LIBRARY OF CONGRESS. 
 
 Cliap\iBA3fcoi)yright No...lS___ 
 
 UNITED STATES OF AMERICA. 
 
Political Economy 
 
 FOR 
 
 High Schools and Academies. 
 
 /^ 
 
 ROBERT ELLIS THOMPSON, A.M., S.T.D., 
 
 President of the Central High School, Philadelphia. 
 
 Boston, U.S.A., and London : 
 
 PUBLISHED BY GINN & COMPANY. 
 
 1895. 
 
1 
 
 i 
 
 ^y\ A 
 
 Copyright, 1895, by 
 ROBERT ELLIS THOMPSON 
 
 ALL RIGHTS RESERVED 
 
PREFACE 
 
 This work is the result of twenty-five years of experience 
 in teaching the subject in the University of Pennsylvania, in 
 the Ogontz School for Young Ladies, in the Central High 
 School of Philadelphia, and in University Extension courses 
 delivered in Philadelphia and the adjacent towns and cities. 
 In this prolonged practice I have aimed at acquiring clear- 
 ness and conciseness, without coming down to twaddle and 
 commonplace. My experience at Ogontz has been of 
 especial value to me in this respect, as it was there that I 
 learned to adjust teaching to the understanding of younger 
 students, without insulting their intelligence by "talking 
 down" to them. That lesson I found just as useful in 
 addressing the more miscellaneous audiences, young and 
 old, trained and untrained, which University Extension work 
 brings together. 
 
 The book presents the views of Political Economy which 
 are held by the American or National , School of List and 
 Carey. I leave it to be judged whether these or the rival 
 doctrines of the English or Orthodox School — whether as 
 originally taught, or as modified by what is called the 
 Historical School — are most in harmony with the experience 
 of mankind and the needs of our own country. In treating 
 
IV 
 
 PREFACE. 
 
 of Bimetallism and Protection especially, I have been 
 obliged to tread on the ashes beneath which the lava glows. 
 I have tried to walk on the straight line of justice, and to 
 deal with entire fairness in discussing opinions which I do 
 not share. 
 
 In using the book teachers will deal with the Notes in 
 small print according to their judgment. They contain 
 matters which I thought the student should know of, but 
 which it is not necessary for him to study. I would suggest 
 that in no case should the words printed in Italics be passed, 
 until it is known that the class has a clear sense of their 
 meaning. 
 
 Philadelphia, June, 1895. 
 
CONTENTS 
 
 CHAPTER PAGB 
 
 I. What Political Economy is, and how it came to 
 
 BE I 
 
 II. The Conquest of Nature 8 
 
 III. Land and Farming 15 
 
 IV. Labor, Capital and Machinery 24 
 
 V. Money and its Uses 35 
 
 VI. Gold and Silver 42 
 
 VII. Banking, Paper Money and Credit ... 50 
 
 VIII. Taxation and Public Debts 62 
 
 IX. Domestic Commerce . 73 
 
 X. Foreign Commerce 81 
 
 XI. Protection and Free Trade 93 
 
 Xli. Communism, Socialism and Anarchism . . . 103 
 
POLITICAL ECONOMY FOR HIGH SCHOOLS 
 AND ACADEMIES. 
 
 CHAPTER I. 
 
 What Political Economy is, and how it came to be. 
 
 1. Economy means housekeeping. In early times house- 
 keeping was much more of an affair than it now is. The 
 people of each house built their own home, fashioned their 
 tools, tanned their leather, got ready their wool and flax for 
 spinning, spun and wove them, made their clothes, and in 
 fact produced all or nearly all they needed, instead of buying 
 them ready-made. Each houseful was a group much larger 
 than a family, and it provided itself with whatever it needed. 
 
 2. It is that kind of housekeeping that we mean when we 
 speak of Political Economy, which is the housekeeping of 
 the nation or State. It is not merely keeping the house 
 clean, home-like and wholesome, seeing that the food is 
 wholesome, and that the outlay on what is bought is no 
 greater than the income. It is, as in the early household, 
 seeing that all who can work are busy at, work which needs 
 to be done, and that there is plenty of material on which 
 they may work, and a proper distribution of what is made 
 according to the needs of each person. There is indeed 
 some buying and selling with other national households. 
 We send them what they cannot so well provide themselves 
 and we take in exchange what they have that we do not 
 
2 POLITICAL ECONOMY. 
 
 produce. And in managing this we have to take care that 
 our outlay is no greater than we can afford. But in the 
 main each national household provides for its own wants, 
 and is not unlike the big " halls," of a single room, in which 
 our forefathers lived, with the fire burning in the centre and 
 the house-father sitting opposite it on the high-seat. There 
 on the long winter evenings, on one side of the hall the 
 women carded wool or flax, spun it with their distaff, and 
 wove it on the loom. On the other side the men repaired 
 their weapons, made their rude tools for farming, fashioned 
 hides and leather into shoes, saddles and jackets, and did 
 other rough work. Macaulay in his ballad, " How Horatius 
 kept the Bridge," gives us a glimpse of such a household in 
 old Rome: 
 
 When young and old in circle around the firebrands close ; 
 When the girls are weaving baskets, and the lads are shaping 
 
 bows ; 
 When the goodman mends his armor, and trims his helmet's 
 
 plume ; 
 When the goodwife's shuttle merrily goes flashing through the 
 
 loom. 
 
 3. Political Economy, as an art or business, began with 
 the beginning of nations. Even before people had any 
 theory about how to do it, they hit upon ways of doing it, 
 just as people learned to play musical instruments and to 
 sing, before they had any theory about music. 
 
 In the ancient world a few men gave some attention to 
 the reasons of these methods, but not very much. They 
 were too much occupied with the comparison of different 
 forms of government, and other matters of poUtics, to have 
 time for Political Economy. 
 
 4. It was the discovery of America which first called 
 attention to the subject. That discovery caused a great 
 
POLITICAL ECONOMY. 3 
 
 inflow of Gold and Silver into Europe, where there had been 
 a growing scarcity of both. It made Europe quite a different 
 continent in the course of a hundred years. It put men to 
 work to improve farming, set up manufactures, build ships, 
 improve harbors, enlarge and beautify cities. As people 
 could not but see the great difference this made, they began 
 to ask why it was. The first simplest answer was that it 
 was plenty of money that made a nation prosperous and its 
 people industrious. And so the first economists spent their 
 time in planning how to get money into the country, and 
 keep it from going out. Some of their plans were rather 
 foolish. 
 
 5. Others who watched the change more closely saw that 
 money was not everything. Spain had got more of the new 
 Gold and Silver than any other country, but did not grow 
 rich thereby. Money flowed out of Spain as fast as it flowed 
 in, because her people were not industrious. It stayed with 
 the countries whose people were willing to work, but had 
 been prevented from finding employment by the want of 
 money, in a way which will be explained hereafter. So these 
 writers, whom we shall call economists, said that the country 
 which had the most industries and fewest idle people, would 
 both get and keep Gold and Silver. They would have more 
 to sell to their neighbors, and would need to buy less from 
 them, and the " balance of trade," as they called it, would 
 be paid in coin. So they urged governments to favor the 
 establishment of as many industries as possible, by paying 
 bounties on their products, or by taxing imported goods 
 which could be made at home. 
 
 6. As time passed, the impression produced by the results 
 of the inflow of Gold and Silver became weaker. The 
 subject began to be studied in other ways. A second school 
 of economists arose in France which taught that natural 
 wealth is to be sought neither in money nor in any industry 
 
4 POLITICAL ECONOMY. 
 
 but farming. Only the tillage of the soil, they said, gives us 
 a real addition to what we have already. Manufactures only 
 change the form of things, just as commerce only changes 
 their place. A yard of cotton cloth is but so much raw 
 cotton plus the food needed to support the workmen who 
 spun and wove it. And both the cotton and the food are the 
 result of tillage. They therefore taught that it was foolish 
 to be trying to have other industries estabUshed than agricul- 
 ture, and wished the State to allow entire freedom of trade. 
 
 7. A Scotchman called Adam Smith studied very closely 
 the writings of both schools, and worked out a theory of his 
 own, which became very popular. He asserted that all kinds 
 of industry help to make a people rich, but farming does the 
 most, while trade does the least ; manufactures coming 
 between the other two. He believed that all three would 
 grow up naturally, and without the government doing any- 
 thing to promote them. So he too advocated Free Trade 
 between nations, while he also taught that trade at home, 
 and especially between town and country, is far more 
 profitable to the nation. He declared that if every man 
 were left free to " do what he will with his own," he would 
 always do that which is best for society also. So he reduced 
 Political Economy, as an art, to doing nothing besides 
 collecting taxes and regulating the issue of money. In fact 
 the idea of the State as a household, with common interests 
 requiring a common management, disappeared. Every man 
 was to be left to shift for himself, except that government 
 was to protect him against theft and outrage. 
 
 8. While it was some seventy years before these new ideas 
 were avowedly adopted by any country, yet they began very 
 soon to give a new direction to public policy. Governments 
 became less meddlesome. They stopped trying to fix the 
 price of bread and the rate of wages, and to keep manu- 
 factures up to an established quality, by their inspection. 
 
POLITICAL ECONOMY. 5 
 
 Labor was set free from the restrictions of the guild system, 
 so that a man might practice any trade without having 
 served an apprenticeships and might open a workshop as a 
 master or employer, without having been a journeyman. 
 Men were thrown more upon their own resources of mind 
 and character, and were told not to lean upon the govern- 
 ment. There was thus a great development of self-reliance 
 and of enterprise. New inventions made labor more 
 productive, and enabled employers to organize it on a large 
 scale. The factory and the steam-engine replaced the 
 hand-labor of the old workshop. 
 
 9. Not all classes, nor yet all countries, prospered equally 
 in this age of free competition. The working classes felt 
 that they were getting the worst of it, as the power of the 
 modern capitalist over labor was vastly greater than that of 
 the old master in the guild. They therefore declined to 
 stand each by himself, and take his chances of work and 
 wages, as the new economists said was best. They organized 
 their Trades' Unions to control and restrict competition in 
 the labor-market, and by this means they exacted better 
 wages and reduced the hours of labor. Some of them, not 
 content with this result, propose to put an end to free 
 competition altogether. They want the State to take 
 possession of all the capital, and to employ all the labor of 
 the country, paying each man the largest wages his work 
 will permit. There have been some very able writers among 
 these Socialists, Karl Marx being the foremost. There is 
 also a school of Political Economists who try to satisfy the 
 Socialists by going half-way. They believe in extending 
 the power of the State to the control of industry, to the 
 insurance of laborers against loss of employment and sick- 
 ness, and to the ownership of railroads and telegraphs. 
 
 10. The less wealthy nations also suffered from this free 
 competition, wherever it was adopted in trade between them 
 
6 POLITICAL ECONOMY. 
 
 and their richer neighbors. That natural growth of the 
 industries, which Adam Smith promised, was not helped 
 but hindered, or rather prevented, by the competition of 
 foreign manufactures. Countries which had possessed 
 manufactures lost them; those which had none failed to 
 acquire them. Both were kept on the level of merely 
 farming their lands to produce food and raw materials, 
 which the richer countries took in exchange for hardware 
 and dry goods. In this trade the rich grew richer, but the 
 poorer countries poorer. These " sold the hide for sixpence, 
 and bought back the tail for a shilling." 
 
 It was this experience which drove the less wealthy 
 countries generally to adopt a system of Protection to Home 
 Industry. They laid duties on the imported articles which 
 might be made at home. Thus they tried to discourage the 
 use of foreign wares, and to secure the growth of manu- 
 factures alongside their farming. 
 
 11. At the same time there arose a school of writers on 
 Political Economy who showed the reasons for this policy. 
 They agreed with Adam Smith that all the three great 
 industries — farming, manufacturing and trading — are 
 sources of wealth, and necessary to the general welfare. 
 They also said, as he did, that of these farming is the most 
 important, and trading the least so ; and that trade between 
 town and country is vastly more profitable to the nation 
 than is foreign trade. But they showed, not only from 
 experience, but from the reason of things, that a poorer and 
 more backward country cannot expect to obtain a well 
 balanced growth of the three great industries unless its 
 government takes pains, and its people will make sacrifices, 
 for that purpose. Of this school Frederick List in Germany 
 and Henry C. Carey in America are the foremost writers. 
 
 12. Political Economy is National housekeeping, after 
 the manner of our forefathers when each family was an 
 
POLITICAL ECONOMY. 7 
 
 industrial unit. As an art it is as old as government itself. 
 As a science it dates from the discovery of America, when 
 the effects of a new supply of money set men athinking as 
 to the reasons for the great change this made. First money 
 was the chief thought; then agriculture. Adam Smith 
 founded the school of " natural liberty," whose teachings 
 came into practice, but caused in later times a reaction on 
 the part of weaker classes and nations. The National school 
 of List and Carey justify this reaction, and present the 
 whole subject from a new point of view. 
 
CHAPTER II. 
 
 The Conquest of Nature. 
 
 1. The good book tells us that man was put into the 
 world with orders to " replenish (or fill up) the earth, and 
 subdue it." Our well-being depends on our subduing 
 its forces to our service. Some things nature gives us 
 without an effort ; but these are very few, and not enough 
 to keep us alive. She is more exacting of men than of the 
 lower animals, who generally find their food at hand, and 
 have at most to catch it as it moves or flies, or gather it as 
 it grows. And as more is demanded of man, greater power 
 of intelligence has been developed in him, or given to him, 
 that he may meet the demand. 
 
 2. Savage vAzxi lives a good deal as do the lower animals, 
 on what nature offers him without his foresight being brought 
 into play. He kills wild beasts and birds, catches fish, 
 gathers fruits and nuts, collects nutritious roots and seeds. 
 The quantity of these to be found in a given area is generally 
 so small that a single family needs square miles of earth's 
 surface for its support, and often suffers greatly from want 
 at that. The savage's condition is one of almost constant 
 hunger, broken by surfeits of food when a supply is obtained. 
 He starves over an area which would supply an abundance 
 of food to a thousand times as many people, if it were 
 brought under cultivation. Thus at the discovery of 
 America the present area of the United States was occupied 
 by about a quarter of a million of Indians, and these — 
 except where the supply of fish was abundant — suffered 
 from frequent famines. 
 
POLITICAL ECONOMY. 9 
 
 3. The barbarous tribes rank a grade higher than the 
 savage. They generally begin their advance from the 
 savage condition by bringing some of the useful animals, 
 the sheep or the ox for instance, under control, and thus 
 creating flocks and herds, upon which they depend for food 
 and clothing. As these animals find nourishment in plants 
 on which man cannot feed, the shepherd and cow-tending 
 races derive far more sustenance from a given area than 
 can the savage. Their food supply is far less uncertain ; 
 and the habit of caring for animals, instead of simply killing 
 them at sight, develops in them gentler and more humane 
 ways of dealing with each other. As they are more 
 confined to the places on which they find pasture, they 
 have better opportunity of studying its vegetation as a 
 source of supply for food and clothing; and they begin 
 to cultivate some plants in preference to others, gather- 
 ing seeds in the fall and planting them in the spring. 
 Under this tillage these plants naturally improve as food- 
 producers. 
 
 4. Our own continent was retarded in the development 
 of its people, by the want of animals like the sheep and ox. 
 It was the greater density of the population in the warmer 
 countries, to which the Indian tribes thronged to escape the 
 northern winter, that drove them to till the soil and cease 
 depending on what nature offered without labor. Out of a 
 species of wild grass, which still grows in southern Mexico, 
 they developed the maize plant by artificial selection. They 
 also cultivated the cassia root, and the cocoa, and various 
 species of grains. To secure a water-supply in many places 
 they had to construct stone aqueducts ; and to know when 
 the time had come for planting they had to study the 
 calendar of the year. Thus a rude architecture and a ruder 
 science were forced upon them by their necessities; and 
 the denser population made it both necessary and possible 
 
10 POLITICAL ECONOMY, 
 
 for them to undertake works which the weaker tribes of the 
 north never attempted. 
 
 5. Civilized man does not depend upon what nature 
 offers him, but obtains inteUigence of nature's forces, and 
 uses this to subdue them. He finds abundant resources 
 where the savage and even the barbarian can get but little, 
 and is thus enabled to support a large population on an 
 area where a handful of savages or a barbarous tribe would 
 starve. He exercises a careful selection in the vegetable 
 and animal kingdoms, exterminating those species which 
 are unfitted to his use, and developing the others into 
 greater usefulness. He adds to the wealth of the soil by 
 manuring, and widens the area of tillage by draining wet 
 lands. He brings the forces of nature — wind, water, 
 steam and electricity — into his service, and adds their 
 power to his own. Thus with every year he becomes more 
 fully master over nature, and better able to supply his wants 
 out of her stores. 
 
 6. As in the warmer parts of America, so probably in 
 Asia and Europe also, it was the growth of population 
 which drove men to give up the old savage way of living, 
 and then that of the barbarian, and to adopt methods which 
 would increase the food supply. It was the same increase 
 of population which made the adoption of better methods 
 possible. A single man, or a mere handful of men, is 
 unable to achieve the conquest of nature we call civiliza- 
 tion. When a handful of settlers, who have been brought 
 up in civilized ways, find themselves alone in a new country, 
 they have to go back to barbarous ways of providing for 
 their wants. They are too weak to do better, and they run 
 the risk of dying for want of food in the midst of natural 
 resources capable of supporting a dense population. Hence 
 the failure of so many small colonies and settlements in our 
 own history. They were destroyed or beaten back by abso- 
 
POLITICAL ECONOMY. 11 
 
 lute want ; and those which succeeded did so at the cost 
 of undergoing severe hardships of cold and hunger, and 
 consequent sickness. 
 
 7. Single men and small bodies of men are weak in the 
 presence of nature. She is their mistress, not they her 
 masters. They must take what she chooses to give, and 
 retreat or perish if her gifts are not sufficient for their 
 needs. 
 
 Large bodies of men, united by industrial association for 
 the mastery of nature, are strong in her presence. They 
 can wrest from her what they need. They can clear away 
 her forests, drain her swamps, bring the soil under tillage, 
 and secure a larger share of necessary things for each, than 
 when a small number seemed to possess everything. 
 
 8. Association with his fellowmen is man's first need, if 
 he is to attain a comfortable existence. By this term 
 "association" is meant not only a conscious and understood 
 agreement between several men for the pursuit of a 
 common object; it means the interlacing of men's lives in 
 mutual service, even though they never have seen each 
 other's faces. Thus when I buy a barrel of flour, I am 
 acting in association with the farmer who grew the wheat ; 
 the trader who bought it of him; the miller who ground 
 it ; the barrel-maker who prepared the packing which holds 
 it ; the railroad men who brought it from the mill ; the 
 dealer from whom I bought it ; and many others besides 
 these. Of the whole series I know only the last, yet each 
 of them has been serving me ; and I in turn, by my payment 
 for the flour, have been serving each of them. It is this 
 association which is the mark of a civilized life, and which 
 makes it possible for millions to have the use of more food 
 and clothing than hundreds did before. 
 
 9. The power over nature which we attain through this 
 association, we call wealth. As it is not a single man, but 
 
12 POLITICAL ECONOMY. 
 
 the whole body of men in the country, who acquire this 
 power, wealth is first of all a social possession. When we 
 speak of individual men as wealthy, we mean that in the 
 distribution of this power a larger share has fallen to some 
 than to others. This is just when it is the result of greater 
 personal intelligence or capacity, which has enabled these 
 to render greater services to society than others have. It 
 is unjust when it has been obtained by force, as in the 
 conquest of a weaker people by a stronger, or by fraud of 
 any kind. So long as men differ in ability, some will 
 command a greater share of the results from subduing the 
 world to our use than others do. We have a right to 
 complain of this only when they have got their larger share 
 by wrong ways. 
 
 10. While wealth is the same as power over nature, value 
 is the measure or indication of nature's resistance to our 
 obtaining the things we need. It is not the same as utility: 
 air and water are the most useful substances we know of, 
 but air has no value and water very little, because they are 
 so plentiful. 
 
 Value does not depend on mere scarcity, for there are 
 some very scarce things for which there is very little 
 demand, as they have no use that we know of. To be 
 valuable a thing must be wanted for use, or for ornament, 
 or as a curiosity, and also must be something we cannot get 
 without an effort. If we can reduce the amount of effort 
 needed to obtain it, then the value falls. If there be a 
 great decrease of the supply, then the value rises. The 
 value of diamonds has fallen since the discovery of the 
 diamond-mines in southern Africa, while rubies and emer- 
 alds are as valuable as before. The value of petroleum 
 has risen since the Pennsylvania oil-wells began to give out. 
 
 11. It is not always true that value falls proportionally 
 to an increase of the supply. If new uses are found for the 
 
POLITICAL ECONOMY. 13 
 
 article, and a greater demand is thus created, its value may 
 remain much the same, or the fall in its value may be much 
 less than the increase. Thus between 1492 and 1792 the 
 supply of Gold and Silver coin in Europe increased thirty- 
 fold by importation from America. Their value, however, 
 fell not to one-thirtieth, but to one-twelfth of what it had 
 been before America was discovered. In this connection it 
 is necessary to remember that Gold and Silver are not 
 metals whose value remains fixed. They are called the 
 precious metals because they are the rarest for which men 
 have much use, and are therefore the most valuable that are 
 largely used. Their value varies from time to time with the 
 demand for them, and with the supply, just as does the 
 value of iron or of wheat. 
 
 12. As nearly everything we have a use for keeps falling 
 in value, through our devising better ways of getting it, or 
 finding new supplies of it, the price we pay for articles is 
 not always what it costs to produce them. If we can 
 reproduce or replace them with less outlay of labor than 
 when they were made, we will not pay more for them than 
 they would now cost. Thus a house that has stood for a 
 century is not worth what it cost to build it. All the 
 materials of which it is made had to be hauled to the site 
 by horses or oxen. The bricks in the walls were made by 
 hand. The timber was cut into boards in a saw-pit, one 
 man pulling the saw up through the log, another down. 
 The boards were planed by hand. The glass was made by 
 a laborious method. All these things are done more 
 cheaply now, mostly by machinery and steam-power. So 
 we are willing to pay for such a house only what it would 
 require to build another house like it, using modern tools, 
 machinery and the like. 
 
 13. The price of anything, therefore, is not the cost of 
 making it, but the cost of replacing it, or making another 
 
14 POLITICAL ECONOMY. 
 
 like it. In some cases, as of articles recently made, the two 
 costs are the same. In the case of the bulk of the wealth 
 of a country the two are not the same. The present price 
 of a State like Pennsylvania, for instance, is not equal to 
 the amount of labor expended in clearing, fencing and 
 draining the fields, making the roads, streets and railroads, 
 building the houses, bridging the rivers, sinking the wells, 
 digging the mines, tunnelling the mountains, and so forth. 
 It is only the cost of the labor needed to have taken 
 Pennsylvania as WilHam Penn found it, and to make it 
 what it is by means of modern machinery, tools and 
 appliances of all sorts. Even if we deduct all the labor 
 whose results have been consumed, we shall find that 
 Pennsylvania cost a great deal more than it could be sold 
 for. 
 
 14. With the progress of intelligence, and the growth of 
 numbers, man acquires the power over nature we call wealthy 
 while the values of the things we desire fall. Mankind 
 passes through savagery and barbarism to civilization, 
 through increase of numbers and of industrial association, 
 which this makes possible. The more people in a country, 
 the larger should be the share of necessaries which falls to 
 each. Men pass from worse to better in land, labor and 
 food. 
 
CHAPTER III. 
 
 La7id and Farminsr. 
 
 "ti' 
 
 1 . We have seen that man passes through three stages in 
 the use of land. He is first a hunter, then a shepherd, then 
 a farmer. In each new stage he needs less land, and gets 
 more out of it, than in the preceding. This lessening of 
 the area he needs, and increase of food and clothing 
 obtained, does not stop with his entrance upon farming. As 
 he acquires more power through the increase of numbers 
 and of intelligence, and through the association with his 
 fellows thus made possible, he narrows still further the area 
 of land he tills, and yet increases his crops. 
 
 2. Early farming is confined to the poorer soils, which 
 are dry, thin and easily tilled. They need no drainage, 
 and can be ploughed with a roughly shaped log, and har- 
 rowed with a bush. The crop will be a scanty one, perhaps 
 seven or eight bushels of wheat to the acre ; but that is the 
 best that is possible to a farming which is weak in its power 
 to conquer nature. 
 
 Later farming comes down from the dry hilltops to the 
 richer valleys below them. It finds in the creek and river 
 " bottoms " the elements of fertility, which the circulation of 
 water has carried down from the higher lands. It applies 
 drainage to their wetter soils, and gets a far larger return 
 for the labor expended. 
 
 It is a mistake therefore to assume that those who first 
 settle a country will bring the best lands under tillage. We 
 might as well assume that they will burn coal rather than 
 wood, or travel by rail rather than on horseback. They 
 
16 POLITICAL ECONOMY. 
 
 take the best they can make use of, and men pass from 
 what is worse to what is better in the use of land. 
 
 3. Early farming is extensive. It spends a small capital 
 on a great acreage of soil, and gets a small return. Thus 
 in the Middle Ages, when England had a population of 
 about two millions and a half, there was a great acreage of 
 wheat sown, so that the people of the towns had to turn out 
 to help to reap it. Also the students of the Universities, 
 who were counted by tens of thousands at that time, had 
 to go home to help. This is the origin of the summer 
 vacation of schools and universities. The crop averaged 
 about seven or eight bushels to the acre, and the whole 
 food-supply was what we now would think enough for a 
 million and a half of people. The yield of wheat in England 
 is now more than thirty bushels an acre, and some of her 
 farmers have raised sixty. 
 
 4. Later farming is inteftsive. It spends a large capital 
 on a small acreage. As some one says, it leaves off thinking 
 of the soil as a quarry, and begins to think of it as a piece 
 of scientific apparatus. Instead of letting the land lie 
 fallow one year in three, that nature may restore it after 
 exhaustion, it supplies each year by manures what the last 
 crop has taken. For this purpose it maintains a great stock 
 of cattle, and takes from the barnyard what enriches the 
 fields. It keeps these cattle under cover in winter, and 
 thus saves the food which would be needed to keep them 
 warm, and prevents their degenerating through exposure. 
 It establishes a rotation of crops, and thus avoids drawing 
 from the soil the same material every year. It keeps the 
 wetter soils warm by drainage, and thus increases the crops. 
 It uses tools and implements constructed on the strictest 
 scientific principles, and thus saves the labor of men, 
 and uses the toil of horses and oxen to the best advan- 
 tage. 
 
POLITICAL ECONOMY. 17 
 
 5. Early farming was poor because the land was held in 
 common ownership by a large group of persons. Frequently 
 no one was sure of having the same piece of land year 
 after year, and therefore he had no motive to make perma- 
 nent improvements. In all cases the tilled land became 
 grazing land after a certain date in the autumn, and each 
 farmer must have his work done by that day. Every year a 
 third lay fallow and was grazed, in England and on the 
 continent of Europe, whether the owner of each plot wished 
 it or not. The methods of tillage were traditional, and 
 much of the work was done in common, so that no improve- 
 ments could be made until they were approved by the whole 
 community. Little change for the better was possible until 
 this common ownership was broken up. 
 
 Later farming gives room for each man to do his best with 
 the land he has, whether he owns it or has leased it. It 
 leaves him free to try which is the best time to sow and to 
 reap, the best way to dig or plow and to reap, the best seeds 
 or roots for each kind of soil. It throws him upon his own 
 judgment, instead of subjecting him to the opinion of a 
 community of men. It thus develops his manhood while 
 making the best of the soil. 
 
 6. Farming is better done, as a rule, by men who own the 
 soil than by those who have only leased it. A very lazy 
 man, it is true, will work harder if he has to earn his rent 
 than if he had only to get his living out of the soil. But the 
 average farmer needs no such spur to industry ; and it con- 
 tributes to the Nation's welfare to have land owned by those 
 who till it. Farmers who own their land are indisposed to 
 favor violent changes in the State. They support its 
 institutions or its interests against revolutionists and anar- 
 chists of all kinds. They have at stake their property in 
 the land. They are rooted in the soil, and therefore 
 conservative. For this reason all the ancient codes of law 
 
18 POLITICAL ECONOMY. 
 
 favored the ownership of land by the majority of the people. 
 The laws of Moses made each farm the perpetual endowment 
 of the family to which it was assigned. It could not be sold 
 away from the family ; and if pledged for debt, it returned 
 to the family at the year of Jubilee. 
 
 7. For this reason small farms are better than large, as 
 the subdivision of the land increases the number of land- 
 owners. Of course in the early settlement of any country 
 the farms will be large at first. With the growth of popula- 
 tion they should be growing constantly smaller, and at the 
 same time the product of each small farm should be greater 
 than was that of the larger. In eastern America many 
 farmers are '' land-poor " because they will not learn this. 
 They have not the capital to till a hundred or two hundred 
 acres, on which they have to pay higher taxes with every 
 decade. If they were to sell off half, and spend the money 
 on the rest, they would become prosperous. 
 
 8. The finest farming in the world is seen in the northern 
 provinces of Belgium. Many of them are as small as seven 
 or eight acres. The land is not naturally rich, but the labor 
 of the people has made a garden of it. They spend twice 
 as much on an acre as is done in England, and keep more 
 cattle. They feed 1800 people to a square mile, and save 
 money. Much of their success is due to the fact that they 
 formerly were a manufacturing people, but their manufac- 
 tures came to an end when the steam-engine superseded 
 hand-labor. They had no coal-beds, and to transport coal 
 in those days was costly. So they applied to farming the 
 careful and business-like methods of the workshop. They 
 economized their time well, wasted no material, left no 
 corners in possession of weeds, and studied which were 
 the best crops, the best implements, the best breeds of 
 cattle. They watched the markets, especially of all the 
 great cities within reach, to see what there was a demand 
 
POLITICAL ECONOMY. 19 
 
 for. America and even England might take lessons from 
 them. 
 
 9. The value of land, like that of anything else, is the 
 measure of nature's resistance that we have overcome in 
 getting what we need of her. It is thus the result of labor 
 expended either on the piece of land itself, or upon land in 
 its neighborhood. Apart from labor, land is merely soil^ and 
 has no value. Through labor it becomes farms and house- 
 lots, and acquires value. There is no value in mere soil, 
 however fertile, unless it has acquired value either through 
 cultivation or through its situation. Nobody would give a 
 dollar for a square mile of the Amazon valley, which is the 
 most fertile soil in the world. No doubt it will yet become 
 the most valuable through conquest of nature's forces by 
 labor. At present an acre of New Hampshire, with the 
 granite cropping out, is worth far more. 
 
 10. As value is the result of labor, those who buy or rent 
 land are paying for the results of labor. They are not pay- 
 ing for what the soil was before labor was expended, but for 
 the farm which human labor has produced from that raw 
 material. A farm is like a ship. Nature gives us the 
 materials out of which to make it, but it is labor which gives 
 these their value in adapting them to human use. Now ships 
 are constantly falling in value, because of the improvements 
 in the ways of making them. No ship that was built twenty 
 years ago would bring near what it cost, even after all allow- 
 ance for wear has been made. So it is with farms, although 
 here the changes are not so rapid. The improvement in 
 machinery and in methods brings down the price of all that 
 has been done in making them ; and their owners cannot sell 
 them for what they cost, but for what it would cost to 
 replace them. 
 
 11. For the same reason, those who rent farms from their 
 owners are able to obtain the use of them in return for the 
 
20 POLITICAL ECONOMY. 
 
 payment of a smaller share of the crop than formerly. It is 
 often true, indeed, that the amount of produce (or its equiv- 
 alent in money) is larger than was paid formerly. But in 
 most cases it will be found that the share of the harvest 
 which the landlord takes in rent is diminished. The only 
 exception is where a change in situation has taken place, 
 through the rise of a better market for farm-produce close 
 by the farm ; and even then the tenant is paying more only 
 because there is a much larger value on which to pay. He 
 is paying for value added to the land by labor on adjacent 
 land. 
 
 12. That part of the value of a piece of land which is due 
 to labor expended on itself is called the earned increme?tt. It 
 is represented by the clearing away of timber, fencing, 
 unexhausted manures, drainage, crops, meadow-sward, lawn, 
 houses, out-houses, and whatever else would not be on the 
 land except through the labor of man and the toil of beasts. 
 To this might fairly be added what the owner or tenant has 
 done to make roads, build school-houses and churches, or to 
 contribute to any object of general benefit in his neighbor- 
 hood. All these add to the value of the land, and have 
 been done by him as the holder of this particular piece 
 of it. 
 
 13. The part of the value of a piece of land which is due 
 to labor expended on land in its vicinity, we call the unearned 
 increment. This of course is greatest where the population 
 is most dense. Thus the owners of land in or near a great 
 city may become rich simply by holding on until their prop- 
 erty rises in price through the demand for building-lots. 
 Away from the cities this kind of increase in value is not so 
 striking. Yet whenever a railroad establishes a station at 
 any point, the land near it rises at once and decidedly in 
 value. So, in a less degree, does all the other land within 
 reasonable reach of such a station. Most of the land which 
 
POLITICAL ECONOMY. 21 
 
 has been taken up in homesteads in the West would have 
 had no value if the railroad had not preceded the settlers, 
 and had not given them lower rates for carrying their 
 produce than are given to Eastern farmers. Even on these 
 terms, such lands are far from cheap, although the settler 
 pays for i6o acres merely the costs of survey, ranging from 
 $37 to $46. The labor of breaking new soil, and the costli- 
 ness of creating all social conveniences, are a high price in 
 themselves. 
 
 Note. — The proposal to take in taxation all the unearned 
 increment, on the principle that it is the creation of society and 
 therefore belongs to society, will b^ discussed in the chapter on 
 Taxation. 
 
 14. The comfort and success of the farmer, therefore, 
 depend not only on what he does with his own land, but on 
 what is done on the land in his neighborhood. The railroad 
 may extend his neighborhood somewhat by carrying his 
 wheat or corn or pork a thousand miles, at the rate it would 
 charge for a hundred miles in the East. But under such 
 conditions he can raise only the few crops which will bear 
 a long transportation, and is thus debarred from having a 
 proper rotation of crops. And it will not give him rates 
 equally low on what he purchases at a distance, or what he 
 gets in exchange for his crops. He thus suffers in both his 
 farming and his profits by his distance from the market. 
 
 Formerly this mattered much less, as every farm was 
 almost a self-supporting community. The . shoes and cloth- 
 ing, the soap and candles, and many other conveniences 
 were then made in the farm-house. It was not necessary to 
 sell much, as very little was bought. The changes in our 
 habits and tastes, and the great cheapening of what is 
 produced by the factory system, has put an end to this. 
 The farmer must find a market for about forty per cent 
 
22 POLITICAL ECONOMY. 
 
 of his crop in order to purchase the real or supposed 
 necessaries of his existence. The " age of homespun " is 
 departed, or lingers only in out-of-the-way corners of the 
 country. 
 
 15. It is of great importance to the farmer, therefore, to 
 have those who supply him with what he must buy, at work 
 in his own neighborhood. If his farm is near by a large 
 and busy population, which is not producing food, he has a 
 steady market for a large variety of farm, garden, orchard 
 and dairy produce. He can vary his crops from year to 
 year, so as to avoid the rapid exhaustion of his land. He 
 can keep many cows and horses, to the enrichment of his 
 manure-heap, and can supplement it with all kinds of town 
 refuse. He can distribute the risks of farming by growing 
 a great variety, so that the weather which hurts one may 
 suit another. While he who farms at a distance from his 
 market can hardly help injuring the quality of his land, he 
 who farms in the neighborhood of his market has constant 
 and plentiful opportunity to improve it. 
 
 16. A whole community in which there is no employment 
 but farming is in constant risk of famine. It sounds odd 
 that people are in danger of starvation when they give all 
 their energies to producing food ; but experience proves this 
 true. All the foreign countries which have had great 
 famines in recent times, have been merely agricultural coun- 
 tries. Ireland, India, China, Persia, Asia Minor, Russia, 
 northern Sweden are instances. At home we have had 
 local famines in parts of Virginia and of West Virginia, and 
 in Nebraska, for the very same reason. When a community 
 "puts all its eggs into one basket," if the basket fall they 
 are ruined. In India if the rains fail to come in the rainy 
 season, it means death to myriads, perhaps to millions. 
 When India was a manufacturing country, the greatest 
 manufacturing country in the world indeed, she had no 
 
POLITICAL ECONOMY. 23 
 
 famines except through the desolations of war. More than 
 the population of any American State have died of hunger 
 in India under the reign of Victoria, and in times of pro- 
 found peace. 
 
 Note. — A government report on Indian famines, made in 
 1885, says : " At the root of much of the poverty of the people of 
 India, and of the risks to which they are exposed in seasons of 
 scarcity, lies the unfortunate circumstance that agriculture forms 
 almost the sole support of the mass of the population ; and no 
 remedy for present evils can be complete which does not include 
 the introduction of a diversity of occupation, through which the 
 surplus of population may be drawn from agricultural pursuits 
 and led to find means of subsistence in manufacturing or some 
 such employment." 
 
 17. The history of man as a farmer is one of progress in 
 the conquest of nature through the growth of association, 
 which the increase of numbers and of intelligence permits. 
 He passes from worse land and methods to better. From 
 a decreasing acreage he obtains an increasing crop. But 
 his progress requires the co-operation of other industries 
 than his own, and the neighborhood of the artisan to give 
 him a steady home market. 
 
CHAPTER IV. 
 
 Labor ^ Capital and Machinery. 
 
 1. A POOR man, who was out of work, once asked a 
 wealthy merchant for assistance or employment. Stephen 
 Girard did not believe in giving money to those who would 
 not work, but he told the man to go into his yard and carry 
 a big pile of stones from one side of it to the other. The 
 man did it, and came back to report that he was done. 
 " Now carry them back again," said Mr. Girard. This the 
 man refused to do, and Mr. Girard dismissed him. 
 
 Was the man right or wrong ? He was right, because 
 what Mr. Girard offered him was not the labor he wanted, 
 and it was beneath his dignity as a man. Labor is human 
 effort directed to some useful purpose by human intelligence. 
 A horse may toil, and a machine may work, but only a man 
 can labor. To ask of a man toil which has no regard for 
 use or service is to insult him. The " dignity of labor " lies 
 in usefulness. 
 
 2. All labor requires the co-operation of capital if it is 
 to produce anything. Capital is the result of past labor 
 employed to carry on present labor. Every man is a capi- 
 talist, in this sense. All the knowledge and experience he 
 possesses, all the tools he owns, all the special expertness 
 he acquires in doing any sort of work, and even all the 
 vigor he derives from the food he has eaten, are forms of 
 capital. Even to dig clams on the seashore requires capital. 
 You must have (i) the knowledge that a clam is hidden 
 under that little airhole in the sand; (2) a clam-shell at the 
 least to lay him bare ; (3) the alertness of eye and hand 
 
POLITICAL ECONOMY. 25 
 
 needed to keep him from escaping; and (4) the strength 
 from food which is needed to keep you up to the work. So 
 of berry-picking in the woods, or any other simple employ- 
 ment : they all require capital, the results of past labor, to 
 carry on present labor with success. 
 
 3. Equally true is it that capital requires the help of 
 labor to produce anything. The wealthy man may live 
 indeed on what he has accumulated until it is exhausted ; 
 but if he wishes to keep up his stock or add to it, he must 
 do this either by his own labor or that of others. There is 
 no increase without labor. Even the forces of nature and 
 the toil of animals cannot be employed without it. 
 
 The laborer and the capitalist therefore are partners in 
 every undertaking. All they produce is a joint-product, 
 from which labor draws wages and capital draws profit. 
 
 4. In the first stage of the history of labor, each worker 
 owned all the capital he made use of. There were no two 
 classes called laborers and capitalists. The rude tools, the 
 imperfect intelligence and the poor skill of the barbarian 
 workman were his own, and no better were to be had. He 
 was his own master, and he did not produce much, because 
 he had so many things to do that he never learned to do 
 any of them very well. 
 
 5. In the next stage we find masters and workmen as 
 separate classes, yet working side by side. The masters are 
 very many, and none of them has much capital. Each has 
 a workshop^ and employs his journeymen and his apprentices 
 at hard labor mostly, and works beside them himself. Every 
 journeyman expects to become a master, as every appren- 
 tice knows he will be a journeyman as soon as he is old 
 enough. The laws will not allow any one to practice 
 any trade, or open and own a workshop, unless he has 
 begun at the beginning, and has worked his way up. 
 Each trade has its guilds in which both masters and work- 
 
26 POLITICAL ECONOMY. 
 
 men are members, to see that this and other rules are 
 enforced. 
 
 6. In the third stage the steam-engine and the machinery 
 it keeps going have come to share the work. A much 
 larger capital is needed to start a factory than was required 
 for the old workshop. The masters (or capitalists) who 
 employ labor are much fewer relatively. Only a few work- 
 men can expect to become masters themselves. The two 
 classes are therefore much farther apart ; and, as the em- 
 ployer cannot know all his workmen, but has to deal with 
 them through his foreman, the chances of misunderstanding 
 and strife are much greater. There is, indeed, more liberty of 
 action. The guild has disappeared, and every man is free to 
 work at any business at which any one will employ him. But 
 the security also of the guild has disappeared, along with its 
 rules to fix the hours of labor, the rate of wages and so forth. 
 
 7. To take the place of the guild, the Trades' Union 
 arose. It combined great bodies of the working people to 
 exact better terms than the single workman could secure, 
 as to wages, hours of labor, and other matters. To make 
 this sure, they refused to work with those who had not 
 joined the Union, that they might drive these to act with 
 the rest. In some cases they enforced their demands by 
 strikes, that is, by stopping work until the employers agreed 
 to what they asked. In some cases these strikes were at- 
 tended with violence and cruelty toward workmen who would 
 not unite in them, or who came from a distance to take the 
 places which the strikers had left. 
 
 8. The great question in dispute between the capitalist 
 and the laborer is the division of the joint-product, so that 
 the former shall get a i2xx profit and the latter fair wages. 
 The law indeed treats the joint-product as the sole prop- 
 erty of the capitalist, and recognizes no claim on the part 
 of the laborer except on the ground of a previous agree- 
 
POLITICAL ECONOMY. 27 
 
 ment, expressed or understoodo But the laborer has a 
 moral right to a fair division, and therefore to fair terms in 
 making his agreement as to the rate of his wages. And it 
 is the interest as well as the duty of his employer to see 
 that he gets fair wages. Ill-paid labor is never really cheap 
 labor, just as slave labor is worth less than that of free 
 workers. Wages which make workmen comfortable and 
 contented, which give them hopefulness and cheerfulness, 
 are those which get the best work out of them. It is profit- 
 able as well as right for the employer to attach his workmen 
 to himself by remembering that they are human beings, and 
 by doing the best he can for them in paying them. 
 
 9. Some economists, indeed, say it is not wise to pay the 
 workman more than will supply him with the necessities of 
 life, or what he thinks to be such. That rate of wages, they 
 think, will lay just check enough on their marrying to keep 
 the number of workmen always up to the needs of the labor- 
 market, and not let it rise above that. They predict 
 that higher wages will cause such a growth of the laboring 
 class as will pull down wages lower than they were before. 
 
 This view of the matter amounts to saying that the work- 
 ingman is a sort of domestic animal, whose price is fixed by 
 supply and demand without his having any will in the 
 matter. It was refuted by the workingmen themselves, 
 when they refused to work at such wages as this theory sug- 
 gested, and compelled their employers to pay more. If the 
 theory had been true, this success would have been followed 
 by a great fall in wages in the next generation. But the 
 fall did not come, and the masters say they would not think 
 of proposing to go back to the old rate. Thus the working- 
 man showed he was not a domestic animal, but a person, 
 with a will of his own. 
 
 10. In dividing the joint-product between the two classes 
 which have produced it, we must take other matters besides 
 
28 POLITICAL ECONOMY. 
 
 profits and wages into the account, (i) The cost of the raw 
 material^ and of fuel and water, or of water-power, must be de- 
 ducted. (2) The wear and Uaroi building 2ind machinery must 
 be deducted. (3) Interest on the capital at ordinary market 
 rates must be deducted. The capitalist might as well have 
 lent it, as taken the risk of putting it into a factory or a mill. 
 
 After deducting these three we may count what is left as 
 to be divided between wages and profits. And here we 
 must remember that the employer himself is entitled to 
 " wages of superintendence," as well as to profit. Profit is 
 simply the payment for the risk he has taken in putting his 
 money into the business. But besides that, he has put at 
 its service his practical intelligence, his business experi- 
 ence, his enterprise and his time. For these he is as much 
 entitled to compensation as is any workman for his labor, or 
 any foreman for his oversight. Very often, indeed, these 
 wages of superintendence are his chief reward, as he may 
 not own the capital, and may have to pay both interest and 
 profit to the actual capitalist. 
 
 II, In dividing what is left between wages and capital, 
 we find there is a lower line below which wages cannot fall 
 and a higher line above which they cannot rise, (i) They 
 cannot go so low that they will not supply the actual needs 
 of the workingman. He may as well starve in idleness as 
 starve at work. (2) They cannot go so high as to leave 
 no profit to the capitalist. He may as well stop his factory 
 as go on without a profit. 
 
 These two lines sometimes come very close together. In 
 bad times it often happens that wages which will just sup- 
 port the workingman, leave very little profit on capital, or 
 none at all. But in good times the two lines lie apart, and 
 the great problem is to draw a line of division between 
 them. Where it shall be drawn is not fixed by any natural 
 law, but by agreement. 
 
POLITICAL ECONOMY. 29 
 
 12. In making this agreement some things favor the work- 
 man, and some the capitaHst. Thus in a free country, where 
 public opinion demands that the workingman shall live in 
 decency and comfort, this opinion helps to put wages up. 
 In another country public opinion may be on the side of 
 capital, and help to keep them down. 
 
 13. Experience shows that in drawing this line it makes 
 a great difference whether labor is so organized that work- 
 men make their agreement in a body, or each man bargains 
 for himself. In the latter case the capitalist generally can 
 make his own terms, as he can better afford to wait. Now 
 " labor is the most perishable of commodities." It is half 
 gone by noon, while the workman has been trying to sell 
 his day's labor. He cannot wait unless he is certain of 
 getting more by waiting, as the single workingman never is. 
 Even the associated body of workmen may make heavy losses 
 in waiting for better terms in a strike. But they always 
 expect to recoup these losses by higher wages, and this 
 they frequently do. Even when they lose their time and 
 trouble in an unsuccessful strike, they may afterwards 
 recover what they have lost by the mere threat to strike a 
 second time. 
 
 14. The natural tendency is for wages to rise higher, 
 while profits remain at much the same figure. This is be- 
 cause, as was shown in the second chapter, the value of 
 things falls steadily with improvements in the methods of 
 producing them. All the results of past labor are thus 
 declining in value, and command lower prices than when 
 first produced. Price is determined not by the cost of pro- 
 ducing, but by the cost of reproducing or of replacing. As 
 soon as any improvement has been made, this latter cost 
 falls below the former. 
 
 Now capital is merely that part of the products of past 
 labor which is used in present labor. It also can be repro- 
 
30 POLITICAL ECONOMY, 
 
 duced more easily than it was produced. Its value, there- 
 fore, constantly falls, and its owner will get less for the use 
 of it than he did. In the great partnership of capital and 
 labor, it is therefore the laborer who makes better and 
 better terms for himself. While part of the improvement 
 goes to cheapen the product, another part goes to raise the 
 wages of the producer, while the rate of profit remains much 
 the same as before. Thus the workman's wages increase 
 both in amount and in purchasing power. Between i860 
 and 1880 the annual wages of skilled workmen in America 
 rose from $460 to $720, while the things they needed to buy 
 fell at rates varying from 26 to 46 per cent. In effect a 
 workman could buy twice as much with his wages in 1880 
 as in i860, while the rate of profit for capital had not risen, 
 and that of interest on money had fallen. 
 
 15. Improvements in general, therefore, and machinery 
 in particular, tend to improve the lot of the laborer. Nor 
 does it generally, in the long run, reduce the amount of 
 employment. By cheapening the product, the market for it 
 is enlarged, until it employs more people and at better 
 wages than before. When the Pennsylvania Railroad began 
 to penetrate the Alleghanies, it was said that great harm 
 would be done to the wagoners, who had carried on the 
 commerce of that hill-country. But this single railroad gives 
 far more employment to wagoners alone than the whole 
 trade of Pennsylvania did before it was constructed. So 
 the making of pins by machinery employs far more people 
 than it did in former times, when as the school-book told us, 
 " it took ten men to make a pin." 
 
 16. It is true that when changes are sudden and great, 
 there are distress and suffering for a time among the work- 
 ing people these have affected. Thus the introduction of 
 the power-loom in the early years of the nineteenth century 
 threw the old hand-loom weavers out of work, and caused 
 
POLITICAL ECONOMY. 31 
 
 great distress. But more people now find work in making 
 the materials of our clothes than in that time ; and they are 
 better paid, while the supply of clothes to each of us is 
 greater. 
 
 17. In a few cases there can be no proportional increase 
 in consumption, and therefore improvement does reduce the 
 amount of employment. Thus the reaping machine has made 
 it possible to get the harvest cut with far less labor than 
 when the hand-sickle or even the cradle was employed. 
 And while it has made it possible for more people to get all 
 the bread they want, it has not enabled the rest of us to eat 
 more bread than we did. In this case the laboring classes 
 profit chiefly as consumers, the cost of food being reduced. 
 Yet the cheapening of flour has opened some new uses for 
 it and extended others, as in paste to make paper boxes. 
 
 18. Attending to machinery such as looms in a factory is 
 very monotonous work, more monotonous indeed than any 
 work was before the general introduction of machinery. It 
 also is the least educative work. In farm work and in 
 housework the mind is kept active by the frequent change 
 of interest. In the factory the mind stagnates, unless the 
 workman or workwoman has time for reading and for study 
 after hours. 
 
 19. Formerly the factories were run from twelve to four- 
 teen hours every day, and even boys and girls had to work 
 for those long hours. Such a life was dreadful for young 
 people ; and one of those who endured it as a boy, tells of 
 his thrusting his hand in among the cog-wheels of the 
 machinery in order to secure a holiday. He declares that 
 the pain of the hurt was as nothing to the joy of his release 
 for a time from his work. 
 
 20. Of late our States have stopped this by limiting the 
 hours of labor in mines and factories to ten a day for grown 
 men, and a still smaller number for women and children. 
 
32 POLITICAL ECONOMY. 
 
 Our workingmen generally think the law should go further, 
 and should limit the working-day to eight hours, as has been 
 done in some of the Australian colonies. This probably 
 will be effected, either by law, as in the reduction to ten 
 hours, or by a general refusal of the working classes to work 
 longer each day, as they did in AustraUa. Nor need the 
 change cause any general reduction of wages or diminution 
 of profits. Part at least of the loss of time will be made up 
 in many trades by the greater efficiency of the workman. 
 In other cases there may be a slight rise in the price of the 
 product, or at least no such reduction in price as otherwise 
 would have followed improvement in methods, until the 
 change is well over. 
 
 21. More radical changes are demanded by some people, 
 who denounce the wages-system itself as a bad one. The 
 Socialists declare that it exposes the workman to excessive 
 " social risk." He may be thrown out of employment, or 
 his wages forced down to near the starvation level by hard 
 times. He may be unfitted to work by illness or old age ; 
 or he may die and leave his wife and young children depend- 
 ent on charity. To correct this evil they demand that the 
 State shall take possession of the instruments of production, 
 shall become the only employers of labor, and shall add the 
 profits of production to wages. 
 
 22. To avert this social revolution several improvements 
 upon the present system have been suggested. The first is 
 the compulsory insurance of workmen. In Germany the 
 working people are divided by law into two classes, viz., 
 those who do, and those who do not, receive more than a 
 specified rate of wages. Those who do are compelled to 
 pay regularly a small contribution to a public fund. The 
 employers of those who do not are compelled to make this 
 payment for them. To these contributions the State makes a 
 considerable addition. Out of this fund support is furnished 
 
POLITICAL ECONOMY. 33 
 
 to those who cannot obtain employment, to those who are 
 disabled from work, and to the widows and orphans of 
 workmen who have died. Something like this has been 
 established by several of our great railroad companies for 
 the benefit of their workmen of all grades. 
 
 23. As business is usually managed, the workingmen get 
 no share in the profits, that is, no compensation for the risk 
 they take in giving their time to learning one particular kind 
 of work, and in taking their chances of finding employment 
 in it. In some industries, however, there is a sliding-scale, 
 by which wages are adjusted to the price of the article the 
 men are making. Thus when nails rise in price, the wages 
 of the nail-makers rise also, and fall when the price falls. 
 Such sliding-scales generally have an upper and a lower 
 limit on them, and wages cannot rise above the upper, or 
 fall below the lower, whatever be the rise or fall of prices. 
 This seems quite fair to the workingmen, and they generally 
 are willing to have the upper line drawn pretty low, if at the 
 same time the lower line is put pretty high. Yet these lines 
 are really bad arrangements for the workingman. When 
 prices fall, the workman is safe only to the point where 
 employment ceases, and then he finds no safeguard against 
 getting no wages at all. In good times, on the other hand, 
 he does not profit fully by high prices. 
 
 24. A better arrangement is profit-sharing. This sets 
 apart a share of the profits of the establishment for division 
 among the workingmen. Sometimes this is done by giving 
 each a share of stock. In others it is agreed that all the 
 profits above a certain percentage shall be divided either 
 partly or entirely among the workmen. This naturally tends 
 to give them a more direct interest in their work, to secure 
 a feeling among them which discourages shirking and waste, 
 and to bring them within the number of those who receive 
 profit in return for their risk. 
 
34 POLITICAL ECONOMY. 
 
 Profit-sharing has been found to fail, however, when hard 
 times have lasted year after year, and there have been no 
 profits to divide. In such cases the workman is too apt to 
 suspect that the books are not fairly kept, and that there 
 would be a dividend for him if they were. 
 
 25. Much less practicable is the plan called co-operation, 
 in which the workmen become their own employers, and 
 own the factories themselves. It is found to be not so hard 
 for them to acquire the ownership by careful and prolonged 
 saving, as it is to manage it wisely when they have got it. 
 They cannot secure the business experience, and they fear 
 to give the scope to enterprise, which are necessary to success. 
 Co-operation of this kind has had but few successes, and 
 those mostly in such businesses as the making of flour-barrels, 
 where not much judgment has to be exercised, and the 
 demand is steady. The workingman in fact cannot get on 
 without the class who direct the big operations of industry. 
 
 26. Labor and capital are partners in every act of pro- 
 duction. The workshop succeeds the isolated laborer, and 
 the factory the workshop, to the general benefit; but the 
 change of social relations in the last case leads to friction. 
 There is no natural law for the division of the joint-product 
 between wages and profits, and the workman has increased 
 his share by combination. There is a law of distribution by 
 which wages tend to rise, while profits do not. The improve- 
 ments which effect this sometimes inflict temporary hardship 
 on the working classes, but permanently benefit them. As 
 these make labor more monotonous and less educative, the 
 reduction of the length of the working day is reasonable. 
 Not so reasonable is the proposal to abolish the capitalist 
 class, whether made by Socialists or Co-operators ; but Com- 
 pulsory Insurance of workingmen and Profit-sharing would 
 be improvements of the wages system. 
 
CHAPTER V. 
 
 Money and its Uses. 
 
 1. When every separate group or family was self-support- 
 ing, there were few or no exchanges between such groups. 
 In the course of time those groups which were more favor- 
 ably situated than others — as being, for instance, on the 
 seashore, where they had access to supplies of salt and of 
 fish — began to trade with those who had less or none of 
 these. At first this trade was simply an exchange or barter 
 of one commodity for another. But as trade developed, 
 cases occurred in which two groups, or later two persons, 
 had each something to sell, but did not either of them want 
 what the other had. This led to an agreement upon some 
 third article which everybody wanted, and which therefore 
 could be used to make a purchase from any one. At first 
 cattle filled this place ; then the skins of cattle, or even those 
 of wild beasts (peltries). This was the beginning of money. 
 
 2. As primitive man loves to adorn himself, the metals 
 which are best suited to this became objects of universal 
 desire at a very early period. They were Silver and Gold ; 
 and as they represented a large value in a small bulk, they 
 were more convenient than any other article that had been 
 used. At first they were paid out by weight, as Abraham 
 did when he bought the cave of Macpelah from the Hittites 
 of Hebron. This was formerly the oldest purchase and 
 payment of which we had any record ; but the explorations 
 at Babylon have supplied still older. 
 
 3. The Egyptians seem to have made the use of Silver 
 easier by casting .the quantity of it which represented the 
 
36 POLITICAL ECONOMY. 
 
 value of an ox or a sheep into the shape of each animal. 
 But the coinage of money was not practiced until the sixth 
 century before Christ, when Croesus, the famous King of 
 Lydia, made a beginning. This example was followed by 
 Darius, King of Persia, and the golden dark of the Persians 
 was long a standard coin throughout the East. The Greeks 
 and then the Romans adopted coinage ; and as the Romans 
 had their work done in the temple of Juno Moneta, or the 
 Adviser, our words inint and money are derived from that 
 title of the Roman goddess. 
 
 4. In its first use money is simply the instrument of 
 exchange. It made it easier to buy and to sell by supplying 
 an article which every seller would take. This naturally led 
 people to watch closely the amount of Silver or of Gold 
 which was usually paid for any article, so that a man might 
 not trade to his own loss. Thus money became a measure 
 of value; and people came to a clearer notion of what each 
 kind of article was worth, than before the use of money 
 became general. 
 
 5. Some writers speak of money as 2. standard of value., 
 but this term cannot be strictly applied to it. A standard is 
 a measure which does not change with the lapse of time. 
 Thus in the reign of Henry VII the English established 
 their standard of linear measure, taking the length of the 
 king's foot as the unit. Four centuries have passed by since 
 that was done, but the foot-measure is exactly the same still. 
 If we read that in the reign of Queen Elizabeth or in that 
 of Queen Anne, a man was over six feet high, we know that 
 this meant exactly what it means in the reign of Queen 
 Victoria. But this is not true of any kind of money that 
 ever existed. As we have seen, all things fall in value 
 through improvements in the means used to obtain them, 
 and Silver and Gold are no exceptions. In the three cen- 
 turies between the discovery of America and the French 
 
POLITICAL ECONOMY. 37 
 
 Revolution, Gold and Silver fell to one-twelfth of their 
 former value. If the English foot-measure had shrunk at 
 the same time until it was but one inch long, that would 
 have been a similar change. 
 
 6. Silver and Gold are taken as measures of value be- 
 cause it is supposed that they change less irregularly than 
 other commodities, and that they change at the same rate 
 as others. There is no substance or article in the world 
 which does not change in its value, but as some substance 
 must be made the standard of deferred payments, the 
 civilized world has hit upon these two. They are scarce, 
 but not too scarce for their purpose. 
 
 7. With the change which has come over industry through 
 the accumulation of capital and the division of labor, money 
 has come to serve another use than making exchanges easy. 
 It serves not only to exchange the articles which have been 
 made, but it helps to have them made in the first place. It 
 is the instrument of association. While it is only one of the 
 many things which constitute capital, it is one of the most 
 essential. Without it the capitalist could not enlist his 
 small army of workmen, get them drilled in the methods of 
 the work, and organize them so that each shall be in his 
 own place, doing his own work. It is money which supplies 
 the industrial bond of the producing as well as the trading 
 class ; and anything which tends to make it scarce or dear, 
 tends to restrict production by making it more costly than 
 it ought to be. 
 
 The notion that money is merely an instrument of ex- 
 change, or rather the fact that it was nothing more in early 
 times, explains the objection to lending it out at interest. 
 It was said that money is "barren," and that they who took 
 back more than they lent were making a gain without ren- 
 dering any corresponding service to the creditor. What 
 they took was the product solely of his labor, since the 
 
38 POLITICAL ECONOMY. 
 
 money lent had produced nothing. And to the product of 
 his labor he alone was entitled. Long after the state had 
 ceased to fix a price for any other commodity, the law tried 
 to limit the amount which might be asked for the loan of 
 money, as indeed the laws of some of our States do still. 
 
 8. To understand how great a part money plays in both 
 exchange and production, let us suppose that it were all to 
 vanish out of a great city in a single night, and that when 
 the people awoke they found they had neither coin nor 
 paper notes of any sort. Their other property, indeed, 
 would be left ; some would still be richer and some poorer. 
 But until they devised some substitute for the money which 
 had vanished, they could make far less use of their property 
 than before. Not only would buying and selling cease, but 
 the whole machinery of production would be stopped. 
 Factory-hands would cease to work, if they saw no way 
 of being paid for the work. No one could get his boots 
 blacked, or his face shaved, or get a ride in a street-car, for 
 want of money. The whole industrial system would go to 
 pieces for a time and we should be carried back to the bar- 
 barous condition, in which each family had to do everything 
 for itself. 
 
 9. What the entire loss of money would thus do by way 
 of hurting a community, would be done in part by any 
 serious reduction of the supply of money. When money 
 grows scarce, the producing classes suffer. They must pay 
 at higher rates for the use of capital, and they may be 
 obliged to sell off their products at a loss to pay debts 
 which fall due. By such a state of things only the money- 
 lenders and speculators make a profit, while the money- 
 borrowers and money-users make great losses. 
 
 10. This is denied by some writers, who think of money 
 as an instrument of exchange, and do not see that it is also 
 the instrument of association, and therefore of production. 
 
POLITICAL ECONOMY. 39 
 
 They say if a country gets more money than it had, the only 
 effect is to put up prices ; and if it lose a part of its supply 
 of money, the only effect will be to lower prices. . This lower- 
 ing of prices, they say, will lead people to bring Silver and 
 Gold from other countries to buy at these lower rates, and 
 thus the money will come back again. So, they say, all 
 things find their level, and the distribution of money all over 
 the world tends to become equal. 
 
 1 1 . This theory of money and prices grows out of a narrow 
 notion of what money is, and it does not fit the facts. It is 
 not in the countries where money is scarce that prices are 
 low, but the reverse. In countries where there is little money, 
 it is only labor that is cheap. In Thibet, for instance, 
 a shilling will buy more labor than in England, but less 
 clothing or hardware. So the shilling drifts from Thibet to 
 England. Money goes to where money is, because the coun- 
 try which has plenty of money can produce most cheaply. 
 " To him that hath shall be given : from him that hath not 
 shall be taken away that which he seemeth to have." 
 
 12. Money being itself a chief instrument in production, 
 it cannot be wise for us to exchange any that we can use 
 for the products of other countries. A Belgian writer (Prof. 
 Laveleye) puts the case this way. Suppose that a number of 
 hunters are on their way to the Rocky Mountains for six 
 weeks' sport. They meet a returning party, who offer to 
 take the guns and ammunition of the outgoing hunters, and 
 to give them in exchange their full value in game. Would 
 the exchange be a wise one 1 Manifestly not, as they would 
 be trading irreplaceable power for the products of power. 
 If the offer had been made on the streets of St. Louis or of 
 Omaha, where the game could be sold and fresh guns and 
 ammunition bought, the case would be different. But at the 
 foot of the Rocky Mountains the guns would not be replace- 
 able in this way, and the exchange would be unwise. 
 
40 POLITICAL ECONOMY. 
 
 13. Now Silver and Gold as money are like these irre- 
 placeable guns. We cannot manufacture coin at our pleas- 
 ure, and in any quantity we need. For Gold especially the 
 whole civilized world is fighting, each country wishing to 
 get all it can, and to keep all it has got. To exchange 
 these metals for dry goods or hardwares is ordinarily a very 
 bad bargain. It is exchanging industrial power for the 
 products of power. 
 
 14. Let us suppose that the rolling stock on our railroads 
 were not replaceable at pleasure, — that we could add to it 
 each year a limited number of freight and passenger cars. 
 In that case it would be foolish for us to trade off many 
 of our freight cars for English cottons or French silks, since 
 by so doing we would place a restriction on the movement of 
 freight throughout the whole country. And coins are little 
 wheels on which roll the whole business of the Nation, whether 
 it be transportation or exchanges or production. 
 
 15. It is true that a country may have more Silver and 
 Gold than it has a use for, and that it may export these in 
 exchange for any other commodity without incurring loss. 
 Australia, for instance, has produced far more Gold than her 
 people could use. Mexico and Peru formerly produced a 
 great surplus of Silver in the same way. The countries 
 which produce neither of these metals have been benefited 
 by getting what the producing country had no use for. 
 
 16. It is also true that a country may get more Gold or 
 Silver than it has any proper use for, or may get it too sud- 
 denly, and thus get more harm than good from it. Spain 
 was the country of Europe into which Silver and Gold for- 
 merly flowed from the new world. But Spain got little 
 benefit from them. Her people were not much disposed to 
 work. Where any were, they found themselves hindered by 
 the heavy duties on goods passing from one province to 
 another, and by the Moorish tax called alcala which the 
 
POJJTICAI, ECONOMY. 41 
 
 Christian kings continued to levy on every sale. So the 
 money left Spain for P'rance, Holland and England, who 
 made better use of it, and thus became wealthy countries, 
 not through the money itself, but through the industries it 
 made possible. 
 
 17. In our own time Germany exacted $1,000,000,000 in 
 Gold from France as a war indemnity in 187 1. This was far 
 more money than the Germans could use profitably, and so 
 the country got harm from it. It gave an opportunity for all 
 sorts of wild undertakings, many of them quite dishonest in 
 their management, and afterwards caused much distress 
 through these failing. But if Germany had added that 
 amount to her money supply at the rate of $25,000,000 a 
 year for forty years, she would have got no harm from it, 
 but much good. 
 
 18. When the increase of money, whether coin or paper 
 or credit, is more than a country can find use for in sound 
 business, there is what is called inflatio7i. One sure sign of 
 this is the growth of mushroom enterprises, whose failure is 
 certain to bring disaster. But up to the farthest point at 
 which a country can absorb the increase of money in safe 
 and profitable business, it will be benefited by the increase. 
 For the same reason it will be injured by the loss of 
 money which it could have employed in business of the 
 right kind. 
 
 19. Money is an advance upon barter. It is the instru- 
 ment of exchange ; a measure of values, but not a standard 
 of value; and above all, the instrument of association for 
 production. The more money a country has, up to the limit 
 of inflation, the greater its industrial power. 
 
CHAPTER VI. 
 
 Gold and Silver. 
 
 1. The use of Gold and Silver as money, it has been 
 shown, grew out of their use for ornament. They also have 
 qualities which fit them for use as coin. When slightly 
 alloyed with other metals, they easily receive and firmly 
 retain any impression. They do not rust easily or even 
 lose their brightness, and they are not easily abraded or 
 worn away by use. Their scarcity makes a small weight 
 and bulk of them to stand for a considerable value. 
 
 2. Yet they have their drawbacks also. A large sum, 
 even in Gold, is a heavy weight. They do abrade to an 
 extent which soon makes Gold coin light of weight, and 
 therefore not current. It is found that if looo new guineas 
 are shipped from London to Edinburgh, eight will be light 
 of weight when they arrive. For this reason the thrifty 
 Scotch people prefer paper money ; and in our own country 
 Gold and Silver certificates are used instead of the coin itself. 
 
 3. In a few countries and in very early times Gold was 
 worth no more than Silver, or even worth less. When com- 
 merce was well established between those countries and the 
 rest of the known world, this ceased. The fact that Silver 
 is more plentiful throughout the world than Gold is, was 
 indicated in its greater cheapness. In Roman times the 
 ratio of value of Gold and Silver was 1:11.91. At the 
 beginning of the Christian era the amount of both in circu- 
 lation in the Roman Empire was about $1,800,000,000. 
 
 During the Middle Ages the stock dwindled, partly by 
 exportation to China and India, and partly through loss by 
 
POLITICAL ECONOMY. 43 
 
 fire, shipwreck, forgotten hoards and burials, until, at the 
 discovery of America, not one-eleventh of it was left. An 
 effect of this loss was the general restriction of industrial 
 enterprise, causing the deep poverty of nearly all Europe. 
 Flanders (northern Belgium) was the only really prosperous 
 country, and that because it attracted the money of the rest 
 of Europe by its manufactures. Venice came next, partly 
 through its drawing on the countries along the Mediter- 
 ranean by its trade, and partly by its finding a substitute 
 for coin in the notes drawn on its bank. 
 
 4. The discovery of America changed the face of Europe, 
 through the inflow of Silver and Gold from the Spanish 
 colonies. At that time the ratio of values was i : 11.3. As 
 the supply of Silver was greater than that of Gold, this ratio 
 changed in three hundred years to 1:15. Far greater than 
 this change, however, was the fall in the values of both, 
 which in the same time (1492-1792) was to one-twelfth of 
 their former value. 
 
 This fall was chiefly in the earlier part of the period. By 
 1640 it had almost ceased, and although the supply continued 
 to increase, until it was thirty times as great in 1792 as it 
 had been in 1492, money fell in value no faster than did 
 commodities generally. This was because the new growth 
 of trade and manufactures, and the improvement of farming, 
 which the increase of money had made possible, now found 
 a use for all the Gold and Silver that was to be had. The 
 era of inflation of prices was over. 
 
 5. During this long period every country in the world 
 admitted Gold and Silver equally to free coinage in their 
 mints, and made both kinds of coin equally available to pay 
 debts to any amount. So did the United States, when it 
 established an American coinage in 1792. The law made 
 the Silver dollar, containing 371.25 grains of pure Silver, the 
 unit of value. This figure was reached by comparing a 
 
44 POLITICAL ECONOMY. 
 
 number of Spanish Silver dollars, and taking their average 
 weight. The ratio of value was also fixed at i : 15. It was 
 found, however, that this ratio differed from that accepted in 
 Europe, and that it worked to keep Gold out of our currency. 
 So in 1834 it was changed to i : 15.5, and at this it remained 
 until 1873. The change was not effected by making the 
 Silver dollar heavier, but by diminishing the number of 
 grains in the Gold dollar. 
 
 6. In the meantime England had adopted a new policy. 
 After a long suspension of the specie payment during the 
 war with France, she resumed the use of coin in 18 16, but 
 of Gold coin only as legal tender for large debts. Her mint 
 was closed to Silver, except so far as the government chose 
 to coin it in small change, and at a profit to itself. Debts of 
 more than thirty shillings (^7.50) could be paid only in Gold, 
 and the banks were required to keep Gold for the redemp- 
 tion of their notes. Thus the United Kingdom became a 
 Gold-Monometallist country, and still is so. But many years 
 passed before any other country followed her example. 
 
 7. In 18 10 and the years which followed, the Spanish 
 colonies of America began to declare their independence. 
 This at once stopped the inflow of the precious metals into 
 Europe. Up to 1840 there was no considerable addition to 
 the stock of coin in Europe and the United States. These 
 years were a time of scantiness of money, restriction of 
 business enterprise, and suffering among the working classes, 
 as before America was discovered. 
 
 The tide turned in 1840 when large Gold mines were 
 opened in the Ural Mountains in eastern Russia. In 1848 
 came the great Gold discoveries in California, and in 1854 
 those in Australia. Ever since there has been a steady 
 inflow of Gold from all these Gold-producing countries to 
 the great centres of business and of production, to the 
 general benefit. 
 
POLITICAL ECONOMY. 45 
 
 8. That this Gold was much needed was shown by its not 
 falling in value more than did commodities generally. Its 
 purchasing power was quite steady. At the same time there 
 was a great revival of all kinds of business, and the common 
 people began to get better wages, and to live more comfort- 
 ably. Yet there was an alarm as to its possible effects, and 
 a proposal was made in France, and adopted in England, to 
 demonetize Gold, that is, to turn it out of the currency and 
 use Silver alone. It was well that few people in either 
 country heeded the people who talked in this way. 
 
 9. Between 1840 and 1870 there were $12 worth of Gold 
 for every ^5 worth of Silver added to the world's supply of 
 the two metals. Yet there was almost no change in their 
 ratio of value, which in 1840 was i : 15.62 and in 1870 was 
 1 : 15.57. The great supply of Gold had raised the value of 
 Silver by but a thirtieth of one per cent. The relative 
 quantity of Silver in the world was declining. In 1848 there 
 were about 3 1 pounds of Silver to each pound of Gold ; by 
 1870, 19 pounds of Silver to one of Gold. 
 
 The reason for the steadiness of the ratio was found in 
 the fact that all the mints of the world, except that of 
 England, were open equally to both metals. The unlimited 
 demand thus created for both equally made the inequality 
 of the supply a matter of no importance. 
 
 10. Since 1870 a great change has taken place and one 
 without a parallel in the history of Money. The mints of 
 Europe, America and India have been closed to the coinage 
 of Silver, except for change. Silver has fallen as compared 
 with Gold until the ratio of value is about 1 132. Gold- 
 monometallism has become the practice of both Europe and 
 the United States. 
 
 Why has Silver thus fallen in value ? Is it because the 
 demand has been diminished, or the supply has been exces- 
 sive t Can it be restored to its old place by restoring the 
 
46 POLITICAL ECONOMY. 
 
 demand ? Or is its fall in value permanent, and likely to go 
 on, so that Silver must be given up by the civilized Nations 
 as money ? On the answer to these questions people are 
 divided into Monometallists and Bimetallists. 
 
 1 1. The MonometaUists trace the fall to the great increase 
 in the supply. Up to 1870 the annual production of Silver 
 was between $40,000,000 and $45,000,000 worth a year. In 
 1870 it rose to $75,000,000 a year, being still below the 
 value of the added Gold, and so continued for five years. 
 In these five years, however, great alarm began to be felt, as 
 formerly about Gold, and this alarm was deepened by the 
 exaggerated reports made as to the possible output of our 
 new mines in Nevada. 
 
 Germany, which in 187 1 exacted a war indemnity of 
 $1,000,000,000 from France, required this to be paid in 
 Gold. The Germans used this Gold to retire the most of 
 their Silver money and put out Gold coin instead. They 
 then tried to sell off their Silver, which amounted to a two 
 years' supply from all the mines, thus farther forcing down 
 the value. This example was then followed by the Scandi- 
 navian nations and by Holland, while France and the 
 countries which agreed with her in trying to uphold the 
 credit of Silver, had to close their mints to it. 
 
 12. Our own country, which is now the chief producer of 
 Silver, in 1873 changed the unit of value from the Silver to 
 the Gold dollar, and stopped the coinage of the former by 
 law. Since that time two ineffectual attempts have been 
 made to restore the credit of Silver, first by a limited coinage, 
 at the ratio 1:16, and then by large purchases of the metal 
 and the issue of certificates on the credit of this silver bullion. 
 But neither of these measures prevented its farther decline, 
 and in 1894 we ceased either to buy or to coin Silver. 
 
 13. The result of turning Silver out of the mints of the 
 civilized world has been to create an excessive demand for 
 
POLITICAL ECONOMY. 47 
 
 Gold, which could not but raise the value of that metal. 
 When we say that Silver is now sold at the ratio i .-32, and 
 was sold at I : 16, twenty-five years ago, this is not the same 
 as saying that Silver is worth but half so much as it was in 
 1870. It means not only that Silver has been forced down 
 by an artificial reduction of the demand for it, but that Gold 
 has been forced up by an equally artificial increase of the 
 demand for it. And with this forced rise in the value of 
 Gold, there has been an apparent fall in the value of every- 
 thing else as measured by Gold. Thus wheat in 1895 is 
 much scarcer and more in demand than it was in 1870, but 
 its price in Gold is not half so high. The same is true of 
 cotton and many other commodities. Now if there were no 
 such thing as debt, and if the prices which the growers of 
 wheat and cotton have to pay for what they buy fell as 
 quickly and as much, this would not matter much. But 
 debt is very general among these classes, and they have to 
 give more than twice as much wheat or cotton to pay the 
 interest on a debt now, as they would have had to give in 
 1870 to pay the interest on the same debt. 
 
 14. As this is true of individual debtors in relation to 
 their creditors, so it is true equally of Nations which are in 
 debt. Creditor Nations generally take the interest on their 
 foreign investments in food or raw materials. Thus India 
 pays England in jute, indigo and wheat; Egypt pays in 
 cotton ; we pay in grain, cotton and meats. Under the 
 operation of the single Gold standard all these countries 
 have to hand over larger and larger quantities of such 
 products to meet obligations to their foreign creditors. 
 
 Since 1870 we have paid off more than half of the great 
 debt incurred in the War for the Union. But we could have 
 paid off the whole of it in 1870 by the sale of fewer bales of 
 cotton, or bushels of wheat, or carcasses of pork, or tons of 
 iron, than we now would have to sell to pay off what remains. 
 
48 POLITICAL ECONOMY, 
 
 15. The Monometallist defends the single Gold standard 
 on two other grounds. The first is that a double standard 
 is impossible, as the supply of one metal is sure to vary 
 from that of the other, and thus to force variation in the 
 ratio of their values. We have seen, however, that in 1840- 
 1870, with a very great variation in the supply of the two 
 metals, there was a very great steadiness in the ratio of 
 value. For all practical purposes it remained the same. 
 The amount of variation was what mathematicians call a 
 negligible quantity. So between 1687 and 1873, under 
 a general policy of Bimetallism, the variation was but 
 from I : 14.94 to i : 15.92 at these two dates. The farthest 
 variations in intermediate years was i : 14.14 in 1760, and 
 I : 16.25 i^ 1813, both of them due to temporary causes. It 
 was only with the demonetization of Silver that the variation 
 became serious. 
 
 16. It is also argued that since Silver in the markets of 
 the world sells at the ratio i 132, if we should attempt to 
 coin it at i : 16 we would drive out all our Gold coinage. 
 For whenever a country undervalues one metal by overvalu- 
 ing the other, the effect always has been to force the export 
 of that which is undervalued. If the law make it less 
 valuable at home, it will be sent to where it is more valuable. 
 
 This is true, as experience has shown, and the sudden 
 loss of $400,000,000 in Gold might prove very disastrous. 
 We therefore either must wait until Europe is ready to unite 
 with us in remonetizing Silver, or we must adopt some 
 course which will compel her to follow our example. 
 
 17. By general consent of mankind Gold and Silver are 
 used for coined money, and are well fitted for this use. 
 The supply from America, coming after a prolonged 
 dwindling of the stock in Europe during the Middle Ages, 
 effected untold good, as did the renewed supply from Cali- 
 fornia and elsewhere since 1840. Up to 1873 the ratio of 
 
POLITICAL ECONOMY. 49 
 
 the two values changed so little as to make no difficulty in 
 their use as money. The fall in Silver since 1870 has been 
 due to demonetizing legislation. It is our interest to have 
 Silver remonetized, but we must avoid any step which would 
 lead to the withdrawal and export of our Gold coinage. 
 
CHAPTER VII. 
 
 Banking, Paper Money and Credit. 
 
 1. Thus far we have been speaking only of money which 
 has intrinsic value, that is, which is made of a quantity 
 of precious metal whose value is equal to that which the 
 coin passes for. No money contains quite so much Gold or 
 Silver as this. To prevent coins from being melted down 
 by those who need Gold or Silver for other purposes, they are 
 made to contain slightly less of either metal than they would 
 purchase. And in the case of token or change money, 
 being coins of less value than a dollar, the difference is very 
 considerable. But coin is money which passes for little 
 more than the worth of the metal it is made of. 
 
 2. Besides this we have representative money of several 
 kinds. The simplest form that we often see is the Silver 
 Certificate. As it is not convenient to carry about large 
 quantities of silver dollars, the government stores them in 
 its vaults and issues instead pieces of silk paper, of the size 
 and shape of bank-notes, but differently printed and colored. 
 Each of these is an order on the Treasury for a specified 
 number of silver dollars. In this way the great quantities 
 of silver dollars we read of as stored away in the Treasury 
 vaults at Washington, are really in use as money, and are 
 circulating by their representatives. Whoever has a five- 
 dollar silver certificate, owns five of those dollars, and can 
 get them by giving it up. And as Gold also is inconvenient 
 for use in large sums, besides being liable to lose weight by 
 use, gold certificates for large amounts are issued, and used 
 especially by the bankers. 
 
POLITICAL ECONOMY. 51 
 
 This plan of using coin certificates first came into use in 
 Hamburg, for convenience of reducing to one standard the 
 many kinds of silver coin which came into that trading city. 
 It was adopted by the Swedes, when their currency was little 
 else than copper, and a merchant would have had to take a 
 dray to carry his money when he went round to collect or 
 pay his debts. 
 
 3. Another form of representative money is the Treasury 
 note, called in America the greenback. 
 
 Nations very generally are in debt, and it is convenient 
 for them to have part of their debt held in a shape which 
 requires them to pay no interest on it. It is in this shape 
 that some four hundred millions of our own debt is held by 
 our own people, at a saving of some $16,000,000 a year of 
 interest to the Nation. But these Treasury notes are orders 
 on the Treasury for " lawful coin of the United States " ever 
 since the Treasury ^^ resumed specie payments'' in 1879. 
 Before that, from the time of their issue during the war, 
 they were not convertible into any kind of coin, but derived 
 what currency they had from confidence that the government 
 would redeem them at some date. It was just the same 
 with the Continental money of the War of Independence. 
 The Continental notes were the Treasury notes of that day. 
 
 4. The chief drawback to this kind of money is that its 
 value depends on the degree of confidence which the govern- 
 ment enjoys at the time. It is almost always issued when 
 the country is at war, and needs to borrow because its revenue 
 will not pay its war expenses. But that is just the time 
 when the country's credit, even with its own people, is at the 
 lowest rate, as nobody can foresee how the war will end.. 
 Thus in the War for Independence, it seemed very doubtful 
 for a time whether or not the colonies would overthrow the 
 English armies, and the Continental notes fell so much that 
 the pay of an officer in the American army would hardly buy 
 
52 POLITICAL ECONOMY. 
 
 oats for his horse. As the general government had no 
 revenue except what the States chose to give it, even the 
 return of peace did not restore the credit of this money. It 
 was only after the adoption of the Constitution that it was 
 possible to redeem the Continental notes at their full value. 
 
 5. The Treasury notes issued during the War for the Union 
 did not pass at their nominal value in Gold and Silver for 
 the same reason. However much the people might hope for 
 the final reunion of all the States, they could not be sure of 
 it. So the purchasing power of the greenbacks rose and 
 fell as events seemed to favor the cause of the Union, or the 
 reverse ; but they never rose to the value of coin. At the 
 same time they were accepted in subscription to interest- 
 bearing bonds, with the purpose of keeping up their value. 
 The effect of this was that the Nation got only about fifty- 
 six cents to the dollar for its bonds, by which it contracted 
 to pay a hundred cents on the dollar in coin. 
 
 6. When the Treasury notes were first issued, and made 
 " legal tender " for the payment of all debts, very many of 
 those who were in debt hastened to pay it off with this 
 cheap money, to the great injury of their creditors. During 
 the war and the years which followed it, money was plentiful, 
 and a great many people were led to incur debt. When the 
 war was over, and the government took steps to bring its 
 paper up to the value of coin, there was naturally a loud 
 outcry. People who had borrowed sixty-cent dollars did not 
 like to have to pay in dollars worth a hundred cents. So a 
 great agitation arose, especially among the owners of mort- 
 gaged farms in the West. Some even proposed to convert 
 the whole debt into greenbacks, and to give up all idea of 
 going back to the use of Gold and Silver. Others wanted to 
 replace all the bank-notes with greenbacks, and to make the 
 volume of these " elastic " by giving the holders of them the 
 right to convert them into bonds, and then to reconvert the 
 
POLITICAL ECONOMY. 53 
 
 bonds into greenbacks whenever they needed money. At 
 last, in 1879, the Treasury began redeeming its notes in 
 Gold and Silver, and from that time there has been no 
 difference in the value of our paper and our coin. 
 
 Note. — A plan was suggested by Dr. Hallock of New York 
 for the resumption of specie payments which would not have 
 caused so much suffering to debtors. It was to take the current 
 value of the greenback dollar as the unit of value, and to coin 
 Gold and Silver at that rate. It might also have been provided 
 that debts incurred before the issue of the greenbacks should be 
 paid at the old rate. 
 
 7. These variations in value, and troubles at one time for 
 creditors and at another for debtors, show that it is hard for 
 governments to go into the business of issuing paper money 
 without doing harm. Yet some good authorities think that 
 the power to issue paper money, which is the power to bor- 
 row money from the community without paying interest, 
 ought to be reserved to the government. Mr. Gladstone, 
 for instance, says that paper money should be plentiful, 
 cheap, and issued only by the government. 
 
 However this might suit England, there is a grave objec- 
 tion to it in America, which grows out of the great extent of 
 our country, its method of government, and the great 
 differences between districts in the matter of wealth. Our 
 National government has no points at which it could issue 
 paper money, except the Treasury at Washington, and a few 
 Sub-treasuries in the great cities. These lie at distances 
 from the majority of the people. A money system centred 
 at these points would be highly centralized, and therefore 
 out of harmony with our political system. Especially 
 the poorer parts of the country would suffer through 
 their distance from those centres. Money would be plen- 
 tiful where it was least needed, and scarcest where it was 
 most so. 
 
54 POLITICAL ECONOMY. 
 
 8. This need of local centres of issue is best supplied by 
 a good banking system. A bank is an institution which 
 deals in money and in credits ; and banks generally issue 
 paper money of their own, called bank-notes. 
 
 There have been money-lenders from remote times, and 
 for thousands of years before money was coined. The 
 explorations of the ruins of Babylon and Nineveh have 
 brought to light their contracts, which were traced on little 
 cylinders of clay, and then burnt hard in the fire. So the 
 cfiscoveries in the ruins of Pompeii show that the Romans 
 had their banking-houses, which loaned money, and also 
 arranged to pay money through other bankers at a distance, 
 by an arrangement like the letters of credit which Ameri- 
 cans take with them when they go to Europe. 
 
 9. The first institution that was called a bank, and was 
 anything like a modern bank, was established in the great 
 trading city of Venice at the close of the twelfth century. 
 At first it was nothing but an association of merchants, from 
 whom the city had borrowed money, and was meant to pro- 
 tect their interests by seeing that the money was repaid. 
 For this purpose they put all their bonds into a common 
 stock or heap (banco). Afterwards they began to make 
 payments to each other by transfers of a part of this stock. 
 This they found so handy, that they left oif wanting to have 
 the debt repaid. And when they got coin from abroad, they 
 readily handed it over to the City, to secure more stock in the 
 bank, as they could make their payments more easily in that 
 way. As the City spent the money in paying its fleets and 
 armies, there was nothing to keep up the credit of the bank- 
 stock but the good faith of the Republic. Yet for seven 
 centuries the Bank of Venice went on, and an order on its 
 stock would pass current in any of the great trading cities of 
 Europe. This was due, however, to circumstances which no 
 longer exist. A bank could not be managed in that way now. 
 
POLITICAL ECONOMY. 55 
 
 I o. The Bank of Genoa in the seventeenth century issued 
 the earhest bank-notes. These were for large sums, and 
 were payable with interest at a date specified. The English 
 goldsmiths followed this example. For the sake of safety 
 people brought them money to lock up in their " strong- 
 boxes," or safes. They found that only a certain proportion 
 of this money was likely to be called for, and that they could 
 use the rest in loans. They lent not the coin itself, but 
 notes bearing interest and redeemable at a specified date. 
 They thus added a sort of banking to their proper business. 
 
 11. It was at the close of the seventeenth century that 
 the Bank of England, the greatest of all banks, and the one 
 which has done most to fix the ways of banking, was estab- 
 lished in London. The British government was fighting 
 France, and needed money. William Patterson, a Scotch 
 minister, proposed to it the plan of a bank, which would 
 enable it to get the money more easily. This was adopted, 
 and in 1694 the bank began its work. It issued at first 
 notes which bore interest, and were redeemable at a given 
 date. Very soon it substituted notes redeemable on demand 
 and bearing no interest, that is, modern bank-notes. It also 
 established the granting of credits by discounting the notes 
 of business men, and of having payments made by checks, 
 which transferred portions of these credits from one man's 
 account to another's. It thus copied what was most useful 
 in the methods of the Bank of Venice. 
 
 12. This English type of bank was transferred to America 
 after the independence of the country was. established, and 
 has existed among us ever since, with some improvements. 
 
 One of these improvements was the admission of manu- 
 facturers as well as traders among the customers of the 
 banks. Formerly it was held that a bank existed only for 
 the benefit of traders, and no kind of producers was given 
 the use of its credit. This restriction has been broken 
 
56 POLITICAL ECONOMY. 
 
 down, and manufacturers now can obtain loans from the 
 banks of both ^purope and America. 
 
 13. Another improvement is the deposit of public bonds 
 for the security of the notes issued by the banks. This was 
 first done in the State of New York, and was copied by the 
 United States in planning the system of National Banks, 
 which has existed since the War for the Union. At present 
 only United States bonds can be thus used, and they are 
 deposited with the United States Treasury before the notes 
 are issued. Should any National Bank fail, its bonds would 
 be sold for the redemption of its notes. 
 
 Note. — As fast as the National debt is paid off, the bonds to 
 be had for this purpose are diminished in amount. This forces a 
 contraction of the bank-note currency. This could be corrected 
 by allowing the banks to deposit State, County and Municipal 
 bonds, instead of or along with those of the Nation. This also 
 would enable the extension of banking in the poorer parts of the 
 country. 
 
 Under the present law none but United States banks can 
 issue bank-notes. There are still many State banks which 
 carry on other parts of the banking business. But if they 
 attempted to issue notes, they would have to pay a tax of 
 six per cent a year upon their amount. This would make it 
 unprofitable. 
 
 14. Still another improvement is the frequent inspection 
 of the banks' accounts by expert officials employed by the 
 government. This is done at irregular intervals and without 
 notice. Should any stockholder show a good reason for 
 asking an additional or special investigation, this also is done. 
 Thus the banks are prevented from disobeying the laws made 
 for the protection of their stockholders and of the public. 
 
 15. The English and American way of conducting a bank 
 is not the only one. Other countries have had their methods 
 of banking, from which Americans might learn a good deal. 
 
POLITICAL ECONOMY. 57 
 
 The first of these is Scotland. At the close of the seven- 
 teenth century Scotland was one of the poorest countries in 
 Europe. It had very few manufactures, not much trade, 
 and agriculture of a poor sort. For want of any employ- 
 ment its people were idle, and were supposed to be unwilling 
 to work. One patriotic Scotchman actually proposed to 
 reduce them to slavery, in order to put a stop to their idle 
 thriftlessness. 
 
 1 6. In 1695, the year after the starting of the Bank of 
 England, was the beginning of Scotch banking. From the 
 first the Scotch banks included among their customers all 
 classes who own property, farmers and manufacturers no 
 less than traders. They also dealt with these customers, 
 not singly, but in small groups, every man in the group 
 being responsible for all the rest. And instead of granting 
 temporary loans by discounting notes, they gave each person 
 in each group a ''''cash credit^'' for an amount specified, this 
 to continue until the bank saw some good reason for dis- 
 continuing it. The amount of this " cash credit " was the 
 limit up to which he might draw upon the bank ; but he 
 drew only what he needed, and paid interest only on what 
 he used. 
 
 17. The advantages of this Scotch method of banking are 
 (i) the greater safety of the banks. Every loan they make 
 is secured by the credit of the whole group ; and unless all 
 fail, the bank cannot lose. In two hundred years only three 
 Scotch banks have failed. (2) The greater safety of the 
 business community in deahng with such banks. In English 
 and American banks the supply of credit depends on the 
 constant renewal of the volume of discounts. If the direc- 
 tors fear that hard times are coming, they are apt to refuse 
 fresh discounts except to a few of their best and safest 
 customers. This itself tends to make money scarce, to 
 create alarm, and to hasten on a panic. As the " cash 
 
58 POLITICAL ECONOMY. 
 
 credits " of the Scotch banks are based on permanent con- 
 tracts, and not on the discount of notes which have to be 
 repaid in a month or two, their directors cannot cause such 
 trouble to the business public. (3) The including of all 
 industrial classes among the bank's customers. In England 
 and America the farming class are excluded as a rule. This 
 has thrown them into an attitude of hostility to the banks. 
 They do not know why they should have to borrow on 
 mortgage, at from eight to twenty-five per cent interest, 
 when traders and manufacturers can borrow on their busi- 
 ness notes at much lower rates. So they generally have dis- 
 liked banks, and more than once they have tried to abolish 
 them altogether, A Scotch bank would be their best friend. 
 
 18. It is true that there are especial difficulties about 
 lending money on the credit of land. There are commonly 
 uncertainties as to the ownership of land. It is not easily 
 sold, if the bank should seize it for a debt. Banks which 
 have been established to make loans on land have often 
 failed. One did so in Scotland. But in Germany they 
 devised a plan of land-banking, which has been highly 
 successful. 
 
 At the close of the second Silesian War, in 1763, that 
 province of Prussia was utterly exhausted. The cattle had 
 been destroyed, the farm and outhouses burnt down, the 
 people left without means to buy seed for a new harvest. 
 The King, Frederic the Great, had neither money nor credit 
 to offer them assistance. It was suggested that all the land- 
 owners of the province should pledge their land jointly as 
 security for a loan. This they did, and the government 
 secured them the loan on easy terms. The single farm or 
 even estate was bad security ; the whole land of a province 
 was found very good security. Since that time the principle 
 has been extended all over the continent from Russia to 
 Portugal, some of these land-banks being government insti- 
 
POLITICAL ECONOMY. 59 
 
 tutions, while others are private associations of land-owners. 
 But neither England nor America has adopted them, although 
 our own country would have found them very useful. 
 
 19. In Germany they have gone still farther, and have 
 included workingmen, who have little or no property, within 
 the system of banking credit. The single workman, as he 
 has nothing but his health and strength to depend upon, 
 cannot borrow. If he fell sick, or were killed in an accident, 
 the loan would be lost to his creditor. But the association 
 of hundreds and even thousands of workingmen, in which 
 each stands as security for all the rest, can borrow money 
 at low rates. The illness or death of a few makes no differ- 
 ence, as the rest can bear the loss easily. On this kind of 
 pledge hundreds of millions of dollars are borrowed at low 
 rates through the People's Banks of Germany. But neither 
 England nor America has adopted these banks. We follow 
 the aristocratic English plan, which leaves the free-hold 
 farmer and the workman outside the system of banking 
 credit. Our system is like a " limited express," made up of 
 palace cars, for the wealthy to travel by. 
 
 Note. — The demand of the Populist Party in the West and 
 the South grew out of this fault in our system. They denounce 
 all banks, because they know only those of the aristocratic type 
 we have copied from England. They ask the Nation to lend 
 them money on their crops, so that they may not have to sell 
 great bulks of wheat, corn and cotton as fast as these are har- 
 vested, because this forces down prices, and hands over the profit 
 of farming to the speculators, who buy when prices are low and 
 wait for a rise. But this advance of money to enable the farmer 
 or planter to wait, is just what a bank of the Scotch kind or a 
 land-bank, would furnish. 
 
 20. A bank, as we have seen, has several branches of 
 business united in one house, (i) It is a place for the 
 deposit of money, for those who wish to lend it out at interest. 
 
60 POLITICAL ECONOMY. 
 
 (2) It is a place for the issue of paper money., which bears no 
 interest, but must be redeemed in coin or in some other 
 form of National money, whenever this is asked at the bank. 
 In the Scotch system, before the English Parliament re- 
 stricted the issue of their bank-notes, all demands on the 
 banks were paid in their notes, checks being not much used 
 in payment. When an employer had to pay his workmen, or 
 a trader to make a purchase, he drew notes from the bank to 
 the amount required. In the English and American method, 
 large accounts are settled by check, and notes are drawn out 
 only to make payments to those who keep no bank account. 
 
 21. The most important branch of the bank's business is 
 
 (3) dealing in credit. In Scotland this is done by a perma- 
 nent contract between the bank and a group of persons, who 
 each possess some property, and who are mutual security 
 for all the credit obtained. In England and America it 
 generally is done by the discount of business paper. Sales 
 at wholesale are generally made on credit, extending to 
 thirty, sixty or ninety days, and the purchaser gives his 
 note for the amount. This note the seller usually endorses., 
 and offers it to the bank for discount. If the bank agrees 
 to discount it, it deducts from the amount of the note the 
 interest for the time it specifies, and gives a credit on its ledger 
 for the remainder. When the time expires, either the buyer 
 who drew the note, or the seller who endorsed it, must pay its 
 full amount. In some cases these credits are given simply 
 upon the note of a business-man, which is called single-name 
 paper. In others they are given upon such a note secured by 
 the deposits of stocks, bonds or mortgages as collateral security. 
 
 22. These credits on the bank's ledger are a third form 
 of money, called money of account. This money makes the 
 payments of all the large transactions of the modern world, 
 except those which take place between different countries, 
 where coin is used to pay the balances. The credit-money 
 
POLITICAL ECONOMY. 61 
 
 of our four chief cities on the Atlantic coast amounts to at 
 least $600,000,000. The law sets no limit to its amount. 
 That depends on the demand for discounts and loans, and 
 upon the discretion possessed by the directors of the banks. 
 It is not redeemable in coin or anything else. Indeed we 
 have not coin enough for such a purpose. And it is, of all 
 kinds of money, the most variable in its amount. It depends 
 on the confidence felt by the directors of the bank in the 
 general soundness of business. If anything occur to make 
 them timid, they may produce a scarcity of credit by refus- 
 ing fresh discounts sufficient to keep up its volume, and 
 thus cause a tightness or stringency in the money market, 
 which may end in a general panic. 
 
 23. To meet this danger we need the Scotch method of 
 creating credits by permanent contracts with groups of mutu- 
 ally responsible persons. At present the only usual combi- 
 nation of responsibility is that of the drawer and the endorser 
 of the note, and the latter generally has but imperfect 
 means of knowmg whether the former will be able to pay it. 
 Mutual responsibility in Scotland is preceded by a search- 
 ing inquiry into the affairs of each member of the group by 
 the rest. 
 
 24. The three forms of money are coin, paper money 
 and money of account. Banks are generally the creator 
 of the second, and always of the third. The bank has been 
 gradually developed, and is capable of still farther improve- 
 ment. Our own country should adapt its practice to the 
 experience of those countries which have made banking 
 democratic, by including the farmer and the workingman 
 within the advantages of the credit system. Thus we might 
 bring to an end the hundred years' war, which has been 
 waged by the poorer classes and sections on our money 
 system. 
 
CHAPTER VIII. 
 
 Taxation and Public Debts. 
 
 1. Government costs money, and good government costs 
 more than bad. The more advanced a country is, and the 
 better its institutions are adapted to its people, the more 
 costly its government will be. Especially a federal system, 
 like that of the United States of America, which has four 
 governments — National, State, County and Township or 
 Municipal — at every point, cannot but be a costly arrange- 
 ment. 
 
 2. The earliest rulers, the patriarchal chiefs of the tribes, 
 being the heads of a communistic system, were the chief 
 owners of its whole property. They took what they needed, 
 or wished, from the common stock. Something like this 
 lasted on in later times, when the Kings took whatever they 
 needed on their journeys. But the practice was much dis- 
 liked, as it fell so unequally on the people ; and it was most 
 practiced by mean Kings, like John of England. It was said 
 of him that the very chickens fled from their roosts when 
 they heard he was coming. 
 
 With the growth of the right of private property, taxation 
 began. Its first form was the right of the Chief or King to stay 
 a specified number of days with each of their subjects, and to 
 bring with them a specified number of men. The story of King 
 Lear and his daughters seems to refer to this arrangement. 
 
 3. Afterwards came the feudal system, in which the barons 
 and knights held their lands as the King's tenants, and 
 rendered military service for them. The King drew his own 
 revenue chiefly from his own lands, and from fines imposed 
 
POLITICAL ECONOMY. 63 
 
 by his judges, and fines paid by the heirs of each estate for 
 being allowed to succeed to possession of it. In course of 
 time the King began to accept a money payment (scutage) 
 in place of military service, and then to levy a tax on all 
 lands of the Kingdom (carucage). With the rise of the 
 towns, the townspeople, especially the traders, began to be 
 taxed (talliage), but the chief dependence was on land-taxes, 
 as land was the principal property of the time. 
 
 4. In modern times the chief wealth of civilized countries 
 has come to be in other things than land and farms. As a 
 consequence there has been a shift of much of the burden of 
 taxation from land to personal property, and especially to 
 the articles produced by manufacture at home, or imported 
 from abroad. This also has been a shift from direct to 
 indirect taxation. 
 
 A direct tax is one which is borne by the person who pays 
 it. Such are taxes on land, on inheritances and on income. 
 An indirect tax is one which is passed on by the person who 
 pays it, to some other person who bears the burden. It is 
 covered up in the price of some article he buys ; and if the 
 bill for that were fully made out, it would specify that the 
 price was so much, and the tax so much in addition. 
 
 5. It is not always easy to say whether a tax is direct or 
 indirect. Suppose that a tax were laid on shoes, a dollar a 
 pair, who would pay it.? If the shoe-market were fully 
 stocked with shoes, and the shoe-dealers were underbidding 
 each other for custom, the whole dollar could not be added 
 to the price of shoes, and perhaps no part of it would be. It 
 would be a direct tax. If the supply of shoes were short, 
 and the shoe-dealers had a good understanding with each 
 other, they would probably add the tax to the price, so that 
 it would be an indirect tax. Or they might make up part of 
 it by reducing the wages of their workmen, unless the latter 
 were well organized in a Trades' Union, and prepared to 
 
64 POLITICAL ECONOMY. 
 
 resist such a reduction. Thus taxes " move on the Hne of 
 least resistance," as Prof. Sumner says. 
 
 When the British Government laid a tax on the tonnage 
 of English shipping, they said this would be an indirect tax, 
 as it would raise the charge for transportation. As there 
 were more ships than the business required, it was really a 
 direct tax on the ship-owners, and was repealed on that 
 account. So a tax on houses and on house-lots may fall 
 upon either landlord or tenant, according to the condition 
 of the market for such property. If hard times have led 
 many families to give up housekeeping and to go to board- 
 ing, the landlord will pay it, and it will be a direct tax. If 
 times grow better, and a lively demand arises for houses, the 
 landlord will shift it upon his tenant, and it will be an 
 indirect tax. 
 
 6. In general, direct taxes are better than indirect. It is 
 best that people should know what their government costs 
 them, as this rouses them to watch how the money is spent, 
 and is a safeguard against waste and extravagance. The 
 people who pay direct taxes are generally the most active in 
 behalf of honest government, although they too often con- 
 found that with low taxes and oppose new outlays which are 
 really needed. 
 
 Indirect taxes also fall more heavily on the poorer classes 
 than on the rich. A tax on tea, for instance, such as is 
 levied in England, is drawn from all the tea-drinkers of the 
 country. The rich man uses little more tea in a year than 
 does the workingman, and he pays not much more in taxa- 
 tion for tea. The poor are taxed constantly, in small 
 amounts each time, and yet to a large amount in the course 
 of a year. Such taxes tend to make the rich richer, and the 
 poor poorer. 
 
 7. An indirect tax is not so open to these objections 
 when its object is to discourage the use of some objection- 
 
POLITICAL ECONOMY. 65 
 
 able articles, such as whiskey, beer or tobacco. Until last 
 century intoxicating drinks were generally too costly for 
 the poorer classes to use them much. But first gin, then 
 whiskey and in eastern Europe vodka (or potato-whiskey) 
 have put drunkenness within the reach of all classes. The 
 London gin-shops used to exhibit a sign : " Drunk for a 
 penny ; dead-drunk and straw for two-pence." To check 
 the growth of intemperance by making intoxicants dearer, 
 they were laid under excise taxes. 
 
 8. While direct taxes are the best, there are difficulties in 
 the way of getting them assessed and collected properly. 
 The greatest of these is the resistance of those tax-payers 
 who hide away taxable property or make false returns as to 
 its amount. As such taxation presents especial temptations 
 to frauds of this kind, it is said to be demoralizing, and 
 therefore mischievous. But temptation to do wrong does 
 not make men do wrong; it only gives a chance for their 
 meanness to show itself, or for them to overcome it and thus 
 become better men. All free people assume that their 
 government speaks the truth to them. It has the right to 
 assume that they will tell the truth to it. 
 
 9. Another objection to direct taxation is that it leads to 
 excessive economy, and thus to neglect of duty, on the part 
 of the governments which depend on it. The property- 
 owners have influence with the legislature, and they fre- 
 quently exert this influence to keep down the tax-rate below 
 what is really needed. The States of the American Union 
 depend almost entirely upon direct taxes for their income. 
 They, therefore, with some exceptions, spend less money 
 than they ought on the objects for which they have to pro- 
 vide. Their schools are far from being as good as they 
 ought to be, and in many cases they are open only during 
 the winter months. Their roads are commonly very poor, 
 and in bad repair. They do not carry out any proper 
 
66 POLITICAL ECONOMY. 
 
 inspection of mines, factories and dams, or of the articles 
 offered for sale as food. Their prisons are often in a shock- 
 ing condition. Other States attend to these matters very 
 well indeed; but their tax-rate is very high, and we find 
 manufacturing firms moving their works away from these 
 States to escape the heavy taxation. 
 
 10. To equalize this, it has been proposed to distribute 
 the surplus of the National revenue among the States, as was 
 actually done in 1836. In our federal system the Nation in 
 ordinary times has not much to do, and it has the command 
 of the most abundant sources of revenue, which are the taxes 
 on the manufacture of intoxicants, and duties on imported 
 goods. It has thrice had to consider what it would do with 
 its surplus of revenue. When its outlay on pensions dimin- 
 ishes through the death of its old soldiers, and its war debt 
 is extinguished, it will again have a surplus to dispose of. 
 By distribution of this it could raise the standard of govern- 
 ment among the States, and lighten the burden of taxation 
 in those States in which tTie government is most efficient. 
 
 11. In selecting the objects of taxation great care must 
 be taken to watch the effects of each tax. Spain, by retain- 
 ing the Moorish tax upon every purchase and sale {akald) 
 did a great deal to destroy commerce among her people, and 
 thus to unfit the country to profit by the inflow of Silver and 
 Gold from America (see p. 40). Russia, by retaining the 
 heavy poll-tax, first imposed by the Tartars of the Golden 
 Horde when they overran the country in the twelfth century, 
 kept her poorer classes in their poverty by a taxation propor- 
 tional to numbers, and not to ability to pay. The window- 
 tax and the hearth-tax levied by the British government in 
 former times, led to the walling up of windows, and the 
 crowding of several families in the use of a single hearth, 
 and thus injured the health and the family life of the poor. 
 So the tax of five cents on each copy of a newspaper, for- 
 
POLITICAL ECONOMY. 67 
 
 merly levied in Great Britain, helped to keep the people 
 ignorant. 
 
 Taxation should be planned to fall only on those who 
 produce or possess more than is necessary for their sub- 
 sistence, and to take only what they can spare without 
 diminution of their productive power. 
 
 12. Some have proposed to avoid the need for a selection 
 by taxing everything in proportion to its value. This would 
 result in taxing many things which it is the interest of 
 society to have owned by all classes, such as books, musical 
 instruments and other means of culture. It also would 
 require the taxation of some things several times. Thus 
 iron would be taxed first as ore, then as pig-iron, then as 
 steel ingots, and lastly as finished machinery. It also 
 would work nearly as badly as did that Moorish tax in 
 Spain, by taxing things in movement, and thus checking 
 the industrial circulation. As a general rule, taxes should 
 fall on things which are at rest, and not on those which are 
 in motion. Lands, houses, incomes, articles of luxury in the 
 hands of those who enjoy them, are proper objects of direct 
 taxation. So are those corporations which enjoy natural 
 mo7iopolies through charters bestowed by the State. Thus a 
 railway secures its right of way through the State taking the 
 land it needs from the former owners at a value assessed 
 by a jury. No other railway, as a rule, can be constructed 
 on the same line. A corporation thus doubly favored should 
 contribute largely to the public revenue. So should a street- 
 railway, which is given the use of a public street. 
 
 13. One proposal is to tax only land-values, making the 
 tax high enough to take the annual value of the unearned 
 increment (see p. 20) of the land. It is said that this in- 
 crement owes its existence to the growth of society, and not 
 to the labor of the land-owner, and that society has the right 
 to take what it has created. This sinsrle tax on land-values. 
 
68 POLITICAL ECONOMY. 
 
 it is claimed, would suffice for all the needs of government, 
 would thus exempt the direct products of labor, such as 
 houses and manufactures of all kinds, from public burdens. 
 It also would make it not worth any one's while to keep 
 possession of more land than he could till, as no one would 
 get more from land than the labor he had expended on it. 
 Thus there would be plenty of land for all who wished to 
 till it, and were willing to pay the land-tax. 
 
 14. To this proposal there are several grave objections. 
 The first is that it would be grossly unjust to introduce such 
 a system of taxation at this stage, however fair it might have 
 been if it had been established at the first. Suppose the 
 case of two men, who have each earned $20,000 in a pro- 
 fession. The one puts his money into railroad-bonds, and 
 the other buys land with his. The latter pays for the un- 
 earned increment on the value of his land, as well as for the 
 earned increment. He pays, that is, for its nearness to a 
 great city, or to a railroad, and to schools, churches, village 
 stores, and the like, as well as for the labor spent on the 
 land itself in clearing, draining, fencing, house-building, and 
 the like. The laws of the State recognize the rightfulness 
 of his purchase when he is making it. Is it fair to him if 
 the State should afterward subtract from what he has bought 
 a third, a half, or even more, on the ground that this had 
 always belonged to society, while it subtracts nothing from 
 the values of the railroad bonds bought by his neighbor ? 
 
 Note. — Some have replied to this that the case is parallel to 
 that of negro slavery. The State in that case allowed persons to 
 invest their earnings in slaves, without any warning that this kind 
 of property was illegitimate, and yet it afterwards took away not a 
 part, but the whole. But the cases are not parallel. The slave 
 owned himself by natural right, and never had or could surrender 
 his right in himself. The unearned increment is claimed as the 
 property of the community, which both can waive and has waived 
 
POLITICAL ECONOMY. 69 
 
 its right by the legislation which sanctions and records purchases 
 of land. Even the abolition of slavery without compensation 
 would have been unfair, if it had not been the result of war. If 
 abolition had been effected peacefully, the slave-owner would have 
 been compensated, as was done in the British West Indies. 
 
 In view of this unfairness many of those who favor the 
 State's taking the unearned increment as its own, propose 
 to apply this only to the future. They would leave all 
 the unearned increment already made to the land-owners, 
 but would claim for the State all that is added from this 
 time. 
 
 15. The principle that the State has the right to take the 
 unearned increment, because this is due to the general 
 growth of society, is no more true of land than of other 
 kinds of property. For instance the paid-up value of some 
 stocks, especially those of the fire-insurance companies, is 
 far below their selling value. Is the State entitled to take 
 the difference ? In many branches of trade large sums are 
 made by those who foresee a scarcity of some article, and 
 buy it up to hold it for a rise. Are all such unearned incre- 
 ments to be taken in taxes t To do so would be to choke 
 off not only speculation, but a vast amount of legitimate 
 enterprise by which society is benefited. 
 
 16. And besides unearned increments of values, there 
 are unearned detriments, equally due to the action of 
 society. Is the State to pay for these.? If fashionable 
 preference shift from some streets to others, and the value 
 of the houses fall in the former, are the owners entitled to 
 compensation t If not, why not 1 
 
 17. The task also of levying such a tax would be one of 
 extreme difficulty. It is hard enough to assess the lump 
 value of land, in our present system of State taxes. It would 
 be vastly harder to determine how much was due to labor 
 expended on that farm, and how much to labor expended on 
 
70 POLITICAL ECONOMY. 
 
 land in its vicinity. The attempt to do so would lead to 
 social bitterness, and would be open to many abuses. 
 
 Nor would the unearned increment thus taken in taxation 
 suffice to pay all the expenses of government. It would 
 still be necessary to assess other taxes upon the products of 
 labor. 
 
 i8. The theory really starts from the assumption that 
 land holds the same place in the economy of civilized 
 nations which it held in the Middle Ages, and still holds in 
 uncivilized countries. It is a proposal to shift taxation back 
 to where it was, before the growth of the other industries 
 created wealth far in excess of the value of the land. It is 
 medieval Political Economy. 
 
 19. In countries which are not civilized they still have a 
 land-tax as the chief source of revenue. The Hindoo culti- 
 vator pays a fourth of his income in such taxes, and is suffi- 
 ciently miserable (see p. 22). The Chinese cultivator is 
 taxed in the same fashion, and can hardly live. In Japan 
 the land-taxes are so high that any one can get land who 
 will undertake to pay them ; and there are few taxes of any 
 other kind. These countries might be fairly described as 
 living under the single land tax, yet each and all of them 
 are poverty-stricken. 
 
 20. A tax on incomes is not permitted to the National 
 government by the Constitution. Incomes of some kinds 
 are taxed in some of the States, and England has had an 
 income tax in successful operation for more than half a 
 century. This is in its principle one of the fairest forms of 
 taxation, as it taxes people with strict reference to their 
 ability to pay, and also with some reference to the amount 
 of protection afforded by the government. Generally the 
 tax is levied only on incomes above a specified amount, 
 because to collect it on those which are smaller would cost 
 more than would be collected on them. The English tax 
 
POLITICAL ECONOMY. 71 
 
 also discriminates between different kinds of incomes, taxing 
 those from land most heavily, next those from business, and 
 lastly those from professions. The reason is that the lump 
 value of an income is smaller in proportion as it is uncertain 
 of continuing. A doctor's income is worth less than that 
 of a store-keeper, because his death may put an end to it 
 any day. 
 
 2 1. In times of peace a nation's income should pay its 
 expenses from year to year. In war this is seldom possible, 
 and every war leaves a double burden of debt. As the war 
 goes on the government is obliged to get large loans, either 
 from its own people, or from abroad, or both. As its credit 
 is imperiled by the war it borrows on harder terms than in 
 peace. The money-lenders either require high interest, or 
 they demand a big discount from the principal of the debt. 
 That is, if they lend at four per cent, they demand a bond 
 for the repayment of a hundred dollars, when they advance 
 only ninety. It is better to sell bonds only at par value, 
 and pay whatever interest is necessary. This leaves the 
 country more free to convert its six or seven per cents into 
 three and a half or four per cents as soon as they are 
 redeemable. 
 
 22. The second indebtedness created by a war is that for 
 pejisions. To induce the citizens to enlist as soldiers, prom- 
 ises are held out that if they are killed, their families will be 
 taken care of, and that if they themselves are disabled by 
 wounds or sickness incurred in the service, they will be sup- 
 ported. Besides these two classes of pensioners there is 
 a third, which consists of old soldiers no longer able to 
 support themselves, although their disability cannot be 
 traced directly to wounds or sickness incurred in the war. 
 For these also the government makes provision. The num- 
 ber thus to be cared for is naturally very great, after a war 
 which cost 400,000 lives in field and hospital, and which 
 
72 POLITICAL ECONOMY. 
 
 saw a million of men under arms. It necessarily dimin- 
 ishes as that generation dies out, and in the course of time 
 becomes a very trifling burden. 
 
 23. The debts incurred by great corporations, and even 
 by private persons borrowing abroad, are in some sense 
 public debts, and should be subjected to public regulation 
 as to the amount which may be thus borrowed, and the con- 
 ditions of payment. Such debts do not ordinarily bring 
 money into the country to the extent to which they make it 
 responsible to pay money back. Even where the interest is 
 met by exports of produce, this tends to derange inter- 
 national exchanges, by requiring exports greatly in excess of 
 imports to maintain a proper balance of trade. As such 
 debts are incurred chiefly by corporations, and as these are 
 especially under governmental control, it would be easy to 
 place such borrowing under close restriction. 
 
 24. Taxation has been developed from the "boarding 
 round " of petty kings, into a scientific assessment of all 
 classes, and of all kinds of property, for public uses. It 
 has passed from the land alone to other forms of prop- 
 erty, and has tended to become indirect instead of direct. 
 Direct taxes are the better because the justef form, but 
 harder to get. The single tax to absorb the unearned in- 
 crement of land-values is neither just nor expedient. It 
 ascribes to land an industrial importance it no longer 
 possesses. Public debts are the result of wars and include 
 pensions to the disabled soldiers and the families of the 
 slain. 
 
CHAPTER IX. 
 
 Domestic Commerce. 
 
 1. As the earliest groups of persons were self-supporting 
 their only commerce was between their members. This was 
 an interchange not of things, but of services. One part of 
 the work fell to the women, another to the men. Some men 
 took to more active labor in hunting and killing wild beasts, 
 while others worked at what called for less exertion. All 
 the group profited by the labor of all. 
 
 2. Commerce in things grew up between groups, when it 
 was found that each had something, which the rest had not, 
 but would like to have. Gradually it extended over the 
 whole country through the rise of a trading class, who car- 
 ried their wares around, like a pedlar of our time. And 
 with the growth of private property, the commerce within 
 the old groups became one of things as well as of persons. 
 Each man sold what he could produce to whoever would 
 buy, whether in his own group or outside it. 
 
 3. Commerce thus grows out of difference in skill and 
 difference in locality ; and the more there is of either the 
 greater will be the commerce. If all places produced just 
 the same things, they would have nothing to exchange. If 
 all men were producing the same things, they could not 
 trade with each other. Wherever a people has been re- 
 duced from variety to uniformity of occupation, as in India 
 and in Ireland, there is almost a cessation of commerce 
 among them. No man needs or helps his neighbor, because 
 all are doing the same thing. They therefore may have 
 trade with foreigners, but none with each other. 
 
74 POLITICAL ECONOMY. 
 
 4. As Adam Smith showed, the most profitable commerce 
 for a country is that which goes on between people of the 
 same neighborhood, or, as he called it, commerce between 
 town and country. It is so for several reasons : (i) It re- 
 quires no great outlay in getting the goods from the pro- 
 ducer to the consumer. The cost of carriage is trifling, and 
 adds little to the price. (2) It makes it possible to " turn 
 over the capital " employed more quickly. When goods 
 have to be sent abroad, the producer has to wait till they 
 are carried ov^r sea, and are sold, before he gets his money 
 back. If he sells at home, the delay is much shorter, and 
 the capital he is using is kept more active. Adam Smith 
 counted that this advantage was twenty-four fold in favor 
 of home commerce. Since transportation has grown more 
 rapid this is reduced, but still exists. 
 
 5. (3) Commerce between distant points is not only costly 
 through charges for transportation, and slow because of the 
 distance, but is liable to be so managed by the trading class 
 as to secure them excessive profits. This is especially true 
 when the whole supply of an article has to pass through a 
 few marts of trade on its way from producer to consumer. 
 At these points it is found possible to buy up the supply of 
 the article, or so much of it as will cause a scarcity, and to 
 hold it for a rise in price. This increase the consumer has 
 to pay, while the producer gets no part of it. In this way 
 wheat and pork have been cornered in Chicago and New 
 York, and fortunes made by extracting a much higher price 
 from the consumer, wliile the Western farmer was none the 
 better off, but rather the worse. These practices naturally 
 led European consumers and traders to look for other 
 sources of supply than America, and they have thus re- 
 duced our European market for food-products. 
 
 Nobody would think of cornering the wheat raised in 
 Pennsylvania, because that is consumed in the neighborhood 
 
POLITICAL ECONOMY. 75 
 
 of the farms which grew it. It has no distance to travel, 
 and is not subject to the power of the trader. 
 
 6. In some cases the producers of necessary commodities 
 follow the example of the traders, and combine to put up 
 prices. This can be done most easily when the article is one 
 which is produced in great establishments, few in number. 
 Ordinarily these form a Trust, by combining all the estab- 
 lishments under a single direction and paying the profits 
 of all out of a common fund. In case any establishment 
 refuses to unite with the rest, the Trust sometimes seeks to 
 coerce them by obtaining control of the supply of the raw 
 material, or by securing from the railroads more favorable 
 rates for transportation than these independent firms can 
 obtain. 
 
 It is not true that Trusts always put up the prices of the 
 article they produce. But even when they do not, they yet 
 have the public at their mercy. They are at best benevolent 
 despots ; and freemen wish to live under no kind of despot. 
 
 7. Trusts formed by the combination of corporations are 
 essentially illegal. The corporation is the creation of law, 
 and possesses no other powers than its charter expressly 
 confers. It " must keep within the four corners of its 
 charter," the courts say. If a corporation be chartered to 
 make coats, it cannot make shoes under that charter. If it 
 be chartered to refine petroleum, or distil whiskey, or make 
 plate-glass, it cannot combine with others to put up, or keep 
 up, the price of whiskey, or of oil, or of glass, without going 
 outside its charter, and thus becoming liable to forfeit it. 
 When all the States do their duty in enforcing this legal 
 principle, there will be few Trusts left. 
 
 8. Sometimes, especially when business is bad, the pro- 
 ducers of some article form a temporary combination to 
 regulate prices. This is called a Fool. It differs from a 
 Trust in that it seeks not to put an end to competition, but 
 
76 POLITICAL ECONOMY. 
 
 to restrict it for a time. But even this should not be allowed, 
 except under some sort of governmental control. Thus on 
 the continent of Europe the railroads form such pools under 
 the direction of the governments, which take care that the 
 terms are not unfair to the public. Such an arrangement is 
 much needed in this country. The jealousies and competi- 
 tion of our great railroads tend to force their charges down 
 so low at times as to leave them no profits on many branches 
 of their business. This makes the railroads weak, and 
 therefore unable to serve the public in other matters. It 
 also tends to drive different railroads to consolidate into one, 
 so as to put an end to competition, i.e., to form railroad Trusts. 
 
 9. The proper regulation of railroad traffic is of great 
 importance to domestic commerce. In America it is made 
 difficult by the fact that each State has sole control of com- 
 merce within its bounds, while the Nation alone controls the 
 commerce which crosses the lines which divide State from 
 State. 
 
 At first no attempt was made at regulation. The railroad 
 was so welcome, that it was given the right of way by State 
 authority, and was also given large grants of land, and in 
 some cases of money. Eight times the area of the British 
 Islands was voted in land-grants to our railroads during the 
 third quarter of the nineteenth century. Afterwards com- 
 plaints began to be heard from the farming States of the 
 West, that railroad charges were so excessive as to eat up 
 the profits of farming, and that favoritism was shown to 
 favored places, and to large customers. In this way small 
 towns, to which but one road ran, were checked in their 
 growth, while cities, in which several roads centred, were 
 helped as much as the others were hindered. Small pro- 
 ducers and traders were crushed out, and the big ones 
 secured a monopoly which enabled them to charge higher 
 prices. 
 
POLITICAL ECONOMY. 77 
 
 10. The railroads first met these criticisms by the answer 
 that they had a right to do as they pleased with what was 
 their own. They said that just as the farmer or the manu- 
 facturer put what price he pleased on his wheat or his cotton 
 cloth, so they had a right to regulate their charges with a 
 view simply to their own interests. To ask anything more 
 of them was to talk socialism and communism. 
 
 The courts, first of those Western States and then of the 
 Nation, decided the case the other way. They held that as 
 the railroad owed its very existence to the action of the 
 State, both in chartering it and in giving it the right of way, 
 it was not a private concern like a farm or a cotton factory. 
 Besides this, the business of transporting goods and persons 
 for pay always had been kept under strict control of the law, 
 in order to prevent unfairness and favoritism of any kind. 
 So the States had the right to limit the charges made for 
 carrying goods, and to require that those charges shall be 
 proportional to distance, that they shall be the same to every 
 one, and that they shall not be changed without public notice. 
 1 1 . The Nation undertook to regulate the part of railroad 
 traffic under its jurisdiction by the Inter-State Commerce 
 law of 1887. This forbids favoritism, and pooling of rates, 
 and requires that no charge for a shorter distance shall be 
 higher than for a larger one. The bill went too far in for- 
 bidding pooling, instead of regulating it. It also went too 
 far in enacting that in no case shall a higher charge be made 
 for a shorter distance. Where railroads have to compete 
 with water transportation, they must put their rates lower 
 than would be remunerative for their whole business. To 
 require their rates to such points to be strictly proportional, 
 is to forbid them to carry freight to them. 
 
 It is just to forbid special rates to points where other rail- 
 roads run, but where there is no competition with water 
 carriage. It is not good policy to have such places built up 
 
78 POLITICAL ECONOMY. 
 
 at the expense of the smaller towns, and the railroads should 
 not be permitted to manage their business in a way which 
 tends to this. For the same reason they should not be 
 permitted to break down small dealers by showing favors to 
 great ones. 
 
 12. Thus far the general tendency of the management of 
 our railroads has been toward centralization. It has tended 
 to build up the cities at the expense of the towns, and the 
 towns at the expense of the villages. It has tended to 
 deprive the farmers of the closely-settled districts of their 
 natural advantage, by charging no higher for carrying farm 
 produce a long distance than a short one. It has tended to 
 keep manufacturers and farmers apart, by giving the manu- 
 facturing districts their supply of grain and flour from 
 distant States at very low rates of carriage. 
 
 13. It is only since the passage of State and National laws 
 to regulate the railroads, that the decentralizing tendency has 
 begun to operate, and its effects are hardly visible as yet. 
 Our right policy is not to sacrifice the country to build up 
 great cities, nor to keep some districts busy with manufac- 
 turing while others feed them and take their textile goods and 
 hardwares in exchange. It is rather to create a vast number 
 of local centres of trade, in each of which the farmers and 
 the manufacturers shall live in neighborhood, and carry on 
 the " trade of town with country " which Adam Smith liked 
 so well. It is to create an industrial system which shall 
 correspond to our political system, in which we so carefully/ 
 avoid sacrificing local interests to centralization. 
 
 14. Not only our railroad policy, but also our monetary, 
 policy tends to centralization in domestic commerce. Ourj 
 National banking system is suited only to the Northern and \ 
 Eastern States, which now can afford the highest security in v 
 the character of the money they use. They at the first had 
 to use money which was far from being well secured, but 
 
POLITICAL ECONOMY. 79 
 
 which was the best they could get. A new community must 
 take risks in such matters. It has to put up with railroad 
 accommodations far inferior in point of safety to what the 
 people of the richer States enjoy. If we had a National 
 railroad law, which required every road to be built with the 
 thoroughness, and conducted with the precautions, which 
 are possible in the older States, the new States would be 
 left almost without railroads. 
 
 Yet not unlike such a law is that which forbids any bank 
 to issue paper money until it has bought National bonds to 
 the full amount, and deposited these with the Treasurer of 
 the United States. The effect is that there are few banks 
 and not many bank-notes in the South and West, while the 
 North and the East can have as many as they choose. A 
 change which would enable each of these poorer com- 
 munities to establish its own bank of issue, and give its 
 producers credit, as the Scotch banks do, would be of great 
 use. It would both relieve them from the need to borrow 
 from the older States on mortgage at high rates, and would 
 tend to develop local business of all kinds. Their need 
 would not be met by larger issues of either Treasury notes 
 or Silver dollars, for these forms of National money are 
 even more centralized in their issue than are the notes of 
 the National Banks. 
 
 15. In the regulation of our domestic commerce it is the 
 right and duty of the State to guard the health and lives of 
 its people. It should see that no articles are sold for food 
 which are unfit for human use through either decay or 
 immaturity. It should require that food and medicine shall 
 be free from adulteration of all kinds. It should see that 
 transportation companies take proper precautions to protect 
 both passengers and employees from foreseen dangers. The 
 number of train-hands killed every year on our railroads is a 
 blot on the Nation. It seems to prove inhumanity in us, but 
 
80 POLITICAL ECONOMY. 
 
 really stands for thoughtlessness, and " evil is done by want 
 of thought as well as by want of heart." 
 
 1 6. The commerce in some kinds of articles is attended 
 with so much danger as to justify the requirement of special 
 precautions. Thus the storage of explosives in large quanti- 
 ties within a city is not allowed, and even gunpowder can be 
 sold only by those who take out a special license, and show 
 that they have taken proper precautions for handling it. 
 
 It is much the same with the sale of intoxicants. Some 
 States forbid this by law. Those who allow it should exact 
 special security from all who undertake it. They should be 
 persons whose social record is good, and who can be trusted 
 not to sell to minors, to persons already intoxicated, or at 
 hours when the sale is forbidden. The number of such 
 places should never be greater than is necessary to meet the 
 actual demand. If there be more, they will push their trade 
 by free distribution of articles calculated to provoke thirst, 
 by sprinkling whiskey on the sidewalk, and by other means. 
 
 17. Domestic commerce is that which is of most impor- 
 tance to a Nation. It is based on difference in industrial 
 skill and toil. It is liable to injury from combination of 
 both producers and traders. Our railroads have harmed it 
 by unfair charges, which tend to centralize business at a few 
 points; but our laws are seeking to undo this harm. Our 
 banking system has had the same bad tendency, which also 
 should be corrected by law. Some branches of domestic 
 trade require special precautions. 
 
CHAPTER X. 
 
 Foreign Commerce. 
 
 I. While domestic commerce depends on differences of 
 employment within the country, foreign commerce grows 
 out of differences of cHmate and productions in different 
 countries. It secures to each country as much as possible 
 of the advantages of the rest. It supplies to more northern 
 regions the spices, fruits, tea, coffee and sugar which flourish 
 best in the neighborhood of the Equator. It sends in 
 exchange for these the flour, tar, pine-lumber, ice and the 
 like which belong to the colder climates towards the poles. 
 
 Besides this, foreign commerce establishes profitable ex- 
 changes between countries whose people differ in the degree 
 of their civilization. It supplies dress fabrics, tools, knives 
 and ornaments to people unable to produce these for them- 
 selves. It takes in exchange their ivory, copra (dried cocoa- 
 nut), camphor, fur-skins, india-rubber and other rude products 
 which it uses in its manufactures. 
 
 Even between nations of the same general rank in civili- 
 zation, there is a natural commerce in articles of finer work- 
 manship, which represent the development of national taste 
 and skill. These range from works of art and books finely 
 printed and illustrated down to dress fabrics of graceful 
 design, and the like. 
 
 2. As in a well-managed household, the expenses of the 
 year will be at least no greater than the income, so in a 
 Nation whose economies are well seen to, there will be no 
 excess of imports over exports, to require the export of 
 money to settle the balance. If, indeed, a country is pro- 
 ducing more Gold or Silver than it can find use for at home, 
 
82 POLITICAL ECONOMY. 
 
 the export of these as commodities may be made without 
 loss. In that case they are simply commodities, like dry 
 goods or hardwares. So, also, if a nation has made large 
 loans to others, it may take the payment of the interest in 
 imports without any disadvantage to itself. Or, if it have 
 a large body of shipping, and carries goods for other coun- 
 tries, it can take the payment for this in imports without 
 incurring any debt. In this way the balance of trade may 
 seem to stand against a country, when it really is in its 
 favor. 
 
 3. Our own situation as a trading nation is the reverse 
 of these suppositions. We produce a great deal of Gold, 
 but not enough for our own use, and any sign of its being 
 needed for export causes a just alarm. We are heavily in 
 debt to England, Holland and Germany, and must export 
 grain, cotton, meat-products and other articles to pay the 
 interest. Through our neglect of our shipping, we have to 
 pay that of other countries, especially England and Norway, 
 to carry our exports and imports. We need, therefore, to 
 export goods to the value of all we import, and also to the 
 value of the interest on our indebtedness to Europe, and to 
 the amount of the charges made for our use of foreign ships. 
 When we succeed in doing this, we- neither export Gold nor 
 go more heavily into debt. 
 
 4. It is said by some that there is no harm in exporting 
 Gold or Silver, since these are less useful than the things 
 we get in exchange for them. Those who say this regard 
 money merely as the instrument of exchange, and not as 
 that of association for production. They hold that its export 
 can but lower prices in the country, and thus induce for- 
 eigners to bring back Gold to make purchases. It has been 
 shown (see pp. 35-41) that the facts do not fit this theory. 
 The countries which have least money are the countries of 
 small production and of high prices. Those which have 
 
POLITICAL ECONOMY. 83 
 
 most money have also the best organized system of labor, 
 and, therefore, the lowest prices. To export money is to 
 give irreplaceable power in exchange for the products of 
 power. 
 
 It is true, as these writers insist, that nobody can eat, 
 drink or wear Gold, and that, by exporting it, we buy things 
 which meet these immediate needs. But this proves noth- 
 ing, as the most useful things are not those which we can 
 eat, drink or wear. They are those which enable us to fur- 
 nish an ample supply of things to eat, drink and wear. And 
 this Gold does. 
 
 5. For this reason, among others, it may be wise to im- 
 pose restrictions on the import of articles which can be 
 made at home, with a view to promoting their production at 
 home. This is generally done by laying a duty upon those 
 articles when brought in from abroad. The list of such 
 duties is called a Tariff. In America, such duties are now 
 laid only by National authority, and our Tariffs are made or 
 altered by Congress. 
 
 Not every Tariff aims at promoting the manufacture at 
 home of the articles on which it imposes duties. In some 
 only those articles are put under duty which cannot be made 
 at home ; or if any article made at home be included, the 
 home-made article is taxed equally. This is the method of 
 the present English Tariff. It thus avoids turning capital 
 and labor to the production of any articles which they would 
 not undertake if there were no such law. This is called Free 
 Trade, and such a Tariff is for revenue only. It is a form 
 of indirect taxation, which is open to the objections that lie 
 against such taxes. It falls more heavily upon the poor 
 than upon the rich, as it taxes the consumers of tea, coffee, 
 spices, tobacco, and other articles in proportion to their 
 consumption of these articles, and without regard to their 
 ability to bear such taxes. It thus tends to make the rich 
 
84 POLITICAL ECONOMY. 
 
 richer by exempting them from their fair share of the public 
 burdens, and to make the poor poorer by laying an unfair 
 share of these burdens upon them. 
 
 6. A Protective Tariff is one which imposes duties on 
 imports with the purpose of setting capital and labor to 
 producing what they would not produce if there w^ere no 
 such law. It selects for taxation commodities which can be 
 produced at home, and exempts from taxation those which 
 cannot. The Tariffs of France, Germany and America gen- 
 erally have been of this kind, as also were those of Great 
 Britain before the year 1846. 
 
 This also is indirect taxation, but it is of the same class 
 with the taxes on intoxicants, as its object is to discourage 
 the consumption of the imported article, and thus leave 
 room for that which is made at home. And while the Tariff 
 for revenue is a permanent arrangement, a protective Tariff, 
 as fast as it attains its object, ceases to tax the consumer. 
 When the foreign article is no longer imported, this duty is 
 no longer paid. 
 
 7. It is objected, however, that "the duty is paid upon 
 the home-made article, and goes not into the Treasury of the 
 Nation, but into the pockets of the producers. It is added 
 to the price of the article, and the manufacturer is enabled 
 by the Tariff to tax the people to his enrichment." 
 
 Let us see if this is true. It is true that at the first the 
 price of the article, whether home-made or imported, rises 
 after a protective duty has been laid on its import. It is 
 also true that for a time the profits of producing that article 
 are likely to be greater than are profits generally. The effect 
 of this, however, is to attract more capital into the business 
 of making it, until competition between the home producers 
 pulls down prices, and with them also profits to the level 
 of profits generally. If the Tariff law conferred a monopoly 
 upon some producers, as a patent for an invention does. 
 
POLITICAL ECONOMY. 85 
 
 then prices and profits might be kept up. But it does not 
 do so, and it is admitted by economists of all schools that 
 in the absence of a monopoly profits cannot be kept above 
 the average level. 
 
 8. The manufacturer of the protected article does not 
 " add the duty to the price " at any stage. If he did, he 
 would get no advantage from it, as his product would be 
 offered to the dealers at exactly the same price as the im- 
 ported article. Now in such cases the foreign article is in 
 possession of the market. The dealers have become used 
 to handling it, and are on friendly terms with the foreign 
 maker. In many cases they are simply his American 
 agents, and are greatly interested in keeping out the home- 
 made article. The consumers also are accustomed to the 
 imported article, and they generally are not free from the 
 notion that what comes from abroad must be better than 
 what is made at home. So the home manufacturer must 
 undersell his foreign rival, if he is to get a footing even in 
 the home market. He cannot add the duty to the foreign 
 price, or he would make no sales. 
 
 9. As home competition grows and prices fall, the foreign 
 producer must either give up the market or pay a part of 
 the import duty. The share of it he has to pay increases 
 with the development of the home manufacture. Hence we 
 find in his trade-circulars, statements that he has to be '' sat- 
 isfied with a smaller average of profit " in America, " than in 
 other markets" where the home competition is less; and 
 that " a material reduction of the American duty, or some- 
 thing like it, is necessary to advance the price." 
 
 10. Tariff duties may be either specific or ad valorem. 
 Specific duties are those which are based on the quantity 
 
 of the article, independently of its value. They are rated 
 at so much a square yard, or a cubic foot, or a hundred- 
 weight, or a gross. As the quantity is always easily ascer- 
 
86 POLITICAL ECONOMY. 
 
 tainable, there are few openings for fraud in the custom- 
 house. Such duties also fall the heavier on coarse and 
 bulky articles of lesser value, and thus offer less tempta- 
 tions for smuggling. In a few cases they would operate 
 unfairly. Thus a specific duty falling equally on all grades 
 of raw sugar would be, in the case of coarse sugars, a tax 
 on the dirt to be taken out by the refiner. For this reason 
 sugars pay duty in proportion to their fineness. 
 
 Ad valorem duties are levied on the value of the article. 
 They fall heavier on costly goods of less bulk, and there- 
 fore more easily smuggled. As the value is certified in the 
 invoice sent by the exporter, much trouble has to be taken 
 by our Consuls in Europe to ascertain the truth or false- 
 hood of these statements, and not always successfully. 
 They therefore offer a high premium upon custom-house 
 frauds. For this reason the English Tariff is so arranged 
 as to admit of no ad valorem duties, while those who, in 
 America, profess to admire English Tariff legislation, gener- 
 ally strive to have the American Tariff constructed on the 
 ad valorem principle. 
 
 II. As was pointed out by Mr. Calhoun in 1846, ad 
 valorem duties work to the injury of the American manufac- 
 turer. In good times, when prices are high and demand is 
 steady, these duties are high also. When prices fall and 
 demand is diminished, the duties fall proportionally. Thus 
 he gets protection against foreign competition when he least 
 needs it, and loses it when it is most needed. Mr. Calhoun 
 proposed to substitute the method of the sliding scale, which 
 the English used in laying duties on imported wheat. By 
 this method a normal price for the article, at which it can 
 be produced at home with a fair profit, is agreed upon. 
 When the price rises above that, there is no import duty. 
 When it falls below it, the duty begins ; and the lower the 
 price the heavier the duty. 
 
POLITICAL ECONOMY. 87 
 
 12. Besides Tariff legislation for the regulation of foreign 
 commerce, nations employ treaties of commerce, either gen- 
 eral or based on the principles of reciprocity. In Europe, 
 indeed, the general practice is to enact two Tariffs, one for 
 foreign goods generally, and the other for the benefit of 
 those countries which are to be admitted to reciprocity. 
 This is useful as limiting the treaty-makers in the extent of 
 the concessions they may grant. For want of this in America, 
 a President and Senate of Free-Trade opinions might abolish 
 a Protective Tariff by admitting all the great trading nations 
 to the footing of reciprocity on terms unfavorable to us. It 
 is therefore understood that the Senate shall not approve 
 such a treaty without the consent of the House. 
 
 13. The character and purpose of reciprocity treaties 
 may be shown best by taking the case of our own commerce 
 with the American republics to the south of us. Until 
 those colonies became independent of Spain, their commerce 
 was monopolized by the mother country. When they re- 
 volted, their ports were thrown open to British trade, at a 
 time when that was shut out of those of Europe by Napo- 
 leon's Continental System. After the return of peace to 
 Europe, the Holy Allia?ice proposed to reduce the Spanish 
 colonies to their former position. Mr. Canning, in view of 
 the perils to British trade this would involve, suggested to 
 our government to declare that we would not permit of this. 
 The result was the Monroe Doctrine of 1823, which put a 
 stop to the plans of the Holy Alliance. 
 
 Mr. John Quincy Adams, then our Secretary of State, was 
 the statesman who gave ear to Mr. Canning and wrote the 
 words of President Monroe's declaration. It was not his 
 purpose, however, to leave these sister republics to British 
 trade alone. He planned an American Congress, which should 
 establish a State System for the New World, and promote 
 commerce as well as secure peace among them. Our politi- 
 
88 POLITICAL ECONOMY. 
 
 cal dissensions defeated the plan, and for eighty years we 
 maintained an attitude almost of indifference to our commer- 
 cial relations with those countries, while guaranteeing their 
 independence. We held the wolf by the ears while England 
 shorS the sheep. 
 
 14. With the growth of our manufactures since the War 
 for the Union, our commerce with Central and Southern 
 America acquired a new interest. We found (i) that we 
 were buying from them twice as much as we sold to them ; 
 
 (2) that our products of all kinds were paying import duties 
 in their ports while theirs generally came free into ours ; 
 
 (3) that through neglect of our merchant shipping we were 
 paying England to carry our products to our own neighbors, 
 and to bring back theirs to us ; (4) that this commerce was 
 so arranged that we paid for their coffee, hides, sugar, 
 spices and india-rubber, not by our exports to them, but by 
 our sales of wheat and the like to England. Ships sailed 
 from England to South America laden with English cottons 
 and hardwares; in South America they took cargoes for 
 New York; from New York they sailed for England with 
 cargoes of American grains. 
 
 15. As most of these countries were competing with each 
 other for our market for sugar, coffee and hides, it was 
 found possible to secure from several of them treaties by 
 which they agreed to admit our flour, meat-products, farm- 
 ing machinery and the like into their ports free of duty, on 
 condition that we admitted their products free into ours. In 
 no case did we ask free admission of anything they were 
 able to make or grow for themselves. The Tariff of 1892 
 was especially adjusted to make such treaties possible ; and 
 under its operation there was already a considerable increase 
 of our trade with these neighbors to the southward. But 
 the Tariff of 1894, by abolishing the discrimination, aban- 
 doned the advantage. 
 
POLITICAL ECONOMY. 89 
 
 1 6. The maintenance of merchant shipping is another 
 measure for the proper regulation of foreign commerce. 
 The country which has few or no ships, and exports largely, 
 must devote a considerable share of its exports to paying 
 for the use of ships. It is liable, therefore, to have to ex- 
 port its money to pay adverse balances of trade, unless its 
 exports are enough to pay both for what it imports and the 
 hire of the ships. 
 
 In colonial times, America was a ship-building country, 
 and the New England colonies were chiefly employed in 
 this industry, in commerce and in the fisheries. Their 
 farms never produced food enough for their people. The 
 success of the War for Independence closed the English 
 market to American ship-builders, and shut American ship- 
 owners out of any carrying trade, except our coast-trade and 
 that between American and foreign ports. The entire ton- 
 nage of our shipping ran down to a fourth of what it had 
 been, and the Eastern States were suffering badly for want 
 of employment for their people. 
 
 17. After the adoption of the Constitution, Congress 
 enacted a series of navigatiojt laws. They were modeled 
 on those which Cromwell established for England, and which 
 in his day destroyed the monopoly of the carrying trade by 
 the Dutch. These forbade ships of other countries to bring 
 into American ports the products of any country but their 
 own and its colonies. They also imposed a tonnage-tax on 
 foreign ships entering our ports, and heavier duties on the 
 imports they brought than on those brought in our own 
 ships. To encourage ship-building, they allowed to no ship 
 the advantage of these laws, unless it had been built in an 
 American dockyard, or had been taken a prize of war by an 
 American ship. 
 
 Under the encouragement offered by these laws, American 
 shipping revived at once, and grew rapidly. Ship-building 
 
90 POLITICAL ECONOMY. 
 
 was improved as regards both the form of the hulk and the 
 method of rigging, so that the American clipper-ship sailed 
 faster and was handled by a smaller crew than any other. 
 Our ships got all the fast, well-paying business which the 
 navigation laws of other countries permitted them to take. 
 With favorable winds they crossed the Atlantic as fast as 
 do many of the steamships now. 
 
 In 1828, in the hope of opening to them still more of the 
 carrying trade, Congress offered to remove all restrictions 
 from the ships of those countries which would do the same 
 for us. Some of them did so at once, but not England. 
 She clung to her Navigation Laws until 1850, and then, by 
 repealing them, took advantage of our offer, when the con- 
 ditions had changed so as to favor her ship-builders. 
 
 18. This change was from wood to iron (or steel) and 
 from sails to steam, in ship-building. Here we were at a 
 disadvantage, as our iron trade was far behind hers. Besides 
 this, all the European countries were anxious to take advan- 
 tage of the change, and to secure as much as possible of 
 the new shipping. So they began to pay subsidies to their 
 steamship lines, first openly, and then under cover of paying 
 them to carry the mails. America also tried to compete, 
 building steamships of wood, which were the fastest on the 
 ocean, but not the safest. These also were paid subsidies 
 until 1855, when the Senate refused to continue this. 
 From that date our shipping has been left, for the most 
 part, to take care of itself, except in the coasting trade, to 
 which foreign vessels are not admitted. All the old naviga- 
 tion laws have been wiped out, except that which confines 
 the American flag to ships of American build. 
 
 The materials used to build ships have been allowed to 
 come into our ports free of duty. But the chief cost of a 
 ship is for the labor expended in the shipyard ; and with 
 more profitable kinds of work open to him, the American 
 
POLITICAL ECONOMY. 91 
 
 workman will not give his labor at the rates paid in British 
 shipyards. We therefore have had to compete with ships 
 cheaply built and heavily subsidized, while we have not even 
 given our ships as much for carrying the mails as amounted 
 to the postage paid on them. 
 
 19. Americans, it is true, have been free to buy ships of 
 foreign build, and to sail them under the foreign flag. Sev- 
 eral steamship-lines are thus owned and managed by Ameri- 
 cans. But no country ever became a great ship-owning 
 country, except by becoming a ship-building country. Our 
 hand has not lost its cunning. Our fast yachts and swift 
 cruisers — both built at home, regardless of cost — have not 
 been surpassed. The few steamships built in our shipyards 
 are among the finest that cross the Atlantic. But through 
 our neglect of the shipping interest, it has declined in 
 America, while every other has advanced. We are paying 
 — the London Times estimates — $200,000,000 a year for 
 the use of foreign ships, and we are suffering the derange- 
 ment of our foreign commerce by having to make this 
 payment out of our exports. 
 
 20. The amount of foreign trade which a country pos- 
 sesses is sometimes taken as a test of its general prosperity. 
 It would be vastly fairer to take the amount of its domestic 
 trade as a test, as Adam Smith showed. The fact that a 
 country sends a great deal of its products abroad, and 
 brings in foreign articles in exchange, and uses much ship- 
 ping in doing so, is no indication that it is managing its 
 housekeeping well. Ireland, for instance, certainly is not a 
 prosperous country ; yet the tonnage of the shipping which 
 enters and clears from its ports in one year, is eight times 
 as great in proportion to the population as is that which 
 enters and clears from our own ports. In Ireland there is 
 hardly any domestic commerce. Nearly every one is engaged 
 in the same business of farming. No man needs or helps 
 
92 POLITICAL ECONOMY. 
 
 his neighbor. All are busy serving the foreigner ; and the 
 ships go out loaded with food, and come in bringing nearly 
 everything else that is used in the country. In Ireland, 
 the average of consumption is very low, for while every- 
 thing the people buy is cheap, they have very little to buy 
 with. In America the average of consumption is the high- 
 est in the world, and has become so since we adopted a 
 policy which fosters the growth of home commerce by pro- 
 ducing the greatest possible variety in the industry of our 
 people. 
 
 21. Foreign commerce is based on difference in climate 
 and capacity among the nations. Its imports should be so 
 balanced by exports as to make it needless to send money 
 abroad. To this end protective duties are useful, and not 
 oppressive to the consumers at home. Reciprocity treaties 
 serve the same end, as does the maintenance of the country's 
 merchant shipping. Domestic rather than foreign commerce 
 is the test of a country's prosperity. 
 
CHAPTER XI. 
 
 Free Trade and Protection. 
 
 1. For two centuries past people have been divided in 
 opinion between the poUcy which regards government as hav- 
 ing the right and duty to oversee the industrial development 
 of the Nation, and that which would confine it to the main- 
 tenance of public order. The latter is called Free Trade, 
 and its friends contend that " no legislation should be of a 
 tendency to divert capital or labor into a channel into which 
 they would not. flow without it. When every man is left free 
 to do what he will with his own, he will do what is most 
 beneficial to society as well as to himself. Society is so 
 constituted that it always is profitable for some one to do 
 anything it needs to have done. When government interferes 
 with this natural movement of self-interest, it is sure to do 
 more harm than good. When all men are left to their 
 natural liberty of action, the best results will be obtained, 
 for the natural laws of supply and demand work more evenly 
 and more wisely than any human law, which attempts to 
 interfere with their operation." 
 
 2. The Free Traders also say that "there is no need of 
 legislation to foster the growth of manufactures or any other 
 industry. All such industries come as a matter of course, 
 as soon as the country is ready for them. When it has more 
 people than can well live by farming alone, and has acquired 
 a surplus of capital for other industries, then there will be a 
 natural diversion of labor and capital into industries the 
 country needs. To attempt to force the growth of such 
 industries before the time, can result only in a hot-house 
 growth of sickly character, which constantly demands 
 
94 POLITICAL ECONOMY. 
 
 increasing Protection from foreign competition. Such an 
 attempt also requires the diversion of capital and labor 
 from channels of profitable employment into those which 
 are less so, to the disadvantage of the whole people." 
 
 3. The Free Trader describes the Protectionist policy as 
 a miserly one in regard to foreign commerce. " Each 
 country," he says, "has its own advantages for the produc- 
 tion of some article which it can supply to the rest more 
 cheaply than they can produce it for themselves. There is 
 thus a natural division of labor among the various countries, 
 as well as within the bounds of each. To refuse to recognize 
 this is as though we refused to recognize the differences of 
 climate, and undertook to raise tropical fruits under glass, 
 instead of importing them. And just as our refusal to buy 
 pine-apples and bananas from the West Indies would result 
 in the reduction of our exports to them, as they could not 
 pay us for our flour if we took no fruit in exchange, so 
 restrictions on other imports work in the same way. Com- 
 modities are paid for with commodities. The country that 
 will not import cannot export." 
 
 4. The Free Trader also objects to restrictions on the 
 trade between nations as tending to " dearness of the neces- 
 saries and comforts of existence. It is legislation, therefore, 
 in the interests of a class, and against the general interests 
 of society, as the producers are a class and the consumers 
 are everybody. The interest of the consumer is simply in 
 cheapness, and whatever puts up prices is adverse to his 
 interest." 
 
 5. It also is said that " Protection introduces into govern- 
 ment a principle of paternalism., which tends to Socialism. 
 It teaches men to lean upon the government, when they 
 ought to rely upon their own thrift, energy and enterprise. 
 It thus prepares them for the Socialism in which the indi- 
 vidual is nothing and the State everything." 
 
POLITICAL ECONOMY. 95 
 
 These arguments are put into many shapes, but they cover 
 the case for Free Trade as an economic policy. 
 
 6. Protectionists do not deny that in most cases, as society 
 is constituted, the man who is left free to do what he will 
 with his own, will do what society needs to have done ; and 
 also that in most cases where there is a social need, it will 
 be profitable for some one to supply it. They do not insist 
 on Protection as a universal principle, as the other party 
 does with Free Trade. They only say that there are excep- 
 tional cases in which the principle of free competition does 
 not work satisfactorily, and that in these the collective action 
 of society is needed. 
 
 Even the Free Trader admits these exceptions in practice, 
 while denying them in theory. (i) He does not leave 
 education to free competition, as that has been tried and 
 does not work well. (2) He does not propose to leave the 
 carriage of letters to free competition. He supports the 
 Post Office, knowing that if we had none, we should see 
 very bad and costly service in the poorer parts of the 
 country. (3) He does not leave Money to free competition. 
 Not only does the Nation coin all the bullion money, but it 
 lays severe restrictions upon the issue of paper money. We 
 once tried Free Trade in paper money, and the results were 
 very bad. (4) He has to admit that our leaving farmers 
 and lumberers to do what they will with their own in the 
 matter of our forests, has not resulted in their doing what 
 was best for society. By clearing the country too completely 
 they have injured the fertility and disturbed the rainfall, so 
 that droughts follow floods, and floods follow droughts. 
 (5) While the Free Trader holds that government should do 
 nothing for manufactures, he is quite ready to have it do a 
 great deal for trade, in constructing and dredging out har- 
 bors, blasting rocks, digging canals, promoting railroads, and 
 the like. The English Free Trader goes a little farther, and 
 
96 POLITICAL ECONOMY. 
 
 besides spending many millions of public money on docks, 
 he pays heavy subsidies out of the public Treasury to steam- 
 ship lines, so as to reduce the cost of carrying the goods of 
 British manufacturers to every part of the world. (6) The 
 Protectionist merely adds one more exception to this list, and 
 insists that a country may be in great need of manufactures, 
 and yet that it may not be profitable for individuals to 
 establish them without help from the community in the shape 
 of bounties, or protective* duties, or any other means that 
 may be thought better than these. 
 
 7. It is argued that we will get all we need if we will wait 
 long enough, as industries grow up naturally, whenever the 
 growth of population and of capital favors them. It is quite 
 true that they would grow up naturally, if there were no 
 interference from without. But the richer and more 
 advanced countries, being already in possession of what they 
 regard as the more profitable industries, spare no pains to 
 prevent their growth elsewhere. It is shown in reports to 
 the British Parliament that their capitalists everr make great 
 sacrifices to prevent the growth of rival industries in other 
 countries, by putting prices so low that the new manufactures 
 cannot compete with them. If all the world were equal in 
 the command of capital and the growth of industrial power, 
 Protection would not be needed. But we must take the 
 world as it is, and it is a world of gross inequalities. 
 
 The situation in Ireland shows how the growth of manu- 
 factures may be retarded, even when the population is too 
 dense to live by farming alone, and there is surplus capital 
 for the other industries. The Irish have made many trials 
 to start manufactures, but they always have been foiled by 
 foreign competition. 
 
 8. That protected industries are not hot-house plants is 
 shown by history. The three greatest of English industries, 
 woolens, iron and steel, and cottons, owe their very existence • 
 
POLITICAL ECONOMY. 97 
 
 to Protection, and are now firmly established. The same is 
 true of every great European industry which is now fighting 
 for the world's markets. 
 
 9. While Protection does divert capital and labor into 
 channels into which they would not flow otherwise, it does 
 not usually divert them out of any other channel in which 
 they are flowing. No country can have more industry than 
 it has capital and labor ; but most countries have a great 
 deal less. The Connecticut towns, for instance, which have 
 become manufacturing centres during the last half-a-century, 
 have not done it by taking capital or labor from farming or 
 anything else. These new industries have found work for 
 idle hands, idle savings and unused credit. No country has 
 so much of these idle things as one which cannot give its 
 people any employment but farming. 
 
 10. That there is a natural division of labor among the 
 Nations, and that foreign commerce enables each country to 
 profit by the advantages of the rest, is the belief of the Pro- 
 tectionists equally with the Free Traders. They differ only 
 in that Protectionists believe it is wasteful and spendthrift 
 for a country to buy of another what it can just as well 
 make for itself. Nor do they think that the fact that some 
 countries can at this moment make an article cheaper than 
 we can, is a reason for not trying to make it, if we have the 
 means and the skill. 
 
 John Stuart Mill says, "The superiority of one country 
 over another in a branch of industry often arises only from 
 it having begun it sooner. A country which has this skill 
 and experience to acquire may in other respects be better 
 adapted to the production than those earlier in the field ; 
 and besides, it is a just remark that ^nothing has a greater 
 tendency to produce improvement in any branch of produc- 
 tion than its trial under a new set of conditions. But it can- 
 not be expected that individuals should at their own risk, or 
 
98 POLITICAL ECONOMY. 
 
 rather to their certain loss, introduce a new manufacture and 
 bear the burthen of carrying it on until producers have been 
 educated up to the level of those with whom the processes 
 have become traditional. A protecting duty continued for a 
 reasonable time will sometimes be the least inconvenient 
 mode by which a country can tax itself for the support of 
 such an experiment." Mr. Mill was a Free Trader, but he 
 said once, " I do not say that if I were an American, I should 
 not be a Protectionist." 
 
 Prof. Thorold Rogers, another English Free Trader, says 
 that " the circumstances in which " the United States and 
 the British Colonies " are situated exactly square with the 
 hypothesis of Mr. Mill. The countries are young and rising, 
 — industries, as yet nascent, are thoroughly suited to the 
 natural capacity of the region and of the people. . . . There 
 is no reason, apparently, except that of priority in the 
 market, why the industry of the old country should not be 
 transplanted to the new." 
 
 II. That commodities should be paid for with commodi- 
 ties in international trade, is just what the Protectionist 
 asserts. That they always are so, history disproves. We 
 have exported hundreds of millions of much-needed Gold to 
 Europe to pay our balances. Japan has lost all her Gold in 
 the same way. Portugal lost both her Gold and her Silver 
 in the same fashion during last century. Russia was losing 
 all hers when she went back to Protection in 1823. It is no 
 answer to say that Gold when exported is " merely a com- 
 modity like any other." The common sense of the whole 
 business world regards the export as a national loss, because 
 it cannot be afforded. 
 
 Protectionists desire the freest of trade in whatever the 
 country cannot produce for itself. They remove the duties 
 from tea, coffee and spices for that reason, while Free Trade 
 countries tax these heavily. But they believe that a Nation 
 
POLITICAL ECONOMY. 99 
 
 which spends more than it makes, or exports more than it 
 imports, is a spendthrift, and will come to grief. 
 
 12. That the interest of society is in mere cheapness, 
 whether the producing classes prosper or the reverse. Pro- 
 tectionists do not believe. If that were true, then hard 
 times would be the best of times, for they are the times of 
 greatest cheapness. In fact it is impossible to sunder the 
 interests of the producers from those of the consumers, 
 especially in a country like ours, where every one is a pro- 
 ducer of some sort. To do so is to act like the man who 
 refused to take quinine for the chills, because the chills were 
 in his back and not in his stomach, where the quinine would 
 go. We are all one body, and if one member suffer, all the 
 members suffer with it. Better therefore than a low price 
 for a thing is a fair price, at which the producer can live 
 comfortably. If we pay less, his loss is likely to come back 
 to us in some shape. 
 
 13. The Free Trade argument fixes attention exclusively 
 on the price of what we buy. But no man prospers simply 
 by the cheapness of what he buys. His interest is in the 
 ratio of the price of what he buys to that of what he sells, 
 whether it be clothing he has made, or wheat he has grown, 
 or brain-power he has put at the service of his fellow-men. 
 And this ratio is most favorable when all kinds of industry 
 are associated, when most power is spent in producing and 
 least in transportation, and when there is least idleness of 
 capital and of labor. 
 
 In this respect Ireland furnishes the contrast to America. 
 In Ireland everything is done for the consumer, and little or 
 nothing for the producer. Everything is cheap in Ireland, 
 and her people fly from this cheapness as from a blight, to 
 find employment for muscle and brain in other lands. An 
 Irish immigrant in America was grumbling that he " could buy 
 as much for a shilling in Ireland as for a dollar in America." 
 
100 POLITICAL ECONOMY. 
 
 "Why did you not stay there ? " he was asked. " Because I 
 could not get ihe shilling ! " 
 
 14. It is of no advantage to the farmer to be able to buy 
 clothing and hardware cheap, if he has no home market in 
 which to sell his produce. He can sell some things indeed 
 to the foreign artisan who supplies him, but even of these 
 not a quarter so much as the same artisan would consume 
 if he were working in America. If the farmer had to 
 exchange his wheat directly for plows, ox-chains, dress-goods, 
 and the like, he would find how great his advantage is in 
 dealing with the home manufacturer. It is the fact that 
 money is used as the medium, which conceals this advantage. 
 
 15. The price of raw materials and of manufactured 
 goods approach each other most nearly where the one is 
 converted into the other. If all our paper-mills were on the 
 Hudson and the Delaware, the price of rags and of paper 
 would be nearer to each other there than anywhere else. 
 As one went westward he would find rags fall and paper rise 
 in price. This is true of all raw material as compared with 
 manufactured goods ; and food is but one general form of 
 raw material, needed for all manufactures equally. It is 
 therefore the interest of the producers of raw materials and 
 of food, that they should be in the neighborhood of those 
 who effect the conversion we call manufacture. There they 
 get the largest share of the manufactured article in exchange 
 for the raw material. 
 
 As already shown (p. 78) this interest is opposed to our 
 railroad policy as well as to Free Trade. 
 
 16. The workingman finds his interest in Protection 
 because (i) whatever tends to increase the variety of 
 employment in the country increases the demand for labor 
 of all kinds. Merely farming countries are full of idlers, 
 who live off the earnings of those who have work. 
 (2) Variety of employment creates a competition for labor. 
 
POLITICAL ECONOMY. 101 
 
 In its absence/employers, being all of one trade, come to an 
 understanding to keep wages down. Hence, even in the 
 same country, as in Belgium and in England, wages of labor 
 are much higher in districts where there is manufacturing, 
 than in those where there is only farming. (3) Every 
 country has its own kind of public opinion as to the style in 
 which its working classes ought to be able to live. This 
 demands in America a much higher standard of comfort 
 than in Europe. But if the products of European labor and 
 capital came in free of duty, it would not be possible to 
 maintain this higher standard. Our workingmen would be 
 dragged down to the level of the laborers of monarchical 
 and aristocratic societies. Under the Protective Tariffs of 
 1860-1892, the American standard rose faster and higher 
 than in any part of the world, as was shown by the inflow of 
 European labor to secure the benefits and the (alleged) dis- 
 advantages of Protection. Whether it was better to admit 
 it or to exclude it, is not here the question. The fact was 
 that it came. 
 
 17. The Constitution of the United States says that 
 government is established to " promote the general welfare." 
 In all countries it is held responsible for this. Parties have 
 been driven from power in our own country because business 
 distress prevailed under their administration. In Europe 
 violent revolutions are almost always associated with popular 
 distress and scarcity. To insist that the government shall 
 abstain from all management of industry, is to refuse it the 
 power to discharge this responsibility. It is to limit its 
 powers as the nations in fact never have agreed to have 
 them limited. Now Protection makes no more interference 
 with the movement of industry than is sufficient for its pur- 
 pose. It does not do anything for individuals, or confer 
 personal advantages of any kind on them. It merely creates 
 a new industrial condition, which every one is equally free 
 
102 POLITICAL ECONOMY, 
 
 to take advantage of. By enlarging the number of employ- 
 ments it also enlarges the range of individual liberty, as it 
 gives greater choice of fields of labor. It thus helps to 
 develop that individuality in the working classes which 
 Socialism seeks to destroy. It leads away from Socialism, 
 not toward it. 
 
 In this connection it is well to remember that we do not 
 have Protection because we have manufactures but manu- 
 factures because we have had Protection. 
 
 i8. Protection and Free Trade are in controversy. The 
 former is unfairly charged with artificiality, hostility to free- 
 dom, class legislation and paternalism. It has the sanction 
 of even Free Traders in their wiser moments, and can be 
 defended as a benefit to all classes. 
 
CHAPTER XII. 
 Communism^ Socialism and Anarchism. 
 
 1. Our modern system of land, labor and industry is 
 based on private ownership and competition. Land is dis- 
 tributed among owners in severalty and they are given 
 almost as complete control of it as though it were clothing 
 or tools or cattle. The accumulations of past labor are 
 mostly in the hands of private capitalists, who pay in wages 
 for the labor of the working classes, and make such bargains 
 as they can in the labor-market. Transportation by sea and 
 land is carried on by individuals and private or semi-private 
 corporations, under the laws which control the common 
 carrier, while the State takes charge of making common 
 roads only, and in some cases leaves even that to turnpike 
 companies. The extension of enterprise is left to private 
 initiative, and even Tariff legislation goes no farther than to 
 create larger opportunity for private enterprise. Only in 
 the regulation of coin and paper money, in the creation of 
 harbors and water-ways, and the carriage of letters, does the 
 government directly enter the sphere of industry, and under- 
 take to do what the people might be left to do for themselves 
 individually or by co-operation. 
 
 2. To this whole system of private management objection 
 is now brought on the ground that it inflicts injustice upon 
 the people at large, while enabling a few individuals to 
 acquire an excessive share of the wealth produced by com- 
 mon labor of all. Those who make this objection belong 
 to several schools, (i) The Communist holds that private 
 property is essentially wrong, and whatever has any use 
 that meets a human need should be common property, and 
 
104 POLITICAL ECONOMY. 
 
 should be placed at the service of every individual who is in 
 need of it. Especially he would have the land held by the 
 State only, and tilled by the people as its members, the 
 harvest being divided among them proportionally to their 
 needs. Something approaching this was the actual usage 
 in primitive society, and something like it may be seen still 
 in countries which have made little progress in civilization. 
 
 3. Everywhere the communistic system of property has 
 borne the same fruit. It has kept people miserably poor by 
 taking away all motive to improvement. It has made the 
 individual count for nothing by making society all-powerful. 
 It thus has stereotyped methods of work, opinions and social 
 arrangements. It is only a minority of mankind that has 
 even now extricated itself from communistic slavery of the 
 individual to the community, but it is that minority that 
 has done all that is worth recording in the world's history. 
 It embraces all the free peoples, who govern themselves, 
 while communistic societies and nations always have bowed 
 under the yoke of a master. It embraces all the peoples 
 who have risen to literary culture and social refinement, and 
 have learned to think each for himself, instead of taking his 
 opinions at the hands of others. It also embraces all the 
 nations who have risen out of the poverty of the savage 
 or the lower type of barbarian, and have secured a high 
 standard of living for their people. The equality which 
 Communism secures is the equality of pauperism, ignorance 
 and political subjection. 
 
 4. (2) Socialism approaches the question from a more 
 modern point of view. Recognizing the fact that the actual 
 product of the world's labor is less important than the 
 instruments of production by which the stock is maintained, 
 it proposes to take those instruments into the hands of the 
 State. Beginning with the railroads and the telegraphs, it 
 would gradually or quickly transfer the ownership of all the 
 
POLITICAL ECONOMY. 105 
 
 capital of the world to government, and vest in it the 
 direction and extension of enterprise. To secure a proper 
 distribution of labor to meet the actual needs of society, it 
 would vest in the government the power to prescribe to each 
 on what he should spend his time, instead of leaving this to 
 personal tastes, or to private opinion of what needs to be 
 done. It would pay every worker in a check, which would 
 certify the time he had spent in the production of the article 
 he furnished, and it would make these checks receivable for 
 products produced by the same amount of time spent by 
 workmen of other kinds. 
 
 5. The Socialist urges as a reason for this industrial 
 revolution some very keen and often instructive criticisms 
 upon the system now in vogue. Part indeed of his criticism 
 grows out of false and exploded theories of the political 
 economists, which were in vogue when Socialism became a 
 system. One of these was the notion that land derives its 
 value from the natural and inherent properties of the soil, 
 and not from human labor expended on it or on land in its 
 neighborhood (see page 19). Another was the notion that 
 there is a natural and necessary rate of wages, being the 
 amount needed to keep up the supply of workmen, as though 
 it were a breed of domestic animals, whose wills were not to 
 be taken into account (see page 27). Yet another was the 
 theory that rent of land grows out of its monopoly by the 
 first in possession, as these took up the best lands, and those 
 who came later had to pay them rent, or put up with worse 
 soils (see page 15). 
 
 If these things were as the economists declared, then our 
 industrial system must be too bad for anything but destruc- 
 tion. But they are not true ; and under our system of 
 private ownership and free competition there is a steady 
 tendency to equality of condition, not to the misery and 
 enslavement of the mass of mankind. 
 
106 POLITICAL ECONOMY. 
 
 6. A second line of attack is on the immoralities which 
 are associated with the present system of industry. The 
 Socialists point to the selfishness and greed with which men 
 pursue wealth, to the direct injury often of those with whom 
 they are competing for markets or for employment. They 
 remind us that employers often show themselves careless of 
 the health, the lives and the morals of their working people, 
 in order to keep down the cost of production and secure 
 high profits to themselves. They make a dreadful exhibit 
 of the sweating system^ by which immigrant labor is employed 
 in all our large cities on wages which hardly suffice to keep 
 the worker alive. They point to the envy with which classes 
 regard the prosperity of other classes, and the evil acts 
 which grow from this bitter root. 
 
 All this is true, but it is not the fruit of our industrial 
 system, but of the low morality of some of those who are in 
 control of the system. Nor will the progress of society be 
 achieved by abolishing the possibility of wrong-doing, for 
 that cannot be done without also abolishing the possibility 
 of free right-doing. You cannot take away from men the 
 opportunity of being selfish, without also taking away the 
 opportunity of showing themselves unselfish. True progress 
 must be found in carrying social opinion forward to the 
 point at which men will find more happiness in unselfish 
 kindness than in selfish gain. Socialism means moral 
 despair of any such future for the race. 
 
 7. Society does need a higher standard of right in matters 
 of business and industry. It needs that every employer 
 shall see in his workmen not merely " hands " but men, — 
 not things, but persons, — not means to his own ends, but 
 ends in themselves. It is their feeling that they are 
 nobodies in the social system which breeds discontent and 
 envy. And not the rich only, but every one of us can work 
 to prevent the spread of that feeling, by treating every 
 
POLITICAL ECONOMY. 107 
 
 human being who comes into our Uves as a person, that is, 
 as an end in himself. 
 
 Society also needs that men shall accept a higher standard 
 of success in life than gain. The workman who would not 
 carry Mr. Girard's pile of stones back across the yard, no 
 matter what he was paid for it, had a right instinct. He 
 felt that use, not gain, is the true end of a man's work. 
 When masters and men alike recognize that principle, there 
 will be industrial peace ; and then it will be felt also that no 
 man has any right to make any gain except for rendering an 
 equivalent service to society. But Socialism never will help 
 us to such results as these. It despairs of them. 
 
 8. A third line of attack is on the econo7nic defects of our 
 industrial system. This especially concerns the recurrence 
 of times of business panic and of depression, by which a 
 great number of workmen are deprived of employment with- 
 out any fault of theirs. It is said to be monstrous that the 
 world should need their work as really as before, that they 
 should be as willing to do it, yet it cannot be done and they 
 must suffer in idleness. If the State had the direction of 
 industry, such iaterruptions of the world's work could not 
 occur, as business would not then be subject to the depres- 
 sions and panics which occur under private direction. The 
 working classes would thus be saved from grave social risk, 
 to which they now are subject. 
 
 It also is objected that in our present system there are 
 openings for dishonesty in the wrecking of railroads, in 
 speculations to force up the prices of necessaries, and in 
 adulterating the quality of food, clothing and medicine, 
 which would disappear under the State's direction of 
 industry. 
 
 9. These economic objections are the most forcible 
 arguments for Socialism that its friends have ever presented. 
 Yet every one of them is an evil which could be remedied 
 
108 POLITICAL ECONOMY. 
 
 without overthrowing our present system of free labor and 
 free capital. Business could be put upon a much sounder 
 and more secure footing than it now is ; and legal remedies 
 could be found for the grave dishonesties of corporation 
 management. 
 
 But even if this were not true, it would be a heavy price 
 that we would pay to rid ourselves of these evils, if we had 
 to give up the personal liberty to make what each of us 
 pleases of his own life, and to accept instead the State's 
 control of us. That would mean the unlimited domination 
 of the average man, his tastes and judgments, over the rest 
 of society. Freedom may cost much, but it is the precious 
 heritage transmitted to us by our fathers, who struggled out 
 of social tyranny into personal liberty of action. No people 
 that has really tasted it, will revert permanently to a system 
 which makes the State omnipotent. 
 
 lo. (3) The Anarchist does not so much concern us here, 
 as his programme is simply the abolition of government, 
 except as it may be judged expedient from time to time to 
 extemporize some sort of Lynch-law to abate social nuisances. 
 He would come swiftly to a kind of communism, by abolish- 
 ing all public guarantee of the rights of property, and thus 
 throwing everything open to the strongest hand that could 
 seize it. The Socialist would take us back to barbarism ; 
 but the Anarchist improves on the proposal by suggesting a 
 return to savagery. 
 
ADVERTISEMENTS 
 
POLITICAL SCIENCE. 
 
 Our Government : 
 
 How It Grew, What It Does, and How It Does It. 
 
 ory 
 Ma 
 
 Science in Iowa College. 12nio. Cloth. 318 pages. Mailing price, 85 
 cents ; for introduction, 75 cents. 
 
 'pHE grand distinction of Professor Macy's book is that it covers 
 
 the whole ground. It is relieved from the ordinary dullness 
 
 of text-books on the subject by the presentation of the government 
 
 at every point as a living, acting organism. Emphasis is given 
 
 to the practical working of the government as it is seen by the 
 
 citizen, and the topics are so presented as to stimulate the direct 
 
 observation and study of the present doings of government. 
 
 F. A. Walker, President of Massa- 
 chusetts Institute of Technology: 
 Professor Macy has rendered an im- 
 portant service to the political con- 
 dition of the country. 
 
 Edmund J. James, Professor of 
 Finance and Administration, Uni- 
 versity of Pennsylvania : I have ad- 
 vised my students to read it. 
 
 0. D. Eobinson, P^^incipal of High 
 School, Albany, iV. T.: The best text- 
 book on civil government for Ameri- 
 can students that has come under my 
 notice. 
 
 J. P. "Welsh, Principal of State 
 Normal School, Bloomshurg, Pa. : I 
 like the book very much. It is well 
 arranged, and topics varying in im- 
 portance are given space in propor- 
 tion. 
 
 Edward Conant, Principal of 
 
 State Normal School, Randolph, Vt. : 
 A very excellent treatise. 
 
 Theodore H. Johnston, Principal 
 of West High School, Cleveland, 
 Ohio. : It is easily best of its kind, 
 
 C. S. Halsey, Principal of Union 
 Classical Institute. Schenectady, 
 N. Y. : It is an admirable book, pre- 
 senting in brief compass the needed 
 information in a form and style well 
 adapted to the wants of the school- 
 room. 
 
 Chas. E. Lord, Principal of High 
 School, Franklin, Pa. : The most 
 satisfactory work of the kind that I 
 have ever seen. 
 
 D. F. Houston, formerly Superin- 
 tendent of Schools, Spartanhurg, 
 S. C. : It easily stands at the head of 
 the list of text-books on civil govern- 
 ment. 
 
 Macy's First Lessons in Ciuil Govern ment 
 
 For Common Schools. See Common School Catalogue. 
 
 IVIacy's Iowa Government Text-Book. 
 
 140 pages. Boards. Mailing price, 45 cents ; for introduction, 40 cents. 
 
152 POLITICAL SCIENCE. 
 
 Political Science and Comparatiue Constitutional 
 
 Law. 
 
 By John W. Burgess, LL.D., Professor of Constitutional and Inter- 
 national History and Law, and Dean of the School of Political Science 
 in Columhia College. Two volumes. 8vo. Cloth. 781 pages. Ketail 
 price, $5.00. Special terms to teachers and for introduction. 
 
 ^HIS work is divided into two Parts. The First treats of the 
 nation as an ethnological concept ; of the state, its idea, its 
 origin, its forms, and its ends ; and shows the historical develop- 
 ment of four typical constitutions of the modern age. 
 
 Part Second treats of sovereignty within the constitution ; of civil 
 liberty; and of government, legislative, executive, and judicial. 
 
 The London Times : A noteworthy i study of political science and juris- 
 contribution to the comparative I prudence. 
 
 Currency, Finance, and Banking. 
 
 Laws of the United States relating to Currency, Finance, and Banking ; 
 with Vetoed Bills and other documents. Compiled by C. F. Dunbar, 
 Professor of Political Economy in Harvard University. Svo. Cloth. 
 309 pages. Mailing price, $2.50 ; special terms for use in classes. 
 
 nrmS book presents in chronological order the exact text of all 
 important acts of Congress relating to currency, finance, coin- 
 age, and banking from 1789 to 1891, with carefully edited 
 abstracts of acts or sections of minor importance. 
 
 The Nation, New York : A work i . . . . Professor Dunbar's task has 
 of obvious utility and convenience. I been most scrupulously executed. 
 
 The Mark in Europe and America. 
 
 A Keview of the Discussion on Early Land Tenure. By Enoch A. 
 Bryan, A.M., President of Washington State Agricultural College 
 and School of Science. 12mo. Cloth, viii + 164 pages. Mailing price, 
 $1.10 ; for introduction, $1.00. 
 
 n^HIS book appeals to those who are interested in any of those 
 sociological questions which are connected with the history of 
 land-holding, as well as to teachers and students of history and 
 economics. 
 
 The Soston Herald : The brevity time nor attention to bestow upon 
 of the book and the absence of a larger work on a topic like this of 
 needless material will recommend real interest, 
 it to many readers who have neither 
 
POLITICAL SCIENCE. 
 
 153 
 
 Political Science Quarterly. 
 
 A Review devoted to the Historical, Statistical, and Comparative Study 
 of Politics, Economics, and Public Law. 
 
 Edited by the Faculty of Political Science of Columbia College. Crown 
 8vo. About 180 pages in each number. Annual subscription, :j^3.UU; 
 Single number, 75 cents. Back numbers and bound volumes can be 
 obtained from the publishers. 
 
 JT is the purpose of the Quartekly to furnish a field where 
 topics of real public interest may be discussed by scientific men 
 from the scientific point of view. 
 
 Its practical tendency is shown by the following partial list of 
 
 subjects discussed during the past eight years : 
 
 Taxation, the Customs Tariff, the National Banks, Silver Coin- 
 age, the Labor Question, the Railroad Question, the Land Question 
 and the Mortgage Question, Civil Service Reform, Municipal Gov- 
 ernment, the Machinery of N"ominations and Elections, the Census, 
 Immigration, Trusts, Governmental Control of Industry, and 
 Socialism. 
 
 E. L. Godkin, Editor of New York 
 Evening Post and Nation : I know 
 of no periodical of its kind which 
 maintains a higher standard of excel- 
 lence. The longer articles are gen- 
 erally models of clear and adequate 
 discussion such as only thoroughly 
 
 competent hands can produce. But 
 the feature which I think most 
 distinctly meritorious is the book 
 reviews. Their thoroughness and 
 impartiality and independence are 
 excellent signs of the times. 
 
 The Philosophy of Wealth. 
 
 Economic Principles Newly Formulated. By John B. Clark A M 
 Professor of History and Political Science in Smith College ; Lecturer 
 on Political Economy in Amherst College. 12mo. Cloth, xiii + 235 
 Mailing price, $1.10 ; for introduction, $1.00. 
 
 rpmS work is a re-statement of economic principles in harmony 
 with the modern spirit. It aims to secure a truer conception 
 of wealth, labor, and vaUie, and of the process of distribution, and 
 takes into account the action of moral forces and the organic 
 nature of society. 
 
 New York Tribune : No book is 
 remembered in which these vital 
 questions have been treated in a 
 
 more elevated and noble tone, ot 
 with more of searching and original 
 thought. 
 
HISTORY. 
 
 115 
 
 A General History. 
 
 For High Schools and Colleges. 
 
 By P. V. N. Myers, Professor of History, University of Cincinnati. 
 12mo. Half leather, x + 759 pages, mailing price, $1.65 ; for intro- 
 duction, $1.50. 
 
 T^HIS history is believed to combine all the qualities that such a 
 work should possess, — a philosophic eye for the great line of 
 development of the life of the race, not diverted by mere inci- 
 dents ; candor in the treatment of all questions ; a due sense of 
 proportion ; accuracy of scholarship ; a style transparent though 
 at the same time full of color ; and the quality of teachableness. 
 
 One feature of the greatest interest and practical value is this, 
 — the author not only brings out and keeps distinct the interrela- 
 tions of things, but he notes and sets clearly before the reader 
 what each nation has contributed to the life and advancement of 
 the race, — and so to our present civilization. Among the methods 
 which will specially recommend themselves to teachers is the plan 
 of cross-references which bind the branches of the learner's acqui- 
 sitions compactly and vitally. 
 
 J. W. Stearns, Professor of Peda- 
 gogy, University of Wisconsin, Madi- 
 son, Wis. : Its selection of topics for 
 treatment, its conception of the rela- 
 tions of parts to the whole, its grasp 
 of what is most vital in the history 
 of the civilized world, together with 
 the vividness and vitality of the nar- 
 rative, make it the hest text-hook in 
 universal history for heginners that 
 we are acquainted with. 
 
 A. H. Fetterolf , President Girard 
 College, Philadelphia, Pa. : I keep 
 it on my desk, and whenever I have 
 a few moments unoccupied I take it 
 up, and I never turn to a page that 
 does not have some things that 
 interest me. 
 
 Angle Clara Chapin, Professor of 
 Greek, Wellesley College, Mass. : It 
 is a marvel of condensation, retain- 
 ing, however, the breadth and inter- 
 est of a fuller narrative. 
 
 Shailer Mathews, Professor of 
 History, Chicago University: The 
 statements are singularly clear and 
 vivid ; the simplicity of its style and 
 its generally picturesque character 
 seem to fit it especially for an ele- 
 mentary text-hook. 
 
 George C. Chase, Professor of 
 Rhetonc, Bates College, Lewiston, 
 Me. : I find it unlike other works of 
 its kind, thoroughly readable. The 
 author has shown a sense of propor- 
 tion seldom exhibited in books de- 
 voted to general history. 
 
 Charles S. Walker, Professor 
 of Mental and Political Science, 
 Massachusetts Agricultural College, 
 Amherst : He presents the facts in 
 their relation to the art, commerce, 
 government, and civilization of 
 mankind so as to attract attention 
 in the very beginning and hold it 
 to the end. 
 
120 
 
 HISTORY. 
 
 Outlines of Mediceual and Modern History. 
 
 By P. V. N. Myers, A.M., Prof. History, Univ. of Cincinnati, author 
 of Outlines of Ancient History, and Remains of Lost Empires. 12mo. 
 Half morocco, xii + 740 pages. With colored maps, reproduced, by per- 
 mission, from Freeman's Historical Atlas. Mailing price, Sl.65- for 
 introduction, $1.50. ' 
 
 rpHIS work aims to blend in a single narrative accounts of the 
 social, political, literary, intellectual, and religious develop- 
 ment of the peoples of mediseval and modern times, — to give in 
 simple outline the story of civilization since the meeting, in the 
 fifth century of our era, of Latin and Teuton upon the soil of the 
 Roman Empire in the West. The author's conception of History, 
 based on the' definitions of Ueberweg, that it is the unfolding of the 
 essence of spirit, affords the key-note to the work. Its aim is to 
 deal with the essential elements, not the accidental features, of the 
 life of the race. 
 
 Unity and cohesion are secured by grouping facts according to 
 the principles of historic development, and while the analysis is 
 rigid and scientific, the narrative will be found clear, continuous, 
 interesting, and suggestive. 
 
 W. F. Allen, late Prof, of History, 
 
 University of Wisconsin : Mr. Myers's 
 book seems to me to be a work of 
 high excellence, and to give a re- 
 markably clear and vivid picture 
 of mediseval history. 
 
 E. B. Andrews, Pres. Brown Uni- 
 versity, Providence, R.I. : It seems 
 certain to take its place as one of the 
 most serviceable books of its kind 
 before the school and college public. 
 
 Geo. W. Knight, Prof, of History, 
 Ohio State University : The author 
 seems to have gotten hold of the 
 active principle, the leading motives 
 and tendencies of each age ; to have 
 taken a comprehensive view of the 
 development of man's ideas, of na- 
 tions, and of governments. Then he 
 has grouped the various events in 
 
 such a way as will bring clearly to 
 view these different phases of the 
 world-development without ignoring 
 what may be called the collateral 
 events. 
 
 Frances M. Buss, Prin. N. London 
 College for Girls, London, England: 
 A valuable work, not too detailed, 
 but enumerating general principles. 
 The maps are especially valuable, 
 and the book is sufficiently interest- 
 ing to be used as a school prize. It 
 supplies a place in the ranks of our 
 text-books until now empty. 
 
 Brandt B. D. Dixon, President 
 Womans Department, Tidane Uni- 
 versity : I am using it with the best 
 results I have ever seen in the study 
 of the period treated. 
 
HISTORY. 
 
 121 
 
 The Leading Facts of English History. 
 
 By D. H. Montgomery. New edition. Rewritten and enlarged, with 
 " Maps and Tables. 12mo. Cloth, viii + 445 pages. Mailing price, 
 $1.25; for introduction, $1.12. 
 
 TlSr this work the important events of English History are treated 
 with great fuUness, and their relation to that of Europe and 
 the world is carefully shown. 
 
 The text is in short paragraphs, each with a topical heading in 
 bold type for the student's use. The headings may be made to 
 serve the purpose of questions. By simply passing them over, the 
 reader has a clear, continuous narrative. 
 
 The treatment of each reign is closed with a brief summary of 
 its principal points. Likewise, at the end of each period there is 
 a section showing the condition of the country, and its progress in 
 Government, Religion, Military Affairs, Learning and Art, General 
 Industry, Manners and Customs. 
 
 No pains have been spared to make the execution of the work 
 equal to its plan. Vivid touches here and there betray the author's 
 mastery of details. Thorough investigation has been made of all 
 points where there was reason to doubt traditional statements. 
 
 The text is illustrated with fourteen maps, and supplemented 
 with full genealogical and chronological tables. 
 
 Hon. E. J. Phelps, recently United 
 States Minister to Great Britain: 
 The author has done a much-needed 
 work extremely well. 
 
 Professor Goldwin Smith: The 
 book, besides being very attractive 
 in appearance, seems to be very 
 suitable for the purpose in view. 
 
 Elisha B. Andrews, President of 
 Brown University : I do not remem- 
 ber to have seen any book before 
 which sets forth the leading facts of 
 English History so succinctly, and 
 at the same time so interestingly 
 and clearly. 
 
 A. L. Perry, Emeritus Professor 
 of Political Economy, Williams Col- 
 lege : I have never seen anything at 
 
 all equal to it for the niche it was 
 intended to fill. 
 
 Jas. F. Colby, Professor of Law 
 arid Political Science, Dartmouth 
 College: Its title is a true descrip- 
 tion of its contents. Its author 
 shows sense of proportion, and wise- 
 ly gives prominence to economic 
 facts and the development of consti- 
 tutional principles. 
 
 F. B. Palmer, Principal of State 
 Normal School, Fredonia, iV. Y. : I 
 have not examined anything that 
 seems to me equal to it for a class in 
 English History. 
 
 John Fiske, Professor of History, 
 Washington University : It seems to 
 me excellent. 
 
124 HISTORY. 
 
 Outline of the Principles of Historii. 
 
 (Grundriss der Historik.) By Johann Gustav Droysen, Late Pro- 
 fessor of History in the University of Berlin. With a Biographical 
 Sketch of the Author. Translated by E. Benjamin Andrews, Presi- 
 dent of Brown University. 12mo. Cloth. XXXV + 122 pages. Mailing 
 price, $1.10; for introduction, $1.00. 
 
 ^HE translator believes this book to be the deepest piece of 
 philosophical writing which has appeared since Hegel. 
 While relating primarily to history, its weighty paragraphs com- 
 prise in outline a philosophy of religion, literature, and pedagogy, 
 all in one. The Historik was the syllabus which Professor Droysen 
 used to place in the hands of the advanced classes in History, as 
 a basis for his extended lectures, the best ever delivered upon the 
 subject, on the Encyclopaedia and Methodology of History. 
 
 Herbert Tuttle, late Professor of 
 Modern History, Cornell University : 
 It ought to enjoy the respect of all 
 American historical scholars. 
 
 George W. Smith, Pj^of. of His- 
 tory, Colgate University, Hamilton, 
 N. Y. : I have earnestly commended 
 it to my senior classes. 
 
 Reference History of the United States. 
 
 By Hannah A. Davidson, M.A., Teacher of History, Belmont School, 
 Cahfornia. 12mo. Cloth, xii + 190 pages. By mail, 90 cents: lor 
 introduction, 80 cents. 
 
 ^HIS book, which is designed expressly for schools of advanced 
 grade, high schools, academies, and seminaries, is an attempt 
 to connect history teaching more closely in method and matter 
 with the teaching and study of history in the college and the 
 university. 
 
 Oliver Emerson Bennett, Chauncy- 1 and useful addition to my library, and 
 Hall School, Boston : It is a valuable I a great assistance in my daily work. 
 
 Historia do Brazil. 
 
 Resumo da Historia do Brazil, para uso das escolas primarias Brazileiras. 
 Pela Professora Maria G. L. de Andrade. 12mo. Cloth, x + 277 
 pages. Illustrated. By mail, $1.00; for introduction, 90 cents. 
 
 rpHIS is a history of Brazil from the earliest times to the year 
 
 1891, written in the Portuguese language. It is believed to 
 
 be the best work of its kind extant, and will be found also an 
 
 excellent reading-book for students of Portuguese. 
 
HISTORY. 125 
 
 Introduction to the Study of the Middle Ages. 
 
 From the Battle of Adrianople to the death of Charlemague (a.d. 
 378-814), By Ephraim Emertok, Professor of History in Harvard 
 University. 12mo. Cloth, xviii + 268 pages. By mail, $1.25 ; for in- 
 troduction, $1.12. 
 
 rpmS work aims to give, in simple narrative form, an account of 
 the settlement of the Germanic peoples on Roman soil, the 
 gradual rise of the Frankish supremacy, the growth of the Chris- 
 tian Church and its expression in the monastic life and in the 
 Roman Papacy, and finally the culmination of all in the Empire 
 of Charlemagne. 
 
 vestigation ; it is concise, hut, at the 
 same time, lucid and interesting. 
 
 George P. Fisher, Professor of 
 Ecclesiastical History, Yale College : 
 The work is the fruit of diligent in- 
 
 Mediceual Europe (814-1300). 
 
 By Ephraim Emerton, Professor of History in Harvard University. 
 12mo. Cloth. XXV + 607 pages. Illustrated. Mailing price, $1,65; 
 for introduction, $1.50. 
 
 ^HIS work is a continuation of the author's Introduction to the 
 Study of the Middle Ages. Its aim is to call the attention of 
 students to the most important political, social, and religious in- 
 stitutions of Continental Europe during the Middle Ages proper. 
 
 Beginning with the Empire of Charlemagne, the first topic 
 discussed is the formation of the European States, as they were 
 to remain during the period. The two great institutions, the 
 Holy Roman Empire and the Roman Papacy, are then traced 
 during the period of the later Carolingian Emperors and the rise 
 of a true German power under the Saxon kings. N'ext is shown 
 the decline of the Papacy under the control of the local Roman 
 nobility, and its restoration by the Saxon emperors. The parallel 
 development of the Empire under the Franconian House and of 
 the Papacy under the influence of the Cluny Reform movement is 
 traced to the conflict of these two powers under Henry IV and 
 Gregory VII. 
 
 Moses Colt Tyler, Professor of scholarly and satisfactory a hook. 
 American History, Cornell Univer- It is in full use here as a text- 
 sity : It is a treat to look into so book. 
 
HISTORY. 129 
 
 HANDBOOKS ON THE HISTORY OF RELIGION. 
 
 See also the Announcements. 
 
 Edited by Morris Jastrow, Jr., Ph.D., Professor of Semitic Languaffes 
 m the University of Pennsylvania. * 
 
 ^ITH a view of illustrating the modern methods of the his- 
 torical study of religions and of compiling the ascertained 
 results of scholarship, it is proposed to issue a series of Handbooks 
 dealing with the various religions, that may serve the purpose at 
 once of practical text and reference books. 
 
 The distinguishing features of this Series will be : (1) Each 
 volume dealing with the history of a special religion is to be en- 
 trusted to the hands of a competent specialist ; (2) The treatment 
 of the subject in the various volumes will follow so far as possible 
 a uniform order. Each volume will accordingly begin with an 
 introductory chapter followed by a section on the land and people 
 under consideration. The third division, forming, as it were, the 
 kernel of the book, will embody a full exposition of the beliefs 
 and rites, the religious art and literature, set forth in each case in 
 the manner best adapted to the religion in question. A fourth 
 division will give the history of the religion, and set forth its 
 relation to others ; and, lastly, each volume will be supplied with 
 a substantial bibliography, with indices and maps, and, so far as 
 necessary, illustrations. (3) Polemical discussion will be rigidly 
 excluded, the subject being viewed from the historical side exclu- 
 sively. (4) For the present, the series will be confined to the 
 ancient and non-Christian religions. The first volume of the 
 Series is now ready. 
 
 The Religions of India . 
 
 By Edward Washburn Hopkins, Ph.D., Professor of Sanskrit in 
 Bryn Mawr College. 12mo. Cloth. + , pages. Mailing price, 
 
 ; for introduction, 
 
 ^HIS book gives an account of the religions of India in the 
 chronological order of their development. The point of view 
 is chiefly historical and descriptive, but the causes leading to the 
 successive phases of religious belief are kept prominently before 
 the reader. 
 
BOOKS IN HIGHER ENGLISH. 
 
 Introd. Price. 
 
 Alexander : Introduction to Browning $1.00 
 
 Atheuseum Press Series : 
 
 Cook : Sidney's Defense of Poesy 80 
 
 Gummere : Old English Ballads 00 
 
 Schelling : Ben Jonson's Timber .80 
 
 Baker : Plot-Book of Some Elizabethan Plays .00 
 
 Cook ; A First Book in Old English 1.50 
 
 Shelley's Defense of Poetry 50 
 
 The Art of Poetry 1.12 
 
 Hunt's What is Poetry? 50 
 
 Newman's Aristotle's Poetics 30 
 
 Addison's Criticisms on Paradise Lost 1.00 
 
 Bacon's Advancement of Learning 00 
 
 Corson: Primer of English Verse 1.00 
 
 Emery : Notes on English Literature 1.00 
 
 English Literature Pamphlets : Ancient Mariner, .05 ; First 
 Bunker Hill Address, .10 ; Essay on Lord Clive, 
 .15 ; Second Essay on the Earl of Chatham, .15 ; 
 Burke, I. and II. ; Webster, I. and II. ; Bacon ; 
 Wordsworth, I. and 11. ; Coleridge and Burns; 
 
 Addison and Goldsmith Each .15 
 
 Fulton & Trueblood : Practical Elocution Retail 1.50 
 
 Choice Readings, $1.50; Chart of Vocal Expression . 2.00 
 
 College Critic's Tablet 60 
 
 Garnett : English Prose from Elizabeth to Victoria .... 1.50 
 
 Gayley : Classic Myths in English Literature 1.50 
 
 Genung: Outlines of Rhetoric 1.00 
 
 Elements of Rhetoric, $1.25 ; Rhetorical Analysis , 1.12 
 
 Gummere : Handbook of Poetics 1.00 
 
 Hudson : Harvard Edition of Shakespeare's Complete Works : — 
 
 20 Vol. Ed. Cloth, retail, $25.00 ; Half-calf, retail . 55.00 
 
 10 Vol. Ed. Cloth, retail, $20.00 ; Half-calf, retail . 40.00 
 
 Life, Art, and Characters of Shakespeare. 2 vols. Cloth, 4.00 
 
 New School Shakespeare. Each play : Paper, .30 ; Cloth, .45 
 
 Text-Book of Poetry ; Text-Book of Prose . .Each 1.25 
 
 Classical English Reader 1.00 
 
 Lockwood : Lessons in English, $1.12 ; Thanatopsis 10 
 
 Maxcy : Tragedy of Hamlet 45 
 
 Minto : Manual of English Prose Literature 1.50 
 
 Characteristics of English Poets 1.50 
 
 Newcomer : Practical Course in Ehglish Composition 80 
 
 Phelps : English Romantic Movement 1. 00 
 
 Sherman : Analytics of Literature 1.25 
 
 Smith : Synopsis of English and American Literature ... .80 
 
 Sprague : Milton's Paradise Lost and Lycidas 45 
 
 Thayer : The Best Elizabethan Plays 1.25 
 
 Thom : Shakespeare and Chaucer Examinations 1.00 
 
 "White : Philosophy of American Literature 30 
 
 Whitney : Essentials of English Grammar 75 
 
 Whitney & Lockwood : English Grammar 70 
 
 Winchester : Five Short Courses of Reading in English Literature, .40 
 
 AND OTHER VALUABLE WORKS. 
 
 CINN & COM.PANY, Publishers, 
 
 Boston, New X^ork, and Chicago. 
 
El