labour ? Neither the one nor the ! 
 other. Why, then, has this diamond such a value ? Because, of 1 
 course, the person to whom I give it up will think I have done him \ 
 a great service." 
 
 And he winds up by saying, " The value is not in the dia- ' 
 mond; it is simply in the services given and received on account of 
 it, and it is fixed by agreement between the contracting parties." 
 
 Very good ; but if the diamond did not exist, there would be no 
 contracting parties, and no services exchanged. Utility is subjec- 
 tive. It is clearly not in the diamond itself, it is in the attribution 
 of utility to the diamond by certain persons ; but this utility is in- 
 separable from the diamond ; the service rendered by the person in 
 possession of the diamond is attached to the diamond itself. In the 
 two examples just cited, the term "service" is employed by Bastiat . 
 in two different senses ; in the first it represents labour, and in the , 
 second, demand. 
 
 M. R. de Fontenay says, in support of Bastiat's theory, 1 " The 
 high price of Clos-Vougeot has been dinned into our ears. But 
 look at the neighbouring summits of the Cote d'Or, with their piles 
 of greyish chalk and their vines, covered like craters by the heaps 
 of stones, which they have thrown up, one by one, from their bosom. 
 The wine extracted with so much labour from the soil sells at only 
 two or three sous the bottle. Hence it is that Clos-Vougeot is 
 worth six or eight francs. To all who have understood what we 
 have just said, this reply will be final." 
 
 It will not be final to the wine-growers, who are much put out by 
 their wine not selling at more than two or three sous the bottle, 
 while that of the neighbouring vineyards realises six or eight francs. 
 What it does prove is, that the same amount of labour produces 
 wholly different results, according to the quality of the natural 
 agents to which it is applied. Are not the physical conditions which 
 give the wine its value of three sous or six francs, absolutely inde- 
 pendent of human industry ? Since there is this difference in the 
 value of the products, you cannot say that the natural utility of the 
 soil, which is the cause of this difference, has no value. 
 
 M. de Fontenay asserts, it is true, that the high price of Clos- 
 Vougeot is the remuneration of the fruitless labour applied to other 
 lands. But if this were true, the other proprietors must profit by it. 
 "Now Clos-Vougeot is owned by a particular proprietor, who alone 
 benefits by the utility attaching to the happy situation of that district. 
 It is clear that the buyer, in paying a high price for the wine of 
 this particular proprietor, takes no account of the fruitless efforts 
 of other people ; he never troubles himself about it. Clos-Vougeot 
 is a wine which takes his fancy, and one of which the supply is 
 
 1 Du Revenu Fonder, p. 257. 
 
40 VALUE. 
 
 limited. The proprietor raises his price, not in proportion to the 
 effort and outlay of the other wine-growers, but according to the 
 offers made him, and the urgency of the demand. It is impossible 
 to separate the utility of the natural agent from the service which 
 it enables man to render. 
 
 Let us go a step further. One man is a good worker, but he has 
 an ill-developed brain. He grinds away doggedly, and yet he makes 
 but an indifferent lawyer, or doctor, or artist. He never produces 
 anything of more than ordinary value. Another man is more 
 i fortunately endowed ; with the same, or even a less, amount of labour, 
 he turns out products of a higher quality, at least in the eyes of the 
 consumers. His brain-power is a birthright for which no credit is 
 due to him, yet its utility has an unquestionable value ! 
 
 A natural agent can have no value, except under two conditions : 
 
 1st. It must be possessed by a human being ; 
 
 2nd. Another human being must feel the want of it. 
 
 In the midst of a desert, air has no value. In a city, every house- 
 . owner possesses a certain quantity of air ; and this air is felt to be 
 of such value that its enjoyment is assured to him by law. 
 
 Electricity distributed through the atmosphere has no value ; but 
 a man may construct a battery, disengage the electricity, and, if I 
 want it, sell it me at a given price. This electricity, then, has a value. 
 
 Adam Smith distinguishes between value in use and value in 
 exchange, because, says he, " the natural agents most indispensable 
 to life, as the heat of the sun, air, water, are useful, but have no 
 value." For the same reason, Bastiat assumes that the utility 
 inherent in natural agents has no value. 
 
 Both these errors spring from want of observation. 
 
 Smith and Bastiat, in their country walks, observed that no one 
 contested the enjoyment of the sunshine with them ; but Smith 
 ought to have known that when Englishmen pay their fare to Nice, 
 Pau, or Home, they are paying for the sunlight which they want ; and. 
 Bastiat ought to have known that if the Medoc district lay under 
 London sunshine, it would never make its fortune in wines, nor sell 
 a few acres for millions of francs. 
 
 Again, they hold that water has no value. Yet this question of 
 water-supply is not yet solved for most European towns. It is 
 almost everywhere wanting. Have they never noticed, in reading 
 the Bible, how the water question crops up at every turn ? Whence 
 comes the celebrity of Mecca ? From the famous wells of Zam-Zam, 
 the wells of Ishmael. In all the Arab legends, in the records of 
 old feuds between tribe and tribe, this question is everywhere 
 prominent. ' The importance of the possession is proportionate to 
 its rarity and its utility. 1 
 
 1 See Histoire des Proletaires, by Yves Guyot and S. Lacroix, vol. i., p. 341, 
 and above, Book I., chap. iv. 
 
Bk. i. Oh. vi.] THE OBJECT OF ECONOMIC SCIENCE. 41 
 
 Every natural agent, very natural force possessed by one manT^ 
 and which another man thinks useful t him, has a value. 
 
 A man possesses a lock of hair of a woman he loved, and he says, 
 " This souvenir has a great value for me." He is right in adding 
 "for me." He would do still better to say, " a great utility." The 
 souvenir has, in fact, no value, so long as no one else wants it. 
 
 M. de Molinari, therefore, was wrong in saying, " Value exists 
 independently of exchange ; exchange proves, but does not create 
 it." No. Utility exists independently of exchange; but value is 
 only a relation between the possessors of utilities. 
 
 Value, then, should be defined as the relation of a utility possessed 
 by one person to the need of another person. 1 
 
 CHAPTER VI. 
 
 THE OBJECT OF ECONOMIC SCIENCE. 
 
 I WILL here give my reasons for calling this work "Principles 
 of Economic Science," and not " Principles of Political Economy." 
 
 True as it is that the value of words depends on the sense in 
 which they are used, and not on their etymology, it is sometimes 
 useful to recall their derivation. 
 
 Economy comes from OIKOS, house, and vo/xos, rule. The ancients 
 did not distinguish very closely between the arts and the sciences. 
 Xenophon says, " Economy is a science like medicine, like bronze- 
 founding, like architecture." And he defines it thus, " It is the 
 science by which a man can increase his house." To this noun we 
 prefix a derivative of the word Tro'Ais, city or society ; so that, ety- 
 mologically, Political Economy is simply the art of augmenting the 
 resources, wealth, and fortune of a society. 
 
 Art has everywhere preceded science. Science is the ascertaining 
 of the mutual relations of phenomena, while art is the application 
 of these relations to the satisfaction of human wants. Medicine, 
 for instance, is but the application of physiology and biology. The 
 confusion between art and science in the study of economic phe- 
 nomena is expressed in the phrase Political Economy. 
 
 This term was used for the first time at the head of an old French 
 treatise published by Mountchrestien de Watteville, in 1615. Ques- 
 nay and his friends, although they had taken the name of Physiocrats, 
 adopted this word and spread it. Adam Smith took it from them, 
 and used it without examination. He considers 2 that " Political 
 Economy, considered as the science of a statesman or legislator, 
 
 1 I first published this definition in 1869. 
 
 2 Wealth of Nations, Book IV. 
 
42 THE OBJECT OF ECONOMIC SCIENCE. 
 
 proposes two distinct objects ; first, to provide a plentiful revenue 
 or subsistence for the people, or, more properly, to enable them to 
 provide such a revenue or subsistence for themselves ; and secondly, 
 to supply the State, or commonwealth, with a revenue sufficient for 
 the public services. It proposes to enrich both the people and the 
 sovereign.'* Rousseau had given a similar definition of it in the 
 Encyclopedic. 
 
 J. B. Say makes some reservations. In the very title of his 
 Traite d'Economie Politique, he describes its object as being the 
 knowledge of the laws which control the formation, distribution, and 
 consumption of wealth. The second title of his book is, "A Simple 
 Exposition of the Manner in which Wealth is Made, Distributed, 
 and Consumed." In his Cours d'Economie Politique he reverts to 
 this definition, and says, 1 " It may be seen, even in this work, that 
 all social interests are comprised within the sphere of this science. 
 Since it has been shown that non-material properties, like personal 
 gifts and acquired faculties, form an integral portion of social 
 wealth, it has also been found that Political Economy, which might 
 seem to have had for its object only material good, embraces the 
 whole social system." 
 
 The less advanced a science is, the less defined are its limits. 
 These words of J. B. Say prove how vague his idea of Economic 
 Science still was, and what a confusion existed in his mind between 
 its laws and their application. The same defect is still more marked 
 among the Germans who have occupied themselves with this 
 subject. 
 
 M. Cauwes, Professor of Political Economy in the Faculty of 
 Law at Paris, rejects " pure political economy," and wishes to make 
 it a "moral science." 2 
 
 Bicardo and Malthus attempt no definition, and Eossi, while 
 he discusses several, offers none himself. 
 
 Stuart Mill defines Political Economy 8 as, "the science which 
 treats of the production and distribution of wealth, so far as they 
 depend upon the laws of human nature." 
 
 Mr. Fawcett 4 says : " Political Economy is concerned with those 
 principles which regulate the production, the distribution, and the 
 exchange of wealth." 
 
 Senior, to avoid all confusion, says, " The economist must not 
 give a single word of advice ; his object is not to recommend one 
 measure, or to dissuade from another, but to establish general 
 principles." 
 
 MacCnlloch also says, ' We may define Political Economy as the 
 
 1 Cours d'Economie Politique, Considerations Generates, p. 41. 
 
 2 Cours d'Economie Politiqut, vol. i. p. 9. 
 
 3 Essays on some Unsettled Questions in Political Economy, p. 133. 
 
 4 Manual of Political Economy, p. 4. 5th edition. 
 
Bk.i. Ch.vL] THE OBJECT OF ECONOMIC SCIENCE. 43 
 
 science of the laws which govern the production, accumulation, 
 distribution, and consumption of articles .or products which are 
 necessary, useful, or agreeable to man, and which possess at the 
 same time an exchangeable value." 
 
 MacCulloch himself, however, has mixed up questions of the 
 application of the science with the science itself ; and indeed almost 
 all the economists, Stuart Mill included, have committed the same 
 error. 
 
 We, for our part, shall begin by considering Economy as a pure 
 science, and seeking the laws which regulate the relations between 
 human wants and the utilities which satisfy them ; and we shall 
 .afterwards confine ourselves to showing how they have been applied. 
 
 M. Courcelle Seneuil drew attention to the necessity of making 
 this distinction, and even proposed to accentuate it by calling the 
 pure science, " Plutology," or the science of wealth, and the applied 
 science " Ergonomy," or the law of labour. 
 
 But as these two words have not found admission into the 
 language, it will be better to employ words already in use, explaining 
 at the same time the precise meaning to be attached to them. 
 
 It is not necessary to create fresh words ; but in order, as far as 
 possible, to avoid all confusion, it would be well, in treating of these 
 systems from a purely scientific point of view, to omit the word 
 "political," which distinctly suggests its treatment as an applied 
 science. " Under the word house," says Xenophon, " we include 
 all that a man possesses." In that case, OIKOS and 1/o/u.os would 
 signify the regulation or ordering of things possessed by man. The 
 science itself, then, should take the title of "Economic Science;" 
 whilst its various applications might be known as political, social, or 
 financial economy, and so on. 
 
 MM. Alglave and Leroy-Beaulieu are not wrong in demanding 
 that political economy should be taught in the Faculties of Science, 
 and regarded as a natural science. 1 
 
 All the definitions which I have quoted contain some errors. 
 For instance, Economic Science is not the science of the production 
 of wealth. The science of the production of wealth is mechanics, 
 physics, chemistry, which produce wealth by enabling man to modify 
 the condition of natural objects. Economic Science has only to di 
 with human relations, resulting from the necessity of satisfying the 
 wants of man. 
 
 Exchange is the mutual relation of utilities between themselves. 
 
 Value is the relation of a utility possessed by one person to the want 
 of another person. 
 
 Economic Science is the study of these relations, that is, of the 
 
 Sitting of the Societ6 d'Economie Politique, 4th April, 1874. 
 
44 THE OBJECT OP ECONOMIC SCIENCE. 
 
 elements which constitute value. MacCulloch was not wrong in 
 proposing to define it as the science of values. 
 
 The object, then, of Economic Science is to ascertain the laws 
 which regulate the relations of natural agents utilised by individuals, 
 acting independently of any forces which could interfere with those 
 relations. 
 
 Or, more concisely, Economic Science is the science of value. 
 
BOOK II. 
 
 THE CONSTITUENTS OF VALUE. 
 
 CHAPTER I. 
 
 ECONOMIC TENDENCIES OP MAN. 
 
 MAN finds himself in face of two objects, external to himself, - 
 matter and force. They may become utilities to him, if he knows 
 how to appropriate them to his needs. 
 
 This appropriation may be brought about by the aid of, 
 
 1st. Changes in the condition of matter, whether chemical or 
 physiological ; 
 
 2nd. Changes of place ; 
 
 3rd. Changes of time ; 
 
 4th. Changes of ownership. 
 
 Let us consider, to begin with, how the first transformations are 
 effected. 
 
 Among the chalks of the Beauce are found flints, artificially cut 
 and shaped. It appears, then, that even so early as the Tertiary 
 epoch there existed a creature which attempted to provide itself 
 with tools. - Geologists call him Tertiary Man. But M. Mortillet 
 has given him his true place as the precursor of man. 
 
 Go back as far as we may in the history of humanity, and we 
 still find in man, or in the animal which comes nearest to man, 
 this tendency to make tools. Man has been defined as the tool- 
 making animal. This definition is clearly incomplete, but it is not 
 otherwise incorrect. The characteristic is so marked, that, in dis- 
 tinguishing the various phases of prehistoric civilisation, we desig- 
 nate them by their tools, the Stone Age, the Bronze Age, etc. 
 
 Now turn to the natives of Tierra del Fuego ; their tools are so 
 primitive that the women are forced to plunge into the water to 
 catch mussels, while the men are sleeping. They use dogs to help 
 
46 ECONOMIC TENDENCIES OF MAN. 
 
 them in catching the otter. Their food -supply is so precarious, 
 that they are sometimes driven to eat their women. 
 
 Four things characterize this period: the insufficiency of tools; 
 the use of animals as tools ; the use of women as tools ; and the 
 want or inadequacy of foresight. 
 
 The imperfection of his tools retards man's progress. Improve 
 his implements, and you raise his grade of civilisation. It also dis- 
 courages foresight ; for while man is so impeded in his exertions 
 to procure indispensable nourishment, he cannot find time either to 
 improve his implements or to save a stock of food sufficient to 
 secure him from the constant pressure of hunger. 
 
 The only efficient implement he has is the dog. Him he has 
 fairly subjugated ; and he makes him work for him, and catch 
 otters. 
 
 His other implement is woman. We shall see the same thing 
 reproduced in various stages of civilisation. 
 
 Man detests exertion. The strongest therefore obliges the weak- 
 est to work, and takes the produce for himself. The first to find 
 herself under these conditions is woman. She begins by being the 
 slave of man. The degree of civilisation is in inverse ratio to the 
 subjection of woman. 
 
 Slavery has originated in the same way. The conqueror has 
 arrogated to himself the right of having wants, and he imposes on 
 the conquered the duty of satisfying them. The slave is regarded 
 as the most convenient, the most productive, of tools. Almost 
 every people, starting with this idea, has tried, not to work for 
 itself, but to conquer others, and thus to get slaves who may work 
 for it. Thus the slave is a living tool. 
 
 In the first stage of civilisation, man is a hunter and fisher, and 
 his implement is an arrow or a hatchet. 
 
 In the second stage, he is a shepherd. He has been able to 
 subjugate animals, or at least to collect them round him ; they are 
 the instruments which furnish him with milk, meat, and wool. 
 
 The agricultural stage comes next. Here man takes the earth 
 as his instrument of labour. He has discovered by observation that 
 by burying grain at a given time, he will reap a harvest at another 
 time. He has foresight now. He has learnt to keep back part of 
 his crops for seed. He has learnt to wait. 
 
 Last of all comes the industrial stage, in which man utilises all 
 those forces of which he once ignored the nature and existence, but 
 which science has now revealed to him. For many centuries he 
 uses wind or water as a motive power ; later on, he learns the use 
 of steam, electricity, and the hoarded heat of the sun ; but it is but 
 a new phase of the same phenomenon, the perpetual endeavour of 
 man to add to his own force the force of implements. 
 
 All these stages may co-exist among the same people, but the 
 
Bk.ii.Ch.i.] ECONOMIC TENDENCIES OP MAN. 47 
 
 predominating one will give its name to the rest. And the token 
 of the economic superiority of one people over another is, that it 
 has more efficient instruments, and is therefore better able to appro- 
 priate natural agents to its wants. 
 
 There are fishermen in England and France to-day, as there were 
 under the earliest civilisation; but they have boats and fishing 
 tackle, they have contrivances unknown to the savages of Tierra del 
 Fuego, and, following the general movement of production, they 
 are beginning to replace the sail and oar by steam, which they 
 now use for drawing up their nets. 
 
 The chase is now become a mere accessory in the business of 
 production, and its importance is fated to decrease more and more. 
 In populous and cultivated lands, game is reared like poultry; and 
 so perfect is the weapon of destruction, that, left to themselves, 
 the game have no chance of escape. 
 
 No doubt we still have flocks and herds ; but the Hebrew patri- 
 archs would be considerably surprised if they could find themselves 
 in an English stable or a Normandy pasture. The breeding, rearing, 
 and produce of cattle, whether for labour or for the supply of meat 
 and milk, are calculated to a nicety. A bullock is a machine, con- 
 structed to give a return proportionate to the amount of fuel 
 furnished to it under the form of food. The whole thing is a 
 mechanical problem. 
 
 So, too, with regard to agriculture, machinery tends more and more 
 to supersede human exertion. Animals were first employed ; these 
 are replaced to-day by steam, to-morrow by electricity. Agriculture 
 is still in many respects empirical ; but the farther we go, the more 
 the earth becomes an instrument of labour like all other tools. We 
 reckon what we have put into it ; we calculate what it ought to 
 return. 
 
 These general facts prove beyond dispute that the industrial 
 stage is absorbing all the others. Its characteristic feature is the 
 power and precision of its tools. 
 
 From these observations it results that man, in his contest with 
 nature, progresses, 
 
 1st. In appropriating natural agents to the satisfaction of his 
 wants and the saving of labour ; 
 
 2nd. In adapting natural agents to facilitate indirectly the satis- 
 faction of his wants. 
 
48 CAPITAL. 
 
 CHAPTER II. 
 
 CAPITAL. 
 
 MUCH discussion has arisen among economists as to the name to be 
 given to the natural agents thus appropriated ; and I will here 
 briefly pass in review the theories to which it has given rise, since 
 the truths of a science acquire fresh salience by the exposure of its 
 errors. 
 
 The physiocrats regarded the soil as the source of all wealth. 
 This error was excusable in their time. They had not seen what 
 wealth can be evolved from the transformation of heat into steam. 
 But it is an outcome of this error, that modern economists still 
 attribute to the soil a peculiar economic character. 
 
 M. Coquelin says, l " All economists, except a few writers of 
 little weight, are agreed in including under the name of capital 
 only those values which have been created and accumulated by the 
 hand of man, and excluding land and the instruments given by 
 nature." 
 
 This restriction is admitted by Rossi and M. Joseph Gamier. 2 
 " Land and labour are primitive forces ; capital is the result of 
 human industry." 
 
 M. Joseph Gamier has given a table in which he divides what 
 may be called the stock-in-trade of society into three categories, 
 designated as follows : 
 
 " 1st. Unappropriated natural instruments, including the sea, 
 public watercourses, the atmosphere, the heat of the sun, and the 
 other forces of nature, physical, chemical, or mechanical, which lie 
 at every one's disposal. 
 
 "2nd. Appropriated natural instruments, including land and 
 labour. 
 
 "3rd. Appropriated artificial or acquired instruments; i.e., 
 capital. 
 
 He distinguishes capital as material or non-material. 
 
 " Material capital comprises all products, as provisions, seed, 
 raw materials, manufactured products, tools, warehouses, buildings, 
 cattle, money, etc., resulting from previous industry ; and also in- 
 cludes the capital employed in the improvement of land, and 
 forming part and parcel of the land improved, thus giving it the 
 double character of a natural and an acquired instrument. 
 
 "Non-material capital includes trade-connection, scientific pro- 
 cesses, knowledge of all sorts, scientific, literary, artistic, etc., this 
 last constituting intellectual capital." 
 
 1 Dictionnaire d'Economie Politique, vol. i., p. 273. 
 
 2 Traite d'Economie Politique. 
 
Bk. ii. Ch. ii.j CAPITAL. 49 
 
 According to this table, land (including under this term water- 
 courses, mines, and so forth) represents appropriated natural 
 instruments ; but coal and iron ore, both of which are raw material, 
 represent appropriated artificial instruments. Further, the sub- 
 stances put into the soil, and forming part aud parcel of it, are 
 capital, but the land itself is not. A drain-pipe is capital ; but J. B. 
 Say himself admits that it would be no easy task to decide whether 
 a tree planted by man would be a natural or an artificial instrument. 
 
 But is not all appropriation the result of human industry ? And 
 if so, then, by M. Garnier's own definition, appropriated land must 
 be capital, like any other natural agent. 
 
 The worst, and at the same time the most widely received 
 definition of capital, is that of James Mill, " Capital is accumulated 
 labour." If so, capital can be created by turning somersaults in 
 the air. The squirrel in its cage is creating capital. And what in 
 the world can he mean by " accumulated labour " ? 
 
 The distinction made by other English economists is somewhat 
 more intelligible. 
 
 Capital, according to Malthus, is "a portion of property devoted 
 to the production and distribution of wealth." 
 
 According to J. S. Mill, it is " wealth applied to a reproductive 
 use." According to Mr. Banfield, l it is "the portion of goods 
 which nature has given us, or which we have accumulated by 
 abstinence." M. Rossi adopts these ideas, and makes capital " not 
 only produce saved," but also " produce destined for reproduction." 
 
 But, from the point of view of economic science, these distinc- 
 tions only serve to complicate the question. It is hard to distinguish 
 between those appropriated articles which are intended for repro- 
 ductive use, and those which are not. For instance, food is often 
 very clearly capital employed in reproductive labour. 
 
 J. B. Say, in sore perplexity, makes another distinction. 2 " When 
 a man builds a dwelling-house, he derives from it no product which 
 he can actually carry to market-; but he derives from it a very 
 appreciable product, since he can sell its use at any time (as he does 
 when he lets it at a rent) ; or he can consume it himself (as when, 
 instead of letting the house, he lives in it). This portion of his 
 capital, then, is not unproductive, although it does not go to the 
 creation of any material product." 
 
 He comes to the conclusion that some capital is productive of 
 utility, and some of enjoyment ; but where, in the language of 
 economy, is the line to be drawn between enjoyment and utility ? 
 
 Bastiat says simply, 3 " The capital of a nation consists in its 
 wealth of materials, provisions, and instruments." 
 
 1 Organisation of Industry. 
 
 2 Cours d' Economic Politique, part 1, chap. id. 
 
 3 Harmonies Economiques, chap. vii. 
 
50 FIXED AND CIRCULATING CAPITAL. 
 
 '* Capital," says M. Courcelle-Seneuil, l " is nothing but the sum 
 of wealth existing at a given time in a given space or in the pos- 
 session of a given person. Capital, then, is, in some respects, 
 synonymous with wealth, since both appellations are applied to the 
 same objects, regarded generally and without distinction." 
 
 In a word, 
 
 Every natural agent appropriated by man is a utility. 
 
 Every utility is capital. 
 
 The capital of an individual is the general mass of utilities 
 possessed by him. 
 
 If I am asked, "But health, which you have described as a 
 utility, is that capital ? " I answer with another question, " Is a 
 sick man worth as much as a sound man ? " 
 
 But a surgical operation, is that capital ? It is an exchange of 
 capital -. the science embodied in the surgeon, and the need of 
 health in me. 
 
 CHAPTER III. 
 
 FIXED AND CIRCULATING CAPITAL. 
 
 ALL economists, from Adam Smith downwards, have divided 
 capital into fixed and circulating capital. By what criterion are 
 they to be distinguished ? Adam Smith gives none. He confines 
 himself to the following classification. 2 
 
 "Fixed capital, of which the characteristic is, that it affords a 
 revenue or profit without circulating or changing masters. It con- 
 sists chiefly of the four following articles, 
 
 " First, of all useful machines and implements of trade which 
 facilitate and abridge labour. 
 
 " Secondly, of all those profitable buildings which are the means 
 of procuring a revenue, not only to a proprietor who lets them for 
 a rent, but to the person who possesses them and pays that rent for 
 them ; such as shops, warehouses, workhouses, farmhouses, with 
 all their necessary buildings; stables, granaries, etc. These are 
 very different from mere dwelling-houses. They are a sort of 
 instruments of trade, and may be considered in the same light. 
 
 " Thirdly, of the improvements of land, of what has been pro- 
 fitably laid out in clearing, draining, inclosing, manuring, and 
 reducing it into the condition most proper for tillage and culture. 
 An improved farm may very justly be regarded in the same light 
 as those useful machines which facilitate and abridge labour, and 
 by means of which an equal circulating capital can afford a much 
 
 1 Traite d'Economie Politique, vol. i., p. 47. 
 
 2 Wealth of Nations, vol. ii., p. 9, 5th edition. 
 
Bk. ii. Oh. iii.] FIXED AND CIKCULATINQ CAPITAL. 51 
 
 greater revenue to its employer. An improved farm is equally 
 advantageous and more durable than any of those machines, fre- 
 quently requiring no other repairs than the most profitable applica- 
 tion of the farmer's capital employed in cultivating it. 
 
 "Fourthly, of the acquired and useful abilities of all the in- 
 habitants or members of the society. The acquisition of such 
 talents, by the maintenance of the acquirer during his education, 
 study, or apprenticeship, always costs a real expense, which is a 
 capital fixed and realised, as it were, in his person. Those talents, 
 as they make a part of his fortune, so do they likewise of that of 
 the society to which he belongs. The improved dexterity of a 
 workman may be considered in the same light as a machine or 
 instrument of trade which facilitates and abridges labour, and 
 which, though it costs a certain expense, repays that expense with 
 a profit. 
 
 " The third and last of the three portions into which the general 
 stock of the society naturally divides itself, is the circulating 
 capital ; of which the characteristic is, that it affords a revenue 
 only by circulating or changing masters. It is composed likewise 
 of four parts, 
 
 " First, of money. 
 
 " Secondly, of the stock of provisions which are in the possession 
 of the butcher, the grazier, the farmer, the corn-merchant, the 
 brewer, etc., and from the sale of which they expect to derive a 
 profit. 
 
 " Thirdly, of the materials, whether altogether rude, or more or 
 less manufactured, of clothes, furniture, and building, which are not 
 yet made up into any of those three shapes, but which remain in 
 the hands of the growers, the manufacturers, the mercers and 
 drapers, the timber-merchants, the carpenters and joiners, the 
 brick- makers, etc. 
 
 " Fourthly, and lastly, of the work which is made up and 
 completed, but which is still in the hands of the merchant and 
 manufacturer, and not yet disposed of or distributed to the proper 
 consumers ; such as the finished work which we frequently find 
 ready-made in the shops of the smith, the cabinet-maker, the gold- 
 smith, the jeweller, the china-merchant, etc. The circulating capital 
 consists in this manner of the provisions, materials, and finished 
 work of all kinds that are in the hands of their respective dealers, 
 and of the money that is necessary for circulating and distributing 
 them to those who are finally to use or to consume them. 
 
 " Of these four parts, three, provisions, materials, and finished 
 work, are, either annually or in a longer or shorter period, regularly 
 withdrawn from it, and placed either in the fixed capital, or in the 
 stock reserved for immediate consumption." 
 
 J. B. Say, Stuart Mill, MacCulloch, MM. de Molinari, Courcelle- 
 
52 FIXED AND CIRCULATING CAPITAL. 
 
 Seneuil, and Stanley Jevons have all restricted themselves to 
 simple commentaries on Adam Smith's classification. M. Courcelle- 
 Senenil winds up with l " This distinction is not indisputable in 
 theory, and often by no means easy to recognise in practice." 
 
 Is the distinction, then, to be regarded as a scholastic refinement, 
 or as a solid reality ? 
 
 In order to answer this question, I must remind the reader that 
 we have observed in the appropriation of natural agents to the 
 wants of man a double character. 
 
 1st. The appropriation of natural agents by man for the immediate 
 satisfaction of his wants. 
 
 2nd. The appropriation of natural agents to facilitate indirectly 
 the satisfaction of his wants. 
 
 Look at the facts ; a man has a hook for catching fish. This 
 hook will always be of use to him as a fish-hook. Should he lose 
 it, he will catch no more fish. But what does he want the fish for ? 
 Either to sell or to eat. If he eats it, it is still of no use to him, 
 unless it undergoes certain chemical changes amounting to a com- 
 plete transformation. If he sells it, it is none the less transformed, 
 so far as he is concerned, for it is turned into money, cocoa-nuts, 
 brandy, etc. 
 
 Take an implement more highly finished than the fish-hook, say 
 a steam-engine. It is of use only so long as all its gear and 
 machinery remain intact. On the other hand, the coal supplied 
 to its furnace is useful only on condition of its conversion into 
 motive force. 
 
 Again, take a cotton-mill. The cotton goes in as cotton- wool, it 
 comes out as cotton-yarn ; in order to produce this utility it has 
 undergone a physical change, while the spindle by means of which 
 this transformation is effected can, on the contrary, be of no use at 
 all, except by remaining exactly as it was. 
 
 The cotton-yarn loses all its utility to the spinner if it is not 
 transformed into money or other products. Like other commo- 
 dities, it has no utility unless it be transformed afresh by way of 
 exchange. 
 
 'From these observations, it appears that there is a real criterion 
 between fixed and circulating capital. 
 
 The following criteria were first established by M. Menier in 
 1874, in his work, Theorie et Application de I'lmpot sur le Capital. 
 
 Fixed capital consists of all such utilities as yield their products 
 vrithout changing their nature. 
 
 Circulating capital consists of all such utilities as change their 
 nature in yielding their products. 
 
 Manuel des Affaires, p. 38. 
 
Bk. ii. Ch. iv.] NOMENCLATURE OP FIXED AND CIRCULATING CAPITAL. 53 
 
 Or thus, 
 
 Fixed capital produces utilities without transforming itself. 
 Circulating capital produces utilities only by undergoing transfor- 
 mation. 
 
 Or, still more simply, 
 Fixed capital is the tool. 
 Circulating capital is the raw material and tne product. 
 
 CHAPTER IV. 
 
 NOMENCLATURE OF FIXED CAPITAL AND CIRCULATING CAPITAL. 
 
 THIS criterion established, it becomes very easy to distinguish what 
 is fixed and what is circulating capital. 
 
 The soil must remain as it is if it is to produce utilities. No 
 doubt it will become exhausted, unless a certain number of its 
 component elements be renewed ; but then, if those component 
 elements have been exhausted, the soil is no longer what it was 
 before. It must be restored to its identity. The soil, therefore, is 
 fixed capital. 
 
 On the other hand, the crops, which are destined to be sold or 
 eaten, are circulating capital. So is the part reserved for seed, for 
 it can only be utilised by losing its identity. 
 
 Among animals, those kept for labour or enjoyment are fixed 
 capital. A pig intended for salting is circulating capital. The 
 cock is fixed capital, the capon is circulating capital. 
 
 Machines, furniture, household utensils, objects of art, in short, 
 all instruments productive of utility, whatever form they may take, 
 are fixed capital. 
 
 All raw material, all manufactured products intended for sale, 
 are circulating capital. 
 
 As to money, it is fixed capital to the legendary miser, who 
 spends his life in counting his gold ; but other men are not in the 
 habit of keeping it to look at. On the contrary, they no sooner 
 have it than they hasten to convert it into houses, lands, food, etc. 
 Money is simply an organ of transmission, a means of exchange. 
 It is, by its very nature, circulating capital. 
 
 But what of bonds and shares ? 
 
 The question shows that the public does not yet realise the exact 
 nature of these things. Shares are nothing but fractions of a title, 
 they are simply a claim to a part- proprietorship. The property 
 may be fixed or it may be circulating capital, as it happens ; the 
 shares are not capital at all, they only represent capital. 
 
 So with bonds ; they are mortgage-deeds, usually secured on 
 
54 THE PLACE OP FIXED AND CIRCULATING CAPITAL. 
 
 fixed capital. Now every mortgagee is a co-proprietor in the pro- 
 perty which forms the security. It is this fixed capital -which 
 produces the annual sum necessary to pay the interest on the 
 advance. 
 
 Private individuals may reckon their bonds and shares among 
 their fixed capital, since they produce a very real utility ; but it is 
 giving them another character than their true one of simple docu- 
 ments, fractional titles to property ; it is confounding the sign with 
 the thing signified. 
 
 The following utilities, then, are fixed capital: 
 
 Soil, Mines, Buildings, 
 
 Machinery Implements, Ships, 
 
 Carriages, Animals put to use, Household utensils. 
 
 Furniture, Objects of art, 
 
 The following are circulating capital : 
 
 Kaw material, Articles of commerce, Money. 
 
 CHAPTER V. 
 
 THE PLACE OF FIXED AND CIRCULATING CAPITAL IN THE WORK OF 
 PRODUCTION. 
 
 No one will dispute that tools augment the power of man. The day 
 he learnt to use the lever, he was enabled to apply more force with 
 less exertion. The day he tamed the dog, he was enabled to do 
 with the dog's help what he could not have done without it. These 
 truths are practically undeniable. I may, however, draw attention 
 to the fact that it is not so long since a good many people debated 
 whether machinery was useful ; and some working men still have 
 their doubts on this point. I shall explain further how this pre- 
 judice has arisen. 
 
 It is enough for my present purpose to point out the following 
 fact. According to the experiments made for ascertaining the 
 horse-power of steam, the strength of one horse is equal to that 
 of seven men. One horse-power of steam is equivalent, at the 
 current rate, to that of three draught-horses, or twenty-one men. 
 
 Now, in 1878, out of nearly 2,800,000 horses, 2,200,000 were 
 used for draught. The total power would equal that of 15,400,000 
 men. 
 
 There was 3,024,000 horse-power of steam, equalling the power 
 of 63,504,000 men. This force, moreover, is continuous, so that 
 
Bk. ii. Ch. v.1 THE PLACE OP FIXED AND CIECULATING CAPITAL. 55 
 
 the figures may be doubled, trebled, even quadrupled, without 
 exaggeration. 
 
 Four horses draw a plough ; they are doing the work of twenty- 
 eight men. While they are ploughing the furrow, the twenty-eight 
 men may be employing their strength, some as joiners, some as 
 masons, some as professors ; whilst others again may be doing 
 nothing. At the end of the day, the same quantity of land will 
 have been ploughed as if the twenty-eight men had all been plough- 
 ing it. If, instead of the four horses, four horse-power of steam 
 had been employed, it would have saved the exertions of eighty- 
 four instead of twenty-eight men, and set them free for some other 
 employment. They might have folded their arms and looked on, 
 and the result at the close of the day would have been the same as 
 if they had been toiling all the time without a moment's respite. 
 That boiler, that valve, those pistons, that coal and water, represent 
 eighty-four cheap, active, and indefatigable slaves. 
 
 Tools tend to reduce huma/n, effort to a minimum. 
 
 If, by means of a tool, a man can obtain in a quarter of ail hour 
 results which he could not otherwise obtain in twenty hours, the 
 use of the tool will have given him all the rest of the time to do 
 what he likes with. In the same way, if a machine can produce 
 the same quantity of utilities as the labour of twenty-one men, then 
 we have twenty-one men set free to attend to the production of 
 something else. 
 
 Thus, three million horse-power of steam represents the exertions 
 of sixty- three millions of men. These men would have been engaged 
 in the mere production of motive force, and in nothing else. In- 
 troduce the use of steam, and you have gained the motive force ; 
 the sixty-three millions of men can apply themselves to the pro- 
 duction of something else. 
 
 In France, for instance, work is done which would take sixty- 
 three millions of men to do it, and the sixty-three millions of men 
 do not exist. 
 
 Moreover, the energies thus set free may in their turn act on 
 other tools, no less powerful than those which have set them at 
 liberty ; one horse-power of steam supplies the place of twenty-one 
 men, but this horse-power is not the only one. The energy of these 
 twenty-one men may spend itself in the use of tools every one of 
 which in its turn liberates the energies of ten, twenty, or a hundred 
 men. 
 
 Hence we draw the conclusion, 
 
 Human effort is productive of utilities in proportion to the power of 
 its tools. 
 
 Here we encounter a new factor. 
 
 From the hand-shaped flint to the flint fixed in a wooden haft is 
 a great stride, and from this stone hatchet to the steam-engine is a 
 still greater. 
 
56 THE PLACE OP FIXED AND CIRCULATING CAPITAL. 
 
 From the day it first occurred to man to fix his flint in a wooden 
 handle, the process has gone on repeating itself. The tool he has 
 made helps him to make another. 
 
 The lids of many thousands of saucepans and kettles must have 
 been raised by the escaping steam, much to the annoyance of house- 
 wives, before a young man of the last century, an intuitive ob- 
 server, perceived the full meaning of this fact, and invented the 
 steam engine. But, once invented, the steam-engine is reproduced 
 indefinitely, and with fresh improvements every day. It is itself 
 employed in its own reproduction. 
 
 Thus: The effort necessary to produce a given result varies in- 
 versely as the power of the tool. 
 
 The energy set free by the use of the tool varies directly as the power 
 of the tool. 
 
 A tool, once produced, may be reproduced indefinitely, and may itself, 
 directly or indirectly, aid in the reproduction. 
 
 I shall be told that the cotton- spindle is not used in reproducing 
 itself. No ; not directly ; but indirectly it helps to clothe the 
 workman who reproduces it. 
 
 I shall be told that a picture is an instrument of enjoyment, and 
 that nevertheless it cannot be reproduced indefinitely. That, too, 
 is strictly true ; but why is the original so valuable, and the copies 
 of so little relative worth, if not because the latter are so easily 
 produced ? Michael Angelo's " Last Judgment " is to art what 
 Watt's engine is to industry. 
 
 To this productive faculty of the finished instrument must be 
 added another characteristic, that of durability. 
 
 An implement lasts a year, two years, ten years ; a road lasts a 
 century or two ; a harbour or railway, if kept in repair, lasts 
 indefinitely ; a house lasts for a variable period. The new fixed 
 capital does not destroy the old. Thus there is an accumulation of 
 fixed capital. 
 
 We have embraced all such tools as produce utilities more or less 
 subjective under the term fixed capital. 
 
 Now, fixed capital produces utilities in only one way, viz., by 
 absorbing raw material, and converting it into products. 
 
 With the man of the Stone Age, the expenditure of raw material 
 is considerable in proportion to the product. He must live long 
 days before he can provide himself with a stone hatchet, and during 
 these days he must eat ; food is his raw material ; the consumption 
 is great, and the result small. The search for circulating capital 
 food, is an hourly anxiety ; for the slenderer his fixed capital, the 
 more difficult he finds it to procure circulating capital. But when, 
 little by little, he has succeeded in obtaining fixed capital enough 
 to allow of his obtaining circulating capital beyond his immediate 
 
-Bk. ii. Ch. v.] THE PLACE OF FIXED AND CIRCULATING CAPITAL. 57 
 
 wants, he has time and energy at his disposal for attempting to 
 increase his fixed capital. 
 
 Compare the hunger-driven pre-historic man with the man of our 
 modern civilisation ! 
 
 Our industry consumes circulating capital in the form of food for 
 thousands of men, and in the form of materials, stone, iron, coal, 
 etc., and this consumption goes on for considerable periods of time. 
 For what purpose ? For the purpose of constructing a house, a 
 ship, a railway, etc., which shall afterwards serve to economise 
 human effort and save the consumption of food and other circulat- 
 ing capital for some other work. Hence : 
 
 The consumption of circulating capital is in inverse ratio to the 
 power of the tool. 
 
 A kilogramme of coal represents 8,000 calories. 1 
 
 One calorie equals 425 kilogrammetres, 2 therefore one kilo- 
 gramme of coal represents 8,000 x 425 = 3,400,000 kilogrammetres. 
 
 One horse-power yields 75x3,600 = 270,000 kilogrammetres per 
 hour. 
 
 In a steam-engine consuming one kilogramme of coal per hour 
 per horse-power, the proportion between the labour exerted and 
 the numerical equivalent of the heat given out is -^ft^fe = 0'08. 
 
 The steam-engine consumes a raw material, coal, which it con- 
 verts into force. This force again results in a product. The loss 
 is as yet considerable ; progress will consist in reducing it. 
 
 A goods-engine at the present day fed with one-eighth the fuel, 
 yields fourteen times the force that Stephenson's engines did in 
 1825. The proportion is as 1 : 112. 
 
 According to Mr. Mundella, 3 the number of tons of coal used 
 in the production of one ton of pig iron were, nine in 1787, three 
 in 1869, and two in 1876. 4 
 
 This saving has been effected by the improved construction of 
 furnaces, the improved arrangements of bellows, and the greater 
 utilisation of heat. This rate of progress has been outstripped in 
 the conversion of iron into Bessemer steel, by the regenerating 
 furnace, and by the Siemens direct process. 
 
 Thus, by means of improved machinery, more utilities are pro- 
 duced at less cost than formerly. 
 
 Industrial progress consists in obtaining the highest possible inverse 
 ratio between the consumption of circulating capital and the return 
 yielded by fixed capital. 
 
 1 The term calorie expresses the amount of heat required to raise one kilo- 
 gramme of water one degree centigrade. 
 
 2 The kilogrammetre is the French dynamometric-unit, answering to the 
 English foot-ton. 
 
 3 -Journal of the Statistical Society, March, 1878. 
 
 4 The diagrams in this volume have been made out by M. Prosper Guyot, 
 director of the Correapondance Scientifique et Agricole. 
 
58 SPACE. 
 
 In tlie multiplication of circulating capital, the effort is in inverse 
 ratio to the power of the fixed capital. 
 
 The multiplication of circulating capital is in direct ratio to the 
 power of fixed capital. 
 
 We are unable at present to determine, at least in the majority 
 of cases, the exact rate of this proportion ; later on it may be 
 possible to ascertain it, when statistics may have furnished more 
 certain information than that we at present possess. 
 
 Bnt of what character is the consumption of most of this circu- 
 lating capital, whether raw material or produce ? 
 
 Man consumes food ; and while he consumes it he is building his 
 hut or making his tools : in doing so, he is converting circulating 
 capital in the form of food into fixed capital in the form of a hut or 
 tools. In a more advanced stage of civilisation, we find him con- 
 verting raw material of all kinds, food, coal, minerals, and so 
 forth, into roads, bridges, harbours, and locomotives. We may say, 
 then, that 
 
 Circulating capital, with the exception of money, has a constant 
 tendency to be converted into fixed capital. 
 
 CHAPTER VI. 
 
 SPACE. 
 
 WE have just examined the action of fixed and circulating capital in 
 changing the condition 'of matter. 
 
 We find it just the same with the changes of place to which 
 matter is subjected. 
 
 We repeat, the partisans of final causes notwithstanding, that 
 matter and force alone lie at the disposal of man. His exertions 
 alone convert them into utilities. 
 
 Man does not find in one place all the various objects which 
 minister to the satisfaction of his wants. He gets his cotton from 
 the United States, and his coal from England. He brings these 
 two species of raw material together ; and when they are trans- 
 formed into products, he brings these products within reach of the 
 consumers who want them. 
 
 A want once recognised, if the utility which will satisfy that 
 want cannot be brought within reach of a man, the man must go 
 within reach of the utility. The sky of Nice cannot be trans- 
 ported into a London fog, so the Englishman goes to Nice for his 
 sunshine. 
 
 The principal factor in this problem is space. 
 
 I borrow the following figures from M. Perdonnet., who has 
 specially interested himself in the means of transport. 
 
Bk. ii. Oh. vi.J SPACE. 59 
 
 A horse of average strength, going at a foot-pace, ten hours out 
 of the twenty-four, cannot carry on his back more than 100 kilo- 
 grammes. The same horse, harnessed to a vehicle, will carry, or 
 rather draw, for an equal distance on an ordinary macadamised road, 
 1,000 kilogrammes, and on a tramway without sharp curves or 
 heavy gradients, 10,000 kilogrammes. 
 
 Further, in 1840, waggons conveying merchandise did from three 
 to four kilometres an hour easily, and, travelling eight hours in 
 the twenty-four, accomplished from twenty- eight to thirty kilo- 
 metres a day. The express goods service, using relays, made from 
 sixty-five to seventy kilometres per day. 
 
 The expense of construction of macadamised roads, from ten to 
 twelve metres broad, would be on an average twenty thousand francs 
 per kilometre, and the annual cost of repair five hundred francs. 
 
 The making of the great railway lines in France has cost 503,000 
 francs per kilometre. A goods engine like the Engerth costs 
 107,000 francs. But this locomotive draws forty -four waggons, 
 each laden with ten tons of merchandise, at a speed of thirty kilo- 
 metres per hour. Thus it performs in one hour a longer journey 
 than a common carrier's cart would do in a day, and in two hours 
 almost as much as the express goods service ; and in twenty -four 
 hours as much as would take the former twenty-four days, and the 
 latter twelve days ; while to the 440,000 kilogrammes drawn by the 
 locomotive must be added its own weight of G2,000 kilogrammes. 
 
 This locomotive, which can ran 300,000 kilometres without get- 
 ting out of repair, consumes in drawing this load sixteen kilo- 
 grammes of coal per kilometre in summer, and eighteen in winter. 
 The expense, including wages, duty, cost of coal, water, oil, grease, 
 waste, lighting, and the repairs of engines and tenders, amounts on 
 an average to 1 fr. 10 cents. 
 
 Let us look into these facts. A man could not carry more than 
 thirty or forty kilogrammes at the most. A horse will carry a 
 hundred three times as much. The horse costs his keep and 
 training ; but these advances are reimbursed by his labour, which 
 replaces that of the man in the proportion above named. It is 
 true, that in order to obtain this result, the man has had to make 
 some exertion in advance. 
 
 Next, the man makes a wider step in advance ; he not only 
 trains the horse, but he makes a road ; but while he is making the 
 road, he must eat ; he must therefore have laid up circulating capi- 
 tal for his own consumption while he is creating the fixed capital. 
 He knows what he is about ; he is converting his food into roads, 
 in order to get more out of his first fixed capital, the horse. Once 
 the road is made, the horse will no longer carry a hundred kilo- 
 grammes, he will draw a thousand. The effort of the man becomes 
 less and less, for a greater and greater result. 
 
60 TIME. 
 
 More or less unconsciously, he follows out this system. He spends 
 at last 500,000 francs per kilometre on roads which formerly cost 
 only 20,000. These 500,000 francs represent for the most part the 
 consumption of coal, iron, and food, circulating capital which has 
 been turned into embankments, tunnels, and rails. The effort ex- 
 pended in advance is so great as to seem absurd, and yet nothing 
 can be more reasonable, since it has proportionately diminished the 
 effort made in the long run. By means of a definite amount of 
 completed labour, he has saved an indefinite amount of labour in the 
 future. 
 
 Here we find another confirmation of the laws already stated : 
 
 Industrial progress consists in obtaining the highest possible inverse 
 ratio between the consumption of circulating capital and the return 
 yielded by fixed capital. 
 
 Circulating capital, with the exception of money, has a constant 
 tendency to be converted' into fixed capital. 
 
 CHAPTER VII. 
 
 TIME. 
 
 ANOTHER economic factor, and one far too much neglected, is time. 
 
 Prehistoric man must have taken a fortnight, perhaps a month, 
 to fashion his hatchet ; and however inured he might be to hunger, 
 he could not live all that time without eating. 
 
 He must therefore have absorbed circulating capital in the shape 
 of food, to be transformed into fixed capital in the shape of a stone 
 hatchet. This is an advance of capital. 
 
 The more developed the civilisation, the more considerable is the 
 advance of capital required. One kilometre of railway costs 
 500,000 francs ; that is to say, during a space of three or four years 
 an amount of circulating capital equivalent to that sum is spent in 
 food for man and beast, in coal for the steam engines, and in 
 materials. Now this fixed capital does not turn into an immediate 
 utility the circulating capital it has consumed. We have first to 
 wait till it is completed, and when it is completed, it is only by 
 little and little that it returns the equivalent of the utilities absorbed 
 by it. 
 
 We have shown that circulating capital has been advanced. This 
 advance is called credit. It minimises time, just as transport minim- 
 ises space. We define it thus : Credit is the advance of circulating 
 capital. 
 
 This circulating capital is consumed in various ways ; but, as we 
 have seen, the greater part of it will be converted into fixed capital. 
 
Bk. ii. Ch. vii.] TIME. 61 
 
 But it may be said, Credit produces nothing. No more does 
 transport. But credit shortens time, just as transport shortens 
 space. 
 
 A has a capital of fifty thousand francs ; with this money he can 
 buy a factory of Z, which he pays for in part only ; he buys coal of 
 Y, which he will pay for in three months, when he has had time to 
 make and sell the products. Every one else does the same in his 
 own case. If it were not the custom to give credit, Y would not have 
 let A have the raw material, A could not have gone on with the 
 manufacture, and the product would never have existed. 
 
 But if Y had not had the raw material, it is clear he could not have 
 given A credit for it. Credit, like transport, always exists in con- 
 nection with something, and is inseparable from it. Transport, in 
 bringing together raw materials of different kinds, and putting them 
 within reach of the consumers, has as its indisputable consequence 
 the multiplication of capital ; and it is the same with credit. 
 
 Credit does not by itself immediately augment the amount of 
 existing capital, but it does augment the producing power of that 
 capital. 
 
 In an active civilisation, this results in a repercussion which 
 indefinitely multiplies the original capital. A consumer buys at 
 three months and sells at three months, which makes six months, 
 and so on. This multiplication, applied daily and hourly to the 
 millions of individuals who produce and consume, represents an 
 immense power of production. It is useless to cavil at it ; it is 
 impossible to deny it. 
 
 Although Stuart Mill himself attests these effects, he laughs at 
 people who speak of an extension of credit as though it were a 
 creation of capital, whereas credit is only permission to use the 
 capital of another person. 1 But if Stuart Mill is right, these people 
 are nevertheless not altogether wrong. An extension of credit is 
 equivalent to an extension of capital, for it places at the disposal of 
 those who have it an amount of capital which they would not 
 otherwise have had. Credit does not always imply the actual use 
 of another person's capital; it sometimes means a mere guarantee 
 or bail. A capitalist opens a credit with a manufacturer who, on 
 the strength of it, enters into certain engagements ; if his affairs 
 prosper, he may never have recourse to the capital represented by 
 his credit. Credit, then, in this case, is a real extension of capital. 
 
 Again, credit is an extension of capital, because it is a saving of 
 time. To produce fixed capital, such as a railway, for instance, I 
 must spend 500,000 francs per kilometre in articles of food and 
 clothing for the workmen, in stone, iron, and other circulating 
 
 pital, which is thus withdrawn from circulation. Supposing it 
 
 1 Principles of Political Economy, Book III., chap, xi., par. 1. 
 
62 TIME. 
 
 to be a French railway, it is calculated that it will repay the capital 
 advanced, with interest, in ninety-nine years. 
 
 Take a bill of exchange, discounted at three months. This bill 
 enables me to procure circulating capital; raw material, which, 
 transformed into products, will enable me to meet the bill at 
 maturity. Whence does this bill derive its value? From the 
 assurance that it will be paid at the date specified. Thanks to this 
 bill, I have been able to procure for myself the " capital of another 
 person," to use it, and to transform it into capital of a higher 
 value ; all which I could not otherwise have done. Here we have 
 not a mere shifting of capital, but an extension of capital. 
 
 "But," it will be urged, "if credit produces an extension of 
 capital, an indefinite extension of credit will produce an indefinite 
 extension of capital." 
 
 This objection only establishes my point. The effect of credit 
 being to absorb circulating capital into fixed capital, it follows that 
 too great an extension of credit will provoke a too rapid absorption, 
 and so the equilibrium is disturbed, and the circulating capital 
 required for utilising the fixed capital becomes scarce. 1 
 
 Stuart Mill himself admits that credit has an acquiring power 
 similar to that of money. 
 
 It is the advantage of credit, that it puts at the disposal of those 
 who will use it to the best advantage capital which the apathy or 
 inaptitude of its possessors might have rendered unproductive. 
 
 In this way, the late Mr. Bagehot has pointed out the principal 
 function of Lombard Street. There are quiet people in the country 
 who accumulate money, and there are active people who use it ; 
 Lombard Street negotiates between them. 
 
 This question of credit was so ill understood, even within com- 
 paratively recent times, that J. B. Say wrote, " It is better, when- 
 ever possible, to work with one's own capital." 
 
 The answer to this is, as Mr. Tooke says, 2 " The power of ac- 
 quisition of merchants who have capital and credit extends far 
 beyond anything people can imagine who have not a practical 
 acquaintance with the speculation-market. If a man with a 
 reputation for possessing sufficient capital for his business and 
 enjoying good credit in his trade, foresees a rise of price in the 
 article in which he deals ; if he be favoured by circumstances at the 
 outset and in the course of his speculation, he may effect enormous 
 purchases, out of all proportion to his capital." 
 
 Mr. Bagehot goes further still. 3 " In every district small traders 
 have arisen, who discount their bills largely, and with the capital so 
 borrowed, harass and press upon, if they do not eradicate, the old 
 
 1 See Book IV., Commercial Crises. 
 
 2 Inquiry into the Currency Principles. 
 
 3 Lombard Street, p. 8. 
 
Bk. ii. Ch. vii.] 
 
 TIME. 63 
 
 capitalist. The new trader has obviously an immense advantage in 
 the struggle of trade. If a merchant have 50,000 all his own, to 
 gain 10 per cent, on it he must make 5,000 a year, and must 
 charge for his goods accordingly ; but if another has only 10,000, 
 and borrows 40,000 by discounts (no extreme instance in our 
 modern trade), he has the same capital of 50,000 to use, and can 
 sell much cheaper. If the rate at which he borrows be 5 per cent., 
 he will have to pay 2,000 a year ; and if, like the old trader, he 
 make 5,000 a year, he will still, after paying his interest, obtain 
 3,000 a year, or 30 per cent, on his own 10,000. ... In 
 modern English business, owing to the certainty of obtaining loans 
 on discount of bills or otherwise at a moderate rate of interest, 
 there is a steady bounty on trading with borrowed capital, and 
 a steady discouragement to confine yourself solely or mainly to 
 your own capital." 
 
 At the same time, credit gives a democratic character to produc- 
 tion ; it puts personal activity in place of capital ; it does away with 
 the great old families of " merchant princes ; " in fact, at the present 
 day we may almost say that whoever has an idea which seems likely 
 to turn out profitable, can obtain capital. I say "seems likely," for 
 he need not be right in his expectation ; he need only make others 
 believe that he is right. Credit is from credere, to believe. 
 
 Credit is quite a modern institution. Formerly there was only 
 the classic usurer, who put out his capital on hazardous ventures, and 
 made it his business to squeeze enormous profits out of the embar- 
 rassments of other people. The money-lender was a person quite by 
 himself, one to whom no other employment was open, a Jew, per- 
 haps ; and he was rarely to be met with in real life. Even now, in 
 many countries, the capitalist cares only to hoard his money, without 
 attempting to get any interest upon it. The popular legends about 
 hidden treasure bear witness to a universal instinct, still to be found 
 in Asia, Africa, and South America, and even among some of our 
 own French peasantry. Macaulay gives a vivid picture of the 
 embarrassment of the merchant of the 17th century, who has made 
 money, and does not know what to do with it. He tells us that 
 during the interval between the Restoration and the Revolution, 
 the wealth of the nation had rapidly increased. Thousands of 
 merchants discovered, on taking stock at Christmas, that after 
 having provided out of the year's incomings for their domestic 
 expenditure, there still remained a surplus. What to do with this 
 surplus was for many of them a question not easy of solution. In 
 the 17th century, a lawyer, a doctor, a retired merchant, who had 
 put by a few thousand pounds, was often much embarrassed to find 
 some safe and profitable investment for them. The father of the 
 poet Pope was a city merchant ; when he retired from business he 
 took with him a box containing twenty thousand pounds, from 
 
64 EXCHANGE. 
 
 which he drew from time to time the amounts necessary for keeping 
 house. 
 
 Hence arose those prejudices against interest on money which are 
 now beginning to disappear. Proudhon, whose only importance as 
 a writer consists in his having appropriated and set forth in an 
 attractive light all the chimaeras of all the utopists who played on 
 the credulity of the masses about the middle of the present century, 
 exclaims, " My philosopher's stone is absolute freedom of credit. 
 If I am deceived in this, socialism is a vain dream." I remember 
 my amazement when, in 1868 and 1869, I heard this question of 
 gratuitous credit discussed at length in public meetings. The 
 disciples of Proudhon offered it as a universal panacea. As a matter 
 of fact, interest is based on two indestructible facts, firstly, the 
 price of time ; secondly, security against risk. 
 
 The borrower pays for the service rendered him. If he does not 
 choose to pay for it, he should not ask for it. Those who wish to 
 abolish interest on money must begin by abolishing the borrower. 
 
 The object of all these combinations of credit is to save time, and 
 to stimulate the more and more rapid formation of new capital, 
 just as all combinations for the purpose of transport aim at minim- 
 ising space. And these two systems of combinations work together 
 towards the same result, the system of credit serving in effect for 
 the transport of capital all over the world, while modern means of 
 transport, by facilitating and accelerating the circulation of circulat- 
 ing capital, facilitate and accelerate its realisation. 
 
 A railway consumes in the making hundreds of millions of francs 
 in food and clothing for workmen, in fodder for horses, in coal for 
 the engines employed, in rails and sleepers which have themselves 
 absorbed in the making a quantity of circulating capital. 
 
 After a time these expenses are refunded, and this refunding we 
 call amortisation. 
 
 Amortisation is the reimbursement of the circulating capital absorbed 
 bi/ fixed capital. 
 
 Thus : 
 
 Credit is the advance of circulating capital. 
 
 Credit does not immediately augment the amount of existing capital, 
 but it does augment the producing po^er of that capital. 
 
 CHAPTER VIII. 
 
 EXCHANGE. 
 
 I HAVE defined value as the relation of the utility possessed by one 
 person to the needs of another person. 
 
 Exchange is the relation of utilities between themselves. According 
 
Bk. ii. Ch. viii."i 
 
 EXCHANGE. 65 
 
 to the Roman classification, Do ut des ; facio ut facias ; do ut facias ; 
 facio ut des. 
 
 A Frenchman of the nineteenth century needs shoes, clothes, 
 wine, bread, meat, coffee, sugar, fish, vegetables, music, news, 
 security, etc. His wants are more varied than his aptitudes; he 
 would find it a hard matter to make all these articles himself The 
 country he lives in is not suited to the production of all this 
 raw material ; nor has he at his disposal the machinery, the motive 
 power, the skill, the land, necessary for obtaining the manufactured 
 product. I need not insist further. Everybody sees how impos- 
 sible it is that each should provide for all his wants himself. 
 Formerly it was a maxim in agriculture, that a piece of land should 
 suffice for itself ; that is, that it should produce all that was neces- 
 sary for the family which cultivated it. This maxim has now gone 
 to swell the mass of exploded theories. The wine-grower of the 
 South grows his wine and buys his corn. The land yields the 
 products it is best fitted to yield, and so must man. This is the 
 principle of division of labour. 
 
 With the development of civilisation, man's wants become more 
 various, and his aptitudes more specialised. The consequence is, 
 that he can produce more utilities than before; but these utilities 
 are more limited in their nature ; they are all of one kind. He now 
 produces, not so much what he wants, as what others want, Hence 
 it comes to pass that exchange becomes an ever more imperious 
 necessity ; for exchange consists in giving away what are to us 
 superfluous utilities in order to obtain what are to us necessary 
 utilities. 
 
 We purposely employ the word " utility " here instead of " thing " 
 or " substance." When we get a musician to play for us, we are not 
 exchanging our money for a certain amount of some substance ; but 
 we regard the agreeable sensation produced by his music as a 
 utility, and we pay him for the sensation. 
 
 The whole mechanism of exchange is based on the variety of 
 wants and aptitudes. 
 
 Every now and then we hear it said, " We must learn to be 
 content. We must set a limit to our wants." How shall we 
 limit them? It is right enough to say individually, "We must 
 have no more wants than we can produce utilities to satisfy." But 
 from another point of view, we must beware of these ethics of 
 apathy. Under the guise of prudence, they tend to idleness. It is 
 the stirring of new wants which impels man to strive, to develope, 
 to augment his powers. It should be the aim of each of us to 
 enlarge his life by multiplying and extending his activity ; the 
 development of our capacities keeps pace with that of our wants. 
 The greater the extent and variety of both the one and the other, 
 the more frequent must exchange become. Among primitive 
 
 F 
 
66 CIRCULATION. 
 
 peoples, it was confined to a few implements or other necessaries : 
 in our more advanced civilisation it forms the principle and conse- 
 quence of our every act. 
 
 The object of exchange is to bring the utilities possessed by each 
 individual within reach of the wants of all the rest. 
 
 CHAPTER IX. 
 
 CIRCULATION. 
 
 MAN appropriates natural agents to his wants by subjecting matter 
 to certain changes of condition. In the language of economy, these 
 changes consist in the action of fixed capital upon circulating 
 capital. 
 
 But these changes can only take place by means of exchange and 
 transport. Industry consists in bringing together different kinds of 
 circulating capital, and submitting them to the action of fixed 
 capital. The metal- worker places ore from Spain and coal from 
 England in a blast furnace. The metal thus obtained, it is the 
 business of commerce to bring it in contact with the consumer, 
 who turns it into nails, hammers, machines, and so on. 
 
 To all these various phenomena, the term circulation a word 
 far too restricted in its present use should be freely applied. 
 
 Circulation is the series of phenomena by the aid of which circula- 
 ting capital is transformed into fixed capital, or into fresh circulating 
 capital. 
 
 I am aware that this definition, like most of those I have given, 
 forms no part of the present vocabulary of economics. Coquelin's 
 definition is very simple, and certainly does not err on the side of 
 naiTowness. According to him, 1 circulation is "the tendency to 
 movement," a definition so wide that it embraces nothing. J. B. 
 Say says, " It is the movement of money or commodities in passing 
 from hand to hand." J. S. Mill says, 2 "The average number of 
 purchases made by each piece (of money) in order to effect a given 
 pecuniary amount of transactions." 
 
 M. Menier is the first economist who has at all grasped the im- 
 portance of circulation. 8 This will be his title of honour in the 
 history of economic science. 
 
 I shall myself ever owe him the deepest gratitude, since it was 
 his vast practical experience which opened up to me new horizons 
 which my theoretical* studies would never have revealed to me. 
 He showed me, by a thousand examples, how all economic questions 
 are summed up in this one of circulation. 
 
 1 Dictionnaire d'Economie Politique. 
 
 3 Principles of Political Economy, p. 301, 7th edition. 
 
 3 Theorie et Application de I'Impdt sur If. Capital, Book iv., chap. 
 
Bk. ii. Oh. x.] RESUME. 67 
 
 "What is my aim as a manufacturer? " he asks. " It is to trans- 
 form my raw material as rapidly as possible into commodities, and 
 my commodities again into fresh capital, at a profit. 
 
 " But is it not possible to determine the rate of this production, 
 and to estimate the influence of rapidity of circulation on production 
 generally ? 
 
 " I have no hesitation in replying, Yes, it is possible ; and it can 
 be done in the simplest manner. A single illustration will serve the 
 purpose. I disregard compound interest for the sake of simplicity. 
 
 " I start with a circulating capital of 100,000 francs (raw ma- 
 terial), which is converted annually into circulating capital (com- 
 modities), and brings me in annually a net profit of 10,000 francs. 
 At the end of ten years I have made 100,000 francs, thus doubling 
 my original capital. I now work with a capital of 200,000 francs, 
 making an annual profit of 20,000 francs; and at the end of 
 another ten years I have a capital of 400,000 francs. From this 
 I gain an annual profit of 40,000 francs, and in ten years more I 
 have 800,000 francs. 
 
 " I have supposed this result obtained in thirty years, but if in- 
 stead of thirty years, I had taken twenty, then at the end of thirty 
 I should have had, not 800,000 francs, but 1,600,000 francs ; and if 
 instead of twenty years, I had taken only ten, it would have "been 
 3,200,000 francs. 
 
 " Hence I conclude that production advances in geometrical ratio to 
 the rapidity of circulation." 
 
 Hence the production of a country depends on the rapidity of 
 circulation. The better a nation utilises time and space, the more 
 it produces. 
 
 CHAPTER X. 
 
 R^SUMlS. 
 
 IT will be useful to sum up in a few words this analysis of the 
 materials which constitute value. 
 
 In order to provide himself with utilities, man must triumph over 
 three obstacles over the inertia of matter, space, and time. 
 
 To obtain a utility possessed by another person, he must give 
 that person an equivalent utility. 
 
 The various combinations by the aid of which these difficulties are 
 overcome, so as to obtain, with a minimum of effort, in a mini- 
 mum of time, a maximum of utility, form the constituent elements 
 of value. 
 
 We will now proceed to examine the causes which increase or 
 diminish value in relation to the various utilities. 
 
BOOK III. 
 
 
 
 VALUE OF FIXED AND CIRCULATING 
 CAPITAL. 
 
 CHAPTER I. 
 
 AN ECONOMIC CONTRADICTION. 
 
 " SINCE the wealth of a country consists in the value of the things 
 it possesses, how comes it that a nation is rich in proportion as 
 things are cheap ? " 
 
 This point was raised by J. B. Say ; and Proudhon, who cared 
 far more for dialectical display than for the reality of things, took 
 up the question and based on it his book, Les Contradictions 
 Economiques. 
 
 He says r 1 " The value of a utility decreases as its production 
 increases, and an unbroken run of success may bring the producer 
 to poverty. 
 
 " Three years of plenty in certain provinces of Russia are a 
 public calamity, just as some abundant vintages have been ruin to 
 the vine- grower. 
 
 " From the relation of utility to exchange value, it results, that if, 
 by malice or accident, exchange is rendered impossible to a producer, 
 his full storehouses will profit him nothing. 
 
 "Utility is a condition precedent to exchange; but take away 
 exchange, and the utility is null. 
 
 " The inevitable result of the multiplication of values is to 
 depreciate them. 
 
 " There is thus a contradiction between the necessity of labour 
 and its resutls. 
 
 1 Contradictions Economiques, chap. ii. 
 
Bk. iii. Ch. i.] AN ECONOMIC CONTRADICTION. 69 
 
 "I challenge any serious economist to tell me, otherwise than by 
 repeating or paraphrasing the question, how it comes that value 
 diminishes as production increases. 
 
 " In technical language, value in use, and value in exchange, 
 while necessary the one to the other, are always in inverse ratio." 
 
 " This," he adds, " is an inevitable opposition." So, the more 
 people toil to become rich, the poorer they become ! He gives his 
 book the alternative title of Philosopliie de la Misere. 
 
 It must be admitted that the question is not a purely captious 
 one; it contains some truth, and economists have no more answered 
 it as yet than mathematicians have solved the problem of Fermat. 
 
 In the first place, we must free this question from an incidental 
 proposition which has nothing to do with it. Proudhon says : 
 " Take away exchange, and utility is null." Robinson Crusoe 
 disposes of this : " I cannot exchange my cavern, my gun, or my 
 umbrella ; but they are useful to me all the same." 
 
 But none the less, the problem awaits solution. M. H. Passy 
 has attempted it, but without throwing any light on the subject. 
 " Private wealth," says he, 1 " is in proportion to the value of the 
 articles which compose it; but the public wealth, not being 
 exchangeable, cannot be evaluated in any way ; the more plentiful 
 things are, the greater the wealth, and the less its relative 
 value." 
 
 According to this argument, the richer a country is, the less it is 
 worth. Every private person can say, " I am rich, for I have things 
 of such and such a value, say x ; " but when you add up the total 
 of this individual wealth, which makes up the general wealth, it 
 comes to zero ! M. Passy has only emphasized the contradiction, 
 instead of reconciling it. 
 
 Bastiat has attempted to settle the question by the aid of a 
 brilliant and subtle theory. 2 
 
 " There are two meanings, both of which may be legitimately 
 assigned to the word wealth; namely, effective wealth, or the sum 
 of the utilities which human labour, with the co-operation of nature, 
 brings within reach of society ; and relative wealth, which is the 
 proportionate share of each in the general wealth, this proportion 
 being determined by value. 
 
 " Every one has a share in the general wealth, equivalent to his 
 own contribution to it." 
 
 Still, this is no solution. Bastiat attempts one in the next chapter, 
 on property and community. 
 
 " Natural gifts, gratuitous materials, gratuitous forces these 
 form the common property of the community. 
 
 " But the human efforts applied to collecting these materials and 
 
 1 Dictionnaire d'Economie Politique, Art. " Valeur." 
 8 Harmonies Economiques, chap. v. 
 
70 AN ECONOMIC CONTRADICTION. 
 
 to directing these forces, which can be evaluated, exchanged, com- 
 pensated, these efforts belong to the domain of private property. 
 
 "In other words, we do not stand in relation to one another as 
 proprietors of the utility of things, but of their value ; and value is 
 the appreciation of reciprocal services. 
 
 '"Die ideas of proprietorship and of community are correlative to 
 those of effort and of gratnitousness from which they spring. 
 
 " Whatever is gratuitous is common, for every one is admitted to 
 the unconditional enjoyment of it. 
 
 "Whatever is the result of effort is appropriated, because the 
 enjoyment is conditional on the taking some pains." 
 
 He shows that the co-operation of nature with man is gratuitous; 
 the co-operation of man alone is onerous. Now human progress 
 consists in relying more aud more on the co-operation of nature, so 
 that the co-operation obtained shall be more and more gratuitous. 
 
 " We gain in proportion as we succeed in sparing our own labour 
 and capital, which are necessarily costly, and obtaining more and 
 more of our products through the gratuitous services of nature. 
 
 " The wealth of man consists in the abundance of things which 
 he possesses." 
 
 He concludes : 
 
 1st. That utility tends to become more and more gratuitous and 
 common, as it gradually emerges from the domain of individual 
 ownership. 
 
 2nd. That value, on the contrary, which alone is capable of 
 appropriation, and alone constitutes property in law and in fact, 
 tends to diminish more and more, relatively to the utility to which 
 it is attached. 
 
 There is a certain amount of truth in Bastiat's remarks, and we 
 have ourselves observed that industrial progress consists in a 
 gradually increasing appropriation of matter to our wants. But 
 Bastiat, with his distinction between effective and relative wealth, 
 far from replying to Say and Proudhon, falls into the same confusion 
 as Adam Smith, Say, and Passy. 
 
 If wealth is in inverse ratio to value, why then do individuals 
 estimate their fortune by its value, and why is a people rich in 
 proportion to its possession of values ? 
 
 If progress consists in increasing the number of gratuitous 
 utilities at the expense of onerous ones, the wealthiest countries will 
 be those whose value is the lowest. 
 
 How does a private person reckon the growth of his fortune ? " I 
 had property worth 100,000 francs; it is now worth 200,000 francs." 
 Xow what, holds good with the individual cannot be false with 
 regard to the nation ; for the wealth of a nation is nothing but the 
 sum total of the wealth of the sum total of the individuals who 
 compose it. 
 
Bk. iii. Ch. i.] AN ECONOMIC CONTRADICTION. 71 
 
 We are again thrown back on the question, Is there any real 
 opposition between value in use and value in exchange, or to use 
 the terms of our own definition between utility and value ? 
 
 The question was necessarily insoluble until we had determined 
 with precision the respective parts played by fixed and circulating 
 capital in production. 
 
 I have defined value as the relation of the utility possessed by 
 one person to the wants of another person. 
 
 I have shown that effort is productive of utilities in proportion to 
 the power of the tool. 
 
 The greater the power of my tool, or field, or factory, the 
 greater is my value in relation to other people, for I have been able 
 to appropriate more utilities, and can render them more services. 
 
 A waterfall, turning a paltry water-wheel, gives a force of ten 
 horse-power; acting on a turbine (horizontal water-wheel), it gives a 
 force of forty horse-power, it yields four times as much utility, and 
 this utility again is exchanged for others, so that my waterfall is 
 worth four times as much as before. If I employ this waterfall to 
 grind corn, it follows that I can grind four times as much with 
 the same effort. I can now charge only half what I did before for 
 grinding, and at the same time make by it double what I made 
 before, and consequently, both in relation to me and in relation to 
 others, my waterfall is worth double what it was before. 
 
 Again, I have a field. This field was formerly distant from any 
 road ; it could not be supplied with the necessary manures, nor could 
 its produce be brought within reach of those who wanted it. It 
 yielded ten hectolitres, and the services of a horse and man were 
 needed to bring this product to market. It now yields twenty 
 hectolitres, the carriage of which to market needs no greater effort, 
 if as much. I sell my grain at half the former price, and make the 
 same profit as before. My field produces more utilities, and has a 
 greater value, both for me and for others. 
 
 We have seen (page 57) how great has been the diminution in the 
 consumption of coal for iron smelting, consequent on the improve- 
 ments effected in the factories. Now the value of the factory 
 must of course be increased, since it possesses a greater power of 
 utility; while the utilities it supplies to consumers must fall in value, 
 since they are more plentiful and cost less to produce. These 
 examples will give us the solution of the problem put by Say and 
 Proudhon. 
 
 It is the value of fixed capital which constitutes wealth, for its 
 value expresses its power of utility. Now the power of utility of 
 fixed capital is shown in the quantity of circulating capital produced 
 by it. But the greater this production, the less laborious it is ; and 
 consequently, these utilities can be furnished at a lower price. 
 
72 THE MEASURE OP VALUE. 
 
 Therefore, 
 
 The value of fixed capital is in direct ratio to the abundance of 
 circulating capital ; and the value of circulating capital is in inverse 
 ratio to the power of fixed capital. 
 
 CHAPTER II. 
 
 THE MEASURE OF VALUE. 
 
 THE solution of this problem will give us the clue to some economic 
 phenomena which have not yet been clearly explained. 
 
 A question much agitated in former days was that of the standard 
 of value. It was equivalent to asking for a value to measure value 
 by. It was simple nonsense. Value can only be measured by value, 
 and all value is variable. 
 
 It is regulated by a single law the law of supply and demand. 
 Supply is my desire to dispose of the utilities I have, in exchange for 
 utilities of another kind. Demand is my desire to obtain a utility, 
 for which I am prepared to give another in exchange. 
 
 The value of a utility is in inverse ratio to the supply, and in direct 
 ratio to the demand. 
 
 This law is the most indisputable in all economic science. Utopists 
 curse it now and then. The Catheder Socialisten fight against it. 
 Yet all their combinations, however ingenious, rest upon this. They 
 attempt to falsify it for their own ends, but they never cease to in- 
 voke it. The cry of the Protectionists is simply a demand for the 
 limitation of supply. 
 
 It needs no demonstration to prove that : 
 
 Value varies according to the urgency of the need, and the difficulty 
 of procuring the utility. 
 
 Nevertheless, economists, instead of contenting themselves with 
 the verification of this fact, have too often seen but one side of the 
 question. 
 
 Adam Smith says that labour is the real measure of the ex- 
 changeable value of any commodity, and that the real price of a 
 thing that which it really costs the man who wishes to obtain it is 
 the labour and trouble he takes to get it. Perhaps so, but what 
 will he sell it at ? or rather, what utility can he obtain in the market 
 in exchange for it ? What purchasing power does it possess ? 
 
 An epic is worth a great deal to its author, because it has cost him 
 great pains to compose ; but does that make it any the more valuable 
 to others ? You buy a fashionable bonnet of a fashionable milliner : 
 does its value depend simply on the trouble of making it ? 
 
 Stuart Mill says, the value of these tools, of these buildings, 
 depends on the cost of production. Mr. Carey answers, that the 
 
Bk. iii. Oh. ii.] THE MEASURE OF VALUE. 73 
 
 value of existing capital is measured by the effort required to repro- 
 duce it, and not by the effort it cost in its production. 
 
 This is a double error. If you build a factory at a distance from 
 the requisite supplies, and from any outlet for its produce, it may 
 cost you dear enough, but it will be worth nothing; whereas a 
 factory favourably situated in these respects, will be worth much 
 more than its cost of production, or of reproduction either. The 
 value of fixed capital is in proportion to the utilities it yields. 
 
 It is chimerical to look for a single source of value. Value is 
 compound of complex elements, amongst which psychology plays 
 an important part. Habit, routine, the pressure of a particular 
 want, are so many causes of the variation of value. Desire is 
 subjective ; and value increases with rarity. 
 
 J. B. Say says that the utility of a thing determines the demand 
 for it ; and the expenses of production determine the extent of this 
 iemand. Stuart Mill says, 1 "Most things naturally exchange for 
 one another in the ratio of their cost of production, or at what may 
 be termed their cost value." 
 
 This holds good, to a great extent, of circulating capital in current 
 use, though the price is modified by the rarity of the article, and 
 by competition; but with regard to fixed capital, it is incorrect. 
 The value of a particular hotel in a town does not depend on its cost 
 price, but on its situation, on the development of the town, on 
 fashion, etc. 
 
 The value of a utility is not to be measured by the amount of 
 labour employed in producing it, but by the quantity of other 
 utilities which it will fetch in exchange. Mdme. Patti may have 
 improved her voice by labour ; but if I expended a thousand times 
 the labour on my'voice that she has on hers, I should never succeed 
 in exchanging the utility given by my voice for the hundred- 
 thousandth part of the utilities which hers enables her to procure. 
 
 J. B. Say rightly says, 2 " The value of a thing is a positive 
 quantity, but it is so only at a given instant. It is the nature of 
 value to be constantly on the move, shifting from place to place. 
 Nothing can fix it invariably, because it is founded on wants and on 
 means of production which change with every mpment." 
 
 Nevertheless, value has been treated as a substantial entity, 
 although it is really nothing but a relation of utilities between them- 
 selves. Stuart Mill remarks very justly, " There cannot be a 
 general rise of values. It is a contradiction in terms." 8 
 
 A tool, being worn out, ceases to produce a certain utility. The 
 value of the tool therefore falls ; but the demand for the utility 
 
 1 Principles of Political Economy, Book III., chap, vi., par. 1. 
 
 2 Cours d 1 Economic Politique, vol. i., p. 70. 
 
 3 Principles of Political Economy, Book II., chap. iv. 
 
74 THE MEASURE OP VALUE. 
 
 continues, and its value therefore rises. Thus it is with corn after a 
 bad harvest. 
 
 A simultaneous rise or fall in the value of everything is impos- 
 sible, because value is comparative. One species of capital rises or 
 falls as compared with others. 
 
 We speak of " cheapness " and " dearness." A thing is " cheap" as 
 compared with other things; it is " dear," as compared with its own 
 price at a former time, or in other places, or as compared with the 
 price of other utilities. Meat or land is said to be dearer now than 
 formerly. Wine is dearer in Paris than in the Herault, and Clos- 
 vou^eot is dearer than Piqnette. Corn is cheap compared with 
 truffles. There is no such thing as absolute cheapness or absolute 
 dearness. 
 
 Everywhere we find, again and again, this play of fixed and cir- 
 culating capital. Values, as we have said, are measured by values. 
 If the proportion of circulating capital to fixed capital remained 
 always the same, the value of the latter would neither increase nor 
 diminish ; but double the amount of circulating capital, the fixed 
 capital remaining the same, and the latter will be proportionately 
 more ; that is, it will be necessary to double the circulating capital, 
 in order to procure the same amount of fixed capital. 
 
 No doubt the relations between the different kinds of circulating 
 capital are constantly varying, and so are the relations between the 
 different kinds of fixed capital; but we shall show that the history 
 of prices demonstrates the truth of the law formulated in the last 
 chapter : The value affixed capital is in direct ratio to the abund- 
 anc-e of circulating capital, and the value of circulating capital is in 
 inverse ratio to the power of fixed capital. 
 
 J. B. Say says 1 that a house at 20,000 francs in Lower Brittany is 
 worth more than one of 20,000 francs in Paris. If this were true, 
 Lower Brittany would be richer than Paris. What he means to 
 say, no doubt, is this : that the house in Lower Brittany is worth 
 more relatively to surrounding objects. It can occupy more ground 
 than the one in Paris, for ground is cheaper. It may be roomier, 
 and have more light and air, for space, air, and sunshine are not as 
 greedily appropriated in the country as in the large towns. But the 
 house of the same price in Paris represents utilities of equal value, 
 though of another kind; if it has less accommodation, it has a 
 central situation, in the midst of a denser and more active popula- 
 tion, etc. 
 
 following out the same idea, Say adds, " An income of 10,000 
 francs in Brittany is much more considerable than the same income 
 would be in Paris." If this were true, every one would leave Paris 
 to go and live in Lower Brittany. What is really true is, that in 
 
 1 Traite d'Economie Politiqne, Book I., chap, xxvii. 
 
Bk. iii. Ch. ii.] 
 
 THE MEASUEE OF VALUE. 
 
 Lower Brittany, 10,000 francs will buy more potatoes, more buck- 
 wheat, cider, and fowls than in Paris ; but many other utilities are 
 far dearer there than in Paris, and 
 thus Paris goes on attracting new 
 inhabitants. 
 
 Adam Smith characterised the 
 word price very correctly when he 
 said it was the nominal value of 
 things. A merchant must be able 
 to estimate the relative value of his 
 sales and purchases; he does so by 
 the aid of money, an equivalent which 
 serves him as a means of exchange. 
 But as gold and silver are themselves 
 utilities whose value is relative, price 
 can never be absolute with respect to 
 them. 
 
 As value is the relation of cer- 
 tain utilities between themselves, 
 so price is the money valuation of this 
 relation. 
 
 Prices, though fluctuating, are con- 
 (rolled by certain uniform influences. 
 Davenant and King recorded, at the 
 close of the seventeenth century, the 
 curious proportions between dearth 
 of production and rise in price, as 
 shown in the accompanying diagram. 
 
 Or thus: 
 
 Deficit 
 
 as compared 
 
 with mean 
 
 consumption. 
 
 1 ... 
 2 ... 
 3 ... 
 
 compared with 
 
 3 
 
 8 
 16 
 
 28 
 45 
 
 Porter 1 and Tooke 2 have accepted 
 this statement. 
 
 M. de Molinari explains the cause 
 of this difference. Every one must 
 have noticed that it needs only a 
 slight deficit in the harvest that is 
 to say, in the amount of corn in the 
 market to occasion a considerable 
 1 Progress of the Nation. 
 
 45 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 40 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Cti 
 
 p 
 
 35 
 
 
 
 
 
 
 
 W 
 
 
 
 
 
 
 
 
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 30 
 
 
 
 
 
 
 
 ^ 
 $ 
 
 
 
 
 
 
 
 
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 fc n' ; 
 
 
 
 
 
 
 
 
 
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 to 
 
 LU 25 
 
 
 
 
 
 
 
 8 
 
 c> 
 
 
 
 
 
 
 
 8 
 
 B 
 
 
 
 
 
 
 
 oT 
 
 QL 
 
 
 
 
 
 
 
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 u. 
 
 
 
 
 
 
 
 
 20 
 
 
 
 
 
 
 
 o 
 
 Ul 
 
 
 
 
 
 
 
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 <0 
 
 
 
 
 
 
 
 ^ 
 
 cc 
 
 
 
 
 
 
 
 d 
 
 
 
 
 
 
 
 
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 in 
 
 
 
 
 
 
 
 9 
 
 
 
 
 
 
 
 
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 10 
 
 
 
 
 
 
 
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 0> 
 
 
 
 
 
 
 
 
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 S g 
 
 
 
 
 
 
 
 
 o o 
 
 
 
 
 
 
 
 
 fc o 
 
 
 
 
 
 
 
 
 Q O 
 
 
 
 
 
 
 
 
 2 History of Prices. 
 
76 THE MEASURE OF VALUE. 
 
 rise in price. In 1847, when the deficiency did not exceed a quarter 
 of the ordinary harvest, prices rose from twenty to forty and fifty 
 francs in succession. While the supply fell in arithmetical progres- 
 sion, prices rose in geometrical progression. In the same way, only 
 a slight increase in} the harvest brings a considerable reduction of 
 prices. From 1847 to 1849 the price of bread fell from fifty to ten 
 or twelve francs, although the excess of the one year was not greater 
 than the deficiency of the other. 
 
 The following circumstance, however, nsually retards this geo- 
 metrical progression : 
 
 When a deficiency occurs in the production of an article, and its 
 price rises in consequence, the demand for it falls. Suppose that in 
 a town which usually consumes 100,000 hectolitres of corn at 20 
 francs, the supply falls short by 10,000 hectolitres. The price im- 
 mediately mounts up to 24 francs, but less corn will be consumed at 
 this price than at 20 francs. The demand will probably fall by 
 about 5,000 or 6,000 hectolitres. The discrepancy between the sup- 
 ply of corn and the money offered in exchange decreasing, the price 
 will fall till it becomes stationary at about 22 francs. So long as the 
 supply of corn is steadily kept up, there will be no further varia- 
 tion. But if it does not, and if the stock is reduced by consumption 
 to 80,000 and 60,000 hectolitres, and so on, the price will rise 
 rapidly. On the other hand, the demand will continue to fall, firstly, 
 because other and cheaper food will be substituted for it ; and 
 secondly, because the rising price will cease to come within reach of 
 the poorest part of the population. But as every one will make the 
 greatest sacrifices rather than die of hunger, the competition among 
 the consumers of corn will still be very keen, and the discrepancy 
 between the quantity of corn and the money offered in exchange 
 will become more and more marked. The last thousand hectolitres 
 will probably sell at an exorbitant price. Corn, and, in general, the 
 absolute necessaries of life, are the things most susceptible of an 
 enormous rise of price in consequence of a deficiency in the supply. 
 
 Hence : 
 
 When the proportion between the quantities of two articles offered in 
 exchange for one another varies in arithmetical progression, the pro- 
 portions between the values'of these two articles will vary in geometrical 
 progression. 1 
 
 It must be added that 
 
 Tie applicability of this law is in inverse ratio to facility of trans- 
 port. 
 
 1 Molinari, Questions de Politique et de Droit Public, vol. i., p. 35. 
 
Bk.iii. Ch. iii.] 
 
 MONEY. 
 
 77 
 
 200 
 
 150 
 
 CHAPTER III. 
 
 MONEY. 
 
 SOME of the Socialists and Communists of 1848 Milliards, 
 attributed all ills to money. Proudhon, who 
 was not without some claim to an acquaintance 
 with economic questions, wished to do away 
 with it by means of his Bank of Exchange. He 
 would have been an enthusiastic supporter of 
 the English periodical, The Exchange and Mart, 
 which serves as a medium for people who want 
 to exchange a capital old horse for a snappish 
 lap-dog. At public meetings in 1868 and 1869, 
 we have heard the most furious anathemas 
 launched against money. Even in England it 
 appears that there are members of Parliament 
 who share these prejudices, for Professor Stanley 
 Jevons tells of one who remarked, not many 
 years ago, " I am not surprised that the people 
 are so poor, when there are so few shillings and 
 sixpenny pieces, and when all the small coin in 
 the kingdom would not pay the rates and taxes 
 for one year." 
 
 This is only an expression of the notion that 
 man can create wealth. We find it everywhere 
 in economic science. Here it has the more 
 scope, because most of the people who use 
 money habitually neglect to consider its real 
 function. 
 
 It has been supposed that money represented 
 all other commodities, and that the total value 
 of the money in a country must equal the total 
 value of all the other property ; and this notion 
 is not yet so exploded as to make it unnecessary 
 to refute it. A glance at Diagram 2 will be 
 enough for the purpose. 
 
 According to M. Vacher, the wealth of 
 France 1 may be reckoned at: 
 
 1 Journal de la Societe de Statisque, November, 1878. 
 I shall adopt, throughout, the figures of Messrs. Vacher, 
 de Foville, Stanley Jevons, Griffen, Newmarch, Sotbeer, ^ ^ 
 
 Bertillon, etc., in addition to the official figures ; but I to 
 
 leave the entire responsibility with their authors, lest I 3 
 
 should be accused of grouping them for my own pur- 
 
 ^ n 
 
 too 
 
 50 
 
 
 208.6 
 
 
 
 
 
 
 
 
 6 
 
78 MONEY. 
 
 Land fr. 156,600,000,000 
 
 Buildings on lease 15,600,000,000 
 
 Buildings 30,000,000,000 
 
 Property in mortmain 5,000,000,000 
 
 State Forests 1,400,000,000 
 
 208,600,000.000 
 Coin 6,000,000,000 
 
 We see then that money in France represents something like 
 three per cent, of the value of lands and houses alone. It is, there- 
 fore, but an infinitesimal part of the wealth of the country. 
 
 Man began with barter. But there was this inconvenience 
 attaching to it, that of two men each might have things to exchange 
 which the other did not want. They would have preferred some 
 equivalent with which each could obtain what he did want. The 
 next thing was to find this equivalent. In Athens, it was found in 
 oxen ; in Siberia and Canada, in furs ; in Chinese Tartary, it was 
 tea; in Scotland, nails; in the old English colonies of America, 
 corn and tobacco ; in North America and the West Indies, shells ; 
 in the Portuguese possessions at Angola, bits of straw ; in Sumatra 
 and Mexico, salt, 
 
 Europeans have largely employed whisky in their dealings with 
 natives ; and at the present time all the commerce of Africa is 
 carried on by means of blue cotton goods manufactured in England, 
 and known as guineas. 
 
 But the system had its inconveniences. An ox is a large piece of 
 money, and it must have been sometimes difficult to get change for 
 it; and besides, there are oxen and oxen. Then again, book-keep- 
 ing must have had its difficulties. Among a hundred articles there 
 are 4,950 possible exchanges, each article having to be valued in 
 terms of every other article. 
 
 J. S. Mill draws attention to the confusion which would follow 
 on the suppression of money as a medium of exchange. In the 
 first place, we should have no common standard of value. It would 
 be a daily perplexity to the housewife to reckon up her morning's 
 purchases. And then, as Adam Smith says, money is an instrument 
 of exchange serving to convey value. 
 
 Money must combine the following qualities : it must have a 
 value of its own ; it must be a commodity ; it must be easily divisible ; 
 must be always identical with itself ; must be durable. The value 
 of money must be real. Nevertheless, among civilised peoples, 
 where money is regarded as an instrument of circulation, it is rather 
 
 poses. Here, M. Vacher's figures relating to the value of property are too low, 
 and those relating to money should also have been doubled. These figures have 
 been disputed (Menier, Avenir Economique, vol. ii.). But I am not here dis- 
 cussing questions of statistics ; I am only attempting to show exact proportions. 
 
Bk. iii. Ch. iii.] MONEY. 79 
 
 what Lord Castlereagh called a sentiment of value, than value 
 itself. 
 
 It is very useful to know what quantity of corn and what quan- 
 tity of wax a pound of silver will buy. The commodity selected, 
 as Professor Stanley Jevons has said, 1 becomes a common denomina- 
 tor, or common measure of value. Aristotle has pointed out very 
 clearly the origin and character of money. He says, " Men 
 invented among themselves, by way of exchange, something which 
 they should mutually give and take, and which, being really 
 valuable in itself, might easily be passed from hand to hand for the 
 purposes of daily life, as iron or silver, or anything else of the same 
 nature. This had at first a fixed standard simply according to its 
 weight or size ; but in process of time they put upon it a certain 
 stamp, to save the trouble of weighing, and this stamp was affixed 
 as a sign of its express value." 2 
 
 Among recent definitions, we may give that of M. Michel 
 Chevalier, completed by Stanley Jevons, which seems to us extremely 
 accurate ; " Pieces of money are ingots, the weight and purity of 
 which are guaranteed by the integrity of the designs stamped on 
 the surface of the metal." Or, more simply, 
 
 Pieces of money are ingots of a certified weight and fineness. 
 
 But the value even of metallic money has long been a matter of 
 faith. 
 
 Professor Stanley Jevons declares that in 1869, after an extended 
 and searching inquiry, he was convinced that nearly half the half- 
 sovereigns, and thirty-one and a half per cent, of the sovereigns 
 were light weight. 3 French money is worse still. Its standard 
 scarcely ever rises above the permitted minimum a thing which 
 ought to be quite exceptional. 
 
 In countries where the precious metals are found, and where 
 money is regarded as a means of storing value, the standard is 
 more rigidly maintained. In the East, silver coins are required to 
 be of extreme purity, the standard being '960,979, so that they may 
 be the more easily stamped. The standard of silver coinage in the 
 Latin Union is only '835. Nevertheless, the law of Germinal, in 
 the year XI. of the Republic, declares, in conformity with that of 
 the 3rd Thermidor, in the year III., that five grammes of silver at a 
 standard of '9 shall constitute the monetary unit under the name of 
 franc. Our money standard has thus, since the convention of 1866, 
 become debased. But in ordinary life nobody cares about it. In 
 monetary, as in all other economic questions, psychology plays a 
 great part. 
 
 Here we have the explanation of Gresham's law : The lad money 
 
 1 Money, 1877. 
 
 3 Politics, Book I., chap. ix. (Bohn's Translation). 
 
 8 Money i p. 112, 4th edition. 
 
80 MONEY. 
 
 drives out the good, while the good money cannot drive out the bad. 
 Why? Because most people pay no attention to the quality of 
 money. It matters little to them whether a coin is a little the worse 
 for wear or not. On the other hand, speculators in money put the 
 new coins in the crucible, and circulate the bad. Hence it is that 
 the State alone can withdraw bad coins from circulation. 
 
 We give here the current commercial equivalents of the metals in 
 1877. 1 
 
 Gold 1 
 
 Platinum. ... 3-5 
 
 Aluminium ... 7 
 
 Silver 16 
 
 Nickel .... 71 
 
 Tin 942 
 
 Copper .... 1,696 
 Lead .... 6,360 
 Bar-iron . . . 15,900 
 Pig-iron . . . 50,880 
 
 A glance at the above table will suffice to explain the ever- 
 increasing use of gold as money, 6 grammes of gold serving for 100 
 grammes of silver, or 800 kilogrammes of iron. The economy of 
 transport is obvious. 
 
 Gold has, besides, several other good qualities. It is ornamental ; 
 it is malleable; it has a high specific gravity ; and it is not easily 
 oxydised or dissolved. Mixed with a tenth part of copper, it 
 becomes hard. Its point of fusion is not too high, and it does not 
 evaporate at any known temperature. Old coins can be melted 
 down at a very slight loss. 
 
 All these qualities, and especially the first, that of great value 
 combined with small bulk, must insure its preponderance over 
 silver. After beginning with leather, tin, copper, and silver, we 
 have come to use gold coin almost exclusively. It is a logical 
 advance which should not have escaped the attention of those 
 alarmists who, like M. Michel Chevalier, in their panic at the dis- 
 covery of the Calif ornian diggings, urged on France the adoption 
 of silver as the only standard. 
 
 Gold must in its turn disappear, at least to a great extent, 
 because its employment is troublesome, and becomes less and less 
 necessary. Paper is more portable than gold. The English Clear- 
 ing House does business to the amount of 6,000,000,000 without a 
 halfpenny. 
 
 The total value of the metals used as coin in England in 1876, 
 was as follows : 
 
 Gold money in circulation 100,000,000 
 
 Bullion 15,000,000 
 
 Silver money 15,000,000 
 
 Bronze money 1,000,000 
 
 Total .... 131,000,000 
 1 At the present rate (1881), silver should be above 17. 
 
Bk. iii. Ch. iii.] MONEY. 81 
 
 The interest at 3J per cent, is 4,262,000 
 
 Loss of interest 4,262,000 
 
 Wear and tear of coin . . . . 48,000 
 
 Expenses of coinage 42,000 
 
 Total .... 4,352,000 
 
 It will be understood that the English are too good financiers not 
 to endeavour to restrain this expenditure as much as possible. 
 
 Newmarch rightly says that gold is the change for the bank-note, 
 as the bank-note is for the cheque, the cheque for the bill of 
 exchange, and the bill of exchange for the transference of amounts 
 from one account to another, and for current accounts. 
 
 The bank-note is daily losing importance in England ; the use 
 of the Clearing House tends to take its place, as it has taken the 
 place of coin. 
 
 This is a consequence of the progress of circulation. The mechan- 
 ism for the transmission of commercial movement has been succes- 
 sively lightened, till a couple of figures in a book have replaced the 
 passing and repassing of bags of gold and silver. 
 
 It is in consequence of this movement that the countries which 
 still maintain a double standard are doomed to undergo, within a 
 given time, a considerable loss. It is true that Holland with her 
 silver standard found an apparent increase in the number of her 
 exports; but as they were paid for in a depreciated coinage, she 
 lost the profits she expected to realise. She has since returned to 
 the gold standard. 
 
 At the present time, the countries having a single standard com- 
 prise 140,000,000 inhabitants, while those having silver, paper, or a 
 double standard, comprise 940,000,000. Among the latter are India 
 and China; England, since 1816, has been amongst the former. 
 This question of the standard is very simple. A standard of 
 measurement is a fixed measure, to which all others can be referred; 
 a standard of weight is in the same way an invariable weight ; but 
 since the money standard itself partakes of the value of money, it 
 can only designate the form of money adopted as legal tender in 
 any country, and having in that country a forced currency for all 
 purposes. 
 
 In France we have adopted two forms of money the franc, 
 weighing five grammes of silver, at a standard of *9, and the louis 
 of twenty francs, at the rate of 155 to a kilogramme. Thus a fixed 
 proportion of 15^ per cent, has been established between the two 
 metals, based on the theory that one kilogramme of gold will be 
 always able to fetch fifteen and a half of silver, neither more nor 
 less. 
 
 Yeb so far back as the seventeenth century, William Petty and 
 Locke had shown the absurdity of taking, as the measure of com- 
 
 G 
 
82 MONEY. 
 
 mercial value, things between which there existed no invariable 
 proportion, and had laid down that in every country there should 
 be but one metal to serve as a standard of reckoning, as a legal 
 tender, and as a measure of value. 
 
 Some governments France amongst them have not yet embraced 
 this simple truth. We have even seen a publicist dedicating all his 
 energies to securing the adoption of this conventional and fictitious 
 proportion by all nations and for all time. M. Cernuschi might 
 have found something better to do. 
 
 The nations composing the Latin Union, viz., France, Belgium, 
 Greece, Italy, and Switzerland, have taken defensive measures by 
 suspending the coinage of five- franc pieces. Practically, however, 
 there is now but one standard that of gold since the possessor 
 of silver bullion cannot have it coined. 
 
 At the same time, the five-franc piece continues to have a forced 
 circulation for unlimited sums. It will soon be absolutely neces- 
 sary to restrict this use to the making up of odd sums. Otherwise 
 it is too plain what the situation must be ; the French merchant, 
 buying in England, must pay in gold ; while the English merchant, 
 buying in France, can pay in silver that is, at a loss of ten to 
 thirteen per cent. The gain to him is as clear as the loss to ua. 
 Hence the following result, attested by the condition of the vaults 
 in the Bank of France. 
 
 Gold. Silver. 
 
 November, 1876 1,541,000,000 627,000,000 francs. 
 
 ,, 1877 1,240,000,000 859,000,000 ,, 
 
 1878 1,099,000,000 1,044,000,000 
 
 13 1879 803,000,000 1,207,000,000 
 
 11 1880 556,000,000 1,247,000,000 
 
 As this book is scientific, and not controversial, I will not pursue 
 this point further than to show that gold and silver, like all other 
 commodities, are not fixed measures, but expressions of variable 
 relations. Money is a variable measure. In measuring other 
 things, it measures also itself. 
 
 The following tables will show the part played by the precious 
 metals since the discovery of America. 
 
 I take these figures from the work of Dr. Sotbeer of Gottingen, 
 " (SMmetalt, $robuftion unb SBertlp&er^dltnifS $unfd)en olb unb @i(6er fettS 
 bcr (Sntbecfung $Interi!a,' J published by Julius Perthes of Gotha. 
 
 The statistics of these matters are full of mistakes. Dr. Sotbeer 
 has pointed out many of them. I shelter myself under his authority. 
 No fewer than six or seven hundred elements enter into the com- 
 position of the following table. Dr. Sotbeer has endeavoured 
 carefully to distinguish the exact value of each ; but he has arrived 
 at only an approximate result. 
 
Bk. iii. Ch. iii.] 
 
 MONEY. 
 
 AVEEAGE ANNUAL PRODUCTION THROUGHOUT THE WORLD AT VARIOUS 
 
 PERIODS. 
 
 Periods. 
 
 Silver. 
 
 Gold. 
 
 Total Value in 
 millions of 
 francs. 
 
 1493 1520 
 
 kilog. 
 47,000 
 
 kilog. 
 5,800 
 
 30-7 
 
 1521 1544 . . . 
 
 90,200 
 
 7,160 
 
 45-2 
 
 1545 1560 
 
 311,600 
 
 8,510 
 
 99-7 
 
 1561 1580 . . . . 
 
 299,500 
 
 6,840 
 
 91-0 
 
 1581 1600 . . . 
 
 418,900 
 
 7,380 
 
 120-0 
 
 1601 1620 . . . 
 
 422,900 
 
 8,520 
 
 124-9 
 
 1621 1640 ...... 
 
 393,600 
 
 8,300 
 
 117-5 
 
 1641 1660 .... 
 
 366,300 
 
 8,770 
 
 113-0 
 
 1661 1680 
 
 337,000 
 
 9,260 
 
 108-1 
 
 1681 1700 
 
 341,900 
 
 10,765 
 
 114-5 
 
 1701-1720 
 
 355,600 
 
 12,820 
 
 124-7 
 
 1721-1740 
 
 431,200 
 
 19,080 
 
 163-5 
 
 1741 1760 
 
 533,145 
 
 24,610 
 
 205-7 
 
 1761-1780 
 
 65"2,740 
 
 20,705 
 
 219-1 
 
 1781 1800 
 
 879,060 
 
 17 790 
 
 259-9 
 
 1801 1810 
 
 894,150 
 
 17 778 
 
 263'2 
 
 1811 1820 
 
 540,770 
 
 11,445 
 
 161-6 
 
 1821 1830 
 
 460,560 
 
 14 216 
 
 153-0 
 
 1831-1840 
 1841 1850 
 
 596,450 
 780,415 
 
 20,289 
 54,759 
 
 205-0 
 366-6 
 
 1851-1855 
 
 886,115 
 
 197,515 
 
 888-2 
 
 1856 1860 . . . 
 
 904 990 
 
 206,058 
 
 922-2 
 
 1861 1865 
 
 1,101, 150 ] 
 
 198,207 
 
 893-4 
 
 1866-1870 
 
 1,339,085 
 
 191 900 
 
 970-5 
 
 1871 1875 
 
 1 969 425 
 
 170 675 
 
 1 038-3 
 
 
 
 
 
 (See Diagram 3, p. 84.) 
 
 Those who threaten us with an inundation of gold must see 
 how small a quantity of it is distributed through the world com- 
 pared with that of silver. M. Suss, a man of considerable 
 weight in Austria, struck with this fact, has predicted the rapid 
 exhaustion of gold. With equal appositeness, other economists 
 have threatened our great grandchildren with the exhaustion of 
 the coal supply. 
 
 If we assume all the gold and silver produced to have been coined, 
 
 1 These figures are higher than those of the English Commission of 
 Inquiry into the causes of the depreciation of silver. (See Mr. Goschen's 
 report of 5th July, 1876.) 
 
84 
 
 ilOXEY. 
 
 Diagram 3. Annual Production of Silver and Gold, 1,000 kilogrammes to be taken as 
 
 unity. 
 
Bk. iii. Ch. iii.] 
 
 MONEY. 
 
 85 
 
 and the kilogramme of gold to be worth 2,790 marks, and that of 
 silver to be worth 180, then we have the following proportions : 
 
 Periods. 
 
 Silver. 
 
 Gold. 
 
 1493-1520 
 
 Per cent. 
 34-3 
 
 Per cent. 
 65-7 
 
 1521-1544 
 
 44-9 
 
 55-1 
 
 1545-1560 
 
 70-3 
 
 29-7 
 
 1661 1680 
 
 70*1 
 
 29'9 
 
 1741-1760 
 
 58-3 
 
 41-7 
 
 1801-1810 
 
 76'4 
 
 23-6 
 
 1831 1840 
 
 65'5 
 
 34.5 
 
 1841-1850 . 
 
 47-9 
 
 52-1 
 
 1851-1855 
 
 22-4 
 
 77*6 
 
 1871-1875 
 
 42-7 
 
 57-3 
 
 100 
 
 Diagram 4. Diagram 5. 
 
 According to Dr. Sotbeer, the coinage between 1851 and 1875, 
 i.e., in a space of twenty-five years, in Great Britain, Austria, 
 British India, the United States, France, Belgium, Italy, Germany, 
 
86 
 
 MONEY. 
 
 Austro- Hungary, Russia,' Norway and Sweden, and the Nether- 
 lands amounted to : 
 
 Gold 
 Silver 
 
 5,785,580 kilogrammes. 
 42,098,340 
 
 Gold, then, constitutes 68'1 per cent, and silver 31'9 per cent, in 
 value of the money coined. (See Diagram 5, p. 85). 
 
 Of this money, 1,029,000 kilogrammes of gold and 11,100,000 
 of silver was in existence already ; thus the increase in silver was 
 relatively less than the increase in gold, which was 46'2 per cent. 
 Let the advocates of a double standard glance at the following 
 figures : 
 
 VABIATIONS IN THE PROPORTIONATE VALUE OP GOLD AND SILVER 
 FROM 1501 TO 1878. 
 
 Periods. 
 
 Proportionate 
 Value. 
 
 1501-1520 . 
 
 
 
 10-75 
 
 1521-1540 . 
 
 
 
 11-25 
 
 1541-1560 . 
 
 
 
 11-30 
 
 1561-1580 . 
 
 
 
 11-50 
 
 1581-1600 . 
 
 
 
 11-80 
 
 1601-1620 . 
 
 
 
 12-25 
 
 1621-1640 . 
 
 
 
 14-00 
 
 1641-1660 . 
 
 
 
 15-00 
 
 1661-1680 . 
 
 
 
 15-50 
 
 1681-1700 . 
 
 
 
 14-96 
 
 1701-1710 . 
 
 
 
 15-27 
 
 1711-1720 . 
 
 
 
 15-15 
 
 1721-1730 . 
 
 
 
 15-09 
 
 1731-1740 . 
 
 
 
 15-07 
 
 1741-1750 . 
 
 
 
 14-93 
 
 Periods. Proportionate 
 
 Value. 
 
 1751-1760 
 
 
 
 
 14-56 
 
 1761-1770 
 
 
 
 
 14-81 
 
 1771-1780 
 
 
 
 
 14-64 
 
 1781-1790 
 
 
 
 
 14-76 
 
 1791-1800 
 
 
 
 
 15-42 
 
 1801-1810 
 
 
 
 
 15-61 
 
 1811-1820 
 
 
 
 
 15-51 
 
 1821-1830 
 
 
 
 
 15-80 
 
 1831-1840 
 
 
 
 
 15-75 
 
 1841-1850 
 
 
 
 
 15-83 
 
 1851-1860 
 
 
 
 
 15-86 
 
 1861-1870 
 
 
 
 
 15-48 
 
 1871-1875 . 
 
 
 
 15-98 
 
 1876-1878 . 
 
 
 
 17-63 
 
 (See Diagram 6, p 
 
 87.) 
 
 It will be seen that in 1876-78 one kilogramme of gold would 
 buy 17' 63 of silver, while in 1500 it would only buy 10. It is 
 needless to insist further on the constant fall in the value of 
 silver. 
 
 Thus confronted with facts, one is compelled to acknowledge that 
 the proportion between the values of gold and silver is variable. 
 But stability is so necessary to man, that even while admitting the 
 value of gold to be variable, he none the less tries to establish a 
 uniform proportion between it and all other values. 
 
 We will proceed to analyse this assumption, and to show into 
 what errors it has led even the men best acquainted with monetary 
 questions. 
 
 We have got into a way of saying " Five grammes of silver at a 
 standard of 0'9 is worth a franc," because the law of 7th Germinal, 
 year XL of the Republic, required this proportion of silver in the 
 monetary unit which it called a franc. 
 
Bk. iii. Ch. iii.] 
 
 MONEY. 
 
 87 
 
 1581-1600 
 1601-1620 
 1621-1640 
 1641-1660 
 1661-1680 
 1681-1700 
 1701-1710 
 171 1 -1720 
 1721-1730 
 1731-1740 
 1741-1750 
 1751-1760 
 1761-1770 
 1771-1780 
 1781-1790 
 1791-1800 
 1801-18 1 1 
 1811-1820 
 1821-1830 
 I83I-184O 
 1841-1850 
 1851-1860 
 I86I-I87O 
 1871-1875 
 1876-1878 
 
 Diagram 6. Proportionate Value of Gold and Silver. 
 
88 MONEY. 
 
 J. B. Say has shown that this expression is incorrect. Five 
 grammes of silver are worth five grammes of silver, just as five 
 grammes of copper are worth five grammes of copper. The di- 
 vision into grammes does not impart a new quality to a metal. 
 
 Still, there is a certain amount of truth in the expression, which 
 we will endeavour to disentangle. 
 
 In England, the cost of coinage is defrayed by the State. A 
 sovereign is worth the same weight of bullion of the same fineness, 
 neither more nor less. 1 In France, the cost of coinage at the 
 bearer's expense is 6 fr. 70 c. per kilogramme of gold of 0'9 stan- 
 dard. The kilogramme represents 3,100 francs. Minting expenses 
 deducted, it is worth 3,093 fr. 30 c. ; and unless the Government 
 should suspend the coinage, it cannot fall below this, for if the 
 value of money were to fall below that of bullion, the owners of 
 money would convert it into ingots. 
 
 The only variations in value arise from cost of transport and 
 keeping, and from the demand for payment in cash. It is these 
 variations which constitute the rates of exchange. 
 
 It is therefore correct to say that the kilogramme of gold is 
 worth 3,100 francs, or, deducting cost of coinage, 3,093 fr. 30 c. ; or 
 that in England 123'27 grains of twenty- two carat gold are worth 
 ;i sovereign. But how are we to express the value of francs or 
 sovereigns ? That is the question. To express the value of 
 coin, we measure or weigh it, and we say it is worth twenty or 
 thirty francs per hectolitre or per quintal. Clearly a greater or less 
 amount of grammes of gold are needed to buy a given quantity of 
 corn ; and consequently the value of gold rises or falls as compared 
 with that of corn. 
 
 Then people jump to the conclusion that gold has risen or fallen 
 in value. 
 
 Yes ; but compared with what ? with corn ? Yes, you say. But 
 how do you know that corn has not gone up in value simply because 
 the consumption has increased, because the means of transport have 
 brought it within reach of the consumer, because agriculture cannot 
 produce a sufficient quantity to satisfy the demand Y The rise in 
 corn may be quite independent of the value of gold ; and the price 
 of corn may indicate its value, not as compared with gold, but 
 as compared with the other utilities for which money serves as a 
 common denominator. 
 
 Diagram 7 compares the price of corn from 1861 to 1870 with 
 its price from 1821 to 1830, long before the discovery of the great 
 fields of gold. 
 
 We know that England and France are the two countries which 
 have absorbed the most gold ; it is, consequently, in these two 
 
 1 If the coining is done through the Bank, one ounce of gold of standard fine- 
 ness fetches 3 17*. 9d. instead of 3 17s. 
 
Uk. iii. Ch. iii.] 
 
 MONET. 
 
 89 
 
 countries that the price of corn may be expected to have risen 
 highest. But this is by no means the case. It has fallen 14 per 
 cent, in England ; it has risen only 1 7 per cent, iu France ; while in 
 Austria and Hungary, where they are so short of gold that they are 
 obliged to have recourse to paper money, it has gone up 131 to 142 
 per cent. 
 
 The price of corn, then, is not dependent on the abundance or 
 scarcity of gold. 
 
 142% Austria. 
 131% Hungary. 
 
 50 
 
 38% Russia. 
 
 17% France. 
 
 14% England. 
 
 1821-1830 1861-1870 
 
 Diagram 7. Price of Corn before and after the great Discoveries of Gold. 
 
 M. Levasseur says r 1 " To have a perfectly correct numerical ex- 
 pression, the term of comparison must consist, not of a single com- 
 modity, but of all." What, all? without exception ? M. Levasseur 
 certainly goes on to admit that the task is difficult, for he adds 
 immediately, " If the price of all or nearly all commodities has 
 
 1 La Question de VOr. 
 
90 MONEY. 
 
 risen one-tenth, we are not thence to conclude that all commodities 
 have risen in value ; for as value is nothing but a relation, a rise 
 or fall of all values at once is nonsense ; but we may conclude that 
 the value of the precious metals that is, the relation of one com- 
 modity to all the rest has fallen in the same proportion." 
 
 In order to give this theory a semblance of truth, it would be 
 necessary that all capital, both fixed and circulating, should ex- 
 perience a uniform rise. Has this ever happened ? No doubt it 
 may be said that in California, when the gold fever was at its 
 height, and the miners who had rushed to the diggings under its in- 
 fluence were giving fifty francs for a bottle of wine, ten francs for 
 a pound of sugar, and five for a pound of flour, the value of 'gold 
 was very low, because gold was very plentiful, while all other 
 commodities were scarce. But the soil, except just at the diggings, 
 was equally valueless. How far, beyond the limits of its own con- 
 tracted area, did this exceptional state of things make itself felt ? 
 
 To return to the question ; even admitting that a uniform rise 
 in the price of all capital is possible, I deny that it proves a fall in 
 the value of gold. 
 
 Let us imagine an island, the gold of which is limited to a 
 certain unvarying quantity, sufficient for its requirements. Let us 
 denote the rate of production and consumption in the island by the 
 number 100, and the amount of its coin by the number 10. 
 
 Its population and consumption increase faster than its produc- 
 tion. The price of meat and corn doubles. Are we to say that 
 gold has fallen in value ? According to M. Levasseur, Yes ; ac- 
 cording to the facts of the case, No. On the contrary, unless the 
 islanders have had recourse to cheques and clearing-houses, gold 
 will have gone up in value ; and yet prices have risen. 
 
 It cannot be otherwise, unless we could suppose that the scarcity 
 of gold might so paralyse business as to cause a fall in prices ; and 
 this would be impossible, for the use of paper money, or some other 
 device, would assuredly supply in great measure the place of gold. 
 
 Again, when the quantity of the precious metals increases, does 
 their value fall in proportion, and vice versa? M. Levasseur 
 declares that the only measure we can give of the value of these 
 metals is their production. He ought at least to have added, 
 *'and their consumption." 
 
 According to Newmarch, in the decade 1865-75, all articles of 
 commerce fell 27 per cent., while real property rose 49 per cent. 
 (See Diagram 8, p. 91.) 
 
 PRODUCTION OF GOLD. 
 
 1861-1865 206,058 
 
 1871-1875 170,675 
 
 At lea*>t, 16 per cent. 
 
Bk. iii. Oh. iil] MONEY. 91 
 
 ISSUE OF GOLD COIN AT THE LONDON MINT. 
 
 (Statistical Abstract.) 
 
 1856-1865 52,788,000 
 
 1866-1875 47,278,000 
 
 Fall, 10 per cent, on the earlier period. 
 
 The total production of gold has fallen 16 per cent., and the issue 
 of the London Mint has fallen 10 per cent. This being so, the 
 price of fixed capital ought to have fallen, and that of gold to have 
 
 50 
 
 40 
 
 30 
 
 20 
 
 10 
 
 100 
 
 10 
 
 20 
 
 30 
 
 1865. 
 
 875. 
 
 Diagram 8. Rise and Fall of Gold in proportion to Fixed and Circulating Capital in Eng- 
 land, 1804-1875. 49, increase in the value of fixed capital. 10, gold coin struck. 27, price 
 of the chief commodities in London. 16, diminution in the production of gold. 
 
 risen ; we ought, therefore, to have to record a fall in the value of 
 fixed capital. On the contrary, there is a rise of 49 per cent. 
 
 " Quite so," some one will say; " but this rise results from there 
 being still a surplus of gold, notwithstanding the diminished issue 
 of coin, and the fall in the value of the metal." If this argument 
 were true, it would still have to be explained why the fall in the 
 price of circulating capital outruns the decrease of coinage. Does 
 
92 MONEY. 
 
 not the fall indicate a rise in the value of gold as compared with all 
 circulating capital, raw material, and articles of commerce and of 
 consumption ? 
 
 Thus, the value of gold has fallen as compared with real property, 
 and risen as compared with circulating capital; whence I am 
 justified in concluding that the value of gold does not vary in pro- 
 portion to its quantity, but in relation to the different kinds of 
 capital, falling as compared with some, and rising as compared with 
 others. 
 
 According to Diagram 7, it has risen 14 per cent, on the London 
 market as compared with corn ; and according to Diagram 8, it has 
 fallen within ten years 49 per cent, as compared with the fixed 
 capital of Great Britain. 
 
 Nevertheless, it would be an error to consider these proportions 
 as strictly correct ; for while money serves as the common denomi- 
 nator of all utilities, the changes in the value of these utilities do 
 not depend solely on money. We have already observed that if corn 
 is dear at a particular moment, it is not because money has fallen in 
 value, but because the yield has fallen short of the consumption. 
 In the same way, if a factory rises in value, it is not because gold 
 has fallen, but because the factory produces more utilities than 
 before. 
 
 At the same time, if I am asked Is this fall in the value of 
 gold to be attributed to a fall in its utility, and this rise in that of 
 fixed capital to its producing more utilities ? the answer cannot 
 be doubtful. Yes, the gold is less useful ; yes, the fixed capital is 
 more useful. 
 
 Like all circulating capital, gold, when produced at a lower price, 
 and in greater abundance, and more economically used, gradually 
 sinks in value as compared with fixed capital. Still, at least within 
 the decade above referred to, its value has sunk less than that of 
 the bulk of circulating capital. We shall see elsewhere that in the 
 period between 1850 and 1877 it has fallen in proportion only 10 
 per cent., which is not much compared with the steady rise of fixed 
 capital. 
 
 There are, however, few historians and economists who do not 
 speak of the value of gold as rising or falling absolutely. It is a 
 singular instance of agreement among them. I will take, as an 
 example, only the latest estimates. Professor Stanley Jevons 
 declares that between 1780 and 1809 the value of gold fell 46 per 
 cent. ; from 1809 to 1849 it rose 14 per cent. ; since 1849 it has 
 fallen again 20 per cent. But the figures he gives in his table of 
 prices since 1785 do not correspond with these oscillations. 1 
 According to M. de Foville, the fall in gold since the beginning of 
 
 1 See Journal of the Statistical Society (" On the Variation of Prices ";, 
 vol. xxviii., 1865. 
 
Bk. iii. Ch. iii.J MONEY. 93 
 
 the century should have been 25 per cent. M. Eos wag l asserts 
 that it did not amount to 4 per cent. M. David, late Secretary to 
 the Department of Commerce of the Swiss Federation, reckons it at 
 31 p er cent. Lastly; Dr. Sotbeer asserts a fall in silver and a rise 
 in gold. 
 
 Mr. Gifien says that gold has been rising in value for the last 
 twenty years. Lord Beaconsfield, in a speech in the House of 
 Lords, in 1878, on the agricultural crisis, said : " Gold rises in 
 value daily, and its rise occasions the fall in prices." Mr. Patterson 
 proved lately before the Statistical Society, that gold never ceased 
 to fall in England and all over the world.2 
 
 It is a bad way of putting the question. No doubt gold has risen 
 and does rise as compared with silver. But, compared with corn, 
 it has risen in England and fallen in Austria ; and, compared with 
 houses and lands, it has fallen in England and France. In short, it 
 has risen as compared with certain utilities which have become 
 cheaper, while it has fallen as compared with other utilities which 
 have become dearer. 
 
 Not long ago, I heard M. Gustave Hubbard, M. Gambetta's 
 familiar on economic questions, at a dinner at the Progres Social, 
 speak, without contradiction, of the depreciation of metals as an 
 incontrovertible fact. I could not help raising a timid protest, to 
 the great indignation of all present which shows that even 
 economists sometimes mistake words for things. M. Hubbard said 
 to me, " Look here ; a louis of last century and a louis of this, do 
 you mean to say the value is the same ? " 
 
 " That depends on what you want to buy." 
 
 " Well," he remonstrated, amid roars of laughter from everybody, 
 " if you are going to put it like that ! " 
 
 I ain sorry for the laughers, but I do put it like that, and it 
 cannot be put in any other way. 
 
 It is untrue to say, "The value of gold has risen or fallen," without 
 specifying the utility with which you are comparing it. 
 
 Moreover, a glance at Diagram 8 and the following Diagrams will 
 remind us that, for the reason given in Book II., gold is always 
 falling in comparison with fixed capital. 
 
 The production of utilities by fixed capital is ever on the increase; 
 and money also, which is circulating capital, increases in abundance, 
 but its utility, instead of increasing, diminishes. By virtue of the 
 law, according to which industrial progress consists in obtaining 
 the highest possible inverse ratio between the consumption of 
 circulating capital and the return yielded by fixed capital, man seeks 
 to restrict the use of money by means of cheques, deposit banks, 
 clearing-houses, and all the modern appliances for lending money. 
 
 1 Les Metaux Precieux, 1875. 
 3 Journal of the Statistical Society, March, 1880. 
 
94 RELATIVE VALUES OP FIXED AND CIRCULATING CAPITAL. 
 
 The law, then, which we have stated, holds good with regard to 
 money : 
 
 The value of fixed capital is in direct ratio to the abundance of 
 circulating capital, and the value of circulating capital is in inverse 
 ratio to the power of fixed capital. 
 
 Hence we may say 
 
 Gold is a commodity. 
 
 The standard of money is a common denominator of values, and a 
 medium of exchange. 
 
 The value of money is relative to the value of the utility for which 
 it is exchanged. 
 
 The value of money is in inverse ratio to the utility of fixed capital. 
 
 CHAPTER IV. 
 
 RELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 1 
 
 I HAVE said that the value of fixed capital is in direct ratio to the 
 abundance of circulating capital, and the value of circulating capital 
 is in inverse ratio to the power of fixed capital. 
 
 The truth of this law has just been demonstrated with regard to 
 money, and the same may now be done with regard to other capital. 
 The demonstration will not take long. The facts speak for them- 
 selves. 
 
 AVERAGE PRICE OF A HECTARE OF LAND. 
 
 Year. Francs. Per cent. 
 
 1789 500 
 
 1815 700 40 
 
 1851 1,290 158 
 
 1862 1,850 290 
 
 1874 2,000 300 
 
 AVERAGE PRICE OF A HECTOLITRE OF GRAIN. 
 
 Per cent, 
 on the prices 
 Francs. of 1787-1809. 
 
 1787-1793 19-89 
 
 1800-1809 19-91 
 
 1820-1829 18-22 
 
 1830-1839 19-08 
 
 1840-1849 20-49 2-8 
 
 1850-1859 21-51 
 
 1856-1876 22-05 15-8 
 
 1 This chapter was read at the meeting of the Association pour V Avancement 
 des Sciences, at Reims, 14th August, 1880. (See report and discussion in the 
 Temps of 10th September, and in the Economiste Frangais of 18th September, 
 16th October, and 19th November, 1880. 
 
Bk. iii. Oh. iv.] RELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 95 
 
 300 -~ - 
 
 250 
 
 200 
 
 1790 1800 1810 1820 1830 1840 I860 I860 1870 1880 
 
 Diagram 9. Price of Land and Agricultural Produce, 1787-1880 (after M. de Foville). 
 
96 . RELATIVE VALUES OP FIXED AND CIRCULATING CAPITAL. 
 AVERAGE WAGES OF AN AGRICULTURAL LABOURER NOT BOARDED. 
 
 Francs. Per cent. 
 
 1789 1- O 1 
 
 1850 1-422 42 
 
 1862 1-85 85 
 
 1875 2-0 100 
 
 MARCHE DE POISST ET DE SCEAUX. 
 
 Price of Beef 
 
 perkil. Percent. 
 1780-1789 ... Of. 45c. 3 
 
 1810 97 
 
 1820 96 
 
 1830 . 1 05 144 
 
 1850 
 1860 
 1870 
 
 1875 
 
 1840 1 11 ... ; 1878 . . 
 
 (See Diagram 9, p. 95.) 
 
 Of. 87c. 93 
 
 1 25 
 
 1 40 211 
 
 1 06 
 
 1 69 275 4 
 
 Now we observe, between 1787 and 1875, an increase of 300 per 
 cent, in the selling value of land, while the increase in the price of 
 corn has been only 15'8 per cent. 
 
 We are told that the " land is in want of hands," and we hear 
 complaints of the dearness of labonr; yet wages have only risen 100 
 per cent. 
 
 The reason of the increased valne of land is, that it is beginning 
 to be turned to better account. No doubt the increase per hectolitre 
 in the production of wheat has not exceeded 82 per cent., and this 
 shows that the value of fixed capital does not rise in a mere arith- 
 metical proportion to the abundance of circulating capital. It rises 
 not only in proportion to the greater quantity of utilities which the 
 fixed capital has furnished, but yet more in proportion to the 
 greater quantities of utilities which the fixed capital seems likely to 
 be able to furnish. 
 
 Again, in estimating prices, not only must the increase of the 
 yield be taken into account, but also the saving effected in the 
 circulating capital employed in producing it. Thns the use of the 
 drill has saved half the seed. Threshing machines have done away 
 with an immense amount of manual labour. Facilities of com- 
 munication have opened fresh outlets for produce. 
 
 Yet, although the value of land has risen 300 per cent., the rise 
 is far below what it ought to be. Agriculture is perhaps the 
 industry which has made least progress during the century. 
 Chemistry and physiology have shown pretty clearly what are the 
 conditions of cultivation, and have reduced them to very simple 
 
 1 Paul Boiteau, Etat de la France en 1789, p. 509. 
 
 2 Maurice Block, vol. ii., p. 39. 
 
 3 Boiteau, ubi sup. 
 
 4 Harche de la Villette (Bull de Statist. Municip.). 
 
Bk.iii.Ch.iv.] RELATIVE VALUES OP FIXED AND CIRCULATING CAPITAL. 97 
 
 formulae; but so far they have been very little applied. The steam- 
 engine, so widely employed in other industries, is here neglected. 
 While three million horse-power is employed in manufactures, agri- 
 culture employs only twenty- five thousand. In short, it is impossible 
 to instance all the utilities lost or neglected by man. 
 
 MM. Deiiayrouze and Ville calculate 1 that by means of irrigation 
 and chemical manures it would be possible to increase the value of 
 every one of the 33,000,000 hectares capable of such amelioration 
 by 3,000 francs, at which rate the soil of France would gain an 
 added value of a hundred milliards of francs. 
 
 The same phenomenon appears in England. I take the follow- 
 ing figures from Mr. Caird 2 : 
 
 INCREASE PER CENT. FROM 1771 TO 1850 AND 1878. 
 
 
 1771 
 
 
 1850 
 
 1 
 
 178 
 
 
 
 
 Increase 
 
 
 Increase 
 
 Kent of land . 
 
 13s. 
 
 27s. 
 
 per cent. 
 107 
 
 30s 
 
 per cent. 
 130 
 
 Production of corn, per acre . . 
 
 23 bus. 
 
 264 b 
 
 us. 15-22 
 
 28 bus. 
 
 22-7 
 
 Wages of agricultural labourers . 
 
 7s. 3d. 
 
 9s.7d 
 
 32-20 
 
 14s. 
 
 93-3 
 
 Price of bread, per Ib 
 
 lAd. 
 
 IJd. 
 
 16-60 
 
 lid. 
 
 
 Price of meat ,, .... 
 
 3d. 
 
 5d. 
 
 66-66 
 
 9d. 
 
 200 
 
 (See Diagram 10, p. 98.) 
 
 We know the difficulties which attend the transfer of landed 
 property in England. It does not pass freely as in France ; and for 
 this reason Mr. Caird has estimated its rent rather than its value. 
 But what does this steady rise in the rent of land mean, if not an 
 enhanced production of utilities by the soil ? 
 
 This rise is 36' 7 per cent, greater than that in the wages of farm 
 labourers. For the .reasons we have already pointed out in the 
 case of France, the increase in the production of corn is far less 
 than the rise in rent. As to the price of bread, it is in 1878 
 exactly what it was in 1771 ! Its value, compared with the fixed 
 capital, land, has fallen 130 per cent. ; and, compared with the 
 wages of farm labourers, 93 per cent. 
 
 It is true that meat alone has risen 200 per cent, in England and 
 275 per cent, in France, but this only proves a lack of production 
 and an increase of consumption ; it only proves that until the 
 last few years man had not been able to overcome those hindrances 
 of time and space which kept him from bringing his products within 
 the reach of the consumers. The rise in price of this circulating 
 capital proves but one thing that it did not circulate enough. 
 
 1 La Richesse, by L. Denayrouze (Nouvelle Revw, 1st March, 1879). 
 
 2 Landed Interest, p. 157. 1878. 
 
98 RELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 
 200 
 
 93, 
 
 L 
 
 66.6% 
 
 L 
 
 
 
 / <& 
 
 32% 
 
 217% 
 
 1771 
 
 1850 
 
 1878 
 
 Diagram 10 Price of Land, of Agricnltnral Products, and Rate of Agricultural Wages 
 ia England, 1771-1878. 
 
Bk. in. Ch.iv.] RELATIVE VALUES OP FIXED AND CIRCULATING CAPITAL. 99 
 
 From this rise in the price of meat, however, M. de Foville l has 
 drawn a conclusion which seems to me incorrect. I reproduce his 
 table, although I think it contains some inaccuracies ; and in all 
 these matters, accuracy is the main thing. 
 
 FROM 1820-1825 TO 1870-1875. 
 
 
 Real rise 
 per cent. 
 
 Real fall 
 per cent. 
 
 Agriculture . . - 
 Importations of col 
 Industries . . . 
 
 ' Real property ... 
 
 187-5 
 142-5 
 
 109* 
 
 *2-5 
 
 36 
 51 
 62-5 
 59 
 25 
 
 
 j Food . . . . . 
 
 Native beverages .... 
 
 Mineral products .... 
 Textile fabrics 
 
 Chemical products . . . 
 Various products .... 
 
 (See Diagram 11, p. 100.) 
 
 M. de Foville infers a downward tendency in the price of agricul- 
 tural produce, and an upward tendency in that of manufactured 
 products. 
 
 It would have been better for the consistency of M. de Foville's 
 theory if he had not himself admitted that the price of " food " (by 
 which, I take it, he means cereals, potatoes, and other agricultural 
 produce) has fallen 2*5 per cent. 
 
 He has been much less struck by the fall in these than by the 
 rise in animal food and in native beverages. 
 
 I have already shown one cause of the rise in meat ; I will now 
 point out another, which applies equally to native beverages. 
 
 There is a constant interchange going on between agricultural 
 and industrial production. All the men employed in industrial 
 production consume agricultural produce. Now industrial pro- 
 duction has increased in much greater proportion than agricultural; 
 and the consumption has not only become greater, but it has 
 changed its character. The consumption of meat has almost tripled ; 
 production has been unable to keep pace with it, and the means of 
 transport have been insufficient to bring it from abroad. The con- 
 sumption of native beverages has tripled, and no other country has 
 been in a position to make up to France the insufficiency of her own 
 vintages. They have hardly yet learnt how to make wine in Spain. 
 
 l Des Moyens de Transport, p. 226. M. de Foville thinks that the purchasing 
 power of money has fallen 25 per cent, since 1825. He therefore subtracts this 
 from his estimate, and gives what he calls the real rise or fall. We have pointed 
 out in the last chapter the error of this estimate. The amounts given ought, 
 therefore, to be raised 25 per cent. 
 
100 RELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 
 
 S/.-043 
 
 s 
 
 2 = 
 
 < 
 
Bk.iii. Ch.iv.] RELATIVE VALUES OP FIXED AND CIRCULATING CAPITAL. 101 
 
 These are the causes of the high price of meat and native beverages. 
 In order not to anticipate, we will not here speak of the means of 
 transport, which, by increasing the means of international inter- 
 course, have multiplied the consumption of French wine, and stimu- 
 lated the exportation of cattle. 
 
 Why has not the price of wheat gone up in the same proportion, 
 seeing its consumption has steadily increased, driving out all inferior 
 grains before it? Because wheat can be imported, in almost any 
 quantity, from Odessa, from the mouth of the Danube, and from 
 the United States. 
 
 M. de Foville's theory is not correct ; and in attempting to prove 
 it, he has only succeeded in establishing ours. Diagram 11 shows 
 that while landed property (the most fixed of all fixed capital) has 
 gone up 187 per cent., corn, tissues, colonial produce, mineral and 
 chemical produce, and every other kind of circulating capital, meat 
 and wines alone excepted, have fallen in the interval between 1825 
 and 1875. 
 
 Nor is this phenomenon peculiar to France; it presents itself 
 under the same forms in England. 
 
 COMPARATIVE VALUES OF FIXED CAPITAL IN THE UNITED KINGDOM IN 
 1865 AND 1875. 
 
 (From the Journal of the Statistical Society, March, 1878, p. 12.) 
 
 FIXBD CAPITAL. 
 
 Millions 
 Sterling. 
 1865 
 
 Millions 
 Sterling. 
 1875 
 
 Difference. 
 
 Per Cent. 
 
 
 1,864 
 
 2,007 
 
 143 
 
 8 
 
 Houses ... 
 
 1,031 
 
 1,420 
 
 389 
 
 38 
 
 
 19 
 
 56 
 
 37 
 
 195 
 
 Iron Works 
 Railways . 
 
 7 
 414 
 
 29 
 
 655 
 
 22 
 
 241 
 
 314 
 58 
 
 
 18 
 
 20 
 
 2 
 
 11 
 
 Gas Works 
 
 37 
 2 
 
 53 
 4 
 
 16 
 2 
 
 43 
 
 100 
 
 
 
 
 
 
 
 3,392 
 
 4,244 
 
 852 
 
 25 
 
 I have been obliged to deal with only a short period, because it 
 is only during this period that we have reliable statistics as to the 
 value of fixed capital. Here we see the value of land augmenting 
 only 8 per cent., while that of houses goes up 38 per cent., that of 
 factories 195 per cent., that of iron-works more than 300 per cent., 
 and that of railways, which are not in England the property of the 
 State, 58 per cent. Within the same period, the value of raw 
 cottons and tissues has fallen 164 per cent., and that of silks 46 per 
 cent., while corn has gone up only 5 per cent. (See Diagram 12, 
 p. 102.) 
 
102 KELAT1VE VALUES OP FIXED AND CIRCULATING CAPITAL. 
 
 
 .< 5 
 
 o S > 
 
 1 1 s 
 
 < 
 
 | r o 
 j < 5 
 
 
 co 
 
 rr 
 
Bk.iii.Ch.iv.] RELATIVE VALUES OF FIXED AND CIKCULATING CAPITAL. 103 
 125 
 
 
 120 
 
 115 
 
 110 
 
 105 
 
 100 
 
 95 
 
 119 
 
 1848-49 1853-54 1858-59 1863-64 1868-69 1873-74 1877-78 
 
 Diagram 13. Value of Land at different Periods, taking 1848-1849 as 100 (after Mr. Charles 
 Turner, Report of August 7, 1879). 
 
 I 
 
 SO 8 
 
 'ALL 
 
 9 1 
 
 9 C 
 
 ) 
 ALL 
 
 COM 
 
 AODlT 
 
 ICS N 
 
 ( 
 ftMEO 
 
 1 
 
 > 1 
 
 ?ISE 
 
 o * 
 
 SO 
 
 COT 
 
 row .. 
 
 WOOL 
 
 
 
 
 
 
 
 SILK 
 
 FLAX 
 
 . WOO 
 
 
 
 
 oit . 
 
 TMB 
 
 R. FR 
 
 ESH T 
 
 ALLOV 
 
 COPP 
 
 :R, LE 
 
 ID. IR 
 
 ON.T 
 
 IN 
 
 
 COPP 
 
 It. 61 
 
 GAR 
 
 TEA 
 
 
 
 
 
 
 
 CORN 
 
 
 
 
 
 
 
 
 
 Diagram 14. Increase or Diminution of Prices in the two Periods 1831-1845 and 1870-1877, 
 taking Prices for the Period 1846-50 as 100. 
 
104 EELATIVE VALUES OP FIXED AND CIRCULATING CAPITAL. 
 
 It is plain, therefore, that in France and England fixed capital 
 has acquired a much greater value than circulating capital. 
 
 I do not wish to weary the reader by multiplying instances ; but, 
 to avoid the accusation of manipulating our figures, let us take 
 different periods, and examine the results. 
 
 We take the following proportions, showing the increase in value 
 of land in England between 1848-49 and 1877-78, from Mr. Chas. 
 Turner's report of the 7th August, 1879, on the Income Tax. (See 
 Diagram 13, p. 103.) 
 
 Now look at the comparison of the prices of circulating capital 
 during the two periods 1831-45 and 1870-77. We have the fol- 
 lowing figures : 
 
 PROPORTIONATE RISE OR FALL IN PRICES FOR THE Two PERIODS 
 1831-1845 AND 1870-1877, TAKING PRICES FOR THE PERIOD 1846- 
 1850 AS 100. 1 
 
 
 After 
 Jevons. 
 1831 to 1845. 
 
 1846 to 1850. 
 
 After 
 Newmarch. 
 1870 to 1877. 
 
 FalL 
 
 Rise. 
 
 1. All commodities named . 
 2. Cotton wool 
 
 115 
 
 151 
 
 100 
 
 100 
 
 125 
 127 
 
 24 
 
 10 
 
 3. Silk, flax, wool .... 
 4. Oil, timber, fresh tallow, 
 tin 
 
 130 
 115 
 
 100 
 100 
 
 127 
 120 
 
 3 
 
 5 
 
 5. Copper, lead, iron, tin 
 6. Coffee, sugar, tea . . . 
 7 Corn 
 
 108 
 135 
 106 
 
 100 
 100 
 100 
 
 117 
 115 
 
 97 
 
 20 
 
 9 
 9 
 
 8. Butcher's meat .... 
 
 
 100 
 
 143 
 
 ... 
 
 
 The rise is very slight ; the fall in some articles much more con- 
 siderable ; and, on comparing periods which are closer together, we 
 find the fall still more accentuated. (See Diagram 14, p. 103.) 
 
 PRICE OF CHIEF ARTICLES OP WHOLESALE TRADE IN 1873 AND IN 1879. 2 
 
 DIMISUTIOX IN 1879. 
 
 Articles. 
 
 Jan. 1873. 
 
 Jan. 1879. 
 
 Difference 
 
 Per Cent, 
 compared 
 with 1873. 
 
 Polled iron (Scotch), per ton . . 
 Coal, per ton 
 Copper . 
 
 127s. 
 30s. 
 91Z 
 
 43s. 
 19s. 
 
 571 
 
 84s. 
 11s. 
 34 
 
 66 
 37 
 37 
 
 
 
 
 
 
 1 Commercial History and Review of 1878 (Supplement to the Economist, March, 
 1879, p. 53). 
 
 2 The Fall of Prices in England, Kobert Gififen (Journal of the Statistical 
 Society, 1879, p. 6G). 
 
Bk.iii.Ch.iv.] RELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 105 
 PRICE or CHIEF ARTICLES OF WHOLESALE TBADE (continued}. 
 
 
 
 
 DlMINUTIOl 
 
 r in 1879. 
 
 Articles. 
 
 Jan. 1873. 
 
 Jan. 1879. 
 
 Difference. 
 
 Per Cent, 
 compared 
 with 1873. 
 
 Tin 
 
 1421. 
 
 61Z 
 
 811. 
 
 57 
 
 Wheat, per quarter . . . 
 
 55s. lid. 
 47s. Qd. 
 
 39s. Id. 
 37s 
 
 16s. 4d. 
 10s. 6d. 
 
 29 
 22 
 
 Beef, inferior, per stone . . 
 First quality . . - . . 
 Cotton, per pound .... 
 Wool per bale . 
 
 3s. Wd. 
 5s. 3d. 
 Wd. 
 231 
 
 2s. Wd. 
 4s. 9d. 
 5|<Z. 
 131 
 
 Is. 
 Qd. 
 
 4frf. 
 Wl 
 
 26 
 10 
 46 
 43 
 
 Sugar, per quintal .... 
 Coffee 
 
 21s. Qd. 
 
 80s 
 
 16s. 
 65s 
 
 5s. Qd. 
 15s 
 
 26 
 19 
 
 Pepper, per pound .... 
 Foreign saltpetre, per quintal 
 
 Id. 
 29s. 
 
 4\d. 
 19s. 
 
 2jd 
 
 10s. 
 
 39 
 34 
 
 (See Diagram 15.) 
 
 1879. 
 
 1873. 
 
 7o> 5 
 
 FAIL PER 
 t> 5 
 
 CENT OP 
 
 * 
 
 ROLLED 
 
 PRICES f 
 9 
 
 IRON 
 
 ROM 1073 
 O 2 
 
 ^SCOTCH) 
 
 TO I37S 
 1 
 
 0^ 
 
 
 
 
 
 COAL 
 
 
 
 
 COPPER 
 
 
 
 
 TfM 
 
 
 
 
 
 
 
 WHFAT 
 
 
 
 FLOUR 
 
 
 BE 
 
 EP INFE 
 
 *>.<?# 
 
 COTTON 
 
 
 BllF l* f QO 
 
 
 
 
 WOOL. 
 
 
 
 
 
 
 SVO-AR 
 
 
 
 COPPEE 
 
 
 PEPPF* 
 
 
 
 SAL 
 
 r PETRE 
 
 
 
 
 
 
 Diagram 15 Fall per Cent, of Prices of Chief Articles of Wholesale Trade from 
 1873 to 1879. 
 
106 EELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 
 
 Consult the British Trade Journal, especially the number for the 
 1st of June, 1880, which contains special tables of prices from 1871 
 to 1880, and you will find throughout, beneath superficial fluctua- 
 tions, a steady downward tendency in the price of circulating 
 capital. Crises are spoken of as accidental phenomena ; but they 
 are a permanent phenomenon, rising in importance as the power 
 of production becomes greater, and capital accumulates more and 
 more rapidly. Manufacturers and agriculturists will have to make 
 up their minds to look these conditions in the face. 
 
 Prohibitive tariffs will not check this phenomenon. The prices 
 in the New York market are a proof of this. 
 
 PRICE OF COMMODITIES ACCORDING TO THE REPORT OF THE NEW 
 YORK CHAMBER OF COMMERCE. 
 
 
 
 YFABS. 
 
 
 
 1825-1829. 
 
 1873-1877. 
 
 Per cent. 
 
 Beef per pound . 
 
 9-12 
 
 $9-80 
 
 + 7-4 
 
 
 10-90 
 
 4-80 
 
 -127 
 
 Cotton, per pound ..... 
 
 12-40 
 
 1460 
 
 + 17 
 
 Iron per ton. ... . 
 
 87-70 
 
 62-CO 
 
 - 41 
 
 
 21-20 
 
 27-40 
 
 + 29 
 
 "Wheat . .... 
 
 1-11 
 
 1-33 
 
 + 19 
 
 For all commodities .... 
 
 
 
 - 42 
 
 (See Diagram 16.) 
 
 1873-77 
 
 1825-29 
 
 1873-77 
 
 
 
 127 
 
 FALL 
 
 >0 C 
 
 RISE 
 
 COAL 
 
 
 41 
 
 IRON 
 
 
 BEEF 
 
 7.4 
 
 
 COTTON 
 
 ir 
 
 
 WHEAT 
 
 19 
 
 Diagram 16. -Rise and Fall of Circulating Capital at New York. 
 
Bk.iii.Ch.iv.] RELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 107 
 
 Yet everywhere, in France as in England, the price of circulating 
 capital ought to have increased, since the consumption has con- 
 siderably augmented. I take the following amounts from M. de 
 Foville 1 : 
 
 COMPARATIVE IMPORTANCE OF INDIVIDUAL CONSUMPTION IN FRANCE, 
 
 IN 1820 AND IN 1870. 
 
 
 VALUE OF AMOUNTS CONSUMED PKB HEAD. 
 
 
 In 1820 
 at price 
 for 1870. 
 
 In 1820, 
 at price 
 for 1870. 
 
 
 In 1870, 
 at price 
 for 1820. 
 
 
 In 1870 
 at price 
 for 1820. 
 
 1. Vegetable food . 
 2. Animal food 
 3. Native beverages 
 4. Various articles . 
 
 Food, total . . 
 
 fr. 
 47-05 
 24-35 
 12-30 
 8-22 
 
 fr. 
 63-55 
 45-52 
 23- 
 5-17 
 
 20/ 
 37/ 
 83/> 
 196/o 
 
 fr. 
 56-86 
 33-57 
 22-60 
 24-61 
 
 63/o 
 
 157/> 
 226/o 
 88/o 
 
 fr. 
 77-12 
 62-64 
 40-10 
 15-61 
 
 91-96 
 
 137-24 
 
 49/ 
 
 137-64 
 
 112/o 
 
 195-47 
 
 (See Diagram 17, p. 108). 
 
 Now let us look at it from the other side. Go to Mexico, to the 
 West Indies, where you will, wherever agriculture and manufactures 
 are in a backward state, you will be met by the same condition of 
 things, circulating capital for the most part dear, and fixed capital 
 (the soil included) for the most part valueless ; a fact which confirms 
 the law we have formulated as to the relations between the values of 
 fixed and circulating capital, and which, at the same time, solves for 
 us the apparent economical contradiction pointed out by J. B. Say, 
 and commented upon by Proudhon : " Since the wealth of a 
 country consists in the value of the things it possesses, how comes 
 it that the nation is rich in proportion as the things are cheap ? " 2 
 
 It is clear, from what we have just seen, that this is a confusion of 
 words ; things can only be measured by things, and values by 
 values ; there cannot be a general rise or a general fall throughout 
 a country ; and, consequently, it is absurd to say that a nation is 
 richest where prices are lowest. We must say, "the prices of certain 
 things." But what things ? We go back to the laws formulated 
 in the last book ; industrial progress consists in continually aug- 
 menting the utilities contained in fixed capital, and in economising 
 the consumption of circulating capital in the form of raw material, 
 while increasing the production of circulating capital in the form of 
 products, the result of which is, that the value of circulating capital 
 goes down, and that of fixed capital goes up. 
 
 1 Moyens de Transport, p. 336. 2 See page 68. 
 
108 EELATIVE VALUES OF FIXED AND CIRCULATING CAPITAL. 
 
 8 
 
 CJ 
 
 
 
 
 
 
 i 
 
 f 
 
 
 Dingrnm 17. Individual Consumption in France. 
 
 
 
 
 
 
 
 la 
 
 o> 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 o 
 o 
 
 
 
 
 5 
 
 
 
 
 
 * 
 
 (O 
 
 
 
 1 s 
 
 
 
 
 1 
 
 
 e 
 
 
 
 
 
 
 
 O 
 
 ^ 
 
 
 
 o 
 
 
 
 $ 
 
 
 
 
 
 
 
 I 
 
 
 
 
 
 
 5 
 
 u> 
 
 
 
 
 
 
 
 
 e> 
 
 i 
 
 <a ~~ 
 
 CO 
 
 
 
 
 
 
 
 
 
 
 
 I 
 
 
 
 
 
 oooooo oooo 
 w t- <N t^ o< r* wr-wr- 
 
 I I 
 
 ' 
 
Bk.iii.Ch.v.] THE RELATION OF SPACE TO THE VALUE OP CAPITAL. 109 
 
 Hence we obtain the following solution of the problem propounded 
 by J. B. Say :- 
 
 The wealth of a nation is in direct ratio to the value of its fixed 
 capital, and in inverse ratio to the value of its circulating capital. 1 
 
 CHAPTER Y. 
 
 THE RELATION OP SPACE TO THE VALUE OF CAPITAL. 
 
 I HAVE said that space is an economic factor, the importance of 
 which we are only just beginning to recognise. 
 
 I have shown 2 how man, by the expenditure of a limited quantity 
 of circulating capital in the construction of a road, a railroad, or a 
 canal, succeeds in diminishing indefinitely the consumption of cir- 
 culating capital in the transport of necessary articles. 
 
 A few figures will show the proportionate advantage. 
 By the most favourable calculation a man can carry thirty kilo- 
 grammes, and travel 30 kilometres in a day ; and supposing him to 
 
 I 1 put forward this formula at the Congress of the Association pour VAvance- 
 ment des Sciences, in August, 1880. It was discussed in the Economists 
 Frangais ; M. Leroy-Beaulieu admits that it is at bottom sound ; but a new 
 theory can never be accepted at once in its integrity. Some little protest against 
 it is absolutely necessary. M. Leroy-Beaulieu says : "It might well happen 
 that the rent of land in the Old World might fall by one-third, or even by half, 
 through the competition of new countries, without any retrogression of society 
 or even impoverishment of the nation." I cannot agree with this view of M. 
 Leroy-Beaulieu, and the land-owners will certainly think that he makes up his 
 mind a little too easily to the diminution in the value of land. Would they 
 have the same purchasing power the day after this diminution had taken place, 
 as they had the day before? The event would be but the complete confir- 
 mation of my theory. The value of land would sink, because the new countries 
 could produce corn, meat, etc., more cheaply than the old. There would thus 
 be a fall in the value of circulating capital ; at the same time, there would be a 
 rise in the value of fixed capital out there. If this movement produced a fall in 
 the value of fixed capital in the Old World, it would prove that the owners of that 
 capital either were not able, or did not know how, to put it to a fresh use, which 
 would enable them to combat the competition from abroad. In that case they 
 would be ruined, and it is impossible to suppose that the wealth of the nation 
 would not suffer in consequence. 
 
 M. Leroy-Beaulieu adds : " It is a misuse of words to say that the wealth of 
 a nation is in inverse ratio to its circulating capital ; we must at least interpose 
 the correction ' in inverse ratio to the value of the units composing its circulating 
 capital.' " My method of demonstrating this point will, I think, be enough to 
 dispel any ambiguity. It was the price of the units, and not of the mass of 
 the circulating capital of a country, that I compared. 
 
 The December number of the Journal des Economistes also contains some 
 remarks on this question by M. Clement. It appears that M. Clement did not 
 quite hear what was said. He will find, on reading this chapter, that his 
 criticisms bear upon misapprehensions of this kind, and not upon any theory 
 or statement of mine. 
 
 2 Book II., chap. i. 
 
110 THE RELATION OP SPACE TO THE VALUE OP CAPITAL. 
 
 spend three francs a day, the cost of transport will come to 3 fr. 
 33 cents, per ton per kilometre. 
 
 A muleteer can drive two mules, each carrying 75 kilogrammes 
 and doing 30 kilometres a day. The cost of transport will now be 
 calculated thus : 
 
 Expenses of man 3 fr. c. per day. 
 
 Ditto of two mules 3 fr. 50 c. 
 
 Wear and tear of man and beast . . 1 fr. c. 
 
 Total ... 7 fr. 50 c. per day. 
 
 Beckoning three hundred days in the year that is, 3,150 kilo- 
 metric tons for the two mules the average rate comes to 87 centimes 
 per kilometric ton. 
 
 The camel is thought a cheap means of conveyance ; let us see 
 what it costs. Fifteen merchants join together to go through the 
 Soudan, and choose a guide ; total sixteen men. Each merchant 
 needs three camels to carry his merchandise, and a fourth to carry 
 his provisions and baggage ; total sixty camels. The camel can 
 carry 400 kilogrammes 40 kilometres a day, and can keep this up, 
 if necessary, more than a month. His keep costs little, but the 
 animal himself has a certain value ; the period of gestation is twelve 
 months, and the rearing is a long process. 
 
 The cost of transport by camel comes to : 
 
 One man 2 fr. 50 c. per day. 
 
 Four camels 4 fr. c. ,, 
 
 Wear and tear .... 2 fr. 50 c. 
 
 Total ... 9 fr. per day = 
 
 3,285 fr. per annum. 
 
 The caravan does two journeys a year, backwards and forwards, 
 a total distance of perhaps 6,000 kilometres. The average load per 
 camel being 400 kilogrammes, the total amount of transport effected 
 by each merchant per annum will be 7,680 kilometric tons. The 
 cost per kilometric ton has come down to 42 centimes. 
 
 At the inquiry made in 1861, M. Eugene Flachat reckoned the 
 price of the kilometric ton transported by road at 20 centimes. 
 M. Jacqmin, in a pamphlet on the scheme of the large carrying 
 agencies for the period 1834-46, calculates the cost by roulage 
 accelere at 43 to 45^ centimes per kilometric ton, and by roulage 
 ordinaire at 23 to 28 centimes. The average would, therefore, be 
 35 centimes per kilometric ton. 
 
 The kilometric tariff on railways in 1835 was as follows : 
 
 Merchandise per Ton, ordinary goods service (petite vitesse). 
 
 Coal .... 8 cent. 1st class ... 12 cent. 
 2nd class. . . 14 3rd class . . 16 , 
 
Bk.iii.Ch.v.] THE EELATION OF SPACE TO THE VALUE OF CAPITAL. Ill 
 
 The present tariff is : 
 
 Merchandise. 
 
 Fast goods service (grande vitesse) 36 cent. 
 
 Ordinary goods service ( 1st class . 16 cent. 2nd class . 14 cent. 
 
 (petite vitesse). 
 
 10 
 
 4th 
 
 8,5, 4 
 
 The average charge, therefore, by ordinary goods service, is 
 barely half that by waggon. 
 
 We are always complaining, and with reason, of the railway 
 charges, and yet the cost per ton, not including incidental expenses, 
 hardly comes up to an average of 6 centimes ; and when we com- 
 pare this charge with the average price of waggon carriage, as given 
 by M. Jacqmin, we find that a saving of 76 per cent, has been 
 effected. 
 
 But the toll l is higher than the carriage, as the following tariff 
 of the fourth class shows, 
 
 Toll. 
 
 Carriage. 
 
 Total. 
 
 fr. 
 
 fr. 
 
 fr. 
 
 From 9 to 100 kilog. at a maximum of 5 fr. . . 0-05 0-03 0-08 
 From 101 to 300 kilog. at a maximum of 12 fr. . 0-03 0-02 0-05 
 Above 300 kilog 0-035 0-015 0-04 
 
 If the tolls were abolished on the railways, as they are already 
 on roads and canals, the carriage would fall to two centimes. We 
 should then have the following proportion, 
 
 Per Kilometric Ton. 
 
 Porter Fr. 3-33 
 
 Mules 0-87 
 
 Waggon 0-25 
 
 Kail, 1835 0-12 
 
 Ditto, 1879 0-06 
 
 Ditto, without Toll 0-02 
 
 The annual trade of France from 1876 to 1878, was, in round 
 numbers, 
 
 Kilometric Tons. 
 
 Eailways Fr. 8,000,000,000 
 
 Internal Navigation 2,000,000,000 
 
 Coasting Trade 1,000,000,000 
 
 Eoads and Streets 8,000,000,000 
 
 This total of nearly twenty milliards of kilometric tons divided 
 by the total number of the population of France, gives an average 
 of 540 kilometric tons a year to each person, that is nearly one 
 
 1 French railway tariffs comprise a double charge, first for the use of the road 
 (pgage), and secondly for the expense of carriage (transport). 
 
112 THE RELATION OF SPACE TO TrfE VALUE OF CAPITAL. 
 
 and a half kilometric tons a day. These figures are exclusive of the 
 great maritime trade, which is also counted by milliards of kilo- 
 metric tons. 
 
 A man of the stone age could by no manner of means have 
 effected the daily carriage of one and a half kilometric tons ; and 
 Robinson Crusoe, though possessed of some of the resources of 
 civilisation, would have been equally at a loss. 
 
 " To move is to produce," says j. S. Mill. He could not have 
 said a truer thing. The whole of industry consists in the bringing 
 together of raw materials. 
 
 In 1838, Arago, who then opposed the introduction of railways, 
 said, " It is not to be supposed that a couple of parallel iron rods 
 can change the face of Gascony." Nevertheless the couple of iron 
 rods were introduced, and the face of Gascony was changed, because 
 these iron rods made it possible to transport the timber it pro- 
 duced. 
 
 There are millions of acres lying valueless in Africa, America, 
 Asia, Australia, simply for want of being brought into communica- 
 tion with the centres of consumption. Let this be done by means 
 of railways and canals, and these lands will forthwith acquire a 
 considerable value, because they will have found an outlet for their 
 produce. 
 
 The Americans know this so well, that the bankers of New York, 
 who get up the railways, and the investors who take shares in 
 them, look for their profit, not to the dividends of the railway, but 
 to the enhanced value of the prairies of Iowa, the corn-lands of 
 Illinois, the forests of Michigan, the coal and iron-works of 
 Pennsylvania, and the emporiums of Chicago and Buffalo. 
 
 The value affixed capital is proportionate to the power of the means 
 of transport. 
 
 Wherever a railway penetrates into a remote part of the country, 
 you will hear quiet people who live there complain, "Railways 
 raise the price of everything." So they do, so far as the products 
 of the locality itself are concerned ; the railway creates a new outlet 
 for them, and thus gives them an increased value ; but, at the same 
 time, it introduces circulating capital at a cheaper rate than was 
 possible with the old modes of conveyance. It therefore brings 
 about a rise in the price of circulating capital produced within the 
 district, and a fall in the price of circulating capital brought in 
 from outside. Thus it levels prices. 
 
 Not only so, but it also brings within reach of the fixed capital 
 of the regions it traverses the raw material which is wanting to 
 them chalk, phosphates, coal, and so forth. It thus enables their 
 fixed capital to produce what it could not produce before. It gives 
 it a greater power of utility. 
 
Bk.iii.Ch.v.] TITE EELATION OP SPACE 
 
 UNiVLKSlTY 
 
 >ITAL. 113 
 
 Formerly, Paris obtained its fruit and vegetable supply entirely 
 from the land in its own neighbourhood ; and the difference in the 
 cost of transport gave these lands a marked advantage over more 
 distant places. Now-a-days, the railway supplies Paris with corn 
 from Marseilles, artichokes and asparagus from Algeria, cauli- 
 flowers, salad, and potatoes from Boscoff, strawberries from 
 Bordeaux, peaches from Provence, melons from Cavaillon, and so 
 on. Formerly, the radius of the milk-supply did not exceed twenty- 
 five kilometres ; it now exceeds a hundred. 
 
 Hence has resulted a fall in the value of land in the environs of 
 Paris, and a rise in the value of more distant land. This fall is 
 however only relative and transitory. It is simply the consequence 
 of the tendency of improved means of communication to level prices. 
 
 The carriage by road of a hectolitre of wheat (75 kilogrammes) 
 costs two centimes per kilometre, or two francs for twenty-five 
 leagues. Hence arose monstrous inequalities in distribution, ac- 
 cording as the harvest was scanty here and abundant there. Now 
 the railway tariffs for corn vary from three to seven centimes per 
 ton. One ton of corn contains more than thirteen hectolitres. It 
 ensues that the inequalities in the price of corn in different districts 
 tend more and more to decrease. 
 
 We give here the maximum inequalities recorded by the 
 Ministry of Agriculture and Commerce for the nine following 
 districts ; North-west, North, North-easf, West, Central, East, 
 South-west, South, South-east, 
 
 1859 
 1865 
 1870 
 1871 
 1872 
 1873 
 
 fr 
 4 
 
 61 187 
 65 187 
 86 187 
 54 187 
 94 187 
 
 
 f 
 
 4 i 
 
 r. c. 
 J71 
 J55 
 553 
 501 
 .74 
 
 3 
 2 
 
 5 I 
 
 6 5 
 
 2 
 2 
 ... 2 
 
 7 1 
 8 3 
 
 (See Diagram 18.) 
 
 
 4 61 
 
 
 
 
 
 
 
 
 
 
 ^ 
 
 S 
 
 
 2 
 
 M 
 
 
 3- 
 
 55 
 \ 
 
 5, 
 
 or 
 
 
 2.8S 1 
 
 ""^^ 
 2 
 
 ^ 
 
 54 
 
 \ 
 
 / 
 
 7 
 
 Stl 
 
 s 
 
 2 
 
 ^ 
 
 .55 
 
 \ 
 
 
 
 
 
 2 
 
 
 
 
 
 X 
 
 1.74 
 
 
 
 
 
 
 
 
 
 
 
 1859 1865 1870 1871 1872 1873 1874 1875 1876 1877 1878 
 
 Diagram 18. Maximum Inequalities in the Price of Corn among the nine Districts of 
 
 France. 
 
114 THE RELATION OF SPACE TO THE VALUE OF CAPITAL. 
 
 The same phenomena are observed in comparing different coun- 
 tries, as the following table shows, 
 
 PRICE OF CORN PER HECTOLITRE. 
 
 
 France. 
 
 New York. 
 
 Odessa. 
 
 Maximum 
 Inequality. 
 
 Year 
 
 fr. c. 
 
 fr. c. 
 
 fr. c. 
 
 fr. c. 
 
 1835 .... 
 
 15 25 
 
 18 45 
 
 9 37 
 
 9 08 
 
 1836 .... 
 
 17 32 
 
 25 79 
 
 8 43 
 
 17 36 
 
 1837 .... 
 
 18 53 
 
 30 76 
 
 8 28 
 
 22 48 
 
 1838 .... 
 
 19 51 
 
 25 50 
 
 9 45 
 
 16 05 
 
 1839 .... 
 
 22 14 
 
 22 04 
 
 10 88 
 
 11 16 
 
 1840 .... 
 
 21 84 
 
 15 44 
 
 11 78 
 
 10 06 
 
 1841 .... 
 
 18 54 
 
 17 13 
 
 11 83 
 
 6 71 
 
 1842 .... 
 
 19 55 
 
 16 02 
 
 11 09 
 
 8 46 
 
 1843 .... 
 
 20 46 
 
 14 12 
 
 9 49 
 
 10 97 
 
 1844 .... 
 
 19 75 
 
 13 35 
 
 9 87 
 
 9 88 
 
 1845 .... 
 
 19 75 
 
 15 26 
 
 10 78 
 
 8 97 
 
 1846 .... 24 
 
 15 36 
 
 12 59 
 
 11 46 
 
 1847 .... 29 01 
 
 20 30 
 
 14 90 
 
 14 11 
 
 1848 .... 1 16 65 
 
 17 66 
 
 12 
 
 5 66 
 
 1849 .... 
 
 15 37 
 
 17 
 
 11 80 
 
 5 20 
 
 1850 .... 
 
 14 32 
 
 17 22 
 
 11 55 
 
 5 67 
 
 1851 .... 
 
 14 48 
 
 14 24 
 
 9 10 
 
 5 38 
 
 1852 .... 
 
 17 23 
 
 14 74 
 
 11 30 
 
 5 93 
 
 1853 .... 
 
 22 39 
 
 23 20 
 
 11 76 
 
 11 44 
 
 1854 .... 
 
 28 82 
 
 30 09 
 
 
 1 27 
 
 1855 .... 
 
 29 32 
 
 34 85 
 
 ... 
 
 5 53 
 
 1856 .... 
 
 30 75 
 
 24 49 . 
 
 22*58 
 
 8 17 
 
 1857 .... 
 
 24 37 
 
 21 92 
 
 19 53 
 
 4 84 
 
 1858 .... 
 
 16 75 
 
 18 75 
 
 14 78 
 
 3 97 
 
 1859 .... 
 
 16 74 
 
 20 
 
 14 02 
 
 5 98 
 
 1860 .... 
 
 20 24 
 
 21 15 
 
 16 15 
 
 5 
 
 1861 . . . - 
 
 24 25 
 
 20 20 
 
 14 31 
 
 9 94 
 
 1862 .... 
 
 23 24 
 
 17 11 
 
 11 66 
 
 11 58 
 
 1863 .... 
 
 19 78 
 
 15 53 
 
 13 26 
 
 6 52 
 
 1864 .... 
 
 17 58 
 
 12 53 
 
 12 75 
 
 5 05 
 
 1865 .... 
 
 16 41 
 
 17 20 
 
 13 60 
 
 3 60 
 
 1866 .... 
 
 19 61 
 
 25 52 
 
 18 08 
 
 7 44 
 
 1867 .... 
 
 26 19 
 
 23 05 
 
 18 70 
 
 7 49 
 
 1868 .... 
 
 26 64 
 
 21 69 
 
 20 40 
 
 6 24 
 
 1869 .... 
 
 20 33 
 
 15 21 
 
 16 15 
 
 5 12 
 
 1870 .... 
 
 20 56 
 
 15 27 
 
 15 30 
 
 5 29 
 
 1871 .... 
 
 25 65 
 
 19 28 
 
 17 85 
 
 7 80 
 
 1872 .... 
 
 23 15 
 
 21 30 
 
 16 32 
 
 6 83 
 
 1873 .... 
 
 25 62 
 
 23 69 
 
 19 
 
 1 93 
 
 1874 .... 
 
 25 11 
 
 23 41 
 
 
 1 70 
 
 1875 .... 
 
 19 32 
 
 17 73 
 
 
 1 59 
 
 1876 .... 
 
 20 59 
 
 18 42 
 
 ... 
 
 2 17 
 
 1877 .... 
 
 23 44 
 
 20 85 
 
 ... 
 
 2 59 
 
 1878 .... 
 
 23 
 
 ... 
 
 ... 
 
 ... 
 
 (See Diagram 19, p. 115.) 
 
Bk. i:i.Ch.v.] THE RELATION OF SPACE TO THE VALUE OP CAPITAL 115 
 
 , 1878 
 
 1877 
 1876 
 1875 
 1874 
 1873 
 1872 
 1871 
 
 1870 S 
 
 1869 | 
 
 1868 | 
 
 1867 2 
 
 1866 -g 
 
 1865 * 
 
 1864 | 
 
 1863 ^ 
 
 1862 g 
 
 1861 3 
 
 I860 * 
 
 1859 g 
 
 1858 ^ 
 
 1857 g 
 
 1856 | 
 
 1855 "I 
 
 1854 
 
 1853 , 
 
 1852 g 
 
 J85I O 
 
 1850 | 
 
 1849 -g 
 
 1848 ^ 
 
 .847 | 
 
 1846 > 
 
 1845 | 
 
 1844 2 
 
 1843 | 
 
 1842 |> 
 
 184 a 
 1840 
 1839 
 1838 
 1837 
 1836 
 1835 
 
116 THE RELATION OF SPACE TO THE VALUE OF CAPITAL. 
 
 Nevertheless, the cost of carriage to England, whether from the 
 Black Sea or from California, of an amount of corn equal to the 
 produce of an English acre, is seldom below, and often above 40 
 shillings ; and the same with fresh meat imported from America. 
 
 This difference, arising from cost of carriage, is equal to the 
 average rent paid by the farmer to his landlord. 1 
 
 But this difference will decrease as the improvement in the means 
 of transport increases. 
 
 The less developed the means of transport, the more circum- 
 scribed will be the area of supply. The objects which are to 
 satisfy the wants of man must be just under his hand ; if they are 
 not, he must do without them. The Armoricans never dreamed of 
 obtaining pepper, sugar, or cinnamon. The early inhabitants of 
 Great Britain never imagined that a day would come when their 
 coal-fields should attract cotton from the United States and India, 
 to be afterwards re-exported, in the form of thread and calico, to 
 supply the needs of people hundreds and thousands of miles away. 
 
 Before the development of the means of transport, the prudent 
 husbandman raised the crops he wanted most ; corn to eat, wine to 
 drink, flax to spin, and so forth. But now he raises what his land 
 will best produce. If it yields bad corn and good wine, he turns 
 it into vineyard, and sells wine to buy his daily bread. Thus, in 
 France, the plains are given up to wheat, the uplands to oats, and 
 other districts to pasture ; even without the imposts on the im- 
 portation of sugar, the soil of the North would by now have been 
 covered with beetroot ; while in the South vineyards had almost 
 entirely supplanted the corn-fields, before the phylloxera appeared 
 to check the transformation. 
 
 Yet prejudice, repulsed at one point, only reappears under 
 another form. " A nation must be self-sufficing ; it must not be 
 dependent on the foreigner." It is the old agricultural theory over 
 again. 
 
 For a nation like France to be self-sufficient, she must dispense 
 with a multitude of things which have come to form part of her 
 daily life coffee and cotton to begin with. If the sacrifice is too 
 great, there is but one alternative, to grow coffee at Montreuil, and 
 cotton in the Beauce. The price would be higher, and the quality 
 poor. It is easier to fetch them from countries where they grow 
 naturally. Let the protectionists say what they will, The means 
 of transport stimulate in every district the productions to which it is 
 best suited, and discourage those to which it is less suited. 
 
 Hence an increase in the power of utility, and consequently in the 
 value, of fixed capital, and a fall in the price of circulating capital, 
 
 1 Caird, Landed Interest, 1878. 
 
iJk.iii.Ch.vi.] THE RELATION OP TIME TO THE VALUE OP CAPITAL. 117 
 
 since it is produced or obtained at less cost. We may therefore 
 say, 
 
 The means of transport, by giving to circulating capital a higher 
 value where it is produced, and a lower where it is consumed, tend to 
 equalise its price. 
 
 Since the means of transport at once bring raw material and carry 
 away produce, they give to fixed capital a greater power of utility. 
 
 The equality in price of all capital of the same kind, and the value 
 uf fixed capital, are in proportion to the power of the means of trans- 
 port. 
 
 CHAPTER VI. 
 
 THE RELATION OF TIME TO THE VALUE OF CAPITAL. PRICE OF CREDIT. 
 
 THE Convention, adopting the idea of Turgot, incorporated with 
 the law this declaration. "Money is a commodity the price of 
 which depends entirely on agreement, and varies, like that of all 
 other commodities, with the relation of demand and supply.'" 
 
 But so keen is prejudice, that this decree had to be rescinded by 
 that of the 2nd Prairial. 
 
 Even now, although the system of maxima (i.e. of fixing by 
 law the maximum price of commodities), is condemned as absurd in 
 the case of other commodities, it is still accepted as correct with 
 regard to money. 
 
 But here again there is a confusion of ideas. We think of our- 
 selves as borrowing money, because it is under the form of money 
 that loans are effected. But they might be effected just as well 
 under the form of bank-notes, cheques, or mere exchange of signa- 
 tures. When you borrow money, even supposing it to be in good 
 hard cash, you do not go and lock it up in a safe; you change it 
 into something else, you pay your debts, you provide yourself with 
 fixed or circulating capital. When we speak of the price of money, 
 we are guilty in fact of a gross blunder, arising from that want of 
 observation which constantly makes us take the sign for the thing 
 signified. It was intelligible enough at a time when money was 
 carefully hoarded. But it is disgraceful, at this time of day, to find 
 such expressions still in use, not only in common parlance, but in 
 legal phraseology. 
 
 If the rate of interest represented the price of the metal, it ought 
 to be highest in England, where there is so little in circulation ; 
 whereas it is in England that it is at the lowest. 
 
 Mr. Tooke says, that every modification in the amount of coin in 
 circulation produces a temporary effect on the rate of interest. He 
 
118 THE RELATION OF TIME TO THE VALUE OF CAPITAL. 
 
 confounds the rate of interest with the rate of exchange. If the 
 amount of coin in circulation is insufficient for the necessities of 
 trade, the rate of exchange will rise ; but not the rate of interest. 
 
 But I shall be told that there are two milliards of money (francs) 
 lying idle in the vaults of the Bank of France, and that under these 
 circumstances the rate of interest must fall. 
 
 Yes ; but how comes all this money to be lying there ? Because 
 the people who received it in exchange for their commodities have 
 found no opportunity of converting it into fresh commodities, or 
 fresh capital ; they are encumbered with it, as a grocer would be 
 encumbered with a quantity of sugar that he could not dispose of. 
 The grocer lowers the price of the sugar in order to make it sell. 
 The holders of the two milliards of francs will lend at a lower rate, 
 and will give a higher price for securities. 
 
 " But then," you say, " the converse should hold good ; if the 
 precious metals became scarce, interest will rise." 
 
 No ; not if circulating capital is abundant, and does not readily 
 find employment. Yes ; if the scarcity of the precious metals is the 
 sign of so brisk a demand for circulating capital, that it finds easy 
 and remunerative employment. 
 
 It should never be forgotten, that even if money has an intrinsic 
 value, it does not become a utility to its possessor until he uses it. 
 It becomes a utility to him the moment it leaves his hands to be 
 converted into some other utility. 
 
 We have said that the rate of interest represents the price of time, 
 just as the cost of transport represents that of space. The rate of 
 interest is governed by the laws which rule all other utilities. 
 
 Where circulating capital is scarce, or where there is not the 
 organisation necessary for easily and safely utilising time, there the 
 rate of interest is high. 
 
 The Visigothic law authorised interest at 12| per cent, on loans of 
 money and 50 per cent, cm loans of merchandise. In France and 
 Italy in the thirteenth century the Jew and Lombard money-lenders 
 charged on an average 20 per cent. In the Rhine provinces during 
 the fourteenth century, 50 to 60 per cent, was not unusual. Now, 
 on the contrary, the rate of interest is constantly diminishing. We 
 may here call attention to M. Leroy-Beaulieu's mistake in connexion 
 with this subject. He says, 1 " The persistent fall in the rate of 
 interest increases the nominal value of all investments, whether in 
 movable property or in lands and buildings. Within the last year, 
 Rentes have gone up from 9 to 10 per cent. ; all real property m 
 towns, notably in Paris, has gone up in at least equal, sometimes 
 greater proportion ; and, the agricultural crisis notwithstanding, it 
 has been the same over the greater part of the country." 
 
 1 Economiste Frangais, Sept. 20, 1879. See also March 22, 1879. 
 
Bk.iii.Ch.vi.] THE EELATION OF TIME TO THE VALUE OF CAPITAL. 119 
 
 Between 1872 and 1879, French 3 per cents, have gone up from 
 51 or 52 to 82, an increase in value of more than 50 per cent., or 7 
 per cent, per annum, without reckoning interest. It must therefore, 
 at the very lowest, amount to 10 per cent, per annum ; and, capital 
 not being exhausted, it will still go up. So that M. Leroy-Beaulieu 
 is not exaggerating when he calculates the gain at 13 per cent. 
 
 This upward movement never ceases. In 1880, the 5 per cents, 
 rose above 120 francs. M. Leroy-Beaulieu was right as to the 
 facts, but he failed to explain them. The laws we have already 
 formulated explain them easily enough. 
 
 What do movable values for the most part represent ? Fixed 
 capital, mines, forges, railways, etc. The value of this capital steadily 
 increases. Movable values are simply fractional titles to this 
 property. Nothing is more natural than that they also should go up 
 in value. Circulating capital, becoming too abundant, falls in value. 
 It seeks to transform itself as quickly as possible into fixed capital. 
 Now, as we have already laid down, 1 a money-claim represents a 
 co-proprietorship in fixed capital; a mortgage is a share of the title 
 to the property. The creditor becomes part-proprietor. Every 
 advance on mortgage, every bond, is a mode of converting circulat- 
 ing into fixed capital. The Funds themselves are a mortgage on the 
 entire property of France, guaranteed by the whole of her fixed 
 capital. The fund-holders are joint proprietors of the national estate. 
 
 It follows from this, that the rise in price of movable values, 
 shares, bonds, and Rentes, is simply one form of the enhanced 
 value of fixed capital. 
 
 The fall in the rate of interest is a proof of the abundance of cir- 
 culating capital. Here again we see the operation of the law we 
 have formulated. 
 
 In the absence of any frightful destruction of capital by war, this 
 state of things will assuredly continue ; a standing warning to those 
 capitalists and financiers who, after having denied the fact, and fore- 
 told a reaction, are now obliged to acknowledge its reality without 
 understanding its cause. 
 
 But it may be objected that in England, during the last century, 
 the legal interest in Queen Anne's time was only 5 per cent., that 
 under the Walpole ministry Consols reached 107, and that under 
 George III. interest fell to 3 per cent. It was during the 
 eighteenth century that interest reached the lowest rate in Europe. 
 From the end of that century it continued to rise until 1872 ; and 
 only since then has it been falling. 
 
 I put the objection roughly, with some overstatement of the facts. 
 But even so, taking them for the moment as correct, so far from 
 contradicting my theory, it only confirms it. 
 
 See page 53. 
 
120 THE RELATION OP TIME TO THE VALUE OF CAPITAL. 
 
 Since the close of last century, an immense amount of capital has 
 been consumed in war ; and bj this means the accumulation and 
 consequent depreciation of circulating capital, and the accompany- 
 ing rise in the value of fixed capital, have been retarded. The same 
 result has followed the creation of railways and other great public 
 works, which have consumed tens of millions of money ; they may 
 in time become productive, but they are not so to begin with. The 
 advance made is very considerable ; and this has helped to retard 
 the accumulation of circulating capital with its attendant phenomena. 
 The loans to American and Asiatic States have similarly consumed 
 an enormous mass of capital, which has for the most part been 
 miserably squandered. We are now, however, beginning to recoup 
 the capital advanced on the great works, almost all of which, as 
 railways, canals, ports, etc., have moreover increased the rapidity 
 of circulation. This has also been facilitated by the extension 
 of telegraphs, by improved banking arrangements, and the like. 
 Now, the quicker the circulation, the more rapidly does circulating 
 capital become fixed. Hence an accelerated rise of movable values, 
 and an accelerated fall of interest. 
 
 It' there had been no wars, interest would long ago have fallen to 
 1 per cent. 
 
 In some countries, in new colonies for instance, the rate is still 
 high, because there is a lack of circulating capital. In Australia, so 
 late as 1850, a loan could only be effected at 15 to 20 per cent., how- 
 ever good the security. The rate has gone down a good deal since 
 then. Between the different States of the Union, the rate of 
 interest varies greatly, from 5 per cent, in New York, to 10 in 
 Illinois, and 15 or 20 in Nebraska (this was in 1878). ' 
 
 We may be sure that the same phenomena will arise here which 
 we have observed with reference to the means of transport, viz., the 
 levelling of prices. The time is not far off when colossal fortunes 
 will no longer be made on 'Change, because the enormous fluctu- 
 ations through which they were realised will, to the general advan- 
 tage, cease to be possible. 
 
 We may therefore conclude that : 
 
 The price of credit is in inverse ratio to the abundance and rate of 
 circulation of circulating capital. 
 
 The tables published in 1878 by Mr. Inglis Palgrave in the 
 Banker's Magazine, relating to the rate of discount in the great 
 European banks, confirm this theory. 2 
 
 Taking the year 1860 as a centre, we shall see that on only two 
 occasions before that time did the rate of discount of the Bank of 
 
 1 L' Agriculture aux Etats-Unis, a report by H. T. Mot, to the Societe des 
 Agriculteurs de France, p. 16. 
 
 2 They have been reproduced in the Bulletin de Statistique du Ulinistere dcs 
 Finances, July, 1878. 
 
Bk.iii.Ch.vi.] THE EELAT1ON OP TIME TO THE VALUE OF CAPITAL. 121 
 
 England fall to 2 per cent., viz., in 1851 and 1853 ; and in 1853, it 
 only remained at that level for six days. Since 1860, on the con- 
 trary, it has fallen to 2 per cent, in seven different years 1862, 
 1867, 1868, 1871, 1875, 1876, 1877. During the two latter years it 
 remained at this level 425 days, that is to say, considerably more 
 than half the time ; and during 1867 and 1868 no less than 483 
 days, sixteen months out of the twenty- four. 
 
 During the period 1844-77, the mean rate of discount of the 
 Bank of France was considerably higher than that of the Bank of 
 England. The most usual rate was 4 per cent,, and next to that 5 
 per cent. A commercial house might discount its bills at the Bank 
 of England for 3 or 2J per cent., and at the Bank of France at 4 per 
 cent., during the same number of days. The Bank of England 
 rate was at 3 per cent, for 2682 days, and that of the Bank of 
 France for 1518 days ; the Bank of England remained at 2 per cent, 
 for 1391 days ; the Bank of France for only 270 days. 
 
 The average rates of discount for the three banks of England, 
 France, and Germany, are as follows: 
 
 Bank of England. Bank of France. Bank of Germany. 
 
 3 16s. 3d. 4 Os. 6d. 4 8s. 7d. 
 
 that is, the English bank-rate of discount is less than the French by 
 5'5 per cent., 1 and less than the German by 16'1 per cent. 
 
 Thus the lowest rate of discount lasted only half the time in 
 France that it did in England, but still nearly one-eighth of the 
 whole period ; but at Berlin it never once fell to 3 per cent., and 
 remained at 3| per cent, for only 54 days. 
 
 There is this much in common between the French rate and 
 the German, that 4 per cent, is the usual rate, and next to that 
 5 per cent. 
 
 We give the figures : 
 
 Bank of France, 1844 to 1877: 
 
 Discount at 4 per cent, during 4,399 days. 
 5 1,935 
 
 Total . . . . 6,334 ., 
 
 Bank of Germany, 1844 to 1879 : 
 
 Discount at 4 per cent, during 7,576 days. 
 5 2,393 
 
 Total . 9,969 , 
 
 The Economist, Nov. 13, 1880. 
 
122 THE RELATION OP TIME TO THE VALUE OP CAPITAL. 
 
 Bank of England, 1844 to 1879 : 
 
 Discount at 4 per cent, during 1,293 days. 
 5 1,106 
 
 Total 
 
 . 2,399 
 
 It is not the abundance of the precious metals which occasions 
 this rate of discount, for we find r 1 
 
 
 Cash. 
 
 In Bank. 
 
 In Circulation. 
 
 PerHead. 
 
 United Kingdom 
 France . . 
 Germany . . 
 
 120,000,000 
 310,000,000 
 123,000,000 
 
 32,000,000 i 
 
 90,000,000 i 
 27,000,005 i 
 
 80,000,000 
 220,000,000 
 96,000,000 
 
 55s. 
 120 
 45 
 
 Bat Great Britain and her Colonies represent one-third of the 
 banking power of the world. 
 
 Banking Power. Per Head. 
 
 Great Britain 780,000,000 23 
 
 France 340,000,000 9 
 
 Germany 280,000,000 7 
 
 The World 2,600,000,000 8 
 
 We see therefore that the low rate of interest or discount does 
 not depend on the abundance of the precious metals, but on the 
 organisation of credit, which admits of a greater economy of 
 ciiculating capital, combined with a more rapid circulation. 
 
 While some Utopists were actually trying by main force to do 
 away with the price of credit, the price was falling of itself by the 
 mere force of circumstances. 
 
 But you cannot satisfy everybody. 
 
 According to some, gratuitousness of credit is the supreme good ; 
 according to Adam Smith, MacCulloch, Roscher, and Stuart Mill, 
 it is the last and utmost ill. They have predicted that the ex- 
 tinction of interest will .produce stagnation of wages, a want of 
 initiative, and a stationary economic condition. 
 
 These fears are indeed chimerical. Capital must always seek 
 investment; for if it is not utilised, production will cease, and the 
 capital itself will soon be exhausted. 
 
 Grutuitousness of credit can never be more than relative. Stag- 
 nation will have no place in the civilisation of the future. 
 
 1 Progress of the World, by M. G. Mulhall, 1880, pp. 31, 37. The figures 
 relating to France are too low. They ought to be almost double. But thir 
 only strengthens the argument. 
 
BOOK IV. 
 
 THE VALUE OF MAN. 
 
 CHAPTER I. 
 
 POPULATION. 
 
 MALTHUS has become a sort of scapegoat, on whose head we lay the 
 responsibility for all the ills that flesh is heir to. He starts with 
 the fact that when several products have each of them a power of 
 reproduction equal to that of the producer, a more or less rapid 
 geometrical progression necessarily ensues. The only question is, 
 " Has every man a generating power equal to that of his father be- 
 fore him?" The answer seems to him to be in the affirmative. The 
 increase of population will therefore be in geometrical progression. 
 
 But while a man may beget two or four children, who for the first 
 fifteen or twenty years will consume without producing, he counts 
 meanwhile for only one in the work of production. Hence it arises 
 that the advance of prodnction must always be a generation behind 
 that of population. 
 
 Malthus formulates the law to which his name has been given 
 in the following terms: 1 "Population, when unchecked, goes on 
 doubling itself every twenty-five years, or increases in geometrical 
 ratio. . . . The means of subsistence, under circumstances the 
 most favourable to human industry, could not possibly be made to 
 increase faster than in arithmetical ratio. . . . Taking the 
 whole earth . . . and supposing the present population equal 
 to a thousand millions, the human species would increase as the 
 numbers I, 2, 4, 8, 16, 32, 64, 128, 256, and subsistence as 1, 2, 3, 
 
 1 Principle of Population, pp. 4, 6. 8th edition. 
 138 
 
124 
 
 POPULATION. 
 
 4, 5, 6, 7, 8, 9. In two centuries the population would be to the 
 means of subsistence as 256 to 9; in three centuries, as 4096 to 13; 
 and in two thousand years the difference would be almost incal- 
 culable." 
 
 This is reckoning after Perrette's fashion. She upsets her milk- 
 pail, and her reckoning breaks down ; but it would have been none 
 the more correct if the milk-pail had not been upset. 
 
 130 
 
 100 
 
 50 
 
 00 , 
 
 ^ * 
 
 a 
 
 1826 1831 1836 1841 1846 1851 1856 1861 1866 1871 1876 
 
 Diagram 20. Proportion between the Capital Value of Recorded Successions to 
 Property, and the Population of France. 
 
 We have to take into account the obstacles which hinder the 
 rigorous application of this estimate. Mai thus, who clearly 
 saw and analysed them, divides them into two sorts destructive 
 and preventive checks. 
 
 Another little point, which quite escaped Malthus, but which 
 
Bk.iv.Ch.i.] 
 
 POPULATION. 
 
 125 
 
 must enter into our calculations, is the increasing industrial capacity 
 of man. The son has no more children than the father had, but 
 by the help of the steam-engine he can multiply his power of pro- 
 duction tenfold. 1 
 
 For the last century, facts have been giving the lie to the law of 
 Malthus, and showing that a priori laws are worth just as little in 
 
 74 
 70 
 
 60 
 50 
 
 30 
 
 20 
 
 10 
 
 100 
 
 1355 1865 1875 
 
 Diagram 21. Proportionate Increase of Wealth and Population in the United Kingdom. 
 
 economic science as anywhere else. Look at France. A glance at 
 the following table is enough to show that wealth increases there 
 at a very different rate from population. 2 
 
 1 See Book II. 
 
 2 This computation of wealth, though not rigorously exact, is a sufficient 
 indication, and it extends over a considerable period. (See Vacher, Evaluation 
 de la Fortune de la France. Journal de Statistique, Nov., 1878.) It is too low, 
 for it does not take account of the under-estimate of personal property given in 
 probate duty returns. 
 
126 
 
 POPULATION. 
 
 PROPORTION BETWEEN THE CAPITAL VALUE OF RECORDED SUCCESSIONS 
 TO PROPERTY, AND THE POPULATION OP FRANCE, 1826-1876. 
 
 Date of Census. 
 
 Number of 
 Population. 
 
 Capital Value of 
 Successions reported. 
 
 Proportion 
 per Head. 
 
 1826 .... 
 
 30,461,937 
 
 Fr. 1,337,359,808 
 
 Fr. 44-28 
 
 1831 .... 
 
 32,569,223 
 
 1,286,271,015 
 
 39-49 
 
 1836 .... 
 
 33,540,912 
 
 1,539,738,388 
 
 45-90 
 
 1841 .... 
 
 34,230,178 
 
 1,640,409,974 
 
 47-91 
 
 1846 .... 
 
 35,400,486 . 
 
 ] ,700,821,890 
 
 48-04 
 
 1851 .... 
 
 35,783,170 
 
 1,831,372,639 
 
 51-17 
 
 1856 .... 
 
 36,039,364 
 
 2,193,957,117 
 
 60-87 
 
 1861 .... 
 
 37,386,313 
 
 2,462,868,220 
 
 65-86 
 
 1866 .... 
 
 38,067,004 
 
 3,271,841,682 
 
 85-94 
 
 1872 .... 
 
 36,102,921 
 
 3,951,245,604 
 
 109-45 
 
 1876 .... 
 
 36,905,788 
 
 4,701,768,569 
 
 127-40 
 
 (See Diagram 20, p. 124.) 
 
 But it will be said that in France the population increases slowly. 
 This is true ; but in England it increases rapidly, and the result is : 
 
 UNITED KINGDOM. 
 
 1855-1865 . 
 1865-1875 . 
 
 Wealth, 
 per cent. 
 
 30 
 
 44 
 
 Population, 
 
 per cent. 
 
 10 
 
 10 
 
 (See Diagram 21, p. 125.) 
 
 POPULATION AND WEALTH OF THE UNITED STATES IN EACH DECADE 
 (1790 TO 1870). 
 
 
 
 
 Increase. 
 
 
 
 
 
 
 Average 
 
 Year 
 
 Population. 
 
 Wealth. 
 
 Population 
 
 Wealth per 
 
 Wealth per 
 Head. 
 
 
 
 
 per Cent. 
 
 Cent. 
 
 
 
 
 (Estimated.) 
 
 
 
 
 
 
 $ 
 
 
 
 $ 
 
 1790 . . 
 
 3,929,827 
 
 750,000,000 
 
 ... 
 
 ... 
 
 187-00 
 
 1800 . . 
 
 5,305,937 
 
 1,072,000,000 
 
 35-02 
 
 43-00 
 
 202-13 
 
 1810 . . 
 
 7,239,814 
 
 1,500,000,000 
 
 36-43 
 
 39-00 
 
 207-20 
 
 1820 . . 
 
 9,638,191 
 
 1,882,000.000 
 
 33-13 : 25-40 
 
 195-00 
 
 1830 . . 
 
 12,866,020 
 
 2,653,000;000 
 
 33-49 
 
 41-00 
 
 206-00 
 
 
 
 (Official.) 
 
 
 
 
 1840 . . 
 
 17,069,453 
 
 3,764,000,000 
 
 32-67 
 
 41-70 
 
 220-00 
 
 1850 . . 
 
 23,191,876 
 
 7,135,780,000 
 
 35-87 
 
 89-60 
 
 30767 
 
 1860 . . 
 
 31,500,000 
 
 16,159,000,000 
 
 35-59 
 
 126-42 
 
 510-00 
 
 1870 . . 
 
 38,558,000 
 
 30,069,000,000 
 
 22-00 
 
 86-13 
 
 776-96 
 
 (After Ivlr. Giffen. See Diagram 22, p. 127.) 
 
Bk.iv.Ch.i.] 
 
 POPULATION. 
 
 127 
 
 These facts show that the law of Malthus might be reversed, 
 that we might say, "Population increases in arithmetical, 
 wealth in geometrical propor- 
 tion." 
 
 Malthus adds, that popula- 
 tion increases with the means 
 of subsistence, and is limited 
 by them. At first sight no- 
 thing could appear more just, 
 and yet the foregoing facts 
 have shown that the means of 
 subsistence may increase much 
 faster than the population. 
 
 Again, Malthus forgets to 
 say what he understands by 
 the means of subsistence. It 
 is clear that the words do not 
 mean the same to an English- 
 man that they do to a Nea- 
 politan ; and even a Neapolitan 
 would find it hard to resign 
 himself to the worms, the 
 Iarva3, and the tiny shell-fish 
 which make up the ordinary 
 means of subsistence of a 
 native of Tierra del Fuego or 
 Australia. 
 
 Strangely enough, M. Ach. 
 Guillard, the foster-father of 
 the Demographie, has adopted 
 this proposition of Malthus, 
 giving it the name of " the 
 general equation of subsist- 
 ence." " The average popula- 
 tion is proportionate* to the 
 available means of subsistence. 
 Given the loaf, the man is 
 born ; withdraw the loaf, and 
 the man disappears." 
 
 Dr. Bertillon has somewhat 
 generalised M. Guillard's law. 
 He formulates it thus : " In a 
 healthy country, inhabited by 
 a given race at a given stage 
 of mental development, the 
 population, and consequently 
 
 and 
 and 
 
 8 
 
 
 
 
 
 
 
 
 
 ! 
 
 R> 
 
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 C 
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128 
 
 POPULATION. 
 
 the number of births, tends to be proportionate to the quantity of 
 productive labour of which that race at that stage of development 
 is most easily susceptible." l 
 
 I shall content myself with remarking that there are very 
 populous countries which have men, but which have not bread. If 
 the proposition of Malthas and of M. Achille Guillard were true, 
 India and Ireland would have been deserted long ago, in spite of the 
 rice and the potatoes which there take the place of bread 2 ; for in 
 India and Ireland the means of subsistence, different as they are 
 from ours, are far from being always proportionate to the increase 
 of population. If this law were correct, France would be much 
 more populous than it is, and Ireland much less so. 
 
 We see from Mr. Burgoyne's report, published in 1838, that the 
 population of Ireland had almost doubled in half a century, while 
 two-fifths of the men were without work, their agriculture being 
 intermittent, and their industries nil. They eat nothing but an 
 easily grown and not very nourishing potato. Milk is scarce. 
 Neither bread nor meat is to be had; the only luxury is whisky. 
 Nevertheless, the children marry almost before they are grown up, 
 and multiply this misery. In the famine of 1847, after having 
 exhausted their potatoes, they killed their pigs, and were next 
 reduced to living on offal, and then on grass. 
 
 The population of Ireland in 1840 was 8,155,000; from 1846 to 
 1875 it has steadily decreased ; in 1878 it was only 5,350,950 a 
 net loss of 2,804,571, or thirty-five per cent. Yet the births have 
 not ceased to exceed the deaths. The Registrar General's returns, 8 
 which in Ireland only go back to the beginning of 1864, record : 
 
 Year. 
 
 Births. 
 
 Deaths. 
 
 Percentage. 
 
 1864 . 
 
 740,275 
 
 495,531 
 
 45 
 
 1868 . 
 
 786.858 
 
 480,622 
 
 63 
 
 1870 . 
 
 792,787 
 
 515,319 
 
 53 
 
 1875 . 
 
 850,607 
 
 546,453 
 
 55 
 
 1877 . 
 
 887,055 
 
 500,348 
 
 77 
 
 Since, then, the births in Ireland are always in excess of the 
 deaths, whence comes the deficit ? 
 
 From emigration. Here we have a check to the increase of 
 population within any given area, which will exist until every square 
 yard of the earth's surface has its inhabitant. 
 
 1 Reforme Economique, p. 41, 1875. 
 
 2 See the Economist for Nov. 13, 1880, The Overpeopling of India, according 
 to Dr. Hunter, the Director-General of Indian Statistics. 
 
 3 Financial Reform Almanack for 1879, p. 121. 
 
Bk. iv. Ch. i.j POPULATION. ] 29 
 
 Malthus indeed speaks of it, but does not regard it as serious. 
 Ho says, 1 " Population invariably increases when the means of 
 subsistence increase, unless prevented by powerful and obvious 
 checks ; these checks, and the checks which keep the population 
 down to the level of the means of subsistence, are moral restraint, 
 vice, and misery." 
 
 This law, modified by an " unless," lacks precision ; and, besides, 
 this enumeration of the checks to population is by no means ex- 
 haustive. 
 
 The soil of the United States supports to-day well-nigh as many 
 millions of white men as it formerly supported thousands of red 
 men. Schoolcraft reckons that every hunter who lives by the pro- 
 duce of the chase needs seventy-eight square miles for his mainten- 
 ance. Oldfield assigns fifty square miles to the support of every 
 Australian aborigine, and Admiral Fitzroy gives sixty-eight to the 
 Patagonian. This obstacle to the population of a country would 
 seem to confirm the law of Mai thus ; but it was not the one which 
 Malthus had in his mind. 
 
 According to him, all creatures are reproduced in geometrical 
 ratio, but they are mown down by want and the failure of the means 
 of subsistence, and thus the equilibrium is restored. This obstacle 
 is in reality less repressive than preventive. The fecundity of 
 domestic animals is greater than that of wild ones, and why ? 
 Because their nourishment? is more regular and more abundant, and 
 requires less expenditure of force. 2 The same holds good of man in 
 his savage state. Insufficiency of nourishment is common ; he is 
 often reduced to feed on wild fruit, insects, larvae, worms, and even 
 balls of earth. He devours all these without freeing them of their 
 innutritious parts. Their value as food is small, and they cost 
 much, not only to find, but also to masticate and digest. They 
 would seem insufficient food even to an Irishman. In hunting and 
 fishing, the savage has to undergo muscular exertion, not indeed 
 long continued, but extremely severe while it lasts. His clothing 
 and shelter is scanty. The drain on his energies is therefore con- 
 siderable, and the reproductive capacity of the race is still more 
 restricted by the fact that the woman undergoes even more fatigue 
 and hardship than the man. 
 
 So much for the preventive check. There is also the repressive 
 check. The individual, under such conditions, cannot live long. 
 In some countries he runs the risk of being killed by wild beasts ; 
 and he moreover aids in his own destruction by fighting, whether 
 in single combat, in family feud, or in tribal war. 
 
 In our own civilisation, on the other hand, the means of subsist- 
 
 1 Principle of Population, p. 261, 8th edition. 
 
 2 See Herbert Spencer, Bioloyy, part VI., The Laws of Multiplication. 
 
 K 
 
130 POPULATION. 
 
 ence (as is shown in diagrams 20 and 21) greatly exceed the 
 population ; and man is more prolific, because he has better nourish- 
 ment with less outlay of force. 
 
 What are the obstacles which impede the increase of population 
 in geometrical ratio ? 
 
 Wherever man restricts his idea of what is essential to him to such 
 objects as he can procure without effort, he acquires a high degree of 
 fecundity. 
 
 Such were the Tahitians, who were compelled to have recourse to 
 such practices as infanticide for limiting their population. Such 
 are the Boers of South Africa ; such were the French of Lower 
 Canada, easy-going people, devoid of enterprise, living in a country 
 where land and the means of subsistence were easily procurable. 1 
 Their Anglo-Saxon neighbours restless, eager, active, not easily 
 satisfied were far less prolific. We may observe the same thing 
 amongst our European populations ; and here we are met by two 
 considerations of different kinds, the one moral, the other physio- 
 logical. 
 
 Malthns points to moral restraint as one of the checks to popula- 
 tion. I need not concern myself with the form which it assumes. 
 The fact is, that there are in our civilisation a great number of 
 persons who choose to limit, and who do limit, the number of their 
 offspring. But the causes which influence them do not come within 
 the domain of economics. 
 
 The beggar has many children, because he cares little about their 
 fate. They can always be beggars, as their parents were before 
 them. The origin of the word proletariat itself points to this fact. 
 
 In the same way, very wealthy people can afford to have many 
 children, because they have no anxiety about their future. And in 
 countries where the custom of primogeniture exists, as in England, 
 and where the father does not trouble himself about providing for 
 his sons or dowering his daughters, large families are of constant 
 occurrence. 
 
 These facts show that the number of births depends, amongst 
 other things, on the ease with which the parents can give their 
 children a position equal to their own. 
 
 At the present moment, France is Malthusian in practice, though 
 not in doctrine. The virtue of frugality has been preached to the 
 Frenchman, and the bourgeois has put this virtue in practice. He 
 has laboured only to be able the sooner to rest. The man who is 
 honoured has long been the man who " does nothing." In order to 
 attain this dignity, the bourgeois lived scantily, and sought in 
 economy a security for the future. Stinginess was the bourgeois 
 
 1 Johnston, quoted by Herbert Spencer, Biology, vol. ii., Laws of Multiplica- 
 tion. See Letourneau, Sociology. 
 
POPULATION. 
 
 131 
 
 virtue. Logically enough, he stinted himself in children as in every- 
 thing else. 
 
 Little by little, the peasant proprietors and large farmers per- 
 ceived and adopted the bourgeois system. They began with scraping 
 together a few crowns to buy a morsel of land. Then, foreseeing 
 the partition of this land, and dreading its attendant expenses, 
 which would have swallowed up at a single gulp all the fruits of 
 their toil, they effected a further saving in children, and contempt- 
 uously left it to the poorest classes to burden themselves with 
 large families. We give the proof of this assertion. 
 
 Dr. Bertillon has divided France into three groups. a The first 
 comprises thirty departments, in which more than one-fourth of 
 the peasantry about 285 out of every 1,000 inhabitants are pro- 
 prietors; the last comprises twenty-one departments, where less 
 than one-fifth of the peasants are proprietors, or an average of 177 
 per 1,000 ; while thirty-one departments, where the peasant-pro- 
 prietors number about 240 per 1,000, form an intermediate group. 
 
 MOVEMENT OF POPULATION ACCORDING TO THE NUMBER OF PEASANT 
 PROPRIETORS PER 1000 IN EACH GROUP (1862). 
 
 Groups of Departments 
 having 
 
 Number of Peasant 
 Proprietors per 1000 
 Inhabitants. 
 
 Marriages. 
 
 Births. 
 
 Deaths. 
 
 Number of 
 Departments 
 in each 
 
 Group. 
 
 Most proprietors 
 Medium number 
 Fewest proprietors 
 
 285 
 240 
 177 
 
 25-3 
 25-6 
 
 25-87 
 
 24-78 
 25-7 
 281 
 
 23-23 
 23-0 
 23-2 
 
 30 
 31 
 21 
 
 Average . . 
 
 240 
 
 25-6 
 
 26 
 
 23-1 
 
 82 
 
 (See Diagram 23, p. 132.) 
 
 From this form of economy on the part of the bourgeois and the 
 peasant there results a falling off in the number of births. 
 
 The increase of population is at the present time slower in 
 France than anywhere else. For every 100 persons in England and 
 France respectively in 1801, there were in 1876 or 1878, in England 
 212 persons, in France only 142. 
 
 1 These figures have been taken from a remarkable work, entitled Demographic 
 de la France, and published in the Dictionnaire Encyclopedique des Sciences 
 Medicates. 
 
132 
 
 POPULATION. 
 
 27 
 
 26 
 
 25 
 
 24 
 
 23| 
 
 // 
 
 s 
 
 Diagram 23. Increase of Population according to the Number of Peasant Proprietors 
 per 1000 Inhabitants in each Group. 
 
Bk.iv.Ch.L] 
 
 POPULATION. 
 
 133 
 
 200 
 
 212. 
 
 / 
 
 197 
 
 175 
 
 175 
 
 165: 
 
 150 
 
 153 
 
 125 
 
 126, 
 
 139 
 
 112 
 
 100 
 
 1801 1811 1821 1831 1841 1851 1861 1870 
 
 1880 
 
 Diagram 24. Increase per cent, of Population in France and England, irrespective of 
 additions of territory. Decreasing Birth-rate in France. 
 
134 
 
 POPULATION. 
 
 
 Population of 
 the British Isles. 
 
 Increase per 1,000 
 Inhabitants. 
 
 1801 
 
 15,996,400 
 
 
 1821 
 
 21,272,187 
 
 330 
 
 1831 
 
 24,392 485 
 
 525 
 
 1841 
 
 27,289,404 
 
 656 
 
 1851 
 
 29,571,644 
 
 750 
 
 1871 
 
 31,638,400 
 
 975 
 
 1878 
 
 33,936,000 
 
 1,126 
 
 
 
 
 The birth-rate in France is eighty per cent, lower than in England 
 and Prussia. Does this arise from a plethora of inhabitants ? Is 
 there no room on French soil for one Frenchman more ? On the 
 contrary, the specific population of France is scanty, compared with 
 her extent. 
 
 The necessaries of life are, after all, relative, With the peasant- 
 proprietor, the one thing needful is his property. With a whole 
 class of the bourgeoisie, it is a place under Government. And for 
 France, taken in her entirety, it is not a daily ration of bread, but 
 a certain amount of comfort. 
 
 Now there are two ways in which this comfort may be gained 
 and preserved ; either by redoubling one's efforts, or by reducing 
 one's burdens to a minimum. Most Frenchmen prefer the latter 
 course. We blame the imprudence of the spendthrift who brings 
 children into the worJd without having the means of maintaining 
 them in it ; but the prudence which refuses to undertake the duties 
 of paternity for fear of the burdens which they entail, is a grave 
 symptom of moral inertia. The spring of life and energy must be 
 broken in a man who, instead of acting, makes it his aim to avoid 
 action. Looked at from this point of view, the following table must 
 excite the deepest concern : l 
 
 NUMBER OF LEGITIMATE CHILDREN (BORN ALIVE) PER MARRIAGE. 
 
 1800-1815 3-93 
 
 1816-1830 3-73 
 
 1831-1835 3-48 
 
 1836-1840 3-25 
 
 1841-1845 321 
 
 1846-1850 3-11 
 
 1851-1855 3-10 
 
 1856-1860 3-03 
 
 1861-1865 3-08 
 
 (See Diagram 25, p. 135.) 
 
 1 Economiste Frangais, March 13, 1880 ; Question de la Population en France, 
 by M. Paul Leroy-Beaulieu. 
 
Bk.iv.Ch.i.] 
 
 POPULATION. 
 
 135 
 
 400 
 
 390 
 
 38C 
 
 370 
 
 360 
 
 350 
 
 34C 
 
 330 
 
 320 
 
 310 
 
 \ 
 
 \ 
 
 300 
 
 5 5 
 
 Diagram 25. Number of Legitimate Children (born alive) per Hundred Marriages 
 during various periods. 
 
136 
 
 POPULATION. 
 
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Bk.iv.Ch.i.] 
 
 POPULATION. 
 
 137 
 
 
 
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138 POPULATION. 
 
 Let ns cast a glance at Diagram 27, which shows the population 
 of various States ranged in three groups according to age ; viz., from 
 birth to fifteen years, from fifteen to sixty, and from sixty onwards. 
 Out of every thousand in France, there are but 275 living of the first 
 group, while there are 617 of the second, and 108 of the third. 
 
 In England the proportion is very different. The first group 
 gives us 354 per thousand, the second only 573, and the last only 
 73. 
 
 But to understand all that is implied in the above figures, we must 
 turn to those relating to the slaves in the United States before the 
 Emancipation. The first group is 424 per thousand a number 
 exceeding that of the corresponding group in the other countries ; 
 the second is 541, and the third only 35. If the birth-rate is high, the 
 waste is enormous. They die early ; the age of sixty is seldom 
 
 In France the birth-rate is low, and the mortality between fifteen 
 and thirty high ; so that while France ranks fifth as to general 
 mortality, she ranks second as to the mortality between fifteen and 
 thirty years, her death-rate being 8'63 per thousand, while that of 
 the Scandinavian countries is only from 5'8 to 6'7, that of Prussia 7, 
 and that of England, with her vast and fatal industries, and of Spain, 
 with her imperfect civilisation, only 8'2. 
 
 SURVIVAL TO THE AGE OF TWENTY. 
 
 (Reforme Economique, Fo. V., p. 57.) 
 
 Proportion per 
 100 inhabitants. 
 Norway ............... 726 
 
 Denmark ............... 71-3 
 
 Sweden ............... 69'8 
 
 England ............... 64'4 
 
 Belgium ............... 64-2 
 
 France ............... 62-9 
 
 Netherlands .............. 61-6 
 
 Prussia ............... 58-6 
 
 Italy ................ 53-4 
 
 Spain ............... 61-1 
 
 (See Diagram 28, p. 
 
 The loss is enormous, for the man is already reared, and prepared 
 to take his part in production, and in the increase of the race. He 
 dies, and all this capital is gone ! 
 
 This high mortality ought to attract our attention, for it undoubt- 
 edly springs from our absurd system of education, from oar military 
 service, and from the parsimony with which the young man's parents 
 have provided for his wants, in order to leave him a larger fortune 
 at their death. 
 
 This period over, the death-rate is very low; life is long; and to 
 
Bk.iv.Ch.i.] 
 
 POPULATION. 
 
 139 
 
 this state of things there attaches a certain inconvenience, since, after 
 sixty years of age, a man cannot, as a general rule, be regarded any 
 longer as an instrument of production, and becomes, therefore, a 
 dead weight on the active portion of the population. 
 
 Arguing from analogy, we may apply to France the biological 
 principle, that in general superior organisms live longer than inferior 
 organisms. 
 
 We will go farther, and apply another principle, that among 
 animals a species produces many young ones of which it takes no 
 care at all, and a few of which it takes a great deal of care. 
 
 The French nation has few children; but of such as it has, it 
 takes an amount of care, inadequate certainly, but yet superior to 
 that of other races, at least as to its results. This population cares 
 
 10 
 
 20 
 
 30 
 
 40 
 
 60 
 
 60 
 
 70 
 
 80 
 
 
 NORWAY 
 
 
 
 
 
 
 
 
 DENMARK 
 
 SW6 O E N 
 
 
 
 
 
 
 .^A 
 
 
 ENS LAND 
 
 
 
 
 
 
 
 QEIGIUM 
 
 
 
 
 
 
 
 FRANCE 
 
 
 
 
 
 
 
 NSTHCRLJ 
 
 NDS 
 
 
 
 
 
 
 PRUSSIA 
 
 
 
 
 
 
 
 ITALY 
 
 
 
 
 
 
 SPAIN 
 
 
 
 
 
 
 
 
 
 
 
 Diagram 28. Survival to the Age of Twenty. 
 
 too much for its conservation, and too little for its renewal. The 
 old are too many, and the young are too few; and the old bring in 
 the government of the old, old ideas, old things, the negation of all 
 progress. 
 
 On the other hand, it rnny be paid, the English population in- 
 creases fast enough. What becomes of the surplus? They emigrate 
 from Great Britain to the United States or Australia. In the 
 thirty-nine years between 1837 and 1876, 8,000,000 persons emi- 
 grated that is, on an average, 22,800 a year. Each emigrant 
 would be worth about 175 to his adopted country; that is, 175 
 would represent the value, out there, of his rearing, education, and 
 skill, and of the stock of money, clothes, etc., which he would bring 
 with him. England has, therefore, contributed an annual average 
 
140 POPULATION. 
 
 of 4,000,000 1 to the progress of America and Australia. And 
 then, when a colony has become powerful, like the United States, 
 she separates herself from the mother country, and closes her 
 frontiers against her. In the meantime, the moment she is strong 
 enough, she raises her customs tariffs, like Australia and Canada, 
 so as to exclude English produce. England has, therefore, all the 
 trouble and none of the profit. She only succeeds in raising up a 
 host of competitoi's. Would not England have been better off if all 
 these millions had been spent within her own borders ? 
 
 The question is a complex one, and there is much to be said on 
 both sides. But has this emigration been so altogether unproductive 
 to England r Is it nothing to her to have her people settled all 
 over the face of the earth, speaking the English language, retaining 
 English manners and traditions ? No doubt, had her population 
 been less dense, the contest for existence would have been less 
 intense ; but that is stagnation; it is arrested development. "Every 
 child you don't have," says M. de la Palisse, " is one man the less." 
 And that man might have been a Papin, a Watt, a Stephenson ! 
 
 Men crowd each other, but still they help each other. Plant a 
 grain of wheat by itself, and it is very doubtful whether it will 
 produce a single ear; but sow an entire field, and the multitude of 
 stalks will be a mutual protection. Solidarity is a law of nature, 
 even among organisms which are perfectly unconscious of it. 
 Without it they would long ago have disappeared, even if they 
 could ever have come into being. So it is with man. 
 
 I do not here take account of physiological hindrances resulting 
 from various diseases, and from the over-heated life of our artificial 
 civilisation; I do but note a fact with a view to its economic conse- 
 quences. 
 
 The increase of population forces progress on every people which 
 has not, like the Hindoo, given itself up to passive resignation. 
 Beneath this pressure the contest for existence becomes more eager; 
 man makes greater efforts ; he develops his powers and his capacity 
 for utilities. If we cannot say that all densely populated nations 
 are strong, we can at least say that no nation with a sparse and 
 stagnant population has ever been strong. So necessary is this 
 density, that we everywhere see a movement towards the towns, 
 where the population is closest. 
 
 The greatest prudence is needed in putting in practice the moral 
 restraint advocated by Malthas. The exaggerated application of 
 this principle threatens little by little to destroy the French popu- 
 lation. If this should extend to the other races which form the front 
 rank of civilisation, they will run the risk of some day being sup- 
 
 1 The Economist Commercial Review of 1878, p. 5. The Economist saysjorty 
 millions ; but this is clearly a mistake. 
 
Bk. iv. Ch. i.] POPULATION. 141 
 
 planted by the less civilised peoples. Whole nations will share the 
 fate which has already befallen the enfeebled and degenerate 
 descendants of our aristocracy and wealthy bourgeoisie. 
 
 We see in France the fruits of a depressing form of political 
 economy. In the early stages of civilisation, selection is stimulated by 
 the strength of the man, and by the beauty, or at least the energy, of 
 the woman. In our own, selection is determined by social position, 
 by dowry, by title, regardless of physical disqualifications, hereditary 
 or acquired. In England, every young man has learnt to count on 
 himself, and every girl to count on herself; they unite to carry on 
 together the contest for existence ; there is real selection, the woman 
 valuing the energy of the man, and the rnan the devotion of the 
 woman. 
 
 Nevertheless, in this prolific country of England, certain dis- 
 tinguished men, advanced thinkers, founded in 1877 the Malthusian 
 League, with Dr. Drysdale as its President. We give some para- 
 graphs from the programme of this Society, which will explain its 
 objects. 
 
 4. "The preventive measures consist iu the limitation of children 
 by abstinence from marriage, or by prudence after marriage. 
 
 5. " The prolonged abstinence from marriage which Malthus 
 preached is the source of many diseases and sexual vices ; early 
 unions, on the contrary, tend to ensure sexual purity, domestic com- 
 fort, social happiness, and individual health ; but it is a grave 
 offence for men and women to bring into the world more children 
 than they can suitably lodge, feed, clothe, and educate. 
 
 6. " Over-population is the most fruitful source of pauperism,, 
 ignorance, crime, and disease." 
 
 We can hardly give a flat contradiction to this statement, and 
 say that it is right that men and women should bring into the world 
 more children than they can suitably house, feed, clothe, and 
 educate; but what do we mean by "suitably"? The question 
 admits of the most various answers. 
 
 The Malthusian League puts the question again in another form ; 
 the restriction of population would have " an immense and almost 
 immediate result in the diminution of the offer of labour, and the 
 consequent rise of wages." This second view of the subject deserves 
 careful examination, for it raises the question What are the laws- 
 which regulate the value of man ? 
 
142 
 
 PROFESSIONS AND OCCUPATIONS. 
 
 CHAPTER II. 
 
 PROFESSIONS AND OCCUPATIONS. 
 
 WE are every day hearing the complaint that hands are wanted 
 for agriculture. The phrase has become quite hackneyed. As far 
 back as 1848, Ledru Rollin, in a speech on the right of labour, spoke 
 of the depopulation of the country districts, and of the necessity of 
 sending the workmen of the towns back to agriculture. In saying 
 so, he certainly betrayed some ingratitude to those to whom we owe 
 the Revolution, and put a somewhat strange interpretation OD free- 
 dom of labour. 
 
 100 
 
 1851 1856 1861 1866 1872 1876 
 
 Diagram 29. Proportion between Urban and Rural Population in Prance. 
 
Uk. iv. Ch. ii.] 
 
 PROFESSIONS AND OCCUPATIONS. 
 
 143 
 
 It is not in France only, but in England and everywhere else, 
 that- the rural population has an undoubted tendency to migrate 
 towards the towns, and that agriculture thus tends to merge in 
 manufacture. 
 
 DISTRIBUTION PER CENT. 
 (Statistique de la France, vol. v., 1876, p. 24.) 
 
 
 Year. 
 
 
 1851. 
 
 1856. 
 
 1861. 
 
 1866. 
 
 1872. 
 
 1876. 
 
 Urban . . . 
 
 25-52 
 
 27-31 
 
 28-86 
 
 30-46 
 
 3112 
 
 32-44 
 
 Kural . . . 
 
 74-48 
 
 72-69 
 
 71-14 
 
 69-54 
 
 68-88 
 
 67-56 
 
 (See Diagram 29, p. 142.) 
 
 Mr. Max Wirth has recorded the same facts in England. 1 
 
 This movement is in accordance with the law we have seated 
 
 the tendency of an agricultural civilisation to develop into a 
 
 manufacturing civilisation. 
 
 Under the present system of agriculture, the use of machinery 
 
 being limited, man's capacity for production is feeble, and the wages 
 
 1 In manufacturing countries, the manufacturing and the agricultural classes 
 each form one continuous wave, moving, however, in opposite directions, the 
 former steadily increasing and the latter steadily diminishing. The agricultural 
 population of Saxony in 1849 was 32 per cent, of the whole ; in 1861 it had 
 fallen to 21 per cent., while the manufacturing population had in the same 
 time risen from 51 to 56 per cent. In Great Britain this movement goes on 
 jointly with the increase of the population and of exports and imports ; that is 
 to say, with the production of wealth. (Lois du, Travail, p. 45.) 
 
 
 
 
 
 
 Population. 
 
 Year. 
 
 Imports. 
 
 Exports. 
 
 Total. 
 
 Population. 
 
 Agri- 
 cul- 
 
 Indus- 
 
 Other 
 Occu- 
 
 
 
 
 
 
 tural. 
 
 trial. 
 
 pa- 
 
 
 
 
 
 
 
 
 tions. 
 
 
 
 
 
 
 
 
 
 / 
 
 1 
 
 / 
 
 1811 
 
 26,510,186 
 
 32,890,712 
 
 59,400,898 
 
 12,596,803 
 
 35-0 
 
 44-0 
 
 21-0 
 
 1821 
 
 30,792,760 
 
 36,659,630 
 
 67,452,390 
 
 14,391,631 
 
 33-0 
 
 46-0 
 
 21-0 
 
 1881 
 
 49,713,889 
 
 37,164,372 
 
 86,878,261 
 
 16,539,318 
 
 30-0 
 
 48-0 
 
 22-0 
 
 1841 
 
 64,377,962 
 
 51,534,623 
 
 116,012,585 
 
 18,720,394 
 
 28'8 
 
 49-6 
 
 21-6 
 
 1851 
 
 110,484,997 
 
 74,488,722 
 
 184,933,719 
 
 20,959,477 
 
 26-2 
 
 51-0 
 
 22-8 
 
 1861 
 
 217,485,024 
 
 159,632,498 
 
 377,117,522 
 
 23,128,518 
 
 21-5 
 
 58-1 
 
 20-4 
 
 (See Diagram 30, p. 144.) 
 
144 
 
 PROFESSIONS AND OCCUPATIONS. 
 
 100 
 
 1811 182! 1831 1841 1851 1861 
 
 Diagram 30. Movement of Industrial and Rural Populations in England, relatively to 
 General Population. 
 
 100% 
 
 95 
 
 90 
 
 85 
 
 IMMIGRAMT 
 
 OF OEP 
 
 POPVLA DON 
 
 1861 1866 1871 1878 
 Diagram 31. Proportion of Immigrant Population to Average Population in a Department. 
 
Bk. iv. Oh. ii.] 
 
 PEOFESSIONS AND OCCUPATIONS. 
 
 145 
 
 of the agriculturist will, therefore, necessarily be lower than those 
 of the artisan. Man now knows that he is not bound to the soil 
 like a plant. The railway runs near him, and he knows that he 
 can go where he finds himself the most valued. This increasing 
 disposition to migrate is shown by the following figures : 
 
 In 1861, the number of Frenchmen who remained in or had 
 returned to their own department was 88' 24 per cent, of the inhabi- 
 tants ; in 1866 it was only 87*45. Immediately after the war it 
 fell to 84'97, and it is now only 83'74. This steady reduction in the 
 stationary population shows how the displacement of populations 
 grows year by year. (See Diagram 31, p. 144.) 
 
 Nevertheless, the agricultural population of France remains con- 
 siderable, as the following tables show : 
 
 Agriculture. 
 
 1st. Proprietors and peasants farm- 
 ing their own land 10,620,886 
 
 2nd. Farmers, husbandmen, and 
 metayers 5,708,132 
 
 3rd. Various agricultural occupa- 
 tions (wine-growers, wood-cutters, 
 gardeners, market-gardeners, &c.) 2,639,587 
 
 56-00 
 30-09 
 
 13-91 
 
 18,968,605 100-00 
 
 Industries. 
 
 f Manufactures 
 * ( Trades . . . 
 
 3,133,807 
 6,140,670 
 
 33-79 
 66-21 
 
 9,274,537 100-00 
 
 Commerce and transport 3,837,223 100-00 
 
 Liberal 
 Professions. 
 
 /Gendarmerie and Police 
 
 Keligion 
 
 Public Service . . . 
 Education .... 
 
 |Law 
 
 [Medicine 
 
 and Art . 
 
 Persons \ 
 
 living Proprietors and fund-holders 
 exclusively \ State pensioners .... 
 
 on their 
 own means, j 
 
 130,769 
 229,667 
 567,541 
 222,641 
 148,905 
 141,830 
 90,052 
 
 1,957,037 
 194,850 
 
 8-54 
 
 15-00 
 
 37-06 
 
 14-54 
 
 9-72 
 
 9-26 
 
 5-88 
 
 1,531,405 100-00 
 
 90-94 
 9-06 
 
 2,151,888 100-00 
 
 (See Diagram 32, p. 146.) 
 
146 
 
 PROFESSIONS AND OCCUPATIONS. 
 
 Occupation. 
 
 Agriculture 18,968,605 53-04 
 
 Industries 9,274,537 25'93 
 
 Commerce and transport 3,837,223 10-73 
 
 Liberal professions 1,531,405 4-28 
 
 Persons living exclusively on their incomes (pro- 
 prietors, fund-holders, and pensioners) . . . 2,151,888 6-02 
 
 35,763,658 lOQ-QQ 
 Unclassed population (beggars, vagabonds, and 
 
 occupations unknown) 281,740 
 
 36,045,398 
 
 (See Diagram 33.) 
 
 IOO 
 Fundholders 
 
 Liberal Professions 
 90 
 
 Commerce 
 80 
 
 
 
 
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 30 
 
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 Diagram 32. Proportionate Distribution of each Group of Occupations. 
 
 10 
 
 20 
 
 30 
 
 40 
 
 50 
 
 60 70 
 
 80 
 
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 Diagram 33. Proportion of Persons employed in each Occupation. 
 
Bk.iv.Ch.ii.] PROFESSIONS AND OCCUPATIONS. 147 
 
 It is not every one in a country who labours at all. Some labour 
 and produce for others ; others enjoy the fruits of those labours. 
 
 Before giving the proportions of the active and inactive classes in 
 Prance, I must make the reservation that a certain number of 
 persons classed as active might more properly be classed as burden- 
 some. Bats are active, but their activity is destructive. So it is 
 with the activity of certain social parasites. 
 
 Dr. Bertillon gives these numbers as follows : 
 
 It is computed that in 1866, out of every ten thousand of the 
 entire population, the number of persons engaged in the so-called 
 liberal professions (including the families and dependants) was : 
 
 Persons living by professions connected with those scientific, 
 literary, and artistic works which are the glory of onr country, 16 
 to 17; 
 
 Persons living by professions concerned with the health of men 
 and domestic animals, 36 to 37 ; 
 
 Persons living by professions connected with the maintenance of 
 justice and equity between man and man, 46 to 47 ; 
 
 Persons living by professions connected with the education of our 
 children, with the transmission of the inheritance of knowledge left 
 us by our ancestors, 53 ; 
 
 i 'ersons living by professions connected with the exercise of the 
 various forms of worship, 62 ; 
 
 Persons living by the carrying on of public business, 108 ; 
 
 Lastly, persons living by the protection of the public peace at 
 home and abroad, and of public and private wealth, 171. 
 
 I may mention in addition at the same period : 
 
 Persons living by the hire of property in the country, 190 ; 
 
 Persons living by the hire of property in towns, 61 to 62 ; 
 
 Persons living by the loan of money to the State or to others, 196 ; 
 
 Persons living on Government pensions or on other means public 
 or private, 39. 1 
 
 Many of these professions appear at first sight useful and pro- 
 ductive, while a closer scrutiny would show that there are magis- 
 trates, charged with the production of public safety, who have never 
 produced anything but the public danger which results from con- 
 tempt for the law, induced by the baseness of the judge. 
 
 Bertillon, Dictionnaire Encyclopedique des Sciences Medicates, Art. FBANCE. 
 
148 
 
 PROFESSIONS AND OCCUPATIONS. 
 
 
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Bk.iv.Ch.iii.] THE VALUE OP MAN. 151 
 
 CHAPTER III. 
 
 THE VALUE OF MAN. 
 
 M/N, as we have said, appropriates utilities either by his own efforts 
 or by exchange. 
 
 The personal effort of man is called labour. It is the employment 
 of his mental or bodily forces in the transformation of the forces of 
 nature into utilities. 
 
 Man can act directly ; but if he is alone he acts feebly. Left to 
 his own resources, we have seen that Robinson Crusoe attained with 
 difficulty to the lowest possible standard of comfort ; and yet 
 Robinson Crusoe had at his disposal the means and methods of a 
 highly developed civilisation. 
 
 Hence results a perpetual exchange of the utilities possessed by 
 each individual. 
 
 Now each individual possesses a certain number of utilities ; and 
 the greater their number, the greater his power of acquiring others 
 by purchase. 
 
 Man can be the owner of two kinds of utilities ; the one, which is 
 commonly called capital, external to himself, an inert mass of soil, 
 machines, coal, stock-in-trade things by themselves useless ; the 
 other, consisting of things incorporated in himself, his intellectual 
 faculties, the knowledge he has acquired, his natural aptitudes and 
 personal attributes. 
 
 He can exchange these utilities for others. We speak of the 
 relations of capital and labour, and we make of them two hostile 
 entities. In reality, there can be no relations except between utilities 
 of different kinds. 
 
 I am a workman, I have learned a trade, I can make locks. I 
 am possessor of the utility known as a lock. Whoever wishes to 
 have locks will have to apply to me. But who will he be ? The 
 possessor of some other utilities, personal or impersonal. He will 
 exchange some of his utilities for mine. Suppose he is a professor ; 
 he will exchange his utility, knowledge, for my utility, locks. But 
 perhaps I do not want his utility, knowledge ? Others, however, do 
 want it ; and thus his utility, knowledge, realised under the form of 
 fees, will give him the power to purchase my utility, locks. 
 
 But this professor does not, perhaps, consume immediately all the 
 utilities which he has received in exchange for those he has given. 
 He lets them lie unproductive in his chest, or else he transforms 
 them into land, mines, railways, or some other form of fixed capital. 
 I, the locksmith, consume at once the utilities I receive in exchange 
 for those I have given. Consequently I have at my disposal only 
 my personal utilities, while the professor has added to his personal 
 
152 THE VALUE OF MAN. 
 
 utilities a number of impersonal utilities. His purchasing power is 
 therefore greater than before ; and the difference between his pur- 
 chasing power and mine is also greater than before. But if it has 
 been gain to him, has it been loss to me ? By no means ; for if his 
 purchasing power has become greater, he can purchase more locks ; 
 my locks will therefore go up in value, and the power of my utilities 
 will be increased. 
 
 When people oppose the terms capital and labour, they misuse 
 the words. It is simply an exchange of personal and impersonal 
 utilities. 
 
 Man is a fixed capital, capable of producing utilities, just like a 
 field, a machine, or any other implement, His superiority as an 
 implement lies in his being able to improve himself ; and the more 
 he is improved the more capable he is of producing utilities, and 
 consequently the greater his value. The more a steam-engine can 
 do, and the less circulating capital it consumes in doing it, the better 
 engine it is. 1 The same rule applies to man. He too consumes 
 fuel in the form of bread, meat, and wine. If he produces half as 
 much again with the same amount of fuel, his power of utility will 
 be doubled and his value proportionately increased. 
 
 Now, in what way is his power of production capable of augmen- 
 tation? It is augmented by knowledge, which has shown him easier 
 and quicker methods of subjecting matter to changes of condition 
 and of place ; and by the use of the steam-engine , which substitutes 
 its own force for that of his muscles. His capacity for utility 
 increases in proportion to the power of the tool he uses. Now what 
 does his power of utility represent ? It represents his value. 
 
 We may say then, 
 
 The value of man is in proportion to the power of his implements. 
 
 For want of observing this fact, many people have authoritatively 
 declared that machinery must destroy labour and lower wages. 
 Such was Sismondi's prophecy, and it has been often repeated since, 
 although the increase in the demand for labour and the amount of 
 wages has repeatedly demonstrated its falsity. In 1760 Arkwright 
 took out his first patent for the spinning jenny. At that time there 
 were in England 5,200 spinners using the spinning wheel, and 2,700 
 weavers, in all 7,900 persons engaged in the production of woven 
 materials. 2 Combinations were formed against his machine, and 
 against that of Hargraves, and he was obliged to take out several 
 patents in succession. The steam-engine of Watt, which was to 
 bring Arkwright's loom into general use, was not invented till 1774, 
 and it was not till 1775 or 1777 that steam cotton mills began to 
 spread through the United Kingdom. 
 
 In 1787, a Parliamentary inquiry showed that the number of 
 
 1 See Book II. 
 
 2 Michel Chevalier, Cours d'Economie Politique, vol. i. p. 354. 
 
dk.iv.Ch.iii.] THE VALUE OF MAN. 153 
 
 work-people had mounted tip to 320,000, an increase of 4,400 per 
 cent. Since then machines have been improved and the same 
 amount of work has needed fewer hands to do it ; yet the number 
 of workmen has gone on steadily increasing. 
 
 Mr. Baines, in his Statistical Documents, states that in 1833 there 
 were in the United Kingdom 237,000 work-people employed in 
 spinning and weaving cotton by machinery, and 250,000 hand 
 weavers, in all, 487,000 persons employed exclusively in the spinning 
 and weaving of cotton stuffs. By reckoning the workmen employed 
 in subsidiary industries, such as calico-printing, he makes it up to 
 800,000 workmen. 
 
 If we add to these the thousands of persons employed in the 
 trades to which the existence of these work-people gives rise, we 
 come to the conclusion that the machinery, which, when first intro- 
 duced, was to have been the ruin of 7,900 spinners, was in 1833 
 providing two million persons with the means of subsistence. 
 Since that time like causes have produced like results. The number 
 of persons now living by the cotton industry cannot be less than 
 2,500,000. 
 
 J. B. Say explained the causes of this phenomenon. Suppose 
 300,000 francs are employed in a manufacture, one-third in raw 
 material, and two- thirds in wages. The manufacturer finds a 
 machine which saves one-third. Will he let the 100,000 francs thus 
 saved lie idle ? No. He will lower the price of his produce in 
 proportion, which will proportionately increase the consumption, 
 and the increased consumption will require the extension of his 
 works, or, if he does not put the money into his business, he will 
 put it in a bank, or lay it out in investments, and the capital thus 
 set free for use will stimulate to fresh enterprises, which in their 
 turn will demand increased human effort. The more abundant cir- 
 culating capital becomes, the more eager are its possessors to find 
 it employment and to convert it into fixed capital. 1 They cannot 
 do so without the aid of human effort. Whether they found a fac- 
 tory, or build a house, or invest in a railway, still they are de- 
 manding human effort. And the greater the demand the higher 
 the price. 
 
 Furthermore, the value of the circulating capital produced by 
 man diminishes in proportion to its abundance. 
 
 The value of man, as of all fixed capital, is in direct ratio to the 
 Abundance of circulating capital. 
 
 This law'is demonstrated by the following figures, which show 
 the increase of wages in France during the nineteenth century : 
 
 1 See Book II. 
 
154 
 
 THE VALUE OF MAN. 
 
 AVERAGE DAILY WAGES OF BUILDERS' WORKMEN EMPLOYED ox 
 
 CHARITABLE INSTITUTIONS. 
 (After M. de Foville, Economiste Fran$ais, 5th Feb., 1876.) 
 
 
 1824-33. 
 
 1834-43. 
 
 1844-53. 
 
 1854. 
 
 1866. 
 
 Masons 
 Carpenters .... 
 Joiners 
 Locksmiths .... 
 
 fr. 
 2-00 
 2-15 
 2-16 
 2-26 
 
 fr. 
 2-07 
 2-21 
 2-22 
 2-32 
 
 fr. 
 2-15 
 2-32 
 2-30 
 2-42 
 
 fr. 
 2-26 
 2-44 
 2-41 
 2-55 
 
 fr. 
 2-34 
 2-52 
 2-49 
 
 2-64 
 
 AVERAGE DAILY WAGES IN THE BUILDING TRADE ix THE CHIEF 
 
 DEPARTMENTAL TOWNS, PARIS NOT INCLUDED. 
 
 (After M. Foville, ubi sup.) 
 
 
 1853. 
 
 1857. 
 
 1871. 
 
 1872. 
 
 50 /o Masons .... 
 50 /> Carpenters . . . 
 47 j<> Joiners .... 
 39 y Locksmiths . . . 
 
 .- 
 
 fr. 
 2-07 
 2-20 
 2-02 
 2-16 
 
 fr. 
 2-40 
 2-53 
 2-31 
 244 
 
 fr. 
 3-06 
 3-34 
 2-85 
 3-02 
 
 fr. 
 3-07 
 3-43 
 2-98 
 3-01 
 
 AVKRAGK DAILY WAGES OF WORKMEN IN THE BUILDING TRADE IN 
 
 PARIS. 
 
 
 1805. 
 
 1810. 
 
 1853. 
 
 1S66. 
 
 1875 
 
 Increase. 
 
 Navvies 
 Stone masons . . 
 Bricklayers . . . 
 Masons . . . . . 
 Rough wallers . . 
 Labourers .... 
 Carpenters. . . - 
 
 fr. 
 2-25 
 3-35 
 3-25 
 3-25 
 2-50 
 1-70 
 3- 
 350 
 
 fr. 
 2-25 
 3-50 
 4- 
 3-25 
 2-50 
 1-90 
 3-25 
 3-25 
 
 fr. 
 3- 
 5- 
 5-25 
 4-25 
 3- 
 2-50 
 5- 
 4- 
 
 fr. 
 4- 
 5-50 
 6- 
 5-25 
 4-25 
 3-35 
 6- 
 4-50 
 
 fr. 
 4- 
 5-50 
 6-25 
 550 
 5- 
 3-50 
 6- 
 5- 
 
 % 
 77 
 69 
 92 
 69 
 100 
 105 
 100 
 42 
 
 Smiths 
 Fitters 
 
 5- 
 3-75 
 
 5- 
 
 4- 
 
 5- 
 4-25 
 
 6-50 
 4-60 
 
 7-0 
 5-25 
 
 40 
 40 
 
 Glaziers .... 
 Plumbers .... 
 Slaters 
 
 3- 
 4-25 
 5- 
 
 
 3-75 
 4- 
 5- 
 
 5- 
 
 5-50 
 g. o 
 
 525 
 6- 
 6- 
 
 75 
 41 
 
 20 
 
 Painters .... 
 Locksmiths . . . 
 
 4-25 
 
 ... 
 
 4- 
 
 4- 
 
 5- 
 5- 
 
 6'*0 
 5- 
 
 41 
 
 We ive the seventeen departments in which, according to M. 
 de Foville, the wages for field-work had in 1862 risen the least. 1 
 1 IS Economise Franqais, January 8, 1876. 
 
Bk. iv. Ch. iii.] . 
 
 THE VALUE OF MAN. 
 AVERAGE DAILY WAGES. 
 
 155 
 
 Department. 
 
 1849-53. 
 
 1855. 
 
 1862. 
 
 Increase from 
 1849-53 to 1862. 
 
 Cotes-du-Nord . . . 
 
 fr. 
 0-80 
 0-86 
 
 fr. 
 0-90 
 0-91 
 
 fr. 
 1-14 
 1-14 
 
 4*6 
 
 32-5 
 
 
 0-82 
 
 0-94 
 
 1-18 
 
 43-9 
 
 Haute-Garonne . . . 
 Ille-et-Vilaine . . . 
 Ari^ge . . 
 
 1-03 
 0-97 
 1-05 
 
 1-08 
 1-03 
 1-18 
 
 1-21 ' 
 
 1-29 
 1-35 
 
 17-5 
 33-0 
 
 28-6 
 
 Tarn 
 
 1-15 
 
 1-22 
 
 1-37 
 
 19-1 
 
 Haute- Vienne . . . 
 Tarn-et-Garonne . . 
 Gers . .... 
 
 1-14 
 1-06 
 1-12 
 
 1-25 
 1-26 
 1-26 
 
 1-37 
 1-40 
 1-43 
 
 20-2 
 32-1 
 
 27-7 
 
 
 1-20 
 
 1-37 
 
 44 
 
 20-0 
 
 Basses-Pyrenees . . . 
 Indre . . 
 
 1-10 
 1-26 
 
 1-17 
 1-55 
 
 44 
 
 48 
 
 30-9 
 17-4 
 
 Mayenne 
 Hautes-Pyrenees . . 
 Manche 
 
 1-14 
 1-10 
 1-21 
 
 1-20 
 1-12 
 1-33 
 
 50 
 50 
 53 
 
 31-6 
 3G-4 
 26-4 
 
 Pas-de-Calais .... 
 
 1-08 
 
 1-30 
 
 1-53 
 
 41-7 
 
 The following are the twenty departments where the wages of 
 field-labour were highest in the same year. 
 
 AVERAGE DAILY WAGES. 
 
 Department. 
 
 1849-53. 
 
 1855. 
 
 1862. 
 
 Increase from 
 1849-53 to 1862. 
 
 Seine 
 
 fr. 
 2- 
 
 fr. 
 2-38 
 
 fr. 
 3*10 
 
 % 
 55'0 
 
 Seine-et-Oise .... 
 Seine-et-Marne . . . 
 Bouches-du-Khone . . 
 Rhone 
 
 1-80 
 1-90 
 
 97 
 92 
 
 2-17 
 2-23 
 2-16 
 2-20 
 
 2-66 
 2-56 
 2-50 
 2-50 
 
 47-7 
 34-7 
 26-9 
 30-2 
 
 
 75 
 
 92 
 
 2-50 
 
 42-8 
 
 
 69 
 
 87 
 
 2'37 
 
 40-2 
 
 Var 
 
 65 
 
 92 
 
 2-35 
 
 42-4 
 
 Aube 
 
 67 
 
 83 
 
 2-33 
 
 39-5 
 
 Marne . . 
 
 72 
 
 90 
 
 2-30 
 
 33.7 
 
 Yonne 
 Haute-Marne .... 
 Charente-Inf6rieure . . 
 Vaucluse 
 Doubs 
 
 65 
 66 
 72 
 04 
 63 
 
 74 
 1-92 
 1-91 
 2-30 
 1-85 
 
 2-26 
 2-22 
 2-22 
 2-20 
 2-17 
 
 370 
 33-7 
 29-0 
 7-84 
 33'1 
 
 
 52 
 
 1-75 
 
 2-16 
 
 42*1 
 
 Ardennes ..... 
 
 75 
 
 1-84 
 
 2-16 
 
 23-4 
 
 Oise 
 
 54 
 
 1 77 
 
 2-15 
 
 39-6 
 
 Lot-et-Garonne . . . 
 Herault .... 
 
 47 
 52 
 
 1-78 
 1*76 
 
 2-13 
 2-12 
 
 44-9 
 39-5 
 
 
 
 
 
 
156 THE VALUE OP MAN. 
 
 AVERAGE DAILY WAGES OF WOMEN IN PARIS. 
 
 Trades. 
 
 In 1844. ! 
 
 In 1853. 8 
 
 In 1860.8 
 
 In 1872. 
 
 Increase. 
 
 Shirt hands .... 
 Staymakers .... 
 Dressmakers .... 
 Embroiderers - ... 
 Lacemakers .... 
 
 fr. 
 0-90 
 1- 
 1-25 
 1-50 
 1-50 
 1-50 
 
 fr. 
 1-50 
 1-50 
 1-75 
 2- 
 2-30 
 2-50 
 
 fr. 
 1-75 
 2- 
 2- 
 2- 
 2-50 
 2- 
 
 fr. 
 2- 
 2- 
 2- 
 3- 
 3- 
 3- 
 
 & 
 
 100 
 60 
 100 
 100 
 100 
 
 Artifcl. Flower makers 
 Laundresses .... 
 Trouser makers 4 . . 
 
 1-50 
 2- 
 1-75 
 
 2-50 
 2-50 
 2-50 
 
 2-25 
 2-50 
 2-75 
 
 3- 
 3- 
 4- 
 
 100 
 50 
 128 
 
 Average .... 
 
 1-43 
 
 2-12 
 
 2-20 
 
 2-78 
 
 94 
 
 AVERAGE DAILY WAGES OF WOMEN IN THE CHIEF TOWNS OF 
 DEPARTMENTS. 6 
 
 Trades. 
 
 In 1853. 
 
 In 1872. 
 
 Increase 
 Per Cent. 
 
 Milliners ...... 
 
 fr. 
 1-12 
 
 fr. 
 1-37 
 
 22 
 
 Shirt hands 
 
 0-90 
 
 1-38 
 
 53 
 
 
 0-98 
 
 1-38 
 
 41 
 
 Staymakers . .... 
 
 0-97 
 
 T46 
 
 51 
 
 
 1-08 
 
 1-49 
 
 38 
 
 Trouser makers 
 
 1-05 
 
 1-50 
 
 43 
 
 
 1- 
 
 1-52 
 
 52 
 
 
 1-25 
 
 1-53 
 
 22 
 
 Waistcoat makers .... 
 Lace makers 
 Artificial Flower makers . . 
 
 0-95 
 1-08 
 1-33 
 
 1-57 
 1-66 
 1-78 
 
 65 
 54 
 34 
 
 In the following tables we give the daily wages of workmen, 
 boarders and non-boarders, in the chief departmental towns, Paris 
 excepfced, according to the Statistique Annuelle de la France, vols. vi. 
 and vii. 6 
 
 1 Figures quoted by M. Louis Blanc in his Organisation du Travail. They 
 may be a little within the truth. 
 
 2 Statistics published by the ministry of Agriculture and Commerce. 
 
 3 Statistics of Parisian industries in 1860, according to the inquiry made by 
 the Chamber of Commerce. 
 
 4 ISEconomiste Frangais. March 15, 1876, Variations des Prix en France, 
 de Foville. 
 
 5 According to M. de Fovillo (Econoiniste Fran$ais, January 8, 1876). 
 8 Published by the Ministry of Agriculture and Commerce. 
 
Bk. iv. Ch. iii.] 
 
 THE VALUE OF MAN. 
 
 157 
 
 DAILY WAGES OF BOARDED WORKMEN. 
 
 Year. 
 
 Ordinary 
 Rate. 
 
 Maximum. 
 
 Minimum. 
 
 Increase. 
 
 
 fr. 
 
 fr. 
 
 fr. 
 
 P er Cent. 
 
 Absolute. 
 
 1853 .... 
 
 0-96 
 
 1-23 
 
 0-74 
 
 ... 
 
 
 1871 .... 
 
 1-40 
 
 1-82 
 
 1-10 
 
 46 
 
 0-44 
 
 1876 .... 
 
 1-49 
 
 1-93 
 
 1-18 
 
 55 
 
 0-53 
 
 1877 .... 
 
 1-51 
 
 1-93 
 
 1-21 
 
 57 
 
 0-55 
 
 DAILY WAGES OF NON-BOARDED WORKMEN. 
 
 Year. 
 
 Ordinary 
 Rate. 
 
 Maximum. 
 
 Minimum. 
 
 Increase. 
 
 
 fr. 
 
 fr. 
 
 fr. 
 
 Per Cent. 
 
 Absolute. 
 
 1853 .... 
 
 1-89 
 
 2-36 
 
 1-53 
 
 
 ... 
 
 1871 .... 
 
 2-65 
 
 3-36 
 
 2-19 
 
 40 
 
 0-76 
 
 1876 .... 
 
 2-86 
 
 3-64 
 
 2-34 
 
 51 
 
 0-97 
 
 1877 .... 
 
 2-87 
 
 3-64 
 
 2-37 
 
 52 
 
 0-98 
 
 Taken altogether, the average rate of wages has increased 53 per 
 cent, in twenty-three years, or 2*3 per cent, per annum. 
 
 USUAL SALARY OF WOMEN (NOT BOARDED) IN THE CHIEF DEPART- 
 MENTAL TOWNS, PARIS ExCEPTED. 
 
 
 
 Increase. 
 
 Trades. 
 
 Average Ordinary Wages. 
 
 
 I 
 
 
 
 Absolute. 
 
 Per Cent. 
 
 
 1853. 
 
 1871. 
 
 1876. 
 
 1877. 
 
 1871. 
 
 1876. 
 
 1877. 
 
 1871. 
 
 1876. 
 
 1877. 
 
 
 fr. 
 
 fr. 
 
 fr. 
 
 fr. 
 
 fr. 
 
 fr. 
 
 fr. 
 
 
 
 
 Laundresses . . 
 
 1-25 
 
 1-50 
 
 1-65 
 
 1-65 
 
 0-25 
 
 0-40 
 
 0-40 
 
 20 
 
 32 
 
 32 
 
 Embroiderers . . 
 
 0-98 
 
 1-45 
 
 1-61 
 
 1-64 
 
 0-47 
 
 0-63 
 
 0-66 
 
 48 
 
 64 
 
 67 
 
 Staymakers . . 
 
 0-97 
 
 1-42 
 
 1-55 
 
 1-55 
 
 0-45 
 
 0-58 
 
 0-56 
 
 46 
 
 60 
 
 58 
 
 Dressmakers . . 
 
 1-08 
 
 1-42 
 
 1-56 
 
 1-57 
 
 0-34 
 
 0-48 
 
 0-49 
 
 32 
 
 44 
 
 45 
 
 Trouser makers . 
 
 1-05 
 
 1-45 
 
 1-53 
 
 1-57 
 
 0-40 
 
 0-48 
 
 0-52 
 
 38 
 
 46 
 
 50 
 
 Lacemakers . . 
 
 1-08 
 
 1-71 
 
 1-76 
 
 1-78 
 
 0-63 
 
 0-68 
 
 0-70 
 
 58 
 
 63 
 
 65 
 
 Artificial Flower") 
 makers . . j 
 
 1-33 
 
 1-70 
 
 1-85 
 
 1-98 
 
 0-37 
 
 0-52 
 
 0-65 
 
 11 
 
 40 
 
 49 
 
 Waistcoat makers 
 
 0-95 
 
 1-51 
 
 1- 
 
 1-61 
 
 0-56 
 
 0-67 
 
 0-66 
 
 59 
 
 70 
 
 69 
 
 Shirt hands . . 
 
 0-90 
 
 1-29 
 
 1-42 
 
 1-41 
 
 031 
 
 0-52 
 
 0-51 
 
 32 
 
 58 
 
 57 
 
 Milliners . . . 
 
 1-12 
 
 1-40 
 
 1-66 
 
 1-45 
 
 0-28 
 
 0-54 
 
 0-33 
 
 25 
 
 48 
 
 39 
 
 Closers .... 
 
 1- 
 
 1-46 
 
 1-63 
 
 1-65 
 
 0-46 
 
 0-63 
 
 0-65 
 
 46 
 
 63 
 
 65 
 
 Total average . 
 
 1-07 
 
 1-48 
 
 1-62 
 
 1-62 
 
 0-41 
 
 0-55 
 
 0-55 
 
 38 
 
 51 
 
 51 
 
 
 
 
 
 
 
 1 
 
 
158 
 
 THE VALUE OF MAN. 
 
 The 6rst thing that strikes one in this table, is that the average 
 wages of women hardly exceed half those of men ; nevertheless, they 
 have participated in almost equal proportion in the general rise 
 which has taken place between 1853 and 1877. 
 
 PARISIAN INDUSTRIES USUAL WAGES OP WOMEN. 
 
 Trades. 
 
 Average Ordinary 
 Wages. 1 
 
 Increase. 
 
 Absolute. 
 
 Per Cent. 
 
 
 1853. 
 fr. 
 250 
 2- 
 1-50 
 1-75 
 2-50 
 2-30 
 2-50 
 1-50 
 2-50 
 
 1871. 
 fr. 
 3' 
 3- 
 2- 
 2- 
 4- 
 3- 
 3- 
 2- 
 3- 
 
 1877. 
 fr. 
 3- 
 3- 
 2- 
 2- 
 4- 
 3- 
 3- 
 2- 
 3- 
 
 1871. 
 fr. 
 0-50 
 1- 
 0-50 
 0-25 
 1-50 
 0-70 
 0-50 
 0-50 
 0-50 
 
 1877. 
 fr. 
 0-50 
 1- 
 050 
 0-25 
 1-50 
 0-70 
 050 
 050 
 0-50 
 
 1871. 
 
 20 
 50 
 33 
 14 
 60 
 30 
 20 
 33 
 20 
 
 1877.* 
 
 20 
 50 
 33 
 14 
 60 
 30 
 20 
 33 
 20 
 
 Embroiderers .... 
 Stavmakers . 
 
 Dressmakers 
 Trouser makers (women) 
 Lacemakers 
 Artificial Flower makers 
 Shirt hands 
 
 Closers (women) . . . 
 Total average . . . 
 
 212 
 
 2-78 
 
 2-78 
 
 0-66 
 
 0-66 
 
 31 
 
 31 
 
 We see that in Paris women's wages are double what they are in 
 the country ; bnt their tendency to rise seems feebler. 
 
 The highest wages, both in Paris and in the departments, are 
 those of jewellers and ornamental sculptors. And why ? Because 
 these are trades which require natural gifts and a long apprentice- 
 ship ; consequently the man who is master of one of them has a 
 greater power of utility, and therefore a. greater value, than an un- 
 skilled workman. Accordingly the wages of these trades have gone 
 np 75 per cent, in Paris, while the unskilled workman's, have risen 
 only 53 per cent. If there are some trades in which wages have 
 increased more rapidly than in that of jewellery, it is because there 
 is a growing tendency among the working classes to select those 
 trades which have a refined and artistic side. The supply of labour 
 in these trades accordingly becomes greater, and they are more 
 easily recruited. 
 
 The average increase of wages has been greater in the country 
 than in Paris, though Paris wages are still in advance of country 
 wages by one-third or even half. It will be easily understood how 
 such an advantage attracts all the more able workmen to Paris, and 
 how this very supply of labour has checked the continued rise in 
 
 1 Stutistique de la France, p. xlvi. 
 
 2 The wages have not varied from 1876 to 1877. 
 
Bk. iv. Ch. iii.] 
 
 THE VALUE OP MAN. 
 
 159 
 
 wages. On the other hand, this influx has reacted on the principal 
 country towns. In order to retain skilful workmen, it has been 
 found necessary to raise their wages. 
 
 This rise of wages has taken place in England as well as in 
 France. You may have seen in London groups of beggars of both 
 sexes, clothed in rags through which the bare shivering skin peeps 
 here and there, with their boots full of holes, and with a look of 
 hopeless resignation on their wan dejected faces ; and you have 
 perhaps thought that here was the last degree of misery short of 
 death itself. Yet they are positively well off, compared with their 
 forefathers. 
 
 Sixty years ago, the number of paupers in London was lOS^OO. 1 
 
 50 
 
 40 
 
 30 
 
 20 
 
 10 
 
 1853 
 
 1863 1871 
 
 Diagram 35. Increase per cent, of wages. 
 
 1876 
 
 In 1875 it was less, although the population had tripled. But the 
 cost of maintaining 100,000 paupers in London is now five times 
 what it was in 1815. Whence comes this difference ? Almost all 
 commodities, including bread, sugar, and tea, are cheaper now than 
 they were then. Paupers do not fix their manner of life for them- 
 selves, it is fixed for them by others, and it must be inferior to that 
 of the worst-paid workmen. 
 
 The difference arises from the fact that the idea of what is indis- 
 pensably necessary, even for paupers, has risen of late years. We 
 know too that in England, when wages have gone up considerably, 
 they fall again on any depression of trade. There is then, no doubt, 
 a certain amount of suffering; but it is nothing to be compared with 
 
 1 Danson, Lectures, p. 42. 
 
160 
 
 THE VALUE OF MAN. 
 
 fi 
 
 B g 
 
 w 
 
 
 
Bk. iv. Oh. iii.] 
 
 THE VALUE OF MAN. 
 
 161 
 
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162 
 
 THE VALUE OP MAN. 
 
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 M 
 
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Bk. iv. Ch.iii.] 
 
 THE VALUE OF MAN. 
 
 163 
 
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164 
 
 THE VALUE OF MAN. 
 
 what formerly existed. There was a very severe crisis in England 
 in 1878 ; but, according to the Board of Trade reports, there was no 
 decrease in the expenditure of the wage-earning classes. 1 The 
 importation of food has not fallen off, and its increased cheapness 
 
 has made np for the fall in 
 wages. The importation of 
 animal food has increased, 
 especially that of bacon, 
 which is largely consumed 
 by the labouring classes ; 
 while the slight falling off 
 in imported vegetables is 
 balanced by the increase of 
 the home supply. The crisis 
 was felt more sevei-ely by 
 the classes just above the 
 working classes ; the con- 
 sumption of wine decreased, 
 while that of spirits was 
 scarcely affected at all. 
 
 This spending power of 
 the working classes, which 
 was much better maintained 
 in 1878 than in preceding 
 crises, checked the i'all of 
 man uf actures. 
 
 According to Professor 
 Leone Levi, the average 
 wage (obtained by divid- 
 ing the sum total of the 
 earnings by the number 
 of the workers), is as fol- 
 lows : 
 
 24 
 
 20 
 
 18 
 
 12 
 
 1866 
 
 1878 
 
 Diagram 36. Increase of Wages : Women and 
 Girls, Men and Lads (Levi). 
 
 MEN. 
 
 WOMEN. 
 
 Year. 
 
 Below 20, per 
 week. 
 
 20 and up- 
 wards, per 
 week. 
 
 Below 20, per 
 week. 
 
 20 and up- 
 wards, per 
 vteek. 
 
 1866 
 
 7s. 6d 
 
 19s. 6d. 
 
 8s. Od 
 
 lls. Od. 
 
 1878 .... 
 
 8 
 
 21 9 
 
 9 
 
 13 8 
 
 
 
 
 
 
 Increase, per 100 .... 
 
 6 
 
 6f 
 
 12 
 
 24 
 
 The Economist, 25th March, 1876, p. 358. 
 
Bk. iv. Ch. iii.] 
 
 THE VALUE OP MAN. 
 
 165 
 
 In the same way, we observe a rise of wages in Alsace. We 
 take the figures from a work by M.. Charles Grad, 1 who quotes 
 from an inquiry made by the Societe Industrielle of Mulhouse. 
 
 WAGES IN THE SPINNING TRADE AT MDLHOUSE, FROM 1835 TO 1880. 
 
 
 1835. 
 
 1845. 
 
 1855. 
 
 1865. 
 
 1880. 
 
 Per cent. 
 
 
 fr. 
 
 fr. 
 
 fr. 
 
 fr. 
 
 fr. 
 
 
 Overlookers .... 
 
 2 91 
 
 3 50 
 
 4 37 
 
 4 58 
 
 6 25 
 
 115 
 
 Enginemen .... 
 
 1 88 
 
 2 30 
 
 3 17 
 
 2 88 
 
 3 50 
 
 86 
 
 Oilers and Greasers . 
 
 1 50 
 
 1 80 
 
 1 58 
 
 2 50 
 
 3 10 
 
 107 
 
 Strap-makers. . . . 
 
 1 50 
 
 1 83 
 
 2 42 
 
 2 50 
 
 4 
 
 160 
 
 Scutch-hands (women) 
 
 96 
 
 1 04 
 
 1 06 
 
 1 33 
 
 1 70 
 
 77 
 
 Card-menders . . . 
 
 1 33 
 
 1 42 
 
 2 83 
 
 2 22 
 
 2 70 
 
 103 
 
 Card-cleaners. . . . 
 
 ... 
 
 ... 
 
 1 79 
 
 1 96 
 
 2 35 
 
 9 
 
 Women Carders . . . 
 
 e 87 
 
 1 ' 
 
 1 01 
 
 1 31 
 
 1 60 
 
 81 
 
 Throstlers 
 
 1 50 
 
 1 50 
 
 1 59 
 
 1 78 
 
 2 40 
 
 60 
 
 Mule Spinners . . . 
 
 1 75 
 
 2 60 
 
 3 75 
 
 4 12 
 
 
 143 
 
 Self-acting Mule Spin- 
 
 
 
 
 
 
 
 ners 
 
 
 
 2 50 
 
 3 52 
 
 4 25 
 
 143 
 
 Piecers 
 
 O'GO 
 
 o'?5 
 
 1 25 
 
 1 42 
 
 2 30 
 
 256 
 
 Doffers (children) . . 
 
 
 ... 
 
 92 
 
 1 08 
 
 1 CO 
 
 9 
 
 (See Diagram 37, p. 166.) 
 
 In a silk-ribbon factory at Guebwiller, the increase during the 
 interval 1848-80 was from 15 to 77 per cent., 2 thus : 
 
 In 1848. 
 
 In 18SO. 
 
 Weavers (men) 
 
 ,, (women) 
 
 ,, (children apprentices) 
 
 Warpers (women) 
 
 Fluters (women) 
 
 Finishers-off (women) .... 
 
 Winders (women) 
 
 Folders 
 
 Dyers 
 
 Overlookers , 
 
 fr. fr. 
 
 2 to 3 30 
 
 1 50 
 50 
 40 
 
 75 
 
 1 
 
 1 50 
 
 2 
 
 2 50 
 80 
 
 70 
 
 1 50 
 
 1 25 
 
 2 50 
 4 50 
 
 fr. 
 
 fr. 
 
 2 10 to 4 25 
 3 80 
 
 2 25 
 
 3 
 2 55 
 1 60 
 
 66 
 
 1 50 
 1 70 
 
 2 35 
 
 3 05 
 
 (See Diagram 38, p. 167.) 
 
 In the same interval, wages have gone up 44 per cent, in the 
 tanneries of Strasburg ; they have risen 25 per cent, in fifty years 
 
 1 Economiste Frangais, 16th Oct. , 1880, p. 474 ; Les Salaires dans V Industrie 
 Manufacturiere, by Charles Grad. 
 
 2 Id. ubi sup. 
 
166 
 
 THE VALUE OF MAN. 
 
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Bk. iv. Ch. iii.] 
 
 THE VALUE OP MAN. 
 
 167 
 
 in the glass works of Wildenstein, and 36 per cent, since 1854 in 
 the two great machine shops of Mulhouse and Grafenstaden. 
 Among nietal-workers, the price of a day's labour varied as 
 follows between 1854 and 1878 : 
 
 
 1854. 
 
 1865. 
 
 1878. 
 
 Per cent. 
 
 Smiths and Founders . 
 Planers and Assistants. 
 Turners and Drillers . 
 Fitters and Moulders . 
 Modellers and Joiners . 
 Braziers ... 
 
 fr. 
 4 23 
 2 57 
 3 28 
 3 30 
 2 44 
 2 50 
 
 fr. 
 
 4 60 
 3 06 
 4 28 
 2 51 
 2 86 
 3 44 
 
 fr. 
 5 18 
 3 70 
 4 60 
 4 30 
 4 10 
 4 40 
 
 20 
 44 
 40 
 30 
 68 
 76 
 
 General average ... 
 
 2 80 
 
 3 08 
 
 3 80 
 
 36 
 
 Of. 0-50 I 
 
 1*60 
 
 (See Diagram 39, p. 168.) 
 2 2-50 3 3-50 4 4'60 
 
 
 
 WE|AVE*S 
 
 
 
 
 
 ] 
 
 
 
 1 ' 
 
 
 
 
 
 
 WA 
 
 f P6RS 
 
 ( WOM 
 
 ;w) 
 
 I 
 
 
 
 
 
 
 
 7 5 
 
 
 Flu 
 
 ters 
 
 ! ' 
 
 
 
 1 
 
 
 Finish 
 h 
 
 ersoff 
 
 ! 
 
 
 
 WH 
 
 IDCRS 
 
 (WOMIN ) 
 
 F 
 
 010 ER 
 
 S 
 
 -H 
 
 I 
 
 
 
 
 
 
 
 
 
 
 
 Rate in 1848. 
 
 Rate In 1880. 
 
 Diagram 38.-Wages of Workpeople at a Silk-ribbon Factory at Guebwiller in 1848 
 
 and 1880. 
 
 M. Charles Grad draws attention to the fact that in the textile, 
 as m the metallurgic industries, it is the lower class of workmen 
 whose wages have risen the most in the last half-centnrj. The 
 explanation is this, that the level of capacity of the working classes 
 is higher than it was, and consequently, men have been more easily 
 recruited for the more difficult and better paid work. This is one 
 of the causes which have checked a further increase in the wages of 
 this class of men. In the less difficult crafts, the demand for labour 
 is steadily growing, and this labour is applied to better and better 
 
168 
 
 THE VALCE OF MAN. 
 
 
 
 
 
 
 
 
 
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Bk. iv. Ch. Hi.] 
 
 THE VALUE OP MAN. 
 
 169 
 
 advantage, owing to the better implements employed. So that 
 first the labourer's wages are raised, and secondly, he is put in a 
 position to maintain this rise 
 
 The remarkable rise in the wages of women which we have 
 observed in England is due to similar causes. Men have aban- 
 doned the trades in which they competed with women, because 
 better channels have opened out for their activities. The demand 
 for women's labour has become more and more considerable. The 
 
 0-50 I l'50 2 2-60 3 3'50 4 4'50 5 5'50 6 
 
 Als. 
 V. 
 Nor. 
 
 i 
 CA 
 
 RD CL 
 
 ANE 
 
 RS 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Man. 
 Mul. 
 
 Als. 
 V. 
 Nor. 
 Man. 
 Mul. 
 
 Als. 
 V. 
 Nor. 
 Man. 
 Mul. 
 
 Als. 
 V. 
 Nor. 
 Man. 
 Mul. 
 
 Als. 
 V. 
 Nor. 
 Man. 
 Mul. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 CA 
 
 ?DER 
 
 o 
 
 3MfN 
 
 ) 
 
 
 
 
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 I 
 
 TH 
 
 ROST 
 
 ICS 
 
 [G-1RI 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 PI 
 
 ETCER 
 
 s 
 
 
 
 
 
 
 
 
 
 
 '- 
 
 
 
 ,-- 
 
 
 
 
 
 
 
 
 SP 
 
 IWNC 
 
 RS 
 
 
 
 
 1 
 
 
 
 
 
 
 
 
 J_ ~ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 | 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Alsace. 
 
 Als. 
 
 Vosges. Normandy. Manchester. Mulhouse. 
 
 Diagram 40. Wages in Manufacturing Industries, by Charles Grad (-Economists Fran^ais, 
 17 September, 1880, p. 353). 
 
 first luxury of a household which has obtained a competency is a 
 servant. The increase in the demand for women's work is one of 
 the most characteristic signs of the progress of public wealth. 
 
 On comparing the wages paid in the different cotton-spinning 
 districts, we find the following variations : 
 
170 
 
 THE VALUE OF MAX. 
 
 
 Alsace. 
 
 Vosges. 
 
 Normandy. 
 
 Man- 
 chester. 
 
 ilul- 
 house. 
 
 Scratch hands (men) . 
 ,, (women) 
 Machine hands . . 
 Card-cleaners . . 
 (girls) 
 Combers (girls) 
 Drawing-frames (girls 
 Throstlers (girls) . 
 Wasters (children). 
 Piecers (men) . . 
 Spinners (men) 
 
 fr. 
 2 Ot 
 1 50 
 2 30 
 2 
 1 20 
 1 40 
 130 
 120 
 1 
 150 
 3 50 
 
 fr. 
 o30 
 1 75 
 3 75 
 2 50 
 175 
 2 
 2 
 225 
 1 50 
 225 
 , 450 
 
 fr. 
 2 t( 
 175 
 3 25 
 225 
 140 
 
 fr 
 33 25 
 2 
 3 75 
 2 50 
 1 50 
 
 fr. 
 2 Ot( 
 1 80 , 
 3 50 , 
 150 , 
 1 50 , 
 
 fr. 
 >2 25 
 2 
 4 
 2 76 
 2 
 
 fr. 
 280 
 
 460 
 230 
 
 fr. 
 170 
 
 235 
 160 
 
 2'io 
 160 
 2 30 
 425 
 
 175 
 180 
 90 
 125 
 375 
 
 2 25 
 
 2 50 
 1 25 
 2 25 
 
 4 20 
 
 220, 
 2 , 
 1 , 
 150, 
 4 0, 
 
 2 50 
 4 
 1 75 
 2 50 
 5 
 
 3 
 323 
 
 281 
 590 
 
 (See Diagram 40, p. 169.) 
 
 Wages are highest in the two towns where trade is the most 
 prosperous, Manchester and Mulhouse. 
 
 Mr. Brassey says that his father, with his unrivalled experience, 
 observed that the price of labour, or, more precisely, the quotient 
 obtained by dividing the day's work by the day's wage, was much 
 about the same everywhere. M. Siemens has adopted this theory, 
 and Mr. Brassey, jun., likewise supports it, though in his book on 
 Foreign Work and English Wages, he does not thoroughly establish 
 it. At first sight it appears paradoxical, and I have not tested its 
 accuracy sufficiently to be able to pronounce decisively upon it. 
 The results above given certainly go to confirm it. I will take but 
 one example. In Manchester the wages of the cotton operatives 
 are higher than anywhere else ; but Manchester is near Liverpool, 
 the greatest emporium for cotton in the world ; it is the market 
 which regulates the prices of cotton throughout Europe, and ac- 
 cordingly it is there that cotton is cheapest. Tariffs between 
 Liverpool and Manchester are not high ; transport is quick ; coal 
 is cheap; the best machinery is used; and lastly, the English 
 operative's capacity for production is greater than anybody else's. 
 Although his wages are higher than those of any of his competitors, 
 they do not necessarily tax production any more heavily than the 
 much lower ones of his Norman rival. 
 
 The value of wages is not exactly measured by their amount in 
 money. An equal sum will procure more food, better lodgings, and 
 more comforts in one place than it will in another. To this must 
 be added sundry institutions which are now appended to the 
 majority of industrial establishments workmeus' dwellings, sav- 
 ings banks, retiring pensions, co-operative societies, and last, but 
 not least, schools ! 
 
Bk. iv. Ch. iii.] 
 
 THE VALUE OF MAN. 
 
 171 
 
 By comparing the rates of wages in the three following countries, 
 we shall find the laws we have laid down again confirmed: 
 
 WEEKLY WAGES. 
 
 Trades. 
 
 Wages. 
 
 Price of Bread. 
 
 Price of Meat. 
 
 NEW YOKE. 
 
 Francs. 
 60 to 75 
 
 Francs per Ib. 
 0-22i 
 
 Francs per Ib. 
 Beef 
 
 
 60 , 90 
 
 
 0-40 to 0-80 
 
 Carpenters and Joiners . . 
 Painters 
 
 45 , 60 
 50 , 80 
 
 
 Veal. 
 
 
 50 , 75 
 
 
 0-40 to 1-20 
 
 
 60 , 90 
 
 
 Mutton 
 
 Smiths 
 
 50 , 70 
 
 
 Q-45 to O'SO 
 
 
 40 , 60 
 
 
 
 Strap and harness-makers . 
 Bakers ... .... 
 
 60 , 75 
 30 , 40 
 
 
 Pork. 
 0-80 to 1-0 
 
 Butchers ....... 
 
 40 , 60 
 
 
 
 Tailors 
 
 50 , 90 
 
 
 
 
 60 , 90 
 
 
 
 ENGLAND. 
 
 40-60 
 
 0'20 to 0-25 
 
 Beef 
 
 Masons 
 
 40-80 
 
 
 0*50 to - 70 
 
 Carpenters and Joiners . . 
 Painters . . . 
 
 41-25 
 36 25 
 
 
 Mutton. 
 
 
 40-50 
 
 
 0-60 to 0-80 
 
 Plumbers 
 
 38-75 
 
 
 Pork 
 
 Smiths 
 
 40-60 
 
 
 A.KQ f n fill 
 
 Cabinet-makers 
 
 38-50 
 
 
 
 Strap and harness-makers . 
 Bakers 
 
 34- 
 32-25 ' 
 
 
 
 Butchers 
 
 36-15 
 
 
 
 
 25 to 36-50 
 
 
 . 
 
 Shoe-makers 
 
 36*75 
 
 
 
 BELGIUM. 
 Bricklayers 
 
 30- 
 
 0-20 to 0'25 
 
 Beef 
 
 
 30- 
 
 
 0-80 to 1-0 
 
 Carpenters and Joiners . . 
 
 27- 
 21-10 
 
 
 Veal. 
 
 Plasterers 
 
 27- 
 
 
 0-80 to 1-0 
 
 Plumbers . 
 
 30- 
 
 
 
 
 v2- 
 
 
 0-80 to 1-0 
 
 Cabinet-makers 
 Strap and harness-makers . 
 
 24- 
 24- 
 24- 
 
 
 Pork. 
 0-80 to 1-0 
 
 Butchers .... 
 
 
 
 
 Tailors 
 
 
 
 
 Shoemakers 
 
 
 
 
 
 
 
 
 The following table shows that the fluctuations in the wages of 
 iron-workers have formed but a very small item in the wide flue- 
 
172 
 
 THE VALUE OF MAN. 
 
 tuations which the price of iron has undergone within the last 
 eleven years : 
 
 
 Average Price 
 per Ton. 
 
 Wages of Puddlers. 
 
 1868 
 
 a. d. 
 6 11 3 
 
 *. d. 
 8 
 
 1873 
 
 11 8 4 
 
 13 3 
 
 1874 
 
 10 18 11 
 
 11 6 
 
 1875 
 
 7 10 4 
 
 8 3 
 
 1877 
 
 6 17 1 
 
 8 3 
 
 1878 
 
 674 
 
 7 6 
 
 1879 
 
 5 18 7 
 
 7 
 
 
 
 
 (See Diagram 41, p. 173.) 
 
 In the same way, Diagram 42, showing the elements which, 
 at various times, have gone to make up the cost price of a ton of 
 iron, proves that variations in the rate of wages have, up to the 
 present time, had but little influence on the price of commodities. 
 
 Wages are higher in England than in Belgium, and higher in the 
 United States than in either ; and why ? Because in the United 
 States the supply of labour is less, while their machinery is 
 extremely perfect, their available fixed capital abundant, and, 
 thanks to their system of credit, circulating capital circulates with 
 a rapidity of which we are here only beginning to form an idea. 
 
 There is a subjective political economy easier to understand than 
 the objective form. "The law of wages " is a phrase which is con- 
 stantly appearing in pamphlets and at public meetings. The real 
 " law of wages " is what I have just stated, but that is not what 
 they mean. 
 
 Some people have a habit of crediting their opponents with ideas 
 they never entertained, or of putting their ideas in an absolute form 
 which they never gave them. Having once presented these ideas, 
 they treat them as genuine, and deduce from them all sorts of con- 
 sequences. The more startling and absurd these consequences are, 
 the better they are satisfied. Their work might have been more 
 useful if they had first verified their premisses ; but then their theory 
 would have vanished in the process, and they would have lost the 
 benefit of it. Now, for men like Proudhon and Lassalle, truth is 
 the second thing, and a brilliant and startling theory the first. 
 They have found in Social Economy a last refuge for the scholastic 
 method. 
 
 Lassalle says, " According to Bicardo, the average of wages is 
 fixed by the absolute necessaries of life." 
 
 In the first place, Ricardo says no such thing, at least in no such 
 absolute form. Here are his own words : " The natural price of 
 
Bk. iv. Ch. iii.] 
 
 THE VALUE OF MAN. 
 
 
 
 1868 1873 1874 1875 1877 1878 1879 
 
 Diagram 41. Fluctuations in the Price of Iron and in the Wages of Ironworkers, 
 
 10 20 30 40 60 60 70 80 00 IOO 
 
 I860 
 
 1871 
 
 1874 
 
 c 
 
 OAL 
 
 OR 
 
 I A BO 
 
 R i U INC 
 
 nirs 
 
 
 
 
 
 
 
 
 6' 6 
 
 
 
 
 
 
 
 
 COAL 
 
 
 
 
 etc 
 
 cB 
 
 OUR SI 
 
 Norms 
 
 
 
 
 
 
 
 
 9* 
 
 9* 
 
 
 9 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 10* 
 
 7**~ 
 
 98 s 
 
 Diagram 42. Cost Price of a Ton of Iron in England (the figures from Brassey's Foreign 
 VForfc and English Wages, p. 316). 
 
174 
 
 THE VALUE OF MAN. 
 
 labour is that price which is necessary to enable the labourers, one 
 with another, to subsist and to perpetuate their race, without either 
 increase or diminution. . . . The natural price of labour, there- 
 fore, depends on the price of the food, necessaries, and conveniences 
 required for the support of the labourer and his family." l 
 
 This is somewhat different from what Laesalle puts into his 
 mouth ; but, even so, Ricardo himself admits that his proposition is 
 not accurate, for he adds : 2 "It is not to be understood that the 
 natural price of labour, estimated even in food and necessaries, is 
 absolutely fixed and constant. It varies at different times in the 
 same country, and very materially differs in different countries. It 
 essentially depends on the habits and customs of the people. An 
 English labourer would consider his wages under their natural rate 
 if they enabled him to purchase no other food than potatoes, and to 
 live in no better habitation than a mud cabin." 
 
 This proposition of Ricardo is as false as the law of Malthus from 
 which it is derived (though Malthus refuted it). In basing his 
 theory of profits on the fall of wages, he commits a manifest error, 
 for if this theory were true, profits would rise in proportion to the 
 poverty of the labourers, and the richest manufacturers would be 
 found in the poorest countries. 
 
 For Ricardo's theory to be true, three conditions must be granted : 
 that the fixed capital to which human effort is applied should 
 always retain the same degree of power; that raw material and pro- 
 ducts shonld experience neither rise nor fall ; and that exchange aud 
 credit should be subject always and everywhere to the same condi- 
 tions. 
 
 The following table 3 proves that the proportion of the price of food 
 to the rate of wages is in inverse ratio to the industrial development of 
 a country. 
 
 Countries. 
 
 Average weekly 
 Rate of Wages. 
 
 Price of the 
 Week's Food. 
 
 Deduction for 
 Food. 
 
 United States. . . . 
 Great Britain .... 
 F ranee .... . 
 
 S. 
 
 48 
 33 
 20 
 
 s. 
 10 
 
 11 
 
 8 
 
 Per cent. 
 21 
 33 
 40 
 
 Belgium . . 
 
 >2 
 
 10 
 
 45 
 
 Germany 
 Italy 
 
 18 
 13 
 
 9 
 
 8 
 
 50 
 64 
 
 
 15 
 
 10 
 
 67 
 
 
 
 
 
 1 Principles of Political Economy, p. 85, 2nd edition. 
 
 2 Ibid., p. 90. 
 
 3 Progress of the World, by Michael G. Mulhall, p. 56. 
 
Bk.iv.Ch.iit] THE VALUE OF MAN. 175 
 
 Yet we are daily seeing Ricardo's error repeating itself. M. 
 Jacqmin, manager of the Chemin de Fer de 1'Est, declares that the 
 expense of a train depends solely on the rate of wages ; and that if 
 wa^es were doubled, the receipts remaining the same, the cost price 
 of a train would likewise be doubled. 
 
 And has the price of coal, of iron, of machinery, of making and 
 maintaining the permanent way, nothing to do with the cost of a 
 train ? Does the system of management adopted by a great com- 
 pany-tmake no difference to the working expenses ? Does it make 
 no difference whether the train goes full or empty ? 
 
 The price of labour, like that of all other commodities, obeys the 
 law of demand and supply. If the demand for labour is greater 
 than the supply, the price rises ; if the supply exceeds the demand, 
 it falls. If the supply becomes so great as to reduce the price to 
 zero, the workman does not work, he begs. 
 
 The workmen, or rather those who profess to speak in their name, 
 have inherited a prejudice shared by Adam Smith, Bicardo, and 
 Sismondi. l They will not allow that any labour is productive 
 which is not immediately embodied in some material form. Conse- 
 quently they do not recognise as earnings the remuneration received 
 by persons of whose work they perceive no direct and palpable 
 product 
 
 According to this doctrine, the physician does not work. Still, 
 no one will deny that when he produces health, his labour is em- 
 bodied in an appreciable object having a certain value ; the healthy 
 man's power of production is superior to that of the sick man, and 
 he is, therefore, worth more. By the same reasoning, the judge 
 and the advocate do no work ; yet the judgment of the one, follow- 
 ing on the pleading of the other, may have strictly material results ; 
 in civil cases it is converted into a sum of money given or received ; 
 in criminal cases, into the imprisonment or liberation of one or more 
 persons. 
 
 Led by this prejudice, the working man pays little regard to 
 administrative capacity. Yet its effects are material enough ; the 
 men who organise railway companies, construct and open new lines, 
 and manage the traffic upon them, furnish distinct and undeniable 
 products. These objectors would deny to administrative ability any 
 claim to remuneration ; and yet there is no other element of pro- 
 duction of equal value with this, inventive ability excepted. 
 
 No one can admire the inventor more warmly than 1 do. In him 
 we have a man who takes one of Nature's forces, hitherto unutilised 
 by man, be it steam, sunlight, or electricity, and he enlists it in the 
 service of humanity. By utilising this force, he substitutes for 
 human effort the labour of a natural agent. There is no greater 
 
 , 
 
 See Sismondi, Political Ecormy,&nfctlae Economy Government, Book I. 
 
 UNIVERSITY 
 
176 THE VALUE OF MAX. 
 
 or more useful work. What would the nineteenth century be 
 without Watt, Fulton, Stephenson, or Morse ? It will be said that 
 if these men had never lived, others would have produced the same 
 inventions ; but this is bad reasoning. How long would it have 
 been before others produced them ? These men were the first 
 comers ; is the time they saved of no account ? Inventive 
 capacity, doubtless, will develop more and more with the growth 
 of objective instruction, but it is not yet become so common as to 
 have but an ordinary value. Indeed, it has the greatest value of all ; 
 and no inventor has ever been rewarded in anything like proportion 
 to the wealth he has produced. Watt and Stephenson may have 
 made thousands, but what are those thousands to the wealth which 
 the steam-engine and the railway have conferred upon humanity ? 1 
 
 The greatest inventor is he who has the greatest appetite for 
 utilities. 
 
 The principle of the company which centres around Mr. Edison 
 is easily understood : " Produce, invent, and we will give you a 
 large share of the profits. We shall still be gainers, since without 
 you we should not have these inventions at all." The very people 
 who have such a horror of inventors, are always working at some 
 problem which nothing but an invention can solve. Everybody 
 has some time or other expressed a desire which could only be 
 satisfied by an invention. 
 
 An invention is completed ; so far, so good ; but it has to be set 
 working. Here comes in the need of administrative ability. Very 
 complex elements enter into its composition initiative, energy, 
 perseverance, the instinct of order, the power of control, and the 
 art of co-ordinating interests. These are qualities rarely united in 
 one individual. 
 
 How many inventions have been long held back for want of the 
 men fitted to put them into operation ! What millions of money 
 wasted for want of intelligence in employing them! At this 
 moment, there is available capital in England, in France, in Bel- 
 gium, in Holland, in Switzerland, in the United States the whole 
 world is there to fertilise and yet to what miserable uses the 
 money is often applied, all for want of administrative capacity in 
 its possessors ! And this incapacity is nowhere more marked than 
 in the administration of national affairs. Look at the statesmen 
 who have succeeded each other at the head of the nations for 
 centuries past ! By the harm they have done, and by the good 
 they have not done, we may estimate the value of administrative 
 capacity. 
 
 Administrative capacity must then receive remuneration, and 
 large remuneration, in virtue of its rareness and of its production 
 
 1 See L'lnventeur, by Yves Guyot, 186C. 
 
Bk.iv.Ch.iv.] THE ORGANISATION OF HUMAN INDUSTRY. 177 
 
 of utilities. Capitalists are already ceasing to grudge it this 
 remuneration, and they will grudge it less and less. The Utopists 
 in vain strive to contest its legitimacy for the sake of their mollusc 
 equality ; it exists by the force of things. 
 
 And I say this not only of private enterprises, but also of public 
 affairs. It is a most mistaken and a most uneconomical calculation, 
 for a democracy to starve those who are charged with the manage- 
 ment of the interests of the community. The consequence will be 
 that practical men will seek profit and security by devoting their 
 energies to their own affairs, and leave the greater risks and 
 doubtful advantages of public life either to wealthy incapables, or to 
 intriguers, or to charlatans, or to enthusiasts. Enthusiasts, indeed, 
 are exceptional ; powerful, remarkable, and useful as they may be, 
 they are always a little quixotic ; and to make such men the pillars 
 of the State would be an imprudence if not a blunder. As to the 
 others, they would be capable of bringing the country to ruin 
 "with a light heart." 
 
 The physical labour of man tends to disappear, and is being 
 advantageously replaced by the intellectual labour of man and the 
 physical labour of the machine. Instead of acting, man directs 
 action. It may be said that the share of intellectual labour in pro- 
 duction is in proportion to the power of fixed capital. 
 
 When the labourer shows his horny palm, and says, " We are the 
 workers, and we alone," he deceives himself. We may hope that 
 his sons will not have these horny palms, the sad, though honour- 
 able, tokens of manual labour; but they will be none the less 
 workers, exerting themselves to obtain a definite product. 
 
 Conclusion : 
 
 Man is a form of fixed capital, subject to the law which defines the 
 relative values of fixed and circulating capital. 
 
 The value of man is in proportion to the power of his implements. 
 His value augments in proportion to the abundance of circulating 
 capital and the poiuer of fixed capital. 
 
 The relation of the price of food to the rate of wages is in inverse 
 ratio to the industrial development of the country. 
 
 CHAPTER IV. 
 
 THE ORGANISATION OF HUMAN INDUSTRY. 
 
 WE have defined human labour 1 as the effort necessary for the 
 appropriation of utilities. 
 
 We shall also show that the value of man is in proportion to the 
 power of his tools and to the abundance of circulating capital. 2 
 
 1 See Book I., chap, iv., p. 56. 2 See the foregoing chapter. 
 
 N 
 
178 THE ORGANISATION OF HUMAN INDUSTRY. 
 
 We have now two questions to examine. First, as to the present 
 organisation of co-operation in productive labour; and secondly, 
 as to the probable changes it may have to undergo. 
 
 There are some pretended reformers with an antiquated ideal 
 who wish to revive the trade-guilds reminiscences of the Roman 
 '. guilds which were formed in the Middle Ages and which lasted till 
 the Revolution. 1 They have never reflected on the vices inherent in 
 these guilds, which the perusal of the foregoing chapter will have 
 enabled our readers to perceive at a glance. 
 
 We have seen that the most perfect form of association is 
 that which best distinguishes between interests and individuals, 
 and specifies most clearly the common interests which it brings 
 together. 
 
 Now the guilds of arts and trades were modelled on the social 
 organisation in the midst of which they grew up. Each guild 
 formed a little feudal State, ruled by the masters, who aimed, and 
 aimed successfully, at making themselves an hereditary caste, and 
 enforcing on every one not of their own order a host of almost 
 impossible conditions as the price of entering it. Each master 
 became a petty baron, to whom the workman was no better than 
 a serf. 
 
 Under the pretext of protection, the master exercised the most 
 absolute despotism over the apprentice and the journeyman. The 
 unfortunate who aspired to the freedom of his craft, had first to 
 serve a long apprenticeship to one master. Nor was it every one 
 who could become an apprentice. At Lyons certain conditions of 
 birth were imposed. All professions were closed to the married 
 man. The masters made the rules, and in every guild they 
 squeezed the very last farthing of profit out of the young work- 
 man. The apprenticeship lasted four years for ropemakers, seven 
 years for wire-drawers, seven for shoemakers, eight for shield- 
 smiths, nine for belt-makers, ten for glass-cutters, and twelve for 
 chaplet-makers. The apprentice had to pay besides on an aver- 
 age twenty silver sous a year. If he could not pay it in money, he 
 had to make it up by an extended time of service. This was the 
 minimum charge. The master might charge more if he liked, 
 but not less. "More money and more service may he take if he 
 be able." 
 
 Handed over powerless to his master, subject to all his require- 
 ments and all his caprices, the apprentice had no appeal. If, driven 
 by want and ill-usage, he ran away, no one might offer him asylum. 
 Like a serf, he could be treated as an article of commerce, and sold 
 by one master to another. Unless he was the son of a master, his 
 troubles did not end with his apprenticeship. He became an 
 
 1 See L'Inventeur, by Yves Guyot. 
 
Bk.iv.Ch.iv.] THE OEQANISATION OF HUMAN INDUSTRY. 179 
 
 assistant. The number of assistants a master could have was 
 limited, like the number of apprentices. The assistant's time was 
 his master's, from sunrise to sunset. He was engaged by the 
 month or year ; and however brutal the master might be, the 
 journeyman could not break the engagement. 
 
 How was he to become a master ? In some guilds, even marry- 
 ing a master's daughter was not enough. In others, less close, he 
 had to give a year to executing a sample of his work, which was to 
 be approved by jurors chosen from among the masters. The 
 masters, always anxious to restrict their number, naturally con- 
 demned his work, unless the poor workman softened their severity 
 by means of "gifts and feasts." In addition to these voluntary 
 expenses, there were official and compulsory expenses. For a 
 master clothier in the seventeenth century, the cost of a banquet was 
 3,240 livres. The freedom of the guild itself was bought ; for a 
 locksmith, joiner, or wheelwright it came to 1,200 or 1,500 livres, 
 and in some other guilds to 4,000 or 5,000 livres. The journeyman 
 whose resources were not equal to these charges was doomed to 
 perpetual servitude without hope of change. If he attempted to set 
 up on his own account, he was pursued and hunted down like a wild 
 beast. 
 
 Turgot, in the preamble to the edict of 1776, abolishing guilds, 
 freedoms, and wardenships, says, " In almost all the towns the 
 exercise of the different arts is centred in the hands of a small 
 number of masters, who form a community by themselves, and who 
 alone, to the exclusion of the other citizens, may make or sell the 
 articles of their particular trade, so that those of our subjects who 
 through choice or necessity adopt a trade or craft cannot carry it on 
 without having first obtained the freedom thereof, which freedom 
 can only be obtained by undergoing a trial as tedious and injurious 
 as it is unnecessary, and by paying numerous dues and exactions, 
 whereby a portion of the funds needed by them for entering upon 
 their business, or even for mere subsistence, is spent in absolute 
 waste. Those who cannot sustain these losses are reduced to a pre- 
 carious existence under the control of the masters, and thus languish 
 in poverty," and so on. 
 
 Turgot declares that "the right to labour is common property, 
 the first and most indefeasible of all rights." 
 
 This edict was of a character too revolutionary to be acceptable 
 in a society founded essentially on privilege. The guilds were re- 
 established the same year ; but they were finally suppressed in 1789, 
 and the more or less interested and ignorant attempts since made to 
 restore them have been in vain. Their restoration would be too re- 
 trograde a step. They are contrary to the law of the development of 
 association, for they confuse individuals with interests, persons with 
 things. They absorb human individuality. They are a species of 
 
180 THE PRIVILEGES OF MASTERS. 
 
 conventual establishment, less and less likely to find a place in our 
 modern civilisation. The stronger the individuality, the more 
 vehemently it must protest against any such absorption. 
 
 CHAPTER Y. 
 
 THE PRIVILEGES OF MASTERS. 
 
 BUT the Revolution knew not how to distinguish the Corporation 
 and the Association. In destroying one abuse, it created another. 
 Hence the law of 14-17 June, 1791. Chapelier, in his report, 
 says innocently, " All citizens must be allowed to assemble ; but 
 citizens of certain professions must not be allowed to assemble in 
 support of their alleged common interests." The law declared : 
 
 " Art. 1. The abolition of every kind of corporation of citizens 
 of the same trade being one of the fundamental principles of the 
 French Constitution, their virtual re-establishment, under any form 
 or pretext whatsoever, is strictly forbidden. 
 
 " Art. 2. Citizens of the same trade or profession, contractors, 
 shop-keepers, the workmen and journeymen of any craft whatsoever, 
 shall not, when met together, nominate presidents, secretaries, or 
 syndics, keep registers, pass decrees or resolutions, or make rules 
 in support of their alleged common interests." 
 
 This was but a doctrinal error, springing from a confusion of 
 ideas ; but later on, in a time of reaction, it became the avowed 
 object of the Legislature, not to guarantee the individual liberty of 
 all, but to confirm the masters in their privileges. 
 
 The law of Germinal, year XI of the Republic, contained this 
 formidable article : 
 
 " Art. 7. Every coalition on the part of workmen for the purpose 
 of discontinuing work in certain shops, for raising the price of 
 labour, ... six months' imprisonment." 
 
 The advantage which this article conferred on the masters 
 appeared so scandalous, that the compilers of the Penal Code felt it 
 necessary to soften it, at least in form, by substituting the following 
 expressions : 
 
 " Art. 414. Every coalition among those who have work 
 done. . . . 
 
 "Art. 415. Every coalition on the part of workmen to occasion 
 a stoppage of work." 
 
 As a matter of fact, Art. 414 could have none but an ironical 
 application, while Art. 415, notwithstanding the addition of the verb 
 * occasion ' (faire), was applied with a roughness which made this 
 refinement of expression wholly superfluous. Moreover, in spite of 
 
Bk. iv. Ch. v.] THE PRIVILEGES OF MASTERS. 181 
 
 the law of 1864, it is still enforced. The spirit which inspired 
 these laws survives, not only in our magistracy, but in govern- 
 mental and official circles. 
 
 The same spirit of privilege is stamped on other regulations. By 
 Art. 1781 of the Code Napoleon, which was not repealed until 1868, 
 the master's evidence, in case of disputes with his workmen, is to be 
 received on his bare word. By the decree of the 17th Dec. 1803, 
 the workman's 'service-book (livret) was assimilated to the passport, 
 and its retention by the master was made compulsory ; the master 
 might note in it all the advances made by him to the workman, and 
 return it only when they had been repaid him in the form of work 
 done ; at the same time, he could dismiss the workman at pleasure, 
 and any future employer would be responsible for debts still due to 
 him, deducting one-fifth from the workman's daily wages for the 
 payment of them. On every change of situation, the workman must 
 have his livret inspected by the police commissioner ; and journey- 
 men butchers and bakers had to deposit their books in his hands. 
 Amongst other vexatious regulations, the registry-offices were im 
 most cases managed by the prefecture of police, and invested with a 
 monopoly. The old guilds had been practically restored for the bene- 
 fit of the prefecture of police. 1 These rules were indeed a little 
 relaxed under the Government of July ; the law of 1854, while it 
 retained the livret system, forbade all comment, favourable or un- 
 favourable. The date of entry was put down, and the book returned 
 to its owner. Indeed, in spite of the law, many workmen never 
 used it at all. 
 
 Some very sincere and earnest democrats declaim against the 
 demand for privileges on the part of the workmen as unreasonable, 
 and contrary to the principle of equality. But who taught the 
 workman to misunderstand the principle of equality and claim caste 
 privileges for his own class ? First, the nobility and gentry of the 
 past ; next, the bourgeoisie of the present. 
 
 M. Persil, Procureur-general of the Court of Paris in 1833, con- 
 fessed with much simplicity the inequality under which the workmen 
 laboured. " It would be risking everything if we were to let the 
 workmen realise their own position as compared with the classes 
 above them, and feel that they are men like the others, and entitled 
 to the same enjoyments." 
 
 Observe, that M. Persil does not ask that the existing order of 
 things should be changed, but only that the workmen should not be 
 permitted to realise it. 
 
 Unfortunately, the facts were so patent, that working-men found 
 out for themselves that they had not exactly the same rights and 
 advantages as their masters; it was easy for them to compare their 
 
 1 See Levasseur, Histoire des Classes Ouvrieres depuis 1789. 
 
182 THE RIGHT TO LABOUR, AND THE ORGANISATION OP LABOUR. 
 
 own poverty with their masters' luxury ; they knew well enough 
 that it was they, and not the masters, who were subjected to the 
 livret system ; they were quite aware of the provisions of Art. 1781 
 of the Code Napoleon, and that laws which already pressed hard 
 upon them were aggravated by the police regulations ; they knew 
 that the masters alone could combine, and that in the contests 
 between the two classes the judges belonged by ties of birth, mar- 
 riage, and relationship to the masters' class. The explosion of 1848 
 revealed that they knew all this, and more besides, in spite of the 
 silence in which M. Persil would fain have buried these questions. 
 
 Then the Persils were much surprised. " What ! " said they, 
 " the workmen not content ? "We never let them know that they 
 had any right to be discontented ! They are clearly in the wrong ! 
 And now they want the tables turned. Hitherto all the privileges 
 have been ours ; now they want all the privileges to be theirs. 
 What madness ! " 
 
 Their madness was brought home to them by the cannon-ball, by 
 the state of siege, by wholesale transportation, and other convincing 
 arguments. But they were not satisfied ; and there was some reason 
 for their dissatisfaction. 
 
 CHAPTER VI. 
 
 THE RIGHT TO LABOUR, AND THE ORGANISATION OP LABOUR. 
 
 THE bourgeois electorate had what Buckle calls the Protective spirit, 
 which might more correctly be called the mendicant spirit. For 
 the beggar is a person who claims a favour, an alms, a privilege, 
 now by entreaties, now by threats. 
 
 It was this spirit which inspired the Socialist doctrines of 1848, 
 doctrines which appear in all the theories and discussions of that 
 time. The refutations of their opponents fell harmless, because they 
 could always be shown to be contradictory. What were the Pro- 
 tectionists to answer, when M. Louis Blanc, attacking free com- 
 petition at home, said to them, " But, gentlemen, if competition is 
 a good thing, why do you ask to be protected against it ? My 
 system is not my own ; I have adopted yours." 
 
 The Protectionists say, " Cotton, iron, coal, are necessary in- 
 dustries ; the making of musical instruments constitutes part of the 
 national property. Insure us against foreign competitors, who 
 make all these things better and cheaper than we." 
 
 For the last sixty years they have gone on repeating these 
 lamentations, and they repeat them now. M. Louis Blanc inter- 
 posed, " You are secured from competition, and you keep the 
 profit to yourselves. We, in our turn, are going to secure the 
 
Bk.iv.Ch.vi.] THE EIGHT TO LABOUR, AND ORGANISATION OF LABOUR. 183 
 
 profits of the monopoly of production to the workman. You can 
 invoke no economic principle against this proposal, your principles 
 are the same as ours; you can only protest in the name of your 
 own interests, and confess that you want to keep your monopoly 
 to yourselves. Well, we want to take it from you, and give it to 
 the workman." 
 
 So put, the argument is unanswerable. 
 
 Unluckily, M. Louis Blanc was too ignorant of even the simplest 
 notions of economy to force his adversaries on the horns of this 
 dilemma. 
 
 He entangled himself in contradictions as complicated as a skein 
 of thread that a kitten has been playing with, and then declared 
 that if he aimed at securing the monopoly of production to the 
 State, he did so in the name of liberty ! He spins off such aphorisms 
 as this : " As long as competition exists, liberty is impossible," and 
 then proceeds to " organise labour " on paper. " The Government 
 should be regarded as the supreme regulator of production, and 
 invested with large powers for the accomplishment of its duties. 
 It must avail itself of competition for the purpose of destroying 
 competition. It must raise a loan to be applied to the creation of 
 ateliers sociaux (co-operative workshops) in the more important 
 branches of national industry." 
 
 It never occurs to M. Louis Blanc to doubt that this loan will 
 be taken up by the capitalists it is desi gned to ruin ; he agrees, 
 however, to pay them interest for their money, but not to allow 
 them the smallest participation in the profits. 
 
 The State will, of course, possess all the virtues ; it will never 
 speculate ; it will prefer to buy dear, when, by choosing its time, 
 it might buy cheap. The price of its products will be fixed by 
 clockwork, irrespective of demand and supply. It is to regulate 
 the industries, not to take them over. Private manufacturers 
 may exist alongside those of the State ; but M. Louis Blanc 
 himself adds, " In every important industry, the co-operative work- 
 shops must compete with private enterprise, and the struggle will 
 not last long." l 
 
 Whatever advantage the workman in M. Louis Blanc's national 
 workshops may enjoy as a producer, he loses as a consumer. Like 
 the simplest disciple of Pouyer Quertier, M. Louis Blanc is averse 
 to cheapness. The co-operative workshops must, to use a favourite 
 expression of the Protectionists, take care to maintain prices at " a 
 remunerative rate." 
 
 The following is M. Louis Blanc's formula for measuring work 
 and wages. " Duty in proportion to strength and capacity, rights 
 in proportion to needs;" but he does not tell us by whom or by 
 what standard these needs and capacities are to be measured. 
 1 Organisation du Travail, p. 88, 4th edition. 
 
184 THE EIGHT TO LABOUR, AND THE ORGANISATION OP LABOUR. 
 
 The basis of the co-operative workshop is to be " the substitution 
 of the point of honour for the motive of self-interest, and conse- 
 quently, the immediate or proximate equalising of wages, till so- 
 ciety attains the ideal towards which it should strive to produce 
 according to its strength, and to consume according to its needs." 
 
 Against that frightful egoism which might find its way into the 
 national workshops, as everywhere else, M. Louis Blanc has an in- 
 fallible remedy. " Let a post be set up in every workshop with this 
 inscription : ' Where brothers associate for work, every idler is a 
 thief.' " 
 
 Although it was the aim of M. Louis Blanc's system to equalise 
 wages, the application of that system began with a monstrous 
 inequality. He admitted that the inclusion of the entire produc- 
 tion of France within his organisation was not the work of a day ; 
 he therefore received into his co-operative workshops only certain 
 privileged persons. If private industry attempted to compete, it 
 must lower its wages. He could not increase the comfort of the 
 few without diminishing that of the many. 
 
 M. Louis Blanc is the sworn foe of capital, yet he says, " The secret 
 of doing better than your neighbour is to have more capital than 
 he." Indeed ? Does not history show that the great owners of capital 
 have often made a destructive use of it, and that the rich man 
 often fails where the skilful and persevering man succeeds ? 
 
 M. Louis Blanc's economic theories are irrefragable because 
 they are intangible. When you come to look at them, you find 
 they have nothing in them. You are astounded that they should 
 ever have deluded even the most ignorant. Yet his recent speeches 
 give us reason to believe that he held to these theories to the 
 last. We cannot but regret that, with his high position in 
 politics, and the consideration in which he was held, he never 
 introduced a bill into the Chamber of Deputies for organising one 
 or more co-operative workshops. The fabrication of tobacco and 
 matches, for instance, might have been handed over to them by 
 way of a beginning. 
 
 " Lafoi qui n'agit point, est-ce unefoi sincere ? r 1 
 
 Alas ! the Organisation du Travail will remain an eloquent witness 
 to the economic aberrations which agitated France from 1840 to 
 1850, the traces of which we see even now from time to time, 
 not only at workmen's meetings, but in the Chambers themselves. 
 
 In 1848, the workmen demanded the right to labour (droit au 
 travail). This expression has acquired, in the imagination of many 
 good bourgeois, an almost Satanic character. And yet, where did 
 the workman get it, if not from the electoral classes of the Restoration 
 
 1 Racine. 
 
Bk.ir.Ch. vi.] THE RIGHT TO LABOUR, AND ORGANISATION OP LABOUR. 185 
 
 and of the Government of July, who have never ceased to ask for 
 and to uphold prohibitive tariffs in the name of national labour ? In 
 the disgraceful discussions which have taken place within the last 
 few years in the Chamber of Deputies and the Senate upon the 
 Customs tariffs, what did the representatives of the cotton and 
 metal industries urge and insist upon, if not the right of labour ? 
 
 In the original draft of the Constitution of 1848, Article 7 was 
 framed thus : 
 
 Art. 7. " The right of labour is the right which every man has 
 to live by his labour. It is the duty of Society, through the channels 
 of production and other means at its command, hereafter to be 
 organised, to provide work for such able-bodied men as cannot 
 find it for themselves." 
 
 This Article was modified as follows : "It is the duty of society 
 by fraternal assistance to protect the lives of necessitous citizens, 
 either by finding them work as far as possible, or by providing 
 for those who are incapacitated for work and who have no families 
 to support them." 
 
 The wording of these two forms shows the theologico-meta- 
 physical character which, at that time, distinguished such discussions. 
 Society was regarded as an entity having means and powers of its 
 own, derived from nobody knows where. People could not see that 
 it was nothing but the whole body of citizens. One must read 
 the speeches made at the time, in order to form a conception of the 
 haziness which enveloped the whole subject. Men of political 
 intellect quite perceived the impossibility of arriving at any practical 
 result. M. Ledru-Rollin, who maintained the necessity of including 
 in the Constitution an acknowledgment of the right of labour, twice 
 made the remark, at which we smile to-day, but which seems then 
 to have surprised no one : " When you have admitted the right of 
 labour, you are not obliged to have it in operation the very next day." 
 The plain meaning of the right of labour is this : " Find me work, 
 and give me wages enough to keep me and my family." " Wages 
 enough ! " But what are " wages enough ? " Where do insufficient 
 wages begin ? Will you be content with potatoes, like the Irish- 
 man ? And what work ? Will you, who are a goldsmith, be content 
 with unskilled labour ? Certainly not. Then society must turn 
 goldsmith in order to employ you, and go on producing always 
 and all the same, regardless of the law of demand and supply. 
 
 But, to go on producing, society must have capital, and where is 
 it to come from ? A loan, says M. Louis Blanc. That is to say, 
 so much capital is to be withdrawn from circulation ; and if this 
 capital is not used to as good purpose as it otherwise would have 
 been, it is a dead loss to society. This involves a reduced power 
 of purchasing labour. In order to create work, society will have 
 helped to diminish the demand for it ! 
 
186 EXCEPTIONAL CONDITIONS OF LABOUR. 
 
 I have just touched on these economic aberrations by the "way. 
 Like their originator, they have gone the way of all flesh, and the 
 offshoots they have left have little of the vigour of the parent stem. 
 
 Mr. Holyoake sums up in a single sentence the whole history of 
 the Socialist doctrines of 1848 : " The Socialist State promises vou 
 a right, and, when you ask for it, gives you a bullet." 
 
 Napoleon III., in his prison at Ham, had amused himself with a 
 Platonic Socialism ; when it came to putting it in practice, he simply 
 played into the hands of intriguers and jobbers. Of the measures 
 in favour of the workmen he accepted only two in 1864, the law on 
 combinations, and in 1868 the repeal of Article 1781. But he was a 
 relentless persecutor of the workman witness the bloody episodes 
 of the strikes of Aubin and the Ricamarie ; and he demoralised 
 them by sending into their midst police- spies, commissioned to 
 intoxicate them with false notions in order to frighten the bour- 
 geoisie with the apparition of the spectre of the Revolution. 1 
 
 CHAPTER VII. 
 
 EXCEPTIONAL CONDITIONS OF LABOUR. 
 
 WE often hear Socialist speakers and writers declaim against the 
 law of demand and supply. They might as well declaim against 
 the rotation of the earth. 
 
 And yet there is some truth in these declamations, though they 
 cannot upset the law of demand and supply. The workman may 
 fairly complain that it is always being twisted to his disadvantage. 
 Thus, in a certain arrondissement in Paris, one person in every 
 seven or eight is in receipt of public relief. A man who ekes out 
 his wages with the public alms can afford to work at a lower price 
 ihan one who has only his own resources to reckon on. This is 
 what the English poor-rate has come to. Invented in the fourteenth 
 century, and systematised in the sixteenth, it has made pauperism a 
 profession, maintained at the cost of those who labour. In attempt- 
 ing to succour the distressed, the State has created distress by 
 depreciating the price of labour. 
 
 In the case of women, the operation of the law of demand and 
 supply is checked by prostitution. Certain workwomen look for 
 their living, not only to the day's work, but to the night's debauch ; 
 the master naturally makes his calculations accordingly, and says 
 to himself, "I know that my workwomen cannot live on the wages 
 
 1 We have lately seen similar commotions produced by the same means and 
 fcr the same ends. The chief editor of Mdlle. Louise Michel's journal, La 
 Revolution Social*, was a secret agent of the Prefecture of Police. 
 
Bk. iv. Oh. vii.] EXCEPTIONAL CONDITIONS OF LABOUR. 187 
 
 I give them without other means. I can get them at the price, and 
 I take them." I wish this economic argument could sink into the 
 minds of all young women ; it would go further with them than all 
 those arguments from religion which, so far, have only resulted in 
 the state of things we see around us. 
 
 We have soldiers who work in the towns, and policemen off duty, 
 who are shoemakers, tailors, and watchmakers. In charitable 
 institutions, like Bicetre, the pensioners carry on small trades ; con- 
 vict labour in France is let out to contractors. 1 The convents, 
 under the plea of caring for the orphan, keep a number of young 
 girls at forced labour up to one-and-twenty, bringing them up 
 economically on the Word of Grod. Exempt from licences, and 
 subsidised by gifts and legacies, they are able to defy the law of 
 demand and supply. The Protestants from purely philanthropic 
 motives, I admit have opened workrooms for girls, but they com- 
 pete with free labour. Deaf mutes have been humanely taught to 
 print ; but they print for certain houses in Paris, and thus cheapen 
 free labour. 
 
 The Protectionists all cry out that native labour will be ruined, if 
 products similar to its own are imported freely into France. They 
 have sent working-class delegates before the Customs Commission. 
 Strange to say, these delegates never pointed out that, if the protec- 
 tion of native industry demanded by the cotton spinners, by the 
 coal and mining companies, and so forth, is to be effectual, it ought 
 to be supplemented by protection against the imported labour of 
 Belgians, Germans, Piedmontese, etc. This is a necessary conse- 
 quence of the protective system. If you protect products, without 
 protecting the workman who produces them, you give protection to 
 capital only, since you do not hinder the importation of foreign 
 labour. The American workman is as logical in demanding the 
 expulsion of the Chinese as the English workman would be illogical 
 if he demanded similar protection, and as the French workman 
 is illogical when he demands protective duties on cotton yarn and 
 submits to the competition of Belgian workmen. Had this argu- 
 ment ever been advanced in the Chamber of Deputies, it would 
 have been interesting to hear the answer given by the champions of 
 " native labour." 
 
 The^e traditions of the mendicant spirit have not yet completely 
 disappeared ; and they have been exhibited in England, the country 
 of all others where they have the least foundation. 
 
 But for every prejudice with which the workman has been re- 
 proached we can find a bourgeois origin. 
 
 In the year XI. of the Republic, Regnault de Saint Jean d' Angely 
 proposed to fix a minimum number of working hours ; and on the 
 
 1 In England it is confined to naval and military works. 
 
188 EXCEPTIONAL CONDITIONS OF LABOUR. 
 
 26th September, 1806, a police regulation appeared fixing the hours 
 of work and the meal times of the building trade in Paris. The 
 workmen now wish to fix a maximum turn and turn about. The 
 English workmen's agitation, first for nine and then for eight 
 hours a day, is well remembered. The hours of work for women 
 and children are settled by law. 
 
 Man certainly is no mere machine, intended to turn out such and 
 such a product incessantly and automatically until it is itself worn 
 out. Nothing can be more just than Macaulay's observations on 
 the usefulness of the English Sunday : 
 
 " That day is not lost. While industry is suspended, while the 
 plough lies in the furrow, while the Exchange is silent, while no 
 smoke ascends from the factory, a process is going on quite as im- 
 portant to the wealth of nations, quite as important as any process 
 which is performed on more busy days. Then, the machine of 
 machines, the machine compared with which all the contrivances 
 of the Watts and the Arkwrights are worthless, is repairing and 
 winding up, so that he returns to his labours on the Monday with 
 clearer intellect, with livelier spirits, with renewed corporal vigour. 
 Never will I believe that what makes a population stronger, and 
 healthier, and wiser, and better, can ultimately make it poorer." l 
 
 Lassalle's axiom, " Production is in inverse ratio to labour," leads 
 to a slightly absurd conclusion; but it is none the less true that 
 too continuous labour exhausts, and that the intensity of the effort 
 is in inverse ratio to its duration. It is a question of mechanics. 
 A week consists of 168 hours. Ten hours' work a day for 6 days 
 leaves 108 hours. Allow 9 hours a day for eating, sleeping, and 
 going to and from work, and you have 45 hours left for family 
 intercourse, friendly gatherings, reading, study, and personal con- 
 cerns. Is that too much ? I think not. 
 
 But that is not the question. The question is, whether the law is 
 to determine the hours of labour. A law of the 14th September, 
 1848, reduced them to twelve hours in mills and factories. Subse- 
 quent decrees have modified it by a host of exceptions. Workshops 
 employing fewer than ten hands were exempted from its operation 
 at a time when such workshops formed nine-tenths of the whole 
 number. This regulation has practically fallen into disuse. In 
 1880 a bill was brought into the Chamber of Deputies for reducing 
 the hours of labour to ten, not only in factories but also in work- 
 shops. The Working Men's Congress of Havre gave the measure 
 its energetic support. Nevertheless, if this law ever came to be 
 applied, it would very soon raise a clamour of protests. What 
 would become of the small manufacturers of Paris, who now and 
 again break into such furious activity ? Are they to do a fixed 
 
 J Speech on the Factory Acts. 
 
Bk. iv. Oh. vii.] EXCEPTIONAL CONDITIONS OF LABOUR. 189 
 
 amount of work all the year round, the same in the dead season as 
 in the busy season ? And what about this perpetual interference of 
 the police in the workshops ? Between public health and humanity, 
 we are getting back to the regulations of Colbert. 
 
 I quoted just now a passage from Macaulay relating to the 
 Sunday's rest ; was there ever a more unpopular law in France than 
 that of 1814, which enforced it ? It has never really been observed. 
 
 In 1859 a London Workmen's Association began the nine hours' 
 movement. In 1861 the employers, to put a stop to it, introduced 
 payment by the hour instead of by the day. At the present time 
 the hours of labour are, in fact, only 56f per week, and yet certain 
 trades unions demand the interference of the law. Not so ; let the 
 labourers by all means be free to combine to fix their wages and 
 conditions of labour ; nothing can be more reasonable. But if the 
 State is to interfere with the hours of labour, there is no reason 
 why it should not interfere with the rate of wages. It is but two 
 sides of the same* question. 
 
 To be really advantageous to the workman, the measure must be 
 framed thus : " Work shall be reduced to nine hours a day ; wages 
 shall not be reduced." 
 
 " But you admit that the law should protect children ? " They 
 are not able to protect themselves. They may be shamefully over- 
 worked by their parents and by masters, who abhor negro slavery, 
 but do not extend their philanthropy to white children. English 
 legislation with regard to the labour of children, of young people 
 of both sexes between fourteen and sixteen years of age, and of 
 women, has been codified in the Factory and Workshop Act, 1878. 
 With the labour of men above eighteen the law does not interfere. 
 The first five days of the week give ten or ten and a half hours* 
 work a day, Saturday only six and a half. But the English legis- 
 lature has clearly seen how difficult of application such regulations 
 are, and has accordingly not imposed uniform rules in all cases ; 
 in some industries, the hours can be extended to fourteen for forty, 
 eight days in the year, and in others for double that time. Pro- 
 tective measures of this kind are often carried to great lengths. 
 In France, the application of the law relating to children's labour 
 bristles with difficulties. In Paris, the half-time schools have not 
 been attended with anything like the success expected from them, 
 and yet there is probably not another city in the world where the 
 treatment of apprentices is so paternal. 
 
 In Germany, the number of children employed in manufacturies 
 has steadily decreased ; and from many industries they have been 
 entirely excluded. It may be questioned whether such exclusion 
 is always an advantage, either to industry or to the children them- 
 selves. 1 
 
 See Economists Frangais, Nov. 15, 1879. 
 
190 EXCEPTIONAL CONDITIONS OP LABOUR. 
 
 One of the questions mooted at the first public meetings held 
 after the passing of the law of 1868, was that of the employment 
 of women. The men demanded its prohibition by law. In sub- 
 sequent working-men's congresses, they have taken care not to go 
 quite so far. The women who took parr in these meetings, far 
 from demanding such favours, wished to have a greater number of 
 callings thrown open to them. At the same time, in that restric- 
 tive spirit which we have such difficulty in getting rid of, they 
 wished night-work for women prohibited. They did not see that 
 this must inevitably exclude them from certain occupations. If 
 night- work is forbidden in the factories, why not in the markets ; 
 and why should not the market women be obliged to bring their 
 vegetables in the morning ? It would be only putting people's 
 lunch a little later. Men must replace women in folding the news- 
 papers. A strange way of opening up fresh avenues for women's 
 labour! 
 
 This restrictive tendency may lead us rather a long way. The 
 Commune issued a decree forbidding bakers to work at night. 
 Rochefort parodied it with "Lamp-lighters may only work by 
 day." If we try to regulate the conditions of labour by law, we 
 soon reach the reductio ad absurdum. 
 
 Liberty of contract between the employer and the employed, and 
 the independence of the contracting parties : this is all that should 
 be guaranteed by the law. 
 
 In past times the law intervened in favour of the employer, giving 
 him the power to impose his will and his wages, acknowledging a 
 value in his affirmation which it refused to those of the workmen, 
 and giving a sanction to his combinations; and in thus taking 
 sides it was wrong. If it were now to side with the workman, 
 granting him monopolies, and creating a minimum limit of wages 
 and a maximum limit of work, it would be wrong again. It would 
 fulfil the well-known description of a military movement, " the same 
 thing over again, only just the opposite." It would be creating a 
 privilege as before ; it would be imposing a forced contract, instead 
 of allowing a free one. 
 
 Some legislative modifications are required from a legal point of 
 view. With regard to accidents, for instance, Article 1382 of the 
 Code Civil lays down that, " Any act whatsoever of one person by 
 which another is injured, obliges the person who has caused the 
 injury to make it good." 
 
 " Art. 1383. Every one is responsible for the injury he has 
 caused, not only by his act, but also by his negligence or impru- 
 dence." 
 
 A workman is killed by a fall from the scaffold, or crushed by a 
 heavy piece of masonry ; as the law stands, he has no claim to 
 
Bk. iv. Ch. vii.] EXCEPTIONAL CONDITIONS OF LABOUR. 191 
 
 compensation, unless he can prove that the accident happened 
 through the master's fault. 
 
 In some trades, such as carpentering, engineering, mining, the 
 day's work is a struggle in which the workman daily risks his 
 life ; in others, such as those which employ injurious chemicals, 
 there is not even a struggle ; the workman is condemned to certain 
 death within a limited time. The sanitary regulations of the 
 Hygienic Councils have been of no use at all. As to the masters, 
 they are not only excessively careless, but sometimes show the 
 most incomprehensible obstinacy. It was not until after several 
 strikes that the workmen in foundries succeeded in compelling the 
 masters to substitute the use of fecula for that of coal dust. 
 
 When a miner is killed by fire-damp, of course the fire-damp is 
 to blame. If the accident had been on a large scale, public opinion 
 would have been roused, and a subscription raised. But the miner 
 was killed just the same ; and nobody takes any notice. There is 
 some advantage in being killed in company. FOB soli ! 
 
 This demonstration is not a solution. Most companies have 
 established funds for pensions and temporary assistance. But in 
 any case, they take care that they themselves are not responsible. 
 An engineman passes his life among machinery ; he has to oil it 
 whilst in motion ; one day, in a moment of forgetf ulness, he is 
 caught by it, and either killed or frightfully mutilated. So much 
 the worse for him. All his own fault. He should have taken 
 better care. If the master is generous, he may do something for 
 him or his family ; if not, they are cast on the streets, and reduced 
 to beggary. 
 
 Clearly, this state of things is not fair. If a soldier is wounded in 
 battle, no one asks whether he has been imprudent ; he gets his 
 pension. It ought to be the same on the field of industry. The 
 workman who is killed or wounded at his work must be regarded 
 as a victim to professional duty. 
 
 A bill for remedying this injustice was brought into the Chamber 
 of Deputies by M. Martin Nadaud in 1880 ; and a somewhat similar 
 bill is under the consideration of the English Parliament. Both of 
 these we heartily approve. 
 
 Contractors and all who employ workmen in dangerous trades 
 will insure themselves against possible accidents, and we shall be 
 spared the melancholy spectacle of maimed and crippled creatures 
 who have no resource but public charity. Charity is very much 
 a matter of chance ; and for these chances we ought to substitute 
 certainties. 
 
 So also in the two or three classes of unwholesome trades, the 
 masters should be held answerable for the sickness and mortality 
 among their men. 
 
192 THE LABOUR MARKET. 
 
 CHAPTER VIII. 
 
 THE LABOUR MARKET. 
 
 WE now proceed to the question of the relations between labour 
 and capital, endeavouring to divest it of all those prejudices on 
 both sides which tend to obscure it; with the certainty of thereby 
 offending both parties. 
 
 It is useless, not to say disingenuous, to try to persuade master 
 and workman that their interests are identical. It is the employer's 
 interest to buy as cheap as possible. It is the workman's interest 
 to sell as dear as possible. That is the plain truth. 
 
 Is there no agreement, then, between these opposing interests f 
 There must necessarily be some sort of agreement, as in any other 
 case of exchange. But the conditions of exchange may be favour- 
 able to one of the parties and unfavourable to the other, or they 
 may be disastrous to both. We have therefore to examine whether 
 the present organisation of the labour market is a rational applica- 
 tion of the laws of economic science. 
 
 Some employers are shocked at the idea of regarding labour as 
 a commodity. "What," they say, li are our workpeople no longer 
 to be subject to us ? Why, they are our children, our family! J> 
 Some fathers, however, do not treat their children particularly 
 well ; and, at any rate, men do not want to be treated like children. 
 
 The workmen, for their part, also exclaim against the idea. " It 
 is a desperate theory for us," they say. " Labour is not like a 
 commodity, and wages are not like a contract, for the workman is 
 not a free seller. The capitalist is always free to employ labour, 
 and the workman is always forced to sell it. The value of labour 
 is completely destroyed unless it is sold on the instant. Unlike 
 real commodities, labour is a form of capital which is not susceptible 
 of accumulation, nor even of saving." It remains to be proved, 
 however, that all real commodities are capable of accumulation and 
 saving. Nobody will dispute that strawberries and fresh eggs are 
 commodities. Can they be saved or accumulated ? 
 
 The value of labour is utterly destroyed, unless it is sold at once ; 
 it is just the same with the value of all motive power. 
 
 It is assumed that the capitalist is always free to employ labour, 
 and the labourer always forced to sell it. True, the capitalist is 
 free not to employ labour, but on condition of not employing his 
 capital. The owners of a coal-mine are not bound to employ 
 labourers ; but in a year's time their mine will be flooded, and the 
 galleries sunk in; their capital will make no return, and if they 
 have engagements which they cannot meet, they will become bank- 
 rupt. Still, it is true they can afford to wait some time, whilst the 
 
Bk.iv.Ch.viii.] THE LABOUE MAEKET. 193 
 
 workman mnst feed himself and his family every day. In this 
 respect the dealer in labour is at a disadvantage in comparison with 
 the dealer in capital. But, in any other transaction, is not the 
 need of one of the contracting parties always more urgent than that 
 of the other ? If the seller's need is the more urgent, the price 
 falls ; if the buyer's is the more urgent, the price rises. Now, for 
 a long time past, the wages of labour have steadily gone up. It is 
 clear, therefore, that the buyer's need has been the more urgent. 
 
 It is in England that the most practical, persevering, compre- 
 hensive, and successful efforts have been made for the regulation 
 of the labour market. It is therefore to England that we shall 
 first turn our attention. 
 
 At their first appearance, the Trades Unions were looked on as 
 mysterious, violent, and bloody conspiracies. It was a war between 
 labour and capital. Capital had all sorts of privileges secured to it 
 by law. Labour was not in a position to dispute its terms. The 
 law of demand and supply was infringed, as it is infringed wherever 
 the monopolist can impose his own terms on the other contracting 
 party. In Edward the Sixth's time, a workman convicted of taking 
 part in a conspiracy for raising wages, had his ears cropped. Such 
 treatment called for reprisals. In 1813, the Luddites declared 
 war against machinery. By way of teaching them to amend their 
 lives, nine-and-twenty of them were hanged in York alone. Their 
 associates continued for some years to ravage the country about 
 Nottingham. Symptoms of the same kind appeared all over 
 England. The workmen knew well enough that the laws oppressed 
 them. They did not clearly see the cause of their sufferings, nor 
 the way to remedy them. 
 
 It is one of the great difficulties of social diseases, that the patient 
 has to make his own diagnosis and his own prescription. The task 
 is difficult, and the doctor is generally wrong. He poisons the 
 wound in trying to cure it. In England, perhaps neither masters 
 nor men knew exactly what wanted doing ; and the workmen 
 blamed the new machinery, when they ought to have been claiming 
 for labour the right to make its own terms with capital. As it was 
 necessary to concede something, and impossible to allow the destruc- 
 tion of machinery, the workmen were gradually allowed freedom of 
 combination. The thing was done reluctantly and badly. In 1824, 
 the restrictive labour laws were abolished, but they were re-enacted 
 the next year, and never definitely repealed until 1839. There 
 still remained amongst the litter of old English laws provisions 
 against associations for influencing the course of labour. Trades 
 Unions, local and general, were founded nevertheless; They had 
 the double character of societies for mutual assistance and for 
 mutual defence. Little was known of them until after the inquiry 
 
 o 
 
194 THE LABOUR MARKET. 
 
 of 1868, consequent on the crimes committed in Manchester and 
 Sheffield in 1866. When a Sheffield saw-grinder named Broadhead 
 boasted before the commission of having been the instigator of 
 murder and incendiarism, there was a general scare. The Times, in 
 a moment of panic, proposed that the masters should make a clean 
 sweep of all the Unionists in their employ. But the English 
 quickly recovered their coolness. It was utterly impossible to sup- 
 press these associations ; it was felt that workmen ought to have 
 the right to combine for the defence and furtherance of their own 
 interests ; and, so far from being proscribed, they were not only left 
 unmolested, but their existence was legally recognised. 
 
 The Trades Unions registered in 1877 have a revenue of 
 254,565, an accumulated capital of 374,989, and comprise 
 260,222 members. 1 They are but the minority of English workmen ; 
 yet their power is incontestable ; it proves, not indeed that their 
 organisation is a good one, but that they have an organisation. 
 What use do they make of it ? 
 
 The charges brought against them may be summed up as follows : 
 They put into a common fund contributions intended for insurance 
 in case of death or sickness, and those intended for strikes and 
 trade purposes, and then apply the fund chiefly to the latter class 
 of purposes. They are almost all subject to a despotic directing 
 committee. They would gladly oppose the use of machinery ; and 
 since they cannot destroy existing machinery, they do their best 
 to prevent the introduction of improvements. The report of the 
 Society of Ironfounders for 1879 asserted that there was only one 
 remedy against machinery to work shorter time and produce less. 
 They prohibit piece-work ; and in some trades, such as brickmaking, 
 the workman is bound not to work too hard. Houses in Manchester 
 are said to have gone up 35 per cent, in consequence of the brick- 
 makers' rules, the workmen, of course, paying their share of the 
 increase, like any other tenants. They demand equal wages for all 
 workmen, notwithstanding differences of skill. Like the guilds of 
 the Middle Ages, they try to restrict the number of apprentices ; 
 under pretence of emancipating the workman, they hold him in the 
 closest bondage, obliging him to conform to their rules, and depriv- 
 ing him of the first of all liberties, the right to labour, by forbidding 
 him to labour except under stated conditions, and requiring him to 
 leave his employment whenever the committee orders a strike. 
 The pessimists go very near to attributing to the Trades Unions 
 the industrial crisis which lately prevailed in England. People 
 must always have a scape-goat. 
 
 1 See Brassey, Foreign Work and English Wages, and Bevan, Manufacturing 
 
 Industry. 
 
Bk, iv. Ch. viii.] THE LABOUR 5IAKKET. 195 
 
 Happily, there are persons in England who keep a cool head, and 
 go to the bottom of things. These men say : 
 
 " Trades Unions, make what exertions they may, will not alter 
 the law of demand and supply, any more than they will stop the 
 rotation of the earth. The age of Joshuas is past. They will never 
 prevent the fall of wages when there are no outlets for industry ; 
 while the eagerness of manufacturers to extend their business on 
 the least appearance of an opening must of itself stimulate a demand 
 for labour which will result in a rise of wages without the inter- 
 ference of Trades Unions. If the Trades Unions were to raise the 
 wages in a given trade higher than that trade could support, it 
 would die out. The demand for labour would decline in conse- 
 quence, and wages would fall. The recent labours of Professor 
 Leone Levi have shown that the wages of non-unionist workmen 
 have within the last ten years undergone a greater increase than 
 those of the members of the most powerful Unions between 1866 
 and 1878. Women's wages have gone up 24 per cent., and those 
 of men generally 6| per cent. 1 The powerlessness of Trades Unions 
 to hinder the fall of wages during a crisis is pointed out in the 
 Report of the Durham Miners' Association. ' In 1874 our income 
 was 47,004, and our expenditure 23,613 ; so that for this one 
 year our income exceeded our expenditure by 23,390. But in 
 1875, 1876, and 1877 there was a relative diminution of receipts 
 and an increase of expenditure. Income in 1877, 33,290 ; ex- 
 penditure, 60,513 ; difference, 27,223. Every one must see that 
 this state of things cannot last long.' It is only when the supply 
 of labour is scarce that the workmen can dictate their own terms to 
 the masters. During the American war wages doubled and tripled. 
 They subsequently declined, but still remained from 50 to 75 per 
 cent, higher than during the previous twenty-five years. There 
 needed no Trades Unions to produce this result. Workmen in the 
 building trade find it easier than others to force a rise in wages, 
 because their industry is limited to fixed localities, and has nothing 
 to fear from foreign competition. Thus, in the United States, 
 masons and brickmakers have made from 11s. 3d. to 15s. a day. 
 In 1873 they even reached 18s. Wd. a day. These conditions are 
 to a great extent independent of Trades Unions. The strikes of 
 masons in London and of joiners in Manchester in 1877 were 
 failures. The masters have answered the workmen's unions by 
 powerful associations among themselves, which give them a power 
 of resistance equal to that of the strongest Trades Unions. To the 
 strike they oppose the lock-out. They insert in their agreements a 
 clause for relieving them, in case of strikes, from the obligation of 
 fulfilling their contracts by the appointed time. As to the exclusive 
 
 1 See Book IV., chap, in., Diagram 36, p. 164. 
 
196 THE LABOUR MARKET. 
 
 spirit of the Trades Unions, they are no doubt wrong in forbidding 
 piece-work, in demanding equality of wages, in trying to put down 
 freedom, of labour among their members, in opposing machinery, 
 and in getting up strikes ; but they have abandoned the wild 
 theories formerly professed at Ghent and Lyons. In 1877, the 
 president of the Trades Union Congress at Bristol denounced in the 
 most energetic terms the outrages which had taken place against 
 manufacturers in Manchester. The following was the programme 
 for 1879 of the Parliamentary Committee of the associated Trades 
 Unions : 
 
 1st. Amelioration of the law respecting accidents, so that work- 
 men and their families may be indemnified in case of death or injury 
 due to the negligence of the employer; 
 
 2nd. Reforms in the administration of justice : (a) Summary 
 jurisdiction of magistrates, with right of appeal and trial by jury, 
 and diminution of useless imprisonments ; (6) Appointment of free 
 referees ; 
 
 3rd. Codification of the criminal law ; 
 
 4th. Reform of the jury law ; 
 
 5th. Extension of the Act of 1875 respecting employers and 
 workmen to ships whilst in British waters ; 
 
 6th. Increase of the number of inspectors of factories and work- 
 shops ; 
 
 7th. Reform of the patent law ; 
 
 8th. Abolition of imprisonment for debt ; 
 
 9th. Certificates of competence for engine-drivers. 
 
 Certainly we have nothing here but what is practical and 
 admissible. 
 
 In conclusion, Trades Unions may do good service by collecting 
 information as to the condition and future prospects of labour 
 Such information will be a guide to the workman in his negotiations 
 with his employers. He will then understand that it is his interest 
 that capital, that "sensitive and volatile element of production," 1 
 should not emigrate abroad, for if it does, the purchasing power of 
 his labour must disappear. He will therefore not drive it away by 
 his exorbitant demands. On the other hand, the capitalist will see 
 that the workman must be paid as highly as the conditions of pro- 
 duction will permit." 
 
 We have given the pros and the cons, let us now turn our atten- 
 tion to the strikes which, according to Mr. Bevan, have taken 
 place in England within the decade 1870-79 inclusive. 
 
 Brassey. 
 
Bk. iv. Ch. viii.] 
 
 THE LABOUR MARKET. 
 
 197 
 
 LOCALITIES AND TRADES AFFECTED. 
 
 Trades. 
 
 
 Towns. 
 
 Weeks. 
 
 Date. 
 
 Carpenters and Joiners . . 
 Tailors 
 
 j 
 
 Heywood . . 
 Wolverhampton 
 Manchester . 
 Dunfermline . 
 Hartlepool. . 
 Shields . . . 
 Merthyr . . 
 Blaenafon . . 
 
 28 
 27 
 52 
 40 
 34 
 34 
 27 
 47 
 
 1872 
 1877 
 1877 
 1878 
 1878 
 1878 
 1874 
 1875 
 
 
 ( 
 
 Aberdeen . . 
 Bradford . . 
 
 Shields . . . 
 
 57 
 20 
 23 
 
 1875 
 1878 
 1873 
 
 
 
 South Wales . 
 Burnley. . . 
 Dronfield . . 
 Pembrokeshire 
 
 21 
 26 
 96 
 
 28 
 
 1875 
 1876 
 1877 
 1876 
 
 
 : 
 
 Kinneil . . . 
 Church Lane . 
 Manvers Main 
 Wishaw . . 
 Middlesborough 
 Parkgate . . 
 
 26 
 36 
 26 
 20 
 29 
 22 
 
 1878 
 1878 
 1878 
 1873 
 1873 
 1875 
 
 
 5 
 
 Aberdare . . 
 Bradford . . 
 Glasgow . . 
 Dumbarton . 
 Runcorn 
 
 26 
 36 
 20 
 
 28 
 26 
 
 1879 
 1879 
 1870 
 1876 
 
 1876 
 
 
 ( 
 
 Glasgow . . 
 Sunderland . 
 Glasgow 
 
 23 
 26 
 33 
 
 1877 
 1876 
 1876 
 
 
 i 
 
 Alloa . . . 
 London. . . 
 
 Newcastle . . 
 Kirkcaldy . . 
 
 56 
 33 
 24 
 36 
 
 1878 
 1877 
 1878 
 1878 
 
 
 (. 
 
 Wigan . . . 
 Barnsley . . 
 Sheffield . . 
 
 30 
 31 
 
 28 
 
 1879 
 1879 
 1875 
 
 
 
 Edinburgh. 
 
 33 
 
 1879 
 
 Engine-drivers 
 
 i 
 
 Newcastle . . 
 Ashton 
 
 21 
 22 
 
 1871 
 1879 
 
 Bail way Employe's 
 Workmen in Tobacco Factories 
 
 Plumbers 
 
 ( 
 * 
 
 Belfast . . . 
 TaffVale . . 
 Newcastle . . 
 Nottingham . 
 
 26 
 25 
 24 
 
 38 
 
 1879 
 1876 
 1879 
 1878 
 
 
 ( 
 
 Darlington. . 
 Dublin . . . 
 
 37 
 31 
 
 1876 
 1878 
 
 
 
 
 
 
198 
 
 THE LABOUR MARKET. 
 
 NUMBER OF STRIKES. 
 
 1870 
 1871 
 1872 
 1873 
 1874 
 1875 
 1876 
 1877 
 1878 
 
 30 
 98 
 343 
 365 
 286 
 245 
 229 
 180 
 268 
 
 1879 (1st December) 308 
 
 2,352 
 
 DURATION OF STRIKES 
 
 1870 
 1871 
 1872 
 1873 
 1874 
 1875 
 1876 
 1877 
 1878 
 1879 
 
 Weeks. 
 68 
 279 
 988 
 
 1,093 
 812 
 684 
 952 
 759 
 
 1,621 
 
 1,774 
 
 9,027 
 
 Or 54,162 working days (Journal of the Statistical Society, March, 1880, p. 46). 
 
 The following have been the results, so far as the writer has 
 been able to ascertain, which attended these various strikes : 
 
 
 Number 
 of Strikes. 
 
 Lost. 
 
 Won. 
 
 Compro- 
 mised. 
 
 Explan- 
 ations. 
 
 Result 
 un- 
 known. 
 
 1870 
 
 30 
 
 1 
 
 8 
 
 2 
 
 11 
 
 19 
 
 1871 
 
 98 
 
 5 
 
 10 
 
 11 
 
 26 
 
 72 
 
 1872 
 
 343 
 
 6 
 
 8 
 
 8 
 
 22 
 
 321 
 
 1873 
 
 365 
 
 
 
 
 
 365 
 
 1874 
 1875 
 
 286 
 245 
 
 23 
 
 17 
 
 9 
 
 49 
 
 286 
 196 
 
 1870 
 
 229 
 
 24 
 
 15 
 
 16 
 
 55 
 
 174 
 
 1877 
 
 l&O 
 
 15 
 
 7 
 
 10 
 
 32 
 
 148 
 
 1878 
 
 268 
 
 43 
 
 3 
 
 15 
 
 61 
 
 207 
 
 1879 
 
 308 
 
 72 
 
 3 
 
 20 
 
 95 
 
 213 
 
 
 
 
 
 
 
 
 Total 
 
 2,352 
 
 189 
 
 71 
 
 91 
 
 351 
 
 2,001 
 
 
 
 
 
 
 
 
 When production increases, the number of strikes increases with 
 
Bk.iv.Ch.viii.] THE LABOUR MARKET. 199 
 
 it; during a crisis they fall off; as soon as the crisis is over they 
 begin again. These figures show that the workmen in their strikes 
 observe the law of demand and supply of labour ; when the demand 
 is weak, they submit; when it is strong, their pretensions rise 
 with it. 
 
 Some strikes, however, are entered upon without hope of success ; 
 they have been provoked by some injustice, against which the 
 workmen wish to protest. Such strikes are the most heroic, and 
 surely the most legitimate. 
 
 Out of these 2,352 strikes, 314 have been due to the colliers, 187 
 to the carpenters, 151 to the masons, 127 to the iron-workers, 120 
 to the cotton- operatives, 100 to the ship-builders, and 96 to the 
 engineers and fitters. 
 
 Within these ten years, strikes have occurred in only 111 trades, 
 and Mr. Bevan remarks that it is " encouraging to have to record 
 how few trades have struck compared with those that have not." 
 
 Mr. Bevan has calculated the loss of wages resulting from 110 
 strikes. Reckoning five working days to the week, and estimating 
 the daily loss per man at four shillings, he makes a total of 
 4,468,950. The strike among the ship-builders on the Clyde 
 in 1877 alone cost 300,000 ; the strike of the Durham miners in 
 1879 cost 240,000. These sums are not included in the total 
 given above. If 112 strikes give a loss of more than five millions, 
 what must the loss on the remaining 2240 amount to ? And what 
 of the indirect losses through depreciation of house-property in 
 the districts liable to great strikes, through unpaid rents, through 
 the accumulation of debt on the head of the workman, causing 
 heavy losses to the tradesmen who have given him credit, and 
 through sickness and physical deterioration and the sufferings of the 
 wives and children ? Sometimes a strike absolutely destroys the 
 industry in the place where it has broken out. This was the case 
 with the dockyards at Millwall. 1 Work migrated elsewhere. A 
 slight reduction of wages for a short time might have saved an 
 industry. A few months later, a redaction of 20 per cent, is neces- 
 sary, and even that comes too late. 
 
 At the same time, it is only fair, in speaking of the waste and 
 ruin produced by strikes, to draw attention to a very just remark 
 of Mr. Ho well's, the Parliamentary Secretary of the Trades Unions. 
 If 10 or 20 per cent, of the workmen engage in a contest on behalf 
 of the whole trade, the rest of the men will share in the benefit, 
 and the loss should therefore be calculated on the whole number. 
 If two hundred out of a thousand men in a district go on strike 
 and obtain an increase of wages for the remaining eight hundred, 
 and thus prevent future strikes, the advantage is obvious. 
 
 1 This fact is disputed by Mr. Brassey. 
 
200 THE LABOUR MARKET. 
 
 The result of the discussion at the meeting of the Statistical 
 Society has been to show that nowhere else is the workman as well 
 off as in England, and that his condition has improved since the 
 strikes. 
 
 We must take into account the limited time which the workmen 
 have had in which to organise themselves. It is only for the last 
 dozen years that the unions have had a legal existence. And yet 
 we expect them to be quite perfect, to commit no errors, to be 
 carried away by no passions, and to weigh with the most perfect 
 accuracy the conflicting interests of themselves and their employers. 
 But are we so perfect, we, who exact so much ? Does no shade of 
 prejudice overcloud our intellect ? Have we overcome that vanity 
 which leads us to look on ourselves as superior beings, and impels 
 us to resist, not only because it is our interest, but because we are 
 childishly ashamed to give way ? 
 
 The strike is a mode of warfare, bringing with it all the de- 
 structive consequences of war, ruin of capital, deterioration of 
 machinery, distress to the workman ; but it is after all only an 
 application of the law of demand and supply. 
 
 The Trades-unionists would be surprised if we told them " You 
 are buying up the market. It was hardly worth while holding 
 up the monopolists to execration, if you were going to take their 
 place and carry on the business." Yet what do they do ? They 
 monopolise labour, they warehouse it, they prohibit its sale by 
 retail. To strike, is to create a scarcity of labour. 
 
 Labour becomes too abundant, its price falls too low, its pos- 
 sessors restrict their offers, just like a merchant withholding his 
 commodities from sale until prices have risen. But he cannot wait 
 beyond a certain time without the prospect of ruin. It is the same 
 with the workmen and with their employers ; both have to come 
 to an agreement, measured by their respective powers of resistance, 
 and always regulated by the law of demand and supply. 
 
 I am simply writing a treatise on Economic Science; and my 
 object in going into these details is only to draw from them certain 
 principles. With regard to the strikes in France, there is only one 
 point to detain us. They have no organisation ; there are no 
 Trades-unions to support them. Yet we labour under such a 
 weight of ignorance in matters of economy, that, no sooner does a 
 strike occur, than we imagine it a riot ; and all the powers of the 
 State, the administration, the magistracy, the police, the gendar- 
 merie, the army, are enlisted against it. The painful reminiscences 
 of Aubin and the Ricamarie are still in men's minds. If M. 
 Gambetta protested against the presence of troops at Creusot in 
 1870, he did not protest against their presence at Anzin in 1878, 
 aud at Boubaix in 1880. When the workmen refuse to work under 
 conditions which do not suit them, we call it insurrection. The 
 
Bk.iv.Ch.viii.] THE LABOUR MARKET. 201 
 
 law of 1864, on combinations, is a hostile law, full of traps and 
 pitfalls into which the strikers must needs fall whenever the 
 Government pleases. M. Emile Ollivier pompously announced in 
 his report, " Absolute freedom, of combination to all classes ; and 
 a rigorous repression of violence and fraud." The maxim is just ; 
 but where does liberty of combination end and liberty of association 
 begin ? 1 The strike is the only object for which the law allows 
 workmen to act in concert ; and then in what a fashion ! A com- 
 bination at St. Etienne, having nominated a committee of sixteen 
 members, was convicted of having formed an association of more 
 than twenty persons, and condemned under Art. 291 and the law 
 of 1834. This law is still in force. 
 
 If syndicates are now established, it is by virtue of a tolerance 
 capricious and uncertain, as tolerance always is. There are not- 
 only many magistrates, but many politicians, who entertain pretty 
 much the same ideas as to strikes and workmen's associations as 
 those to which M. Lepelletier gave utterance in his speech, made 
 in 1867 as Public Prosecutor, against the operative tailors of Paris. 
 " The strike is a conflagration, disastrous and terrifying, but tran- 
 sient ; that is extinguished already. The Association is the hearth 
 from which fresh flames may burst to-morrow ; that must be ex- 
 tinguished too." 
 
 We for our part, on the contrary, demand liberty of association 
 for the workman as for all other citizens ; it is a right ; and it has 
 been practically useful in England. For the solution of all those 
 irritating questions which arise between employers and workmen 
 we can show that it is indispensable. 
 
 Practical men, and economists who do not mistake recrimination 
 and declamation for argument, think that the true means of avoid- 
 ing strikes is the formation of great associations of workmen and 
 employers. Mr. T. Wood Bunning has shown 2 that they will 
 reduce the friction which arises where men are debating their 
 respective interests ; that the delegates of both parties, acting on 
 behalf of their respective constituents, would insure to the arrange- 
 ments decided upon the stability indispensable to great industrial 
 enterprises. Mr. Brassey, too, shows how useful these associations 
 might become in diffusing information as to the value of labour 
 and the industrial situation. 
 
 1 The law of France distinguishes between coalitions (or combinations) and 
 associations. The coalition is a temporary union of workmen for demanding 
 higher wages or going on strike, and is permitted by a recent law passed in 
 1864 ; the association is permanent, and, under an old law unrepealed by the 
 enactment of 1864, is illegal if its members exceed twenty in number. The 
 French Chambers have had before them a proposal, which will probably shortly 
 become law, for granting the French Trades Unions (syndicats professionels) a 
 certain amount of freedom. 
 
 2 Journal of the Statistical Society, March, 1880. 
 
202 THE LABOUR MARKET. 
 
 All these arguments will appear incontrovertible, except to 
 people who pretend that the best way of coming to an agreement 
 is to misunderstand each other. 
 
 It is by means of these associations, these Trades Unions, these 
 syndical chambers, that the labour-market must be organised. 
 
 At the time of the joiners' strike in Manchester in 1877, joiners 
 were being paid in Manchester 8|dL an hour, in Liverpool 8Jd., at 
 Bradford 8d., at Lincoln 7fd., at Lancaster 7d., at Cambridge 6Jd., 
 at Gloucester 6d., at Winchester 5|d, and at Frome 4f c2. 
 
 The labour being the same, and the differences in the conditions 
 of existence very insignificant, this difference in wages proves that 
 the labour-commodity has not yet been able to organise its outlets ; 
 for the prices of commodities, e.g. corn, tend to a level in pro- 
 portion to the development of the means of transport, and the 
 facility and rapidity of circulation. 
 
 Now, man remains the commodity least easy to transport ; he is 
 not always alone, he has a wife and children ; he is held back by 
 ties of family and friendship ; by habit, by the dislike of uncertainty, 
 by the inertia common to us all ; and finally, by the want of in- 
 formation as to the state of trade in other places. 
 
 In 1850 M. Max Wirth founded the Arleitgeber (Labour-ex- 
 change). 1 M. de Molinari attempted to realise the same idea in 
 Belgium. Both enterprises were unsuccessful. Their failure does 
 not, however, prove the idea a false one. It accords with all those 
 historic laws which we have explained and verified. The separation 
 of the man from the thing, of the personality of the man from the 
 service he performs, and the definition and limitation of this service, 
 are undeniable tokens of progress. The slave was an article of 
 exchange; he belonged body and soul to his master, who could 
 require everything from him, even his life. It was little better 
 with the serf; and the journeyman of the ancient guild is still his 
 master's liege man. To-day the workman gives nothing but his 
 labonr. He sells a fixed and clearly-specified product while he 
 himself remains independent. He can think what he pleases, 
 believe what he pleases ; no one calls him to account for his life ; 
 he hands over to his employer a specified product at a fixed price, 
 just as a merchant at Havre delivers to his correspondent in Paris 
 a chest of coffee. The workman is a dealer in labour. In place 
 of the exchange, he has the strike. It is a coarse expedient, with 
 none of those conveniences which the exchange possesses. In place 
 of brokers there are, in some trades, registry offices. Everywhere 
 the labour commodity is sold retail. 
 
 In the Trades Unions we see the formation of a wholesale labonr 
 market. The committees of the Trades Unions are real brokers, 
 
 1 See Max Wirth, Les Lois du Travail, pp. 210-213. 
 
Bk.iv.Ch.viii.] THE LABOUR MARKET. 203 
 
 whose business it is to regulate the price of the commodity labour. 
 When they enter into negotiations with the commodity capital, 
 they do not deal with the commodity labour by retail, but whole- 
 sale. 1 It follows that they learn that labour must submit to the 
 law of demand and supply, like every other commodity. 
 
 The miners of Newcastle organised a general committee, and 
 admitted the principle of a sliding scale of wages. 2 It has since 
 been adopted in other parts of England. The institution of this 
 sliding scale has shown the workmen something of the difficulties 
 with which colliery managers have to contend, and the causes of 
 the differences between the price of coal at the pit's mouth and the 
 price paid by the consumer. Out of the 1 5s. per ton paid by 
 the London consumer, only 4s. 5d. reaches the colliery owner in 
 Northumberland or Durham. The wages of miners in England 
 rose between 1871 and 1873 to 6s. 6d. or even 8s. Od. per day; a 
 crisis supervened, and they fell to 2s. Od. or 2s. 6d. The shock was 
 severe, but it was borne more easily than it would have been if the 
 miners had not been kept informed of the economic situation. 
 
 It is only by means of associations of this nature that questions 
 like the following can be solved. A coal company has six pits close 
 together ; in one the coal is excellent, and easily obtained, and the 
 pitmen can realise high wages; in the other five they cannot make 
 as much. The only thing to be done is to strike an average. 
 
 It is the glory of Mr. Mundella to have established boards of 
 arbitration, and to have introduced the habit of referring to them. 
 It has been the prevention of many strikes. 
 
 The trade syndicates in France pursue objects similar to those of 
 the Trades Unions in England. They date from 1861, and are the 
 result of the information acquired by the workmen at the Exhi- 
 bition. Their delegates, in a memorial dated the 2nd of February, 
 1868, and addressed to the Minister of Commerce, demanded : 
 
 1st. Modifications in the conseils des prud'hommes. 
 
 2nd. The repeal of Article 1781 of the Oode Civil. 
 
 3rd. The abolition of the livret, 
 
 4th. The right of public meeting. 
 
 5th. The establishment of syndical chambers of workmen similar 
 to those of the masters. 
 
 The French delegation at Vienna demanded : 
 
 1st. The institution of legal commissions to inquire into and 
 decide upon differences between masters and workmen. 
 
 2nd. The introduction of a system of technical education more 
 practical than that provided by the ordinary official course. 
 
 The Workmen's Congress, held at the Salle Franklin, Havre, 
 
 1 Journal of the Statistical Society, March, 1880, p. 55. 
 
 2 Mr. T. W. Bunning. 
 
204 THE LABOUE MABKET. 
 
 from the 14th to the 22nd December, 1880, voted the following 
 resolutions, under the head of Question du Salariat : 
 
 1st. Repeal of all laws restricting association. Absolute freedom 
 of every open and public Association, with liberty to adopt such 
 form as may be most convenient. 
 
 2nd. Recognition of syndical chambers as entitled to civil rights, 
 and their admission to tender for public contracts. 
 
 3rd. Revision of the law relating to prud'hommes ; their decisions 
 to be rendered executory within three days. 
 
 4th. Abolition of registry offices, and substitution of the offices of 
 the syndical chambers. 
 
 5th. Admission of syndical chambers to give evidence ia Parlia- 
 mentary inquiries. 
 
 6th. Limitation of the working day to ten hours at most. 
 
 7th. Abolition of the livret. 
 
 8th. An active supervision of work in workshops and factories 
 by inspectors from the workmen's syndical chambers. 
 
 9th. Wages not to be reduced by fines or stoppages. 
 
 10th. Workshop regulations to be approved by the syndical 
 chambers and prud? homines. 
 
 llth. Masters to be forbidden by law to oblige their workmen to 
 subscribe to relief funds belonging to their establishments. 
 
 12th. Labour in prisons to be abolished, and agricultural peni- 
 tentiaries to be substituted ; labour in convents to be suppressed, 
 pending the suppression of the convents themselves. 
 
 13th. Abolition of the octroi, of indirect taxes, and of imposts on 
 articles of consumption. 
 
 14th. Imposition of a single tax on fixed capital, based on a new 
 valuation. 
 
 15th. Lastly, the Congress voted for the creation by the executive 
 committee of a reserve fund for old age. A circular to be addressed 
 to all the syndical chambers, requesting their opinion on this 
 important subject. 
 
 Some points in this programme are open to exception, and some 
 show the old exclusive mendicant spirit; others are admirable, and 
 the revolutionary Collectivists have found scarcely anything more 
 to ask for at present. Moreover, the Congress paid extraordinary 
 attention to the question of instruction and apprenticeship. 
 
 The system of apprenticeship is almost everywhere unsatisfactory. 
 The workmen all look on the apprentice as their servant. He goes 
 the rounds, sweeps the shop, and picks up his knowledge of the 
 trade hap-hazard, often amidst taunts and blows. Some workmen, 
 far from helping him, regard him with an evil eye as a future 
 competitor, who will bring down the price of labour and overstock 
 their calling; and they would willingly rid themselves of him, in 
 order to keep a monopoly of production. The syndical chambers, 
 
Bk.iv.0h.viii.] THE LABOUE MARKET. 205 
 
 by demanding the establishment of technical schools, give evidence 
 of a great moral improvement. 
 
 Lastly, these chambers proclaim freedom of labour. That is the 
 great thing. The odious despotism of the old guild must not be 
 revived under the form of trade associations. It has been this 
 frightful spirit of class and caste which has petrified for so many 
 centuries the Eastern civilisations of India, China, and Japan. 
 
 At the discussion on Mr. Bevan's work at the Statistical Society, 1 
 Mr. T. W. Bunning, the Secretary of the Northumberland and 
 Durham Colliery Owners' Association, who, from his position, must 
 be supposed to be a well-informed and experienced person, said, 
 with a sagacity which is only too rare, " Men of alt classes have 
 very much the same passions, and we may fix a pretty equal per- 
 centage of reasonable and unreasonable people among them. They 
 are all influenced by the same motive personal interest ; and this 
 personal interest does not prevent strikes, because neither of the 
 two parties can measure the interests of the other." In general, 
 the masters think they do too much for their men, and the men think 
 they do not do enough. Masters and men have the same prejudices; 
 they cannot see that they are two contracting parties, buyer and 
 seller. 
 
 Many workmen think the masters are monsters, who could pay 
 higher wages if they pleased, and who do not raise them out of pure 
 ill-will. This ignorance of economy, which is often shared by the 
 masters, creates two kinds of prejudices. There springs up on the 
 part of the workman a boon-begging spirit, which turns to hatred 
 if it is not satisfied; and on the part of the employer, the habit of 
 making himself master too literally. Both substitute the idea of 
 favour for that of justice. 
 
 No doubt, from a moral point of view, we must admit that there 
 are some excellent employers, who have done a great deal for their 
 workpeople. They have turned to account their hereditary adminis- 
 trative capacity, and the experience they have gained in business, 
 to provide institutions for their men, such as the men themselves 
 could never have created or even imagined. They have given them 
 an interest in the extension of their business. As far-seeing 
 calculators, they have not chosen to sacrifice everything to the 
 present opportunity, and make a profit out of the poverty of their 
 workmen by taking advantage of all the fluctuations in the demand 
 and supply of labour. And then, in moments of discouragement, 
 they complain, " We do everything we can for them, and they give 
 us no credit for it. They are an ungrateful lot." 
 
 But in the first place, the effort made is not collective, it is 
 isolated ; and secondly, it is the tendency of the workmen to see 
 
 1 Journal of the Statistical Society, March, 1880. 
 
206 THE LABOUE MARKET. 
 
 but one thing the difference between the gains of capital in a 
 thriving industry, and the wages of their own labour; and they 
 overlook the fact that if their wages were suddenly raised, in how- 
 ever slight a proportion, the gain would soon turn to loss. Besides, 
 they do not consider the risk. They see the immense profits made 
 at a given moment, but they cannot calculate the average profit, 
 allowing for the fluctuation of prices. Sometimes they run up the 
 cost price "Raw materal, so much; my labour, so much" and 
 think they have made a very close calculation ; but if the master's 
 reckoning had been no closer, the works wo old long ago have 
 been closed. The workmen's ingratitude is not ingratitude, but 
 ignorance. 
 
 Employers and workmen must realise that it is their mutual 
 interest to understand each other. Many have already done so. 
 It is by common agreement that they must find the solution of the 
 questions now pending between them. 
 
 The manufacturers complained in the year XI. of the Republic of 
 the workmen's habit of violating their articles of apprenticeship 
 and contracts for work. Such complaints are still heard from time 
 to time ; but are not the employers themselves chiefly to blame for 
 it ? They all say, " I mean to be master in my own house." 
 Accordingly, they reserve their freedom ; they will not bind them- 
 selves to long engagements. The consequence is, that the workmen 
 for their part get into the habit of not considering themselves 
 engaged, and when the fancy takes them, when they think the 
 moment favourable for striking, they stop work, walk off, and leave 
 their master in the lurch. The employer has his own contract with 
 a third party. If his workmen all at once raise their price, his loss 
 may be very serious. Suppose the stokers of one of the gas 
 companies go on strike for a single day, a whole town is left in 
 darkness. Or suppose the engine-drivers of a railway company 
 refuse to work, they can suspend the traffic over a whole country- 
 side. 
 
 In old times, the English workman could not leave his master at 
 all ; but there is not much chance of bringing back that state of 
 things ; and the employer is beginning to see that if he is to guard 
 his own freedom of action, the men will take it into their own hands 
 to guard theirs, and it is therefore his interest to make a solid con- 
 tract. Accordingly, the more intelligent of the large manufacturers 
 have recourse to various contrivances for attaching their workmen 
 to their establishments, providing houses, alms-bouses, and schools, 
 giving bonuses and increased wages for long service, retiring pen- 
 sions, and annual gratuities. l The railway companies give com- 
 missions to their agents. 
 
 1 See for details, Patrons et Ouvriers de Paris, by A. Fougerouese. 
 
Bk.iv.Ch.viii.1 THE LABOUE MARKET. 207 
 
 The employers, who must have labour, are as much interested as 
 the workmen in the solution of these questions. Most of them have 
 not yet found this out, and yet they need but glance at the facts to 
 be convinced of it. 
 
 As we hav^ shown, capital increases much faster than population, 
 at least in England, France, and the United States. This propor- 
 tion tends to increase as fresh mechanical means of production are 
 introduced. There will consequently be a want of hands, for the 
 demand for labour will outrun the supply. The capitalist will then 
 have to do his utmost to procure the most productive labour possi- 
 ble under the most favourable conditions possible. In another half 
 century, if no war should in the meantime occasion one of those 
 terrible destructions of capital which retard civilisation for years, 
 the commodity labour will be scarcer than the commodity capital. 
 
 It may be said that there are still millions of hands at command, 
 Are not the Chinese even now invading the United States ? and 
 after the Chinese, are there not the negroes ? There is not much to 
 fear for the supply of labour. 
 
 That is one side of the question. But people forget that the 
 world is not troubled with a plethora of population ; that only the 
 smallest part of its natural forces is utilised ; that it is but forty 
 years ago that a great industrial revolution began to change the 
 conditions of production. Now, the farther we go, the more must 
 natural forces take the place of human; the less important is 
 muscular strength, and the more important is intellectual power. 
 The more advanced races will take the whole intellectual direction 
 of production, leaving the more disagreeable employments, which 
 will be daily decreasing in importance, to the less advanced races. 
 But, thanks to the progressive applications of science, the produc- 
 tive power of human labour will go on increasing, and will a ugnient, 
 first the amount of capital, secondly, the purchasing power of capi- 
 tal, and thirdly, the supply of capital. And, since the value of 
 labour is in proportion to the supply of capital, wages will continue 
 to advance. 
 
 Employers have too long regarded the workmen as their debtors. 
 Already the reduction in the rate of interest, the difficulty of find- 
 ing profitable investments, and the losses to which their foreign 
 ventures have exposed them, have shown them that, if they mean to 
 go on producing, they must allow a larger share to the other con- 
 tracting party. Their own interest compels them to see that 
 solidarity is no empty word. Agriculturists are complaining of the 
 want of hands. What is the meaning of this phrase ? That the 
 supply of capital is greater than the demand for work. It will be 
 increasingly so in all industries. The egoists and idiots who wish to 
 enjoy all the advantages of society, on condition of having them all 
 to themselves, may like it little enough, but it is none the less a 
 
208 THE LABOUR MARKET. 
 
 sign of progress. The employers of labour will have to make 
 advances to it, to pay it attention, as the small tradesman makes 
 advances to the customer ; and these advances will take the form of 
 co-operative associations, of participation of profits, of provision for 
 the education of children, for the sick, and for old age. 
 
 This solidarity shows itself already in several joint enterprises in 
 which the workman is a real partner. We cannot examine them in 
 detail, but we may point out certain prejudices which tend to their 
 disadvantage. For instance, the Trades Unions are averse to piece- 
 work, and so, in theory, are some French workmen ; mostly those 
 who think that the workman should do as little work as possible, 
 withont considering that the less he produces, the less he can claim 
 for his produce. To the honour of our country, we may say that 
 only a very small minority prefer work by the day. With piece- 
 work the workman feels himself free. He makes a bargain with 
 his employer, who finds him in raw material, tools, and motive 
 power. So long as he delivers the piece at a given time and 
 under fixed conditions, he is independent. He works without 
 supervision, and saves his dignity. Piece-work maintains the dis- 
 tinction between the man and the thing, the human individual and 
 the utility he produces. It specifies the function of the man, who 
 owes a fixed service in return for a fixed price. Piece-work is one 
 of the progressive forms of the organisation of labour, and, in large 
 undertakings, it begins to be substituted for other modes of labour 
 wherever it can be applied. 
 
 At Creusot and at Terrenoire it has been observed that the work- 
 man engaged on piece-work does not work harder, but he works 
 more intelligently. His work is said to be 75 per cent, better, and 
 he earns 50 per cent. more. Both parties are gainers, the work- 
 man by 50 per cent., and the employer by 25 per cent. 
 
 At Gail's factory the workmen are engaged a raffutage, that is, at 
 so much an hour for the work they do. Each one becomes a con- 
 tractor, has his own implements, work-bench, steam, and share of 
 accommodation. 1 It takes four workmen to fit an engine ; sup- 
 pose their united wages for the job to come to 32, they will be 
 divided thus : first, each man will be paid so much per hour ac- 
 cording to his ability ; secondly, he will be paid according to the 
 number of hours he has worked ; thirdly, the balance of the 32 
 will be divided among the workmen in proportion to the wages 
 they receive. There are no sub-contractors. 
 
 In the next case, we find little groups of men filling the place of 
 sub-contractors. In the slate quarries of North Wales, three or four 
 men form a co-partnery, and undertake to extract slates from the 
 
 1 The workman finds the small tools himself, while steam and machinery are 
 provided by the employer. 
 
Bk. iv. Ch. viii.] THE LABOUR MARKET. 209 
 
 portion of the quarry assigned to them, at so much, per thousand. 
 These men form a third of the total number of workmen. The rest 
 are employed by them. The quarry owners supply the more expen- 
 sive implements, while the associated workmen find the powder and 
 small tools. 1 
 
 There are two kinds of labour : servile labour, enforced by chains 
 and whipping ; and free labour, stimulated by pride in one's work. 
 It is needless to say which of the two is the more productive. 
 Time-work is a relic of servile labour ; piece-work is the highest 
 expression of free labour. It is the beginning of association. 
 
 As a proof of the efforts made towards the common agreement of 
 which we have been speaking, we must note the participation of 
 workmen in the master's profits. 2 
 
 A German economist, M. Victor Bohmert, head of the statistical 
 department in Saxony, has gone into this subject in detail. He in- 
 cluded in his inquiry 120 establishments in different countries, under 
 different conditions, and representing different industries. The 
 following are the conclusions he has come to : 3 
 
 1st. The participation in profits works well in almost all cases, 
 and raises both the material and the moral condition of the men. 
 
 2nd. The system cannot, of course, be preached as a panacea for 
 social maladies, or as a concession to absolute justice ; it is simply a 
 thoroughly understood system of wages, the adoption of which, in 
 the majority of cases, and according to the nature of the employ- 
 ment, may become as profitable to those who find the work as to 
 those who find the labour. 
 
 3rd. The idea of adopting this system is always fair and reason- 
 able, but its application does not admit of a rigid adherence to one 
 particular form or method. On the contrary, several different 
 forms may be adopted concurrently, for the purpose of gradually 
 improving the system of remuneration. 
 
 4th. The great variety of circumstance exhibited in the special 
 reports by the various industries proves how much depends on 
 places and persons, and shows that each case should be dealt with 
 on its own merits and according to its peculiar circumstances. Each 
 enterprise is a little world in itself, and demands a special develop- 
 ment, as well as united action on the part of those concerned in it. 
 It may be laid down as a principle, that participation in its highest 
 form demands of each person concerned more effort as well as 
 superior practical skill. 
 
 5th. In order to apply the system successfully, attention must be 
 paid to the following conditions : 
 
 2 foreign Work and English IVages, by T. Brassey, p. 242. 
 
 2 Bulletin de la Participation aux Benefices, 2nd year (Librairie Chaix). 
 
 3 An analysis of this report will be found in the Journal des Economistes for 
 July, 1880. 
 
 P 
 
210 THE LABOUR MARKET. 
 
 () The participation must be so arranged as to establish a real 
 and practical community of interests between masters and men. 
 
 (6) The question of wages is independent of that of profits. 
 Wages can only depend on variations in the labour market, and not 
 on the rate of profits. 
 
 (c) In making the general estimate, the industrial and com- 
 mercial sides of the question must be kept apart, and there must be 
 no mixing up of the separate questions of labour, capital, and the 
 object of the enterprise. 
 
 (d) It is well, in apportioning shares of profits, to take into con- 
 sideration the total remuneration received by each person interested, 
 and even, in some cases, the time spent in the employ of the firm or 
 company. 
 
 (e) As large a portion of the profits as possible should be divided, 
 in order that the shares may not be so small as to be a matter of 
 indifference to the men. 
 
 (f) As many of the men as possible should be made sharers in 
 the profits; and their share should be made independent of the will 
 of the master or of any fresh director. 
 
 (#) In every enterprise formed on this principle, an adequate 
 reserve fund should be set aside ; first, to meet extraordinary repairs 
 of buildings or machinery; secondly, to make good possible losses. 
 
 (Jt) The shares should not, as a rule, be included in the general 
 expenses, and they should bear interest ; but it should be provided 
 that at the expiration of a fixed term of service, or in domestic 
 emergencies, or for buying a house, or during prolonged stagnation 
 of trade, the men should have a right to receive the share of prcfits 
 standing to their credit. 
 
 6th. It is the essential object of this system to invest each indi- 
 vidual workman with a certain amount of capital, so that he may 
 gradually and quietly pass from the position of a wage-earner to 
 that of a capitalist, and have his modest share in the public pro- 
 perty. The sooner this object is attained, the sooner will the pre- 
 vailing hostility between masters and workmen be put a stop to. 
 But it is for those who have proved the strongest in the struggle 
 for existence to be the first to set about removing this hostility. 
 
 Some undertakings of this sort have failed. One instance quoted 
 is that of Brings' Colliery, where the men were admitted to a share of 
 the profits, but only after a deduction of 10 per cent, for interest on 
 capital, irrespective of the rate of profits realised ; and, this being 
 found too moderate, it was presently raised to 14 per cent. Under 
 these circumstances, the workmen found the idea of participation 
 somewhat illusory;* and they were perhaps not wholly wrong. The 
 system was started in 1865, and abandoned in 1875. 
 
 When we hear of a failure, we must look into its causes ; and 
 when we hear of a success, TV* must ask whether it is of a nature to 
 
Bk iv. Ch. ix.] CO-OPERATION. 211 
 
 justify the general adoption of the system. Here lies the difficulty 
 of questions of this kind. Take the case of the workmen engaged 
 in the construction of a railway or a harbour, or piercing an isthmus 
 like that of Suez or Panama. The works are mortgaged perhaps for 
 millions of pounds sterling, they will take years to finish, and not 
 till then can the contractors and capitalists know whether they are 
 to gain or lose by them. In the meantime, the workmen must be 
 lodged, clothed, and fed. In a case of this sort, they would hardly 
 care for a share in profits which might turn out to be losses. 
 
 The wages system will never die out, because there are plenty of 
 people who prefer the security of the present to the chances of the 
 future. 
 
 In France there are many workmen who have a little capital; 
 they get it from their parents, country people who have bought 
 land, or as a dowry with their wives, or by their own saving. 
 What do they do with it ? Many of them know perfectly well that 
 it is far more advantageous for them to remain plain workmen than 
 to set up on their own account. They see for themselves that the 
 management of capital is not the easy matter that people who have 
 never had it imagine. They put their money in State or municipal 
 loans. At Ronbaix they join in dozens and half-dozens to buy 
 lottery shares. If they have luck, they divide the prize in propor- 
 tion to the amount contributed by each. 
 
 A wage-earner here is a share-holder there. It is the same with 
 all of us who live by our work and are paid for it. 
 
 Accordingly, we must be on oar gnard against wishing to limit 
 the combinations of capital and labour to one fixed form. The 
 forms are as varied as the kinds of production. But we may safely 
 affirm, without fear of deluding ourselves or others, that, by the 
 force of things, some agreement of this kind will be brought about. 
 Workmen will learn to read, write, and reckon, to think, and to 
 speak ; they will know how to fight for their own interests. Yes- 
 terday things were different ; they had to submit to the will of a 
 man who not only had the money, but knew how to use it to his 
 own advantage, and who enjoyed all sorts of legal privileges. But 
 to-morrow will not be like yesterday. 
 
 CHAPTER IX. 
 
 CO-OPERATION. 
 
 WE now come to the most important industrial transformation 
 which has been attempted this century, co-operation. 
 
 It is a good thing for the workman to have a capital outside 
 
212 CO-OPEEATION. 
 
 himself in addition to his bodily forces. But how is he to get it ? 
 Prudent people say, " By saving." 
 
 But, as we have said before, saving is a depressing passion. It 
 is all very well for a well-fed, well- clothed, welt-housed man to tell 
 other people to save that is, to deny themselves. It is the 
 doctrine of religious asceticism. Once started on this road, why 
 not hold up to the workman's imitation the hermits of the Thebaid, 
 or the fakirs of India ? Does not privation weaken the most 
 robust ? Does not insufficient nourishment mean loss of force ? 
 
 Englishmen have not the frugality which is so much admired in 
 the French peasant. They seek the same end in other ways, and 
 they find it in other ways ; in ways which at first sight perhaps 
 seem paradoxical in co-operation, which is saving through spend- 
 ing. You buy what you want at the stores, at the current price ; 
 the difference between current price and cost price is profit; the 
 profit is saved and becomes capital, and this capital may be used to 
 found industrial establishments. 
 
 In 1826 the Co-operative Magazine said in so many words, " Mr. 
 Owen never proposed that the rich should give of their riches to 
 the poor; he claims that the poor shall be placed in a position to 
 create new wealth for themselves." 
 
 Co-operation in England has run through three stages : the 
 enthusiast stage, from 1821 to 1830 ; the socialist stage, from 1831 
 to 1844 ; and the practical stage, beginning in 1844 with the foun- 
 dation of the celebrated association of the Rochdale Pioneers. 
 
 The story of this association is always being told, and it cannot 
 be told too often. At the outset, twenty-four workmen contributed 
 one pound each ; in 1878, there were 10,187 members, the capital 
 was 292,344 ; the amount turned over in the year, 300,000 at 
 least, and the profits in 1878 alone, 52,694. No one was allowed 
 to put more than 200 into the society. 
 
 In 1863, Mr. Abraham Greenwood, President of the Rochdale 
 Pioneers, established in Manchester a "Limited Liability Wholesale 
 Co-operative Society." It is an aggregation of smaller societies, each 
 member of which subscribes only five shillings, so that a society of 
 a hundred members has a hundred shares, a society of five hundred 
 members five hundred shares, and so on. This society has no\v 
 three factories, one at Leicester, which makes 300,000 pairs of shoes 
 a year ; another at Crumpsall, for biscuits, sweetmeats, and dry 
 soap ; and a third at Durham, for soap. It has butter warehouses 
 in Ireland ; it has a bank with deposits amounting to 6,000,000 ; 
 in 1864 it had 18,337 shareholders, and in 1878 it had 300,000 
 shareholders, with a capital of 405,599, and effected sales to the 
 amount of 2,739,581. Its profits had risen to 33,350. 
 
 Nevertheless, the regular development of co-operative societies 
 has been surrounded with difficulties. They have had no legal 
 
Bfr. iv. Oh. is.] CO- OPERATION. 2 1 3 
 
 existence. The managers could go off with the cash-box, and when 
 the case came into court, they were acquitted. 1 Sometimes the 
 society has grown too rich, and not knowing how to lay out its 
 capital, it has obliged its members to withdraw it. 2 
 
 The object is to organise productive associations. They may be 
 organised on various principles. In some societies, as in that of 
 the Manchester printers, all the capital is subscribed by the stores ; 
 there are no individual shares. 
 
 In Lancashire, the co-operative societies have become proprietors 
 of a considerable number of joint-stock concerns ; and although 
 their success has not been altogether unchecked, the French Protec- 
 tionists quote their returns to show what profits can be made. 
 
 The division of profits may be variously arranged. As a rule, 
 they should be divided between the managers ; the workmen who 
 form the society, in proportion to their respective salaries ; and the 
 customers, in proportion to the value of their purchases. 3 
 
 From Mr. Cowen's Parliamentary Report on Co-operative So- 
 cieties in England, it appears that there were, in 1877, 12,000 of 
 them in the United Kingdom. 4 In England alone, not including 
 Scotland and Ireland, they had, at the end of 1878, a share capital 
 of 5,347,199, a deposit capital of 692,478 ; their receipts during 
 the year had been 18,460,758 ; and their net profits 1,565,497. 
 They numbered 499,584 members. 
 
 The Report of the twelfth annual Congress of Co-operative 
 Societies, held in 1880, gives the details of the operations of sixty- six 
 societies for 1878 and 1879. The following are the totals : 
 
 
 Capital. 
 
 Sales. 
 
 Profits. 
 
 1878 .... 
 1879 .... 
 
 2,544,399 
 2,581,501 
 
 8,871,247 
 8,090,160 
 
 672,009 
 683,491 
 
 These figures attest the formidable extent of the business opera- 
 tions of these societies ; and it must not be forgotten that 
 co-operation has only existed for forty years. 
 
 The success of co-operation has given rise to some illusions in 
 France. Frenchmen, whose attention was attracted by the mar- 
 vellous successes of the Rochdale Pioneers, saw only the thousands 
 they had made, and overlooked their labours, their struggles, and 
 even the very principles of their organisation. They thought there 
 
 1 Holyoake, History of Co-operation, vol. ii., p. 114. 
 
 2 Ibid., vol. ii., p. ill 
 
 3 Ibid., vol. ii., p. 122. 
 
 4 Ibid., vol. ii., p. 113. 
 
214 CO-OPERATION. 
 
 was some magic in the word " co-operation ; " they took it for a 
 philosopher's stone which would turn everything to gold. But it 
 is not the name that makes the gold, but the thing ; you do not get 
 what you want by gilding a word like an idol, and then invoking it, 
 but by putting your own shoulder to the wheel. Unluckily, they 
 expected a miracle ; no miracle came, and unreflecting enthusiasm 
 was followed by the apathy of discouragement. 
 
 Nevertheless, some co-operative societies have prospered. There 
 is one at Koubaix, founded on the English model, for an unlimited 
 period. Having saved by expenditure, it has made an arrangement 
 with Le Nord Insurance Company, and buys houses for its members. 1 
 At Rheims, a co-operative society for buying articles of consump- 
 tion has been in existence for thirteen years, and has now fifteen 
 branches in the town, and is in a flourishing condition. At 
 Puteaux, there is a similiar society which is doing well. 
 
 Insurance companies make considerable sacrifices by way of 
 commission. Ever since 1865, M. Engel Dolfus has had the 
 ' effects of all the workmen in the employ of the firm of Dolf'us-Mieg 
 insured. The insurance agent goes through the rooms, asking who 
 will insure. Some accept, some decline. Those who accept gain 
 very considerable advantages. 
 
 In France, co-operation is still feeling its way. But the time 
 lost will soon be regained, if workmen will study economic facts 
 instead of working themselves up with metaphysical declamation. 
 
 One of the obstacles to the success of co-operative movements, in 
 England, as in France, has been the workmen's contempt for ad- 
 ministrative capacity. They often choose the greatest talker instead 
 of the best manager. 2 They often concern themselves with matters 
 which have no bearing on the prosperity of the association. Then 
 again, the workmen, not seeing the need of highly paid administrative 
 skill, deprive themselves of the services of men really fitted to take 
 the direction of their affairs. Mr. Brassey observed that the 
 secretary of the Council of the important Trades Unions of Glasgow 
 receives only 10 a year, and took it as indicating a profound 
 ignorance of economic laws. 
 
 The following resolution was passed at the Congress of English 
 Co-operative Societies held in 1877 : " The Congress remains firmly 
 convinced that co-operative societies should be based on the 
 principle of reconciling the opposing interests of the capitalist, the 
 workman, and the buyer, through the equitable division of profits 
 among them." 
 
 I cannot close these remarks better than by quoting a few 
 passages from the work of Mr. Holyoake, who for forty years has 
 
 1 The Temps for July 23rd, 1880, gives the rules. 
 
 2 History of Co-operation, vol. ii., p. 120. 
 
Bk. iv. Ch. x.J CONCLUSION. 215 
 
 been actively concerned in the English co-operative movement, and 
 has had an important share in determining its leading features. 
 
 " Co-operation seeks the material means of growth. It husbands 
 provisions for its members by creating stores, and supplies articles 
 of utility by manufactures ; it aims at the ownership of land and 
 vessels ; it builds ; it engages in commerce and farming operations, 
 with a view to the self- employment of its members ; it provides for 
 their education and self-government, that society may be self- 
 sustained and self-controlled. Its means are capital and industry. 
 The capital it saves by economy or hires, using it as an agent, 
 and paying it its fair market value as such, and paying it no more. 
 Its policy is to divide the entire profit made by thought, skill, and 
 labour, equitably among those who produce it. This is what 
 co-operation means, and the nature of the principles which will 
 influence the future of industry." 1 
 
 *' Workmen have their affairs in their own hands now, and they 
 will learn to clear their way, and to pay their way, as the middle- 
 class have learned to do.^ 
 
 "The instinct of co-operation is self-help. Only men of inde- 
 pendent spirit are attracted by it. 3 ... I have proved, as I 
 have proceeded, what I said in the beginning, that it asks no aid 
 from the State ; it petitions for no gift from individuals ; it disturbs 
 no interests ; it attacks nobody's fortune ; it attempts no confisca- 
 tion of existing gains ; but stands apart, works apart, clears its own 
 ground, gathers in its own harvest, distributes the golden grain 
 equitably among all the husbandmen ; and without needing favours 
 or incurring obligations, it establishes the industrious classes among 
 the possessors of the fruits of the earth." 4 
 
 The future progress of co-operation will depend on the union 
 and perseverance of those in whose hands the movement may be. 
 
 CHAPTEK X. 
 
 CONCLUSION. 
 
 FROM this assemblage of facts, we may draw the following con- 
 clusions. 
 
 Production will take many and various forms which will change 
 the conditions of labour. From this time forward, manufacturers on 
 a small scale will obtain from those who deal in motive force a 
 
 1 Holyoake, History of Co-operation, vol. ii., p. 443. 
 
 2 Ibid., vol. ii., p. 451. 
 8 Ibid., vol. ii., p. 453. 
 4 Ibid., vol. ii., p. 455. 
 
216 CONCLUSION. 
 
 share in the advantages enjoyed by manufacture on a large scale. 
 The invention of small motors is everywhere a desideratum, and one 
 of these days it will be realised. With improved means of trans- 
 port, it will be less necessary for industry to congregate in tlie 
 towns. The utilisation of hydraulic force, and the power of trans- 
 porting force to a distance will change some of the existing con- 
 ditions of the workshop. 
 
 But, however you may multiply theoretical combinations, you 
 will find two characteristics of modern industry always the same ; 
 1st, division of labour ; 2nd, the constant predominance of industry 
 on a large scale. Whether these characteristics recommend them- 
 selves to individual tastes or not, is not the question. They exist. 
 and the workman had better not waste his time in complaining of 
 them, but try to turn them to the best advantage. The State is 
 powerless to put capital into the hands of the workmen. They can 
 have it only by their own exertions, and by organisation of one sort 
 or another. Their aim should be to establish an equitable inter- 
 change, instead of expecting everything from an equitable distribu- 
 tion. They should set themselves to strengthen all those associations 
 which make it possible for them freely to discuss the price of their 
 labour and to insure their future. 
 
 And, above all, we commend to their observation the law they 
 have so often disregarded that the form of association approaches 
 perfection in proportion as it recognises the distinction between 
 interests and persons. 
 
 Let them remember that all liberties are summed np in one 
 freedom of labour. 
 
 We must seek to realise 
 
 1st. The organisation of the labour market through trades 
 unions, trade syndicates, labour exchanges, and joint committees. 
 
 2nd. A better agreement between employers and employed ; 
 security guaranteed by the employer ; and a more binding system 
 of contract. 
 
 3rd. The establishment and development of ce-operative societies. 
 
BOOK V. 
 
 EXPERIMENTAL ECONOMICS. 
 
 IN Book I. we defined the terms used to express the principal 
 phenomena of economic science. 
 
 In Book II. we analysed the constituent elements of value. 
 
 In Book III. we snowed the relations between fixed and circu- 
 lating capital. 
 
 In Book IV. we considered man himself as an economic factor. 
 
 In Book V. we are to study the various systems he has invented 
 to satisfy his economic requirements. 
 
 CHAPTER I. 
 
 LANDED PROPERTY. 
 
 LANDED property has, especially within the last century, been made 
 the subject of the most passionate discussion. Like the physiocrats, 
 the great majority of people in France are so accustomed to look on 
 landed property as the only property, that they have got into the 
 habit of omitting the adjective. Utopists and Conservatives, the 
 proletariat and the bourgeoisie, have, each in their turn, shown 
 equal ignorance in accusing and defending it, in attributing to it all 
 good and all evil. They have all started with Rousseau's declaration, 
 " The man who first took it into his head to enclose a piece of land 
 and to say, ' This is mine,' and who found other people simple 
 enough to believe him, was the real founder of civil society." 
 
 To the Utopist, this enclosed ground was Eve's apple, the original 
 sin from which all subsequent ills bave sprung. The bourgeois, who 
 thought of nothing but his houses and farms, did not dispute this 
 theory of their origin, but contented himself with saying, " Eve's 
 apple agrees with me very well, and I am going to keep it." 
 Lamartine exclaims, "I know no man in France who reverences 
 
 217 
 
218 LANDED PROPERTY. 
 
 property as I do ; I regard it as a divine principle, as the law of 
 God, and not of man." 1 All disputes about property have turned 
 on this question : Had the Adam of property the right to enclose 
 his land ? It is the characteristic of scholastic disputants to 
 wrangle endlessly about hypotheses, until it occurs to some one to 
 test the hypotheses themselves. 
 
 Rousseau's theory of property has generated Ricardo's theory of 
 rent (1817). Ricardo imagined the first owner as taking the best 
 land himself and leaving the worst to others. Here is what he 
 says : 2 
 
 " Suppose land, No. 1, 2, 3, to yield, with an equal employment 
 of capital and labour, a net produce of 100, 90, and 80 quarters of 
 corn. In a new country, where there is an abundance of fertile land 
 compared with the population, and where therefore it is only 
 necessary to cultivate No. 1, the whole net produce will belong to 
 the cultivator, and will be the profits of the stock which he advances. 
 As soon as population had so far increased as to make it necessary 
 to cultivate No. 2, from which ninety quarters only can be obtained 
 after supporting the labourers, rent would commence on No. 1 ; for 
 either there must be two rates of profit on agricultural capital, or 
 ten quarters, or the value of ten quarters, must be withdrawn from 
 the produce of No. 1 for some other purpose. Whether the pro- 
 prietor of the land or any other person cultivated No. 1, these ten 
 quarters would equally constitute rent ; for the cultivator of No. 2 
 would get the same result with his capital, whether he cultivated 
 No. 1, paying ten quarters for rent, or continued to cultivate No. 2, 
 paying no rent. In the same manner it might be shown, that when 
 No. 3 is brought into cultivation, the rent of No. 2 must be ten 
 quarters, or the value of ten quarters, whilst the rent of No. 1 would 
 rise to twenty quarters ; for the cultivator of No. 3 would have the 
 same profits whether he paid twenty quarters for the rent of No. 1, 
 ten quarters for the rent of No. 2, or cultivated No. 3 free of all 
 rent." 
 
 Ricardo decides that " Rent is that portion of the produce of the 
 earth which is paid to the landlord for the use of the original and 
 indestructible powers of the soil." 3 
 
 This theory is based on the theory of final causes. It presup- 
 poses that the earth was created for the use of man, and that con- 
 sequently man had only to occupy it for it to bear him what he 
 wanted. 
 
 Now, we find, on observing the facts, that fertile lands are fertile 
 for themselves, and not for man ; they are covered with trees, shrubs, 
 
 1 Speech on the Preamble of the Constitution. 
 
 2 Principles of Political Economy, chap, ii., p. 52, 2nd edition. 
 
 3 Lbid., p. 47. 
 
Bk.v. Ch.L] LANDED PROPERTY. 
 
 or herbage ; they are marshy, miasmatic, liable to inundation, the 
 haunt of wild beasts and reptiles. Before man can avail himself of 
 their fertility, he has first to free them from their natural products. 
 This preliminary labour demands a vast outlay of strength, time, 
 tools, and often of combined labour, and a considerable absorption of 
 circulating capital. It is easy enough to say, " This land is mine.' r 
 The difficulty lies in the occupying it. 
 
 A glance over the vast tracts of fertile land still unappropriated 
 might have been enough to prove this truth ; but people have pre- 
 ferred to carry on endless discussions on the theory of rent. The 
 American economist, Mr. Carey, who had opportunities of observing 
 the manner in which land is appropriated in a new country, was 
 the first to assert that appropriation, instead of beginning with the 
 most fertile, begins with the least fertile land. 
 
 Man, weak and isolated, requiring a prompt return for his labour, 
 clears first the dry friable uplands, where there is no luxuriant 
 vegetation to encounter. The first English colonists in America 
 settled on the sterile soil of Massachusetts, and founded the colony 
 of Plymouth. In New York State, Manhattan Island was first 
 cleared ; and in ascending the Hudson they kept always to the high 
 lands, leaving the richest land, which requires most labour in clearing 
 and draining, unoccupied to this day. The same phenomenon 
 appears everywhere, in New Jersey, on the Delaware, in Georgia, 
 Alabama, Florida, and along the banks of the Mississippi, millions 
 of acres of which are covered with splendid trees. It is easier to 
 fell the little pines on the hill-side than to get rid of this exuberant 
 vegetation. The first colonist of Wisconsin planted himself on the 
 highest land, known as the Great Rampart. It has passed into a 
 proverb in the United States, that the damp prairies are the terror of 
 the first emigrant, and make the fortune of the last. Thus it is that 
 the poor lands of New England have enriched their owners, whilst 
 the rich lands of Lower Virginia and North Carolina, of which the 
 Dismal Swamp forms part, have not yet been brought under culti- 
 vation. 
 
 Humboldt records the same state of things in Mexico. The 
 vegetation along the narrow plain which skirts the sea-border 
 is magnificent but fatal. Accordingly, the Spaniards used this 
 plain only as a stepping-stone to the upper regions, where the 
 Indians preferred maintaining a laborious existence by agriculture 
 to descending into the plains. All through Mexico and Peru, the 
 advanced posts of civilisation are confined to the table-lands. It is 
 the same in Costa Rica and Nicaragua. Quito is built high and 
 dry on the hills, not down in the valley of the Orinoco. There is not 
 a single town on the banks of the mighty Amazon. 
 
 Whence came the Aryan peoples ? Tradition is not far wrong in 
 making them descend from the mountains. When Egypt was at 
 
220 LANDED PROPERTY. 
 
 the height of her prosperity, the Delta was cultivated ; but in her 
 decadence the canals were allowed to overflow and the Delta was 
 deserted. 
 
 In England, the Lincolnshire fens are the lands most recently 
 brought under cultivation. They are also the most fertile. What 
 was the largest town in Gaul at the time of the Roman conquest ? 
 Autun. Where did Vercingetorix concentrate all the efforts of the 
 Gallic people ? IntheMorvan. It is in Auvergne, in the Cevennes, 
 and in Brittany, in barren and mountainous countries, that we find 
 the most traces of the Roman occupation. During the frightful 
 distress of the 14th and 15th centuries, the Beauce relapsed into 
 forest. Look at the fat pastures of Holland, won from the sea ; and 
 at our own rich polders, slowly and laboriously reclaimed ! 
 
 Man appropriates the land he can cultivate, not the land he 
 would prefer to cultivate. 
 
 Such an occupation of the land is very different from the imag- 
 inary process described by Rousseau. Moreover, private property 
 is the most recent form of property. 1 No such thing existed in 
 primitive times. The soil at first belonged to the horde that covered 
 it. Then, going a step higher, it belonged to the family, the tribe, 
 the Greek yeVos, the Latin gens, the Celtic clan, the German 
 cognatio. We find this system of collective property existing in 
 China before the year 2205 B.C. It still exists in some outlying 
 provinces. It is stamped on the traditions of all Oriental races. 
 
 The labours of Mommsen have shown that the agrarian commune 
 was the primitive system of Italy. It still lingers in popular 
 tradition as the golden age. It made way for the collective 
 property of the family or gens. The intervention of the State in 
 sales and bequests of land is explained by the idea that the trans- 
 mission of land is a public interest, which cannot be subject to 
 private caprice. Private property dates from Nurna ; and side by side 
 with it existed the ager publicus, or common domain, which later on 
 was monopolised by the patricians. 
 
 Among the Germans, hereditary property included only the house 
 and the close surrounding it (terra salica). The common land was 
 called the mark. Each family was entitled to the temporary enjoy- 
 ment of a share in each of the divisions of the mark, but had no 
 permanent or hereditary right over it. Individual ownership 
 appears only in the allod of the Saxons after the Roman occupation. 
 The copartnership of the family among the Germans is evidenced 
 
 1 De la Propriete ct de ses Formes Primitives, by M. Emile de Laveleye. 
 Ancient Law, by Sir H. S. Maine. Origin of Civilisation, by Sir J. Lubbock, etc. 
 (See Menier, Avenir Economique, vol. i., Book V.) M. Letourneau, m his Socio- 
 logie, pp. 284, 394, does not fully admit this law. He quotes instances of 
 private ownership in Australia, in Tahiti, and among the Kabyles ; but they do 
 not really invalidate the law involved in the facts we are considering. 
 
Bk.v.Ch.L] LANDED PKOPERTY. 221 
 
 by 1st, the fai-da, or venvelta ; 2nd, the obligation to pay the 
 wehrgeld, or composition for military service; 3rd, the guardian- 
 ship 'of the munduald, or chief of the family; and 4th, hereditary 
 seisin. The whole family being proprietors, there was no succession, 
 but continuity of possession. 
 
 Family communities, under the name of societes taisibles (tacit 
 societies), existed till the end of the middle ages, and a few are even 
 now to be found in the Nivernais, Auvergne, and the Bourbonnais. 1 
 England was originally occupied by agrarian communities ; but 
 her social organisation became modified during the Anglo-Saxon 
 period; and by the time of the Norman invasion the mark had 
 become the manor. The feudal system gave to the lord the forests- 
 and pastures which had remained undivided amongst the villagers. 
 The meadows were apportioned annually among the tenants. The 
 arable land became private hereditary property. But all the cus- 
 toms of the early agrarian community were maintained. Every 
 peasant had his lot in each field of the agricultural series ; cultiva- 
 tion was co-operative. 
 
 In the Russian mir we find ourselves in actual contact with the 
 earliest idea of property under patriarchal rule. " The patriarchal' 
 family," says M. de Laveleye, "is the basis of the commune; and 
 the members of the mir are generally considered as descendants of 
 a common ancestor. The ties of family have preserved among the 
 Russians a power which they have lost elsewhere. The family is 
 a sort of permanent corporation, under the almost absolute authority 
 of a chief, called the elder. All goods are in common; house, 
 garden, furniture, crops, are the common property of all the mem- 
 bers of the family." Every one knows what has been the outcome 
 of this organisation, maintained down to our own time by the 
 despotism of the Czars. The Russian peasant is ignorance itself. 
 His ill-used wife has to perform the hardest and most fatiguing 
 labour. Russia, with her rich soil, has the feeblest agricultural 
 production ; she is two thousand years behindhand in her processes ;. 
 the cultivator reaps only three or four times what he has sown. 
 But since the emancipation of the serfs, the patriarchal system has 
 shown a tendency to fall to pieces. "The feeling of individual 
 independence undermines and destroys it." The young people 
 obey the Elder no longer. The married son wants a home to him- 
 self, and each couple forms a separate household. Among the 
 South Slavonian races, and also among the German Swiss, there 
 are still family communities forming the basis of the land system ; 
 but these communities are scattered by the approach of a railway. 
 Now propose this system to the French peasant; say to the young 
 
 1 See Dupin for an account of the Communaute des Jault, visited by him in 
 1840. 
 
222 LANDED PBOPEfiTY. 
 
 man about to marry, " You are to go on living with your parents, 
 your brothers and sisters, your brothers-in-law and your sisters- 
 in-law ; and you can all help in cultivating the collective property." 
 He will tell you fast enough, " We want our independence." 
 
 These facts are not in accordance with the statement of certain 
 collectivists, 1 that " you may almost measure the degree of civil- 
 isation by the extent to which collective appropriation has taken 
 place." 
 
 This being so, what becomes of Ricardo's theory of Rent ? of 
 Proudhon's assertion, that " property is robbery ? " of the law of 
 1849, prohibiting under heavy penalties any discussion of the prin- 
 ciples of property ? 
 
 Property, then, has not always possessed the purely individual 
 character with which Rousseau invested it. It began by being 
 collective and undivided ; and in proportion as civilisation has pro- 
 gressed and individuality has become stronger and more self- 
 conscious, it has become individualised. There is no place for 
 metaphysical questions as to the right of property, or for mutual 
 recriminations. Landed property, like all other property, may 
 assume various forms according to varying degrees of civilisation 
 and social organisation, and according to the nature of the produce 
 and the mode of working the soil. 
 
 The proprietor is not the privileged monster Ricardo makes him, 
 nor the incarnation of evil he seems to be to the popular imagina- 
 tion. He is a man who, whether by accident of birth or circum- 
 stances or by his own exertions, finds himself in possession of fixed 
 capital; this fixed capital, if well kept and cultivated, produces 
 utilities in the shape of corn, potatoes, sheep, and oxen. These 
 utilities the landlord exchanges for others; their value varies ac- 
 cording to the law of demand and supply. 
 
 But the owner, instead of himself producing these utilities, may 
 let this instrument of labour, this implement called land, to some 
 one else. For the hire of this instrument he will receive a sum #, 
 just as he would if he had lent money. The better the condition 
 and the greater the power of utility of the implement, the greater 
 will be the amount x. 
 
 According to Ricardo's theory, the first occupier of the most 
 fertile land should, at the end of a certain time, have received an 
 enormous rent. 
 
 But the facts have not confirmed his theory on this point. If 
 the value of land as fixed capital has greatly risen, still it has risen 
 much less than the value of much other fixed capital, such as mines 
 and factories. And these mines, also, lie at the disposal of any one 
 who will take them ! The world still contains many millions of 
 
 1 La Revue Socialiste, January, 1880. 
 
Bk.v.Ch.i.] LANDED PROPERTY. 223 
 
 tons of coal without an owner ! It is only the other day that we 
 began to work the coal-field of the Pas de Calais. 
 
 The owner of the soil, like every other possessor of fixed capital, 
 has the advantage of possessing an instrument productive of utilities; 
 but it is not enough to have this instrument, he must be able to use 
 it. It is the difficulty of using it which has led to the custom of 
 letting land. The owner sacrifices a part of the profit he might 
 have derived directly from it, in favour of an indirect profit, smaller 
 but surer. Why is it that even in France, where the land is so 
 subdivided, farmers are found who prefer renting land to buying it 
 with the money they now use in cultivating it ? Because this land 
 is prepared ready to their hand ; because it is irrigated, drained, or 
 planted; because it has available means of communication to bring 
 them their raw material and ensure an outlet for their produce. For 
 the rent he pays, the farmer might have acres of very fertile land 
 in America. Out in the West, he might have four acres almost for 
 nothing. He prefers to rent a few hectares near Paris, or in the 
 Departement du Nord. The value of land is not in proportion to its 
 supposed natural fertility, but to the density of population, the 
 abundance of circulating capital, and the facility of transport. It 
 is not land, any more than any other natural agent, that is wanting, 
 but the art of using it. 
 
 No doubt the possessors of the soil have often been privileged 
 persons ; and they are every day making efforts to preserve and 
 even to increase their privileges. When the English landlords were 
 fighting for the maintenance of the corn laws, what were they 
 doing? They were insisting on the privilege of selling their own 
 corn dearer than foreign corn, so as to profit by the difference, and 
 to raise the value of their land. The French protectionists are 
 claiming the same privilege when they levy a duty on meat and cry 
 out for one on corn. They try to lay a tax on articles of con- 
 sumption and to exempt themselves from its operation ; and if 
 they find themselves to a great extent mistaken, the mistake is due 
 to their ignorance of the reflex action of economic laws. 
 
 These privileges, these extravagant claims, are anti-economic, and 
 must be strenuously opposed. When the nomad tribe or family settles 
 down, the destiny of man becomes fixed to the soil, like that of a 
 vegetable. Under the feudal system, if there was no land without 
 a lord, the lord was bound to the land. So, of course, was the 
 serf. The titles, rights, and services of man were all bound up with 
 the soil. It was thus difficult of transmission. The proprietor 
 and his property tended to be indissolubly united. Traces of these 
 notions still exist in our codes and customs ; but they are gradually 
 disappearing as we free ourselves from all the impediments which 
 check our progress. The oyster sticks to the rock, shell and all, 
 and never moves ; the snail, if it moves at all, must drag its shell 
 
224 
 
 LANDED PROPERTY. 
 
 along with it. In some stages of civilisation, no doubt, it may have 
 been a very good thing for man to be attached to his shell ; but it 
 has weighted him heavily in the race of life. Those who have gone 
 the fastest and acquired the most are precisely those to whom the 
 possession of the soil has been forbidden the Jews. Paradoxical 
 as it may seem, a similar cause has made the greatness and power 
 of England. 
 
 The system of landed property in England is detestable, because 
 it hinders the circulation of land. The following table gives a view 
 of the distribution of landed property in the United Kingdom. 1 
 
 
 Number. 
 
 Per Cent. 
 
 Extent of 
 Land. 
 
 Per Cent. 
 
 Proprietors of less than one acre 
 each .... 
 
 852,438 
 252,725 
 41,090 
 
 10,888 
 6,459 
 124 
 
 72 
 21 
 3-5 
 
 0-9 
 
 Acres. 
 188,413 
 4,910,723 
 15,133,057 
 
 51,885,118 
 2,570 
 
 0-2 
 67 
 20 
 
 71 
 
 n 
 
 
 n 
 
 of from 1 to 100 acres 
 100 to 1000 acres 
 1000 acres and 
 upwards .... 
 of land the acreage of 
 which is uncertain 
 of land the rent of 
 which is uncertain 
 
 1,103,724 
 
 72,119,881 
 
 This table, although it shows that out of 72,000,000 acres, 
 51,000,000 are divided among 10,000 proprietors, gives but an in- 
 adequate idea of the importance of the great landlords in England, for 
 out of this number 977 persons possess 10,000 acres and upwards 
 apiece. Thus 71 per cent, of the soil is in the hands of 90' per 
 cent, of the total number of proprietors, while 72 psr cent, of the 
 proprietors possess only 0'2 per cent, of the soil among them. 
 
 Mr. Caird reckons that the entire arable land in the United King- 
 dom is held by 180,000 owners, and that only one per cent, of the 
 soil is covered by properties of less than ten acres ; and even this 
 is almost exclusively building property. 2 
 
 In England the land question is absorbing every one's attention, 
 and the economists of the Cobden Club are not behindhand in 
 demanding a radical modification of the laws. 
 
 I have already pointed out that this system of tying up the 
 land has resulted in a diminution of its produce, its value, and conse- 
 quently its rent. I have also said that this system of aristocratic 
 
 1 Financial Reform Almanack, 1679, p. 17. 
 3 Caird, Landed Interest. 
 
Bk.v.Ch.i.] LANDED PEOPERTY. 225 
 
 privilege has contributed to make the greatness of England. And 
 in this way : 
 
 The English middle class, not being able to invest its savings in 
 land, throws them into manufactures, or into ventures in foreign 
 countries, and thus keeps them in circulation, instead of locking them 
 up, like the French bourgeois, in small properties, a system which 
 merely enables them just to scrape along, and gives them an ideal, 
 not of active production, but of depressing economy. The following 
 table shows how much people have been mistaken in thinking that 
 there is no wealth outside landed property. 
 
 SCHEDULE A. 
 
 GROSS REVENUE OF LAND AND FIXED PROPERTY. 
 
 1848-49 47,982,221 = 100 
 
 1853-54 46,772,256 = 97 
 
 1858-59 48,931,916 = 102 
 
 1863-64 51,390,046 =- 107 
 
 1868-69 54,961,481 = 114 
 
 1873-74 57,402,720 = 119 
 
 1877-78 49,388,384 = 124 
 
 SCHEDULE D. 
 
 PROFITS OF INDUSTRIES AND COMMERCE. 
 Years. 
 
 l84-9 80,929,700 = 100 
 
 1853-54 104,962,480 = 130 
 
 1858-59 106,547,938 = 132 
 
 1863-64 132,786,351 = 164 
 
 1868-69 165,526,682 = 204 
 
 1873-74 240,100,756 = 297 
 
 1877-78 250,635,707 = 309 
 
 Report of Mr. Charles Turner, Controller-General, 7th August, 1879, The 
 EC momist, March 13, 1880. 
 
 (See Diagram 43, p. 226.) 
 
 According to these tables, the returns from trade and manufac- 
 tures are almost half as much again as those of real estate. 
 
 In France, the conditions of real property are just the converse 
 of what they are in England. According to statistics published in 
 1868, the entire soil of France, exclusive of woods and forests, was 
 divided in 1862 amongst 3,225,877 farms ; and dividing the area of 
 cultivated soil by this number, we have 10J hectares as the average 
 extent of each farm. But the following table shows the real 
 division : 
 
 Q 
 
226 
 
 LANDED PEOPEKTY. 
 
 OIU 
 
 300 
 
 
 
 
 
 
 ' K> 
 
 
 
 
 
 
 as* 
 
 r 
 
 
 
 
 
 
 "/ 
 
 
 27O 
 
 
 
 
 
 ; / 
 
 
 260 
 
 
 
 
 
 n 
 
 
 OKQ 
 
 
 
 
 
 * 1 
 
 
 240 
 
 
 
 
 
 \l 
 
 
 230 
 
 
 
 
 
 *- / 
 * / 
 
 
 oorj 
 
 
 
 
 i 
 
 7 
 
 
 2 1 
 
 
 
 
 * 
 
 / 
 
 
 200 
 
 
 
 
 / 
 
 !2C4 
 
 
 190 
 
 
 
 
 / 
 
 
 
 180 
 
 
 
 
 / 
 
 
 
 170 
 
 
 
 
 / 
 
 
 
 160 
 
 
 
 
 'l64 
 
 
 
 150 
 
 
 
 / 
 
 
 
 
 140 
 
 
 
 / 
 
 
 
 
 130 
 
 'So 
 
 
 
 \*z 
 
 
 
 
 120 
 
 
 
 
 
 
 .^* 
 
 110 
 
 / 
 
 
 
 M 
 
 I- - ~ ' ~ 
 
 * 
 
 moli 
 
 / 
 
 102 
 
 
 
 ;v 
 
 
 
 00 
 
 * **^*"H 
 
 r 
 
 
 
 
 
 848-49 1853-64 1858-69 1863-64 1868-69 1873-74 1S77-78 
 
 Diagram 43. Increase per Cent, of the Profits of Industries and Commerce, compared 
 with the Revenues of Land, in England. 
 
 10 20 30 40 50 60 70 SO 
 
 Small Properties 
 
 Medium Properties 
 
 Large Properties, 
 above 40h. 
 
 BE 
 
 LOW 5 
 
 MtCT* 
 
 RES 
 
 1 
 
 5.59 FR 
 
 >M 5 TO 1 
 
 h 75-48 
 
 FROM 
 
 10 TO 40 
 
 I 9-75 
 
 
 
 
 
 
 4. 
 
 fS 
 
 
 
 
 
 
 
 Diagram 44. Distribution of Property in France. 
 
Bk. v. Ch. i.] 
 
 LANDED PROPERTY. 
 
 227 
 
 
 Number. 
 
 Percentage. 
 
 Small properties, 
 i 
 
 Medium propertie 
 Large properties, 
 
 of 5 hectares 
 
 1,815,558 
 619,843 
 
 56-29 
 19-19 
 
 rom 5 to 10 hectares . . . 
 Total . . . 
 
 2,435,401 
 636,309 
 154,167 
 
 75-48 
 19-75 
 4-75 
 
 s, from 10 to 40 hectares . . 
 above 40 hectares .... 
 
 3,225,877 
 
 99-98 
 
 (See Diagram 44, p. 226.) 
 In 1876, the various agricultural employments numbered : 
 
 1. Proprietors cultivating their own lands . . . 
 
 2. Farmers, husbandmen, and metayers . . . 
 
 3. Various agricultural occupations, wine- 
 
 growers, wood-cutters, gardeners, market- 
 
 Per Cent. 
 
 10,620,886 56-0 
 5,708,132 30-09 
 
 
 ' ' 
 
 18,968,60.5 100-0 
 
 10 20 30 40 50 6G 
 
 
 
 
 
 
 ** 
 
 
 
 
 50-09' 
 
 
 
 
 
 
 
 
 
 Proprietors and Peasants 
 Cultivating their own 
 Lands. 
 
 Farmers, Husbandmen, 
 and Metayers. 
 
 Various Agricultural Oc- 
 cupations. 
 
 Diagram 45. Agricultural Occupations. 
 
 This state of things emphasizes a fact long ago observed the pas- 
 sion of the French peasant for the land. " The land is his mistress,'* 
 says Michelet ; and in order to possess her, he has made and is still 
 making all the exertions possible to a man of narrow education. 
 
 This subdivision has had the advantage of inciting the peasant 
 to work, and of giving him self-reliance. His bit of land makes 
 him feel he is somebody, gives him solidity, and increases his 
 powers of action and of resistance. But on the other hand, this 
 subdivision keeps agriculture at the empirical stage. Our me- 
 thods are those of our fathers no machinery, no scientific pro- 
 cesses, no engineers to reduce the productivity of the soil to a for- 
 mula. At the same time, subdivision must give rise to association. 
 
228 LANDED PROPERTY. 
 
 The peasant has long looked on machinery with suspicion ; but he 
 is beginning to see that there is some good in it. Drainage 
 and irrigation are absolute necessities, and they cannot be done 
 each on his own little plot ; associations must inevitably be formed 
 for the purpose. They have existed for centuries in the Vaucluse 
 and the Bouches du Rhone. They will continue to multiply, and 
 to consolidate isolated interests. 
 
 Moreover, the bourgeois proprietor is beginning to see that if 
 the land which serves him as an investment has its advantages, it 
 has also grave disadvantages for a man who looks for a return 
 without troubling himself about it. The pride he took in treading 
 his own soil is beginning to disappear. The railroads are making 
 him a traveller, and breaking up his attachment to a particular 
 spot. He finds personal property far more convenient than land, 
 which involves draining and planting and legal proceedings ; or 
 houses, which he must look after and keep in repair, and with the 
 tenants of which he cannot always keep on good terms. So he goes 
 to the stockbroker instead of the notary, and takes shares in a rail- 
 way or a mine, or buys into the Rente Fonciere, a company based on 
 the observation of this very psychological fact to which I have been 
 drawing attention. 
 
 This tendency is so strong, that for the last few years it has some- 
 what checked the rise in the value of land. The small capitalist, 
 who formerly farmed out his land, has sold it to the peasant. Bub 
 the migration of the peasants to the towns, and the consequent 
 scarcity of agricultural hands, must put a stop to the subdivision of 
 the soil. The migrating peasant sells his share to his brothers, 
 and seeks some other field for the capital thus obtained. 
 
 We may therefore predict a radical change within the next 
 generation or two in the condition of landed property in France. 
 Some legislative measures alone are wanting to facilitate it. In 
 trying to find guarantees for landed property, we have really loaded 
 it with burdens. We must learn to realise that land is jnst like any 
 other utility, and make it just as easily transmissible. There is 
 nothing Utopian in this. The system has already been attended 
 with complete success in Australia, and that under circumstances 
 of the greatest difficulty. 
 
 The relations of property in a new country are complicated by 
 the conflicting interests of stock-farming and agriculture. Every- 
 one knows that the English law of conveyancing is a complete 
 chaos. Mr. Torrens, a man of equal initiative and perseverance, 
 has, by the Act known by his name, placed the law of real property 
 on a perfectly simple basis. Its mechanism is briefly as follows. 
 The Act is permissive ; if a proprietor wishes to avail himself of it, 
 he makes an application to the Registry Office, sending in with it 
 his title deeds and a description and plan of the property. On the 
 
Bk.v.Ch.L] LANDED PEOPERTY. 229 
 
 expiration of six months, during which any counter-claim may be 
 put in, the Registry issues a certificate of title, in the form of a 
 coupon bearing on it a small plan of the property with a list of all 
 charges and mortgages on it. This certificate of title is transferable 
 by simple endorsement ; and if the title is afterwards disputed, the 
 action must be brought against the Government. By this guarantee 
 the proprietor's title is rendered unassailable. 1 
 
 Since July 2, 1858, when it became law in South Australia, this 
 Act has been successively adopted by Victoria, Queensland, and 
 New South Wales. 
 
 The chief economic improvements yet to be introduced into our 
 system of land tenure are these : a greater security for land ; the 
 removal of all legal risks ; the substitution of the registrar for the 
 conveyancer; a system of registration paying its own costs, but not 
 intended as a means of revenue ; and the transmission of land by 
 simple endorsement of the title-deed. 
 
 I know there are some people in France whose cry is for " the 
 collective appropriation of the soil." 2 It is possible they may have 
 some scheme drawn up ready for legislation, in which they define 
 their meaning and explain how the thing is to be done ; but if they 
 have, they have so far kept it a secret. For my own part, I do not 
 at present see how the collective appropriation of the soil is possible, 
 except by means of syndicates and societies capable of improving 
 the lands they possess. To occupy the land is not enough, it must 
 be put to use; and in order to this, a large amount of circulating 
 capital must be laid out in farm buildings, roads, drainage, irriga- 
 tion, clearing, and manures, and in labour, whether human, animal, 
 or mechanical. 
 
 As to any purely speculative questions with regard to the rights 
 of property or persons, our previous observations have put them 
 quite out of court. 
 
 Property is a necessary fact, for natural agents have no utility until 
 they have been appropriated. So far, it is not land that has ever been 
 wanting, but the power to utilise it. 
 
 Ricardo's theory of rent is based on a misstatement of facts. The 
 least fertile, and not the most fertile lands are the first cultivated. 
 
 As civilisation advances, property becomes more and more individual 
 and transferable. 
 
 1 For further details see Reforme Economique, Sept. 15, 1877. Thanks to 
 the courtesy of Mr. James Stansfeld, M.P., I have had access to some very rare 
 Parliamentary papers bearing on this subject. I am now preparing a complete 
 study of the scheme, with a view to its application in France. 
 
 2 Declaration of the Congress at Marseilles, and of the Collectivist Congress 
 at Havre. 
 
230 COMMERCE. 
 
 CHAPTER II. 
 
 COMMERCE. 
 
 WE have defined Exchange as the relation of utilities between 
 themselves. 1 
 
 We have said that its object is to bring the utilities possessed by 
 one individual within reach of the wants of others. 
 
 The practice of exchange is called commerce. The word is com- 
 pounded of cum and merx ; to carry on commerce is to exchange. 
 M. Charles Dunoyer did well to recall the derivation of the word, 
 for it dissipates some false notions. 
 
 Trade has always been looked on as the domain of certain classes, 
 who were long regarded with contempt. The Flaminian Law for- 
 bade the Roman patricians to trade. To evade this law, they 
 traded through their slaves. In France, even at the present day, 
 the civil population is, by virtue of this old prejudice, divided into 
 traders and non-traders. The former are under a special jurisdiction, 
 a special code, special burdens. No distinction could be more absurd. 
 Are we not all trading every day of our lives, either as buyers or 
 sellers ? Are we not all dealers in something or other, journalists, 
 artists, labourers, land-owners, selling our talents, our muscular 
 strength, or the produce of our land ? 
 
 Trade, then, is not an occupation confined to a few individuals, it 
 is the constant occupation of the whole body of citizens in every 
 country where civilisation is advanced enough for diversity of wants 
 and division of labour. 
 
 Our needs are varied, and so are our capabilities. You have 
 utilities of one sort, and I of another. Each of us wants some of 
 the other's utilities. We exchange. 
 
 We find the same prejudice applied to trade, of which we have 
 already spoken as applied to labour. Some people think that it is 
 not productive of utility because it produces nothing new. True, 
 but it places utilities within reach of the wants to be satisfied. 
 
 The trader is sometimes called a parasite. But he is the piston- 
 rod of the engine. How would it work without him ? 
 
 A Breton peasant has hens which lay him a dozen eggs. He 
 does not want the eggs, and he does want other things. There is a 
 great demand for eggs in Paris. If there were no traders to collect 
 the eggs of a hundred such peasants, and send them to Paris, if 
 there were no traders in Paris to buy them up and bring them 
 within reach of the consumer, the Breton peasant must keep his 
 eggs and the Parisian can have none to eat. It is very possible 
 that the peasant sells his eggs too cheap, and that the Parisian buys 
 them too dear; but this only shows that the organisation of com- 
 
 1 Book II., chap. viii. 
 
Bk.v.Ch.ii.] COMMEECE. 231 
 
 merce is defective, its machinery too complicated, and its friction 
 too great. It does not show that commerce itself is useless. 
 
 The utility given is equal in value to the utility received ; and 
 hence some economists have argued that exchange produces no 
 utility. They do not see that the utility I give is superfluous to 
 me, and that the utility I receive is superfluous to the man who 
 gives it me. A wine-grower produces several thousand gallons of 
 wine. He cannot drink them all ; if he cannot exchange them, he 
 will produce only the hundred gallons or so necessary for his own 
 consumption. Again, a manufacturer produces miles upon miles of 
 cotton thread. He would never produce them if he could not ex- 
 change them. Every one makes, not what he wants, but what he 
 can make best, and then exchanges it for what he wants. 
 
 Products are exchanged for products. The more a nation pro- 
 duces, the more outlets it opens to other nations. It is absurd to 
 think you must ruin a country to make it buy your commodities. 
 Once ruined, what has it left to buy them with ? It is your 
 interest that your neighbour should be rich. The trader's prosperity 
 depends on the wealth of his customers. 
 
 Protectionist theories are now being once more dinned into our 
 ears ; they are set forth with the impudence of ignorance in our 
 legislative assemblies, and they are so strong that even their oppo- 
 nents have to treat them with a certain respect. 
 
 " We must favour production," that is the cry. But why ? Do 
 we produce in order to produce ? Are we to work for the sake of 
 working, like the squirrel in his cage ? 
 
 Cast your eyes over the world, what do we see ? On the one 
 hand, corn, cotton, cloth, iron, produced in great quantities; on the 
 other hand, people who want all these things and have none of them 
 the producers anxious to sell, everybody else eager to buy, and yet 
 the first selling less than they would like to sell, and the last buying 
 less than they would be glad to buy. And then our profound 
 financiers complain of " over-production ! " 
 
 Is the world so gorged to repletion ? Have we really more 
 meat, and wine, and bread than we can find a use for? Is there 
 no one in want of a shirt or a coat ? Have we reached such a height 
 of well-being that all wants are satisfied, and no fresh ones are 
 forthcoming ? 
 
 Par from it. In the first place, most men cannot satisfy their 
 most primitive needs; and in the second place, men's needs are 
 capable of indefinite expansion. It is absurd to speak of over-pro- 
 duction except with reference to this or that particular place, where 
 there is a lack of exchangeable products. The whole art of ex- 
 change lies in bringing together surplus products. To aid circula- 
 tion, to open fresh outlets, to act as a channel of communication 
 this is the use of trade. 
 
232 COMMERCE. 
 
 The effect of the opening up of new markets upon production has 
 been well brought out by M. Courcelle-Seneuil. 1 In Adam Smith's 
 pin factory, ten workmen turn out 48,000 pins a day. Now, suppos- 
 ing that there is not a sufficient demand for these 48,000 pins, it 
 will be necessary to reduce the number of workmen, thereby reduc- 
 ing the division of labour, or else to shorten the hours of labour. 
 In either case the labour will be less productive, and there will be 
 a waste of force. If, on the other hand, there is a demand for 
 100,000 pins, instead of 48,000, there will be no corresponding 
 increase in certain expenses, such as those of book-keeping ; and 
 thus there will be pure gain. Hence we may say, 
 
 The cost of production is in inverse ratio to the extent of the 
 market. 
 
 In the good old times, every kind of production formed the 
 monopoly of some trade or guild. It was a privilege conceded by 
 the king. When the discoveries of Columbus and the Portuguese 
 opened up fresh fields to Europeans, every productive country, 
 every object of consumption, became the exclusive monopoly of some 
 company. From the 16th to the 18th century, the maritime trade 
 of Europe was centred in the hands of about seventy privileged 
 companies. At first these privileges may have had their use in 
 stimulating enterprise ; but later on, the companies, resting on their 
 oars, gave themselves up to the one object of selling little and selling 
 dear. Such is the necessary tendency of all similar organisations. 
 It is the unavowed and perhaps unconscious aim of the modern 
 protectionist. , 
 
 The idea of free competition was unknown in France until the 
 middle of the 18th century ; and the honour of formulating it 
 belongs to the physiocrats. 
 
 Competition involves activity, effort, conflict; but the apathetic 
 cannot endure activity and effort ; and in every contest the strong 
 prevail, and the weak go to the wall. Yet in human history it has 
 been the strong, those who were first on the field, who have 
 demanded the suppression of competition, in order to banish all 
 rivals from the territory they have acquired. The masters tried to 
 forbid the journeyman the freedom of his craft. The existing 
 companies try to prevent the consumer from buying cheap the 
 articles they mean to sell dear. There never was a monopoly 
 which was not to the advantage of the strong, and to the detriment 
 of the weak. 
 
 The opponents of competition can have but one object to secure 
 ;he advantages they have acquired by birth or individual effort 
 from being diminished by rivalry. They have no wish to improve 
 their machinery or to produce better articles at a smaller cost ; 
 
 1 Cours d'Economie Politique, vol. i. p. 151. 
 
they only want the status quo, but they v^S 
 
 o themselves ; 
 
 they set their faces against all progress achieved from without. 
 
 Darwin speaks of the struggle for existence. It is the struggle 
 for economic existence which has been the cause of all material 
 progress. Competition rouses from the apathy of content, and un- 
 ceasingly stimulates the effort to improve. It is the grand agent of 
 evolution. Competition fixes the natural level of prices. The 
 Protectionists raise endless discussions on cost price ; but no one 
 knows what it is, apart from competition. 
 
 There are not three manufacturers in ten whose articles have cost 
 them precisely the same. Varying conditions make the cost price 
 vary in almost every case. But it is fixed, so far as the purchaser 
 is concerned, by competition ; and the best managed factory gains 
 more, and the worst managed factory gains less. The mean price, 
 which represents the expenses and profits of the majority, is deter- 
 mined simply by the law of demand and supply, acting through com- 
 petition. 
 
 Competition so enters into the very nature of things that when- 
 ever the Legislature has tried to put it down, its restrictions have 
 been systematically evaded. Smuggling has never been looked on 
 as a disgrace. Public opinion has held its own against authority. 
 
 The mercantile system, based on the theory of the balance of 
 trade, dates in France from the time of Colbert ; in England, from 
 Cromwell ; in Spain, from Philip II. Its aim was, to attract the 
 precious metals into the country, and to prevent their going out of 
 it. In spite of experience, it still forms a tenet of the protec- 
 tionists. 
 
 Now, the following table shows that never has the importation 
 of the precious metals been so great in France as since the con- 
 clusion of the treaty of commerce of 1860. 
 
 VALUE, EXPRESSED IN MILLIONS OF FRANCS. 
 
 
 
 
 Excess of 
 
 Imports. 
 
 Exports. 
 
 Imports over 
 
 
 
 Exports. 
 
 1st decade, 1827-1836 . 
 
 1,809 
 
 697 
 
 1,112 
 
 2nd 
 
 1837-1816 . 
 
 1,711 
 
 754 
 
 957 
 
 3rd 
 
 1847-1856 . 
 
 3,563 
 
 2,244 
 
 1.389 
 
 4th 
 
 1857-1866 . 
 
 6,877 
 
 5,025 
 
 1,852 
 
 5th 
 
 1867-1876 . 
 
 6,479 
 
 3,007 
 
 3,472 
 
 
 Total . . 
 
 20,439 
 
 11,727 
 
 8,782 
 
 Average 
 
 for the 50 years 
 
 409 
 
 235 
 
 176 
 
234 COMMERCE. 
 
 Within this last period, the annual average movement of the 
 precious metals has been, 
 
 Imports Fr. 647,000,000 
 
 Exports 300,0i,0,000 
 
 Difference in favour of imports .... Fr. 347,000,000 
 (See Diagram 46, p. 235.) 
 
 And it was during this period, which records an excess of three and 
 a half milliards of import over export, that we paid the war indem- 
 nity of five milliards. 
 
 Then we hear of the American spectre, of the invasion of 
 American corn, and the drainage of our gold. Truly the protec- 
 tionists are somewhat given to metaphor. Here are the latest 
 fisrures : 
 
 
 Imports. 
 
 Exports. 
 
 1877 ....... 
 
 Fr 683 095 000 
 
 Fr 141 194 000 
 
 1878 
 
 543,581,000 
 
 189 158 000 
 
 1879 
 
 332 016 000 
 
 424 351 000 
 
 1880 
 
 295 759 000 
 
 475 073 000 
 
 
 
 
 Thus, in the last two years, the cnstorn-house returns attest an 
 exportation of 899,000,000 francs and an importation of 627,000,000 
 francs, the difference being 272,000,000 francs. Now, during the 
 last decade we had an excess of three and a half milliards of 
 import ; and during the last fifty years, an excess of 8,782,000,000! 
 We see that it will be many years before the excess of our exports 
 of the precious metals will occasion a serious monetary crisis. 
 
 But we owe this recent excess in imports, not to free trade, but to 
 protection, which closes the United States against our products. 
 But are the United States themselves the better for it? The 
 ship which arrives at Havre from New York laden with corn, 
 does but a bad stroke of business, if she gets nothing bub a few 
 bags of gold for her return cargo. What she wants is, not gold, but 
 French products, on which her owners may make ten or twenty 
 per cent., to the gieat advantage both of the French producer and 
 of the American merchant and consumer. Exchange in money is 
 bnt a make-shift. Even now, in debates on the customs, or in news- 
 paper estimates, even those which pass for reliable, we constantly 
 hear of the balance of trade ; and when the total importation 
 exceeds the total exportation, we are told that the balance of trade 
 is against ns. Yet. J. B. Say long ago 1 showed that in reality it is 
 now just the reverse. And Bastiat has clenched the demonstration 
 
 1 Trcute d'Economie Pohtiquc, Book I., chap. xvii. 
 
Bk. v. Ch. ii.] 
 
 COMMERCE. 
 
 235 
 
 400 millions 
 
 by a conclusive instance. 1 " A friend of mine, a merchant, having 
 effected two transactions with very different results, I was curious 
 to compare the way in which these results figured in his own books 
 with that in which they figured in the custom-house returns. 
 
 " M. T. despatched a ship from Havre to the United States, 
 laden with French commodities, principally what are called 'articles 
 de Paris,' the declared value of which amounted to 200,000 francs. 
 Arrived at New Orleans, it appears that the expenses incurred 
 amounted to 10 per cent., and the various dues to 30 per cent, of 
 the original value, which raised 
 it to 280,000 francs. It realised 
 a profit of 20 per cent., or 
 40,000 francs, and yielded a 600 millions 
 total of 320,000 francs, which 
 the consignee converted into 
 cotton. Charges for transport, 
 insurance, commission, etc., on 
 this cotton came to 10 per 
 cent., so that on reaching 
 Havre, the new cargo figured 
 on the custom-house books at 
 352,000 francs. Lastly, M. T. 
 sold the cargo for 422,400 
 francs, thus making a profit of 
 70,400 francs, or 20 per cent. 
 
 " Thus, there appeared in 
 M. T.'s books, to the credit of 
 the profit and loss account, 
 that is to say, as profit, two 
 items, one of 40,000 francs, 
 and the other of 70,400 francs ; 
 and M. T. is quite sure that 
 he is not deceived on this 
 point. 
 
 " But how do the partisans 
 of the balance of trade read the 
 custorn-honse returns ? They 
 find that France has exported 
 200,000 francs and imported 
 
 352,000 francs, and conclude that she has squandered the profits 
 of her past economies, that she has impoverished herself and is on 
 the road to ruin, and that she has given away to the foreigner 
 152,000 francs of her own capital. 
 
 " Some time after this, M. T. despatched another ship, also laden 
 
 200 millions 
 
 1867 
 
 1876 
 
 Diagram 46. Average Annual Movement of the 
 Precious Metals in France from 1867 to 1876. 
 
 1 Sophismes Economiques, 1st series. 
 
236 COMMERCE. 
 
 with 200,000 francs worth of the products of our national labour. 
 But the unfortunate vessel foundered just outside the port ; and all 
 that remained for M. T. to do, was to enter the two following items 
 on his books : 
 
 '"Sundries account owes to x 200,000 francs for the purchase of 
 various articles despatched by the So and So. 
 
 " ' Profit and Loss account owes to Sundries 200,000 francs for 
 the total loss of cargo.' 
 
 " Meanwhile, the custom-house registers exports to the amount 
 of 200,000 francs; and as there are no imports to register, it follows 
 that the partisans of the balance of trade must see in this ship- 
 wreck a clear net profit to France of 200,000 francs. It also 
 follows, according to this theory, that France has a very simple 
 method at her disposal for perpetually doubling her capital; she 
 has only to let her merchandise clear the customs, and then chuck 
 it into the sea." 
 
 If the balance of trade is always to be in favour of this country, 
 the French merchant must always lose by his foreign transactions. 
 As this can hardly be the object he has in view, it is not to be 
 wondered at if he does his best to turn the balance of trade against 
 the country ; and in this attempt he fortunately succeeds, despite 
 all the efforts of the custom-house. Thus it is that in every 
 European country, the imports exceed the exports, notwithstand- 
 ing all that Governments can do to bring about the opposite result. 
 According to the protectionist theory, the United Kingdom must be 
 the poorest of all, for its imports for the years 1869 73, averaged 
 331,120,000; and its exports, 224,000,000; and in the year 
 1878 alone, its imports amounted to 328,000,000 ; and its exports 
 to 192,000,000. 
 
 The protectionist idea of trade is all going out and nothing coming 
 in ; which is a violation of the very principle of exchange. Under 
 the plea of encouraging home manufactures, they apply themselves 
 very conscientiously to closing all outlets for them ; for as produce 
 is exchanged for produce, if foreign nations cannot sell their goods 
 to us, neither are they likely to buy ours. England has boldly 
 swept away all barriers without waiting for reciprocity. She has 
 thrown open her gates to the enemy, to the great satisfaction of her 
 own consumers in other words, of her whole population; troubling 
 herself very little at the excess of her imports over her exports. 
 
Bk. v. Ch. ii.] 
 
 COMMBBC1. 
 
 237 
 
 FOREIGN TRADE OF THE UNITED KINGDOM BEFORE AND AFTER THE 
 REFORMS OF SIR ROBERT PEEL. 
 
 
 Imports. 
 
 Exports. 
 
 1840 
 
 62,000,000 
 
 110,080,000 
 
 1850 
 
 152,320,000 
 
 115,800 000 
 
 
 
 
 Difference .... 
 
 90,320,000 
 
 5,720,000 
 
 BEFORE AND AFTER THE TREATY OF COMMERCE WITH FRANCE. 
 
 
 Imports. 
 
 Exports. 
 
 I860 
 
 210,520 000 
 
 164 520 000 
 
 1879 . . . 
 
 363 000 000 
 
 249 000 000 
 
 
 
 
 Difference .... 
 
 152,480.000 
 
 84,480,000 
 
 Reciprocity is one of those catch-words which arc always spring- 
 ing up ^ven among people who call themselves freetraders. The- 
 word is wrong in itself, for we do not exchange like products. 
 
 Moreover, it is our interest to be flooded with the products of 
 other countries at a cheaper rate than we could produce them 
 ourselves ; and if other countries think fit to pay dear for our pro- 
 ducts, that is their own concern. We consume for ourselves, and 
 it is our interest to buy cheap. Not only do the protectionists 
 wish to keep foreign products out of their own country, they also 
 ask for bounties to help them to inundate foreign countries with 
 their goods; for their whole commercial policy is based on this 
 precept, Do to others as you would not that they should do to you. 
 
 Every bounty on exportation is paid out of the pockets of the 
 tax-payers, or at least of the consumers, of the country which pays 
 it. And what for ? To supply a foreign country at a cheaper rate 
 than it could supply itself. It is simply making a present to your 
 rivals. 
 
 At this moment, our sugar duties are levied in such a manner as- 
 to constitute a bounty on exportation, with what result, we may 
 learn from the following extract. 1 " This bounty may raise the 
 price of beet-root ; but the profit which will accrue from it to some 
 Frenchmen will be paid by all. The whole nation is in fact doubly 
 taxed. In the first place, the bounty, whether it cost 750,000 or 
 only 360,000 a year, represents a very serious charge on all French 
 
 1 Fawcett's Free Trade and Protection. 
 
238 COMMERCE. 
 
 tax-payers. This tax, however, is only one part of their burden ; 
 for if the encouraging of this export raises sugar only a farthing 
 per pound (and this is a very moderate estimate), the additional 
 price which Frenchmen are compelled to pay is no less than 
 1,000,000 a year." 
 
 In England there is no tax on sugar, so that Englishmen can 
 buy French sugar cheaper than their own. The English sugar- 
 refiners grumbled, and demanded a tax on importation to neutralise 
 our bounty ; but public opinion found prompt expression in the 
 Times. " The French are mad, with their export bounties. We are 
 not going to match their folly with our own. Our refiners can take 
 to some other industry ; and our consumers, thanks to the sacrifices 
 made by the French exchequer, will get their sugar cheap." 
 
 The cotton-manufacturers of Lille, with their coal on the spot, 
 compete ruinously with those of Rouen, who have to fetch theirs by 
 boat. Those in the Vosges have water-power at hand, but then 
 their transport expenses are heavy ; these three groups of cotton- 
 spinners ought surely to be protected against each other. Nay 
 more, the woollen trade may justly cry out against the competition 
 of cotton clothing. Cotton is a foreign product ; wool is a native 
 product ; why not be logical, and prohibit cotton ? 
 
 The wood- fed iron-furnaces of Brittany have been forced to die 
 out. If they had only had a good prescriptive tariff, prohibiting 
 the importation into the province of coal-worked iron, they might 
 have gone on to this day. 
 
 The protectionists may say, "We never talked any such nru- 
 sense." But the fact that they are demanding protection against 
 Alsace and Lorraine, which were French provinces only yesterday, 
 shows what they are capable of. Their logical ideal is, to confine 
 the nation to their own factories. Notwithstanding the relations 
 between the value of circulating and of fixed capital, they say, " If 
 you want to make money, you must have high prices. Therefore, 
 the prices of the circulating capital we produce must be artificially 
 raised, and then we shall grow rich." 
 
 They forget that they themselves, as consumers, prefer to buy in 
 the cheapest market. They forget another thing that a factory 
 can afford to reduce its profits almost indefinitely, so long as it can 
 indefinitely multiply its products. 
 
 How could they overlook the simple fact, that, while manufactured 
 articles have almost all fallen in value, manufactures themselves 
 have risen ? Can they not see that the masses are now the great 
 consumers ? When thiugs are cheap, everybody buys ; and every- 
 body can afford to buy more than anybody. 
 
 But if prices are raised, consumption is checked, and production 
 with it. Production being checked, all who were engaged in it 
 are obliged to limit their consumption ; and every fresh diminution 
 
Bk.v.Cb.iii.J COMMERCIAL CRISES. 239 
 
 in consumption re-acts on production. Rnin, misery, stagnation ; 
 this is what the protectionists are conscientiously and in all 
 simplicity fighting for. 
 
 If their theory were true, it should be applied, not only to 
 foreign produce, but to internal trade. The system must be re- 
 established between province and province, and that even more 
 strictly than before. Each commune ought to be self-sufficing. 
 It should be protected against the competition of its neighbours. 
 
 On the same theory, the more difficulty we have in obtaining 
 necessaries, the richer we are. We cannot too much admire the 
 efforts people make to become poorer, with the idea of becoming 
 richer. There is really no irony more cruel than that of the pro- 
 tectionist system ; and, unfortunately, it does not confine itself to 
 words. Its true followers belong to two classes, the dupers and 
 the duped. The dupes are ignoramuses, who find in this chimera 
 the satisfaction of their need of something absurd to believe in. 
 The subjective power of the human mind extends to everything 
 must have its superstitions in economics, as in religion. 
 
 Commerce consists in bringing together the wants of man and the 
 utilised forces of nature. 
 
 With subdivision of labour, individual labour grows more effective, 
 outlets multiply, and the exchange of products becomes more necessary. 
 
 Every obstacle to freedom of trade hinders the fall of circulating 
 capital, and, consequently, the rise of fixed capital. 
 
 The system of protection is therefore the best fitted to ruin a country. 
 
 CHAPTER III. 
 
 COMMERCIAL CRISES. 
 
 IN Economy, as in all other social phenomena, psychological facts 
 play an important part. It is because they have not been sufficiently 
 taken into account that we have had so many erroneous explana- 
 tions of commercial crises. 
 
 M. Juglar has written an interesting work on the subject. He 
 enumerates, with some surprise, as the precursors of all commercial 
 crises, the following symptoms : great prosperity ; enterprises and 
 speculations of all descriptions ; a rise in the price of land and 
 houses, in the demand for labour, and in wages; a fall of interest; 
 a credulous public ; and a taste for commercial gambling. 
 
 Of these facts Stuart Mill gives the following explanation. The 
 accumulation of capital is limited by the rate of the profits it 
 yields ; if it becomes too plentiful, investors seek enterprises which 
 offer larger profits. Then we have a break-neck race in speculation. 
 
240 COMMEECIAL CRISES. 
 
 This explanation is an application of the law of Malthns to capital. 
 Capital, being too abundant, risks and destroys itself, and this 
 destruction restores equilibrium. Crises, on this theory, are a 
 necessary evil ; they are a natural check on the indefinite expansion 
 of capital. Since there are no more wants in the world to be satis- 
 fied, since the entire population of the globe has reached the extreme 
 limit of its powers of consumption, and no one any longer says, " I 
 should like to be rich," it follows that there must be now and then 
 a destruction of capital. The crisis clears the ground, and enter- 
 prise begins afresh. 
 
 Very able financiers concur in this view of the question. M. G. 
 de Laveleye 1 says that there is nothing left to do in England, 
 France, or Belgium. There are no new railways to make, no new 
 canals to open. The great public works are completed. It is the 
 same in Holland and Italy, and even in Spain, whose traditional 
 indolence is now fully justified. In Germany, the means of pro- 
 duction and transport are already too great, and clearly out of 
 proportion to the possible requirements of the country. Asia, 
 Africa, America, Oceania, have all reached their maximum pro- 
 duction and consumption. Humanity has nothing to do but fold 
 its arms. 
 
 And yet production goes on, and production is ruin. There are 
 too many producers and too few consumers. The glut of 1877 
 was not a momentary difficulty ; it is a permanent and ever inten- 
 sifying crisis. 
 
 Such is the theory of an eminent financier. Nor is it his own 
 invention merely ; many economists have broached it ; and those 
 who do not adopt precisely the same formula find complicated 
 explanations, which all come to the same thing, and reinforce the 
 protectionist cry of " over-production." 
 
 But then comes the question Is every one comfortably fed 
 and clothed and lodged ? Is every member of the human family 
 satisfied and content ? Is nobody hungry any more, all the world 
 over ? You say, 
 
 " The supposition is absurd ; every one knows the contrary." 
 
 " Then the accepted explanation of commercial crises is equally 
 absurd ? " 
 
 " Yes." 
 
 The true explanation of commercial crises has been given by Mr. 
 Bouamy Price. 2 It agrees exactly with our view of the part played 
 by fixed and circulating capital in production. 
 
 Why is production excessive ? Because there is a falling off in 
 the means of purchase. 
 
 And whence comes this falling off ? 
 
 1 Du Caractere de la Crise Economique Actuelle. Brussels, 1879. 
 3 Contemporary Review, May, 1879. 
 
Bk. v. Oh. iii.] COMMERCIAL CEISES. 241 
 
 It must be remembered that the power of purchasing lies in the 
 possession of commodities, that money is simply a medium for the 
 exchange of these commodities, and that the buyer can only pro- 
 cure the money by first selling his own commodities. 
 
 Every purchase made with money implies a previous sale of 
 commodities in order to obtain this money ; so that every purchase 
 is only one-half of a transaction. A hatter sells a hat for a guinea, 
 and with the guinea buys a pair of shoes ; the hat is exchanged for 
 shoes. It is the hat that has bought the shoes. Wholesale trans- 
 actions clearly show that all purchasing power resides ultimately 
 in commodities. 
 
 Whence then comes commercial depression ? Surely from a 
 want of commodities to exchange. Hence it is that trade becomes 
 stagnant, factories work half time or not at all ; the money-market 
 is disturbed ; banks and great, commercial houses fail. It is all 
 because there is a lack of commodities to buy with. 
 
 But how comes it that buyers and consumers have lost their 
 purchasing power ? Why have they fewer commodities to ex- 
 change ? It is the consequence of a general fact, itself due to 
 several possible causes. There has been an excess of consumption, 
 more has been consumed and destroyed than has been replaced. 
 It is this that has done the mischief, that has brought about a 
 diminution of the stock of commodities to be exchanged, and so 
 has reduced the consumers, that is to say the purchasers, to 
 poverty. 
 
 Crises, therefore, do not spring from over-production, but from 
 over-consumption. 
 
 But what is over-consumption ? Are not all things made to be 
 consumed ? Yes. All products are consumed and destroyed, some 
 very quickly, as food, coal, and such-like things ; others very 
 slowly, like machinery, buildings, ships, and fixed capital generally. 
 
 But here comes into play a distinction which explains the nature 
 and essence of over-consumption. All articles of consumption 
 divide themselves naturally into two classes, 1st, those which 
 minister to production, and 2nd, those which minister to luxury and 
 enjoyment. The difference between the two classes is this, cir- 
 culating capital applied to articles of the first class is consumed 
 indeed, but it is reproduced by means of those articles, as the food 
 and clothing of farm labourers, the manure put into the soil, and 
 the wear and tear of ploughs are reproduced in the resulting 
 harvest ; circulating capital expended on luxuries, say on hounds 
 and whippers-in, disappears and leaves nothing behind. We know 
 that capital is the sum total of everything necessary to the production 
 of wealth ; and it is clear that if the capital thus destroyed is fully 
 restored in the products realised, the productive power of the nation 
 will remain intact, its wealth will be undiminished, its sales and 
 
242 COMMEKCIAL CRISES. 
 
 purchases will go on as before, and there will be no sign of 
 commercial depression. The prosperity of the country is untouched, 
 because it has the same quantity of commodities to exchange. Now 
 let us look at the other side of the question. Suppose that a 
 portion of the capital destroyed is not replaced in products. The 
 necessary consequence will be that, the producing power having 
 fallen, there will be a real diminution of wealth. The country will 
 now be poorer, because it has less to exchange. The reason is plain. 
 The capital which was destroyed has been only in part restored ; 
 and this is true over-consumption. 
 
 It is said that bad harvests produce commercial crises ; and this 
 is true. But why ? Because a bad harvest represents an excess 
 of consumption. All the expenses of cultivation have been incurred, 
 labourers and their families have had to be maintained, horses 
 to be fed, carts and ploughs and raw material to be bought and 
 used is not all this consumption ? A good harvest will replace 
 all this consumption, and more than replace it ; it yields a profit, 
 and this profit is an increase of purchasing power. But, if the 
 harvest is bad, then the things consumed in cultivation are not 
 replaced by new products. There is a real destruction of capital. 
 The purchasing power of the cultivator is diminished. 
 
 Now, look at the late crisis. There have been great famines in 
 India and China, those important customers of England, and their 
 purchases in Yorkshire and Lancashire have accordingly dimin- 
 ished ; England herself has suffered from a series of bad harvests, 
 and her agriculturists have had less power of purchasing manu- 
 factured articles. In France we see the same thing, as a conse- 
 quence of bad harvests and vintages. 
 
 Adam Smith says that the main trade of every civilised nation 
 is that which is carried on between town and country. In his time 
 this was correct. It will become less and less so as machinery 
 is more and more used in agriculture. At the same time, the 
 agricultural population of France is, as we have seen, even now 
 considerably in excess of the urban population. A bad harvest re- 
 duces their purchasing power; the manufacturers whose ploughs 
 or whose stuffs they should have bought cannot get customers for 
 their wares. They in their turn find their purchasing power 
 diminished. 
 
 This loss may be represented by the following figure. 
 
 AGRICULTURE. 
 
 Advances; capital { 
 Returns 
 
 1 
 f 
 
 
 100 
 
 1 
 
 1 
 
 60 
 
 
Bk.v.Cb.iii.] COMMERCIAL CKISES. 243 
 
 The purchasing power of the agriculturists is thus diminished 
 50 per cent. 
 
 But the manufacturer also has made advances of fixed capital 
 reckoned to produce 100. The agriculturist can buy only 50. 
 
 INDUSTRY. 
 
 * 100 
 
 Advances; capital [ J 
 
 1 50 
 
 Agricultural demand ( | 
 
 50 per cent of the power of this fixed capital is therefore wasted ; 
 and in this way the purchasing power of the industrial classes, 
 both masters and men, is diminished in the same proportion, and 
 they in their turn consume less of the produce of others. 
 
 Every one knows that water stands at the same level in vessels 
 which communicate with one another. So here, a general fall 
 proves the solidarity of all interests. 
 
 Nor is this all. When the harvest is bad, the consumer pays 
 dearer for his corn and meat and wine. Even if his resources 
 remained the same, their purchasing power is weakened. Thus 
 the industrial production of the entire country is crippled. 
 
 The protectionists, whose ideal it is that the country should 
 always pay famine prices for its corn and meat, apply themselves 
 in all sincerity to ensuring a permanent crisis. 1 
 
 War, again, represents a formidable excess of consumption, its 
 operation being nothing but destructive. It withdraws a great 
 number of men from productive labour men who must be fed 
 and clothed all the same, while they bring in no return for their 
 consumption. It disturbs industry ; it destroys roads, railways, 
 and other appliances of industrial activity. All this is over-con- 
 sumption. We are taxed now-a-days for the maintenance of vast 
 armaments, not to create wealth, but to destroy it ; the utilities they 
 consume are for ever deprived of all purchasing power. 
 
 But to return. We have said that the eve of a crisis is invariably 
 signalised by all the appearances of prosperity ; industries multiply, 
 railways are made, and great public works undertaken ; capital is 
 squandered in foolish investments. The economists and the public 
 become alarmed, and we are warned against over-production. But 
 it is really over-consumption. 
 
 You undertake great works ; but the formation of fixed capital is 
 itself over-consumption, for it represents an excess of consumption 
 over production for a certain period, the difference being represented 
 by the diminution of purchasing power during that time. 
 
 1 See M. Menier's speech on free-trade in the Chamber of Deputies, Feb. 
 19th, 1880. 
 
244 COMMERCIAL CRISES. 
 
 The work undertaken, the engine, factory, or other instrument 
 of production, whatever it may be, will no doubt, in course of time, 
 make up this loss, but gradually. The support of the workmen 
 who build a ship is a temporary loss of wealth. They must consume 
 food, and this does not at once bring in an increase of purchasing 
 power. 
 
 Now, suppose the canal or harbour to have been made ; in all this 
 fixed capital there lies locked up a large amount of circulating 
 capital. Then? results a temporary diminution of purchasing power. 
 This phenomenon was remarked by Mr. Hyndmann, in that article on 
 the bankruptcy of India which created such a sensation in England 
 about the end of 1878. He pointed to the famine then devastating 
 India, and cutting down her inhabitants by hundreds of thousands. 
 "What ! cried the public, are there no railways, no irrigation works ? 
 Why have they not prevented this catastrophe ? Not only have 
 they not prevented it, they are partly responsible for it. They have 
 been constructed by means of loans and taxes which have absorbed 
 the whole circulating capital of the Indian population. Then comes 
 the famine. The iron road brings down to starving Madras and 
 Bombay the grain of the Punjaub and the North-west Provinces. 
 But the purchasing power is gone ; the people have not the means 
 to buy the grain when it arrives, and they die of hunger. 
 
 In the same way Mr. Bonamy Price, in the article we have already 
 referred to, explains the crisis in the United States. " We are now," 
 he says, " in a position to perceive the magnitude of the blunder of 
 which the American people were guilty, in constructing this most 
 mischievous quantity of fixed capital in the form of railways. They 
 acted precisely like a land-owner who had an estate of 10,000 a 
 year, and spent 20,000 on drainage. It could not be made out of 
 savings, for they did not exist; and at the end of the very first 
 year he must sell a portion of the estate to pay for the cost of his 
 draining. In other words, his capital, his estate, his means of 
 making income whereon to live, was reduced. The drainage was 
 an excellent operation, but for him it was ruinous. So it was with 
 America. Few things, in the long run, enrich a nation like rail- 
 ways ; but so gigantic an over-consumption, not out of savings, but 
 out of capital, brought her poverty, commercial depression, and 
 much misery. The new railways have been reckoned at some 
 30,000 miles, at an estimated cost of 10,000 a mile; they destroyed 
 three hundred million of pounds worth, not of money, but of corn, 
 clothing, coals, iron, and other substances. The connection between 
 such over-consumption and commercial depression is here only too 
 visibly that of parent and child. 
 
 " But the disastrous consequences were far from ending here. 
 The over-consumption did not content itself with the wealth used 
 up in working the railways and the materials of which they were 
 
Bk. v. Ch. iii.] COMMEECIAL CRISES. 245 
 
 composed. It sent other waves of destruction rolling over the land. 
 The demand for coal, iron, engines, and materials kindled prodi- 
 gious excitement in the factories and the shops; labourers were 
 called for on every side ; wages rose rapidly ; profits shared the 
 upward movement; luxurious spending overflowed; prices advanced 
 all round ; the recklessness of a prosperous time bubbled over ; and 
 this subsidiary over- consumption immensely enlarged the waste of 
 the national capital set in motion by the expenditure on the railways 
 themselves. Onward still pressed the gale ; foreign nations were 
 carried away by its force. They poured their goods into America, 
 so overpowering was the attraction of high prices. They supplied 
 materials for the railways, and luxuries for their constructors. 
 Their own prices rose in turn ; their business burst into unwonted 
 activity ; profits and wages were enlarged ; and the vicious cycle 
 repeated itself in many countries of Europe. Over-consumption 
 advanced with greater strides; the tide of prosperity rose ever 
 higher ; and the destruction of wealth marched at greater speed." 
 
 Fixed capital is an implement of permanent value ; but it repays 
 not all at once, bat little by little, after long use. Consequently, 
 the formation of fixed capital implies a temporary destruction of 
 capital, an excess of consumption, a decrease of purchasing power. 
 
 Take a railway, for instance. It has cost in wages and main- 
 tenance of labourers, and in materials of all sorts, say ten thousand 
 pounds per mile. This 10,000 is for the time withdrawn from 
 circulation. No doubt it will eventually be more than repaid, but 
 it is a question of time. We see this going on in the United States. 
 A crisis raged there for two or three years ; by that time the 
 capital consumed had been replaced, and the crisis came to an end. 
 
 Another point : fixed capital cannot be utilised if there is no 
 available circulating capital. Ships and railways are useless if there 
 are no commodities for them to convey; a factory cannot be worked 
 unless' there are consumers ready to buy its products. If, then, 
 circulating capital has been so far exhausted as to take a long time 
 replacing, fixed capital must meanwhile remain unproductive, and 
 the crisis is so much the longer and more, severe. 
 
 The simplest observation shows that the crisis of 1876-79 was 
 due to no other cause. We have just seen how it was brought 
 about in the United States. In Germany, it was owing to the fright- 
 ful consumption of capital in fortresses and armaments, in which the 
 Government has, by the help of the war indemnity, been able to 
 indulge itself. 
 
 England, for her part, has been supplying circulating capital to 
 the United States, Turkey, Egypt, and her own colonies. Some of 
 these have become insolvent, and the others will take long to regain 
 their purchasing power. Hence a crisis. 
 
 And this is only one side of the question. In economic matters 
 
246 COMMERCIAL CEISES. 
 
 there is always a reflex action to be taken into account. The 
 English manufacturers, for instance, furnish India, Australia, and 
 America with rails, engines, iron bridges, etc. The demand being 
 considerable, they augment their means of production, and add the 
 consumption of their own circulating capital to that of their 
 customers. When purchasers fall off, they have no longer the 
 circulating capital to employ their fixed capital. Thus, in 1873-4 
 the number of blast furnaces in England rose from 876 to 959. In 
 1878 only about half that number were at work. 
 
 All over-production is really over-consumption. The over-pro- 
 ducer is one who begins by consuming, in wages and raw material, 
 a sum which he afterwards fails to recover. 
 
 Superficial observers have seen only the last stage, and overlooked 
 the first ; and so they fall into the mistake of fancying, in full nine- 
 teenth century, that there is an excess of production, when, out of the 
 thirteen hundred millions who people the globe, not one million 
 perhaps are in a position freely to satisfy their wants. 
 
 Over-production may exist in particular industries, but it cannot 
 exist in all at once. When all industries suffer simultaneously, it 
 is from a very different cause, as we have already shown. 
 
 But the human mind is sluggish. The capitalist is seldom a man 
 of initiative. The manufacturer, who is, is mostly guided in the 
 choice of his product and in the method of producing it, not by 
 thorough scientific observation, but by chance and personal incli- 
 nation. 
 
 Man is an imitator. Certain manufacturers succeed, and immedi- 
 ately other manufacturers and other capitalists say, " Let us manu- 
 facture the same thing." They hardly think to inquire whether the 
 manufacturers first in the field are not equal to satisfying the whole 
 demand. This instinctive movement has the good effect of pro- 
 voking competition, of stimulating innovations, and of cheapening 
 the market ; but these improvements are not effected without 
 difficulty ; and often the production of a particular thing is out of 
 all proportion to its utility. Then the struggle for existence does 
 its work. The weak disappear, the strong survive ; and the 
 former, not unnaturally, complain of over-production. 1 
 
 Economic science, like all other sciences, has its commonplaces. 
 Economists are accustomed to say that " Capital applies itself to the 
 most profitable branches of trade, and rapidly abandons the less 
 profitable." " Rapidly ? " No, not quite. It does, no doubt, abandon 
 them perforce after a long and often cruel struggle, but not till then. 
 
 Capitalists are like sheep ; they must do as the rest do. Each 
 takes his capital where every one else takes theirs, and then he is 
 astonished at the congestion of capital. 
 
 1 See, with regard to the psychological aspect of crises, the Spectator, for the 
 28th of December, 1878, p. 1628 
 
Bk. v. Oh. iii.] COMMEECIAL CEISES. 247 
 
 Notwithstanding all the marvels which have been accomplished 
 this century, we cannot conceal from ourselves that the industrial 
 and commercial classes are largely creatures of routine. But if 
 they cannot keep pace with changing wants and new economic 
 conditions, they must take the consequences. 
 
 We have said that exchange is one form of division of labour ; 
 but our means of communication, much as they may have improved 
 during the last half-century, are still far from perfect. Thus it 
 happens that A manufactures an article which B may want. But 
 in order that A may sell his article, it is not enough that B wants 
 it. A must be able to find B. 
 
 Now, A may make a good many articles in the belief that some- 
 where or other there are Bs who want them. Jerome Paturot made 
 millions of night-caps on the ground that there are millions of 
 people in the world unprovided with them. But if Jerome Paturot' s 
 night-caps do not fall into the hands of those who use them, and if 
 he cannot persuade those who do not use them that they are abso- 
 lutely indispensable, he will simply have been guilty of over- 
 production. 
 
 But if Jerome Paturot cannot make good the consumption which 
 this production has entailed, he will fail, and his failure will make 
 itself felt on all sides. It is a waste and destruction of capital. It 
 is over- consumption. 
 
 Those persons and there are a good many of them who attach 
 some mysterious power to money, say that money is the cause of 
 crises. 
 
 " The determining cause of all these crises," says M. Emile de 
 Laveleye, 1 " lies in the drain on the precious metals." This phrase 
 just expresses the notion which has given the name of " money 
 market" to the mechanism for the interchange of capital. The 
 drain on the precious metals is an effect and not a cause. There is 
 a demand for money ; why ? Because there are payments to be 
 made, and the debtor has not commodities sufficient to pay with ; 
 or because the seller is in want of money, and insists on being paid 
 in coin. 
 
 We have seen of what secondary importance money is in business 
 transactions in ordinary times ; but it is a vehicle, an intermediary. 
 Now, foreign countries, or certain parts of the country, may have 
 absorbed great quantities of money. India and Russia, for instance, 
 having no use for English products, such as iron, machinery, or 
 textile fabrics, require payment in gold for their cotton and their 
 corn. Usually, this demand for gold is a symptom of distress in 
 the country which makes it. It prefers it to manufactured articles, 
 because it needs it for its internal consumption. If it is not to be 
 
 1 Le Marche Monttaire et ses Crises, p. 193. 
 
248 COMMERCIAL CRISES. 
 
 had in the country from which it is demanded, then there is first 
 obstruction, and then stoppage, just as it would be if there were 
 much traffic and a want of vehicles. 
 
 It has been said that crises arise from the excessive issue of bank 
 notes. This was Sir Robert Peel's opinion. Mr. Tooke has proved 
 by facts that in all cases of a rise or fall in prices, that rise or fall 
 has preceded, and therefore cannot have been caused by, the 
 increase or diminution in the issue of notes. 1 
 
 Here, again, the effect has been taken for the cause. Paper 
 obtains credit only when it is quite certain that it can be reduced 
 to money. Here the psychological question recurs. Those who 
 ask for the money do not want to keep it, they only want to have 
 it for a moment in order to exchange it for other products. The 
 absence of money is of importance only so far as it shows that there 
 is a difficulty in procuring it, and that this difficulty arises from 
 an interruption in the exchange of products which might have 
 procured the money, or have rendered it unnecessary to have 
 recourse to money at all. 
 
 The assignats, which occasioned such a fearful crisis, represented 
 excellent value, viz., land; but it was fixed capital, not readily 
 transformable into circulating capital, which was what every one 
 was wanting at the moment. But metal money may be abundant 
 during a violent commercial crisis. It is the story of the miser 
 dying of hunger in the midst of his gold. The crisis of 1857 
 occurred eight years after the immense discoveries of gold in Cali- 
 fornia. It had nothing to do with an absence of gold ; but the 
 Crimean War had produced over- consumption, a bad harvest had 
 aggravated this over-consumption, there was not circulating capital 
 enough to carry on production, and there were therefore no pro- 
 ducts to exchange. 
 
 Bagehot advises the banks to lend as much money as possible 
 during times of panic. Panic arises from the idea that you have 
 no money. You must show that you have. Once produce this 
 conviction, and the drain of gold will stop of itself as soon as the 
 sums it was intended to pay are paid ; and the natural interchange 
 of products again begins to work. 
 
 The merchants, who, to a certain extent, understand these things, 
 have sometimes faced them with surprising heroism. 
 
 In 1797 the Bank of England suspended cash payments ; in 1811 
 the Government gave forced currency to its notes, and this regula- 
 tion lasted down to 1822. Following the example set them by their 
 fathers under analogous circumstances in 1745, the merchants, 
 bankers, manufacturers, and ship-owners of London immediately 
 called a meeting, in which it was decided that they would in no 
 
 1 History of Prices. 
 
Bk. v. Ch. iv. ] BANKS . 2 49 
 
 case refuse to receive bank-notes in payment of sums due to them, 
 and that they would do their utmost to effect their own payments 
 in the same manner. It is for scientific history to render homage 
 to these nameless heroes. 
 
 Even crises have had their apologists. A correspondent in The 
 Times of the llth of January, 1879, congratulated the United States 
 on the crisis they were then undergoing. Up to 1875 all expen- 
 diture, both public and private, had been recklessly increased. 
 Then came the crisis, and every one reduced his expenditure within 
 proper limits. " Retrenchment " was the order of the day in pub- 
 lic business; sinecures were abolished; unnecessary public works 
 were abandoned. The expenses of New York State had amounted 
 in 1874 to 3,500,000 ; in 1878 they were reduced to 1,500,000, 
 out of which 115,000 were put aside to pay off the debt. 
 
 There is some truth in the idea that sorrow has its uses. We do 
 not begin to take care of ourselves till we find ourselves thoroughly 
 ill. But sometimes it is then too late. 
 
 Even statesmen are constantly encouraging the destruction of 
 capital. They fancy that prodigality promotes trade. Fetes, balls, 
 the building of palaces all this is good for trade. The construc- 
 tion of the fortifications round Paris was good for trade. They do 
 not see that they are creating a waste of circulating capital which 
 is never reproduced; and which, thus consumed, loses all purchasing 
 power. They will say next that war affords a good outlet; so it does, 
 in a sense, and so does a sieve. The capital thus swallowed up can 
 create no further demand for labour. Man himself, therefore, falls 
 in value ; wealth decreases ; and a crisis follows, more or less intense, 
 more or less prolonged, but always, and in any case, disastrous. 
 
 Hence : Commercial and financial crises are produced, not by over- 
 production, but by over-consumption. 
 
 CHAPTEE IV. 
 
 BANKS. 
 
 I HAVE said that credit is analogous to transport. 1 The one tends to 
 annihilate time, and the other to annihilate space. But the language 
 of Economy is still far from exact, inasmuch as it has given to the 
 word " credit " an unforeseen extension of meaning, not only setting 
 aside its etymology, which would not much signify, but including 
 under the term a range of functions not strictly of the same nature. 
 Thus, the institutions which deal with credit may carry on opera- 
 tions of a very varied character. 
 
 1 Book II., chap. vii. 
 
250 BANKS. 
 
 They may take upon themselves the charge of the precious metals, 
 bonds, and securities, or guarantee a certain standard of coin. 
 These are simply measures of security. 
 
 Or they may undertake the more economical transfer of bullion. 
 Here they touch upon the domain of transport, since the object is 
 to surmount the obstacle of distance. 
 
 Or, lastly, they may make it their business to discount bills, to 
 make advances, and to defray loans; and here their object is to 
 economise time. 
 
 All the institutions which carry on all or any of these operations 
 are included under the name of Banks. 
 
 Adam Smith l has admirably described the functions of banks 
 during the seventeenth century, in small States such as Hamburg 
 or Genoa. They had nothing to do with discounting, nor with the 
 custody of money, nor even with saving the transport of money. 
 They concerned themselves only to procure good money. 
 
 In order to understand this, we must imagine a little State enjoy, 
 ing a great trade, like Genoa, Hamburg, or Amsterdam. It receives 
 from the neighbouring States all sorts of worn and clipped money 
 to such an extent that, at Amsterdam, the current coin was 
 depreciated 9 per cent. As soon as a good coin appeared, it was 
 melted down and exported ; and the consequence was, that as good 
 money was not always to be had for paying bills of exchange, the 
 value of such bills fluctuated in a manner very injurious to the 
 interests of commerce. " In order to remedy these inconveniences, 
 a bank was established in 1609, under the guarantee of the city 
 This bank received both foreign coin and the light and worn coin 
 of the country, at its real intrinsic value in the good standard 
 money of the country, deducting only so much as was necessary for 
 defraying the expense of coinage and the other necessary expense 
 of management. For the value which remained after this small 
 deduction was made, it gave a credit in its books. This credit was 
 called bank money, which, as it represented money exactly accord- 
 ing to the standard of the mint, was always of the same real value, 
 and intrinsically worth more than current money. . . . The 
 money of such banks (i.e. Venice, Genoa, Amsterdam, Hamburgh, 
 and Nuremberg,) being better than the common currency of the 
 country, necessarily bore an agio, which was greater or smaller 
 according as the currency was supposed to be more or less degraded 
 below the standard of the State. The agio of the Bank of Ham- 
 burgh, for example, which is said to be commonly about 14 per 
 cent., is the supposed difference between the good standard money 
 of the State and the clipped, worn, and diminished currency poured 
 into it from all the neighbouring States." 
 
 1 Wealth of Nations, Book IV., chap. iii. 
 
Bk.v. Ch.lv.] BANKS. 251 
 
 To this very important function of creating a good coinage was 
 added next that of the custody of money. The bank guaranteed 
 the money entrusted to it against fire, thieves, and other accidents. 
 Then came another question the saving of time and space. It was 
 no longer necessary to count or carry the money ; a simple transfer 
 on the books was enough. 
 
 The Bank of Amsterdam did not lend out the smallest part of the 
 moneys deposited with it. For every florin for which it gave credit 
 on its books it paid the value of a florin in money or bullion. 
 Existing, as it did, for the public service, and not for its own profit, 
 it was placed under the care of the four burgomasters. Such was 
 one form of the primitive bank. 
 
 The Italian banks were financial companies for lending money to 
 the Governments of their respective cities. It was not till later on 
 that they undertook commercial banking operations. 
 
 The need of security led to the formation of deposit banks. The 
 English merchants used to place their money in the Tower of 
 London, until Charles I., without consulting them, seized 200,000 
 under pretence of a loan. The merchants withdrew the rest, and 
 adopted the custom of placing it with the goldsmiths, a custom still 
 maintained in Liverpool. It is this need of security which now 
 leads to enormous sums being deposited in the Banks of England 
 and France. 
 
 If a bank of issue allows interest on deposits, it must find employ- 
 ment for them. 
 
 In order to economise the transport of money or commodities, 
 antiquity itself invented the bill of exchange. It was known in 
 Athens, and at Home. It was in constant use in the fourteenth 
 century. One of the most important parts of a banker's business 
 is that which deals with bills of exchange. 
 
 The late Professor Stanley Jevons recounts the expedients used 
 as substitutes for metal money: 1 
 
 1. The replacement of standard money by representative money. 
 
 2. The intervention of book-credit. 
 
 3. The cheque and clearing system. 
 
 4. The use of foreign bills of exchange. 
 
 5. The international clearing system. 
 
 The list is not in chronological order, for the bill of exchange 
 preceded the cheque. The London and Westminster Bank, the 
 first deposit bank that issued cheques, dates from 1834. The 
 cheque has only been used in France since 1865, and is hardly yet 
 acclimatised. 
 
 Yet the idea is very simple. Two people have business relations, 
 sometimes buying, sometimes selling. They see that it is a waste 
 
 1 Money, p. 190. 
 
252 BAKES. 
 
 of labour to be constantly sending money to and fro between them. 
 It is only necessary to pay the difference, if there is any. 
 
 Now, since merchants are in the habit of depositing their money 
 in common centres, a simple transfer on the books is all that is 
 required. The cheque is an order to transfer. The bit of paper 
 that A gives to B means that the sum which has so far stood to 
 the credit of A shall henceforth stand to the credit of B. 
 
 In England a system of compensation was established between 
 the banks before the use of cheques was introduced. The Clearing- 
 house was established in 1775, to avoid the carriage of money, and 
 to save the rounds of the bank clerks. Twenty-six banks, acting on 
 their own initiative, and without legal intervention, formed a private 
 association, meeting in a common room. In 1810 the associated 
 banks were forty in number ; they are now only twelve, but ex- 
 tremely powerful. They effect a daily settlement on paper amounting 
 to 20,000,000. This represents a weight in gold money of 157 
 tons, and in silver money of 2,500 tons. Not a single shilling 
 passes ; all differences are settled by drafts on the Bank of England. 
 
 Here is a real bank of exchange, which Proudhon would have 
 done well to study, instead of dreaming of one of his own. 
 
 In 1858 Sir John Lubbock and Mr. W. Gillett organised a 
 clearing-house system for the provinces. This system is very 
 simply explained by Professor Stanley Jevons, in the following 
 diagram : 
 
 cef g I m n re t u v w * y z 
 
 \ 
 
 U V W 
 
 CH- 
 
 Diagram 47. The Provincial Clearing-nouse System. 
 
 Every country bank has a current account with some bank in 
 London ; and all the London banks settle their mutual transactions 
 daily through the Clearing-house. It follows that a payment can 
 
 1 Money, chap. xxi. 
 
}k. v. Ch. iv.] 
 
 BANKS. 253 
 
 5e effected between persons in different parts of the country, via 
 Ljondon. In Diagram 47 let P, Q, E, be country banks, having a 
 London agent X ; and let U, V, W, be other country banks, having 
 i London agent Y. If P's customer a wishes to make a payment 
 :o U's customer r, he sends him by post a cheque on his banker 
 P ; and r, on receiving it, has it carried to his account by U, who, 
 iaving no direct communication with P, sends it to T, who pre- 
 sents it to X through the medium of the Clearing-house. X debits 
 P with the amount, and advises him by the next post. Nothing 
 3ould be more simple than this arrangement. 
 
 The institution of clearing-houses is spreading. They have them 
 it Manchester and Newcastle, but, oddly enough, not at Liverpool, 
 which has not adopted cheques, but prefers to use bank-notes and 
 money. It is a local custom of the trade. 
 
 The New York Clearing-house dates from 1855, includes fifty- 
 nine banks, and does an enormous business. A Clearing-house was 
 established by some bankers in Paris on the 18th of March, 1872. 
 The following is a table of its operations up to the 31st of March, 
 1880 : 
 
 Francs. 
 
 1872-1873 1,602.584,727-51 
 
 1873-1874 2,142,308,845-48 
 
 1874-1875 2,009,740,692-50 
 
 1875-1876 2.213,724,86058 
 
 1876-1877 2,598,607,894-42 
 
 1877-1878 2,199,593,418-67 
 
 1878-1879 2,628,243,743-21 
 
 1879-1880 3,222,745,255-48 
 
 18,617,543,437-85 
 
 In 1842 Robert Stephenson and Morison established a sort of 
 Clearing-house for settling accounts between railway companies. 
 
 In 1874 the London Stock Exchange Clearing House was started, 
 for the purpose of balancing, not sums of money, but quantities of 
 scrip between the various brokers. It must be observed that the 
 amounts transferred represent only 10 per cent, of the business 
 actually settled. 
 
 We see then that these institutions all aim at substituting for the 
 use and transport of coin a simple transfer on paper. We may 
 say that the circulation of a country develops with the decrease of the 
 use of money, in proportion to the extent of its business. 
 
 It is one aspect of the fact we have already remarked, that 
 industrial progress consists in obtaining the greatest possible inverse 
 proportion between the consumption of circulating capital and the return 
 affixed capital. 
 
 We have just seen that banks fulfil three important functions; 
 procuring good money, taking care of money, and economising the 
 
254 BAtfKS. 
 
 use and transport of money. In the performance of these three 
 functions, they are aided by paper money in various forms : bills 
 of exchange, cheques, and bank-notes ; a bank-note being a kind of 
 cheque payable to the bearer without endorsement. 
 
 But banks have another important function, that of credit 
 properly so called. They facilitate loans between A, who does not 
 know what to do with his money, and B, who wants it for immediate 
 use. For this purpose they use paper money, discounting drafts, 
 and notes payable to order, which are promises to pay. And lastly, 
 for some years past, they have absorbed as much capital as possible, 
 have issued notes, subventioned large enterprises, and lent credit to 
 embarrassed States. 
 
 The profit derived by the bank from all these transactions of 
 every sort is a commission. 
 
 The bankers, rich as they are, do not work on their own 
 resources. 
 
 The real source of their profits is the confidence they inspire. 
 The banker is a broker between manufacturer and capitalist, and 
 between trader and trader. His profits are in inverse ratio to the 
 capital required. The capital itself is simply a concession to 
 public opinion. 
 
 Discounting consists in cashing engagements contracted on ac- 
 count of actual industrial operations. 
 
 Discounting in London includes two functions, Istly, the pro- 
 curing money for country bankers, by discounting their paper when 
 they are obliged to borrow, which seldom happens ; 2ndly, the 
 country bankers having almost always, on the contrary, too much 
 money, the London bill-broker finds employment for it in dis- 
 counting commercial bills. According to a statement of Mr. 
 Richardson, one of the principal bill-brokers in London in the early 
 part of this century, the second kind of business is fifty times as 
 extensive as the first. 
 
 It is not necessary to go into the details of banking. We have 
 said enough to indicate its two leading features. It now remains 
 to consider the great question of the national banks of France and 
 England. 
 
 The Act of 1844 divides the Bank of England into two branches ; 
 the Banking Department proper, and the Issue Department, whose 
 sole function is to issue bank-notes not exceeding in the aggregate 
 15,000,000 on Government securities in the vaults of the Bank. 
 
 Nothing could be more unscientific than this distinction ; for the 
 use of bank-notes ought to vary with the discounting of bills of 
 exchange. 
 
 I borrow the following balance-sheet from Mr. Bagehot's work ; 
 but it would be easy to draw up a similar table from the accounts 
 published every Wednesday. 
 
Bk. v. Ch. iv.] 
 
 BANKS. 
 
 ISSUE DEPARTMENT. 
 
 Notes issued 33,288,640 
 
 33,288,640 
 
 Government debt . . 
 Other securities . . . 
 Gold coin and bullion . 
 Silver bullion . . . 
 
 255 
 
 11,015,100 
 
 3,984,900 
 
 18,288,640 
 
 
 
 33,288,640 
 
 BANKING DEPARTMENT. 
 
 Proprietors' capital 
 
 Best 
 
 Public deposits, including 
 Exchequer, Savings 
 Banks, Commissioners 
 of National Debt, and 
 dividend accounts . . 
 
 Other deposits .... 
 
 Seven day and other 
 bills . 
 
 . 14,553,000 
 3,103,301 
 
 8,585,215 
 18,204,607 
 
 445,460 
 44.891.613 
 
 Government securities . 13,811,953 
 Other securities . . . . 19,781,988 
 
 Notes 10,389,690 
 
 Gold and silver coin . . 907,982 
 
 44,891,613 
 
 Thus, out of the total number of bank-notes in circulation, 
 15,000,000, issued on the National Debt and other securities^ are 
 guaranteed by the State, and 18,288,640 are issued on gold coin 
 and bullion. The Bank can in no way augment the circulation. All 
 other notes issued by it must be guaranteed by specie. Such is the 
 "iron system " " which ruins us," say its opponents, "which saves 
 us," say its advocates. 
 
 Now, no bank in or out of London, except the Banking Depart- 
 ment of the Bank of England, possesses any considerable sum in 
 specie or negotiable securities, beyond what is required in every- 
 day business. 
 
 On Dec. 29, 1869, the Debit Account of this department was 
 as follows : 
 
 Public deposits . . . 
 
 Private deposits 
 
 Bills at seven days and others 
 
 8,585,200 
 
 18,204,600 
 
 445,480 
 
 27,235,280 
 
 The Credit Account showed a reserve in legal currency of: 
 
 Banknotes . 10,389,690 
 
 Gold and silver coin 907,982 
 
 11,297,672 
 
256 BANKS. 
 
 This is the entire reserve in legal currency, with which, according 
 to law, the Banking Department faces a debit nearly three times as 
 great. It has no other ready money. 
 
 All the other London banks deposit their principal reserve with 
 the Bank of England. It is the bankers' bank. The reserve 
 of the Bank of England (averaging, between 1866 and 1873, 
 10,000,000), is the whole of the money at disposal for meeting 
 the debts of Lombard Street. Nay, more ; as all the country banks 
 send their money to London, the money in the vaults of the Bank 
 of England forms not only its own reserve, but that of all the banks 
 in the country. Nor is this all. Ever since the Franco-German war, 
 London has become the clearing-house of Europe. The Bank of 
 England reserve has therefore to face the contingency of a demand 
 or immediate payment all over Europe. 
 
 All the banks depend on the Bank of England ; all the merchants 
 depend upon the banks ; the reserve of the Bank of England is their 
 sole guarantee; and this guarantee the directors of the Bank 
 have a constant tendency to reduce in order to pay larger dividends 
 to their shareholders. 
 
 The London and Westminster Bank holds a reserve of only 13 
 per cent, of its deposits. The Bank of England reserve is over 40 
 per cent. Hence it will be easily understood that there is a great 
 difference in the rate of profits, and that the shareholders of the 
 Bank of England are constantly complaining and urging the 
 directors to diminish it. Thus the whole gigantic structure of 
 English credit rests on the Bank of England. It is a pyramid 
 standing on its apex. Besides, the interests of directors and share- 
 holders clash with those of the public ; while the mode of appoint- 
 ment of the directors themselves affords no adequate security for 
 their competency. ^ 
 
 Nevertheless, no one imagines that the Bank of England can fail. 
 It is a sort of fetish. Its solvency is an article of faith. It makes 
 no difference that in 1797 it suspended payment, that it very nearly 
 did so again in 1825, and that in 1839 it was only saved by a loan 
 from the Bank of France. Three times since 1844 Peel's Act has 
 had to be suspended : in 1847, because its reserve had fallen to 
 1,994,000 ; in 1857, because it had fallen to 1,502,000 ; and in 
 1866, because it had fallen to 3,000,000. But what does it signify ? 
 It is an accepted fact. The Bank can never fail. 
 
 We are here in presence of the same psychological fact which 
 explains the existence of so many an old and abominable institution. 
 People believe in it. People are used to it. It is the same force of 
 custom which everywhere preserves so much that is bad and use- 
 less. 
 
 Mr. Inglis Palgrave, in his Notes on Banking, reckons that the sum 
 total of bank-notes and specie in the hands of the bankers of the 
 
Bk.v. Ch.iv.] 
 
 BANKS. 257 
 
 United Kingdom does not, amount to more than four or five per 
 cent, of their engagements. 
 
 The entire credit of England is thus based on a fiction, though 
 of course every one is convinced that the trading classes and their 
 customers will never need to draw out at one moment the twentieth 
 part of the money of which they are entitled to draw the whole. 
 
 In France, the law of 1791 proclaimed liberty of labour and of 
 internal trade. Several banks were founded; they inspired con- 
 fidence notwithstanding the terrible cataclysm of the assignats : 
 credit was established ; and they met with a success which proved 
 their ruin. Their success tempted the Government. Bonaparte 
 thought to manage business as be would manage a battalion. He 
 wrote to Count Mollien, "The Bank must always discount bills 
 at 4 per cent." To him banking seemed a department of Govern- 
 ment, an engine of credit. The capital on which he started it was 
 the privilege of coining money. 
 
 Such were the doctrines which inspired the law of the 24th of 
 Germinal in the year XII. of the Republic, to which the Bank of 
 France owes its origin. The Government converted a part of its 
 capital into Government stock, which the Bank could not sell 
 without its authority. It took possession of the rest, and gave 
 drafts on the receivers-general in forced exchange. Out of an 
 amount of 97,000,000 francs, discounted in 1805, 80,000,000 were 
 composed of securities of this sort. 
 
 As long as the Empire lasted, the Bank was commercially useless. 
 All its capital was engaged in Government funds, and was returned 
 on deposit to guarantee loans at three months compulsorily 
 renewed. While it, had 128,000,000 francs thus absorbed, it had 
 less than 18,000,000 francs in commercial bills. 
 
 On January 18, 1814, the Bank inflicted losses to the extent of 
 12 per cent, on the holders of its notes. As to its shareholders, 
 they realised under the first Empire profits amounting to 90,000,000 
 francs. 
 
 Under the Restoration the Bank continued its relations with the 
 Government, with the result that in 1818 it was obliged to reduce 
 the date of maturity of its bills from sixty to forty-five days, and a 
 crisis ensued. Still it continued its connection with the State. In 
 1825, the Duke de Gaeta expressed his great regret at " the depri- 
 vation of the extraordinary advantages which the Bank has derived 
 in previous years from the service of the State." The Revolution 
 of 1830 renewed these advantages. In 1833 M. Odier said in his 
 report, " The Bank must seek every opportunity of extending its 
 relations with the Government." 
 
 But now observe what took place. The Bank wished to remain 
 a Parisian bank, doing important business with the State. But 
 local banks were founded at Lyons, Marseilles, Havre, and Lille ; 
 
 8 
 
258 BANKS. 
 
 while Orleans, Amiens, Dijon, and Toulouse presented the statutes 
 of their banks for approval. What was the Bank to do ? It got 
 the Council of State to sanction the principle that every local bank 
 should be limited to its own locality, and no external communication 
 allowed. 
 
 The Bank Charter expired in 1843, but, was renewed for twenty- 
 four years. Branches were established in various towns ; but they 
 were simply discount houses. The Bank made no increase in its 
 capital in order to supply them. 
 
 The amount of business steadily increased. In 1846 the total 
 money reserve consisted of current accounts belonging to the 
 public and the Treasury, which were liable to be withdrawn at any 
 time. 
 
 During this year the reserve fell to the extent of 172,847,000 
 francs. M. d'Argout ascribed this fact to the dearth of provisions ; 
 but the figures bear no relation to the importation of grain. M. 
 Grandin explained the matter more correctly in the Chamber of 
 Deputies. The Ministry had abruptly withdrawn its deposits. 
 The Bank had sent out 110,000,000 francs in coin for the benefit of 
 the bankers, who were using it to tender for foreign loans ; and the 
 public had withdrawn its money to invest in railways. 
 
 During the year 1847 the Bank was put to all sorts of shifts, none 
 of which, however, proved prejudicial to its shareholders. 
 
 Then came the Revolution of 1848. Between the 26th of 
 February and the 14th of March the reserve fell from 140,000,000 
 francs to 70,000,000 ; on the evening of the loth there remained 
 only 59,000,000. The vicious nature of the system became apparent. 
 The Bank had 125,000,000 francs due to the Treasury, which 
 required them. Its liabilities amounted to 305,000,000 francs, 
 while its main asset was 1,170,000 francs of Rentes, which it could 
 not negotiate without causing a panic. A forced currency was 
 established, and a decree of the 27th of April united all the depart- 
 mental banks with the Bank of France. 
 
 Fresh privileges were conferred by a decree of the 3rd of March, 
 1852, providing for the extension of the Charter, which was to 
 expire in 1867 ; and in that year it was extended until 1897. The 
 Bank will probably within the next five or six years propose a 
 further renewal. The whole question will then have to be 
 thoroughly dealt with. 
 
 In 1857 the Bank obtained the privilege of raising its rate of 
 discount above 6 per cent. In 1861, it profited by this concession 
 to raise the rate to 10 per cent. The Government then reassured 
 public opinion by an inquiry, which has so far only resulted in six 
 quarto volumes, entitled EnquSte sur la Circulation Monetaire. 
 
 We must here briefly explain the operations carried on by the 
 Bank, and the objections raised during the inquiry. 
 
Bk. v. Ch. iv.] 
 
 BANKS. 259 
 
 The business of the Bank of France consists in : 
 
 1. Discounting bills on Paris or on towns where the Bank has 
 branches, drawn at not more than three months, and bearing three 
 endorsements or two only where it is a bond fide trade transaction, 
 but in that case accompanied by a transfer of Government stock, 
 bank shares, or receipts for goods. 
 
 2. Making advances on French Government stock, payable 
 within a fixed or an indefinite period ; on French railway shares and 
 debentures; on bonds of the Credit Foncier and the city of Paris ; 
 and on deposits of a value of 12,000 francs at least, in bullion or in 
 gold and silver coin. 
 
 3. Issuing bills payable at sight and to bearer, and bills trans- 
 missible by endorsement. 
 
 4. Taking charge, on payment of a consideration, of national 
 bills and securities, and French or foreign stock, and to receive 
 payments on account of them payable in Paris. 
 
 5. Receiving on current account moneys paid into it and bills 
 on Paris, and carrying out instructions respecting them to the extent 
 of the amounts in its hands. 
 
 6. Issuing bills payable to order at the branch banks. 
 
 Now, what ought to be the chief object of a national bank ? To 
 assist the operation of credit between individuals, and to facilitate 
 exchange by negotiating bills. 
 
 But, advances on Government stock and other securities do less 
 good to trade than to the speculators, who borrow on the securities 
 they deposit, and with the advances thus obtained purchase fresh 
 securities and begin again. When money is plentiful, the Bank 
 advances freely, and its shareholders profit at the expense of the 
 rate of discount. When money is scarce, the Bank finds it necessary 
 to husband its resources, and raises its rate of discount. 
 
 It is a curious fact, and one which proves how little economic 
 questions are understood, that several witnesses at the inquiry pro- 
 posed that the Bank should have a uniform rate of discount ! 
 
 The Bank has always opposed the issue of bank-notes for small 
 sums. If it has now and then allowed the practice for a moment, 
 it has always suppressed it on the first opportunity. 
 
 In an ordinary transaction only two signatures are necessary, the 
 buyer's and the seller's. But the Bank requires three signatures. 
 The real contracting parties have therefore to pay a third. It is 
 true that a decree of 1868 facilitated the discounting of bills with 
 two signatures, by authorising the Bank to accept as security, in 
 lieu of the third signature, the deposit, not only of its own shares or 
 of Government scrip, but also of any sort of securities on which it 
 ordinarily makes advances. 
 
 The Bank has the right of curtailing the period which bills have 
 to run. Such a right is absolutely revolutionary. It has also the 
 
260 BANKS. 
 
 right arbitrarily to refuse the paper of any house it chooses ; and 
 from this decision there is no appeal, though the motive may have 
 been nothing but caprice, rancour, or political hostility. It is said 
 that it never abuses these extravagant powers. Perhaps ; but that 
 would only show that the men are better than the system. 
 
 It is, of course, a bold thing to attack the Bank of France. We 
 shall be told of the immense services it rendered during the war, 
 and of the 1,485,000,000 francs it lent to the Government. But sup- 
 pose the Bank had never existed, would France herself have been 
 the less wealthy ? Not in the least. The Government would have 
 gone elsewhere for the money, that is all. We may rest assured 
 that the Bank had the best of the bargain. For it is the peculiar 
 advantage of this half-public, half-private institution, that it 
 flourishes best during times of trial and disaster. A glance at its 
 dividend will prove this. 
 
 In 1846, the shareholders received the highest dividend they had 
 ever had, viz., 159 francs; in 1847 they had 177 francs. The 
 dividend of 1869 was 107 francs ; then came the war, and in 1870 
 the dividend was 114. 
 
 Troubles accumulated, and the dividend rose in 1871 to 300 
 francs, and in 1872 to 320. Prosperity returned ; in 1878 the 
 dividend had fallen to 95 francs ; in 1879 it was 110. 
 
 M. Thiers said, in June, 1871, that " the Bank, by its services to 
 the State, had covered itself with honour." We have seen that 
 while deserving well of its country, it had deserved still better of its 
 shareholders. 
 
 In reality, the Bank of France has no capital at all ; for what 
 capital it has is locked up or invested in Government funds. For 
 meeting its engagements it has nothing bat deposits of coin which 
 may be withdrawn any day. Its reserve, which seems so large, may 
 vanish at any moment. It is therefore purely fictitious. 
 
 This rapid sketch of the position of the national banks of England 
 and France suffices to show on what an anomaly the entire credit 
 and consequently the whole industrial and commercial system of 
 the two countries rests. It is the monarchical idea applied to credit. 
 The Government has thought proper to exercise a royal prerogative 
 on the traffic in paper money. Its interference has done nothing 
 but harm ; for by concentrating all responsibility on a single estab- 
 lishment, by making it the sole reservoir of money in the country, 
 and by inspiring the erroneous belief that no storm, however 
 terrible, can ever sink it, the State has carefully paved the way for 
 the very catastrophe it seeks to avoid. By mixing up public and 
 private finance, it still further complicates the situation and adds 
 to the danger. 
 
 Statesmen, who are rarely economists, have always been un- 
 willing to admit this fact that a bank-note is nothing more than 
 
Bk. v. Ch. iv.] BANKS. 261 
 
 an ordinary commercial bill or bond. It is not a substitute for 
 money, but for other paper. The bank-note represents the endorse- 
 ment by the bank of the note issued ; only, as the bank's signature 
 is at present good and universally known, the note is negotiable, on 
 the sheer understanding that the bank is pledged to pay it in cash 
 on presentation. 
 
 Now, as we have just seen r this obligation on the part of the 
 national Banks of France and England is not enforced by any 
 adequate sanction. Nevertheless, they go on, and it is only once in 
 a decade or two that they fail to keep their engagements, which, 
 for a public institution, is not bad. 
 
 It is true they have a comparative stability ; but what does it 
 come from ? Not from their capital, not from the money they 
 have in hand; it rests entirely on their notes and on public 
 opinion. 
 
 Accordingly, it is not the public who lean on the bank, as is 
 generally supposed ; it is the bank which leans on the public. When 
 the bank is ruined, it is the public who save it. 
 
 This being so, what can be urged against freedom of banking ? 
 
 A banker a bill-broker if you will thinks proper to issue notes 
 payable at sight to the bearer. What risk is there ? Since the 
 notes are at sight, he is always bound to give cash for them, or he 
 may as well close his bank at once ; and banks are not usually 
 opened to-day to be closed to-morrow. 
 
 The admirers of monopolies are always boasting of what mono- 
 polies have done ; they take no account of what monopolies have 
 hindered. 
 
 If with a reserve of 1,000 the banker can issue notes up to 
 4,000, he obtains from the public 3,000, for which he pays no 
 interest, and puts it out at, say, 5 per cent, by discounting bills 
 at that rate. It is his interest to keep as many notes as possible in 
 circulation ; and, as all other banks are similarly interested, there 
 results a far greater extension of credit than could have been effected 
 by a monopoly. 
 
 This monopoly is so contrary to the nature of things, that, not- 
 withstanding all the protection enjoyed by the Bank of France, 
 business tends to desert it, and to betake itself to the great financial 
 companies, which accumulate deposits in their safes, and take up 
 bills below the bank rate of discount. 
 
 On all accounts it is desirable to distribute the risks as much 
 as possible ; but the organisation of the national banks of England 
 and France aims at concentrating them. The following remark 
 of Mr. Bagehot's shows his appreciation of this : " The use of cre- 
 dit is, that it enables debtors to use a certain part of the money 
 their creditors have lent them. If all those creditors demand all 
 that money at once, they cannot have it, for that which their 
 
262 PUBLIC COMPANIES AND ASSOCIATIONS. 
 
 debtors have used is for the time being employed, and not to be 
 obtained." l 
 
 Now, the bankers have come to regard reserves in cash as almost 
 superfluous ; there are scarcely any except at the national banks. 
 If a panic supervenes, the entire strain is borne by the Bank. The 
 least symptom is enough to disturb the Bank of France. Notwith- 
 standing its enormous reserve, we have seen it raise its rate of dis- 
 count in 1879 and in 1880 ; and the slightest rise impedes circula- 
 tion. 
 
 We may therefore conclude that : 
 
 The Bank of England and the Bank of France base the whole organ- 
 isation of credit in the two countries respectively on a perilous fiction. 
 
 Freedom of issue by all banks ought to be substituted for the existing 
 monopoly. 
 
 CHAPTER V. 
 
 PUBLIC COMPANIES AND ASSOCIATIONS. 
 
 IN primitive societies the strong impose their will on the weak, and 
 compel them to minister to pleasures which they keep to themselves. 
 All arrangements made by authority have been made in this spirit. 
 The master is a military or religious chief. He commands, the 
 rest obey. Women are the first slaves, captives are the next. 
 Castes are formed. In India the Brahmin has a right " to all that 
 exists." The Sudra owes him obedience, must keep nothing for 
 himself, cannot accumulate. We are told that Joseph said to the 
 Egyptians, " Behold, I have bought you and your land for 
 Pharaoh." In all primitive civilisations we see authority imposed 
 by the stronger or the cleverer which comes to the same thing 
 on the weaker and more credulous. 
 
 As wants and capacities alike grow varied, the necessity of ex- 
 change is forced on the individual and the community. Exchange 
 is a contract freely entered into. Little by little, by the force of 
 things, contract takes the place of prescription. This charac- 
 teristic appears very strongly amongst the Athenians a nation of 
 merchants and sailors. When an Athenian undertook to supply 
 a native of Smyrna or Miletus, the one thing of importance was, 
 that the engagement should be punctually and exactly carried out. 
 It mattered not to the one contracting party who the other might 
 be. Fidelity to engagements is the sole basis of trade ; agreements 
 and contracts have nothing personal in their character; they are 
 absolutely real, using the word in its strict etymological sense. 
 
 1 Lombard Street, p. 55. 
 
Bk. v.Ch.v.] PUBLIC COMPANIES AND ASSOCIATIONS. 263 
 
 Accordingly, in the ancient world it is in the Greek commercial 
 cities, and especially in Athens, that we find the liveliest sense of 
 individual rights. 
 
 In Rome, the individual was absorbed in the State ; bis person- 
 ality and his interests are ill-defined. Still, the associations which 
 farmed the revenues appear to have had something in. common 
 with our joint- stock companies, whose distinguishing feature is the 
 concerning themselves with interests irrespective of persons. But 
 the object which the old revenue-farming companies had in view 
 was neither commercial nor industrial ; they were the mere agents 
 of the State, taking upon themselves the ungrateful but profitable 
 task of collecting the taxes. 
 
 The monks of the West were real industrial and commercial 
 societies. 1 In times when public security was almost unknown, 
 they placed themselves and their property under the protection 
 of religion. Their capital and energy formed a common stock; 
 they undertook public works, they cleared and cultivated large 
 tracts of land. But in these communities men and things were not 
 distinguished ; and often the abbey, instead of belonging to the 
 community, was a mere appanage of the abbot, who, in the use of 
 his discretionary power, openly made a profit out of the monks, 
 while they in their turn as shamelessly traded on the credulity of 
 the people. 
 
 The merchants of the Middle Ages organised themselves into 
 leagues, to protect themselves against the barons. These defensive 
 leagues, necessarily jealous and exclusive, were so firmly organised 
 that they developed into actual States. Genoa, Pisa, and Marseilles 
 banded themselves together, and traded with the infidel. Montpelier, 
 which kept its consulship in the hands of merchants and traders, 
 to the exclusion of doctors, advocates, and notaries, introduced the 
 Arabian civilisation into France, and, with Narbonne, Agde, Mmes, 
 Beziers, and Cahors then the centre of French commerce served 
 as a link between East and West. Rochelle was connected with 
 the Hanseatic League, and the merchants of the Breton towns with 
 those of Spain, Portugal, and Holland. Associations were formed 
 by Avignon and St. Gilles ; Nice and Pisa ; Aries and Nimes ; 
 Marseilles, Aries, and Avignon ; and Lyons and the towns of 
 Champagne. The great London league included twenty-four towns. 
 The Jews sought shelter from persecution in these centres. 
 
 The modern system of partnership seems to have originated with 
 the Lombards. The citizens of Genoa, Florence, and Milan, even 
 when their cities were at war with one another, still put their 
 capital into a common fund. The liability of the partners to third 
 parties was a constant theme of discussion among their lawyers. It 
 
 1 See Histoire des Proletaires, by Yves Guyot and Sigismond Lacroix, chap, 
 viii. 
 
264 PUBLIC COMPANIES AND ASSOCIATIONS. 
 
 was they who evolved the principles, still so imperfectly developed, 
 of maritime law. 
 
 The Hanseatic League was fonnded by Hamburg and Lnbeck in 
 1239, as a bulwark against the encroachments of Denmark. It at 
 last included eighty-five towns, rose to a dominant position, and 
 formed a federal republic, served by princes and administered by 
 diets. It was one of the most powerful agents in the transforma- 
 tion of feudal civilisation. It was the Hanseatic League which 
 abolished the right of wreckage, and which first gave a distinct 
 form to the question of the respect due to contracts with foreigners. 
 
 The first joint-stock company that we hear of is the Russia 
 Company, whose capital was composed of 240 shares, and whose 
 regulations date from 1555 and were confirmed by Act of 
 Parliament in 1556. The objects of another English trading 
 society were sufficiently expressed by its title of Merchant Adven- 
 turers. In 1561 a company of shareholders was formed for the 
 manufacture of iron by mechanical processes. Banks and marine 
 insurance companies rapidly spread through England, Holland, the 
 Hanseatic towns, and the commercial cities of the South ; while the 
 factories of Utrecht and Haarlem, and the sugar refineries of 
 Amsterdam, were carried on by companies. Frequently the State 
 intervened. The French East India Company was at once a cor- 
 poration and a partnership with nominal shares. 
 
 In France, associations for working mills had been started as 
 early as the sixteenth century : but joint-stock companies appear 
 to have been unknown until the eighteenth century. The law of 
 1673 did not concern itself with them. The idea of association 
 for commercial purposes was not originated till the time of Law. 
 We find some important mining, insurance, and other companies, 
 such as the Caisse d'Escompte, existisg in 1788. 
 
 But there was as yet no clear distinction between financial and 
 commercial associations like these, and those corporations whose 
 characteristic principle was the community, not only of things, but 
 also of persons. Such were the trade-guilds, in which the appren- 
 tice and journeyman were subject to the master. It was the aim 
 of every branch of these guilds to assume to itself the monopoly of 
 one of the products of human activity. They were less anxious to 
 act, than to hinder others from acting. The spirit of protection 
 invariably fosters a spirit of idleness. This must be the ruin of all 
 associations of this kind. 
 
 The Revolution did well in breaking up the guilds, in the name 
 of freedom of labour ; but seeing or imagining in all other associa- 
 tions the same objectionable characteristics, it tolerated only one 
 form, viz., the simple partnership. This distrust was perpetuated 
 in our codes ; and it was not until the law of 1867 that it showed 
 some signs of abatement. It still reappears at intervals, in the 
 
Bk. v. Oh. v.] PUBLIC COMPANIES AND ASSOCIATIONS. 265 
 
 tribune, in the press, and in the cabinet. It has its rnaxim "There 
 cannot be an imper ium in imperio." Accordingly, the citizens are 
 to be kept apart; their energies are to be shut up in a sort of 
 solitary confinement, lest their collective strength should prove too 
 strong ; as if the power of a nation were not the sum of the power 
 of its citizens, and as if the aim of the State should be to make a 
 nation strong by stunting individual growth ! 
 
 What has this famous system led to ? The general tendency 
 of economic progress has proved more powerful than legislative 
 distrust. The State has been compelled to countenance the ac- 
 cumulation of a common capital, rather than go for ever without a 
 railway. But, as the spirit of association has never been allowed 
 to develop among us, it has been found necessary for the State 
 to interfere in the formation and organisation of these societies ; it 
 has constituted itself their guardian, has guaranteed their credit, 
 and, for fear of admitting an imperium in imperio, it has, with the 
 perspicacity which distinguishes most of its precautionary measures, 
 formed one itself, by creating monopolies such as the Bank of 
 France, the Credit Foncier, the Credit Mobilier, and the great 
 railway and insurance companies. It has thus taken upon itself 
 the responsibility of all their faults and errors, and of all the 
 disasters in which they may involve the public. Little by little, 
 the Government perceives what it has done ; reproaches are 
 showered upon it ; and it seeks to rid itself of its unpopular parfc 
 by passing laws like those of 1863 and 1867, which, after all, aro 
 very inadequate safety-valves. 
 
 But what I wish to lay the greatest stress on, is the anti-pro- 
 gressive character of this legislation. For a long time it forbade 
 all associations except those of a personal character, in which 
 individuals as well as interests are bound up together. Now, if we 
 glance at the process of human development, we observe that each 
 step in advance lias been marked by a sharper separation between 
 persons and things. In the primitive tribe, man is linked to man ; 
 in the Gity-8tat.es of antiquity the individual is regarded as a 
 molecule of the City ; under the feudal system, every man is the 
 vassal or serf of another ; under a monarchy by divine right, men 
 are simply the subjects of a king subject himself to his confessor. 
 As Sir H. Maine has shown, progress consists in the substitution 
 of contract for prescription. 
 
 But how is this tendency displayed ? The question throws us 
 back on division of labour and distribution of functions. 
 
 In primitive societies, whilst the art of grouping interests is yet 
 in its infancy, persons and interests are indiscriminately confused 
 together. A man's master is the master also of his wife and 
 children ; he commands, and they obey. Association implies, not 
 simply the pursuit of a common object, in view of which it exists, 
 
266 PUBLIC COMPANIES AND ASSOCIATIONS. 
 
 but also the possession of a common faith and common ideas, 
 symbolised, in the classic civilisations, by a common altar. Even 
 now, the same passion for confusion exists in the State and in 
 private associations. Of the errors from which the State finds it so 
 hard to free itself here in France we shall speak later on. In- 
 dustrial and commercial associations in countries which have not 
 yet had long and thorough experience are liable to similar mis- 
 apprehensions. M. Courcelle-Seneuil l says, "In countries accus- 
 tomed to association, commercial relations are completely separated 
 from those of private life. It is not unusual for one partner not to 
 know where the other lives, or whether he is married or single." 
 
 Under these conditions, partnership is simply an association of 
 capital, in which individuals tend more and more to disappear and 
 to become independent of each other. Personal piques and vanities, 
 the rivalries of wives and children, find no place ; we are united on 
 the one point of securing the success of the matter in hand ; for 
 the rest, we have our own opinions in religion and politics, and on 
 our own private concerns. 
 
 This separation of private from social life is the first rule in the 
 art of grouping interests, an art hitherto little known and little 
 observed. 
 
 Therefore, 
 
 1st. That form of association is the most advanced which most 
 clearly distinguishes between interests and persons. 
 
 2nd. The power of association is in direct proportion to the. clearness 
 with which the interests associated and the end in view are defined. 
 
 The highest expression of economic progress is the joint-stock 
 company, whose action French legislation has so far striven to 
 hinder. Until 1867 no joint-stock company could be formed in this 
 country without the authorisation of the Government. 
 
 And yet, what progress has been made by this form of association ! 
 It has nothing to do with persons, it collects capital. This capitnl 
 may belong to persons of different nationalities ; but the sense of 
 nationality is lost in the union for a common object, and thus the 
 fusion of interests paves the way for the extinction of national hatreds. 
 
 Moreover, the management of capital in different countries does not 
 greatly vary. Subject everywhere to the law of demand and supply, 
 which is unaffected by circumstances or surroundings, its existence 
 depends on its conforming to that law. Does not a true road to 
 union lie here ? 
 
 Liberty of person, solidarity of interests. Such should be the 
 motto of all associations ; and no association realises it so well as the 
 joint stock company. It is not surprising therefore that legislators 
 have so bitterly opposed it, even down to the present time. 
 
 1 Manuel des Affaires, p. 133. 
 
Bk.v.Ch.v.] PUBLIC COMPANIES AND ASSOCIATIONS. 267 
 
 But then, we are told, joint stock companies sometimes conduct 
 their affairs badly, and come to a frightful crash in the end. Yes. 
 A train running off the line, the failure of a public company, is a 
 public disaster; while the upsetting of a coach, the bankruptcy of 
 a small publican, disturbs nobody very much. It is all a question 
 of proportion. 
 
 But people can only learn by their own experience. The dupes 
 who lose their money in such enterprises have relied on somebody's 
 name, or on the look of a prospectus. They have had their 
 plebiscite, voting their capital away in the hope of fabulous gains ; 
 then they have had their Sedan. It is their own fault. 
 
 Moreover, it is a great question whether the losses caused by 
 these occasional catastrophes are not more than counterbalanced by 
 the gains. The besetting fault of humanity is, not doing too much, 
 but doing too little. 
 
 But here again we see the State appearing as an earthly provi- 
 dence, omnipresent, omniscient, regulating the life and acts of the 
 ignorant, imprudent, unreasoning individual. Spite of the fact, 
 proved by the history of social development, that all progress in 
 the idea of law is marked by the increased predominance of the 
 substance over the form, the legislator interferes to impede and 
 trammel the form of contract. 
 
 Laws intended to affect the fluctuations of demand and supply 
 are almost always useless, however well meant. On the Bourse, the 
 marclie a terme is prohibited, 1 and a dishonest debtor who wants to 
 break through his engagements may plead its illegality; and yet, 
 notwithstanding this risk, the practice has become habitual. The 
 Penal Code forbids artificial rises and falls, under penalty of im- 
 
 1 Speaking generally, the marche a terme may be said to be a form of sale, by 
 the terms of which the merchandise is to be delivered at a time agreed upon, 
 but still distant, while the price is fixed at once. The contract may, however, be 
 either real or fictitious. It is real when the contracting parties have actually 
 intended the goods to be delivered, and when proportionate damages can be 
 claimed in case of non-delivery. This kind of contract is perfectly legal, and 
 can be legally enforced. On the other hand, the bargain is fictitious when the 
 parties arrange that, failing the delivery of the goods, the matter shall be settled 
 by the payment of the difference between the price agreed on and the current 
 market price at the time appointed for the delivery. Such a clause plainly 
 shows that the buyer has no real wish to compel the vendor to fulfil the con- 
 tract, and the whole affair is reduced to a speculation on the rise and fall of 
 prices. When there is a difficulty in ascertaining whether the marche a terme 
 is real or fictitious, the tribunals decide according to circumstances. If two 
 men on the Bourse, who have no other occupation, were found to be carryinf 
 on a speculation of this kind, say in the wool trade, the bargain would be 
 regarded as unmistakably fictitious. It is a simple case of gambling or betting 
 and as such the law refuses to recognise it (see Article 1965 of the Civil Code)! 
 It may be added, that betting on the rise and fall of the public funds is a mis- 
 demeanour provided against by Article 411 of the Criminal Code, while bets on 
 merchandise are not punishable, but simply null. 
 
268 PUBLIC COMPANIES AND ASSOCIATIONS. 
 
 prisonrnent varying from one month to a year; but this law is 
 daily broken with impunity. 
 
 There is another disadvantage in laws restricting freedom of 
 contract. They induce a feeling of false security. People fancy 
 themselves effectually protected by the law, and neglect to look 
 into the regulations and articles of the company, contenting them- 
 selves for the most part with reading reports, which, thorough as 
 they may seem, are wholly fictitious. Almost all companies are 
 co: trolled by a sort of Council of Ten, out of which only one or two 
 members are initiated. These are usually persons whose attentions 
 are divided among several financial companies, the interests of which 
 are by no means necessarily identical. M. Bmile Pereire was a 
 member of nineteen boards of directors at once, and M. Isaac Pereire 
 of twelve. They consult their own interests, rather than those of 
 the public; the public must learn to defend its own, and not to put 
 its money into the hands of financiers who are famous for their 
 failures. 
 
 No sooner has one of these crashes taken place, than a number 
 of Bills are brought in for preventing it by law. It is pretty well 
 known how it came about, and every effort is turned to stopping 
 that particular leak. The remedy comes a little late, but that does 
 not seem to signify. Thus, even in England, after the fall of the 
 City of Glasgow Bank, publicists of note demanded all sorts of 
 useless measures with the most astonishing- simplicity. The 
 Saturday Eevieiv of the 28th of December, 1878, proposed that the 
 banks should submit their affairs to official inspection every ten 
 years. The Saturday Review must have forgotten the history of 
 the Credit Fonder and the Credit Molilier, both under the direct 
 control of the State. The capital of the Credit Fonder, intended 
 to encourage French agriculture, was invested in Egyptian loaus ; 
 and fictitious dividends were distributed under the guarantee of 
 governors and deputy-governors appointed by the State. And this 
 under a republican government. 1 
 
 Up to the time of the Austrian crash, in 1873, joint-stock 
 companies could not be formed without the sanction of the Govern- 
 ment ; and between 1867 and 1873 1,005 had been authorised, of 
 which only 682 were ever able to make a start. 
 
 Herbert Spencer has demonstrated the uselessness of State 
 interference with banks. The only real control is the control of 
 the public. The more publicity the banks give to their affairs, the 
 greater the confidence they will inspire. In proportion to the 
 spread of sound economical opinions, they will be forced to submit 
 to a diffused control, under penalty of provoking reasonable mis- 
 trust. As to the Glasgow failure, everybody knows that fear is a 
 
 1 See the Economiste Fran$ais, May 10th, 1879. 
 
Bk.v.Ch.v.l PUBLIC COMPANIES AND ASSOCIATIONS. 269' 
 
 bad counsellor; and the English Parliament did not allow itself to 
 be carried away by panic. It simply passed a Bill facilitating the 
 transformation of banks with unlimited liability into banks with 
 limited liability. 
 
 The one good Bill bearing on company law was introduced by M. 
 Emile Ollivier, of fatal memory. It is contained in a single clause : 
 
 " The law exercises control over commercial companies only 
 in default of special agreements. All agreements are good as 
 between the parties, provided they are not contrary to public- 
 order and morality. They cannot hold good as against third 
 parties unless they are made public." 
 
 If this Bill had passed, we should not now see the organisation of 
 societies framed on the most progressive lines impeded by State 
 interference. 
 
 From time to time, violent outcries are raised against the distri- 
 bution of wealth, as if all possible association of interests had 
 uttered its last word, and locked itself up in its last formula. Far 
 from it. The art of grouping interests is still in its infancy. A 
 hundred years ago, people's minds had not even begun to distinguish 
 between the corporation and the company; and certainly with 
 some persons the distinction is not very clear yet. Only thirteen 
 years ago, 1 a joint-stock company could not be formed in France- 
 without authorisation. 
 
 Yet, notwithstanding all these obstacles and inconveniences, it 
 is to financial and commercial association that we owe the utilisa- 
 tion of a multitude of wasted forces, the construction of vast 
 monuments of engineering skill, the piercing of mountains and 
 isthmuses, the creation of co-operative societies like the Rochdale 
 Pioneers. We look back on what it has already done, and cannot 
 even guess what it may yet do when once it is freed from all those 
 artificial guarantees which have warped its character and arrested 
 its expansion. 
 
 1 This was written in 1881. 
 
BOOK VI. 
 
 THE FUNCTIONS OF THE STATE, 
 
 CHAPTER I. 
 
 STATE INTERVENTION IN ECONOMICS. 
 
 THE foregoing examination shows that our existing economic 
 organisation is purely empirical. We have seen what destructive 
 prejudices and treacherous fictions lie at the root of great institu- 
 tions like the Banks of France and England; we have passed 
 rapidly in review a number of measures which, under pretext of 
 enriching the country, only impoverish it. 
 
 Knowledge alone can dissipate these errors. 
 
 When thje mistake is confined to individuals, the consequences, 
 however deplorable, are circumscribed, and the reaction soon dies 
 away. But when the error is collective, and strong enough to find 
 embodiment in legislative measures, when it compels all the forces 
 of society to serve its triumph, then it may do incurable mischief. 
 It may check the progress of a nation, and reduce it to a level of 
 permanent inferiority among the nations which surround it. 
 
 When we look impartially at human history, we see that the 
 State has been the chief hindrance to economic progress. 
 
 In detail, this is undisputed. It is universally admitted that the 
 State produces dearer and worse than private enterprise. Let us 
 take a few chance instances. 
 
 It takes the Government 800,000 working days to build a ship of 
 8,000 tons ; while private industry constructed the Amiral-Duperre, 
 a ship of 10,487 tons, in 411,000. The Government built the 
 Redoutable at a cost of 662 francs per ton, while the Amiral- 
 Duperre cost only 562. 1 
 
 1 M. E. Farcy's speech in the debate on the Admiralty Budget for 1880. The 
 .figures have never been disputed. 
 
 270 
 
Bk. vi.Ch.i.] STATE INTERVENTION IN ECONOMICS. 271 
 
 When the persons included in the amnesty had to be brought 
 home from Noumea, the adequate victualling of the ships was over- 
 looked ; .arid to this day the peculations on the sailors' rations go on 
 just as they did a hundred years ago. 
 
 We have all read the astounding disclosures afforded by the 
 inquiries into the administration of the War Department. All that 
 was asked of it was, to be ready for war when it came. It comes at 
 last, and then we are told that it is "an abnormal state of things ; " 
 as if, for the army nt least, it were not the normal state of things ! 
 
 So then it is discovered that the artillery is placed in parks 
 where it cannot be got out; that there is no harness here, and no 
 horses there ; that supplies are missing wherever they are wanted ; 
 that the soldiers are now without food, now without ammunition. 
 The incapacity and improvidence become almost ludicrous. The 
 genius of Shakespeare never imagined a more sorrowful farce. 
 And this sort of thing goes on. 1 The caporal d'ordinaire (mess- 
 room corporal) has had to be reinstated, to prevent the grossest 
 peculation in the contracts for meat. The War Department is 
 obliged to confess that it turns out muniments of war at greater 
 cost and of worse quality than private firms. 2 
 
 The Department of Roads and Bridges is very proud of its science 
 and skill. Nevertheless, ir, has perpetrated a series of sometimes 
 disastrous mistakes. The population along the banks of the Loire 
 complained in 1866 that their homes had been submerged by the 
 floods. All the consolation the Ministry of Public Works could find 
 to give them in its official report was, that they had nothing to 
 complain of, for it was a wonder they had not all been drowned 
 long before. 
 
 These shortcomings are not peculiar to France. From time to 
 time some inquiry discloses the profound disorder which reigns ill 
 the English Admiralty ; the number of ships which cannot sail, and of 
 c-ompasses which are only fit for an otd curiosity shop. Everywhere 
 the same astounding carelessness, the same egregious blunders. 
 Did not the Indian Government overlook a little matter of a few 
 millions in its budget ? 
 
 We all know what a costly indulgence the Grovernment mania 
 for building has turned out. The Poor Relief Department has 
 spent a great part of its funds in building. Then there is the Hotel 
 Dieu, the Empress's charity. Every one of its four hundred beds 
 has cost 87,500 francs. Moreover, the patients, if they are well 
 lodged, are ill fed ; and there are said to be as many attendants as 
 patients. And now the Ministry of the Interior is proposing to 
 have penitential cells at the Conciergerie, which will come to 33,000 
 francs each. 
 
 1 See Journal Officiel, November 27, 1878. 
 
 2 Journal 0/iciel, November 30 and December 1, 1878. 
 
272 STATE INTERVENTION IN ECONOMICS. 
 
 Government is naturally prodigal, for it spends other people's 
 money; and the more a department spends, the more important it is. 
 
 A new trade drives an old ono out of the field. Those who 
 carried on the old one must seek some fresh employment. The 
 railway superseded the diligence ; the guards and postilions had to 
 take to other work. The State owed them 110 compensation, and 
 gave them none. But had the diligences been in the service of the 
 State, vested interests would have had to be recognised. At this 
 moment, if you propose the abolition of indirect taxation, you are 
 met with the unanswerable argument, "But what is to be done with 
 the employes ? " 
 
 Government is rigid ; it cannot accommodate itself to new wants 
 and difficulties. In order to act with regularity, it has had to bind 
 itself by fixed rules. It can only act in a given direction and in a 
 given manner. The necessity for order has given the spirit of 
 control the predominance over that of initiative. 
 
 When Government has once made a blunder, it perpetuates it 
 indefinitely. It is well known that the English Poor Law has never 
 done the work it was meant to do ; and yet from one day to another 
 it could not be repealed without creating a catastrophe. In France 
 we have thousands of decrepit institutions which go on in the same 
 way. There is the monopoly of matches. Every one complains of 
 it. No one defends it. Yet it will probably hold out another ten 
 years. 
 
 We are always extending the system of Government inspection. 
 In general, the results are just the opposite of what was looked for. 
 Steam boilers are required to be of a certain thickness. It is, 
 therefore, not worth the maker's while to improve the quality of the 
 metal, and so make the boilers stronger and lighter. They are 
 turned out according to regulation, receive the Government stamp, 
 and burst. 
 
 Laboratories are established and analysts appointed, and then it 
 is found that the instruments used are not accurate. Is there any 
 compensation for the victims ? Everything goes by favour. Frauds 
 go on unchecked, while things which have nothing fraudulent about 
 them are punished as fraud. Fresh regulations are demanded ; 
 under the plea of the public health, every law is set aside ; the 
 importation of cattle and meat is forbidden ; and whole classes of 
 pariahs are created. 
 
 England, too, from time to time succumbs to the same craze ; but 
 she finds it no defence against adulteration. The publication in the 
 Lancet of some facts as to the adulterations carried on by certain 
 manufacturers and dealers, did more good than all the previous 
 measures of the Government. 
 
 The State cannot be made responsible, it can always evade com- 
 plaints. We see it in the postal and telegraph service. We see it 
 
Bk.vi.Ch.i.] STATE INTERVENTION IN ECONOMICS. 273 
 
 in the bad cigars with which it thinks proper to supply the public. 
 Ministers, magistrates, and police agents constantly violate the law, 
 with the serene consciousness that they are above it. 
 
 I might quote many more examples of the deceptions created by 
 the interference of the State, but I content myself with referring 
 the reader to M. Menier's Avenir Economique. 1 
 
 Official corruption is a subject of every-day conversation, and the 
 vices, f or I w iH not say the shortcomings, of the Government are 
 even exaggerated. It is accused of theft and extortion, when it is 
 guilty of nothing worse than idleness, indifference, neglect, and 
 incapacity. 
 
 Everywhere disorder underlies the superficial order. 
 
 When it has thus been sufficiently proved that whatever the State 
 puts its hand to, it does nothing but blunder ; that the articles it 
 makes for itself are dearer and worse than those made for it by 
 private firms ; that the irksomeness of State inspection outweighs 
 its advantages ; that its attempted reforms usually end in aggravated 
 abuses ; that in trying to avert one evil, it usually creates another ; 
 that it is commonly led to its decisions by considerations quite 
 foreign to the matter in question ; that its interference has the 
 disastrous effect of discouraging private initiative ; that it is at once 
 prodigal of its resources and wanting in the power of adaptation ; 
 and that, notwithstanding a complicated system of supervision, its 
 administration is rotten to the core when the tribune, the press, the 
 reports of Parliamentary Committees and official inquiries, ai*e daily 
 swelling the indictment against the State, what is the conclusion 
 drawn from all this by the bulk of our publicists, deputies, poli- 
 ticians, and electors ? 
 
 That the province of the State must be extended ! 
 
 M. Emile de Laveleye says : " When one thinks on all the ills that 
 bad Governments have inflicted, one can understand the desire to 
 reduce their powers and to restrict their sphere." And two minutes 
 afterwards he adds, with the Oatheder- Socialisten, " History shows 
 that the State is the most perfect agent of progress and civilisation." 
 It is a somewhat naive expression of a common inconsistency. 
 
 In 1863 and in 1869 the Republican party was opposed to 
 centralisation ; now it is in power, it talks of the rights of the State, 
 and meets every proposal which aims at infusing some life into the 
 commune with the reproach of disintegrating the country. 
 
 Whilst the Ministry itself admitted that the communes had made 
 great sacrifices for the development of primary education, a future 
 Minister of Public Instruction, M. Paul Bert, was annexing the 
 communal funds and throwing them into a central fund which the 
 State could distribute as it thought fit. The local authorities are 
 
 1 Vol. II., Book I. 
 
274 STATE INTERVENTION IN ECONOMICS. 
 
 deprived of the control of instruction. The communes are not 
 allowed to institute faculties of higher education. The education 
 given by the University is now seen to be defective, and it is pro- 
 posed to secure the monopoly for the State. 
 
 Complaints are made of the swarms of officials, and the abuse of 
 offices in the gift of the Government at election times ; and yet it 
 is proposed that the State should not only buy up but work the 
 railways, which would place fresh patronage at its disposal, and 
 enable it, by an ingenious arrangement of tariffs, to favour one 
 district at the expense of another. 
 
 The tobacco monopoly, advantageous as it may be to the Budget, 
 is very injurious to French industry and agriculture. This being 
 so, M. Alglave, Professor of Financial Science in the Faculty of 
 Law in Paris, advocates the extension of the monopoly to alcohol. 
 
 I might multiply examples of these tendencies ad nauseam; every 
 day some new law is proposed, some fresh regulation demanded, to 
 hinder this, to superintend that, to draw a little tighter the gag 
 that stifles and the bonds that confine us, as if what we want above 
 all things were not air and freedom. 
 
 In spite of our old and varied experience, we still think that a 
 change of rulers is all that is necessary. Every one thinks he could 
 do better himself. He should ask himself whether he too has not 
 made mistakes, whether he has never been too weak or too severe, 
 whether he has never wasted his money in unsuccessful speculation, 
 whether he has always managed his household affairs with prudence ? 
 And even if his conduct in these particulars has been irreproachable, 
 it will not prove his ability to wield more extensive powers. 
 
 For perhaps he has, so far, had to deal with very limited matters, the 
 elements of which are very simple and can be embraced in a single 
 glance, their causes easily traced, and their consequences easily fore- 
 seen ; while matters of State are so complex that Social Science is 
 hardly now beginning to disentangle even a few of them. And while 
 a private person, however intelligent, honest, and self-possessed, 
 finds it hard to conduct himself with prudence, you are expecting 
 the State, which, after all, is only guided by a few men, to be wiser, 
 further-sighted, more intelligent than any one man by himself. 
 
 Despotism weakens the individual and narrows his capacities. 
 
 If a nation believes that the State can do everything, it will 
 make it responsible for all the ills it suffers and all the blessings it 
 goes without. It will attribute to it rain and fine weather, the 
 phylloxera, and the Colorado beetle. Agriculturists will lay the 
 blame, of their bad harvests on it, and expect it to raise the price of 
 corn, while the labourers are clamouring for it to lower the price 
 of bread. Capitalists will at the same time ask for duties to protect 
 them as producers, and for low prices to benefit them as consumers. 
 Workmen will ask it to lessen their work and raise their wages. 
 
Bk.vi.Ch.ii.]THE EEVENUES AND ^EXPENDITURE OP THE STATE. 275 
 
 Whoever cannot get what he wants will apply to the State. Some 
 day they will break up the Government. Next day there will still 
 perhaps be men rash enough to assure them that the State is an 
 omnipotent providence, which can miraculously satisfy the most 
 contradictory wants ; and so on in a circle. 
 
 M. Guizot says, " It is a great mistake to believe in the sovereign 
 power of the political machine." Yet he himself, while in power, 
 helped to spread the mistake. 
 
 Faith in the State is a sort of adaptation of the religious idea. 
 The State is regarded as a sort of earthly providence, which can 
 create wealth and happiness, and confer a host of boons on the 
 public or the individual. Then they pray, " Give me a good place. 
 Hamper the industry of my competitors. Do me a favour. Give 
 me privileges." As Bastiat says, "The State is the great fiction by 
 means of which every one tries to live at the expense of everybody 
 else." 
 
 The interference of the State in matters of Economy by means of 
 regulations, protective duties, monopolies, and imposts, rests on the old 
 idea of the omnipotence and omniscience of the governor, and the 
 incapacity and ignorance of the governed. 
 
 It is justified under a rule by divine right ; it is inadmissible under 
 a government by discussion. 
 
 It is always costly. 
 
 CHAPTER II. 
 
 THE REVENUES AND EXPENDITURE OP THE STATE. 
 
 THOSE who seek to add indefinitely to the duties of the State forget 
 that its services are not gratuitous. The following table, showing 
 the expansion of our budgets, is a convincing proof of this. 
 
 The earlier budgets did not separate the expenditure of the State 
 from the expenses paid out of special funds, such as the depart- 
 mental and communal rates (centimes additionnels) and other 
 accessory sources of revenue. These must be included in our 
 table if we are to have an accurate comparison of the budgets 
 of different periods. 
 
 Date. Amount. 
 
 1789 531,440,000 francs. 
 
 1815 931,441,404 
 
 1828 1,024,100,637 
 
 1840 1,367,711,102 
 
 1852 1,513,109,997 
 
 1860 2,084,091,354 
 
 1865 2,147,191,012 
 
 1869 2,209,270,054 
 
276 THE REVENUES AND EXPENDITURE OF THE STATE. 
 
 Date. Amount. 
 
 1872 2,655,346,969 francs. 
 
 1874 2,945,034,736 
 
 1876 2,944,713,000 
 
 1877 3,051,766,000 
 
 1879 3,156,512,638 
 
 1880 3,145,000,000 
 
 1881 3,232,000,000 
 
 1882 (proposed) 3,294,000,000 
 
 To this must be added 559,000,000 francs more for outlav 
 chargeable on special sources, the expenses of the compte de liquida- 
 tion^ a series of charges which have just necessitated a loan of 
 one milliard, and which will have to be supplemented by another 
 before long. 
 
 Lastly, there must be added the expenditure of communes and 
 departments. The octrois come to more than 250,000,000 francs. 
 Communal taxes other than the centimes additionnels amount to 
 about a hundred million francs, and the various items of the com- 
 munal budgets to another hundred million, giving a total of some 
 4,200,000,000 francs, without reckoning the expenditure payable 
 out of loans raised by the communes and departments. 
 
 Between 1789 and 1815 the budget had nearly doubled ; in 1828 
 it reached a milliard; and under Louis Philippe, 1,600,000,000 
 an increase of 50 per cent, in seventeen years. 
 
 Almost every year expenditure has exceeded revenue ; in 1840, 
 by 138,000,000 francs; in 1847, by 214,000,000 francs; in 1854 by 
 186,000,000 francs; in 1860, by 119,000,000 francs; in 1861, 
 by 164,000,000 francs. Out of the thirty years from 1840 to 1870, 
 twenty years have shown a deficit; and since the war there have 
 been deficits of 81,000,000 francs in 1872, 44,000,000 francs in 
 1873, and 64,000,000 francs in 1877. 
 
 According to M. Vacher's calculations, the convertible, or rather 
 exchangeable, part of the total annual production of France is 
 9,400,000,000 francs deducting taxes as far as possible. In round 
 numbers, we may put it at ten milliards. 
 
 Suppose our expenditure for the year 1880 had amounted to less 
 than 4,200,000,000 francs, the net income of France, according to 
 present estimates, would be roughly 14,200,000,000 francs, out of 
 which 30 per cent., or nearly one third, is consumed in public 
 expenditure. 
 
 This proportion, while not excessive, is nevertheless considerable, 
 the more so as we must look not only at the sum taken, but at tlie 
 manner of taking it; and compare what has been done with it with 
 what might have been done. 
 
 1 This was a special fund, set apart after the late war, for replacing war 
 material, building new fortresses, etc. 
 
Bk vi.0h.ii.] THE REVENUES AND EXPENDITURE OF THE STATE. 277 
 
 Out of the 2,836,503,223 francs of estimated revenue in the 
 original budget prepared for 1882, there are, 
 
 Kegistration 552,096,000 francs. 
 
 Stamps 145,014,000 
 
 Customs and Salt Duty .... 316,858,000 
 
 Indirect Taxes 1,033,743,000 
 
 Postal and Telegraph Service . . 138,204,000 
 
 2,185,915,000 
 
 All these taxes are taxes on circulation; and they compose nearly 
 four-fifths of the budget. The indirect taxes, properly so called, 
 and the customs, amount to 1,340,000,000 francs about half the 
 budget. 
 
 Now M. Menier has shown in his book, Theorie et Application 
 de rimpot sur le Capital, that all these taxes tend to check the 
 development of wealth in France. 
 
 Adam Smith formulated four rules to serve as a test of the 
 soundness of a tax. M. Menier, not from a priori considerations, 
 but from observation of facts, gives nine. We quote them here, 
 referring those who wish to see how they are worked out to M. 
 Menier's book. 
 
 1st. Taxes should be levied on things, not on persons. 
 
 2nd. They should not affect circulation. 
 
 3rd. They should not impede freedom of labour. 
 
 4th. Taxation should be uniform. 
 
 5th. The assessment of taxes should be regular. 
 
 6th. Taxes should be levied on the capital of the nation ; every 
 
 man contributing in proportion to his capital. 
 7th. They should be stated, and not arbitrary. 
 8th. They should be levied at the time and in the manner most 
 
 convenient to the tax -payer. 
 9th. They should be collected as economically as possible. 
 
 It is quite superfluous to attempt to show that all our taxes, as 
 well direct as indirect, violate some one or other of these rules. 
 
 We may affirm that there is not one of our taxes that is propor- 
 tionate. It has been repeatedly shown that the land-tax is 2 per 
 cent, of the income in one commune, and 14 per cent, in another. 
 As to licences, the duty is not levied on a source of income but on 
 a charge the value of the rent. 
 
 It is needless to speak of our indirect taxes ; every one knows 
 they are progressive in the wrong direction. They impede 
 circulation ; and we have already seen that wealth grows in geo- 
 metric ratio to rapidity of circulation. They have another disad- 
 vantage, which indeed springs from this. We have said that the 
 increase of wealth in a country is shown by the cheapness of 
 
278 THE REVENUES AND EXPENDITURE OF THE STATE. 
 
 circulating capital and the increasing value of fixed capital. 1 Now, 
 what is the effect of indirect taxes on every article of production 
 wine, alcohol, salt, sugar, etc. ? To create a factitious dearness of 
 circulating capital, and to check its natural fall. They are thus in 
 flagrant opposition to the most significant indication of economic 
 development. 
 
 They have the further disadvantage of falsifying the exact 
 relations of the demand and supply of labour, and of interfering 
 with its price ; creating an apparent rise in wages, without bene- 
 fiting the wage-earner. They heighten the price of production, and 
 thus retard consumption, especially that of manufactured articles ; 
 for since they fall on the necessaries of life, they so far deprive 
 the wage-earning classes of the power to purchase manufactured 
 articles. 
 
 One would think that some Timon, swearing eternal hatred to 
 the human race, was at the bottom of our financial system. It 
 seems made on purpose to hinder the workman alike from pro- 
 ducing and from consuming, and to compel every industry to 
 hinder every other. 
 
 If there is a principle which is beyond dispute, it is that of 
 freedom of labour. Now, indirect taxation strikes at freedom of 
 labour in a thousand ways; it forbids work at a particular time 
 or in a particular manner ; it affects this product or that, accord- 
 ing to the fancy of the legislator, who makes himself the judge of 
 other men's wants. "We can tax alcohol," he says; "it is not a 
 necessary. We must take the tax off wine and put it upon beer." 
 M. Thiers made no secret of his opinion that indirect taxation 
 ought to exercise a guiding influence on the industry of a country. 
 Preconceived notions on the subject of taxation have prevented our 
 seeing these anomalies. They are bound up with all our ideas on 
 the constitution of society. They may be shown to have gone 
 through the following phases : 2 
 
 In the primitive civilization, which rested on the idea of force 
 and not of labour, it was the aim of every man to live at the 
 expense of others. This idea clothed itself in various forms, of 
 which the most distinct was that of conquest. 
 
 The conquered were to supply the wants of the conquerors ; such 
 is the origin of taxation. It is neither more nor less than tribute 
 
 Taxation retained this form until the end of the French monarchy, 
 and what was really meant by it may be described thus : 
 
 Under the primitive system, taxation meant the exploitation of the 
 oppressed classes by the oppressing class, of the conquered popula- 
 tion by the conquering race. 
 
 1 Page 109. 
 
 2 What follows is a resume of the early chapters of Menier's Theorie et 
 Application de VImpdt sur le Capital 
 
Bk.vi.Ch.ii.] THE REVENUES AND EXPENDITURE OP THE STATE. 279 
 
 Under the monarchic system, taxes were the exploitation of the 
 people by the king. 
 
 In a word, the interests of those who pay and of those who 
 receive are antagonistic, and the tax is the expression of this 
 antagonism. 
 
 This view of taxation has been so general, that it pervades most 
 of the definitions of economists. They have placed on the one side 
 the individual, the subject, the tax-payer, and on the other the 
 Government, the State, whose business it is to rule and restrain 
 the individual, as though their interests must needs be mutually 
 opposed. But the State has always the best of it. It is the master 
 of the citizens, instead of being simply the agent of the nation. It 
 commands, and they must obey. The heads are counted, and each 
 must pay. The tax is personal instead of being real. The man 
 pays, not the thing. The citizens are the serfs and tenants of the 
 State. They must pay so much per head for the right to live in 
 the country. 
 
 This theory, which is the theory of Montesquieu, of J. B. Say, 
 and of many others, is thus summed up by M. G. de Molinari. 
 " Taxation has to meet the tax- payer in the very act of satisfying 
 his wants." 
 
 This definition would justify imposts on consumption, the object 
 of which is to arrange the taxes in such a way that whoever escapes 
 one must pay another. 
 
 It is all very well to say, " But no one ought to be allowed to 
 escape taxation." But you must confess that if you have to give 
 back in poor relief perhaps in the hospital or the prison all 
 that you took in taxes from those unfortunates to whom you have 
 rendered life impossible, then your imposts are no gain to you, 
 but a heavy charge. 
 
 Many other definitions of taxation, 1 while giving it a more ex- 
 tended meaning and attempting to indicate the mode of its applica- 
 tion, still retain the old idea of antagonism between the tax-payer 
 and the State. 
 
 The physiocrats understood it a little better. They did indeed 
 maintain the idea of the antagonism between the Government and 
 the community ; but in their definitions the individual disappears ; 
 and moreover they try to point out the sources from which the 
 revenue ought to be drawn. 
 
 Quesnay says, 2 " Taxes are a part of the revenue derived from 
 the net produce of the landed property of an agricultural people." 
 
 Le Trosne says, 3 " Taxes are a portion of the annually renewed 
 wealth of the country, charged on the net produce, and employed 
 in the public service." 
 
 1 See Theorie et Application de VImpdt sur le Capital, Book, I., chap. iv. 
 2 Maximes Generates. 3 De Vurdre Social. 
 
280 THE REVENUES AND EXPENDITURE OP THE STATE. 
 
 Mercier de la Riviere says, " A sum drawn from the annual 
 revenues of a nation to form the private revenue of the sovereign, 
 in order to enable him to bear the annual charges of his sovereignty." 
 
 The definitions of Adam Smith and Ricardo are also generalisa- 
 tions. The former defines taxes as the revenue out of which the 
 public expenditure and the necessary expenses of Government must 
 be met ; the latter, as that portion of the produce of the land and 
 industry of a country which is placed at the disposal of the 
 Government. 
 
 Rossi says, " Taxation is essentially a tribute imposed on th 
 income of society, and it is based on the right of the State to claim 
 a share in the distribution of the general net produce and income." 
 
 M. Courcelle Seneuil's definition is similar: "The taxes are a 
 part of the general revenue raised by authority for the maintenance 
 of the G overnment and its agents, and sometimes for other purposes 
 deemed useful to the community." 
 
 These last definitions are incomplete, but they enlarge the 
 question instead of narrowing it. They have one other great 
 advantage, they make taxation a charge on property instead of on 
 persons. And they point out the true source from which the taxes 
 should be derived. They unequivocally assert that they ought to 
 be raised on the national income. 
 
 But what is the national income ? It is the sum of the private 
 incomes of the citizens. 
 
 Now, according to Adam Smith, the sources of income are three : 
 profits, rent, and wages. How are they to be reached ? By analys- 
 ing every income in detail. Here we see the inconsistency into 
 which these economists have fallen. In their definitions they made 
 the taxes fall on things ; but in reality, as it turns out, they fall on 
 persons. In order to reach the general income, we must ascertain 
 from every one what his private income is. We have sinaply gone 
 round in a circle and got back to the point from which we started. 
 
 Whether the tax is voted by the tax-payer or not, we come back 
 to this, that it is a burden imposed by the State on the individual. 
 
 Yet this definition is hardly consistent with the laws which 
 regulate the production and distribution of wealth in a nation. A 
 new definition seems to be required. 
 
 When, in 1789, the exhausted monarchy called on the nation to 
 save itself, its representatives had an inkling, however vague, of a 
 truth afterwards formulated by James Mill and others of the 
 Bentham School ; viz., that there must be identity of interests 
 between the governing body and the community. This idea it is 
 which is loosely expressed in the much-abused phrase, " the sove- 
 reignty of the people ; " which is applied or mis-applied under every 
 
Bk. vi. Ch. ii.] THE HE VENUES A^D EXPENDITURE OF THE STATE. 281 
 
 form of parliamentary government, and on whiok every democratic 
 republic is based. 
 
 We may then distinctly affirm : That taxes cannot be a tribute 
 paid by one class to another, as in the mediaaval oligarchy or the 
 classic republic ; that they cannot be the dues imposed by the ruler 
 on the nation, as in absolute monarchies ; that they cannot be a 
 bargain between two contracting parties, since the interests of the 
 State and the people must be identical. 
 
 In the days of privilege, when whole classes were exempt from 
 taxation, the State had to distinguish between the taxable and the 
 non-taxable. It was as a protest against this system that the 
 principle of taxation without exemption was asserted. But now 
 that these privileges, however much they may be secretly coveted, 
 can never again be professed as a principle, or form any sort of 
 basis for legislation, the Exchequer has only to consider the national 
 wealth in bulk. As far as the State is concerned, it is indivisible, 
 like the capital of a manufacturer. There is no need to inquire 
 to whom such and such portions of it belong. The State has 
 nothing to do but to secure it every possible advantage. The 
 State, in fact, has to deal with the capital of the nation exactly as I 
 have to deal with my private capital. 
 
 A nation, regarded economically, is a unity in itself. It possesses 
 a certain extent of territory, which has certain natural utilities ; 
 these natural utilities have been developed by labour or appropri- 
 ated by man ; the capital of the nation is the sum total of the utilities 
 it possesses. 
 
 The nation, being a group of interests, forms a board, or syndicate, 
 of which the State is the manager. In the case of France, this 
 syndicate is composed of 86 individuals, viz., the departments ; 
 these again represent 362 arrondissements, which in their turn 
 represent 2,500 cantons, representing 36,000 communes. 
 
 Such are the elements into which this syndicate resolves itself. 
 Bat what are these communes, these cantons, these arrondissements, 
 these departments ? Tkey too are combinations of interests ; they 
 are themselves syndicates. The mayor and prefect, then, are 
 syndics, or directors ; the government itself can be nothing more 
 than the manager of the national syndicate. Now, just as there 
 are not two systems of book-keeping, one for private individuals 
 and the other for public bodies, so there cannot be two modes of 
 management for the nation and for a company of private persons. 
 Nay, I will push the analogy further still ; I will add that there is 
 but one mode of administering capital, whether it is done by an 
 individual or by a body of individuals. 
 
 Now, if, instead of saying that these cases are analogous, we say 
 they are identical, we shall get at the true definition, of taxation, 
 viz. : 
 
282 THE EEVENUES AND EXPENDITUEE OF THE STATE. 
 
 Taxes represent the general working expenses incurred in the em- 
 ployment of the national capital. 1 
 
 The only tax which conforms to these rules and to this definition 
 is a tax on fixed capital. 
 
 The following articles are the draft of a proposed law for creating 
 such a tax. 
 
 Art. 1. Taxation is uniform. It is imposed on fixed capital. 
 
 Art. 2. Duties ... are replaced by a tax, at the rate of so 
 much per cent, on the selling value of fixed capital owned in 
 France. 
 
 Art. 3. Fixed capital consists of all such utilities as do not lose 
 their identity in the using, namely, the soil, mines, buildings, 
 machinery, implements, ships, vehicles, beasts of burden, household 
 utensils, furniture, and objects of art, when not regarded as com- 
 modities offered for sale. 
 
 Art. 4. The fixed capital owned within each commune shall be 
 rated by the comptroller of the direct taxes. He shall be assisted 
 by two delegates nominated by the municipal council. In towns 
 consisting of several cantons, the municipal council shall nominate 
 two delegates for each canton. These committees shall be em- 
 powered to add experts to their number. 
 
 Art. 5. In rating insured personal property, the policy of in- 
 surance shall be taken as the basis of the estimate. 2 
 
 Art. 6. In rating real property the comptrollers of the direct 
 taxes shall avail themselves of the official survey as it now stands, 
 adopting, in place of the estimate of income, the real estimate of 
 the saleable value, based on documentary evidence of sales in the 
 neighbourhood within the preceding four years, on policies of in- 
 surance, arid other like documents. 
 
 Art. 7. The tax extends to the whole of the capital, regardless 
 of any debts and charges with which it may be encumbered. 
 
 Art. 8. Claims for exemption or reduction of the tax shall be 
 referred to the mayor; and shall be presented, examined, and 
 adjudicated upon, subject to the forms and delays prescribed in 
 the case of indirect taxes. The lists of tax-payers shall be settled 
 by the prefect at the end of the year. 
 
 Art. 9. All other regulations common to direct taxes shall be 
 Applicable to the tax on capital. 
 
 Art. 10. Departmental and communal expenses shall be met by 
 means of centimes additiovnels? 
 
 1 "We are here speaking exclusively of that part of the work which belongs 
 to the State. The total capital of the nation is partly under individual and 
 partly under collective management. In the above definition of taxation; it is 
 the collective part alone to which we refer. 
 
 2 In France, all kinds of house property must bylaw be insured. (Translator.) 
 
 3 See Menier's Bill for authorising the communes to turn the octroi duties inu 
 direct taxes, and the scheme for the suppression of the octrois by the author. 
 
iBk.vi.Ch.ii.] THE EE VENUES AND EXPENDITURE OF THE STATE. 283 
 
 This bill has at least the advantage of being short and easily 
 understood. It remains to examine the objections raised against 
 it. 
 
 In order to soften the transition, it might at first be left to the 
 option of the communes to test its operation. I need not go into 
 these details here. All I have now to prove is the unscientific 
 character of the present system of taxation, and of the fiscal doc- 
 trines of most economists. 
 
 And now, how are these funds employed, which, as we have 
 seen, are raised on such questionable principles ? 
 
 When the State has been in difficulties, it has borrowed. The 
 French budget for 1882 assigns the modest sum of 1,083,304,000 
 francs for the service of the National Debt. This represents a 
 capital of about twenty-seven milliards. Add to this, in round 
 numbers, 50,000,000 fr. of interest for a departmental debt of about 
 a milliard, and 200,000,000 fr. for a communal debt of more than 
 four milliards, and we reach the sum of thirty-two milliards of 
 debt. 
 
 Now, if we balance the millions which have been spent on ad- 
 ministrative blunders, on buildings, monuments, and the like, 
 unnecessary, unproductive, and often ill-fitted for their purpose, 
 or on armaments and military enterprises, on our victories and our 
 defeats, against those which have been spent in a really useful and 
 reproductive manner, we shall find that it would take volumes to 
 contain the first, while the second would go into a sheet of note- 
 paper. The labour of doing it would hardly be thrown away, so long 
 as -there are people who wish to add to the functions of the State. 
 Meanwhile, here is the expenditure of the budget of 1882. 
 
 Francs. 
 
 The debt 1,083,304,000 
 
 Public worship 53,365,000 
 
 War (ordinary expenditure) 575,505,000 
 
 Marine (ordinary expenditure) 172,001,000 
 
 Fr. 1,884,175.000 
 To which must be added : 
 
 War (extraordinary expenditure) 55,089,000 
 
 Marine (extraordinary expenditure) .... 35,184,000 
 
 Fr. 90,273,000 
 
 Thus, out of an expenditure reckoned at 2,818,000,000 francs, 
 more than two-thirds are consumed by the Debt, Public Worship, 
 War, and Marine. 
 
 The Debt is almost entirely due to our mistakes ; the budgets 
 
284 THE REVENUES AND EXPENDITURE OP THE STATE. 
 
 for War arid Marine rather menace than guarantee our national 
 security ; while as to Public Worship, without entering here into 
 any abstract questions, it is evident that, however productive of 
 utilities it may be, its utilities are not of this world. 
 The other services cost : 
 
 Francs. 
 
 Ministry of Justice 35,895,000 
 
 Foreign Affairs 13,758,000 
 
 The Interior 60,231,000 
 
 Algeria (civil service) 21,237,000 
 
 Finance (general service) 19,564,000 
 
 Marine (colonial service) 30,950,000 
 
 Public Instruction 69,909,000 
 
 Fine Arts 8,489,000 
 
 ,, Agriculture and Commerce .... 21,534,000 
 
 Puhlw-Wnrlcfi f ordinary service . . 86,699,000 
 
 5 [extraordinary service. 47,786,000 
 
 Finance (collection of revenues) . . 172,010,000 
 
 Posts and Telegraphs 111,136,000 
 
 Agriculture and Commerce .... 14,404,000 
 
 Admitting for a moment that all these services are useful, that 
 Justice is not to be had at any lower price, that Foreign Affairs 
 cannot be any more cheaply administered, that the expenditure 
 of the Ministry of the Interior admits of no further retrenchment, 
 that the money spent by the Ministry of Public Instruction is all 
 logically employed in the intellectual development of the nation, 
 we still see how comparatively small a place in our budget is held 
 by the really useful services. 
 
 But I will cite just one instance of the prodigality of which a 
 Government is capable. It is clear that no private enterprise, nor 
 the most powerful financial body imaginable, could afford to des- 
 pise a saving of 68,000,000 fr. per annum. Yet this is what our 
 Government a Republican Government a Government by dis- 
 cussion has been guilty of, in neglecting ever since 1876 to carry 
 out the scheme for the conversion of the Five per Cents. 1 
 
 The case is just this. The Government issues the Five per Cents, 
 at 82 francs ; that is, it says to its creditors, " For a sum of 82 francs 
 you shall have a right to Government stock bringing you in 5 
 francs per annum." Only the Government reserves the right, 
 if the rate of interest should fall, of either paying off its creditors 
 at 100 francs, OP of lowering the interest. Every subscriber to 
 the loan knows the terms of the contract. The Five per Cents, 
 have gone up to 120 francs, the interest amounts to 343,000,000 
 francs. Take one franc from every rive, and you effect a saving of 
 68,600,000 francs per annum. Such would be the result of the 
 conversion from, five to four per cent. It might have been done 
 
 1 The measure was successfully carried out in 1883. (Translator.) 
 
Bk. vi. Oh. ii.] THE REVENUES AND EXPENDITUEE OP THE STATE. 285 
 
 in 1876, but it has been put off from year to year from political 
 and electoral motives. It shows the grave defect of all State in- 
 tervention in matters of economy. Governments concern them- 
 selves more with how things look than with how they are. They 
 are guided in their decisions by other motives than the real interests 
 involved. 
 
 One theory yet remains to be refuted. It prevailed very ex- 
 tensively under the old Monarchy : we find it repeatedly in Voltaire ; 
 and it is still reproduced now and again by some of our Deputies 
 and State financiers. We give it here in all its simplicity. 
 
 The Government receives money ; provided this money does not 
 go out of the country, it will come into circulation again, and the 
 country will be none the poorer. 
 
 At this rate, the Government may, without injury, absorb all 
 the produce of the country, so long as it does not send it abroad. 
 Logically or illogically, every one will recoil from this consequence. 
 But if it be not true, the premiss must be false ; and nothing is 
 easier than to prove it so. 
 
 The State, the departments, the communes, absorb 4,200,000,000 
 francs a year. If the State did not absorb them, they would be 
 put to other uses. Now, have they, when they leave the coffers 
 of the State, any greater purchasing power than before they went 
 in ? By no means. Part has been employed in paying officials 
 who consume, but do not produce ; part has been used in founding 
 cannon and providing rations ; part has gone to pay the interest 
 on the debt which is robbing Peter to pay Paul ; all this has been 
 consumed. So far from being increased, its purchasing power has 
 been diminished. The milliard thus used has been deflected from 
 its natural course ; and the very administration of the money has 
 cost a good deal of unproductive labour. 
 
 The purchasing power of all the sums which pass through the 
 hands of the State is less when they come out than when they 
 went in. 
 
 " But," you will say, " how about public security at home and 
 abroad ? How about posts and telegraphs ? and education ? and 
 public works ? " 
 
 Here arises another question, as to what is the province of the 
 State. Let us proceed to examine it. 
 
286 THE PROVINCE OF THE STATE. 
 
 CHAPTER III. 
 
 THE PROVINCE OF THE STATE. 
 
 IN entering on the study of this question, we must take into con- 
 sideration some historical facts. 
 
 In the earlier civilisations the individual was the slave of the 
 tribe, tkie gens, the clan, or the mir. His personality was absorbed 
 in the community, and the community itself was embodied in a 
 chief whose power was limited only by custom and religious tra- 
 dition. The City- States of antiquity were so deeply impressed 
 with this character, that they exercised an absolute control over the 
 religious, moral, intellectual, and material life of every citizen. 
 Moreover, as the city was organised only for war, defensive or 
 offensive, and left productive labour to slaves, it was necessary to 
 subordinate the private action of each of its members to the com- 
 mon action of all. Thus, even in liberal Athens, where ancient 
 man was susceptible of the highest development, the law forbade 
 celibacy; and Socrates was condemned to death because, in scoffing 
 at the gods of the city, he had committed high treason. When 
 the city came to be personified in Caesar, it was to Caesar that all 
 freedom of action was subordinated, while he in turn was to supply 
 the mob with bread and games, " panem et circenses." 
 
 This conception of the omnipotence of the State has passed into 
 our modern civilisation. The legists turned it to account for the 
 benefit of the King ; while the disciples of Rousseau transferred 
 the same omnipotence to the State, which in theory was a kind of 
 impersonal entity, but in fact always incorporated itself at last in 
 one or more men. 
 
 The progress of civilisation may be measured by the emancipa- 
 tion of the individual. Luther claimed for man the right to choose 
 his own faith. The great work of the 18th century, so magnifi- 
 cently recorded in the Declaration of the Rights of Man, was to 
 eliminate more and more the intervention of the State. By pro- 
 claiming individual liberty, it checked individual caprice ; by 
 proclaiming liberty of religion and of the press, the right of public 
 meeting, and the rights of labour, it acknowledged that it was not 
 for the State to control the beliefs, the thoughts, the opinions, and 
 the acts of the individual. Notwithstanding the retrograde steps 
 which have been taken since then, and the caricatures of diviue 
 and human right which are constantly re-appearing in official 
 speeches, in the press, and on the platform, it is to the carrying out 
 of these ideas that all national effort for the last eighty years has 
 been devoted. 
 
 If we cast an eye on the past as well as on the present, and 
 
Bk.vi.Ch.iii.] THE PROVINCE OF THE STATE. 287 
 
 consider the signs by which we know whether a measure is pro- 
 gressive or retrograde, we come to this that we all accept as a 
 criterion of progress the following law : 
 
 Progress is in inverse ratio to the coercive action of man on man, 
 and in direct ratio to the action of man on things. 
 
 This law points out the limits within which the action of the 
 State must more and more confine itself, in spite of any temporary 
 movement i a contrary direction. 
 
 The State will be less and less regarded as a director of con- 
 science. Even so long as fifty years ago it was possible to say, 
 "The law is of no religion." The words indicated a tendency 
 rather than a reality ; but the tendency cannot but grow. Recent 
 experience has determined the State not to prosecute errors of 
 opinion. In fact, it no longer has the right to choose between good 
 doctrines and bad. It is in vain that it attempts to retain the 
 control of the popular intellect ; it is slipping away from it. Itself 
 a Government by discussion, how can it impose its opinion without 
 losing its character ? 
 
 There is a profound difference, in idea if not as yet in law, 
 between the ancient and the modern jurisprudence. In ancient 
 times, persons were subordinated to things. A contract was called 
 nexum, the contracting parties, nexi. They regarded it as a tie, 
 
 bond; and this tie was knotted by religious formalities. 1 The 
 
 odern idea of contract is different. Article 1101 of the Code Civil 
 thus defines it : "A contract is an agreement by which one or 
 more persons bind themselves to one or more others to give, to 
 do, or not to do, a certain thing." And again, by Article 1126, 
 " Every contract has for its object something which one of the 
 parties binds himself to give, to do, or not to do." Contract can 
 only relate to things, to specified services, 2 and may always be 
 cancelled in consideration of damages (Article 1142). The 
 further we go, the more marked is the distinction between persons 
 and things. Private agreements tend to restrict more and more 
 the sphere of the State ; commercial bodies act independently of 
 it ; while the principle of exchange, by a sort of reflex action, is 
 extended to all relations. Little by little the idea takes form, 
 that in all the combinations of life there is only one fixed principle, 
 namely, reciprocity of services. This reciprocity is determined by 
 mutual consent, just as in a contract for sale. As industry and 
 commerce are founded on the voluntary interchange of services, this 
 principle becomes the basis of our productive civilisation. 
 
 The State should confine itself to the care of certain common 
 and general interests. It should watch over the external security 
 
 1 H. S. Maine, Ancient Law, p. 296. 
 
 2 The provisions of the Code Civil with regard to the relations of the sexes 
 are an infraction of these principles. 
 
288 THE PROVINCE OP THE STATE. 
 
 of tlie country, its army, its marine, its diplomacy ; and over its 
 internal security, in matters of administration, justice, and police. 
 It should labour to increase the production of national capital, by 
 means of education and of public works, and by the multiplication 
 of the means of transport. 1 
 
 " The bias indeed of most persons trained in political economy is to 
 consider the general, truth on which their science reposes as entitled 
 to become universal ; and, when they apply it as an art, their efforts 
 are ordinarily directed to enlarging the province of contract and to 
 curtailing that of Imperative Law, except so far as law is necessary 
 to enforce the performance of contracts. The impulse given by 
 thinkers who are under the influence of these ideas is beginning to 
 be very strongly felt in the Western world. Legislation has nearly 
 confessed its inability to keep pace with the activity of man in dis- 
 covery, in invention, and in the manipulation of accumulated 
 wealth ; and the law even of the least advanced communities tends 
 more and more to become a mere surface stratum, having under it 
 an ever changing assemblage of contractual rules with which it 
 rarely interferes except to compel compliance with a few funda- 
 mental principles, or unless it be called in to punish the violation of 
 good faith." 2 
 
 And again, " The word status may be usefully employed to con- 
 struct a formula expressing the law of progress thus indicated, 
 which, whatever may be its value, seems to me to be sufficiently 
 ascertained. All the forms of status taken notice of in the Law of 
 Persons were derived from, and to some extent are still coloured by, 
 the powers and privileges anciently residing in the Family. If, 
 then, we employ status, agreeably with the usage of the best 
 writers, to signify these personal conditions only, and avoid applying 
 the term to such conditions as are the immediate or remote result 
 of agreement, we may say that the movement of the progressive 
 societies has hitherto been a movement /row status to contract"* 
 That is, it has consisted in the elimination of absolute law, and the 
 growth of the system of contracts. 
 
 The nation is to be regarded as simply a great public company, 
 the members of which are free to act independently. The State is 
 the manager of this company. 
 
 To govern, is to direct men ; to administer, is to put life and 
 order into things. The task of the State is becoming less and less 
 that of government, more and more that of administration. It is 
 the mission of the thinker rigorously to determine this formula ; it 
 is the mission of those engaged in public affairs to see it carried out 
 in practice. Rising far above the question of the various forms of 
 
 1 Many of these functions may be fulfilled by the communes. 
 3 Sir H. S. Maine, Ancient Law, p. 305, 7th edition. 
 3 Ibid., p. 170. 
 
Bk.vi.Ch.iii.] THE PROVINCE OP THE STATE. 289 
 
 government, this should be the legacy of the nineteenth century to 
 the twentieth. 
 
 It remains to lay down the limits within which this action of the 
 State should be confined. Ought it, for instance, to undertake 
 public works, or to leave them to private initiative ? Ought it to 
 undertake the postal and telegraphic services, the railways and 
 lighthouses ? Can it hold monopolies ? 
 
 We can here only point out some general rules, the result of 
 manifold observation. 
 
 1st. In virtue of tbe principle that those who have an interest in 
 a thing will do it better than those who have none, the Government 
 should undertake nothing which can be done by private adventure. 
 
 2nd. The State should secure to every one the free use of his 
 own faculties, that is, freedom of labour. It ought not to impede 
 any form of human action which, being untainted by either 
 violence or fraud, injures no one. It should, therefore, maintain 
 freedom of trade, for without this the citizens are hindered in the 
 use of their faculties. If it suppresses this, it is false to its mission. 
 When it thinks to be a protector, it becomes an aggressor. And 
 this is what it does when it establishes protective tariffs. 
 
 The same error appears in the creation of a crowd of factitious 
 offences offences not only of opinion, but of morals, which have in 
 fact no other criterion than an uncertain public opinion. And it is 
 for want of attention to this law that the State prohibits associations 
 and meetings, and tries to secure to itself the monopoly of educa- 
 tion. 1 
 
 We have said that the State ought to provide for the security of 
 its citizens by the administration of justice. But, in virtue of this 
 rule, it ought not to impose its interference on citizens who prefer 
 to have recourse to arbitration amongst themselves. It ought not 
 to meddle with private agreements so long as they are free from vio- 
 lence and fraud. On the other hand, it ought to give an effectual 
 sanction to the execution of contracts ; and this is a mission it does 
 not fulfil, for the sanctions of the law can be made effectual throughout 
 the social scale only on condition of the absolute gratuity of justice ; 
 whereas, at the present time, justice is made a medium of taxation 
 so that, in our land of professed equality, the poor man may always 
 be victimised by the dishonesty of the rich. 
 
 The State must provide for personal and public security. All it 
 has done so far has been to build luxurious prisons and keep a large 
 number of persons confined in them. I suppose it is vain of its own 
 machinery. As for the weak and unprotected, for ill-used and 
 deserted children, they are sent to the House of Correction, and 
 they come out as a magistrate admitted worse than they went in. 
 
 1 See Doctrines Societies du Christianisme, by Yves Guyot, 2nd edition. 
 
 
 
290 THE PROVINCE OF THE STATE. 
 
 Thus the State allows a number of living forces to be lost ; and not 
 only so, but, under pretext of protecting society and public order, it 
 is constantly interfering with the inoffensive action of individuals. 
 
 The State must never become a speculator, seeking to make a 
 profit out of its enterprises ; it must never compete with private 
 industry ; it must undertake only works of public utility and the 
 carrying on of the public services. It may assume the management 
 of posts and telegraphs, so as to bind together all parts of the country, 
 but it fails in its mission when it converts these services into sources 
 of revenue. They should be conducted at cost price. 
 
 Article 538 of the Code Civil thus defines what is included under 
 the term " public property " : " Roads, high roads, and streets made 
 at the expense of the State, navigable rivers, streams, wreckage and 
 derelicts, ports, harbours, roadsteads, and generally all such portions 
 of French territory as are not susceptible of private ownership, are 
 considered as parts of the public property." Article 407 adds 
 fortifications and their belongings. All these things are objects of 
 public utility. 
 
 What is the test of public utility ? It is plain that fortifications 
 make no return ; private persons would never think of erecting them 
 with a view to profit ; they are built only to meet the requirements 
 of national security. The State alone can make them. But is this 
 the case with the other objects comprised in Article 538 ? In Eng- 
 land, roads, streets, ports, and roadsteads belong to corporations, 
 counties, and even private persons ; so that they are plainly not 
 necessarily public property ; while canals and railways are also 
 private property, though under parliamentary sanction. 
 
 Now we cannot conceal from ourselves, that after the fall of the 
 first Empire we had to send our engineers into England to study 
 roads and canals ; and they brought us back macadamised roads and 
 the canal system of 1820. 1 England had been constructing railways 
 for ten years when, in 1834, a lecturer on railways at the Ecole des 
 Fonts et Chaussees itself advocated the employment of horse- 
 power. 2 Fifty years ago we did not know what docks were, while 
 Liverpool had had them ever since 1699. These facts prove that- 
 State intervention in the matter of public works is not indispen- 
 sable ; but they do not prove that it should be absolutely interdicted. 
 The State might open them and keep them in repair, so long as it 
 does not work them at a profit. Railways, for instance, should be 
 regarded as roads, and handed over to private enterprise ; there will 
 then come a time when there will be competing services, both for 
 passengers and goods, on the same line ; neither passengers nor 
 merchandise will have to pay the toll (pecige) which at present 
 forms the heaviest item of the tariff'; there will be no charge except 
 
 1 Dutens, Histoire de la Navigation Interieurc de la France. 
 
 2 Isaac Pereire, La Question des Chemins de Fer, p. 69. 
 
Bk. vi. Ch. iii.] THE PROVINCE OF THE STATE. 291 
 
 that of the transport itself, and this will be reduced to almost 
 nothing. 
 
 Thus, the chief economic function offhe State is to provide tlie means 
 of free circulation, and to establish between the different parts of the 
 country a national solidarity. 
 
 Here we have a positive duty of the State which seems scarcely to 
 have occurred to those who at the same time wish to burden it with 
 a host of other functions. At present this solidarity does not exist. 
 Suppose a war to break out and a certain district to be invaded ; 
 your house is burned for purposes of defence ; and yet you have to 
 pay your share of the war indemnity just as if you had not already 
 lost your house in the interests of the country. Then there are in- 
 undations. They are caused for the most part by the carelessness or 
 clumsiness of an administration paid by the whole country. The cost 
 to France of the inundation of 1855 has been reckoned at upwards 
 of 155,000,000 francs. A credit of two millions was opened for the 
 relief of the sufferers. In 1875 the ravages caused by the floods in 
 the South were estimated at 149,000,000 francs ; and the ridiculous 
 sum of 48,539fr. 90c. was granted in aid. It is true there were 
 private subscriptions, but they were quite inadequate. It was nofc 
 a case for private charity, but for national insurance. 
 
 We may include as coming within the economical sphere of the 
 State those services in which the general body of citizens are 
 interested, and which cannot yield any immediate return, as certain 
 scientific investigations, the maintenance of laboratories, and the 
 higher education. I say the State, taking it collectively ; but I think 
 there would be great advantages in leaving the higher as well as 
 secondary education to the initiative of the communes. As to 
 primary education, I am in favour of the intervention of the State 
 so far as this that it should see to its being everywhere given. 
 But recent facts have shown the action of the State to be less rapid 
 and effective than that of the communes. 1 
 
 As to the question of centralisation or decentralisation, there is no 
 absolute criterion. Sometimes the links which unite the different 
 parts of a country are too tightly drawn, and sometimes not tightly 
 enough. In the latter case, a want of cohesion is felt, which has 
 shown itself several times in Switzerland and the United States, 
 and which, under the new German Empire, has resulted in the 
 absorption of Germany into Prussia. In France, on the contrary, 
 we are certainly over-centralised. But we may here call to our aid 
 the rule before applied to mark out the relations of the State to the 
 individual : what the commune or the district can do for itself, the 
 State ought not to do for it. For instance, it is clear that there is a 
 great advantage in the postal service being conducted by the State, 
 
 1 See the statistics of primary education, published by the Ministry of Public 
 Instruction. 
 
292 CHARACTERISTICS OF ECONOMIC PROGRESS. 
 
 this being beyond the sphere of the commune ; bnt there is no such 
 advantage in the intervention of the State to sanction the opening 
 of a street, or to direct the local police. 1 
 
 Lastly, the Government has to represent the interests of the 
 nation in its relations with foreign countries. 
 
 In matters of economy, international policy must be guided by 
 the following principles : 
 
 The Government, so far from hindering international traffic and 
 intercourse, must- take all possible steps towards furthering it. 
 
 It must therefore favour all international agreements, such as 
 treaties of commerce, and the assimilation of money, of weights and 
 measures, and of railway and postal tariffs, etc. 
 
 It must never oppose a useful enterprise, however advantageous 
 to a rival nation. This is a rule not only of interest to all 
 nations, but of interest to each. I need name but one instance. 
 England opposed the Suez canal. No nation has profited by it 
 more than England herself. 
 
 The State must appropriate, construct, or maintain only the fixed 
 capital indispensable to bring out the value of private property. It 
 must never become a manufacturer of, or a dealer in, circulating 
 capital. It must restrict itself to providing the freest possible cir- 
 culation between the different parts of the country. Once admit 
 the competency of the State to deal in tobacco, powder, or any 
 other article, and there is nothing to prevent its turning baker the 
 next day, and butcher the next, and hatter the day after. The 
 sole manufacturer and the sole dealer ! the ideal of the communists 
 and the monks. 
 
 CONCLUSION. 
 
 CHARACTERISTICS OF ECONOMIC PROGRESS. 
 
 WE have only been able briefly to formulate the principles which 
 govern the production and distribution of wealth, and to show that 
 the art of co-ordinating the various interests is still in its infancy, 
 and generally appears to be in direct contravention of the maxims 
 of science. Bankers, financiers, merchants, and manufacturers all 
 consider their own interests of the first importance, and enrich 
 themselves often by doing the very reverse of what ought to be 
 done. The economic organisation, even of the nations most ad- 
 vanced in wealth and civilisation, rests on the grossest empiricism, 
 and on traditions dating from the earliest times. And yet we have 
 shown how rapidly capital accumulates in England, in the United 
 States, in France, and in Belgium. And this, although millions are 
 
 1 See the scheme of municipal organisation voted by the Municipal Council of 
 >aris, Nov. 6, 1880. 
 
Conclusion.] CHARACTERISTICS OF ECONOMIC PROGRESS. 
 
 293 
 
 thrown away every year in unproductive expenditure on military 
 and marine armaments, and the energies of hundreds of thousands 
 of men wasted during their best years, to the irretrievable ruin of 
 their private career. The following table presents a calculation of 
 the frightful waste of wealth occasioned by the wars of the last 
 twenty years : 
 
 Fr. 
 
 Crimean War 8,500,000,000 
 
 Italian War (1859) 1,500,000,000 
 
 American Civil War, North . . . 23,500,000,000 
 
 South .... 11,500,000,000 
 
 Schleswig-Holstein War 175,000,000 
 
 Austro-Prussian War . 1,650,000,000 
 
 Expeditions to Mexico, Morocco, and Paraguay . 1,000,000,000 
 
 Franco-German War 12,500,000,000 
 
 Eusso-Turkish War 6,250,000,000 
 
 66,575,000,000 
 
 A glance at the following table * will show (in millions of francs) 
 the heavy charge to which Europe is put by its state of latent 
 warfare : 
 
 - 
 
 Receipts. 
 
 Appropriation. 
 
 
 Gross. 
 
 Net. 
 
 Civil List. 
 
 War. 
 
 Debt. 
 
 Total 
 Expenditure. 
 
 Germany . . 
 
 2,375 
 
 1,875 
 
 46 
 
 537 
 
 231 
 
 1,875 
 
 Austro-Hungary 
 
 1,712 
 
 1,531 
 
 30 
 
 303 
 
 531 
 
 1,640 
 
 France . . . 
 
 2,781 
 
 2,717 
 
 ... 
 
 732 
 
 1,062 
 
 2,717 
 
 Great Britain . 
 
 2,100 
 
 1,812 
 
 16 
 
 675 
 
 700 
 
 1,812 
 
 Kussia . . . 
 
 2,187 
 
 2,100 
 
 35 
 
 795 
 
 425 
 
 2,225 
 
 Italy .... 
 
 1,562 
 
 1,412 
 
 14 
 
 228 
 
 457 
 
 1,412 
 
 Swiss Confeder 
 
 
 
 
 
 
 
 ation . 
 
 41 
 
 16 
 
 ... 
 
 15 
 
 1-8 
 
 17 
 
 Belgium . 
 
 250 
 
 235 
 
 3-2 
 
 43 
 
 65 
 
 235 
 
 Holland. 
 
 227 
 
 212 
 
 2-2 
 
 78 
 
 56 
 
 212 
 
 Denmark 
 
 67 
 
 60 
 
 1-8 
 
 24 
 
 11 
 
 60 
 
 Sweden . 
 
 122 
 
 107 
 
 2-6 
 
 38 
 
 12 
 
 107 
 
 Norway . 
 
 68 
 
 62 
 
 7 
 
 16 
 
 5-8 
 
 62 
 
 Spain 
 
 625 
 
 600 
 
 10 
 
 150 
 
 275 
 
 687 
 
 Portugal 
 
 143 
 
 125 
 
 3-2 
 
 29 
 
 62 
 
 137 
 
 Greece . 
 
 37 
 
 33 
 
 1-7 
 
 9-7 
 
 15 
 
 37 
 
 Koumania 
 
 85 
 
 68 
 
 1 
 
 18 
 
 50 
 
 108 
 
 Servia . 
 
 25 
 
 18 
 
 5 
 
 4-3 
 
 0-7 
 
 22 
 
 Turkey . 
 
 500 
 
 437 
 
 31 
 
 137 
 
 375 
 
 750 
 
 Total .... 
 
 14,812 
 
 13,426 
 
 200-0 
 
 3,839-0 
 
 4,339-0 
 
 14,121 
 
 1 Kolb, Statistique Comparge, 1880. (The figures are approximate, fractions 
 of millions being for the most part omitted in the several addenda, but reckoned 
 in the totals.) 
 
294 CHARACTERISTICS OF ECONOMIC PROGRESS. 
 
 Those who, from temperament or classical education, attempt to 
 carry the old Roman theories into the field of our productive civili- 
 sation may regard these commonplaces with scorn ; but so long as 
 these figures remain unreduced, and so long as some of those who 
 are in power cherish the idea of recommencing the ravages of which 
 we have just given an incomplete representation, for in addition 
 to all that appears in official statistics must be reckoned private 
 losses, the check to production, and the waste of human capital, 
 so long it will not be useless to repeat that all these living forces, 
 these millions of money, these energies spent in destruction, would 
 have been better employed in production. 
 
 If we cast an eye on even the most productive societies, we are 
 startled at the small number of persons whose activity is in any 
 degree utilised. 1 I say, in any degree ; for of those who do, or 
 attempt to do, productive work whether in the way of production, 
 exchange, or transport many, while putting themselves to the 
 greatest pains, achieve only the meanest results. It is at the same 
 time true that an inventor like Watt, Fulton, Stephenson, or Ark- 
 wright will add millions to the world's capital, and that, thanks to 
 their discoveries, a stoker or an engineer may have a power of pro- 
 duction which could not have been attained by the muscular 
 strength of millions of labourers. It is true that the manager of a 
 manufacturing concern may by some extremely simple expedient 
 augment enormously the power of production of the instruments 
 already in his hands. Yet even amongst such workers as these 
 what an amount of time is lost ! Where do we find any one devot- 
 ing to his work the full force and energy of which he is capable? 
 Even in the most industrious of our centres of civilisation, a very 
 small fraction of human energy is employed in production. 
 
 It is the same with capital. The aim, of course, is, to produce 
 well, to produce much, to produce cheaply. But a host of preju- 
 dices obstruct the realisation of this ideal. Few people have any- 
 thing to be called a scheme, a method, a principle. On the 
 contrary, people are, for the most part, slow 'to act, remiss in 
 seeking out the best employment for their capital ; and so it comes 
 to pass that they let themselves be taken in by the claptrap of 
 charlatans, and throw away millions on foreign loans, treating the 
 whole thing as a sort of lottery, and leaving the result to chance or 
 Providence. 
 
 The following is the result, as given in a table published by the 
 Economist in its review of the state of commerce and manufactures 
 for the jear 1878. 
 
 1 See Book IV. chap. ii. 
 
Conclusion.] CHARACTERISTICS OF ECONOMIC PROGRESS. 
 
 295 
 
 FOREIGN LOANS ISSUED IN LONDON SINCK 1860. 
 
 Total Losses. 
 
 
 
 Turkey 89,000,000 
 
 Peru 26,000,000 
 
 Mexico 16,000,000 
 
 Venezuela 4,600,000 
 
 Honduras 3,500,000 
 
 Uruguay 2,300,000 
 
 Paraguay 3,000,000 
 
 Bolivia 1,700,000 
 
 Costa Bica 3,400,000 
 
 Confederate States .... 2,400,000 
 
 Other States 5,200,000 
 
 157,100.000 
 
 Partial Losses. 
 
 
 
 Egypt 45,600,000 
 
 Austria 6,900,000 
 
 Alabama . . . 1,000,000 
 
 Columbia . . . 1,500,000 
 
 Argentine Confederation 1,400,000 
 
 Portugal . . . 8,680,000 
 
 Hungary . . . 700,000 
 
 Chili .... 700,000 
 
 Others .... 800,000 
 
 67,280,000 
 
 To the list of partial losses must be added a Spanish loan of 
 109,000,000. Exclusive of this, however, we have a sum of 
 224,380,000 sterling invested on the London Stock Exchange in 
 foreign loans between 1860 and 1878. Of this sum, 67,280,000 
 have been compromised, and 157,100,000 millions have completely 
 disappeared. 
 
 In France it was once proposed to hold an inquiry into foreign 
 loans ; but no one has ventured to follow up the proposal. 
 
 No matter. Millions are thrown away every day on the Bourse 
 in speculations that come to nothing. Then comes the waste of 
 capital by the State itself wasted, too often, in. public works as 
 well as in unproductive expenditure. In France we have a mania 
 for building, and fasten up in unreproductive fixed capital large sums 
 which are thus deprived for long enough of their purchasing 
 power. In fine, we need only look at the mode of life of the wealth- 
 ier classes in Paris, to convince ourselves of the immense amount of 
 capital that is wasted day by day. 
 
 Yet even this waste is better than the narrow and petty inertia 
 
296 CHARACTEEISTICS OF ECONOMIC PEOGEESS. 
 
 of the smaller French bourgeoisie. The English are now com- 
 plaining of the frequency of early retirement from partnership. 
 It is a vice which has long characterised French industrv, though 
 the existence of large companies is beginning to put a stop to it. 
 Many people set before themselves a certain fixed goal, and the 
 moment they have reached it they retire from business. They 
 work only to earn the right to be idle. This goal attained, they 
 take to speculation as an outlet for their surplus activity, then tire 
 of it as aimless, and fritter away their savings on engrossing trifles. 
 What a waste of force and of capital ! 
 
 Even now, we are so ill-balanced that every now and then 
 we are seized with a panic that takes us back to the year one. 
 We took fright at machinery, and imagined it would ruin the 
 working classes. Proudhon went so far as to propose that all 
 new models should be shut up for several years in the Conserva- 
 toire des Arts et Metiers before they were allowed to be used. 
 In 1873 some economists, more timid than prudent, announced that 
 coal was going to run short, and recommended housewives to stint 
 themselves in the use of it, in order to avoid the responsibility of 
 condemning their great grandchildren three or four centuries off to 
 die of cold, to eat their beefsteak in the Abyssinian manner, and to 
 renounce tea and all other warm infusions and decoctions. Elec- 
 tricity stepped in and re-assured these alarmists ; so then, in order 
 not to be quite without a grievance, they predicted the ruin of 
 the coal companies. In 1880 Mr. Brassey declares that gold is 
 growing scarce; and while, up to that time, the fall of prices had 
 been attributed to the abundance of gold, he ascribes it to the dearth 
 of gold. And people take the alarm at once just as they did thirty 
 years ago, when M. Michel Chevalier predicted the depreciation 
 of gold and the rise of the price of silver ! 
 
 The Protectionists are especially liable to this depressing passion 
 of fear. They periodically predict the ruin of France by the inva- 
 sion of wool from Australia, pork from Chicago, beef from La Plata, 
 corn from Russia or the United States, cotton aud iron from Eng- 
 land. They are seized with a chronic frenzy of persecution. For 
 the last forty years, French industry has been expected to vanish 
 altogether ; our fields were to lie fallow, our population was to 
 emigrate, wages were to be reduced to nothing, and all our factories 
 were to be closed. None of all this has happened, and yet they 
 go on with their prophecies; and the curious thing is, that they 
 succeed in getting them turned into customs tariffs ! 
 
 What a monstrous inconsistency! The genius of Invention 
 triumphs over time and space, it throws its whole force into the 
 effort to increase the speed of a train or a ship while economising 
 a few kilogrammes of coal ; it covers the globe with a network of 
 telegraph wires, establishing an almost instantaneous commuuica- 
 
Conclusion.] CHARACTERISTICS OF ECONOMIC PROGRESS. 297 
 
 tion between the inhabitants of its most distant regions ; it creates 
 ingenious contrivances for rendering the advance of capital almost 
 gratuitous; and then, when it has made all these efforts, in comes 
 the genius of Finance, of Administration, of Protection, and sets 
 to work with quite another object in view. What is simple it finds 
 bad ; it multiplies formalities, it raises its customs barriers across 
 harbour basins and railway lines, it lengthens time and widens 
 distance, it separates Europe from America and Australia, it 
 snatches away by its tariffs and imposts the benefits which the 
 inventor has earned for mankind. And the people who do all this 
 are men who have the reputation of being financiers and statesmen ! 
 They disdain the old adage of the Physiocrats, "Let be, let live," 
 that is, let buy, let sell, let work. Their ideal is, no buying, no 
 selling, no living, nor letting live. 
 
 Man has always been divided between the tendency to increase 
 the number of the utilities he wants and the tendency to augment 
 the value of those he possesses. In a word, every one wants to 
 have the greatest possible number of utilities at his command, and 
 to sell the utilities he has to others at the highest possible price. 
 To this inconsistency are owing all the errors, all the false systems, 
 the protectionist theories, and the appeals to the State. 
 
 Our interests are antagonistic only because each of us wishes to 
 satisfy his wants without effort, that is to say, without reciprocity. 
 Hence the old notion that the best way to enrich oneself is to 
 impoverish one's neighbour. Little by little the discovery was 
 made, that peaceable exchange is more profitable than forcible con- 
 quest ; and this exchange cannot take place without discussion, 
 bargaining, and agreement. This discovery harmonises the in- 
 terests which appeared to conflict. 
 
 It is the immediate interest of the manufacturer to produce 
 cheaply and sell dear. If he has a monopoly, he can do this. If 
 not, competition will compel him to produce in the best possible 
 manner articles of the best possible quality while he reduces his 
 profit almost indefinitely in order to extend his trade. But this 
 compulsion results in the .mutual advantage of himself and his 
 customers. 
 
 There is an old prejudice which we sometimes hear repeated, 
 and which appears in books where one would hardly expect it under 
 this form : It is the interest of England to ruin Spanish manu- 
 facturers, in order to force the Spaniards to buy her own products. 
 Now, I do not say that this notion never existed in any English 
 brain ; but if it did, it has long ago disappeared. Every trader 
 knows that his own prosperity depends on the prosperity of his clients, 
 and that if his clients are poor, they cannot afford to buy. In this 
 way he is led, by the mere force of facts, and without any sort of 
 sentiment, to wish the maximum of prosperity to everybody; for 
 
298 CHARACTERISTICS OF ECONOMIC PROGRESS, 
 
 the greater the general prosperity, the greater will be the general 
 power to purchase, and consequently the greater the outlet for 
 liis goods. Thus the force of circumstances establishes solidarity 
 of interests. 
 
 Again, the recognition of economic interests tends to do away 
 with many of the causes of war. Wars have generally sprung 
 from religious or dynastic questions, from national vanity, or from 
 the idea that the way to enrich oneself is to impoverish others. 
 But the improved means of communication and the abundance of 
 disposable capital tend to increase international intercourse ; the 
 owners of property dread the risks that accompany every war; 
 and little by little they will create so strong a public opinion that 
 war will become absolutely impossible among industrial nations. 
 
 If we look back into history, we see men butchering one another 
 for chimeras ; abused by priests, who work upon their credulity by 
 promising them happiness in this world and in a more or less indefi- 
 nite future ; deceived by heroes, whom they blindly follow and for 
 whom they stupidly die ; eager to let go the substance for the 
 shadow ; exasperating themselves about a word; hating one another 
 for a dogma; and squandering on an illusion the whole force of 
 their energies. All these are psychological phenomena. Now 
 economic progress tends to effect a profound psychological change 
 in those whom it touches. 
 
 Man in his primitive state has no means of defence against the 
 lorces of nature. The smallest satisfaction of his wants costs him 
 considerable effort. But in our industrial civilisation he has 
 domesticated these hostile forces, he has trained them to do his 
 work; and the more he perfects his means, the less trouble he finds 
 in securing their co-operation. His risks diminish ; his certainties 
 increase ; he insures himself against fire, hail, accident, and death. 
 With less effort, he is able to satisfy more wants. Economic pro- 
 gress is MI direct ratio to the action of man on things. 
 
 A starving man can have no intellectual energy. If for a 
 moment he ceases to be pre-occupied with this goading necessity, 
 he takes refuge in dreamy introspection. Such is the story of the 
 hungry Middle Ages. 
 
 The progress of science is teaching us to trouble ourselves no 
 more about words and dogmas ; to study realities in their complex 
 relations ; to substitute continuous observation for chance impres- 
 sions ; and these methods must in time cover the whole field of 
 human action. The notion of morality based on reciprocal interests 
 must govern our industrial civilisations, enforcing the recognition 
 of reciprocal rights, respect for our plighted word, and fidelity to 
 our engagements. 
 
 We are already beginning to reap these fruits of the industrial 
 and scientific development of mankind ; but by virtue of the law of 
 
Conclusion.] CHAEACTEETSTICS OP ECONOMIC PEOGEESS. 
 
 299 
 
 survival formulated by Tylor, and in consequence of oar false edu- 
 cation, we are not yet freed from the traditions of military and 
 sacerdotal civilisation, the source of all this waste of wealth, this 
 fruitless expenditure of force, these wars, and this armed peace only 
 less ruinous than war. 
 
 M. Courcelle-Seneuil has worked out the following ingenious 
 parallel : 
 
 ANCIENT, OR KOMAN IDEAL. 
 
 1. Aim of social activity, war. 
 
 2. Property founded on conquest. 
 
 3. Classes of persons : free-born, 
 freed, and slaves. 
 
 4. Liberal and servile professions. 
 
 5. Political preponderance of the 
 military element and of so-called pub- 
 lic functionaries. 
 
 6. Absolute power founded on mili- 
 tary force. 
 
 7. Classification by privilege founded 
 on tradition and the pleasure of the 
 government. 
 
 8. A stationary society, corrected 
 from time to time by a reversion to 
 the ancient type. 
 
 9. A society ruled by laws, under 
 the supervision of a public authority 
 invested with compulsory powers. 
 
 MODERN, OB SCIENTIFIC IDEAL. 
 
 1. Aim of activity, peaceful industry. 
 
 2. Property founded on labour and 
 saving. 
 
 3. Citizens with equal rights. 
 
 4. Functions morally equal, and 
 tending to the same ends. 
 
 5. Political preponderance of the 
 industrial element. 
 
 6. Empire of laws freely assented 
 to by all. 
 
 7. Classification founded on personal 
 merit, tested by free competition. 
 
 8. A progressive society, constantly 
 improving itself by labour and in- 
 vention. 
 
 9. A society living by the free initi- 
 ative of the citizens, regulated by the 
 observance of the moral law. 1 
 
 We have undergone experiences sharp enough to make us aware 
 of the prodigious errors we have committed in our mode of re- 
 garding and estimating our interests. We have learnt that peaceful 
 solutions are better than violent ones, that blows are not arguments, 
 and that foreign and civil wars cost dear and bring in their train 
 certain evil and uncertain good. 
 
 The great internal problem which France has now to solve, is 
 the substitution of peaceful for revolutionary means of evolution 
 for revolution. 
 
 The vague yearnings of the labouring classes, hitherto ill-defined, 
 are beginning to shape themselves into opinions which may be 
 grasped and discussed ; and capitalists are beginning to understand 
 that their claims must be investigated. Every one at last admits 
 that a nation cannot be powerful while it is divided against itself, 
 or while it is the policy of its government to strengthen itself at 
 the expense of the individual citizen. 
 
 It is one of England's chief sources of strength, that her 
 
 1 It would have been better to say " moral laws." 
 
300 CHARACTERISTICS OF ECONOMIC PROGRESS. 
 
 labouring classes know that through the free play of her institutions 
 they can obtain, within a certain time, the reforms they demand. 
 Surely the same conviction should exist a fortiori in France, the 
 country of universal suffrage. 
 
 Our statesmen are timid, and dare not incur the responsibility of 
 reforms, because they do not feel themselves urged on by any 
 public opinion which knows its own mind. It is this public opinion 
 which men who have any power of initiative, any faith in an idea, 
 ought to set themselves to form. 
 
 Bentham rendered an immense service to England by sketching 
 out for her a clear programme, which she has followed through 
 various phases, and which her most eminent thinkers maintain and 
 are still developing. France also must adopt a line of conduct, and 
 give herself an ideal of action from which she must not allow 
 herself to be diverted by passing political events; and this pro- 
 gramme may be summed up in two words : it is the substitution, 
 in place of a military and sacerdotal civilisation, of a civilisation 
 of science and production. 
 
INDEX. 
 
 Adam Smith, Definition of Economic 
 Science by, 12 ; Sympathy a motive 
 equal to self-interest, 27 ; His defi- 
 nition of value contested, 35, 40; 
 His definition of fixed and circu- 
 lating capital, 50, 51 ; On different 
 classes of banks, 250. 
 
 Administrative ability undervalued by 
 working-classes, 175, 214. 
 
 Agricultural products, Fallacy of theory 
 of fall in price of, compared with 
 manufactured products, 99-101. 
 
 Amortisation, Definition of, 64. 
 
 Association for trade purposes. History 
 of, 262-264; Wrongly opposed by 
 the State, 130, 264 ; Advantages of, 
 266. 
 
 Association, Forbidden by French Ee- 
 volution, 180; Distinguished from 
 coalition, 201. 
 
 Bagehot, On credit, 62. 
 
 Balance of trade, Theory of, contested, 
 233-236. 
 
 Banks, Diverse functions of, 250-254 ; 
 Vicious system of credit of Bank of 
 England, 254-257; Evils of State 
 interference with, 254-262 ; Short 
 history of Bank of France, 257 ; 
 Nature of business of Bank of 
 . France, 259. 
 
 Bastiat, His theory of value contested, 
 37 ; Definition of capital by, 49 ; 
 On growth of national wealth, to- 
 gether with increasing cheapness of 
 its constituent utilities, 69. 
 
 Blanc, Louis, Charges against econo- 
 mists by, 10; His scheme for 
 organisation of labour criticised, 
 183-186. 
 
 Bonamy Price, Economic Science not 
 a science according to, 7 ; His 
 theory of commercial crises main- 
 tained, 240. 
 
 Capital, Divided by Gamier into 
 material and non-material, 48 : 
 Various definitions of, 49 ; Defined, 
 50, 52 ; Fixed and circulating, vary- 
 ing distinctions between, 50 ; Fixed 
 and circulating, articles composing, 
 54 ; Producing power of, increased 
 by credit, 61 ; Fixed and circulating, 
 relative values of, 94 ; Evidences of 
 rise in value of fixed, and fall in 
 value of circulating, 101-109 ; In- 
 creases faster than labour, 207. 
 
 Carey, His theory of rent approved, 
 219. 
 
 Catheder-Socialisten, Demands for 
 State intervention by, 9. 
 
 Circulating capital, Definition of, 52 ;. 
 Consumption of, reduced by improve- 
 ments in fixed capital, 57 ; Tends 
 to be converted into fixed capital, 
 58, 60 ; FaU in value of, not to be 
 prevented by protection, 106 ; price 
 of, equalised by improved means of 
 transport, 117. 
 
 Circulation, Definition of, 66 ; Rapidity 
 of, instanced by Menier, 67. 
 
 Civilisation, Four stages of, 46. 
 
 Clearing-house, System of the, 252. 
 
 Coalition, Distinguished from associa- 
 tion, 201. 
 
 Commerce, Part played by, in State 
 economy, 230. 
 
 Committees of Inquiry, How con- 
 stituted and conducted, 24-26 ; 
 Herbert Spencer's estimate of, 25. 
 
302 
 
 INDEX. 
 
 Competition, Advantages of, 232. 
 
 Comte, Auguste, his system of soci- 
 ology deductive, 7. 
 
 Co-operation, Louis Blanc's views on, 
 183 ; Development of, in England, 
 
 212 ; Development of, in France, 
 
 213 ; Character of, 215. 
 Courcelle - Seneuil, Definition of a 
 
 " want " by, 29 ; His definition of 
 wealth, 31 ; Classic and modern 
 social ideal contrasted by, 299. 
 Credit, Definition of, 60 ; Overcomes 
 time, 61 ; Increases producing power 
 of capital, 61 ; Views of various 
 economists on, 60-63 ; As a function 
 of banking, 254 ; Banks of England 
 and France based on vicious svstem 
 of, 254-262. 
 
 Demand and Supply, The regulators 
 of value, 72 ; Operation of, how 
 injuriously affected, 186 ; Evils of 
 State interference with, 267-269. 
 
 Diagrams, Application of, to Econom- 
 ics, 23. 
 
 Discount, Varying rates of, in England, 
 France, and Germany, 121 ; Eate of, 
 not dependent on currency, 122. 
 
 Economic Science ; Definition and 
 defence of, by J. B. Say, 1-5; In- 
 ductive method applied to, 2 ; An 
 experimental science, 3 ; Con- 
 stituent parts of, 5 ; Disputes as to 
 nature and scope of, 5-11 ; Bonamy 
 Price's view of, 7 ; Position of, in 
 Germany, 8-10 ; General ignorance 
 on matters of, 11-13 ; Definitions 
 of, by Adam Smith, J. B. Say, and 
 Eossi, 12 ; Materials for formulating 
 laws of, 20 ; Seasons for preferring 
 this title to that of Political Econo- 
 my, 41 ; Definition of, 44. 
 
 Economists, The, Charges against, by 
 Ingram, 6 ; by Louis Blanc, 10 ; 
 Held responsible for operation of 
 laws they discover, 14 ; Their share 
 in French Eevolution, 16 ; Their in- 
 fluence on English history, 17 ; 
 Power of discovering and of apply- 
 ing laws not always united in, 18 ; 
 Not always impartial, 19. 
 
 Emigration, A constant check on over- 
 population, 128 ; Gain and loss to 
 mother- country through, 139. 
 
 Exchange, Definition of, 34, 64; Ne- 
 cessitated by multiplicity of wants 
 
 and specialisation of aptitudes, 65 ; 
 Is it productive of utilities ? 231. 
 
 Fawcett, His definition of Political 
 Economy, 42. 
 
 Fixed capital, Definition of, 52 ; Eono- 
 my of human effort by improvements 
 in, 55 ; Improvements in, reduce 
 consumption of circulating capital, 
 57 ; Tendency of, to absorb circula- 
 ting capital, 58, 60; Utility of, in- 
 creased by improved means of 
 transport, 117; Formation of, ne- 
 cessitates over-consumption, 243, 
 245 ; Proposal to render it alone 
 liable to taxation, 282. 
 
 France, Ignorance of Economic Science 
 in, 13 ; Causes of low birth-rate in, 
 130-139 ; Proportionate distribution 
 of population among professions in, 
 147 ; Trades Unions illegal in, 200 ; 
 Legislation demanded by trade syn- 
 dicates in, 203 ; Excessive sub- 
 division of land in, 225-228 ; Vices 
 inherent in banking system of, 257- 
 262 ; Unsounduess of present system 
 of taxation in, 275-277. 
 
 Frugality, Disadvantages of, 212. 
 
 Gold, Advantages of, as medium of ex- 
 change, 80 ; Economists divided as 
 to rise or fall of. 92. 
 
 Guilds of the Middle Ages, Oppression 
 of working-classes by, 178 ; Sup- 
 pressed by Turgot, 179. 
 
 Herbert Spencer, On general ignor- 
 ance of Economic Science, 12 ; In- 
 fluence of economists on English 
 history, 17; His estimate of Com- 
 mittees of Inquiry, 25. 
 
 Inductive method, Application of, to 
 Economic Science, 2. 
 
 Ingram,Views of, on Economic Science, 
 5 ; His charges against economists, 6. 
 
 Interest, Compounded of price of time 
 and security against risk, 64 ; Eate 
 of, not dependent on amount of coin 
 in circulation, 117 ; Falls \\iih rise 
 of fixed and increase in circulating 
 capital, 119 ; Eises with destruction 
 
 ' or excessive formation of fixed capi- 
 tal, 120. 
 
 Jevons, S., On money and the coinage, 
 79 ; Enumeration of substitutes for 
 metallic money by, 251. 
 
INDEX. 
 
 303 
 
 Labour, Object of, to promote utility, 
 38 ; Not essential to wealth, 33 ; 
 Definition of, 34 ; Advantages of 
 short hours of, 188 ; Subject to same 
 laws as other commodities, this 
 theory opposed by both employers 
 and workmen, 192; Capital increases 
 faster than, 207. 
 
 Land, Peculiar economic character 
 wrongly attributed to, 48, 217; 
 Causes of increased value of, 96 
 100 ; Importance of, exaggerated, 
 217, 222-228; Property in, from 
 being collective becomes individual, 
 220-222 ; Unequal distribution of, 
 in England, 224 ; Excessive subdi- 
 vision of, in France, 2:25-228 ; Land- 
 law in Australia, 228. 
 
 MacCulloch, Definition of wealth by, 
 31; Definition of Political Economy 
 by, 42. 
 
 Maine, H. Sumner, On social progress, 
 288. 
 
 Malthus, His law of population con- 
 tested, 123-131. 
 
 Malthusian League, Principles of, 141. 
 
 Man, Three qualities universal in, 
 acquisitiveness, egoism, dislike to 
 trouble, 27 ; Progress of, in civilisa- 
 tion, through appropriation of 
 matter and force, 45-47 ; A form 
 of fixed capital, and consequently 
 rising in value with increase of cir- 
 culating capital, 152, 153, 172. 
 
 Menier, On circulation, 66 ; Principles 
 of taxation according to, 277 ; His 
 proposed law of taxation, 282. 
 
 Mill, J. S , His definition of wealth, 
 31 ; His definition of Political 
 Economy, 42 ; His definition of 
 capital, 46; On credit, 61; His 
 definition of circulation, 66 ; On 
 value, 73 ; His theory of commercial 
 crises contested, 239. 
 
 Money, Amount of, in a country no 
 criterion of its wealth, 77 ; Qualities 
 essential to, 78 ; The common de- 
 nominator of value, 79 ; Its value 
 taken on trust, 79; Disadvantages 
 of double standard of, 81-86 ; Sub- 
 stitution of paper, for coin, 81 ; 
 General rise or fall in value of, a 
 fallacy, 88-94 ; Economists divided 
 as to rise or fall of gold, 92; No 
 exception to general rule of rise of 
 fixed and fall of circulating capital, 
 
 93 ; Commercial crises erroneously 
 attributed to want of, 247 ; Sub- 
 stitutes for metallic, 251. 
 
 Natural agents all appropriated, 32. 
 
 Over-production, Its existence denied, 
 231, 240 ; Eeally over-consumption, 
 241-246 ; May exist in particular 
 industries, 246. 
 
 Political Economy, Various definitions 
 of, 41-43. See also Economic 
 Science. 
 
 Population, Malthus' law of, contested, 
 123-131 ; Over-emigration, want of 
 energy, a high standard of comfort, 
 all checks to, 128, 130 ; Increase of, 
 an incentive to progress, 140 ; Ten- 
 dency of, towards concentration in 
 towns, 142-145 ; French, propor- 
 tionate distribution of, among pro- 
 fessions, 147. 
 
 Practice not to be opposed to theory, 
 4, 15. 
 
 Price, Bonamy. See Bonamy Price. 
 
 Price, The nominal value of things, 
 75 ; Relation between rise in, and 
 dearth of production, 75 ; General 
 rise or fall in, a fallacy, 88-94. 
 
 Production increased by use of tools, 
 54 ; Relation between dearth of, and 
 rise in prices, 75 ; Cost of, decreases 
 with increase in amount of, 232, 
 238. See also Over-production. 
 
 Profits, Participation of workmen in, 
 209-211. 
 
 Protection no check to fail in value 
 of circulating capital, 106. 
 
 Protectionists, Inconsistencies of, 182, 
 187, 239; Errors of, exposed, 
 231-239. 
 
 Proudhon, On growth of national 
 wealth, 68. 
 
 Purchasing power, Extended effect of 
 partial loss of, 242. 
 
 Reciprocity, Fallacy of, in commerce, 
 236-238. 
 
 Rent, Average, of English acre equals 
 cost of transport of foreign corn 
 equal in amount to yield of acre, 
 116 ; Ricardo's theory of, contested, 
 218-222 ; Carey's theory of, ap- 
 proved, 219. 
 
 Ricardo, His opinions on theory of 
 exchange-value, 36 ; His theory of 
 
304 
 
 INDEX. 
 
 natural price of labour questioned, 
 174 ; His theory of rent contested, 
 218-222. 
 
 Eousseau, Mode of original appropria- 
 tion of laud, according to, 217. 
 
 Say, J. B., Definition and defence of 
 Economic Science by, 1-5, 12 ; 
 Distinguishes between capital pro- 
 ductive of utility and capital pro- 
 ductive of enjoyment, 49 ; On value, 
 73, 74. 
 
 Science, Progress in, entails subversion 
 of previous opinions, 14. 
 
 Sciences, Two orders of, descriptive 
 and experimental, 2. 
 
 Sismondi, His view, that labour has a 
 value of its own, opposed, 34. 
 
 Smith, Adam. See Adam Smith. 
 
 Space, Gradual annihilation of, through 
 improved means of transport, 59. 
 
 Spencer, H. See Herbert Spencer. 
 
 State, The, Mistaken view of functions 
 of, shown in Constitution of 1848, 
 185 ; Mistaken opposition by, to 
 trade associations, 264 ; Defects 
 and abuses of State management, 
 270-273 ; Misapplication of its 
 revenues by, 283 ; Action of, de- 
 creases with increase in civilisation, 
 286-288 ; Its true sphere of action, 
 289-292 ; While neglecting its own 
 sphere, trenches on that of the in- 
 dividual, 289-291 ; Principles which 
 should guide its international re- 
 lations, 292. 
 
 State-intervention, Demands for, by 
 Catheder- Socialisten, 9; Against 
 and on behalf of the working classes, 
 180-182. 183, 188, 190, 200 ; With 
 labour, how far beneficial, 188 ; 
 Demanded by Trades Unions and 
 workmen's delegates, 196, 203 ; Evils 
 of, in banking, 254-262 ; Evils of, 
 in demand and supply, 267-269 ; 
 Demand for, prevalent, although its 
 disadvantages recognised, 273-275. 
 
 Statistics, A descriptive science, 3 ; 
 Unreliability of , 20-23, 235; Defi- 
 nition of, by Querry, 20 ; Averages 
 sometimes misleading, 21 ; Com- 
 pilers of, either interested or in- 
 different, 21 ; Keliability of, depen- 
 dent on constancy of conditions, 22. 
 Strikes, Statistics respecting, 197; 
 Waste occasioned by, 199 ; Some- 
 times useful, 199. 
 
 Summing up, 292. 
 
 Taxation, Unsoundness of present 
 system of, in France, 275-277 ; 
 Principles on which it should be 
 based, according to Menier, 277 ; 
 Evils of indirect, 277 ; Various 
 definitions of, 279 ; True principle 
 of, worked out, 280-282 ; Proposed 
 law rendering fixed capital alone 
 liable to, 282. 
 
 Theory, Practice not to be opposed to, 
 4, 15. 
 
 Time neutralised by credit, 61. 
 
 Tocqueville, A. de, Economists and 
 the French Eevolution, 16. 
 
 Tooke, On Credit, 62. 
 
 Torrens' Laud Act (Australia), Pro- 
 visions of, 228. 
 
 Trades Unions, Fuse of, 193 ; Charges 
 against, 194 : Advantages and dis- 
 advantages of, 195 ; Their demands 
 for legislation, 196; Illegal in 
 France, 200; Eegulate price of 
 labour, 202. 
 
 Transport, Gradual conquest of space 
 through improved means of, 59 ; 
 Gradual decrease in consumption of 
 circulating capital by means of, 
 109-112 ; Equalises prices of cir- 
 culating capital, 112-117 ; Cost of, 
 of foreign corn equals average rent 
 of land in England yielding equal 
 quantity of corn, 116 ; Increases 
 utility of fixed capital, 117. 
 
 Utilities defined, 34. 
 
 Value, Previous theories of, inade- 
 quate, 35-40 : Dependent on human 
 relations, 37 ; Two conditions ne- 
 cessary to, in natural agent, 40 ; 
 Definition of. 41 ; Eesume of con- 
 stituents of. 67 ; Eegulated by 
 demand and supply, 72 ; No one 
 source of. 73 ; Not constant but 
 relative, 73, 74, 86. 
 
 Wages, Money not sole test of value 
 of, 170 ; Proportion between, and 
 price of food, 174 ; Modes of bring- 
 ing about uniformity of, 201. 
 
 Want, A, Definition of, by Courcelle- 
 Seneuil, 29. 
 
 Wealth, Definitions of, by Courcelle- 
 Seneuil, MacCulloch, J. S. Mill, 
 Hobbes, and Lauderdale, 30-32; 
 Not exclusively material, 30; De- 
 
INDEX. 
 
 305 
 
 fined, 32, 34; Not proportionate 
 to amount of labour expended, 
 33 ; National, grows with increasing 
 cheapness of its constituent utilities, 
 various explanations of this phe- 
 nomenon, 68-70 ; Author's explana- 
 tion, 72, 109 ; Amount of money in 
 a country no test of its, 77. 
 
 Women, Primary cause of subjugation 
 of, 46 ; Improved pecuniary posi- 
 tion of, 158, 169 ; Agitation for 
 increased employment of, 190. 
 
 Working-classes, The, not injured by 
 use of machinery, 152 ; Improved 
 pecuniary position of, attested by 
 
 figures, 154-170 ; Administrative 
 ability undervalued by, 175, 214 ; 
 Oppression of, in the Middle Ages, 
 178 ; Legislative interference with, 
 180-182, 200; Legislative inter- 
 ference on behalf of, 188; Legis- 
 lative interference demanded by, 
 196,203; Their demands and pre- 
 judices a counterpart of those, of 
 the bourgeoisie, 182, 184, 188 ; Com- 
 pensation of, for injuries received in 
 employer's service, 190; Kelations 
 between, and employers, 201, 203, 
 205, 207-210; Participation of, in 
 profits, 209-211. 
 
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