A TREATISE POLITICAL ECONOMY; PRODUCTION, DISTRIBUTION, AND CONSUMPTION WEALTH. BY JEAN-BAPTISTE SAY. TRANSLATED FROM THE FOURTH EDITION OF THE FRENCH, BY C. R. PRINSEP, M. A. WITH NOTES BY THE TRANSLATOR. NEW AMERICAN EDITION. CONTAINING A TRANSLATION OF THE INTRODUCTION, AND ADDITIONAL NOTES. BY CLEMENT C. DIDDLE, LL.D MEMBER Of THE AMERICAN PHILOSOPHICAL SOCIETY. PHILADELPHIA: J. B. LIPPINCOTT & CO. 1855. Entered according to the act of Congress, in the year 1832, by JOHN GRIOG, in the office of the clerk of the district court of the eastern district of Penn- sylvania. ADVERTISEMENT BY THE AMERICAN EDITOR, TO THE SIXTH EDITION. A NEW edition of this translation of the popular treatise of M. Say having oeen called for, the five previous American editions being entirely out of print, the editor has endeavoured to render the work more deserving of the favour it has received, by subjecting every part of it to a careful re- vision. As the translation of Mr. Prinsep was made in the year 1821, from an earlier edition of the original treatise, namely, the fourth, which had not received the last corrections and improvements of the author, wherever an essential principle had been involved in obscurity, or an error had crept in, which had been subsequently cleared up and removed, the American editor has, in this impression, reconciled the language of the text and notes to the fifth improved edition, published in 1826, the last which M. Say lived to give to the world. It has not, however, been deemed necessary to extend these alterations in the translation any further than to the correction of such discrepancies and errors as are here alluded to ; and the editor has not ventured to recast the translation, as given by Mr. Prinsep, merely with a view to accommodate its phraseology, in point of neatness of expression or diction, to the last touches of the author. The translation of Mr. Prinsep, the editor must again be permitted to observe, has been executed with sufficient fidelity, and with considerable spirit and elegance ; and in his opinion it could not be much improved by even remoulding it after the last edition. The translation of the introduc- tion, given by the present editor, has received various verbal corrections ; and such alterations and additions as were introduced by the author into his fifth edition, will now be found translated. It is, moreover, proper to state, that at the suggestion of the American proprietors and publishers of this edition of the work, the French moneys, weights and measures, throughout the text and notes, have been conven- ed into the current coins, weights and measures of the United Slates , wnen the context strictly required it by a rigorous reduction, and when merely assumed as a politico-arithmetical illustration, by a simple approx- imation to a nearly equivalent quantity of our own corns, weights or IV ADVERTISEMENT TO THE SIXTH EDITION. measures. This has been done to render the work as extensively useful as possible, and will, no doubt, make the author's general principles and reasonings more easily comprehended, as well as more readily remem- bered, by the American student of political economy. Many new notes, it will be seen, have been added by the American editor, in further illustration or correction of those portions of the text which still required elucidation. The statistical data now incorporated in these notes, have been brought down to the most recent period, both in this country and in Europe. No pains have been spared in getting access to authentic channels of information, and the American editor trusts that the present edition will be found much improved throughout. The death of M. Say took place, in Paris, during the third week of No- vember, 1832, on which occasion, according to the statements in the French journals, such funeral honours were paid to his memory as are due to eminent personages, and Odilon-Barrot, de Sacy, de Laborde, Blanqui, and Charles Dupin, his distinguished countrymen and admirers, pro- nounced discourses at the interment in the cemetery of Pere Lachaise. The account of his decease, here subjoined, is taken from the London Political Examiner of the 25th of November, 1832, and is from the pen of its able editor, Mr. Fonblanque, one of the most powerful political writers in England. Mr. Fonblanque, it appears, was the personal friend, as well as the warm admirer, of the genius and writings of M. Say, and was well qualified to appreciate his high intellectual endowments, his profound knowledge and political wisdom, his manly independence, his mild yet dignified consistency of character, and above all, his rare and shining private virtues. There hardly could be a more interesting and instructive task assigned to the philosophical biographer, than a faithful portraiture of the life and labours of this illustrious man, which were so ardently and efficiently devoted to the advancement of the happiness and prosperity of his fellow-men. Perhaps the writings of no authors, how- ever great their celebrity may be, are exerting a more powerful and en- during influence on the well-being of the people of Europe and America, than those of Adam Smith, and John Baptiste Say. " France has this week lost another of her most distinguished writers and citizens, the celebrated political economist, M. Say. The invaluable branch of knowledge to which the greatest of his intellectual exertions were devoted, is indebted to him, amongst others, for those great and all-pervading truths which have elevated it to the rank of a science ; and to him, far more than to any others, for its popularization and diffusion. Nor was M. Say a mere political economist ; else had he been necessarily a bad one. He knew that a subject so ' immersed in matter,' (to use the fine expression of Lord Bacon,) as a nation's prosperity, must be looked at on many sides, in order to be seen rightly even on one. M. Say was one of the most accomplished minds of his age and country. Though he l iad given his chief attention to one particular aspect of human affairs, all their aspects were interesting to him ; not one was excluded from his ADVERTISEMENT TO THE SIXTH EDITION. v survey. His private life was a model of the domestic virtues. From the time when, with Chamfort and Ginguene', he founded the Decade Philo- sophique, the first work which attempted to revive literary and scientific pursuits during the storms of the French Revolution alike when courted by Napoleon, and when persecuted by him (he was expelled from the Tribunat for presuming to have an independent opinion); unchanged equally during the sixteen years of the Bourbons, and the two of Louis Philippe he passed unsullied through all the trials and temptations which have left a stain on every man of feeble virtue among his conspicuous contemporaries. He kept aloof from public life, but was the friend and trusted adviser of some of its brightest ornaments; and few have contri- buted more, though in a private station, to keep alive in the hearts and in the contemplation of men, a lofty standard of public virtue. If this feeble testimony, from one not wholly unknown to him, should meet the eye of any onewholoved him, may it, in so far as such things can, afford tnat comfort under the loss, which can be derived from the knowledge that others know and feel all its irreparableness !" C. C. B. PHILADELPHIA, December, 1834. 1* ADVERTISEMENT BY THE AMERICAN EDITOR TO THE FIFTH EDITION. No work upon political economy, since the publication of Dr. Adam Smith's profound and original Inquiry into the Nature and Causes of the Wealth of Nations, has attracted such general attention, and received such distinguished marks of approbation from competent judges, as the " Traite D'Economie Politique," of M. Say. It was first printed in Paris in the year 1803; and, subsequently, has passed through five large editions, that have received various corrections and improvements from the author. Translations of the work have been made into the German, Spanish, Italian, and other languages ; and it has been adopted as a text- book in all the universities of the continent of Europe, in which this new but essential branch of liberal education is now taught. The four former American editions of this translation have also been introduced into many of the most respectable of our own seminaries of learning. It is unquestionably the most methodical, comprehensive and best digested treatise on the elements of political economy, that has yet been presented to the world. It exhibits a clear and systematical view of all the solid and important doctrines of this very extensive and difficult science, unfolded in their proper order and connexion. In the establish- ment of his principles, the author's reasonings, with but few exceptions, are logical and accurate, delivered with distinctness and perspicuity, and generally supported by the fullest and most satisfactory illustrations. A rigid adherence to the inductive method of investigation, in the prosecu- tion of almost every part of his inquiry, has enabled M. Say to effect a nearly complete analysis of the numerous and complicated phenomena of wealth, and to enunciate and establish, with all the evidence of de- monstration, the simple and general laws on which its production, dis- tribution, and consumption depend. The few slight and inconsiderable errors into which the author has fallen, do not affect the general sound- ness and consistency of his text, although, it is true, they are blemishes that thus far darken and disfigure it. But these are of rare occurrence, and the false conclusions involved in them may be easily detected and refuted by recurrence to the fundamental principles of the work, with which they manifestly are at variance, and contradict. ADVERTISEMENT TO THE FIFTH EDITION. yii The foundation of the science of political economy was firmly laid, and the only successful method of conducting our inquiries in it pointed out and exemplified by the illustrious author of the Wealth of Nations ; a number of its leading doctrines were also developed and explained by other eminent writers on the continent of Europe, who, about the same time, were engaged in investigating the nature and causes of social riches. But neither the scientific genius and penetrating sagacity of the former, nor the profound acuteness and extensive research of many of the latter, enabled them to obtain a complete discovery of all the actual phenomena of wealth, and thus to effect an entire solution of the most abstruse and difficult problems in political economy; those, namely, which demonstrate the true theory of value, and unfold the real sources of production. Aided, however, by the valuable materials collected and arranged by the labours of his distinguished predecessors, here referred to, and proceeding in the same path, our author, with the closeness and minutenes of attention due to this important study, has succeeded in examining under all their aspects, the general facts which the ground- work of the science presents, and by rejecting and excluding the acci- dental circumstances connected with them, has thus established its ulti- mate laws or principles. Accordingly, by pursuing the inductive method of investigation, M. Say, in the most strict and philosophical manner, has deduced the true nature of value, traced up its origin, and presented a clear and accurate explanation of its theory. His definition of wealth, therefore, is more precise and correct than that of any of his predecessors in this inquiry. The agency of human industry, which "Dr. Adam Smith, not with the strictest propriety, denominated labour, the important operation of natu- ral powers, especially land, and the functions of capital, as well as the relative services of these three instruments, and the modes in which they all concur in the business of production, were first distinctly and fully pointed out and illustrated by our author. In this way he successfully unfolded the manner in which production is carried on, and imparts value to the products of agriculture, manufactures, and commerce. By, also, distinguishing reproductive from unproductive consumption, M. Say has exhibited the exact nature of capital, and its consequent important agency in production, and thus has shown why economy is a source of national wealth. Such are this author's peculiar and original specula- tions, the fruits of deep and patient meditation on the phenomena ob- served. The elementary principles derived from them, with others pre- viously ascertained, he has combined into one harmonious, consistent, and beautiful system. But a few of these solid and well-established positions have been criti cised and objected to as inconclusive and inadmissible, by Mr. Ricardo and by Mr. Malthus, two of the ablest and most distinguished political economists among our author's contemporaries. Other doctrines in rela- tion to the nature and origin of value have been advanced by them, and viii ADVERTISEMENT TO THE FIFTH EDITION. with so much plausibility too, that some of the most acute reasoners of the present day have not been sufficiently on their guard against the fallacies involved in them. The mathematical cast given to their reason- ings by these writers, has captivated and led astray the understandings of intelligent and sagacious readers, and induced them to adopt, as scientific truths, what, when properly investigated and analyzed, are found to be merely specious hypotheses. Hence it is that a theory of value, purely gratuitous, has been extolled in one of the principal literary journals of Great Britain, as being "no less logical and conclusive than it was profound and important." Our author, accordingly, deemed it necessary to examine the arguments brought forward in support of these views of his opponents, in order to test their soundness and accuracy, and to submit his own principles to a further review, that he might be- come satisfied that the conclusions he had deduced from them had not been in any manner invalidated. In the notes appended by M. Say to the French translation of Mr. Ricardo's Principles of Political Economy and Taxation, the reader will find what the editor deems a masterly and conclusive refutation of the theoretical errors of this author. M. Say's strictures upon the twentieth chapter of the work, entitled, " Value and Riches, their Distinctive Pro- perties," are in his opinion decisive and unanswerable. The fallacies con- tained in Mr. Ricardo's theory of value, which, the editor thinks, may be traced to an anxiety to give consistency to the loose and inaccurate proposition of Dr. Adam Smith, that exchangeable value is entirely de- rived from human labour, are there fully exposed, and his whole train of reasoning, in connection with it, shown to rest upon an unwarrantable assumption. It must, however, be conceded that Mr. Ricardo was an intrepid and uncompromising reasoner, who always proceeded in the most direct and fearless mannerfrom his premises to the conclusion. But not uniting with the strongest powers of reasoning, a capacity for ana- lytical subtilty, he sometimes did not perceive verbal ambiguities in the formation of his premises, and transitions in the signification of his terms in the conduct of his argument, which, in these instances, vitiated his conclusions. The fundamental errors into which he has fallen, accord- ingly, do not arise from any want of strictness in his deductions, but from undue generalizations and perversions of language. In M. Say's Letters to Mr. Malthus, which have been translated by Mr. Richfer, the points at issue between these two eminent political economists are dis- cussed in the most luminous, impartial, and satisfactory manner ; and by all candid and unprejudiced critics must be considered as bringing the controversy to a close. It is not his intention, nor would it be proper on this occasion, for the editor to enter further into the merits of the controversial writings of our author. Any dispassionate inquirer, who will take the pains carefully to leview the whole ground in dispute, will, he thinks, find that the disqui- sitions referred to contain a triumphant vindication of such of the author's ADVERTISEMENT TO THE FIFTH EDITION. 1X general principles as had been assailed by his ingenious opponents. Whenever the study of the science of political economy shall be more generally cultivated as an essential branch of early education, most of the abstruse questions involved in the controversies which now divide the writers on this subject will be brought to a conclusion ; the accession of useful knowledge it will occasion will more effectually eradicate the prejudices which have given birth to these disputes and misconceptions, than any direct argumentative refutation. The great merits of this treatise on political economy are now begin- ning to be well known and properly estimated by that class of readers who take a deep interest in the progress of a science, which " aims at the improvement of society," as DUGALD STEWART so truly remarks, " not by delineating plans of new constitutions, but by enlightening the policy of actual legislators ;" a science, therefore, with the right understanding of whose principles, the welfare and happiness of mankind are intimately connected. In alluding to this admirable work of M. Say, Mr. Ricardo remarks, " that its author not only was the first, or among the first, of continental writers, who justly appreciated and applied the principles of Smith, and who has done more than all other continental writers taken together, to recommend the principles of that enlightened and beneficial system to the nations of Europe ; but who has succeeded in placing the science in a more logical, and more instructive order ; and has enriched it by seve- ral discussions, original, accurate, and profound." The English public has for some time been in possession of the present excellent translation of this treatise by Mr. Prinsep ; the first edition of which was published in London in the spring of 1821. It is executed with spirit, elegance, and general fidelity, and is a performance, in every respect, worthy of the original. It is here given to the American reader without any material alteration. In various notes which the English translator has thought proper to subjoin to his edition of the text, he has wasted much ingenuity in en- deavouring to overthrow some of the author's leading principles, which, notwithstanding these attacks, are as fixed and immutable as the truths which constitute their basis. Had Mr. Prinsep more thoroughly studied M. Say's profound theoretical views on the subject of value, and had he, also, made himself acquainted, which it nowhere appears that he has done, with the powerful and victorious defence of these doctrines, con- tained in the notes on Mr. Ricardo's work, and in the letters to Mr. Malthus, already referred to, he perhaps might have discovered, that they are the ultimate generalizations of facts, which, agreeably to the most legitimate rules of philosophizing, the author was entitled to lay down asgeneral laws or principles. At all events, Mr. Prinsep should not have ventured upon an attack on these first principles of the science of Doliti- cal t-conomy, without this previous examination. Such, therefore, of these notes of the English translator as are in oppo- sition to the well-established elements of the science, and have no other X ADVERTISEMENT TO THE FIFTH EDITION. support than the hypothesis of Mr. Ricardo and Mr. Malthus, have been entirely omitted; the American editor not deeming himself under any obligation to give currency to errors, which would perpetually interrupt and distract the attention of the reader in a most abstruse and difficult inquiry. Other notes of the translator, which contain interesting and valuable illustrations of other general principles of the work, drawn from the actual state of Great Britain and her colonies, have been retain- ed in this edition, as appropriate and useful. The translator's remarks on the pernicious character and tendency of the restrictive and prohibi- tive policy, are particularly worthy of regard, confirming as they most fully do, on this subject, all the important conclusions of the author. The folly x>f attempting, either by extraordinary encouragements, to attract towards some branches of production a larger share of capital and in- dustry than would be naturally employed in them, or by uncommon restraints forcibly to divert from others a portion of the capital and in- dustry that would otherwise be invested in them, is at last beginning to be understood. The restrictive system, or that which by means of legislative enact ments endeavours to give a particular direction to national capital and industry, derived its whole support from the assumption of positions now generally admitted to be gratuitous and unfounded, namely, that in trade whatever is gained by one nation must necessarily be lost by another, that wealth consists exclusively of the precious metals, and con- sequently, that in all sales of commodities, the great object should be to obtain returns in gold and silver. In Europe these erroneous opinions have now, for some time, been relinquished by political economists of all the various schools, some of whom yet differ and dispute respecting a few of the more recondite and ultimate elements of the science. In the whole range of inquiry in political economy, perhaps there is not a single proposition better established, or one that has obtained a more universal sanction from its enlightened cultivators in every country, than the libe- ral doctrine, that the most active, general, and profitable employments are given to the industry and capital of every people, by allowing to their direction and application the most perfect freedom, compatible with the security of property. This fundamental position of political economy, and the various principles that flow from it as corollaries, were first sys- tematically developed, explained, and taught by the great father of the science, Dr. Adam Smith ; although glimpses of the same important truth had previously, and about the same time, reached the minds of a few eminent individuals in other parts of the world. " The most effectual plan for advancing a people to greatness," says Dr. Smith, " is to main- tain tnat order of things which nature pointed out; by allowing every man, as long as he observes the rules of justice, to pursue his own inter- est in his own way, and to bring both his industry and his capital into the freest competition with those of his fellow-citizens." Animated by a like desire to promote the improvement and happiness of mankind, with that which actuated the author of the Wealth of Nations, the most pro- ADVERTISEMENT TO THE FIFTH EDITION. x j tound inquiries among his successors embraced his enlarged and benevo- lent views, as the only certain means of increasing the general prosperity, and eloquently maintained and enforced them. The doctrines of the freedom of trade and the rights of industry, were vindicated and taught by all the distinguished British political economists ; namely, by Dugald Stewart, Ricardo, Malthus, Torrens, Homer, Huskisson, Lauderdale, Bentham, Mills, Craig, Lowe, Tooke, Senior, Bowring, M'Culloch, and Whatley ; and, on the continent of Europe, by authors as celebrated, by Say, Droz, Sismondi, Storch, Garnier, Destutt-Tracy, Ganilh, Jovella- nos, Sartorius, Q,ueypo, Leider, Von Schlozer, Kraus, Weber, Muller, Scarbeck, Pechio, and Gioja. " Under a system of perfectly free commerce," says Mr. Ricardo, " each country naturally devotes its capital and labour to such employ- ments as are most beneficial to each. This pursuit of individual advan- tage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most effica- ciously the powers bestowed by nature, it distributes labour most effec- tively and most economically : while by increasing the general mass of productions, it diffuses general benefit, and binds together by one com- mon tie of interest and intercourse, the universal society of nations throughout the civilized world. It is this principle which determines that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manu- factured in England." Our own celebrated countryman, Franklin, too, with a sagacity and force which always characterized his intellect, maintained and exempli- fied in his " Essay on the Principles of Trade," what he therein repeat- edly called " the great principle of freedom in trade." Even before the appearance of the Wealth of Nations, he had with almost intuition anti- cipated some of the most profound conclusions of the science of political economy, which other inquirers had arrived at only after a patient and laborious analysis of its phenomena. The new and generous commer- cial policy is not more beholden for support and currency to the argu- ments and illustrations of any of its early expositors, than to the clear and vigorous pen of the highly gifted American philosopher. " The ex- pressions, Laissez nous faire, and pas trop gouverner," which, to use the language of DUGALD STEWART, the highest of all authorities, " com- prise in a few words two of the most important lessons of political wis- dom, are indebted chiefly for their extensive circulation, to the short and luminous comments of Franklin, which had so extraordinary an influence on public opinion, both in the Old and New World." Nevertheless, strange as it may seem, by a perversion or misconception of a few of his incidental opinions, the name of the first of practical statesmen lias been invoked, and its authority employed among us, in aid of a system of restraints and prohibitions on commerce, which it was the chief aim of his politico-economical writings to refute and condemn, as afike repug- nant to sound theory and destructive to national prosperity. Whenever American statesmen and legislators shall have as clear and steady per x ii ADVERTISEMENT TO THE FIFTH EDITION. ceptions as Franklin of the truth and wisdom of the doctrine of common cial freedom, we may expect that our national and state codes will no longer exhibit so many traces of that empirical spirit of tampering regu- lation which, instead of invigorating and quickening the development of national wealth, only cramps and retards its natural growth. " Where should we expect," says M. Say, in a letter to the editor, " sound doc- trine to be better received than amongst a nation that supports and illus- trates the value of free principles, by the most striking examples. The old states of Europe are cankered with prejudices and bad habits ; it is America who will teach them the height of prosperity which may be reached when governments follow the counsels of reason, and do not cost too much." The preliminary discourse has been translated by the American editor, and in his editions of the work restored to its place. The editor must confess that he is at a loss to account for the omission by the English translator of so material a part of the author's treatise as this introduc- tion to his whole inquiry. In itself it is a performance of uncommon merit, has immediate reference to, and sheds much light over, the gene- ral views unfolded in the body of the work. The nature and object of the science of political economy, the only certain method of conducting any of our inquiries in it with success, and the causes which have hither- to so much retarded its advancement, are all considered and pointed out with great clearness and ability. The author has also connected with it a highly interesting and instructive historical sketch of the progress of this science during the last and present century, interspersed with nu- merous judicious and acute criticisms upon the writings and opinions of his predecessors. Moreover, this discourse, throughout every part, Is deeply philosophical, and well calculated to prepare the reader for the study on which he is about to enter. The editor has, therefore, he trusts, performed an acceptable service in putting the American student in pos session of so important a part of the original work.* Notes have also been subjoined by the American editor, for the pur pose of marking a few inconsiderable errors and inconsistencies into which the author has inadvertently fallen, and of supplying an occasional illustration, drawn from other authors, of such passages of the text as seemed to require further elucidation or correction. C. C. B. PHILADELPHIA, April, 1832. * The following extract of a letter from M. Say, to the American editor, it may not be improper to subjoin, as it contains the author's opinion of the value he attaches to the preliminary discourse. " Your translation and restoration of the preliminary discourse adds, in my eyes, a new value to your edition. It could only have been from a narrow calculation of the English publisher, that it was omitted in Mr. Prinsep's translation. Ought that portion of the work to be deemed unuseful, whose aim is to unfold the real object of the science, to present a rapid sketch of its history, and to point out the only true method of inves- tigating it with success ? Mr. George Prymc, professor of political economy in the university of Cambridge, in England, makes this very discourse the principal topic of *everal of his first lectures." CONTENTS. BOOK I. OF THE PRODUCTION OF WEALTH. ADVERTISEMENT by the American Editor, to the Sixth Edition Page iii Advertisement by the American Editor, to the Fifth Edition vi Introduction rr CHAP. I. Of what i to be understood by the term production 61 II. Of the different kinds of industry, and the mode in which they concur in pro- duction 63 III. Of the nature of capital, and the mode in which it concurs in the business cf production 71 IV. Of natural agents, that assist in the production of wealth, and specially of land . 74 V. On the mode in which industry, capital, and natural agents unite in production. 77 VI. Of operations alike common to all branches of industry 79 VII. Of the labour of mankind, of nature, and of machinery respectively 85 VIII. Of the advantages and disadvantages resulting from division of labour ; and of the extent to which it may be carried 90 IX. Of the different methods of employing commercial industry, and the mode in which they concur in production 99 X. Of the transformations undergone by capital, in the progress of production .... 105 XI. Of the formation and multiplication of capital 109 XII. Of unproductive capital 118 XIII. Of immaterial products, or values consumed at the moment of production 119 XIV. Of the right of property 127 X'V. Of the demand or market for products 132 XVI. Of the benefits resulting from the quick circulation of money and commodities. 140 XVII. Of the effect of governments, intended to influence production 143 Sect. 1. Effect of regulations prescribing the nature of products 143 Digression Upon what is called the balance of trade 148 2. Of the effect of regulations, fixing the manner of production 175 3. Of privileged trading companies 183 4. Of regulations affecting the corn trade 189 XVIII. Of the effect upon national wealth, resulting from the productive efforts of pub- lic authority 199 XIX. Of colonies and their products 203 XX. Of temporary and permanent emigration, considered in reference to national wealth 213 XXI. Of the nature and uses of money: Sect. 1. General remarks 217 2. Of the material of money _. . 220 3. Of the accession of value a commodity receives, by being vested with the character of money 224 4. Of the utility of coinage , and of the charge of its execution 228 5. Of alterations of the standard-money 234 6. Of the reason why money is neither a sign nor a measure 240 7. Of a peculiarity, that should be attended to, in estimating the sams mentioned in history 248 8. Of the absence of any fixed ratio of value between one metal and another 254 9. Of money as it ought to be 256 10. Of a copper and brass metal coinage 261 11. Of the preferable form of coined money 262 12. Of the party on whom the loss of coin by wear should properly fall. . . 263 XXII. Of signs or representatives of money : Sect ]. Of bills of exchange and letters of credit 265 2. Of banks of deposite 268 3. Of banks of circulation or discount, and of bank notes, or convertible paper 270 4. Of paper-money 280 CONTENTS. BOOK II. ' OF THE DISTRIBUTION OF WEALTH. I. Of the basis of value, and of supply and demand 284 II. Of the sources of revenue 292 III. Of real and relative variation of price 297 IV. Of nominal variation of price, and of the peculiar value of bullion and of coin 306 V. Of the manner in which revenue is distributed amongst society 314 VL Of what branches of production yield the most liberal recompense to productive agency 321 VII Of the revenue of industry : Sect 1. Of the profits of industry in general 324 2. Of the profits of the man of science 228 3. Of the profits of the master-agent or adventurer in industry 229 4. Of the profits of the operative labourer 332 5. Of the independence accruing to the moderns from the advancement of -industry 340 VIII. Of the revenue of capital : . Sect. 1. Of loans at interest 343 2. Of the profit of capital 354 3. Of the employments of capital most beneficial to society 357 IX. Of the revenue of land : Sect 1. Of the profit of landed property 359 2. Of rent .... 365 X. Of the effect of revenue derived by one nation from another 368 XI Of the mode in which the quantity of the product affects population : Sect 1. Of population, as connected with political economy 371 2. Of the influence of the quality of a national product upon the local dis- tribution of the population 381 BOOK III. OF THE CONSUMPTION OF WEALTH. I. Ol iiie different kinds of consumption 387 II. Of the effect of consumption in general 391 III. Of the effect of productive consumption 393 IV. Of the effect of unproductive consumption in general 396 V. Of individual consumption, its motives and its effects 401 VI. On public consumption : Sect 1. Of the nature and general effect of public consumption 412 Of the principal objects of national expenditure 421 Of the charge of civil and judicious administration 425 Of charges, military and naval 429 Of the charges of public instruction 432 Of the charges of public benevolent institutions 438 Of the charges of public edifices and works 441 VII. Of the actual contributors to public consumption 444 VIII. Of taxation: Sect 1. Of the effect of all kinds of taxation in general 446 2. Of the different modes of assessment, and the classes they press upon respectively 468 3. Of taxation in kind 473 4. Of the territorial or land-tax of England 476 IX Of national debt: Sect. 1. Of the contracting debt by national authority, and of its general effect. 477 2. Of public credit, its basis, and the circumstances that endanger its solidity 482 Appendix '. 488 INTRODUCTION. A SCIENCE only advances with certainty, when the plan of inquiry and the object of our researches have been clearly defined; otherwise a small number of truths are loosely laid hold of, without their connexion being per- ceived, and numerous errors, without being enabled to de- tect their fallacy. For a long time the science of politics, in strictness lim- ited to the investigation of the principles which lay the foundation of the social order, was confounded v/ith political economy, which unfolds the manner in which wealth is pro- duced, distributed, and consumed. Wealth, nevertheless, is essentially independent of political organization. Under every form of government, a state, whose affairs are well administered, may prosper. Nations have risen to opu- lence under absolute monarchs, and have been ruined by popular councils. If political liberty is more favourable to he development of wealth, it is indirectly, in the same manner that it is more favourable to general education. In confounding in the same researches the essential ele- ments of good government with the principles on which the growth of wealth, either public or private, depends, it is by no means surprising that authors should have involved these subjects in obscurity, instead of elucidating them. Stewart, who has entitled his first chapter "Of the Govern- ment of Mankind," is liable to this reproach : the sect of "Economists" of the last century, throughout all their writings, and J. J. Rousseau, in the article " Political Eco nomy" in the Encyclopedic, lie under the same imputation, Since the time of Adam Smith, it appears to me, these two very distinct inquiries have been uniformly separated , the term political economy* being now confined to the sci- ence which treats of wealth, and that of politics, to desig * From OIKOS a house, and vofw j a law ; economy, the law which regulates the household. Household, according to the Greeks, comprehending all the goods in possession of the family ; and political, from inSAif, cirntas, extending its application to society or the na tion at large. Political economy is the best expression that can be used to designate the science dis- cussed in the following treatise, which is not the investigation of natural wealth, or that which nature supplies us with gratuitously and without limitation, but of social weilih exclusively, which is founded on exchange and the recognition of the right of property both social regulations. Xvi INTRODUCTION. nate the relations existing between a government and its people, and the relations of different states to each other. The wide range taken into the field of pure politics, whilst investigating the subject of political economy, seem- ed to furnish a much stronger reason for including in the same inquiry agriculture, commerce and the arts, the true sources of wealth, and upon which laws have but an acci- dental and indirect influence. Thence what interminable digressions ! If, for example, commerce constitutes a branch of political economy, all the various kinds of com- merce form a part ; and as a consequence, maritime com- merce, navigation, geography where shall we stop ? All human knowledge is connected. Accordingly, it is neces- sary to ascertain the points of contact, or the articulations by which the different branches are united ; by this means, a more exact knowledge will be obtained of whatever is peculiar to each, and where they run into one another. In the science of political economy, agriculture, com- merce and manufactures are considered only in relation to the increase or diminution of wealth, and not in reference to their processes of execution. This science indicates the cases in which commerce is truly productive, where what- ever is gained by one is lost by another, and where it "is profitable to all ; it also teaches us to appreciate its several processes, but simply in their results, at which it stops. Besides this knowledge, the merchant must also understand the processes of his art. He must be acquainted with the commodities in which he deals, their qualities and defects, the countries from which they are derived, their markets, the means of their transportation, the values to be given for them in exchange, and the method of keeping accounts. The same remark is applicable to the agriculturist, to the manufacturer, and to the practical man of business ; to acquire a thorough knowledge of the causes and conse- quences of each phenomenon, the study of political econo- my is essentially necessary to them all ; and to become ex- pert in his particular pursuit, each one must add thereto a knowledge of its processes. These different subjects of in- vestigation were not, however, confounded by Dr. Smith ; but neither he, nor the writeis who succeeded him, have guarded themselves against another source of confusion, here important to be noticed, inasmuch as the develop- INTRODUCTION. X vu mcnts resulting from it, may not be altogether unuseful in the progress of knowledge in general, as well as in the prosecution of our own particular inquiry. In political economy, as in natural philosophy, and in every other study, systems have been formed before facts have been established ; the place of the latter being sup- plied by purely gratuitous assertions. More recently, the inductive method of philosophizing, which, since the time of Bacon, has so much contributed to the advancement of every other science, has been applied to the conduct of our researches in this. The excellence of this method consists in only admitting facts carefully observed, and the consequences rigorously deduced from them ; thereby effec- tually excluding those prejudices and authorities which, in every department of literature and science, have so often been interposed between man and truth. But, is the whole extent of the meaning of the term, facts, so often made use of, perfectly understood ? It appears to me, that this word at once designates o5- jects that exist, and events that take place ; thus presenting two classes of facts: it is, for example, one fact, that such an object exists ; another fact, that such an event takes place in such a manner. Objects that exist, in order to serve as the basis of certain reasoning, must be seen ex- actly as they are, under every point of view, with all their qualities. Otherwise, whilst supposing ourselves to be reasoning respecting the same thing, we may, under the same name, be treating of two different things. The second class of facts, namely, events that take place, consists of the phenomena exhibited, when we observe the manner in which things take place. It is, for instance, a fact, that metals, when exposed to a certain degree of heat, become fluid. The manner in wh . h things exist and take place, con- stitutes what is calletl the nature of things ; and a careful observation of the nature of things is the sole foundation of all truth. Hence, a twofold classification of sciences ; namely, those which may be styled descriptive, which arrange and accurately designate the properties of certain objects, as botany and natural history ; and those which may be styled experimental, which unfold the reciprocal action of sub- 2* O XVili INTRODUCTION. stances on each other, or in other words, the connexion between cause and effect, as chemistry and natural philo- sophy. Both departments are founded on facts, and con- stitute an equally solid and useful portion of knowledge. Political economy belongs to the latter ; in showing the manner in which events take place in relation to wealth, it forms a part of experimental science.* But facts that take place may be considered in two points of view; either as general or constant, or as particular or variable. General facts are the results of the nature of things in all analogous cases ; particular facts as truly re- sult from the nature of things, but they are the result of several operations modified by each other in a particular case. The former are not less incontrovertible than the latter, even when apparently they contradict each other. In natural philosophy, it is a general fact, that heavy bo- dies fall to the earth ; the water in a fountain, neverthe- less, rises above it. The particular fact of the fountain is a result wherein the laws of equilibrium are combined with those of gravity, but without destroying them. In our present inquiry, the knowledge of these two classes of facts, namely, of objects that exist and of events that take place, embraces two distinct sciences, political economy and statistics. Political economy, from facts always carefully observed, makes known to us the nature of wealth ; from the know- ledge of its nature deduces the means of its creation, un- folds the order of its distribution, and the phenomena at tending its destruction. It is, in other words, an exposi- tion of the general facts observed in relation to this sub- ject. With respect to wealth, it is a knowledge of effects and of their causes. It shows what facts are constantly conjoined with ; so that one is always the sequence of the other. But it does not resort for any further explanations to hypothesis : from the nature of particular events their concatenations must be perceived ; the science must con- duct us from one link to another, so that every intelligent * Experimental science, in. order to establish why events take place in a certain man- ner, or to be able to assign a particular cause for a particular effect, to a certain extent must be descriptive. Astronomy, in order to explain the eclipses of the sun, must del monstrate the opacity of the moon. Political economy, in like manner, in order to ehow that money is a means of the production of wealth, but not the end, must exhibit Hi true nature, INTRODUCTION. x j x understanding may clearly comprehend in what manner the chain is united. It is this which constitutes the excel- lence of the modern method of philosophizing. Statistics exhibit the amount of production and of con- sumption of a particular country, at a designated period ; its population, military force, wealth, and whatever else is susceptible of valuation. It is a description in detail. Between political economy and statistics there is the same difference as between the science of politics and history. The study of statistics may gratify curiosity, but it can never be productive of advantage when it does not indi- cate the origin and consequences of the facts it has collect- ed ; and by indicating their origin and consequences, it at once becomes the science of political economy This doubtless is the reason why these two distinct sciences have hitherto been confounded. The celebrated work of Dr. Adam Smith can only be considered as an immethodical assemblage of the soundest principles of political econo- my, supported by luminous illustrations ; of highly inge- nious researches in statistics, blended with instructive re- flections ; it is not, however, a complete treatise of either science, but an irregular mass of curious and original speculations, and of known demonstrated truths. A perfect knowledge of the principles of political econo- my may be obtained, inasmuch as all the general facts which compose this science may be discovered. In statis- tics this never can be the case ; this latter science, like history, being a recital of facts, more or less uncertain, and necessarily incomplete. Of the statistics of former periods and distant countries, only detached and very im- perfect accounts can be furnished. With respect to the present time, there are few persons who unite the qualifi- cations of good observers with a situation favourable for accurate observation. The inaccuracy of the statements we are compelled to have recourse to, the restless suspi- cions of particular governments, and even of individuals, their ill-will and indifference, present obstacles often in surmountable, notwithstanding the toil and care of in- quirers to collect minute details with exactness; and which, after all, when in their possession, are only true for an in- stant. Dr. Smith accordingly avows, that he puts no XX INTRODUCTION great faith in political arithmetic ; which is nothing more than the arrangement of numerous statistical data. Political economy, on the other hand, whenever the principles which constitute its basis are the rigorous de- ductions of undeniable general facts, rests upon an im- moveable foundation. General facts undoubtedly are found- ed upon the observation of particular facts ; but upon such particular facts as have been selected from those most carefully observed, best established, and witnessed by ourselves. When the results of these facts have uni- formly been the same, the cause of their having been so satisfactorily demonstrated, and the exceptions to them even confirming other principles equally well established, we are authorised to give them as ultimate general facts, and to submit them with confidence to the examination of all competent inquirers, who may be again desirous of subjecting them to experiment. A new particular fact, when insulated, and the connexion between its antecedents and consequents not established by reasoning, is not suffi- cient to shake our confidence in a general fact ; for who can say that some unknown circumstance has not produced the difference noticed in their several results? Alight feather is seen to mount in the air, and sometimes remain there for a long time before it falls back to the ground. Would it not, nevertheless, be erroneous to conclude that this feather is not affected by the universal law of gravi- tation ? In political economy it is a general fact, that the interest of money rises in proportion to the risk run by the lender of not being repaid. Shall it be inferred that this principle is false, from having seen money lent at a low rate of interest upon hazardous occasions ? The lend- er may have been ignorant of the risk, gratitude or fear may have induced sacrifices, and the general law, disturbed in this particular case, will resume its entire force the mo- ment the causes of its interruption have ceased to operate. Finally, how small a number of particular facts are com- pletely examined, and how few among them are observed under all their aspects? And in supposing them well ex- amined, well observed, and well described, how many of them eithei prove nothing, or directly the reverse of what s intended to be established by them. Hence, there is not an absurd theory, or an extravagant INTRODUCTION. M j opinion that has not been supported by an appeal to facts;* and it is by facts also that public authorities have been so often misled. But a knowledge of facts, without a know- ledge of their mutual relations, without being able to show why the one is a cause, and the other a consequence, is really no better than the crude information of an office- clerk, of whom the most intelligent seldom becomes ac- quainted with more than one particular series, which only enables him to examine a question in a single point of view. Nothing can be more idle than the opposition of theory to practice! What is theory, if it be not a knowledge of the laws which connect effects with their causes, or facts with facts ? And who can be better acquainted with facts than the theorist who surveys them under all their aspects, and comprehends their relation to each other? And what is practice! without theory, but the employment of means without knowing how or why they act ? In any investi- gation, to treat dissimilar cases as if they were analogous, is but a dangerous kind of empiricism, leading to conclu- sions never foreseen. Hence it is, that after having seen the exclusive or re- strictive system of commerce, a system founded on the opinion that one nation can only gain what another loses, almost universally adopted throughout Europe after the revival of arts and letters ; after having seen taxation without intermission perpetually increasing, and in some countries extending itself to a most enormous amount ; and after having seen these same countries become more opulent, more populous, and more powerful, than at the time they carried on an unrestricted trade, and were almost entirely exempt from public burdens, the generality of man- kind have concluded that national wealth and power were attributable to the restraints imposed on the application of industry, and to .the taxes levied from the incomes of individuals. Shallow thinkers have even pretended that this opinion was founded on facts, and that every different one was the offspring of a wild and disordered imagination. * In France, the minister of the interior, in his expose of 1813, a most disastrous pe- riod, when foreign commerce was destroyed, and the national resources of every descrip- tion rapidly declining, boasted of having proved by indubitable calculations, that the country was in a higher state of prosperity than it ever before had been. t By the term practice, is not here meant the manual skill which enables the artificer or clerk to execute with greater celerity and precision whatever he performs daily, and which constitutes his peculiar talent ; but the method pursued in superintending and administering public or private affairs. XXii INTRODUCTION. It is, however, on the contrary, evident that the support- ers of the opposite opinion embraced a wider circle of facts, and understood them much better than their oppo- nents. The very remarkable impulse given, during the middle ages, to the industry of the free states of Italy and of the Hanse towns of the north of Europe, the spectacle of riches it exhibited in both, the shock of opinions occa- sioned by the crusades, the progress of the arts and sciences, the improvement of navigation and consequent discovery of the route to India, and of the continent of America, as well as a succession of other less important events, were all known to them as the true causes of the increased opulence of the most ingenious nations on the globe. And although they were aware that this activity had received successive checks, they at the same time knew that it had been freed from more oppressive obstacles. In consequence of the authority of the feudal lords and barons declining, the intercourse between the different provinces and states could no longer be interrupted ; roads became improved, travelling more secure, and laws less arbitrary ; the enfranchised towns, becoming immediately dependent upon the crown, found the sovereign interested in their advancement; and this enfranchisement, which the natural course of things and the progress of civilization had ex- tended to the country, secured to every class of producers the fruits of their industry. In every part of Europe per- sonal freedom became more generally respected ; if not from a more improved organization of political society, at least from the influence of public sentiment. Certain prejudices, such as branding with the odious name of usury all loans upon interest, and attaching the importance of nobility to idleness, had begun to decline. Nor is this all. Enlightened individuals have not only remarked the influence of these, but of many other .analogous facts; it has been perceived by them, that the decline of prejudices has been favourable to the advancement of science, or to a more exact knowledge of the immutable laws of nature ; that this improvement in the cultivation of science has itself been favourable to the progress of industry, and in- dustry to national opulence. From such an induction of facts they have been enabled to conclude, with much greater certainty than the unthinking multitude, that INTRODUCTION. xx jii although many modern states in the midst of taxation and restrictions have risen to opulence and power, it is not owing to these restraints on the natural course of human affairs, but in spite of such powerful causes of discourage- ment. The prosperity of the same countries would have been much greater, had they been governed by a more liberal and enlightened policy.* To obtain a knowledge of the truth, it is not then so ne- cessary to be acquainted with a great number of facts, as with such as are essential, and have a direct and immediate influence ; and, above all, to examine them under all their aspects, to be enabled to deduce from them just conclu- sions, and be assured that the consequences ascribed to them do not in reality proceed from other causes. Every other knowledge of facts, like the erudition of an almanac, is a mere compilation from which nothing results. And it may be remarked, that this sort of information is peculiar to men of clear memories and clouded judgments; men who declaim against the best established doctrines, the fruits of the most enlarged experience and profoundest reason- ing ; and whilst inveighing against system, whenever their own routine is departed from, are precisely those most under its influence, and who defend it with stubborn folly, fearful rather of being convinced, than desirous of arriving at certainty. Thus, if from all the phenomena of production, as well as from the experience of the most extensive commerce, you demonstrate that a free intercourse between nations is reciprocally advantageous, and that the mode found to be most beneficial to individuals transacting business with foreigners, must be equally so to nations, men of contracted views and high presumption will accuse you of system. Ask them for their reasons, and they will immediately talk to you of the balance of trade ; will tell you, it is cleai that a nation must be ruined by exchanging its money for * Hence it is that nations seldom derive any benefit from the lessons of experience. To profit by them, the community at large must be enabled to seize the connexion be- tween causes and their consequences ; which at once supposes a very high degree of intelligence and a rare capacity for reflection. Whenever mankind shall be in a situa- tion to profit by experience, they will no longer require her lessons ; plain sound sense will then be sufficient. This is one reason of our being subject to the necessity of con- stant control. All that a people can desire is that laws conducive to the general interest of society should be enacted and carried into effect ; a problem which different political constitutions more or less imperfectly solve. INTRODUCTION. merchandise in itself a system. Some will assert that circulation enriches a state, and that a sum of money, by passing through twenty different hands, is equivalent to twenty times its own value ; others, that luxury is favour- able to industry, and economy ruinous to every branch of commerce both mere systems ; and all will appeal to facts in support of these opinions, like the shepherd, who. upon the faith of his eyes, affirmed that the sun, which he saw rise in the morning and set in the evening, during the day traversed the whole extent of the heavens, treating as an idle dream the laws of the planetary world. Persons, moreover, distinguished by their attainments in other branches of knowledge, but ignorant of the prin- ciples of this, are too apt to suppose that absolute truth is confined to the mathematics and to the results of careful observation and experiment in the physical sciences ; ima- gining that the moral and political sciences contain no in- variable facts or indisputable truths, and therefore cannot be considered as genuine sciences, but merely hypothetical systems, more or less ingenious, but purely arbitrary. The opinion of this class of philosophers is founded upon the want of agreement among the writers who have investi- gated these subjects, and from the wild absurdities taught by some of them. But what science has been free from extravagant hypotheses ? How many years have elapsed since those most advanced have been altogether disen- gaged from system ? On the contrary, do we not still see men of perverted understandings attacking the best estab- lished positions ? Forty years have not elapsed since water, so essential to our very existence, and the atmo- sphere in which we perpetually breathe, have been accu- rately analyzed. The experiments and demonstrations, nevertheless, upon which this doctrine is founded, are con- tinually assailed ; although repeated a thousand times in different countries by the most acute and cautious experi- menters. A want of agreement exists in relation to a de- scription of facts much more simple and obvious than the most part of those in moral and political science. Are not natural philosophy, chemistry, botany, mineralogy, and physiology, still fields of controversy, in which opinions are combated with as much violence and asperity as in political economy ? The same facts are, indeed, observed INTRODUCTION. by both parties, but are classed and explained differently by each ; and it is worthy of remark, that in these contests genuine philosophers are not arrayed against pretenders. Leibnitz and Newton, Linnaeus and Jussieu, Priestley and LaVoisier, Desaussure and Dolomieu, were all men of un- common genius, who, however, did not agree in their phi- losophical systems. But have not the sciences they taught an existence, notwithstanding these disagreements ?* In like manner, the general facts constituting the sciences of politics and morals, exist independently of all controversy. Hence the advantage enjoyed by every one who, from distinct and accurate observation, can establish the existence of these general facts, demonstrate their con- nexion, and deduce their consequences. They as certainly proceed from the nature of things as the laws of the ma- terial world. We do not imagine them ; they are results disclosed to us by judicious observation and analysis. Sovereigns, as well as their subjects, must bow to their authority, and never can violate them with impunity. General facts, or, if you please, the general laws which facts follow, are styled principles, whenever it relates to their application ; that is to say, the moment we avail our- selves of them in order to ascertain the rule of action of * " The controversies," says Col. Torrens, in his ' Essay on the Production of Wealth,* published in 1821, "which at present exist amongst the most celebrated masters of po litical economy, have been brought forward by a lively and ingenious author as an ob jection against the study of the science. A similar objection might hav been urged, in a certain stage of its progress, against every branch of human knowledge. A few years ago, when the brilliant discoveries in chemistry began to supersede the ancient doctrine of phlogiston, controversies, analogous to those which now exist amongst polit- ical economists, divided the professors of natural knowledge; and Dr. Priestley, like Mr. Malthus, appeared as the pertinacious champion of the theories which the facts estab- lished by himself had so largely contributed to overthrow. In the progress of the human mind, a period of controversy amongst the cultivators of any branch of science must necessarily precede the period of their unanimity. But this, instead of furnishing a reason for abandoning the pursuits of scienpe, while its first principles remain in uncer- tainty, should stimulate us to prosecute our studies with more ardour and perseverance until upon every question within the compass of the human faculties, doubt is removed and certainty attained. With respect to political economy, the period of controversy is passing away, and that of unanimity rapidly approaching. Twenty years hence there will scarcely exist a doubt respecting any of its fundamental principles " And in the preface of the third edition of his ' Essay on the External Corn Trade,' published in 1826, Col. Torrens makes these further remarks : "On a former occasion, the author ventured to predict, that at no distant period, controversy amongst the pro- fessors of political economy would cease, and unanimity prevail, respecting the funda- mental principles of the science. Rethinks he can already perceive the unequivocal signs of the approaching fulfilment of this prediction. Since it was hazarded, two works have appeared, each of which, in its own peculiar line, is eminently calculated to correct the errors which previously prevailed. These publications are, ' A Critical Dis- sertation on the Nature, Causes, and Measures of Value, by an anonymous author ;' au stood, oppose to many of these principles, exhibit nothing that ought either to surprise or alarm individuals animated with a desire of promoting the general welfare. The phi- losophy of Newton, which, during a period of fifty years was unanimously rejected in France, is now taught in all its schools. Ultimately it will be perceived, that there are studies of still greater importance than this, if esti- t mated by their influence on the happiness and prosperity of mankind. Still how unenlightened and ignorant are the very na- * "They would wish, so to express myself, that I might be able to demonstrate that my proofs are conclusive, and that they are not wrong in submitting' to them. The soundness of my reasoning has produced a momentary conviction ; but they afterwards feel the habitual influence of their former opinions return with undiminished authority, although without any adequate cause, as in the case of the apparent increase in the diameter of the moon at the horizon. They would wish to be freed by me from these troublesome relapses, of whose delusiveness they are sensible, but which nevertheless importune them. In a'word, they are desirous that I should be enabled to effect by reason what time alone can accomplish ; which is impossible. Every cause has an effect peculiar to itself. Reason may convince, opinions carry us along, and illusions perplex us; but time alone, and the frequent repetition of the same acts, can produce that state of calmness and ease which we call habit. Hence it is, that all new opinions are such a length of time in spreading themselves. If an innovator has ever had im- mediate success, it is only from having discovered and promulgated opinions already floating in every mind." DESTUTT-TRACY, Logique, chap. 8. Ix INTRODUCTION. tions we term civilized ! Survey entire provinces of proud Europe; interrogate a hundred, a thousand, or even ten thousand individuals, and of this whole number, you will hardly, perhaps, find two embued with the slightest tincture of the improved science of which the present age so much boasts. This general ignorance of recondite truths is by no means so remarkable as an utter unacquaintance with the simplest rudiments of knowledge applicable to the situation and circumstances of every one. How rare, also, are the qualifications necessary for one's own instruction, and how few persons are solely capable of observing what daily happens, and of questioning whatever they do not understand ! The highest branches of knowledge are then very far from having yielded to society all the advantages to be expected from them, and without which they would be mere curious speculations. Perhaps their perfect appli- cation is reserved for the nineteenth century. In moral as well as in physical science, inquirers of superior minds will appear, who, after having extended their theoretical views, will disclose methods of placing important truths within the reach of the humblest capacities. In the ordi nary occurrences of life, instead of then being guided by the false lights of a transcendental philosophy, mankind will be governed by the maxims of common sense. Opin- ions will not rest on gratuitous assumptions, but be the result of an accurate observation of the nature of things. Thus, habitually and naturally ascending to the source of all truth, we shall not suffer ourselves to be imposed upon by empty sounds, or submit to the guidance of erroneous impressions. Corruption, deprived of the weapons of em- piricism, will lose her principal strength, and no longer be able to obtain triumphs, calamitous to honeef men, and disastrous to nations. BOOK I. OF THE PRODUCTION OF WEALTH. CHAPTER I. OF WHAT IS TO BE UNDERSTOOD BY THE TERM, PRODUCTION. IP we take the pains to inquire what that is, which mankind in a social state of existence denominate wealth, we shall find the term employed to designate an indefinite quantity of objects bearing inherent value, as of land, of metal, of coin, of grain, of stuffs, of commodities of every description. When they further extend its signification to landed securities, bills, notes of hand, and the like, it is evidently because they contain obligations to deliver things pos- sessed of inherent value. In point of fact, wealth can only exist where there are things possessed of real and intrinsic value. Wealth is proportionate to the quantum of that value ; great, when the aggregate of component value is great ; small, when that aggre- gate is small. The value of a specific article is always vague and arbitrary, so long as it remains unacknowledged. Its owner is not a jot the richer, by setting a higher ratio upon it in his own estimation. But the moment that other persons are willing, for the purpose of obtaining it, to give in exchange a certain quantity of other articles, likewise bearing value, the one may then be said to be worth, or to be of equal value with, the other. The quantity of money, which is readily parted with to obtain a thing, is called its price. Current price, at a given time and place, is that price which the owner is sure of obtaining for a thing, if he is inclined to part with it.* The knowledge of the real nature of wealth, thus defined, of. the difficulties that must be surmounted in its attainment, of the course and order of its distribution amongst the members of society, of the * The numerous and difficult points arising out of the confusion of positive anti relative value are discussed in different parts of this work; particularly in the leading chapters of Book II. Not to perplex the attention of the reader, I con- fine myself here to so much as is absolutely necessary to comprehend the phe nomenon of the production of wealth. 6 62 ON PRODUCTION. BOOK I. uses to which it may be applied, and, further, of the consequences resulting respectively from these several circumstances, constitutes that branch of science now entitled Political Economy. The value that mankind attach to objects originates in the use it can make of them. Some afford sustenance ; others serve for cloth- ing; some defend them from the inclemencies of the season, as houses ; others gratify their taste, or, at all events, their vanity, both of which are species of wants : of this class are all mere ornaments and decorations. It is universally true, that, when men attribute value to any thing, it is in consideration of its useful properties ; what is good for nothing they set no price upon.* To this inherent fitness or capability of certain things to satisfy the various wants of man- kind, I shall take leave to affix the name of utility. And I will go on to say, that, to create objects which have any kind of utility, is to create wealth ; for the utility of things is the ground- work o*f their value, and their value constitutes wealth. Objects, however, cannot be created by human means ; nor is the mass of matter, of which this globe consists, capable of increase or diminution. All that man can do is, to re-produce existing materials under another form, which may give them an utility they did not before possess, or merely enlarge one they may have before present- ed. So that, in fact, there is a creation, not of matter, but of utility ; and this I call production of wealth. In this sense, then, the word production must be understood in political economy, and throughout the whole course of the present work. Production is the creation, not of matter, but of utility. It is not to be estimated by the length, the bulk, or the weight of the product, but by the utility it presents. Although price is the measure of the value of things, and their value the measure of their utility, it would be absurd to draw the inference, that, by forcibly raising their price, their utility can be augmented. Exchangeable value, or price, is an index of the recog- nised utility of a thing, so long only as human dealings are exempt from every influence but that of the identical utility: in like manner as a barometer denotes the weight of the atmosphere, only while the mercury is submitted to the exclusive action of atmospheric gravity. In fact, when one man sells any product to another, he sells him the utility vested in that product ; the buyer buys it only for the sake of its utility, of the use he can make of it. If, by any cause what- ever, the buyer is obliged to pay more than the value to himself of * It would be out of place here to examine, whether or no the value mankind attach to a thing be always proportionate to its actual utility. The accuracy of the estimate must depend upon the comparative judgment, intelligence, habits, and prejudices of those who make it. True morality, and the clear perception of their real interests, lead mankind to the just appreciation of benefits. Politi- cal economy takes this appreciation as it finds it as one of the data of its rea- 8onings ; leaving to the moralist and the practical man, the several duties of enlightening and of guiding their fellow-creatures, as well in this, as in other particulars of human conduct. CHAP. I. ON PRODUCTION. 63 that utility, he pays for value that has no existence, and consequent ly which he does not receive.* This is precisely the case, when authority grants to a particular class of merchants the exclusive privilege of carrying on a certain branch of trade, the India trade for instance ; the price of Indian imports is thereby raised, without any accession to their utility or intrinsic value. This excess of price is nothing more or less than so much money transferred from the pockets of the consumers into those of the privileged traders, whereby the latter are enriched ex- actly as much as the former are unnecessarily impoverished. In like manner, when a government imposes on wine a tax, which raises to 15 cents the bottle what would otherwise 'be sold for 10 cents, what does it else, but transfer 5 cents per bottle from the hands of the producers or the consumers of wine to those of the tax-gather- er ?f The particular commodity is here only the means resorted to for getting at the tax-payer with more or less convenience ; and its current value is composed of two ingredients, viz. 1. Its real value originating in its utility : 2. The value of the tax that the govern- ment thinks fit to exact, for permitting its manufacture, transport, or consumption. Wherefore, there is no actual production of wealth, without a creation or augmentation of utility. Let us see in what manner this utility is to be produced. CHAPTER II. OF THE DIFFERENT KINDS OF INDUSTRY, AND THE MODE *IN WHICH THEY CONCUR IN PRODUCTION. SOME items of human consumption are the spontaneous gifts of nature, and require no exertion of man for their production ; as air, water, and light, under certain circumstances. These are destitute of exchangeable value ; because thp want of them is never felt, others being equally provided with them as ourselves. Being neither pro- curable by production, nor destructible by consumption, they come not within the province of political economy. But there are abundance of others equally indispensable to our existence and to our happiness, which man would never enjoy at all, did not his industry awaken, assist, or complete the operations of * This position will hereafter be further illustrated. For the present it is enough to know, that, whatever be the state of society, current prices approxi- mate to the real value of things, in proportion to the liberty of production ami mutual dealing. t It will be shown in Book HI. of this work, what proportion of the tax is paid by the producer, and what by the consumer. 04 ON PRODUCTION. BOOK I. nature. Such are most of the articles which serve for his food, rai ment and lodging. When that industry is limited to the bare collection of natural products, it is called agricultural industry, or simply agriculture. When it is employed in severing, compounding, or fashioning the products of nature, so as to fit them to the satisfaction of our various wants, it is called manufacturing industry* When it is employed in placing within our reach objects of want which would otherwise be beyond reach, it is called commercial industry, or simply commerce. It is solely by means of industry that mankind can be furnished, in any degree of abundance, with actual necessaries, and with that variety of other objects, the use of which, though not altogether in- dispensable, yet marks the distinction between a civilized communi- ty and a tribe of savages. Nature, left entirely to itself, would pro- vide a very scanty subsistence to a small number of human beings. Fertile but desert tracts have been found inadequate to the bare nourishment of a few wretches, cast upon them by the chances of shipwreck: while the presence of industry often exhibits the spec- tacle of a dense population plentifully supplied upon the most un- grateful soil. The term products is applied to things that industry furnishes to mankind. A particular product is rarely the fruit of one branch of industry exclusively. A table is a joint product of agricultural industry, which has felled the tree whereof it is made, and of manufacturing industry, which has given it form. Europe is indebted for its coffee to the agricultural industry, which has planted and cultivated the bean in Arabia or elsewhere, and to the commercial industry, which hands it over to the consumer. These three' branches of industry, which may at pleasure be again infinitely subdivided, are uniform in their mode of contributing to the act of production. They all either confer an utility on a sub- stance that possessed none before, or increase one which it already possessed. The husbandman who sows a grain of wheat that yield's twenty-fold, does not gain this product from nothing: he avails him- self of a powerful agent ; that is to say, of Nature, and merely directs an operation, whereby different substances previously scattered throughout the elements of earth, air, and water, are converted into the form of grains o'f wheat. Gall-nuts, sulphate of iron, and gum-arabic, are substances existing separately in nature. The joint industry of the merchant and manu- facturer brings them together, and from their compound derives the black liquid, applied to the transmission of useful science. This joint operation of the merchant and manufacturer is analogous to that * Since matter can only be modified, compounded, or separated, by moans either mechanical or chemical, all branches of manufacturing industry may be subdivided into the mechanical and the chemical arts, according to the predomi- nance of the one or the other in their several processes. CHAP. II. ON PRODUCTION. 05 of the husbandman, who chooses his object and effects its attainment by precisely the same kind of means as the other two. No human being has the faculty of originally creating matter, which is more than nature itself can do. But any one may avail himself of the agents offered him by nature, to invest matter with utility. In fact, industry is nothing more or less than the human employment of natural agents; the most perfect product of labour, the one that derives nearly its whole value from its workmanship, is probably the result of the action of steel, a natural product upon some substance or other, likewise a natural product.* Through ignorance of this principle, the economists of the 18th century, though many enlightened writers were to be reckoned amongst them, were betrayed into the most serious errors. They allowed no industry to be productive, but that which procured the raw materials ; as the industry of the husbandman, the fisherman and the miner ; not adverting to the distinction, that wealth consists, not in matter, but in the value of matter; because matter without value is no item of wealth; other\vise water, flint-stones, and dust of tho roads, would be wealth. Wherefore, if the value of matter consti- tutes wealth, wealth is to be created by the annexation of value. Practically, the man who has in his warehouse a quintal of wool worked up into fine cloths, is richer than one who has the same quantity of wool in packs. To this position the economists replied, that the additional value communicated to a product by manufacture, was no more than equi- valent to the value consumed by the manufacturer during the process; /or, said they, the competition of manufactures prevents their ever raising the price beyond the bare amount of their own expenditure and consumption ; wherefore their labour adds nothing to the total wealth of the community, because their wants on the one side destroy as much as their industry produces on the other.f * Alagrotti in his Opuscula, by way of exemplifying the prodigious addition of the value given to an object by industry, adduces the spiral springs that check the balance-wheels of watches. A pound weight of pig-iron costs the operative manufacturer about five cents. This is worked up into steel, of which is made the little spring that moves the balance-wheel of a watch. Each of these springs weighs but the tenth part of a grain ; and when completed, may be sold as high as three dollars, so that out of a pound of iron, allowing something for the loss of metal, 80,000 of these springs may be made, and a substance of five cents value be wrought into a- value of 240,000 dollars. f Mercier de la Riviere, in his work entitled "Ordre Nat^rel des Societes Poh- tirjires" torn. ii. p. 255, while labouring to prove, that manufacturing labour is barren and unproductive, makes use of an argument, which I think it may be of some service to refute, because it has been often repeated in different shapes, and some of them specious enough. He says, " that if the unreal products of industry are considered as realities, it is a necessary inference, that an useless multiplication of workmanship is a multiplication of wealth." But because human labour is productive of value, when it has an useful result, it by no means follows, that it. is productive of value, when its result is either useless or injun oiis. All labour is not productive : but such only as adds a real value to any substance or thinf. And the futility of this argument of the economists is pin 6* I 60 ON PRODUCTION. BOOK I. But it should have been previously demonstrated by those who made use of this argument, that the value, consumed by mechanics and artizans, must of necessity barely equal the value produced by them, which is not the fact ; for it is unquestionable, that more savings are made, and more capital accumulated from the profits of trade and manufacture, than from those of agriculture.(l). Besides, even admitting that the profits of manufacturing industry are consumed in the satisfaction of the necessary wants of the manu- facturers and their families, that circumstance does not prevent them being positive acquisitions of wealth. For unless they were so, they could not satisfy their wants : the profits of the land-owner and agriculturist are allowed to be items of positive wealth ; yet they are equally consumed in the maintenance of those classes. Commercial, in like manner as manufacturing industry, concurs in production, by augmenting the value of a product by its transport from one place to another. A quintal of Brazil cotton has acquired greater utility, and therefore larger value, by the time it reaches a warehouse in Europe, than it possessed in one at Pernambuco. The transport is a modification that the trader gives to the commodity, whereby he adapts to our use what was not before available ; which modification is equally useful, complex and uncertain in the result, as any it derives from the other two branches of industry. He avails himself of the natural properties of the timber and the metals used in the construction of his ships, of the hemp whereof his rigging is composed, of the wind that fills his sails, of all the natural agents brought to concur in his purpose, with precisely the same view and the same result, and in the same manner too, as the agriculturist avails himself of the earth, the rain, and the atmosphere.* beyond all question by the circumstance, that it may be equally employed against their own system and that of their opponents. They may be told, " You admit the industry of the cultivator to be productive ; therefore he has only to plough and sow his fields ten times a year to increase his productiveness ten- fold," which is absurd. * Genovesi, who lectured on political economy at Naples, defines commerce to be "the exchange of superfluities for necessaries." He gives as his reason, that in every transaction of exchange, the article received appears to each of the contracting parties more necessary than that given. This is a far-fetched notion, which I think myself called on to notice, because it has obtained considerable currency. It would be difficult to prove, that a poor labourer, who goes to the (1) [Our author, in, here asserting, " that more savings are made, and more capital accumulated from the profits of trade and manufacture, than from those of agriculture," has fallen into an error, which it is proper to notice. In the absence of prohibitions and restraints, the profits of agriculture, manufactures and commerce, will all be on an equality, or always nearly approaching towards it; for any material difference will cause a diversion of capital and industry to the more productive channel, and by that means restore the equilibrium. In overthrowing the hypothesis of the economists, the author has inadvertently, for a moment, lost sight of his own general principles, which so clearly establish the equality of profits in all the different branches of industry.] AMERICAN EDITOR. CUAP. H. ON PRODUCTION. 67 Thus, when Raynal says of commerce, as contrasted with agricul ture and the arts, that " it produces nothing of itself," he shows him- self to have had no just conception of the phenomenon of production. In this instance Raynal has fallen into the same error with regard to commerce, as the economists made respecting both commerce and manufacture. They pronounced agriculture to be the sole channel of production ; Raynal refers production to the two channels of agri- culture and manufacture : his position is nearer the truth than the other, but still is erroneous. Condillac also is confused in his endeavour to explain the mode in which commerce produces. He pretends that, because all commo- dities cost to the seller less than the buyer, they derive an increase of value from the mere act of transfer from one hand to another. But this is not so ; for, since a sale is nothing else but an act of barter, in which one kind of goods, silver for example, is received in lieu of another kind of goods, the loss which either of the parties dealing should sustain on one article would be equivalent to the profit he would make on the other, and there would be to the community no production of value whatsoever.* When Spanish wine is bought at raris, equal value is really given for equal value: the silver paid, and the wine received, are worth one the other; but the wine had not the same value before its export from Alicant : its. value has really increased in the hands of the trader, by the circumstance of trans- port, and not by the circumstance, or at the moment, of exchange. alehouse on a Sunday, exchanges there his superfluity for a necessary. In all fair traffic, there occurs a mutual exchange of two things, which are worth one the other, at the time and place of exchange. Commercial production, that is to say, the value added by commerce to the things exchanged, is not operated by the act of exchange, but by the commercial operations that precede it. The Count de Verri is the only -writer within my knowledge, who has explain- ed the true principle and ground- work of commerce. In the year 1771, he thus expresses himself: "Commerce is in fact nothing more than the transport, of goods from one place to another." (Meditazioni sulla economic, politico, 4.) The celebrated Adam Smith himself appears to have had no very clear idea of commercial production. He merely discards the opinion, that there is any pro- duction of value in the act of exchange. * This circumstance has escaped the attention of Sismondi, or he would not have said, " The trader places himself between jhe producer and the consumer, to benefit them both at once, making his charge for that benefit upon -both." (Nouveaux Principes d' 'Economic Pol. Liv. ii. ch. 8). He would make it appear as if the trader subsisted wholly upon the value produced by the agricul- turist and the manufacturer; whereas he is maintained by the real value he him- self communicates to commodities by giving them an additional modification, an useful property. It is this very notion that stirs up the popular indignation against the dealers in grain. I,. .S'ffj/, of Nantes, has fallen into the same mistake (Principales Causes de la Richesse, &c. p. 110). By way of demonstrating the value conferred by commerce to be unreal, he alleges it to be absorbed by the charges of transport. By this incidental process of reasoning, the economist concluded manufacture to be unproductive ; not perceiving, that in these very charges consists the revenue of the commercial and manufacturing producers ; and that it is in this way that the values raised by production at large are distributed amongst the several pro ducers. 38 ON PRODUCTION. BOOK I. The seller does not play the rogue, nor the buyer the fool ; and Con- dillac has no grounds for his position, that " if men always exchang- ed equal value for equal value, there would be no profit to be made by the traders."* In some particular cases the two other branches of industry pro- duce in a manner analogous to commerce, viz. by giving a value to things to which they actually communicate no new quality, but that of approximation to the consumer. Of this description is the indus- try of miners. The coal or metal may exist in the earth, in a perfect state, but unpossessed of value. The miner extracts them thence, and this operation gives them a value, by fitting them for the use of mankind. So also of the herring fishery. Whether in or out of the sea, the fish is the same ; but under the latter circumstances, it has acquired an utility, a value, it did not before possess.f Examples might be infinitely multiplied, and would all bear as close an affinity, as those natural objects, which the naturalist classi- fies only to facilitate their description. This fundamental error of the economists, in which I have shown that their adversaries in some measure participated, led them to the strangest conclusions. According to their theory, the traders and manufacturers, being unable to^add an iota to the general stock of wealth, live entirely at the expense of the sole producers, that is to say, the proprietors and cultivators of the land. Whatever new value they may communicate to things, they at the same time con- sume an equivalent product, furnished by the real producers: manu- facturing and commercial nations, therefore, subsist wholly upon the wages they receive from their agricultural customers ; in proof of which position, they alleged that Colbert ruined France by his pro- tection of manufactures, &c.J The truth is, that, in whatever class of industry a person is engaged, he subsists upon the profit he derives from the additional * See his work entitled, " Le Commerce et le (fouvernment consideres rela- tivement Tun a fautre." Ire. partie, ch. 6. f We may consider as agents of the same class of industry, the cultivator of the land, the breeder of cattle, the woodcutter, the fisherman that takes fish he has been at no pains in breeding, and the miner who, from the bowels of the earth, extracts metal, stone, or.combiistibles, that nature has placed there in a perfect state; and, to avoid multiplicity of denominations, the whole of these occupations may be called by the name of agricultural industry, because the superficial cultivation of the earth, is the chief and most important of all. Terms are of little consequence, when the ideas are clear and definite. The wine- grower, who himself expresses the juice of his grapes, performs a mechanical operation, that partakes more of manufacture than agriculture. But it matters little whether he be classed as a manufacturer or agriculturist; provided that it be clearly comprehended in what manner his industry adds to the value of the product. If we wish to give separate consideration to every possible manner of giving value to things, industry may be infinitely subdivided. If it be the object to generalize to the utmost, it may be treated as one and the same; for every branch of it will resolve itself into this: the employment of natural substances and agents in the adaptation of products to human consumption. See tne numberless writings of that sect. CHAP. IL ON PRODUCTION. 69 value, or, portion of value, no matter in what ratio, which his agoncy attaches to the product he is at work upon. The total value of pro- ducts serves in this way to pay the profits of those occupied in pro- duction. The wants of mankind are supplied and satisfied out ot the gross values produced and created, and not out of the net values only. A nation, or a class of a nation, engaged in manufacturing or com- mercial industry, is not a whit more or less in the pay of another, than one employed in agriculture. The value created by one branch is of the same nature as that created' by others. Two equal values are worth one the other, although perhaps the fruit of differ- ent branches of industry: and when Poland barters its staple product, wheat, for the staple commodity of Holland, East and West India produce, Holland is no more in the pay or service of Poland, than Poland is of Holland. Nay, Poland herself, which exports at the rate of ten millions of wheat annually, and therefore, according to the economists, takes the sure road to national wealth, is, notwithstanding, poor and depopu- lated : and why ? Because she confines her industry to agriculture, though she might be at the same time a commercial and manufactur- ing state. Instead of keeping Holland in her pay, she may with more propriety be said to receive wages from the latter, for the raising of ten millions of wheat, per annum. Nor is she a jot less dependent than the nations that buy wheat of her: for she has just as much desire to sell to them, as they have to buy of her.* Moreover, it is not true that Colbert ruined France. On the con- trary, the fact is that France, under Colbert's administration, emerged from the distress that two regencies and a weak reign had involved her in. She was, indeed, afterwards ruined again ; buj for this second calamity, she may thank the pageantry and the wars of Louis XIV. Nay, the very prodigality of that prince is an undeniable evidence of the vast resources that Colbert had placed at his disposal. It must, however, be admitted that those resources would have been still more ample, if he had but given the same protection to agriculture, as to the other branches of industry. Thus it is evident, that the means of enlarging and multiplying wealth within the reach of every community are much less confined than the economists imagined. A nation, by their account, was un- able to produce annually any values beyond the net annual produce of its lands ; to which fund alone recourse could be had for the sup- port not only of the proprietary and the idler, but likewise of the merchant, the manufacturer, and the mechanic, as well as for the total consumption of the government. Whereas we have just seen that the annual produce of a nation is composed, not of the mere net pro- * We shall find in the sequel, that, if any one nation can be said to be in the service of another, it is that which is the most dependent; and that the most dependent nations are, not those which have a scarcity of land, but those which bave a scarcity of capital. 70 ON PRODUCTION. BOOK 1 duce of its agriculture, but of the gross produce of its agriculture, commerce, and manufacture united. For, in fact, is not the sum total, that is to say, the aggregate of the gross product raised by the nation, disposable for its consumption ? Is value produced less an item of wealth, because it must needs be consumed ? And does not value itself originate in this very applicability to consumption. The English writer, Stewart,who may be looked upon as the leading advocate of the exclusive system, the system founded on the maxim, that the wealth of one set of men is derived from the impoverish- ment of another, is himself no less mistaken in asserting, that, " when once a atop is put to external commerce, the stock of internal wealth cannot be augmented."* Wealth, it seems, can come only from abroad ; but abroad, where does it come from ? from abroad also. So that in tracing it from abroad to abroad, we must necessarily, in the end, exhaust every source, till at last we are compelled to look for it beyond the limits of Our own planet, which is absurd. Forbonnais,f too, builds his prohibitory system on this glaring fallacy; and to speak freely, on this fallacy are founded the exclu- sive systems of all the short-sighted merchants, and all the govern- ments of Europe and of the world. They all take it for granted, that what one individual gains must needs be lost to another; that what is gained by one country is inevitably lost to another: as it the possessions of abundance of individuals and of communities could not be multiplied, without the robbery of somebody or other. It one man or set of men, could only be enriched at others' expense, how could the whole number of individuals, of whom a state is com- posed, be richer at one period than at another, as they now confess- edly are in France, England, Holland, and Germany, compared with what they wer| formerly? How is it, that nations are in our days more opulent, and their wants better supplied in every respect, than they were in the seventeenth century? Whence can they have derived that portion of their present wealth, which then had no existence? Is it from the mines of the new continent? They had already advanced in wealth before the discovery of America. Be sides, what is that which these mines have furnished? Metallic wealth or value. But all the other values which those nations now possess, beyond what they did in the middle ages, whence are they derived? Is it not clear, that these can be no other than created values? We must conclude, then, that wealth, w r hich consists in the value that human industry, in aid and furtherance of natural agents, com- municates to things, is susceptible of creation and destruction, of increase and diminution, within the limits of each nation and inde- pendently of external agency, according to the method it adopts tc bring about those effects. An important truth, which ought to teach * Essay on Political Economy, b. ii. c. 26. f Siemens de Commerce, CHAP. HL ON PRODUCTION. 71 mankind, that the objects of rational desire are within their reach, provided they have the will and intelligence to employ the true means of obtaining them. Those means it is the purpose of this work to investigate and unfold. CHAPTER IIL OF THE NATURE OF CAPITAL, AND THE MODE IN WHICH IT CONCURS IN THE BUSINESS OF PRODUCTION. As we advance in the investigation of the processes of industry, we cannot fail to perceive, that mere unassisted industry is insuffi- cient to invest things with value. The human agent of industry must, besides, be provided with pre-existing products ; without w hich his agency, however skilful and intelligent, would never be put in motion. These pre-existing requisites are, 1. The tools and implements of the several arts. The husband- man could do nothing without his spade and mattock, the weaver without his loom, or the mariner without his ship. 2. The products necessary for the subsistence of the industrious agent, as long as he is occupied in completing his share of the work or production. This outlay of his subsistence is, indeed, in the long run, replaced by the product he is occupied upon, or the price he will receive for it; but he is obliged continually to make the advance. 3. The raw materials, which are to be converted into finished products by the means of his industry. These materials, it is true, are often the gratuitous offerings of nature, but they are much more generally the products of antecedent industry, as in the case of seed- corn supplied by agriculture, metals, the fruit of the labour of the miner and smelter, drugs brought by the merchant perhaps from the extremities of the globe. The value of all these must be found in advance by the industrious agent that works them up. The value of all these items constitutes what is denominated pro- ductive capital. Under this head of productive capital must likewise be classed the value of all erections and improvements upon real or landed property, whicn increase its annual produce, as well as that of 'the farming live and dead stock, that operates as machinery in aid of human industry. Another item of productive capital, is money, whenever it is employed to facilitate the interchange of products, without which production could never make any progress. Money distributed through the whole mechanism of human industry, like the oil that greases the wheels of complex machinery, gives the requisite ease and facility to its movements. But gold and silver are not produc live unless employed by industry : they are like the oil in a machine 72 ON PRODUCTION. BOOK L remaining in a state of inaction. And so also of all other tools and implements of human industry. Jt would evidently be a great mistake to suppose that the capital of a community consists solely of its money. The merchant, the manufacturer, the cultivator, commonly have the least considerable portion of the value composing their capital invested in the form of money; nay, the more active their concern is, the smaller is their relative proportion of their capital so vested to the residue. The funds of the merchant are placed out in goods on their transit by land or water, or warehoused in different directions: the capital of the manufacturer chiefly consists of the raw material in different stages of progress, of tools, implements, and necessaries for his work- men : while that of the cultivator is vested in farming buildings, live stock, fences and enclosures. They all studiously avoid burthening themselves with more money than is sufficient for current use. What is true of one, two, three, or four individuals, is true of soci'ety in the aggregate. The capital of a nation is made up of the sum total of private capitals; and, in proportion as a nation is pros- perous and industrious, in the same proportion is that part of its capital, vested in the shape of money, trifling compared to the amount of the gross national capital. Neckar estimates the circulating medium in France, in the year 1784, at about 440 millions of dol- lars, and there are reasons for believing his estimate exaggerated-; but this is not the time to state them. However, if account be taken of all the works, enclosures, live stock, utensils, machines, ships, commodities, and provisions of all sorts belonging to the French people or their government in any part of the world ; and, if to these be added the furniture, decorations, jewellery, plate, and other items of luxury or convenience, whereof they were possessed, at the same period, it will be found that 440 millions of Circulating medium was a mere trifle compared to the aggregate of these united values.* Beeke estimates the total capital of Great Britain at 2300 millions sterling,f (equal to more than 11,000 millions of dollars.) The total amount of her circulating specie, before the establishment of her present paper money, was never reckoned by the highest estimates at more than 47 millions sterling ;J that is to say, about l-50th of her capital. Smith reckoned it at no more than 18 millions, which could not be the l-127th part.(l). *Artnur Young, in his " Journey in France" in spite of the unfavourable view lie gives of French Agriculture, estimates the total capital employed in that kingdom, in that branch of industry alone, at more than 2200 millions of dollars; and states his belief, that the capital of Great Britain, similarly employ- ed, is in the proportion of two to one. f- Observations on the produce of the income-lax. | Pitt, who is supposed to have overrated the quantity of specie, states the pold at forty-four-millions; and Price estimates the silver at three millions, making- a total of forty-seven millions. (1) [The following summary recapitulation of the value of property in Great Britain and Ireland, in the year 1833, is extracted from "Table XVI. GENERAL CHAP. III. ON PRODUCTION. Capital in the hands of a national government forms a part of the gross national capital. We shall see, by-and-by, how capital, which is subject to a conti- nual wear and consumption in the process of production, is continu- ally replaced by the very operation of production ; or rather, how its value, when destroyed under one form, re-appears under another. At present it is enough to have a distinct conception, that, without it, industry could produce nothing. Capital must work, as it were, in concert with industry ; and this concurrence is what I call the pro- ductive agency of capital. ESTIMATE of the PUBLIC and PRIVATE Property of ENGLAND and WALES, SCOT- LAND and IRELAND, (1833)," from " PEBRER on the TAXATION, DEBT, CAPITAL, RESOURCES, &c. of the whole BRITISH EMPIRE," a work of the highest authority, published in London, April, 1833. SUMMARY RECAPITULATION. AGGREGATE VALUE OF PROPERTY IN GREAT BRITAIN AND IRELAND. Productive Private Property, Unproductive do. Public Property, Equal to dollars, 2,995,000,000 580,700,000 3,575,700,000 103,800,000 Total, 3,679,500,000 ENGLAND AND WALES: Productive Private Property, - - - - 2,054,600,000 Unproductive do. - - - - 374,300,000 SCOTLAND : Productive Private Property, - - - - 318,300,000 Unproductive do. .... 51,100,000 IRELAND : Productive Private Property, - - - - 622,100,000 Unproductive do. .... 116,400,000 Do. do. in Great Britain and Ireland, 17,661,600,000 2,428,900,000 ?69,400,000 738,500,000 38,900,000 Public Property in England and Wales, 42,000,000 Do. in Scotland, - - - - 3,900,000 Do. in Ireland, ... - 11,900,000 Do. in common to Great Britain } and Ireland, as the Navy, Military, and > 46,000,000 Ordnance Stores, &c. ... - ) Grand Total, Equal to dollars, 7 103,800,0^0 3,679,500,000 17,661,600,000 K AMERICAN EDITOR. 74 ON PRODUCTION. BOOK L CHAPTER IV. ON NATURAL AGENTS THAT ASSIST IN THE PRODUCTION OP WEALTH, AND SPECIALLY OP LAND. INDEPENDENTLY of the aid that industry receives from capital, that is to say, from products of her own previous creation, towards the creation of still further products, she avails herself of the agency and powers of a variety of agents not of her own creation, but offered spontaneously by nature : and from the co-operation of these natural agents derives a portion of the utility she communicates to things. Thus, when a field is ploughed and sown, besides the science and the labour employed in this operation, besides the pre-created values brought into use, the values, for instance, of the plough, the harrow, (he seed-corn, the food and clothing consumed by labourers during the process of production, there is a process performed by the soil, the air, the rain, and the sun, wherein mankind bears no part, but which nevertheless concurs in the creation of the new product that will be acquired at the season of harvest. .This process I call the productive agency of natural agents. The term natural agents is here employed in a very extensive sense; comprising not merely inanimate bodies, whose agency ope- rates to the creation of value, but likewise the laws of the physical world, as gravitation, which makes the weight of a clock descend ; magnetism, which points the needle of the compass : the elasticity of steel ; the gravity of the atmosphere ; the property of heat to dis- charge itself by ignition, &c. &c. The productive faculty of capital is often so interwoven with that of natural agents, that it is difficult, or perhaps impossible, to assign, with accuracy, their respective shares in the business of production. A hot-house for the raising of exotic plants, a meadow fertilized by judicious irrigation, owe the greater part of their productive powers to works and erections, the effect of antecedent production, which foim a part of the capital devoted to the furtherance of actual and present production. The same may be said of land newly cleared and brought into cultivation; of farm-buildings ; of enclosures ; and of all other permanent ameliorations of a landed estate. These values are items of capital, though it be no longer possible to sever them from the soil they are attached to.* In the employment of machinery, which wonderfully augments the productive power of man, the product obtained is due partly to ihe value of the capital vested in the machine, and partly to tho * It is for the proprietor of the land and of the capital respectively, when tho ownership is in different persons, to settle between them the respective value un(i efficacy of the agency of these two productive agents. The world at largo may be content to comprehend, without taking the trouble of measuring, then respective shares in the production of wealth. CHAP. IV. ON PRODUCTION. 75 agency of natural powers. Suppose a tread-mill,* worked by ten men, to be used in place of a wind-mill, the product of the mill might be considered as the fruit of the productive agency of a capi- tal consisting of the value of the machine, and of the labour of ten men employed in turning the wheel. If the tread-mill be supplant- ed by sails, it is evident that the wind, a natural agent, does the work often human beings. In this instance, the absence of the natural agent might be reme- died, by the employment of another power ; but there are many .ases, in which the agency of nature could not possibly be dispensed with, and is yet equally positive and real ; for example, the vegeta- tive power of the soil, the vital principle which concurs ia the pro- duction of the animals domesticated to our use. A flock of sheep is the joint result of the owner's and shepherd's care, and the capital advanced in fodder, shelter, and shearing, and of the action of the organs and viscera with which nature has furnished these animals.' Thus nature is commonly the fellow-labourer of man and his instruments ; a fellowship advantageous to him in proportion as he succeeds in dispensing with his own personal agency, and that of his capital, and in throwing upon nature a larger part of the burthen of production. Smith has taken infinite pains to explain, how it happens that civilized communities enjoy so great an abundance of products, in comparison with nations less polished, and in spite of the swarm of idlers and unproductive labourers that is to be met with in society. He has traced the source of that abundance to the division of la- bour ;f and it cannot be doubted, that the productive power of in- dustry is wonderfully enhanced by that division, as we shall here- after see by following his steps ; but this circumstance alone is not sufficient to explain a phenomenon, that will no longer surprise, if we consider the power of the natural agents that industry and civili- zation set at work for our advantage. Smith admits that human intelligence, and the knowledge of the laws of nature, enable mankind to turn the resources she offers to better account : but he goes on to attribute to the division of labour this very degree of intelligence and knowledge : and he is right to a certain degree ; for a man, by the exclusive pursuit of a single art or science, has ampler means of accelerating its progress towards perfection. But, when once the system of nature is discovered, the production resulting from the discovery, is no longer the product of the inventor's industry. The man who first discovered the property of fire to soften metal's, was not the actual creator of the utility this process adds to smelted ore. That utility results from the physical * A wheel in the form of a drum, turned by men walking inside, (roue a marchre.} I- Take his own words: "It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-rroverned society, that universal opulence, which extends itself to th lowest ranks of the people." Wealth of Nations, b. i. c. 1. 76 ON PRODUCTION. BOOK L action of fire, in concurrence, it is true, with the labour and capita] of those who employ the process, But are there no processes tha* mankind owes the knowledge of to pure accident? or that are so self- evident, as to have required no skill to discover? When a tree, a natural product, is felled, is society put into possession of no greater produce than that of the mere labour of the woodman? From this error Smith has drawn the false conclusion, that all values produced represent pre-exerted human labour or industry, either recent or remote ; or, in other words, that wealth is nothing more than labour accumulated ; from which position he infers a se- cond consequence equally erroneous, viz. that labour is the sole measure of wealth, or of value produced. This system is obviously in direct opposition to that of the economists of the eighteenth century, who, on the contrary, main- tained that labour produces no value without consuming an equiva- lent; that, consequently, it leaves no surplus, no net produce; and that nothing but the earth produces gratuitous value, therefore nothing else can yield net produce. Each of these positions has been re- duced to system ; I only cite them to warn the student of the dan- gerous consequences of an error in the outset,* and to bring the science back to the simple observation of facts. Now facts demon- strate, that values produced are referable to the agency and concur- rence of industry, of capital,f and of natural agents, whereof the chief, though by no means the only one, is land capable of cultiva- tion ; and that no other but these three sources can produce value, or add to human wealth. * Amongst other dangerous consequences of the system of the economists, is the notable one of substituting a land-tax in lieu of all other taxation ; in the certainty, that this tax would affect all produced value whatever. Upon a con- trary principle, and in pursuance of the maxims laid down by Smith, the net produce of land and of capital ought to be exempted from taxation altogether, if with him we take for granted, that they produce nothing spontaneously ; but this would be as unjust on the opposite side. f Although Smith has admitted the productive power of land, he has disre- garded the completely analogous power of capital. A machine, an oil-mill for example, which employs a capital of 4000 dollars, and gives an annual net return of 200 dollar.3, after paying all expenses, gives a product quite as substantial as that of a real estate, that cost 4000 dollars, and brings an annual rent or net produce of 200 dollars, all charges deducted. Smith maintains, that a mill which has cost 4000 dollars, represents labour to that amount, bestowed at sundry times upon the different parts of its fabric ; therefore, that the net produce of the mill is the net pro- duce of that precedent labour. But he is mistaken : granting for argument sake, the value of the mill itself to be the value of this previous labour; yet the value daily produced by the mill is a new value altogether; just the same as the rent of a 'anded estate is a totally different value from the value of the estate itself, and may be consumed, without at all affecting the value of the estate. If capital contained in itself no productive faculty, independent of that of the labour which created it, how is it possible, that capital could furnish a revenue in perpetuity, independent of the profit of the industry that employed it? The labour that created the capital would receive wages after it ceased to operate would have Titerminable value ; which is absurd. It will be seen by-and-by, that these notions have not been mere matter of speculation. CHAP. V. ON PRODUCTION. 77 Of natural agents, some are susceptible of appropriation, that is to say of becoming the property of an occupant, as a field, a cur- rent of water ; others can not be appropriated, but remain liable to public use, as the wind, the sea, free navigable streams, the physical or chemical action of bodies one upon another, &c. &.c. We shall by-and-by have an opportunity of convincing ourselves, that this alternative, of productive agents being or not being suscep- tible of appropriation, is highly favourable to the progress of wealth. Natural agents, like land, which are susceptible of appropriation, would not produce nearly so much, were not the proprietors certain of exclusively gathering their produce, and able to vest in them, with full confidence, the capital which so much enlarges their pro- ductiveness. On the other hand, the indefinite latitude allowed to industry to occupy at will the unappropriated natural agents, opens a boundless prospect to the extension of her agency and production. It is not nature, but ignorance and bad government, that limit the productive powers of industry. Such of the natural agents as are susceptible of appropriation, form an item of productive means ; for they do not yield their con- currence without equivalent ; which equivalent, as we shall see in the proper place, forms an item of the revenues of the appropriators. At present we must be content to investigate the productive opera- tion of natural agents of every description, whether already known, or hereafter to be discovered. CHAPTER V. ON THE MODE IN WHICH INDUSTRY, CAPITAL, AND NATURAL AGENTS UNITE IN PRODUCTION. WE have seen how industry, capital, and natural agents concur in production, each in its respective department ; and we have likewise seen that these three sources are indispensable to the creation of products. It is not, however, absolutely necessary that they should all belong to the same individual. An industrious person may lend his industry to another possessed of capital and land only. The landholder may lend his estate to a person possessing capital and industry only. Whether the thing lent be industry, capital, or land, inasmuch as all three concur in the creation of value, their use also bears value, and is commonly paid for. The price paid for the loan of industry is called wages. The price paid for the loan of capital is called interest. And that paid for the loan of land is called rent. 7* 78 ON PRODUCTION. BOOK I. The ownership of land, capital, and industry is sometimes united in the same hands. A man who cultivates his own garden at his own expense, is at once the possessor of land, capital, and industry, and exclusively enjoys the profits of proprietor, capitalist, and labourer. The knife-grinder's craft requires no occupancy of land ; he car- ries his stock in trade upon his shoulders, and his skill and industry at his fingers' ends ; being at the same time adventurer, (a) capitalist. and labourer. It is seldom that we meet with adventurers in industry so poor, as not to own at least a share of the capital embarked in their con cern. Even the common labourer generally advances some portion ; the bricklayer comes with his trowel in his hand ; the journeyman tailor is provided with his thimble and needles ; all are clothed better or worse ; and though it be true, that their clothing must be found out of their wages, still they find it themselves in advance. Where the land is not exclusive property, as is the case with some stone-quarries, with public rivers and seas to which industry resorts for fish, pearls, coral, &c., products may be obtained by industry and capital only. Industry and capital are likewise competent to produce by them- selves, when that industry is employed upon products of foreign growth, procurable by capital only ; as in the European manufac- ture of cotton and many other articles. So that every class of manufacture is competent to raise products, provided there be in- dustry and capital exerted. The presence of land is not absolutely necessary, unless perhaps the area whereon the work is done, and which is commonly rented, may be thought to come under this description, as in extreme strictness it certainly must. However, if the ground where the business of industry is carried on, be reckoned as land used, it must at least be admitted, that, with aid of a large capital, an immense manufacturing concern may be conducted upon a very trifling spot of ground. Whence this conclusion may be drawn, that national industry is limited, not by territorial extent, but by extent of capital. A stocking manufacturer with a capital say of 4000 dollars, may keep in constant work ten stocking frames. If he manages to double his capital he can employ twenty ; that is to say, he may buy ten more frames, pay double ground-rent, purchase double the quantity of silk or cotton to be wrought into stockings, and make the requisite advances to double the number of workmen, &c. &c. But that portion of agricultural industry, devoted to the tillage of (a) The term entrepreneur is difficult to render in English ; the corresponding word, undertaker, being already appropriated to a limited sense. It signifies the master-manufacturer in manufacture, the farmer in agriculture, and the mer- chant in commerce ; and generally in all three branches, the person who takes npon himself the immediate responsibility, risk, and conduct of a concern of industry, whether upon his own or a borrowed capital. For want of a better word, it will be rendered into English by the term adventurer. T. CHAP. VI. ON PRODUCTION. 79 land, is, in the course of nature, limited by extent of surface. Neither individuals nor communities can extend or fertilize their territory, beyond what the nature of things permits ; but they have unlimited power of enlarging their capital, and consequently, of setting at work a larger body of industry, and thus of multiplying their pro- ducts ; in other words, their wealth. There have been instances of people, like the Genevese, who with a territory that has not produced the twentieth part of the necessa- ries of life, have yet contrived to live in affluence. The natives of the barren glens of Jura are in easy circumstances because many mechanical arts are there practised. In the 13th century, the world beheld the republic of Venice, ere it held a foot of land in Italy, derive wealth enough from its commerce to possess itself of Dalma- tia, together with most of the Greek isles, and even the capital of the Greek empire. The extent and fertility of a nation's territory depend a good deal upon its fortunate position. Whereas the power of its industry and capital depends upon its own good management ; for it is always competent to improve the one and augment the other. Nations deficient in capital, labour under great disadvantage in the sale of their produce; being unable to sell at long credit, or to grant time or accommodation to their home or foreign customers. If the deficiency be very great indeed, they may be unable even to make the advance of the raw material and their own industry. This accounts for the necessity, in the Indian and Russian trade, of re- mitting the purchase-money six months or sometimes a year in advance, before the time when an order for goods can be executed. These nations must be highly favoured in other respects, or they never could make considerable sales in the face of such a disad- vantage. Having informed ourselves of the method in which the three great agents of production, industry, capital and natural agents, con- cur in the creation of products, that is to say, of things applicable to the uses of mankind, let us proceed to analyze more minutely the particular operation of each. The inquiry is important, inasmuch as it leads imperceptibly to the knowledge of what is more and what is less favourable to production, the true source of individual affluence, as wll as national power. CHAPTER VI. OF OPERATIONS ALIKE COMMON TO ALL, BRANCHES OF INDUSTRY. IF we examine closely the workings of human industry, it will be founn, mat, to whatever object it be applied, it consists of three dis* tinct operations. 80 ON PRODUCTION. BOOK I. The first step towards the attainment of any specific product, is the study of the laws and course of nature regarding that product. A lock could never have been constructed without a previous know- ledge of the properties of iron, the method of extracting from the mine and refining the ore, as well as of mollifying and fashioning the metal. The next step is the application of this knowledge to an useful pur- pose: for instance, the conclusion, or conviction, that a particulai form, communicated to the metal, will furnish the means of closing a door to all the wards, except to the possessor of the key. The last step is the execution of the manual labour, suggested and pointed out by the two former operations; as, for instance, the forging, filing, and putting together of the different component parts of the lock. These three operations are seldom performed by one and the same person. It commonly happens, that one man studies the laws and conduct of nature; that is to say, the philosopher, or man of science, of whose knowledge another avails himself to create useful products, being either agriculturist, manufacturer, or trader ; while the third supplies the executive exertion, under the direction of the former two ; which third person is the operative workman or labourer. All products whatever will be found, on analysis, to derive exist- ence from these three operations. Take the example of a sack of wheat, or a pipe of wine. The first stage towards the attainment of either of these products was, the discovery by the natural philosopher or geologist, (a) of the con- duct and course of nature in the production of the grain or the grape ; the proper season and soil for sowing or planting ; and the care requi- site to bring the herb or plant to maturity. The tenant, if not the proprietor himself, must afterward have applied this knowledge to his own particular object, brought together the means requisite to the creation of an useful product, and removed the obstacles in the way of its creation. Finally, the labourer must have turned up the soil, sown the seed, or pruned and bound up the vine. These three distinct operations were indispensable to the complete production of the product, corn or wine. Or take the example of a product of external commerce; such as indigo. The science of the geographer, the traveller, the astro- nomer, brings us acquainted with the spot where it is to be met with, and the means of crossing the seas to get at it. The merchant equips his vessels, and sends them in quest of the commodity ; and the mariner and land-carrier perform the mechanical part of this pro- duction. But, loooking at the substance, indigo, as a mere primary material of a further or secondary product, of blue cloth for instance; we all (a) Agronome : I am not aware of any corresponding English term, denoting; tlie student in that branch of geology conversant with the properties of the sur- face of the earth ; in other words, the scientific agriculturist. T CHAP. VL ON PRODUCTION. 81 know that the chemist is first applied to for information, as to the nature of the substance, the method of dissolving it, and mordants requisite for fixing the colour ; the means of perfecting the process of dyeing are then collected by the master manufacturer, undei whose orders the labourer executes the manual part of the process. Industry is, in all cases, divisible into theory, application, and execution. Nor can it approximate to perfection in any nation, til! that nation excel in all three branches. A people, that is deficient in one or other of them cannot acquire products, which are and must be the result of all three. And thus we may learn to appreci- ate the vast utility of many sciences, which, at first sight, appear to be the objects of mere curiosity and speculation.* The negroes of the coast of Africa are possessed of considerable ingenuity, and excel in all athletic exercises and handicraft occupa- tions ; but they seem greatly deficient in the two previous operations of industry. Wherefore, they are under the necessity of purchasing from Europe the stuffs, arms, and ornaments, they stand in need of. Their country yields so few products, notwithstanding its natural fertility, that the slave traders are obliged to lay in their stock of provisions beforehand, to feed the slaves during the voyage.f In qualities favourable to industry, the moderns have greatly sur- passed the ancients, and the Europeans outstrip all the other nations of the globe. The meanest inhabitant of an European town enjoys innumerable comforts unattainable to the sovereign of a savage tribe. The single article, glass, that admits light into his apartment, and, at the same time, excludes the inclemency of the weather, is the beauti- ful result of observation and science, accumulated and perfected during a long course of ages. To obtain this luxury, it was neces- sary previously to know what kind of sand was convertible into a substance possessing extension, solidity, and transparency; as well as by the compound of what ingredients, and by what degree of heat, the substance was obtainable: to ascertain, besides, the best form of furnace. The very wood- work, that supports the roof of a glass-house, requires, in its construction, the most extensive knowledge of the strength of timber, and the means of employing it to advantage. Nor was the mere knowledge of these matters sufficient ; for that knowledge might possibly have lain dormant in the memory of one or two persons, or in the pages of literature. It was further requi- * Besides the direct impulse, given by science to progressive industry, and which indeed is indispensable to its success, it affords an indirect assistance, by the gradual removal of prejudice; and by teaching mankind to rely more upon their own exertions, than on the aid of superhuman power. Ignorance is the inseparable concomitant of practical habits, of that slavery of custom which stands in the way of all improvement; it is ignorance that imputes to a supernatural cause the ravages of an epidemical disease, which might perhaps be easily pre- vented or eradicated, and makes mankind recur to superstitious observances, when precaution, or the application of the remedy, is all that is wanted. Sci- ences, like facts, are linked together by a chain of general connexion, and }ie' the United Kingdoms, was 288,708,453 Ibs. 84 ON PRODUCTION. BOOK L In manufacture, experiment is hazarded on safer grounds of cal- culation, capital engaged for a much shorter period, and if success ensue, the adventurer rewarded by, a longer period of exclusive ad- vantage, because his process is less open to observation. In some places, too, the exclusive advantage is protected by patents of inven- tion. For all which reasons, the progress of manufacturing is gene- rally more rapid and more diversified than that of agricultural industry. In commercial industry, the risk of experiment would be greater than in the other two branches, if the costs of the adventure had no auxiliary and concurrent object. But it is usually in the course of a regular trade, that a merchant hazards the introduction of a virgin commodity of foreign growth into an untried market. In this man- ner it was that the Dutch, about the middle of the seventeenth cen- tury, while prosecuting their commerce with China, with no very sanguine expectation, made experiment of a small assortment of dried leaves, from which the Chinese were in the habit of preparing their fa- vourite beverage. Thus commenced the tea-trade, which now occa- sions the annual transport of more than 45 millions of pounds weight, that are sold in Europe for a sum of more than 80,000,000 of dollars.* In some cases of very rare occurrence, boldness is nearly certain of success. When the Europeans had recently discovered the pas sage round the Cape of Good Hope and the continent of America, their world was suddenly expanded to the East and West ; and such was the infinity of new objects of desire in two hemispheres, whereof one was not at all, and the other but very imperfectly known before, that an adventurer had only to make the voyage, and was sure of selling his returns to great advantage. In alt but such extraordinary cases it is perhaps prudent to defray the charges of experiments in industry, not out of the capital en- gaged in the regular and approved channels of production, but out of the revenue that individuals have to dispose of at pleasure, with- out fear of impairing their fortune. The whims and caprices that divert to an useful end the leisure and revenue which most men devote to mere amusement, or perhaps to something worse, cannot be too highly encouraged. I can conceive no more noble employ- ment of wealth and talent. A rich and philanthropic individual may, in this way, be the means of conferring upon the industrious classes, and upon the consumers at large, in other words, upon the mass of mankind, a benefit far beyond the mere value of what he ac tually disburses, perhaps beyond the whole amount of his fortune however princely it may be. Who will attempt to calculate the value conferred on mankind by the unknown inventor of the plough ?f A government, that knows and practises its duties, and has large resources at its disposal, does not abandon to individuals the whole * Voyage Commerciel et Politique aux Indes Orientales, par M. Felix Kenouard de Sainte Croix. t Thanks to the art of Printing, the names of the benefactors of mankind will Henceforward be lastingly recorded ; and if I mistake not, with more veneration CHAP. VH. ON PRODUCTION. 85 glory and merit of invention and discovery in the field of industry. The charges of experiment, when defrayed by the government, are not subtracted from the national capital, but from the national revenue ; for taxation never does, or, at least, never ought to touch any thing beyond the revenue of individuals. The portion of them so spent is scarcely felt at all, because the burthen is divided among innumerable contributors ; and, the advantages resulting from suc- cess being a common benefit to all, it is by no means inequitable that the sacrifices, by which they are obtained, should fall on the community at large. CHAPTER VH. OF THE LABOUR OP MANKIND, OF NATURE, AND OF MACHINERY RESPECTIVELY. BY the term labour I shall designate that continuous action, exert- ed to perform any one of the operations of industry, or a part only of one of those operations. Labour, upon whichever of those operations it be bestowed, is productive, because it concurs in the creation of a product. Thus the labour of the philosopher, whether experimental or literary, is productive ; the labour of the adventurer or master-manufacturer is productive, although he perform no actual manual work ; the labour of every operative workman is productive, from the common day- labourer in agriculture, to the pilot that governs the motion of a ship. Labour of an unproductive kind, that is to say, such as does not contribute to the raising bf the products of some branch of industry or other, is seldom undertaken voluntarily; for labour, under the definition above given, implies trouble, and trouble so bestowed could yield no compensation or resulting benefit: wherefore, it would be mere folly or waste in the person bestowing it. When trouble is directed to the stripping another person of the goods in his possession by means of fraud or violence, what was before mere extravagance and folly, degenerates to absolute criminality; and there results no production, but only a forcible transfer of wealth from one individual to another. Man, as we have already seen, obliges natural agents, and even than those which derive lustre from the deplorable exploits of military prowess. Among these will be preserved the names of Olivier de Serres, the father of French agriculture; the first who established an experimental farm; of Duhamel, of Malsherbes, to whom France is indebted for many vegetables now naturalized in her soil and climate: of Lavoisier, whose new system of chemistry has effect- ed a still more important revolution in the arts ; and of the numerous scientific travellers of modern times ; for travels, with an useful object, may be regarded as adventures in the field of industry. 8 86 ON PRODUCTION. BOOK 1. the products of his own previous industry, to work in concert with him in the business of production. There will, therefore, be no difficulty in comprehending the terms labour or productive service of nature, and labour or productive service of capital. The labour performed by natural agents, and that executed by pre-existent products, to which we have given the name of capital, are closely analogous, and are perpetually confounded one with the other: for the tools and machines which form a principal item of capital, are commonly but expedients more "or less ingenious, foi turning natural powers to account. The steam engine is but a com- plicated method of taking advantage of the alternation of the elas- ticity of water reduced to vapour, and of the weight of the atmo- sphere. So that, in point of fact, a steam engine employs more pro- ductive agency, than the agency of the capital embarked in it : for that machine is an expedient for forcing into the service of man a variety of natural agents, whose gratuitous aid may perhaps infinitely exceed in value the interest of the capital invested in the machine. It is in this light that all machinery must be regarded, from the simplest to the most complicated instrument, from a common file to the most expensive and complex apparatus. Tools are but simple machines, and machines but complicated tools, whereby we enlarge the limited powers of our hands and fingers; and both are, in many respects, mere means of obtaining the co-operation of natural agents.* Their obvious effect is to make less labour requisite for the raising the same quantity of produce, or, what comes exactly to the same thing, to obtain a larger produce from the same quantity of human labour. And this is the grand object and the acme of industry. Whenever a new machine, or a new and more expeditious process is substituted in the place of human labour previously in activity, part of the industrious human agents, whose service is thus ingeni- ously dispensed with, must needs be thrown* out of employ. Whence many objections have been raised against the use of machinery, which has been often obstructed by popular violence, and sometimes by the act of authority itself. To give any chance of wise conduct in such cases, it is necessary beforehand to acquire a clear notion of the economical effect result- ing from the introduction of machinery. A new machine supplants a portion of human labour, but does not diminish the amount of the product; if it did, it would be absurd to adopt it. When water-carriers are relieved in the supply of a city by any kind of hydraulic engine, the inhabitants are equally well supplied with water. The revenue of the district is at least as great, but it takes a different direction. That of the water-carriers is reduced, while that of the mechanists and capitalists, who furnish * Generalization may at pleasure be carried still further ; a landed estate may le considered as a vast machine for the production of grain, which is refitted and Kept in repair by cultivation : or a flock of sheep as a machine for the raising of mution or wool. CHAP. VIL ON PRODUCTION. 87 the funds, is increased. But, if the superior abundance of the pro- duct and the inferior charges of its production, lower its exchange- able value, the revenue of the consumers is benefited; for to them every saving of expenditure is so much gain. This new direction of revenue, however advantageous to the com- munity at large, as we shall presently see, is always attended with some painful circumstances. For the distress of a capitalist, when his funds are unprofitably engaged or in a state of inactivity, is nothing to that of an industrious population deprived of the means of subsistence. Inasmuch as machinery produces that evil, it is clearly objection- able. But there are circumstances that commonly accompany its introduction, and wonderfully reduce the mischiefs, while at the same time they give full play to the benefits of the innovation. For, 1. New machines are slowly constructed, and still more slowly brought into use ; so as to give time for those who are interested, to take their measures, and for the public administration to provide a remedy.* 2. Machines cannot be constructed without considerable labour, which gives occupation to the hands they throw out of employ. For .nstance, the supply of a city with water by conduits gives increased occupation to carpenters, masons, smiths, paviours, &c. in the con- struction of the works, the laying down the main and branch pipes, &c. &c. 3. The condition of consumers at large, and consequently, amongst them, of the class of labourers affected by the innovation, is improved by the reduced value of the product that class was occupied upon. Besides, it would be vain to attempt to avoid the transient evil, consequential upon the invention of a new machine, by prohibiting its employment. If beneficial, it is or will be introduced some- where or other ; its products will be cheaper than those of labour conducted on the old principle; and sooner or later that cheapness will run away with the consumption and demand. Had the cotton spinners on the old principle, who destroyed the spinning-jennies on their introduction intq Normandy, in 1789, succeeded in their object France must have abandoned the cotton manufacture; every body would have bought the foreign article, or used some substitute ; and the spinners of Normandy, who, in the end, most of them, found employment in the new establishments, would have been yet worse off for employment. * Without having recourse to local or temporary restrictions on the use of new methods or machinery, which are invasions of the property of the inventors or fabricators, a benevolent administration can make provision for the employment of supplanted or inactive labour in the construction of works of public utility at the public expense, as of canals, roads, churches, or the like ; in extended colo- nization; in the transfer of population from one spot, to another. Employment is the more readily found for the hands thrown out of work by machinery because thev are commonly already inured to labour. 88 ON PRODUCTION. BOOK I. So much for the immediate effect of the introduction of machinery. The ultimate effect is wholly in its favour. Indeed if by its means man makes a conquest of nature, and com- pels the powers of nature and the properties of natural agents to work for his use and advantage, the gain is too obvious to need illus- tration. There must always be an increase of product, or a dimi- nution in the cost of production. If the sale-price of a product do not fall, the acquisition redounds to the profit of the producer; and that without any loss to the consumer. If it do fall, the consumer is benefited to the whole amount of the fall, without any loss to the producer. The multiplication of a product commonly reduces its price, that reduction extends its consumption; and so its production, though become more rapid, nevertheless gives employment to more hands than before. It is beyond question, that the manufacture of cot ton now occupies more hands in England, France, and Germany, than it did before the introduction of the machinery that has abridg- ed and perfected this branch of manufacture in so remarkable a degree. Another striking example of a similar effect is presented by the machine used to multiply with rapidity the copies of a literary per- formance, I mean the printing press. Setting aside all consideration of the prodigious impulse given by the art of printing to the progress of human knowledge and civiliza- tion, I will speak of it merely as a manufacture, and in an economi cal point of view. When printing was first brought into use, a multitude of copyists were of course immediately deprived of occu- pation ; for it may be fairly reckoned, that one journeyman printer does the business of two hundred copyists. We may, therefore, conclude, that 199 out of 200 were thrown out of work. What followed ? Why, in a little time, the greater facility of reading printed than written books, the low price to which books fell, the stimulus this invention gave to authorship, whether devoted to amusement or instruction, the combination, in short, of all these causes, operated so effectually as to set at work, in a very little time, more journeymen printers than there were formerly copyists. And if we could now calculate with precision, besides the number of journeymen printers, the total number of other industrious people that the press finds occupation for, whether as type-founders and moulders, paper-makers, carriers, compositors, bookbinders, book- sellers, and the like, we should probably find, that the number of persons occupied in the manufacture of books is now 100 times what it \vas before the art of printing was invented. It may be allowable to add, that viewing human labour and ma- chinery in the aggregate, in the supposition of the extreme case, viz. that machinery should be brought to supersede human labour alto gether, yet the numbers of mankind would not be thinned ; for the sum total of products would be the same, and there would probabiy be less suffering to the poorer and labouring classes to be apprehend- CHAP. VII. ON PRODUCTION. 89 ed ; for in that case the momentary fluctuations, that distress the different branches of industry, would principally affect machinery, which, and not human labour, would be paralyzed ; and machinery cannot die of hunger ; it can only cease to yield profit to its employ- ers, who are generally farther removed from want than mere labourers. But however great may be the advantages, which the adventur- ers in industry, and even the operative classes, may ultimately derive from the employment of improved machinery, the great gain accrues to the consumers, which is always the most important class, because it is the most numerous; because it comprehends every description of producers whatever; and because the welfare of this class, wherein all others are comprised, constitutes the general well- being and prosperity of a nation.* I repeat, that it is the consumers who draw the greatest benefit from machinery; for though the invei/or may indeed for some years enjoy the exclusive advantage of his invention, which it is highly just and proper he should, yet there is no instance of a secret remaining long undivulged. Nothing can long escape publicity, least of all what people have a personal interest in discovering, especially if the secret be necessarily con- fided to the discretion of a number of persons employed in construct- ing or in working the machine. The product is thenceforward cheap- ened by competition to the full extent of the saving in the cost of production ; and thenceforward begins the full advantage to the con- sumer. The grinding of corn is probably not more profitable to the miller now than formerly; but it costs infinitely less to the con- sumer. Nor is cheapness the sole benefit that the consumer reaps from the introduction of more expeditious processes: he generally gains in addition the greater perfection of the product. Painters could un- doubtedly execute with the brush or pencil the designs that ornament our printed calicoes and furniture papers, but the copperplates and rollers employed for that purpose give a regularity of pattern, ana uniformity of colour, which the most skilful artist could never equal. The close pursuit of this inquiry through all the arts of industry would show, that the advantage of machinery is not limited to the bare substitution of it for human labour, but that, in fact, it gives a positive new product, inasmuch as it gives a degree of perfection before unknown. The flatting-mill and the die execute products, that the utmost skill and attention of the human hand could never accomplish. In fine, machinery does still more; it multiplies products with which it has no immediate connexion. Without taking the trouble to reflect, one perhaps would scarcely imagine that the plough, the harrow, and other similar machines, whose origin is lost in the night * Paradoxical as it may appear, it is nevertheless true, that the labouring class is of all others the most interested in promoting the economy of human labour ; for that is the class which benefits the most by the general cheapness, and suf fers most from the general dearness of commodities. 8* M 00 ON PRODUCTION. BOOK L of ages, have powerfully contributed to procure for mankind, besides the absolute necessaries of life, a vast number of the superfluities they now enjoy, whereof they would otherwise never have had any conception. Yet, if the different dressings the soil requires could be no otherwise given, than by the spade, the hoe, and other such simple and tardy expedients, if we were unable to make available in agricultural production those domestic animals, that, in the eye of political economy, are but a kind of machines, it is most likely thit the whole mass of human labour, now applicable to the arts of indns- try, would be occupied in raising the bare necessary subsistence of the actual population. Thus, the ploUgh has been instrumental in releasing a number of hands for the prosecution of the arts, even of the most frivolous kind ; and what is of more importance, for the cultivation of the intellectual faculties. The ancients were unacquainted with water or wind-mills. In their time, the wheat their bread was made of, was pounded by the labour of the hand : so that perhaps no less than twenty individuals were occupied in pounding as much wheat as one mill can grind.* Now a single miller, or two at the most, is enough to feed and superintend a mill. By the aid, then, of this ingenious piece of mechanism, two persons are as productive as twenty were in the days of Caesar. Wherefore, in every one of our mills, we make the wind, or a current of water, do the work of eighteen persons ; which eighteen extra persons are just as well provided with subsistence ; for the mill has in no respect diminished the general produce of the community: and whose exertions may be directed to the creation of new products, to be given by them in exchange for the produce of the mill; thereby augmenting the general wealth of the community .f CHAPTER VIII. OF THE ADVANTAGES AND DISADVANTAGES RESULTING FROM DIVISION OP LABOUR, AND OP THE EXTENT TO WHICH IT MAY BE CARRIED. WE have already observed that the several operations, the com- bination of which forms but one branch of industry, are not in gene- ral undertaken or performed by the same person ; for they commonlv * Homer tells us, in the Odyssey, b. xx., that twelve women were daily em- ployed in grinding corn for the family consumption of Ulysses, whose establish- ment is not represented as larger than that of a private gentleman of fortune of modern days. \ Since the publication of the third edition of this work, M. de Sismondi has published his Nmiveaux Principes f the same operation. 94 ON PRODUCTION. BOOK I Should a tailor try to make his own shoes as well as his coat, he would infallibly ruin himself.* We see every day people acting as their own merchants, to avoid paying a regular trader the ordinary profit of his business ; to use their own expression, with the view of pocketing that profit themselves. But this is an erroneous calcula- tion ; for this division of labour enables the regular dealer to execute the business for them much cheaper than they can do it themselves. Let them reckon up the trouble it costs them, the loss of time, the money thrown away in extra charges, which is always proportion- ally more in small than in large operations, and see if all these to- gether do not amount to more than the two or three per cent, that might be saved on every- paltry item of consumption ; even suppo- sing them not to be deprived of what little advantage they might expect, by the avarice of the cultivator or manufacturer they would have to deal directly with, who will of course impose, if he can, upon their inexperience. I" is no advantage, even to the cultivator or manufacturer himself, except under very particular circumstances, to intrude upon the province of the merchant, and endeavonr to deal directly with the consumer without his intervention. He would only divert his at- tention from his ordinary occupation, and lose time that might be far better employed in his own peculiar line ; besides being under the necessity of keeping up an establishment of people, horses, car- riages, &c. the expenses of which would far exceed the merchant's profit, reduced as it always must be by competition. The advantages accruing from division of labour can be enjoyed in respect of particular kinds of products only; and not in them, un- til their consumption has exceeded a certain point of extension. Ten workmen can make 48,000 pins in a day ; but would hardly do so, unless where there was a daily consumption of pins to that amount ; for, to arrive at this degree of division of labour, one workman must be wholly and exclusively occupied in sharpening the points, while the rest are severally engaged, each in a different part of the process. If there be a daily demand for no more than 24,000, he must needs lose half his day's work, or change his occupation* in which case, the division of labour will be less extensive and complete. For this reason, divisions of labour cannot be carried to the extreme limit, except in products capable of distant transport and the conse- quent increase of consumption; or where manufacture is carried on amidst a dense population, offering an extensive local consumption. For the same reason, too, many kinds of work, the products of which are destined to instantaneous consumption, are executed by the same individual, in places whertf the population is limited. In a small town or village, the same person is often barber, surgeon, doctor, * The low price of sugar in China is probably occasioned, in part, by the cir- cumstance of the grower leaving to a separate class the extraction of the sugar from the cane. This operation is performed by itinerant sugar pressers, who go from house to house, offering their services, and provided with an extremely simple apparatus Vide Macartney's Embassy, vol. iv. p. 198. CHAP. VIII. ON PRODUCTION. 95 and apothecary ; while in a populous city, and there only, these are not merely separate and distinct occupations, but some of them are again subdivided into several branches; that of the surgeon, for in- stance, is split into the several occupations of dentist, oculist, ac- coucher, &c. ; each of which practitioners, by confining his practice to a single branch of this extensive art, acquires a degree of skill, which, but for this division, he could never attain. The same circumstance applies equally to commercial industry. Take the village grocer ; the consumption of his groceries is so lim- ited, as to oblige him to be at the same time haberdasher, stationer, innkeeper, and who knows what, perhaps even news-writer and pub- lisher ; whereas in large cities, not only grocery at large, but even the sale of a single article of grocery, is a great commercial concern. At Paris, London, and Amsterdam, there are shops, where nothing else is sold but the single article tea, oil or vinegar; and it is natural to suppose that such shops have a much better assortment of the sin- gle article, than those dealing in many different commodities at once. Thus, in a rich and populous country, the carrier, the wholesale, the intermediate, and the retail dealer conduct each a separate branch of commercial industry, and conduct it with greater perfection as well as greater economy. Yet they all benefit by this economy ; and that they do so, if the explanations already given are not convincing, ex- perience bears irrefragable testimony ; for consumers always buy cheapest where commercial industry is the most subdivided. Ceteris paribus, a commodity brought from the same distance is sold cheap- er at a large town or fair, than in a village or hamlet. The limited consumption of hamlets and villages, besides obliging dealers to combine many elsewhere distinct occupations, prevents many articles from finding a regular sale at all seasons. Some are not presented for sale at all, except on market or fair days ; on such days the whole week's or perhaps year's consumption is laid in. On all other days, the dealer either travels elsewhere with his wares, or finds some other kind of occupation. In a very rich and very populous district, the consumption is so great, as to make the sale of one article only, quite as much as a trader can manage, though he devote every day in the week to the business. Fairs and markets are expedients of an early stage of national prosperity; the trade by caravans is a still earlier stage of international commerce; but even these expedients are far better than none at all.* * The country markets of France not only exhibit extreme inertness in parti- cular channels of consumption ; but a very cursory observation is sufficient to show, that the sale of products in them is very limited, and the quality of what are sold very inferior. Besides the local products of the district, one sees nothing there, except a few tools, woollens, linens, and cottons of the most inferior quality. In a more advanced stage of prosperity, one would find some few objects of gratification of wants peculiar to a more refined state of existence: some arti- cles of furniture combining convenience and elegance of form ; woollens of somfl variety or' fineness and pattern ; articles of food of a more expensive kind, whe- 06 ON PRODUCTION. BOOK I. From the necessity of the existence of a very extended consump- tion, before division of labour can be carried to its extreme point, it follows, that such division can never be introduced in the manufac- ture of products, which, from their high price, are placed within the reach of few purchasers. In jewellery, especially of the better kinds, .t is practised in a very limited degree ; and such division being, as we have seen, one cause of the indention and application of ingenious processes, it is not surprising that such processes are least often met with in the preparation of products of highly finished workmanship. In visiting the workshop of a lapidary, one is often dazzled with the costliness of the materials, and the skill and patience of the work- man ; but it is only in the grand manufactories of articles of univer- sal consumption, that one is astonished with the display of ingenuity employed to give additional expedition and perfection to the pro- duct. In looking at an article of jewellery, it is easy to form an idea of the tools and processes, by means of which it has been executed; whereas few people, on viewing a common stay-lace, would suppose it had been made by a horse or a current of water, which is actually the case. Of the three branches of industry, agriculture is the one that admits division of labour in the least degree. It is impossible to collect any great number of cultivators on the same spot, to use their joint exer- tions in the raising of one and the same product. The soil they work upon is extended over the whole surface of the globe, and obliges them to work at considerable distance frorn each other. Be- sides, agriculture does not allow of one person being continually employed in the same operation. One man cannot be all the yeai ploughing or digging, any more than another can find constant occu- pation in gathering in the crop. Moreover, it is very rarely that the whole of one's land can be devoted to the same kind of cultivation, or that the same kind of cultivation can be continued on the same spot for many successive years. The land would be exhausted ; and, supposing the cultivation of the whole property to be uniform, yet even then, the preparing and dressing of the whole ground, and the getting in of the whole of the crops, would come on at the same time, and the labourers be unoccupied at other periods of the year.* ther on account of their preparation or the distance they may have been brought from ; a few works of instruction or tasteful amusement ; a few books besides mere almanacs and prayer-books. In a still more advanced stage, the consump- tion of all these things would be constant and extensive enough to support regu- lar and well-stocked shops in all these different lines. Of this degree of wealth examples are to be found in Europe, particularly in parts of England, Holland, and Germany. *It is not common to meet with such large concerns in agriculture, as in the branches of commerce and manufacture. A fanner or proprietor seldom under- takes more than four or five hundred acres; and his concern, in point of capital and amount of produce, does not exceed that of a middling tradesman, or manu- facturer. This difference is attributable to many concurrent causes; chiefly to !.! extensive area this branch of industry requires; to the bulky nature of the CHAP. VIII. ON PRODUCTION. 97 Moreover, the nature of his occupation and of agricultural pro- ducts makes it highly convenient for the cultirator to raise his own vegetables, fruit, and cattle, and even to manufacture part of the tools and utensils employed in his house-keeping ; though in the other channels of industry, these items of consumption give exclusive occupation to a number of distinct classes. Where concerns of industry are carried on in manufactories, in which one and the same master manufacturer conducts the product through all its stages, he can never establish any great subdivision of the various operations, without great command of capital. For such division requires larger advances of wages, of raw materials, and of tools and implements. Where eighteen workmen manufacture but twenty pins each per day, that is to say, in all 360 pins, weigh- ing scarcely an ounce of metal, the daily advance of an ounce of fresh metal is enough to keep them in regular work. But if, in con- sequence of division of labour, these same eighteen persons can be brought, as we know they can, to produce 86,400 pins, the daily supply of raw material requisite for their regular employ will be 240 ounces weight of metal ; consequently a much more considerable advance will be called for. If we further take into calculation, that there is an interval of probably a month or more, from the purchase of the metal by the manufacturer to the period of his reimbursement by the sale of his pins, we shall find that he must necessarily have at all times on hand, in different stages of progressive manufacture, 30 times 240 ounces of metal; in other words, the portion of his capital vested in raw material alone will amount to the value of 450 Ibs. of metal. In addition to which, it must be observed, that the division of labour cannot be effected without the aid of various implements and machines, that form themselves an important item of capital. Thus, in poor countries, we frequently find a product carried through all its stages, from first to last, by one and the same workman, from mere want of the capital requisite for a judicious division of the dif- ferent operations. We must not however suppose, that, to effect this division of labour, it is necessary the capital should be placed all in the hands of a single adventurer, or the business conducted all within the walls of one grand establishment A pair of boots undergoes a variety of processes, whereof all are not executed by the bootmaker alone; the grazier, the tanner, the currier, all others, who immediatel> or re- motely furnish any substance or tool used in the making of boots, contribute to the raising of the product; and though there is a very considerable subdivision of labour in the making of this article, lb? produce, and consequently difficulty of collecting it at one point from the distant parts of the farm, or sending it to very remote markets ; to the nature of the business itself, which is not susceptible of any regular and uniform system, and requires in the adventurer a succession of temporary expedients and directions, suggested hy the difference of culture, of manuring and dressings, and the variety of "each labourer's occupations, according to the seasons, the change of weather &c. 9 N 98 ON PRODUCTION. BOOK L greater part of the joint and concurrent producers may have very little command of capital. Having detailed the advantages of the subdivision of the various occupations of industry, and the extent to which it may be carried, the view of the subject would be incomplete, were we to omit noticing, on the other hand, the inconveniences that inseparably attend it. A man, whose whole life is devoted to the execution of a single operation, will most assuredly acquire the faculty of executing it better and quicker than others ; but he will, at the same time, be rendered less fit for every other occupation, corporeal or intellectual; his other faculties will be gradually blunted or extinguished ; and the man, as an individual, will degenerate in consequence. To have never done any thing but make the eighteenth part of a pin, is a sorry account for a human being to give of his existence. JNor is it to be imagined that this degeneracy from the dignity of human nature is confined to the labourer, that plies all his life at the file or the hammer; men, whose professional duties call into play the finest faculties of the mind, are subject to similar degradation. This divi- sion of occupations has given rise to the profession of attorneys, whose sole business it is to appear in the courts of justice instead of the principals, and to follow up the different steps of the process on their behalf. These legal practitioners are, confessedly, seldom deficient in technical skill and ability ; yet it is not uncommoi? to meet with men, even of eminence in this profession, wholly igno- rant of the most simple processes of the manufactures they every day make use of; who, if they were set to work to mend the simplest article of their furniture, would scarcely know how to begin, and could probably not drive a nail, without exciting the risibility of every carpenter's awkward apprentice ; and if placed in a situation of a greater emergency, called upon, for instance, to save a drowning friend, or to rescue a fellow-townsman from a hostile attack, would be in a truly distressing perplexity ; whereas a rough peasant, inha- biting a semi-barbarous district, would probably extricate himself from a similar situation with honour. With regard to the labouring class, the incapacity for any other than a single occupation, renders the condition of mere labourers more hard and wearisome, as well as less profitable. They have less means of enforcing their own rights to an equitable portion of the gross value of the product. The workman, that carries about with him the whole implements of his trade, can change his locality at pleasure, and earn his subsistence wherever he pleases : in the other case, he is a mere adjective, without individual capacity, inde- pendence, or substantive importance, when separated from his fellow- labourers, and obliged to accept whatever terms his employer thinks fit to impose On the whole, we may conclude, that division of labour is a skil- ful mode of employing human agency, that it consequently multiplies ihe productions of society; in other words, the powers and the enjoy- CHAP. IX. ON PRODUCTION. 99 ments of mankind; but that it in some degree degrades the faculties of man in his individual capacity, (a) (1) CHAPTER IX. OF THE DIFFERENT METHODS OF EMPLOYING COMMERCIAL INDUSTRY, AND THE MODE IN WHICH THEY CONCUR IN PRODUCTION. COMMODITIES are not all to be had in all places indifferently. The immediate products of the earth depend upon the local varie- ties of soil and climate ; and even the products of industry are met with only in such places as are most favourable to their production. Whence it follows that, where products, whether of industry or of the earth, do not grow naturally, they can not be introduced or produced in a perfect state, and fit for consumption, without under- going a certain modification ; that is to say, that of transport or con- veyance. This transfer gives occupation to what has been called commercial industry. External commerce consists of the supply of the home market with foreign, and of foreign markets with home products.* Wholesale commerce is the buying of large quantities and re- selling to inferior dealers. Retail commerce is the buying of wholesale dealers, and re-selling to consumers. * Products that are bought to be re-sold, are called merchandise; and merchan- dise bought for consumption is denominated commodities, (i) (a) This consideration makes it peculiarly incumbent upon the government of a manufacturing nation to diffuse the benefits of early education, and thus prevent the degeneration from being intellectual as well as corporeal. T. (6) This distinction has been discarded in the translation, for the sake of simplification; the general term products being sufficiently intelligible and specific. T. (1) ["The extensive propagation of light and refinement," says DUGALD STEWART, " arising from the influence of the press, aided by the spirit of com- merce, seems to be the remedy to be provided by nature against the fatal effects which would otherwise be produced, by the subdivision of labour accompanying the progress of the mechanical arts : nor is any thing wanting to make the remedy effectual, but wise institutions to facilitate general instruction, and to adapt the education of individuals to the stations they are to occupy. The mind of the artist, which, from the limited sphere of his activity, would sink below the level of the peasant or the savage, might receive in infancy the means of intellectual enjoyment and the seeds of moral improvement; and even the insipid uniformity of his professional engagements, by presenting no object to awaken his ingenuity or to distract his attention, might leave him at liberty to employ his faculties on subjects more interesting to himself, and more extensively useful to others."] AMERICAN EDITOR, 100 ON PRODUCTION. BOOK I. The commerce of money or specie is conducted by the banker, who receives or pays on account of other people, or gives bills, or- ders, or letters qf credit, payable elsewhere than at the place where they are given. This is sometimes called the banking trade, (a) The broker brings buyers and sellers together. The persons engaged in these several branches are all agents of commercial industry, whose agency tends to approximate products to the hands of the ultimate consumer. The agency of the retailer of an ounce of pepper is quite as indispensable to the consumer, as that of the merchant, who despatches his vessel to the Moluccas for a cargo ; and the only reason why these different functions are not both performed by one and the same individual is, because they can be executed with more economy and convenience by two. To enter minutely into an examination of the limits and practices of these various departments of commercial industry, would be to write a treatise on commerce.* All we have to do in this work is, to in- quire in what manner and degree they influence the production of values. In Book II., we shall see how the actual demand for a product originating in its utility, is limited by the amount of the cost of production, and upon what principle its relative value is determined in each particular place. At present it is sufficient for the clear con ception of commercial production, to consider the value of a product as a given quantity or datum. Thus, without examining the reason why oil of olives is worth at Marseilles thirty, and at Paris forty sous per lb., I shall content myself with simply stating, that who- ever effects the transport of that article from Marseilles to Paris, thereby increases its value to the amount of ten sous per lb. Nor is it to be supposed, that its intrinsic value has received no accession by the transit. The value has positively augmented. The intrinsic value of silver is greater at Paris than at Lima ; and the cases are precisely similar. In fact, the transport of products can not be effected without the concurrence of a variety of means, which have each an intrinsic value of their own, and of w y hich the actual transport itself, in the literal and confined sense of the term, is commonly not the most chargeable. There must be one commercial establishment at tho *A complete treatise on commerce is still a desideratum in literature, not- withstanding the labours of Melon and ForlmjinaiR, for hitherto the principles and consequences of commerce have been little understood. (1) (a) The banker's business is not confined to dealings in metal, coined or un- coined, but is extended to dealings in paper-money, and dealings in credit, as e lead by every well-educated merchant. AMERICAN EDITOR. CHAP. IX. ON PRODUCTION. ipj place where the products are collected ; another at the place it is transported to ; besides package and warehousing. There must be an advance of capital equivalent to the value trans- ported. Moreover, there are agents, insurers, and brokers, to be paid. All these are really productive occupations, since, without their agency, the consumer can never enjoy the product; and suppos- ing their remuneration to be reduced by competition to the lowest rate possible, he. can be in no way cheaper supplied. In commercial, as well as manufacturing industry, the discovery of a more economical or more expeditious process, the more skilful employment of natural agents, the substitution, for instance, of a canal in place of a road, or the removal of a difficulty interposed by nature or by human institutions, reduces the cost of production, and pro- cures a gain to the consumer, without any consequent loss to the producer, who can lower his price without prejudice to himself, because his own outlay and advance are likewise reduced. The same principles govern both external and internal commerce. The merchant that exports silks to Germany or to Russia, and sells at Petersburg for 40 cents per yard, stuffs that have cost but 30 cents at Lyons, creates a value of 10 cents per yard. If the same mer- chant brings a return cargo of peltry from Russia, and sells at Havre for 240 dollars what cost him at Riga but 200 dollars, or a value equiva- lent to 200 dollars, there will be a new value of 40 dollars, created and shared amongst the different agents engaged in this production of value, whatever nation they may belong to, and whatever be the rela- tive importance of their respective productive agency, from the first- rate merchant to the ticket-porter inclusive.* And by this creation of value, the wealth of the French nation is enriched to the amount of all the gains of French industry and of French capital, in the course of this production; and the Russian nation to the amount of those of Russian industry and Russian capital. Nay, perhaps a third nation, independent both of France and of Russia, may get the whole profit accruing from the mutual commercial intercourse between these nations ; and yet neither of them loses any thing, if their industry and capital have other equally lucrative employments ai home. The very circumstance of the existence of an active external commerce, no matter what agents it be conducted by. is a very powerful stimu- lus to internal industry. The Chinese, who abandon the whole of their external commerce to other nations, must nevertheless raise an enormous gross product, otherwise they could never support, as they do, a population twice as large as that of all Europe, upon a surface of nearly equal extent. A shop-keeper in good business is quite as well off as a pedlar that travels the country with his wares on his back.f Commercial jealousy is, after all, nothing but prejudice : it is a wild fruit, that will drop of itself when it has arrived at maturity. * The ordinary proportions of this division will be explained, infra, Book II. Chap. 7. f It has been often asked, Why not combine commercial with agricultural and 9* 102 ON PRODUCTION. BOOK L The external commerce of all countries is inconsiderable, com- pared with the internal. To convince ourselves of the truth of this position, it will be sufficient to take note at all numerous or even sumptuous entertainments, how very small is the proportion of values of foreign growth, in comparison with those of home produc- tion; especially, if we take into the account, as we ought to do, the value of buildings and habitations, which is necessarily of home production.* (a) The internal commerce of a country, though, from its minute i amification, it is less obvious and striking, besides being the most considerable, is likewise the most advantageous. (1) For both the remittances and returns of this commerce are necessarily home pro- ducts. It sets in motion a double production, and the profits of it are not participated with foreigners. For this reason, roads, canals, bridges, the abolition of internal duties, (i) tolls, duties on transit, (c) which are in effect tolls, every measure, in short, which promotes internal circulation, is favourable to national wealth. manufacturing productions'? Why, for the same reason that makes a whole- sale cotton spinner, if he have a surplus of time and capital, more apt to extend his spinning concern, than to employ his labour and capital in the working up of his own filiature into muslin and printed calicoes. * It would be impossible to estimate the proportion with any tolerable accu- racy, even in countries where calculations of this kind are most in vogue. In- deed, the attempt would be a sad waste of time. To say the truth, statistical statements are of little real utility ; for, be their accuracy ever so well assured, hey can only be correct for the moment. The only knowledge really useful is, the knowledge of general principles and laws, that i$ to say, the knowledge of the connexion between cause and effect, which alone can safely teach us what measures it is best to adopt in every possible emergency. The sole use of sta- tistics in political economy is, to supply examples and illustrations of general principles. They can never be the basis of principles, which are gipunded upon the nature of things ; whereas statistics, in the most improved state, are only an index of their quantity. (a) This position may be correct or not, according to circumstances. The national wants must always, in the long run, be supplied by the national indus- try and exertions : but what is there to prevent a nation from exchanging the larger portion of its domestic products for the products of other nations ? The people of Tyre probably consumed more products of external than of domestic industry, although indeed those external must have been purchased with domes- tic products. Tyre, it is true, was rather a city than a nation. Holland resem- bled her in many particulars. The observation applies to every community, the chief part of whose production is, the modification of external products. T. (ft) Douanes. (c) Octrois. (1) [The author has here, in common with Dr. Smith, fallen into an error. Capital, whether employed in the home or foreign trade, is equally productive. If, for example, the home trade realized greater profits than foreign commerce, every cent of capital employed in the latter would, in a very little time, be with- drawn from so comparatively disadvantageous an investment. Capital will flow into the foreign, instead of the home trade, only because it will thereby yield a larger profit. The internal commerce of a country cannot therefore be said to be " the most advantageous."] AMERICAN EDITOR. CHAP. IX. ON PRODUCTION. 103 There is a further branch of commerce, called the trade of specu- lation, which consists in the purchase of goods at one time, to be re-sold in the same place and condition at another time, when they are expected to be dearer. Even this trade is productive ; its utility consists in the employment of capital, warehouses, care in the pre- servation, in short, human industry in the withdrawing from circu- lation a commodity depressed in value by temporary superabun- dance, and thereby reduced in price below the charges of production, so as to discourage its production, with the design and purpose of restoring it to circulation when it shall become more scarce, and when its price shall be raised above the natural price, the charges of production, so as to throw a loss upon the consumers. The evident operation of this kind of trade is, to transport commodities in respect of time, instead of locality. If it prove an unprofitable or losing concern, it is a sign that it was useless in the particular instance, and that the commodity was not redundant at the time of purchase, and scarce at the time of re-sale. This operation has also been denomi- nated, with much propriety, the trade of reserve. () Where it is directed to the buying up of the whole of an article, for the sake of exacting an exorbitant monopoly price, it is called forestalling, which is happily difficult, in proportion as the national commerce is extensive, and, consequently, the commodities in circulation both abundant and various. The carrying trade, as Smith calls it, consists in the purchase of goods in one foreign market for re-sale in another foreign market This branch of industry is beneficial not only to the merchant that practises it, but also to the two nations between whom it is practised ; and that for reasons which have been explained while treating of ex- ternal commerce. The carrying trade is but little suited to nations possessed of small capital, whereof the whole is wanted to give activ- ity to internal industry, which is always entitled to the preference. The Dutch carry it on in ordinary times with advantage, because their population and capital are both redundant, (b) The French, in peace time, have carried on a lucrative carrying trade between the different ports of the Levant; because adventurers could procure advances of capital on better terms in France than in the Levant, and were per- haps less exposed to the oppression of the detestable government of that country. They have since been supplanted by other nations, whose possession of the carrying trade is so far from being an injury to the subjects of the Porte, that it actually keeps alive the little remaining industry of its territories. Some governments, less wise in this particular than the Turkish, have interdicted their carrying trade to foreign adventurers. If the native traders can carry on the V.a) Commerce de reserve. There is no corresponding term in English ; it in intelligible enough. (6) The carrying trade of Holland is now almost extinct. In fact, whether or no it be suited to a given nation at a given time, depends upon a great variety of circumstances. The advantage of the neutral character gave a very large pro- portion of it for some years to the American Union, though notoriously deficient in capital for the purposes of internal cultivation. T 104 ON PRODUCTION. BOOK I. transport to greater profit than foreigners, there is no occasion to exclude the latter; and, if it can be conducted cheaper by foreigners, their exclusion is a voluntary sacrifice of the profit of employing them. An example will serve to elucidate this position. The freight of hemp from Riga to Havre costs a Dutch skipper, say 7 dollars per ton. It must be taken for granted, that no other but the Dutchman can carry it so cheap. He makes a tender to the French government, which is a consumer of Russian hemp, to provide tonnage at 8 dollars per ton, thereby obviously securing to himself a profit of 1 dollar per ton. Suppose then, that the French government, with a view to favour the national shipping, prefers to employ French tonnage, which can not be navigated for less than 10 dollars per ton, or 11 dollars, allow- ing the same profit to the ship-owner What is the consequence? Tho government will be out of pocket 3 dollars per ton, for the mere pur- pose of giving a profit of 1 dollar to the national ship-owners. And, as none but the individuals of the nation contribute towards the na- tional expenditure, this operation will have cost to one class of French- men 3 dollars for the purpose of giving to another class of Frenchmen a profit of 1 dollar only. However the numbers may vary, the result must be similar; for there is but one fair way of stating the account. It is hardly necessary to caution the reader, that I have through- out been considering maritime industry solely in its relation to national wealth. Its influence upon national security is another thing. The art of navigation is an expedient of war, as well as of commerce. The working of a vessel is a military manoeuvre; and the nation containing the larger proportion of seamen, is, therefore, ceteris paribus, the more powerful in a military point of view; conse- quently, political and military considerations have always interfered with national views of commerce, in matters of navigation; and Eng- land, in passing her celebrated Navigation Act, interdicting her car- rying trade to all vessels, the owners and at least three-fourths of the crews whereof were not British subjects, had in view, not so much the profits of the carrying trade, as the increase of her own military marine, and the diminution of that of the other powers, especially of Holland, which then enjoyed an immense carrying trade, and was the chief object of English jealousy. Nor can it be denied, that these views may actuate a wise national administration; assuming always, that it is an advantage to one nation to domineer over others. But these political dogmas are fast growing obsolete. Policy will some day or other be held to consist in coveting the pre-eminence of merit rather than of force. The love of domination never attains more than a factitious elevation, that is sure to make enemies of all its neighbours. It is this that engen- ders national debt, internal abuse, tyranny and revolution ; while the sense of mutual interest begets international kindness, extends the sphere of useful intercourse, and leads to a prosperity, permanent, because it is natural. (1) (1) [The operation of the British Navigation-acts, like all other restrictive re- C illations, has been prejudicial to the growth of national wealth, without, at the same Urne, having contributed in any degree to the establishment of the naval CHAP X. ON PRODUCTION. 105 CHAPTER X. OF THE TRANSFORMATIONS UNDERGONE BY CAPITAL IN THE PROGRESS OP PRODUCTION WE have seen above (Chap. III.) of what the productive capital of a nation consists, and to what uses it is applicable. So much it was necessary to specify, in enumerating the various means of produc- tion. We now come to consider and examine, what becomes of capital in the progress of production, and how it is perpetuated and increased. To avoid fatiguing the reader with abstract speculation, I shall begin with giving examples, which I shall take from every day's experience and observation. The general principles will follow of themselves, and the reader will immediately see their applicability to all other cases, which he may have occasion to pronounce a judg- ment upon. When the land-owner is himself the cultivator, he must possess a capital over and above the value of his land ; that is to say, value to some amount or other consisting, in the first place, of clearance of the ground, together with works and erections thereon, which may at pleasure be looked upon as part of the value of the estate, but which preponderance of Great Britain. " If it can be made to appea r," says a highly distinguished political economist, " that the greater wealth which we should, in the absence of these laws, have possessed, would have supplied a revenue ade- quate to the maintenance of an equal number of seamen in the navy, it would follow that we are no gainers by these acts ; and if it further appear that this ad- ditional revenue would have been equal to the maintenance of twice or three times as many seamen, it would be clear that we are losers by them. It is acknow- ledged by many of the advocates for these laws, that their tendency has not been to increase the national revenue, but in some degree the reverse. " Our national preponderance," says, we believe, Mr. Homer, "rests on a very different basis. Our national energy and wealth originate in OUT freedom, and in that security of property which is its happy consequence. The number of our seamen in merchant shipping is owing to the spirit and capital of our tra- ders, and to our great extent of coast. The magnitude of our navy is due neither to navigation-acts, nor to colonial monopolies, but to the resources of an indus- trious country. " Howdifferent are the ideas suggested by such observations, from the narrow theories of those who trace our naval superiority to the operation of a few acts of Parliament ! They remind us of the technical philosophy of the judge, who gravely ascribed the lamentable prevalence of duelling, not to the violence of human passions, but to a misapprehension of the law of the land ! Besides, our naval greatness, as it is well remarked by Dr. Smith, was conspicuous before our navigation laws were framed. It existed then, as it had done before, and has done since, in a degree commensurate with our commerce, and with the ex- tent of our national prosperity. These circumstances, and not navigation laws, will be found the regulators of naval power in all countries. They determine its extent among the Dutch, to whom, even in the season of their greatest strength, navigation laws were entirely unknown." Vide Edinburgh Review, vol. xiv. page 95.] AMERICAN EDITOR o 106 ON PRODUCTION. BOOK L are, nevertheless, the result of previous human exertion, and an ac- cession to the original value of the land.* This portion of his capital is little subject to wear and tear ; trifling occasional repairs will preserve it entire. If the cultivator obtain from the annual produce wherewithal to effect these repairs, this item of capital is thereby preservable in perpetuity. Ploughs, and other farming implements and utensils, together with the animals employed in tillage, form another item of the culti- vators capital, and an article of much quicker consumption, which, however, may in like manner be kept up and renovated, as occasion may require, at the expense of the annual produce of the concern, and thus be maintained at its full original amount. Finally, he must have stores of various kinds; seeds for his ground, provisions, fodder for his cattle, and food as well as money for his labourers' wages, &c.f Observe, that this branch of capital is totally decomposed once in the course of the year, at least ; and sometimes three or four times over. The money, grain and provisions of eve- ry description disappear altogether; but so it must necessarily be, and yet not an atom of the capital is lost, if the cultivator, after abstracting from the produce a fair allowance for the productive service of his land (rent) for the productive service of the capital embarked (interest) and for the productive service of the personal labour that has set the whole in motion (wages), contrive to make the annual produce replace the outlay of money, seed, live stock, &c., even to the article of manure, so as to put himself in possession of a value equal to what he started with the preceding year. Thus we find, that capital may yet be kept up, though almost every part of it have undergone some change, and many part* 1*6 completely annihilated ; for, indeed, capital consists not in this or that commodity or substance, but in its value. Nor is it difficult to conceive, that if the estate be sufficiently extensive, and managed with order, economy, and intelligence, the profits of the cultivator may enable him to lay by a surplus, after replacing the entire value of his capital, and defraying the expenses of himself and family. The mode of disposing of this surplus is of the utmost importance to the community, and will be treated of in the next chapter. All that is at present necessary is, to impress a * Arthur Yeung, in his View of the Agriculture of France, makes no estimate of this item of capital permanently vested in the land of France within its old limits; but merely reckons it to be less than the capital so vested in England, in the proportion of 36 livres tournois per English acre. So that, in the very mode- rate supposition, that half as much capital is vested in permanent amelioration of the land in France as in England, the capital so vested in Old France, reckoned at 7 dollars per acre, would amount, upon 131 millions of acres, to 817 millions of dollars for this item of French capital alone. f The same writer (Young) estimates, that in France, these two last items of capital, viz. implements, beasts of husbandry, stores of provisions, &c. may be set clown at 9 dollars per acre, one acre with another; making an aggregate of 1179 millions of dollars; which, added to the former estimate, shows a total of 1996 millions of dollars, capital engaged in the agricultural industry of Old France He estimates the same items of capital in England at twice as mucc ;r acre. CHAP. X. ON PRODUCTION. 107 clear conviction, that the value of capital, though consumed, is not yet destroyed, wherever it has been consumed in such way as to re- produce itself; and that a concern may go on forever, and annually render a new product with the same capital, although that capital be in a perpetual course of consumption. After tracing capital through its various transformations in the department of agriculture, it will be easy to follow its transforma- tions in the other two departments of manufacture and commerce. In manufacture, as well as agriculture, there are some branches of capital that last for years ; buildings and fixtures for instance, machi- nery and some kinds of tools ; others, on the contrary, lose their form entirely; the oil and pot-ash used by soap-makers cease to be oil and pot-ash when they assume the form of soap. In the same manner, the drugs employed in dyeing indigo cease to be Brazil wood or annatto, as the case may be, and are incorporated with the fabric they are employed in colouring.. And so of the wages and maintenance of the labourers. In commerce, almost the whole capital undergoes complete trans- mutation, and many items of it several times in the course of a year. A merchant exchanges his specie for woollens or jewellery, which is one change of form. He ships them for Turkey, and on the voyage, some more of his money is converted into the wages of the crew. The cargo arrives at Constantinople, where he sells the investment to the wholesale dealers, who pay him in bills upon Smyrna, which is a second metamorphosis ; the capital embarked is now in the shape of bills, which he makes use of in the purchase of cotton at Smyrna; a third transformation. The cotton is shipped for France and sold there, which completes the fourth change of form; thus reproducing the capital, most probably with profit, under its original shape of French coin. It is obvious,'that the objects capable of acting the part of capital are innumerable. If, at any given period, one wishes to know what the capital of a nation consisted of, it would be found composed of an infinity of objects, commodities and substances, of which it would be impossible to guess the aggregate value with any tolerable accuracy, and of which some are situated many thousand leagues from its frontiers. At the same time, it appears that the most in- significant and perishable articles are a part, and often a very im- portant part, too, of the national capital ; that although the items of capital are in a continual course of consumption and decomposition, it by no means follows, that the capital itself is destroyed and con- . sumed, provided that its value be preserved in some other shape ; consequently, that the introduction or import of the vilest and most perishable commodities may be just as profitable as that of the most costly and durable gold or silver; that, in fact, the former, are more" profitable the instant they are more sought after; that the pro- ducers themselves are the only competent judges of the transforma- tion, export, and import, of these various matters and commodities: 108 ON PRODUCTION. BOOK L and that every government which interferes, every system calculated to influence production, can only do mischief. There are concerns, in which the capital is completely renovated, and the work of production begun afresh, several times in the year. An operation of manufacture, that can be perfected and the product sold in three months, will admit of the capital being turned to account annually four times. It may be supposed that the profit each time is less than when the capital is turned but once in twelve months. Were it otherwise, there would be four times the profit gained ; an advantage that would soon attract an overflow of capital in this particular channel, and lower the profit by competition. On the other hand, products that it requires more than a year to perfect, such as leather, must, over and above the original capital, yield the profits of more than one year ; otherwise, who could undertake to raise them ? In the trade of Europe with China and the East Indies, the capi- tal embarked is two or three years before its return. Nor is it ne- cessary in commerce or in manufacture, any more than in agricul- ture, which has been cited as an example, that the capital should be realized in the form of money, to be entirely replaced. Merchants and manufacturers, for the most part, realize in this way the whole of their capital but once in their lives, and that is when they wind up and leave off business. Yet they are at no loss to discover at any time whether their capital be enlarged or diminished, by referring to the inventory of their assets for the time being. The capital employed on a productive operation is always a mere advance made for payment of productive services, and reimbursed by the value of their resulting product The miner extracts the ore from the bowels of the earth ; the iron-founder pays him for it. Here ends the miner's production, which is paid for by an advance out of the capital of the iron-found- er. This latter next smelts the ore, refines and makes it into steel, which he sells to the cutler : thus is the production of the founder paid, and his advance reimbursed by a second advance on the part of the cutler, made in the price for the steel. This again the cutler works up into razor-blades, the price for which replaces his advance of capital, and at the same time pays for his productive agencv. It is manifest, then, that the value of the ultimate produt. ra^or- blades, has been sufficient to replace all the capital successively em- ployed in its production, and, at the same time, to pay for the pro- duction itself; or rather, that the successive advances of capital have paid for the productive services, and the price of the product has reimbursed those advances ; which is precisely the same tning as if the aggregate or gross value of the product had gone immediately lo defray tne charges of its production. CHAP. XI. ON PRODUCTION. 109 CHAPTER XI. Lv the foregoing chapter, I have shown how productive capital, though kept, during the progress of production, in a continual state of employment, and subject to perpetual change and wear, is yet ultimately reproduced in full value, when the business of production is at an end. Since, then, wealth consists in the value of matter or substance, not in the substance or matter itself, I trust my readers have clearly comprehended, that the productive capital employed, notwithstanding its frequent transmutations, is all the while the same capital. It will be conceived with equal facility, that, inasmuch as the value produced has replaced the value consumed, that produced value may be equal, inferior, or superior in amount, to the value consumed, according to circumstances. If equal, the capital has been merely replaced and kept up ; if inferior, the capital has been encroached upon ; but if superior, there habeen an actual increase and accession of capital. This is precisely the point to which we traced the culti- vator, cited by way of an example in the preceding chapter. We supposed him, after the complete re-establishment of his capital, so as to put him in a condition to begin the new year's cultivation with equal means at his disposal, to have netted a surplus produce beyond his consumption of some value or other ; say of 1000 dollars. Now, let us observe the various methods, in which he may dispose of his surplus of 1000 dollars; for simple as the matter may appear to be, there is no point upon which more error has prevailed, or which has greater influence upon the condition of mankind. Whatever kind of produce this surplus, which we have valued at 1000 dollars, may consist of, the owner may exchange it for gold or silver specie, and bury it in the earth till he wants it again. Does the national capital suffer a loss of 1000 dollars by this operation? Certainly not; for we have just seen, that the value of that capital was before completely replaced. Has any one been injured to that amount? By no means; for he has neither robbed nor cheated any body, and has received no value whatever, without giving an equiva- lent. It may be said, perhaps, he has given wheat in exchange for the dollars he has thus buried, which wheat was very soon con- sumed ; yet the 1000 dollars still continue withdrawn from 'the capital of the community. But I trust it will be recollected, that wheat, as well as silver or gold, may compose a part of the national capital ; indeed, we have seen that national capital must necessarily consist, in a great measure, of wheat and such like substances, liable to either partial or total consumption, without any diminution of capital thereupon ; for, in short, that reproduction completely replaces the value consumed, including the profits of the producers, whose 10 1JO ON PRODUCTION. BOOK I productive agency is part of the value consumed. Wherefore, the instant that the cultivator has fully replaced his capital, and begins again with the same means as before, the 1000 dollars may be thrown into the sea without reducing the national capital. But let us trace the disposal of this surplus of 1000 dollars to every imaginable destination. Suppose, for instance, that instead of being buried, they have been spent by the cultivator upon an elegant entertainment. In this case, this whole value has been destroyed in an afternoon; a sumptuous feast, a ball, and fireworks, will have swallowed up the whole. The value thus destroyed exists no longer in the community : it no longer forms an item in the aggregate of wealth; for those persons, into whose hands the identical pieces of silver have come, have given an equivalent in wines, refreshments, eatables, gunpowder, &c., all which values are reduced to nothing ; the gross national capital, however, is no more diminished in this case than in the former. A surplus value had been produced ; and this surplus is all that has been destroyed, so that things remain just as they were. Again, suppose these 1000 dollars to have been spent in the pur- chase of furniture, plate, or linen. Still there is no reduction of national productive capital ; although* it must be allowed there is no accession ; for in this case, nothing more is gained than the additional comforts the cultivator and his family derive from the newly pur chased moveables. Fourthly and lastly, suppose the cultivator to add this excess ol 1000 dollars to his productive capital, that is to say, to re-employ it in increasing the productive powers of his farm as circumstances may require, in the purchase of more beasts of husbandry, or the hire and support of more labourers ; and in consequence, at the end of the year, to gather produce enough to replace the full value of the 1000 dollars, with a profit, in such manner, as to make them capable of yielding a fresh product the year after, and so on every year to eternity. It is then, and then only, that the productive capital of the community is really augmented to that extent. It must on no account be overlooked, that, in one way or other, a saving such as that we have been speaking of, whether expended productively or unproductively, still is in all cases expended ana consumed ; and this is a truth, that must remove a notion extremely false, though very much in vogue namely, that saving limits and injures consumption. No act of saving subtracts in the least from consumption, provided the thing saved be re-invested or restored to productive employment. On the contrary, it gives rise to a con- sumption perpetually renovated and recurring ; whereas there is no repetition of an unproductive consumption, (a) (a) On the subject of saving, Sismondi, and after him our own Malthus, have adopted a different opinion. According to them, the powers of production have already outrun the desire and the ability to consume ; consequently, every thing that tends to reduce that desire is injurious, because it is already too inert for the interests of production. Wherefore, inasmuch as the desire of accumuiation CHAP. XI. ON PRODUCTION. HI It must be observed, too, that the form in which the value saved is so saved and re-employed productively, makes no essential differ- ence. The saving is made with more or less advantage, according to the circumstances and intelligence of the person making it. Nor is there any reason why this portion of capital should not have been accumulated, without ever having for a moment assumed the form of specie. It may be that an actual product of the farm has been saved and resown or planted, without having undergone any transmutation ; perhaps the wood, that might have been used as firing to warm su- perfluous apartments, may nave been converted into palings or other carpenter's work ; and what was cut down in the first instance as an item of revenue, be so employed, as to become an item of capital. Now, the only way of augmenting the productive capital of indi- viduals, as well as the aggregate productive capital of the community, is by this process of saving ; in other words, of re-employing in pro- duction more products created than have been consumed n their cre- ation. Productive capital cannot be accumulated by the mere scra- ping together of values without consuming them; nor any otherwise, than by withdrawing them from unproductive, and devoting them to reproductive consumption. There is nothing odious in the real picture of the accumulation of capital ; we shall presently see its happy consequences. is the direct opposite of that of consumption, it must of necessity be injurious in the highest degree. On these principles, it might be proved without difficulty, that the prodigality of public authority, war, or the poor law of England, is a national benefit: for all of them stimulate consumption. Indeed they leave their readers to draw this inevitable conclusion ; for they maintain in plain terms, that the enlargement of the productive powers of man, by the use of machinery or otherwise, makes the existence of unproductive consumers a matter, not of mere possibility or probability, but of actual necessity and expedience. (Vide Sis- mondi, Nouv. Prin. liv. ii. c. 3. and liv. iv. c. 4. Malthus, Prin. of Pol. Econ.} These maxims would justify the prodigality of Louis XIV. of France, and of the Pitt system of England. But fortunately they are erroneous; and if the contrary principles laid down by our author here and infra, Chap. XV., needed further illustration or support, they have been rendered still more clear and convincing by his recent Lettres a M. Malthus. It is true, that the enlargement of pro- ductive power naturally leads to the multiplication of unproductive consumers: why 1 because the desire of barren consumption, instead of being inert, is always active in the human breast. But that multiplication is not necessary ; fcr the consumer may be made a producer, if not of material, at least of immaterial pro- ducts, which latter are capable of infinitely more multiplication and variety, as well as of more general diffusion than material products. While this field re- mains open, a national administration never need despair of finding occupation for the human labour supplanted by machinery. And what is the parsimony of moJern days] It is not the hoarding of coin or other valuables, which, though as our author observes, it subtracts nothing from the national capital, is yet a social mischief, because it suspends the utility of an existing product, or at any rate, prevents it from yielding the human gratification, which its barren con- sumption would afford. The accumulations of the miser are now either vested in reproduction which is beneficial, or in the ownership of the sources of produc- tion, land, &c. &c. which it matters not to public wealth who may be possessed of, or in the incumbrances of those sources, mortgages, national funds, &c. &c., which are but portions of that ownership, and to which the same observation applies. T. 1 12 ON PRODUCTION. BOOK I. The form under which national capital is accumulated, is com- monly determined by the respective geographical position, the moral character, and the peculiar wants of each nation. The accumula- tions of a society in its early stages consist, for the most part, of buildings, implements of husbandry, live stock, improvements of land ; those of a manufacturing people chiefly of raw materials, or such as are still in the hands of its workmen, in a more or less finished state ; and in some part, of the necessary manufacturing tools and machinery. In a nation devoted to commerce, capital is mostly accumulated in the form of wrought or unwrought goods, that have been bought by the merchant for the purpose of re-sale. A nation that at the same time directs its energies to all three branches of industry, namely, agriculture, manufactures, and com- merce, has a capital compounded of all three different forms of pro- duction ; of that amazing quantity of stores of every kind, that we find civilized society actually possessed of; and which, by the intel- ligent use that is made of them, are constantly renovated, or even increased, in spite of their enormous consumption, provided that the industry of the community produces more than is destroyed by its consumption. I do not mean to say, that each nation has produced and laid by the identical article that composes its actual capital. Values, in some shape or other, have been produced and laid by; and these, through various transmutations, have assumed the form most convenient foi the time being. A bushel of wheat saved will feed a mason as well as a worker in embroidery. In the one case, the bushel of wheat will be reproduced in the shape of the masonry of a house; in' the other, under that of a laced suit. Every adventurer in industry, that has a capital of his own em- barked in it, has ready means of employing his saving productively ; if engaged in husbandry, he buys fresh parcels of land ; or, by judi- cious outlays and improvements, augments the productive powers of what already belongs to him ; if in trade, he buys and sells a greater quantity of merchandise. Capitalists have nearly the same advan- tage : they invest their whole savings in the same manner as their former capital is invested, and increase it pro tanto, or look out for new ways of investment, which they are at no loss to discover ; for the moment they are known to be possessed of loose funds, they seldom have to wait for propositions for the employment of them ; whereas the proprietors of lands let out to farm, and individuals that live upon fixed income, or the wages of their personal labour, have not equal facility in the advantageous disposal of their savings, and nan seldom invest them till they amount to a good round sum. Many savings are therefore consumed, that might otherwise have swelled the capitals of individuals, and consequently of the nation at large. Banks and associations, whose object is to receive, collect, and turn to profit the small savings of individuals, are consequently very favourable to the multiplication of capital, whenever they ^re ocifbctly secure. CHAP. XI. ON PRODUCTION. 113 The increase of capital is naturally slow of progress : for it can never take place without actual production of value, and the creation of value is the work of time and labour, besides other ingredients.* Since the producers are compelled to consume values all the while they are engaged in the creation of fresh ones, the utmost they can accumulate, that is to say, add to reproductive capital, is the value they produce beyond what they consume; and the sum of this sur- plus is all the additional wealth that the public or individuals can acquire. The more values are saved arid reproductively employed in the year, the more rapid is the national progress towards pros- perity. Its capital is swelled, a larger quantity of industry is set in motion, and saving becomes more and more practicable, because the additional capital and industry are additional means of production. Every saving or increase of capital lays the groundwork of a perpetual annual profit, not only to the saver himself, but likewise to all those whose industry is set in motion by this item of new capital. It is for this reason that the celebrated Adam Smith likens the frugal man, who enlarges his productive capital but in a solitary instance, to the founder of an almshouse for the perpetual support of a body of labouring persons upon the fruits of their own labour ; and on the other hand, compares the prodigal that encroaches upon his capita], to the roguish steward that should squander the funds of a charitable institution, and leave destitute, not merely those that derived present subsistence from it, but likewise all who might derive it hereafter. He pronounces, without reserve, every prodigal to be a public pest, and every careful arid frugal person to be a benefactor of society, f It is fortunate, that self-interest is always on the watch to preserve the capital of individuals ; and that capital can at no time be with- drawn from productive employment, without a proportionate loss of revenue. Smith is of opinion, that, in every country, the profusion and igno- rance of individuals and of the public authorities, is more than com- pensated by the prevalent frugality of the people at large, and by *The savings of a rich contractor, of a swindler or cheat, of a royal favourite, saturated with grants, pensions, and unmerited emoluments, are actual accumu- lations of capital, and are sometimes made with facility enough. But the values thus amassed by a privileged few, are, in reality, the product of the labour, capital, and Jand, of numbers, who might themselves have made the saving, and turned it to their own account, but for the spoliation of injustice, fraud, or vio- lence. f Wealth of Nations, b. ii. c. 3. Lord Lauderdale, in a work entitled, " Enquiry .nto the Nature and Origin of Public Wealth," has proved, to his own conviction, /n opposition to Smith, that the accumulation of capital is adverse to the increase of wealth : grounding his argument on the position that such accumulation with- draws from circulation values which would be serviceable to industry. But this position is untenable. Neither productive capital, nor the additions made to it, Are withdrawn from circulation : otherwise they would remain inactive, and yield no profit whatever. On the contrary, the adventurer in industry, who makes use of it, employs, disposes of, and wholly consumes it, but in a way that re- produces it, and that with profit. I have noted this error of his lordship, because it has been made the basis of other works on political economy, which abound in false conclusions, having set out on this false principle. 10* P 114 ON PRODUCTION. BOOB L their careful atttention to their own interests.* At least it seems undeniable, that almost all the nations of Europe are at this moment advancing in opulence ; which could not be the case, unless each of them, taken in the aggregate, produced more than it consumed unproductively.f Even the revolutions of modern times appear to have been rather favourable than otherwise to the progress of opu- lence ; for they are no longer, as in ancient days, followed by con- tinued hostile invasion, or universal and protracted pillage ; whereas, on the other hand, they have commonly overthrown the barriers of prejudice, and opened a wider field for talent and enterprise. But it is still a question, whether this frugality, which Smith gives indi- viduals credit for, be not, in the most numerous classes of society, a forced consequence of a vicious political organization. Is it true, that those classes receive their fair proportion of the gross produce, in return for their productive exertions? How many individuals live in constant penury, in the countries considered as the most wealthy ! How many families are there, both in town and country, whose whole existence is a succession of privations ; who, with every thing around them to awaken their desires, are reduced to the satis- faction of the very lowest wants, as if they lived in an age of the grossest barbarism and national poverty ! Thus I am forced to infer, that, though unquestionably there is an annual saving of produce in almost all the nations of Europe, this saving is extorted much more commonly from urgent and natural wants, than from the consumption of superfluities, to which policy and humanity would hope to trace it. Whence arises a strong sus- picion of some radical defect in the policy and internal economical systems of most of their governments. Again, Smith thinks that the moderns are indebted for their com- parative opulence, rather to the prevalence of individual frugality, * Wealth of Nations, b. ii. c. 3. f Except during the continuance of ruinous wars, or excessive public extra- vagance, such as occured in France under the domination of Napoleon. It can- not, be doubted, that, at that disastrous period of her history, even in the moments of her most brilliant military successes, the amount of capital dilapidated exceed- ed the aggregate of savings. Requisitions and the havoc of war, in addition to the compulsory expenditure of individuals, and the pressure of exorbitant taxa- tion, must unquestionably have destroyed more values than the exertions of individual economy could devote to reproductive investment. This sovereign, wholly ignorant of political economy himself, and consequently affecting to despise its suggestions, encouraged his courtiers, like himself, to squander the enormous revenues derived from his favour, in the apprehension that wealth might make them independent. (1) (1) [We are told by Dr. Bowring and Mr. Villiers, in their valuable report on the Commercial Relations between France and Great Britain, published during the present year (1834), that the best authorities agree in declaring that the national riches of France were greatly diminished by the Imperial Regime, and, probably, a much larger amount was sacrificed in increased prices and diminish- ed trade than was lost by the more direct operation of Napoleon's policy.] AMERICAN EDITOR. CHAP. XL ON PRODUCTION. 115 than to the enlargement of productive power. I admit, that some absurd kinds of profusion are more rare now-a-days than formerly ;* but it should be recollected, that such profusion can never be prac- tised, except by a very small number of persons ; and if we take the pains to consider how widely the enjoyment of a more abundant and varied consumption is diffused, particularly among the middle classes of society, I think it will be found, that consumption and fru- gality have increased both together; for they are by no means incom- patible. How many concerns are there in every branch of industry, that, in times of prosperity, yield enough produce to the adventurers to enable them to enlarge both their expenses and their savings? What is true of one particular concern, may possibly be true of the national production in the aggregate. The wealth of France was progressively increasing during the first forty years of the reign of Louis XIV., in spite of the profusion, public and private, that the splendour of the court occasioned. The stimulus given to produc- tion by Colbert, multiplied her resources faster than the court squan- dered them. Some people supposed, that this very prodigality was the cause of their multiplication ; the gross fallacy of which notion is demonstrated by the circumstance, that after the death of that minister, the extravagancies of the court continuing at the same rate, and the progress of production being unable to keep pace with them, the kingdom was reduced to an alarming state of exhaustion. The close of that reign was the most gloomy that can be imagined. After the death of Louis XIV., the public and private expendi- ture of France have been still further increasing ;f and to me it ap- *It is not, however, to be supposed, that the internal economy of ancient and of modern states is so widely different as some may be led to imagine. There is a striking similarity between the rise and fall of the opulent cities of Tyre, Carthage, and Alexandria, and those of the Venetian, Florentine, Genoese, and Dutch republics. The same cause must ever be attended with the same effect. We read of the wonderful riches of Croesus, king of Lydia, even before his conquest of some neighbouring states : whence we may infer, that the Lydians were an industrious and frugal people ; for a king can draw his resources solely from his subjects. The dry study of political economy would lead to this infer- ence ; but it happens to be also confirmed by the historical testimony of Justin, who calls the Lydians a people once powerful in the resources of industry ; (gens industrid quondam potens ;) and gives a notion of their enterprising character, when he tells us that Cyrus did not complete their subjugation, until he had habituated them to indolence, gaming and debauchery. (Jussique cauponias et ludicras artes et lenocinia exercere.) It is clear, therefore, that they must have before been possessed of the opposite qualities. Had Crcesus not taken a turn for pomp and military renown, he would probably have remained a powerful monarch, instead of ending his days in misfortune. The art of connecting cause with effect, and the study of political economy, are probably as conducive to the personal welfare of kings, as to that of their subjects. f This increase of expenditure has not been altogether nominal, and consequeu tial upon the reduction in the standard of the silver coinage of France ; a greater quantity and variety of products were consumed, and those of a better and more expensive quality. And though refined silver is now intrinsically worth nearly as much as in the days of Louis XIV., since the same weight of silver is^ given for the same quantity of wheat; yet the same ranks of society now actually ex- pend more silver in weight as well as in denomination. 116 ON PRODUCTION. BOOK I. pears indisputable, that her national wealth has advanced likewise : Smith himself admits that it did ; and what is true of France is so of most of the other states of Europe in some degree or other. Turgot* falls in with Smith's opinion. He expresses his belief, that frugality is more generally prevalent now than in former times, and gives the following reasons : that, in most European countries, the interest of money was, on the average, lower than it had ever before been, a clear proof of the greater abundance of capita] ; there- fore, that greater frugality must have been exerted in the accumula- tion of that capital than at any former period ; and, certainly, the low rate of interest proves the existence of more abundant capital : but it proves nothing with regard to the manner of its acquirement in fact, it may have been acquired just as well by enlarged produc- tion as by greater frugality, as I have just been demonstrating. However, I am far from denying, that in many particulars, the moderns have improved the art of saving as well as that of producing. A man is not easily satisfied with less gratifications than he has been accustomed to: but there are many which he has learnt to procure at a cheaper rate. For instance, what can be more beautiful.than the coloured furniture papers that adorn the walls of our apartments, combining the grace of design with the freshness of colouring ? For- merly, many of those classes of society that now make use of paper hangings, were content with whitewashed walls, or a coarse ill-exe- cuted tapestry, infinitely dearer than the modern paperings. By the recent discovery of the efficacy of sulphuric acid in destroying the mucilaginous articles of vegetable oils, they have been rendered serviceable in lamps on the Argand principle of a double current of air, which before could only be lighted with fish oil, twice or thrice as dear. This discovery has of itself placed the use of those lamps, and the fine light they give, within reach of almost every class.f For this improvement in frugality, we are indebted to the advances of industry, which has, on the one hand, discovered a greater number of economical processes ; and, on the other, everywhere solicited the loan of capital, and tempted the holders of it, great or small, by better terms and greater security. In times when little industry existed, capital, being unprofitable, was seldom in any other shape than that of a hoard of specie locked up in a strong box, or buried in the earth as a reserve against emergency : however considerable in amount, it yielded no sort of benefit whatever, being in fact little else than a mere precautionary deposit, great or small. But the moment that this hoard was found capable of yielding a profit pro- portionate to its magnitude, its possessor had a double motive for increasing it, and that not of remote or precautionary, but of actual, * Reflex sur la Form, et la Distrib. de.s Rich. 81. ( It is to be feared, that taxation will ultimately deprive the consumer of the ndvantage of sucli improvements. The increase of the internal taxes (tlroits reimiii), of the stamps on patents, of the taxes and impediments affecting the internal transport of commodities, have already brought the price of these vege- oils almost to a par with the article they had so beneficially supplanted CHAP. XL ON PRODUCTION. 117 immediate benefit; since the profit yielded by the capital might, without the least diminution of it, be consumed and procure addi- tional gratifications. Thenceforward it became an object of greater and more general solicitude than before, in those that had none to create, and in those that had one to augment, productive capital; and a capital bearing interest began to be regarded as a property equally lucrative, and sometimes equally substantial with land yielding rent. To such as regard the accumulation of capital as an evil, insomuch as it tends to aggravate the inequality of human fortune, I would sug- gest, that, if accumulation has a constant tendency to the multiplying of large fortunes, the course of nature has an equal tendency to divide them again. A man, whose life has been spent in augmenting his own capital and that of his country, must die at last, and the succes- sion rarely devolves upon a sole heir or legatee, except where the national laws sanction entails and the right of primogeniture. In countries exempt from the baneful influence of such institutions, where nature is left to its own free and beneficent action, wealth is naturally diffused by subdivision through all the ramifications of the social tree, carrying health and life to the furthest extremities.* The total capital of the nation is enlarged at the same time that the capital of individuals is subdivided. Thus, the growing wealth of an individual, when honestly acquired and reproductively employed, far from being viewed with jealous eyes, ought to be hailed as a source of general prosperity. I say honestly acquired, because a fortune amassed by rapine or extortion is no addition to the national stock ; it is rather a portion of capital transferred from the hands of one man, where it already existed, to those of another, who has exerted no productive industry. On the contrary, it is but too common, that wealth ill-gotten is ill-spent also. The faculty of amassing capital, or, in other words, value, I appre- hend to be one cause of the vast superiority of man over the brute creation. Capital, taken in the aggregate, is a powerful engine con- signed to the use of man alone. He can direct towards any one channel of employment the successive accumulations of many gene- rations. Other animals can command, at most, no more than their * It is to be regretted that people should be so little attentive to merit in their testamentary dispositions. There is always a degree of discredit thrown upon the memory of a testator, by his bounty to an unworthy object ; and, on the con- trary, nothing endears him more to the survivors than a bequest dictated by public spirit, or the love of private virtue. The foundation of a hospital, 1 &f an establish- ment for the education of the poor, of a perpetual premium for good actions, or a bequest to a writer of eminent merit, extends the influence of the wealthy beyond the limits of mortality, and enrols his name in the records of honour, (a) (a) This laudable ambition is always proportionate to the wealth, the civil liberty, and the intelligence of a nation. In England, scarcely a year passes over our heads without more than one instance of useful aiid extensive muni- ficence. The bequests to the elder Pitt, to Wilberforce, and other public men, the frequent foundations and enlargements of institutions of relief or education, reflect equal honour on the character of the nation, and the memory of the iuJU vidnals. T. US ON PRODUCTION. BOOK L L % respective individual accumulations, scraped together in the course of a lew days, or a season at the utmost, which can never amount to auy thing considerable : so that, granting them a degree of intel- ligence they do not seem possessed of, that intelligence would yet remain ineffectual, for want of the materials to set it in motion. Moreover, it may be remarked, that the powers of man, resulting from the faculty of amassing capital, are absolutely indefinable; because there is no assignable limit to the capital he may accumu- late, with the aid of time, industry, and frugality CHAPTER XII. OF UNPRODUCTIVE CAPITAL WE have seen above, that values once produced may be devoted-, either to the satisfaction of the wants of those who have acquired them, or to a further act of production. They may also be with- drawn both from unproductive consumption and from reproductive employment, and remain buried or concealed. The owner of values, in so disposing of them, not only deprives himself of the self-gratification he might have derived from their consumption, but also of the advantage he might draw from the productive agency of the value hoarded. He furthermore withholds from industry the profits it might make by the employment of that value. Amongst abundance of other causes of the misery and weakness of the countries subjected to the Ottoman dominion, it cannot be doubted, that one of the principal is, the vast quantity of capital remaining in a state of inactivity. The general distrust and uncer- tainty of the future induce people of every rank, from the peasant to the pacha, to withdraw a.part of their property from the greedy eyes of power: and value can never be invisible, without being inac- tive. This misfortune is common to all countries, where the govern- ment is arbitrary, though in different degrees proportionate to the severity of despotism. For the same reason, during the violence of political convulsions, there is always a sensible contraction of capital, a stagnation'of industry, a disappearance of profit, and a general de- pression while the alarm continues : and, on the contrary, an instan- taneous energy and activity highly favourable to public prosperity, upon the re-establishment of confidence. The saints and madonnas of superstitious nations, the splendid pageantry and richly decorated Vttols of Asiatic worship, gave life to no agricultural or manufacturing enterprise. The riches of the fane and the time lost in adoration *vould really purchase the blessings that barren prayers can never oxtort from the object of idolatry. There is a great deal of inert capital in countries, where the national habits lead to the extended CHAP. XIII. ON PRODUCTION. 119 use of the precious metals in furniture, clothes, and decorations. The silly admiration bestowed by the lower orders on the display of such idle and unproductive finery, is hostile to their own interests. For the opulent individual, who vests 20,000 dollars, in gilding, plate, and the splendour of his establishment, has it not to lay out at interest, and withdraws it from the support of industry of any kind. The nation loses the annual revenue of so much capital, and the annual profit of the industry it might have kept in activity. Hitherto we have been considering that kind of value only, which is capable, after its creation, of being, as it were, incorporated with matter, and preserved for a longer or shorter period. But all the values producible by human industry, have not this quality. Some there are, which must have reality, because they are in high estima- tion, and purchased by the exchange of costly and durable products, which nevertheless have themselves no durability, but perish the moment of their production. This class of values I shall define in the ensuing chapter, and denominate immaterial products.* CHAPTER XIII. OF IMMATERIAL PRODUCTS, OR VALUES CONSUMED AT THE MOMENT OS- PRODUCTION. A PHYSICIAN goes to visit a sick person, observes the symptoms of disease, prescribes a remedy, and takes his leave without deposit- ing any producj, that the invalid or his family can transfer to a third person, or even keep for the consumption of a future day. Has the industry of the physician been unproductive ? Who can for a moment suppose so ? The patient's life has been saved perhaps. Was this product incapable of becoming an object of barter ? By no means : the physician's advice has been exchanged for his fee ; buj the want of this advice ceased the moment it was given. The act of giving was its production, of hearing its consumption, and the consumption and production were simultaneous. This is what I call an immaterial product. The industry of a musician or an actor yields a product of the same kind: it gives one an amusement, a pleasure one can not pos- sibly retain or preserve for future consumption, or as the object of barter for other enjoyments. This pleasure has its price, it is true . * It was my first intention to call these perishable products, but this 'erm would be equally applicable to products of a material kind. Intransferahle. would be equally incorrect, for this class of products does pass from the pro- ducer to the consumer. The word transient does not exclude all idea of dura lion whatever, neither does the word momentary. 120 ON PRODUCTION. BOOK I but it has no further existence, except perhaps in the memory, ana no exchangeable value, after the instant of its production. Smith will not allow the name of products to the results of these branches of industry. Labour so bestowed he calls unproductive; an error he was led into by his definition of wealth, which he defines to consist of things bearing a value capable of being preserved, instead of extending the name to all things bearing exchangeable value: consequently, excluding products consumed as soon as created. The industry of the physician, however, as well as that of the public functionary, the advocate or the judge, which are all of them of the same class, satisfies wants of so essential a nature, that without those professions no society could exist. Are not, then, the fruits of their labour real? They are so far so, as to be purchased at the price of other and material products, which Smith allows to be wealth ; and by the repetition of this kind of barter, the producers of immaterial products acquire fortunes.* To descend to items of pure amusement, it cannot be denied, that the representation of a good comedy gives as solid a pleasure as a box of comfits, or a discharge of fire-works, which are products, even within Smith's definition. Nor can I discover any sound rea- son, why th<; talent of the painter should be deemed productive, and not the lalent of the musician, f Smith himself has exposed the error of the economist in confining the term, wealth, to the mere value of the raw material contained in each product ; he advanced a great step in political economy, by demonstrating wealth to consist of the raw material, plus the value added to it by industry; but, having gone so far as to promote to the rank of wealth an abstract commodity, value, why reckon it as nothing, however real and exchangeable, when not incorporated in matter ? This is the more surprising, because he went so far as to treat of labour, abstracted from the matter wherein-it is employed ; to examine the causes which operate upon and influence its value; and even to propose that value as the safest and least variable mea- sure of all other values.J The nature of immaterial products makes it impossible ever to accumulate them, so as to render them a part of the national capital. A people containing a host of musicians, priests, and public func- tionaries might be abundantly amused, well versed in religious doctrines, and admirably governed ; but that is all. Its capital would receive no direct accession from the total labour of all these individuals, though industrious enough in their respective vocations, because their products would be consumed as fast as produced. * Wherefore de Verri is wrong in asserting, that the occupations of the sove- leign, the magistrate, the soldier, and the priest, do not fall within the cognizance ef political economy. (Meditazioni sulla Economic, Politico, 24.) f This error has already been pointed out by M. Germain Gamier, in the notes to his French translation of Smith. \ Some writers, who have probably taken but a cursory view of the positions here laid down, still persist in setting down the producers of immaterial product* CHAP. XIII. ON PRODUCTION. 121 Consequently, nothing is gained on the score of public prosperity, by ingeniously creating an unnatural demand for the labour of any of these professions ; the labour diverted into that channel of produc- tion can not be increased, without increasing the consumption also. If this consumption yield a gratification, then indeed we may console ourselves for the sacrifice ; but when that consumption is itself an evil, it must be confessed the system which causes it is deplorable enough. This occurs in practice, whenever legislation is too complicated. The study of the law, becoming more intricate and tedious, occupies more persons, whose labour must likewise be better paid. What does society gain by this 1 Are the respective rights of its members- bet- ter protected 1 Undoubtedly not : the intricacy of law, on the con- trary, holds out a great encouragement to fraud, by multiplying the chances of evasion, and very rarely adds to the solidity of title or of right. The only advantage is, the greater frequency and duration of suits. The same reasoning applies to superfluous offices in the pub- lic administration. To create an office for the administration of what ought to be left to itself, is to do an injury to the subject in the first instance, and make him pay for it afterwards as if it were a benefit.* Wherefore it is impossible to admit the inference off M. Gamier, that because the labour of physicians, lawyers, and the like, is pro- ductive, therefore a nation gains as much by the multiplication of tha class of labour as of any other. This would be the same as bestow- ing upon a material product more manual labour than is necessary for its completion. The labour productive of immaterial products, like every other labour, is productive so far only as it augments the utility, and thereby the value of a product : beyond this point it is a purely unproductive exertion. To render the laws intricate pur- posely to give lawyers full business in expounding them, would be equally absurd, as to spread a disease that doctors may find practice. Immaterial products are the fruit t of human industry, in which term we have comprised every kind of productive labour. It is not so .easy to understand how they can at the same time be lite fruit of capital. Yet these products are for the most part the result of some talent or other, which always implies previous study ; and no study can take place without advances of capital. Before the advice of the physician can be given or taken, thephy- amongst the unproductive labourers. But it is vain to struggle against the nature of things. Those at all conversant with the science of political economy, are compelled to yield involuntary homage to its principles. Thus Sismondi, after having spoken of the values expended in the wages of unproductive labourers, goes on to say, " Ce sont des Consummations rapides qui suivent imme- diatement la production," Nouv. Princ. torn. ii. p. 203; admitting a production oy those he had pronounced to be unproductive ! * What, then, are we to think of those who assert in substance, if not in words, that such a formality or such a tax is productive of one benefit at least, namely, the maintenance of such or such an establishment of clerks and officers * | Traduction de Smith, note 20. 11 Q 122 ON PRODUCTION. BOOK I. sician or his relations must first have defrayed the charges of an edu- cation of many years' duration : he must have subsisted \vhile a stu- dent; professors must have been paid; books purchased; journeys perhaps have been performed ; all which implies the disbursement of a capital previously accumulated.* So likewise the lawyer's opin- ion, the musician's song, &c. are products, that can never be raised without the concurrence of industry and capital. Even the ability of the public functionary is an accumulated capital. It requires the same kind of outlay, for the education of a civil or military engineer, as for that of a physician. Indeed we may take it for granted, that the funds expended in the training of a young man for the public service, are found by experience to be a fair investment of capital, and that labour of this description is well paid ; for we find more applicants than offices in almost every branch of administration, even in countries where offices are unnecessarily multiplied. The industry productive of immaterial products will be found to go through exactly the same process, as, in the analysis made in the l/eginnirig of this work, we have shown to be followed by industry in general. This may be illustrated by an example. Before an ordinary song can be executed, the arts of the composer and the practical musician must have been regular and distinct callings ; and the best mode of acquiring skill in them must have been discovered ; this is the department of the man of science, or theorist. The appli- cation of this mode and of this art, has been left to the composer and singer, who have calculated, the one in composing his tune, the others in the execution of it, that it would afford a pleasure, to which the audience would attach some value or other. Finally, the execution is the concluding operation of industry. There are, however, some immaterial products, with respect to which the two first operations are so extremely trifling, that one may almost account them as nothing. Of this description is the service of a menial domestic. The art of service is little or nothing, and the application of that art is made by the employer ; so that nothing is left to the servant, but the executive business of service, which is the last and lowest of industrious operations. It necessarily follows, that, in this class of industry, and some few others practised by the lowest ranks of society, that of the porter for instance, or of the prostitute, &c. &c. : the charge of training being Httle or nothing, the products may be looked upon not only as the fruits of very coarse and primitive industry, but likewise as products, to the creation of which capital has contributed nothing ; for I can not think the expense of these agents' subsistence from infancy, till the age of emancipation from parental care, can be considered as a * I will not here anticipate the investigation of the profits of industry and ca- pital, but confine myself to observe, en passant, that capital is thrown away upon the physician, and his fees improperly limited, unless, besides the recompense of his actual labour and talent, (which latter is a natural agent gratuitously given to him,) they defray the interest of the capital expended in his education, and not the common rate of interest, but calculated at the rate of an annuity. CHAP. Xin. ON PRODUCTION. 123 capital, the interest of which is paid by the subsequent profits. I shall give my reasons for this opinion when I come to speak of wages.* The pleasures one enjoys at the price of any kind of personal exer- tion, are immaterial products, consumed at the instant of production by the very person that has created them. Of this description are the pleasures derived from arts studied solely for self-amusement. In learning music, a man devotes to that study some small capital, some time and personal labour ; all which together are the price paid for the pleasure of singing a new air or taking part in a concert. Gaming, dancing, and field-sports, are labours of the same kind. The amusement derived from them is instantly consumed by the persons who have performed them. When a man executes a paint- ing, or makes any article of smith's or joiner's work for his amuse- ment, he at the same time creates a durable product or value, and an immaterial product, viz. his personal amusementf In speaking of capital, we have seen, that part of it is devoted to the production of material products, and part remains wholly unpro- ductive. There is also a further part productive of utility or plea- sure, which, can, therefore, be reckoned as a portion neither of the capital engaged in the production of material objects, nor of that absolutely inactive. Under this head may be comprised dwelling- houses, furniture and decorations, that are an addition to the mere pleasures of life. The utility they afford is an immaterial product. When a young couple sets up house-keeping for the first time, the plate they provide themselves with cannot be considered as abso- lutely inactive capital, for it is in constant domestic use; nor can it be reckoned as capital engaged in the raising of material products; for it leads to the production of no one object capable of being re- served for future consumption ; neither is it an object of annual con sumption, for it may last, perhaps, for their joint lives, and be handed down to their children ; but it is capital productive of utility and pleasure. Indeed, it is so much value accumulated or in other words withdrawn from reproductive consumption ; consequently, yielding neither profit nor interest, but productive of some degree of benefit or utility, which is gradually consumed and incapable of being real- ised, yet it is possessed of real and positive value, since it is occa- * The wages of the mere labourer are limited to the bare necessaries of life, without which his agency cannot be continued and renewed ; there is no surplus for the interest on capital. But the subsistence of his children, until old enough to earn their livelihood, is comprised in the necessaries of the labourer. t An indolent and inert people is always little addicted to amusements Result- ing from the exercise of personal faculties. Labour is attended with so much pain to them, as very few pleasures are intense enough to repay. The Turks think us mad to find pleasure in the violent motions of the dance; without re fleeting, that it causes to us infinitely less fatigue than to themselves. They prefer pleasures prepared by the fatigue of others. There is, perhaps, as much industry expended on pleasures in Turkey as with us; but it is exerted in genenu by slaves, who do not participate in the product. 124 ON PRODUCTION. BOOK! sionally the object of purchase : as in the instance of the rent of a house or the hire of furniture, and the like. Although it be a sad mistake of personal interest to vest the small- est particle of capital in a manner wholly unproductive, it is by no means so to lay out, in a way productive of utility or amusement, so much as may be not disproportionate to the circumstances of the individual. There is a regular gradation of the ratio of capital so vest- ed by individuals respectively, from the rude furniture of the poor man's hovel, up to the costly ornaments and dazzling jewels of the wealthy. When a nation is rich, the poorest family in it possesses a capital of this kind, not indeed of any great amount, but still enough to satisfy moderate and limited desires. The prevalence of general wealth in a community is more strongly indicated by meeting uni- versally with some useful and agreeable household conveniences in the dwellings of the inferior ranks, than by the splendid palaces and costly magnificence of a few favourites of fortune, or by the casual display of diamonds and finery we sometimes see brought together in a large city, where the whole wealth of the place is often exhibit- ed at one view, at a fete or a theatre of public resort ; but which, after all, are a mere trifle, compared with the aggregate value of the household articles of a great people. The component items of a capital producing bare utility or amuse- ment, are liable to wear and tear, though in a very slight degree; and if that wear and tear be not made good out of the savings of annual revenue, there is a gradual dissipation and reduction of capital. This remark may appear trifling ; yet how many people think they are living upon their revenue, when they are at the same time par- tially consuming their capital ! Suppose, for instance, a man is the proprietor of the house he lives in ; if the house be calculated to last 100 years, and have cost 20,000 dollars in the building, it costs the proprietor or his heirs 200 dollars per annum, exclusive of the interest upon the original cost, otherwise the whole capital will be extinguished, or nearly so, by the end of 100 years. The same rea- soning is applicable to every other item of capital devoted to the production of utility or pleasure ; to a sideboard, a jewel, every im- aginable object, in short, that comes under the same denomination. And, vice versd, when annual revenue, arising from whatever source, is encroached upon for the purpose of enlarging the capital devoted to the production of useful or agreeable objects, there is an actual increase of capital and of fortune, though none of revenue. Capital of this class, like all other capital, without exception, is formed by the partial accumulations of annual products. There is no oth*er way of acquiring capital, but by personal accumulation, or by succession to accumulation of others. Wherefore, the reader is referred on this head to Chap. XI, where I have treated of the accu- mulation of capital. A public edifice, a bridge, i higtiwav , are savings or accumulations of revenue, devoted to the fonnatk.n of < capital, whose returns art an immaterial product consumed by the public at large. If the con CHAP. XIII. ON PRODUCTION. 125 struction of a bridge or highway, added to the purchase of the ground it stands upon, have cost 200,000 dollars, the use the public makes of it may be estimated to cost 10,000 dollars per annum.* There are some immaterial products, towards which the land is a principal contributor. Such is the pleasure derived from a park or pleasure-garden. The pleasure is aflbrded by the continual and daily agency of the natural object, and is consumed as fast as produced. A ground yielding pleasure must, therefore, not be confounded with ground lying waste or in fallow. Wherein again appears the anal- ogy of land to capital, of which, as we have seen, some part is pro- ductive of immaterial products, and some part is altogether inactive. Gardens and pleasure-grounds have generally cost some expense in embellishment; in which case, capital and land unite their agency to yield an immaterial product. Some pleasure-grounds yield likewise timber and pasturage : these are productive of both classes of products. The old-fashioned gar- dens in France yielded no material product ; those of modern times are somewhat improved in this particular, and would be more so, if culinary herbs and fruit-trees were oftener introduced. Doubtless, it would be harsh to find fault with a proprietor in easy circumstances, for appropriating ^art of his freehold to the mere purpose of amuse- ment. The delightful moments he there passes with his family around him, the wholesome exercise he takes, the spirits he inhales, are among the most valuable and substantial blessings of life. By all means then let him lay out on the ground as he likes, and give full scope to his taste, or even caprice; but if caprice can be directed to an useful end, if he can derive profit without abridging enjoyment, his garden will have additional merit, and present a two-fold source of delight to the eye of the statesman and the philosopher. . I have seen some few gardens possessed of this double faculty of production ; whence, although the lime, horse-chestnut and sycamore trees, and others of the ornamental kind, were by no means ex- cluded, any more than the lawns and parterres; yet at the same time the fruit-trees, decked in the bloom of vernal promise, or weighed down by the maturity of autumnal wealth, added a variety and rich- ness of colouring to the other local beauties. The advantages of dis- tance and position were attended to without violating the conve- nience of division and inclosure. The beds and borders, planted with vegetables, were not provokingly straight, regular, or uniform, * If it entail a further charge of 300 dollars for annual repairs and mainte- nance, the public consumption of pleasure or utility may be set down at 10,200 dollars per annum. This is the only way of taking the account, with a view to compare the advantage derived by the payers of public taxes, with the sacrifices imposed on them for the acquisition of such conveniences. In the case put above, the public will be a gainer, if the outlay of 10,200 dollars have effected an annual saving in the charge of national production, or, what is the same thing, an annual increase of the national product, of still larger amount. In the contrary supposition, the national administration will have led the nation into a losing concern. 11* 120 ON PRODUCTION. BOOK I but harmonised with the undulations of .the surface, and of vegetation of larger growth ; and the walks were so disposed as to serve both for'pleasure and cultivation. Every thing was arranged with a view to ornament, even to the vine-trelliced well for filling the watering pots. The whole, in short, was so ordered, as if designed to impress the conviction, that utility and beauty are by no means incompatible, and that pleasure may grow up by the side of wealth. A whole country may, in like manner, grow, rich even upon its ornamental possessions. Were trees planted wherever they could thrive without injury to other products,* besides the accession of beauty and salubrity, and the additional moisture attracted by the multiplication of timber-trees, the value of the timber alone would, in a country of much extent, amount to something considerable. There is this advantage, in the cultivation of timber-trees, that they require no human industry beyond the first planting, after which nature is the sole agent of their production. But it is not enough merely to plant, we must check the desire of cutting down, until the weak and slender stalk, gradually imbibing the juices of the earth and atmosphere, shall, without the hand of cultivation, have acquired bulk and solidity, and spread its lofty foliage to the heavens.f The best that man can do for it is, to forget it for some years ; and even where it yields no annual product, it will recompense his forbearance when arrived at maturity, by an ample supply of firing, and of tim- ber for the carpenter, the joiner, and the wheel-wright. In all ages, the love of trees and their cultivation has been strongly recommended by the best writers. The historian of Cyrus records, among his chief titles to renown, the merit of having planted all Asia Minor. In the United States, upon the birth of a daughter, the cultivator plants a little wood, to grow up with her, and to be her portion on the day of marriage. (1) Sully, whose views of policy, were extremely enlightened, enriched most of the provinces of France with the plantation he directed. I have seen several, to which public gratitude still affixes his name ; and they remind me of the saying of Addison, who was wont to exclaim, whenever he saw a plantation, " A useful man has passed this way." " * In many countries, an exaggerated notion seems to prevail, of the damage done by timber-trees, to other products of the soil ; yet it should seem, that they rather enhance than diminish the revenue of the landholder; for we find those countries most productive, that are the best clothed with timber : witness Nor mandy, England, Belgium and Lombardy. f The leaves of trees absorb the carbonic-acid gas floating in the atmosphere we breathe, and which is so injurious to respiration. When this gas is super- abundant, it brings on asphyxia, and occasions death. On the contrary, vegeta- tion increases the proportion of oxygen, which is the gas most favourable to re- spiration and to health. Ce.te.ris paribus, those towns are the healthiest, which have the most open spaces covered with trees. It would be well to plant all our spacious quays. (1) The American cultivator might be said, with much greater semblance of truth, on the birth of a daughter, to cut down " a little wood," instead of plant 'ng one AMERICAN EDITOR. CHAP. XIV. ON PRODUCTION. 127 As yet we have been taken up with the consideration of the agents essential to production ; without whose agency mankind would have no other subsistence or enjoyment, than the scanty and limited sup- ply that nature affords spontaneously. We first investigated the mode in which these agents, each in its respective department, and aft in concert, co-operate in the work of production, and have after- wards examined in detail the individual action of each, for the fur- ther elucidation of the subject. We must now proceed to examine the intrinsic and accidental causes, which act upon production, and clog or facilitate the exertion of productive agents. CHAPTER XIV. OF THE RIGHT OF PROPERTY. IT is the province of speculative philosophy to trace the origin of the right of property ; of legislation to regulate its transfer ; and of political science to devise the surest means of protecting that right Political economy recognises the right of property solely as the most powerful of all encouragements to the multiplication of wealth, and is satisfied with its actual stability, without inquiring about its origin or its safeguards. In fact, the legal inviolability of property is obvi- ously a mere mockery, where the sovereign power is unable to make the laws respected, where it either practises robbery itself,* or is impotent to repress it in others; or where possession is rendered perpetually insecure, by the intricacy of legislative enactments, and the subtleties of technical nicety. Nor can property be said to exist, where it is not matter of reality as well as of right. Then, and then only, can the sources of production, namely, land, capital, and indus- try, attain their utmost degree of fecundity. (1) * The strength of an individual is so little, when opposed to that of the go- vernment he lives under, that the subject can have no security against the exac- tions and abuses of authority, except in those countries where the guardianship of the laws is entrusted to the all-searching vigilance of a free press, and their violation checked by an efficient national representation. (1) Although', according to our author, it is the province of speculative philos- ophy to trace the origin of property, the existence of which, in all politico-econo- mical inquiries, is assumed as the foundation of national wealth, it may not here be improper to introduce a few observations on the Right of Property, illustrating its historical origin, and pointing out its true character. Most writers on natu- ral law, among whom may be named Grotius, Puffendorff, Barbeyrac, and Locke,' ascribe, in general, the origin of property to priority of occupancy, and have much perplexed themselves in attempting to prove how this act should give an exclu- sive right of individual enjoyment to what was previously held in common Elackstone, although he does not enter into the dispute about the manner, sus 'ia 128 ON PRODUCTION. BOOK I. There are some truths so completely self-evident, that demonstra- tion is quite superfluous. This i? one of that number. For who will attempt to deny, that the certainty of enjoying the fruits of ono's been remarked, in which occupancy conveys a right of property, expresses no doubt about its having this effect, independent of positive institutions. Later writers on jurisprudence have adopted other theories on the subject of pro- perty, which being altogether unsatisfactory, we will not notice, except to remark that the most refined and ingenious speculations, although equally inconclusive, respecting the nature and origin of property, are those of Lord Kames, in the Essay on Property, in his Historical Law Tracts. DUGALD STEWART, however, is the first inquirer who has taught us to think and reason with accuracy on this subject, and it is to his observations on the Right of Property, contained in the supplement to the chapter, "Of Justice," in his -work on the "Philosophy of the Active and Moral Powers of Man," that we must refer the reader who is desirous of possessing just and unanswerable argu- ments for the true foundations on which property rests. We must here content ourselves with extracting a few passages, which will exhibit this illustrious phi- losopher's views of the origin of the acquisition of property, which he traces to two distinct sources. " It is necessary," says Stewart, " to distinguish carefully the complete right of property, which is founded on labour, from the transient right of possession which is acquired by mere priority of occupancy; thus, before the appropriation of land, if any individual had occupied a particular spot, for repose or shade, it would have been unjust to deprive him of possession of it. This, however, was only a transient right. The spot of ground would again become common, the moment the occupier had left it; that is, the right of possession would remain no longer than the act of possession. Cicero illustrates this happily by the simili- tude of a theatre. ' Quemadmodum theatrum, cum commune sit, recte tamen dici potest ejus esse cum locum quern quisque occuparit.' The general conclusions which I deduce are these : 1. That in every state of society labour, wherever it is exerted, is understood to found a right of property. 2. That, according to natural law, labour is the only original way of acquiring property. 3. That, according to natural law, mere occupancy founds only a right of possession ; and that, whenever it founds a complete right of property, it owes its force to positive institutions." After premising these leading propositions, he proceeds with what he terms a blight historical sketch of the different systems respecting the origin of property, from which we have only room to copy the following passage, which, however, contains this eminent author's views of the right of property, as recognised by the law of nature; and the right of property, as created by the municipal regU' lotions, and demonstrating the futility of the attempts hitherto made to resolvfl all the different phenomena into one general principle. " In such a state of things as that with which we are connected, the right of property must be understood to derive its origin from two distinct sources; the one is, that natural sentiment of the mind which establishes a moral connexion between labour and an exclusive enjoyment of the fruits of it ; the other is the municipal institutions of the country where we live. These institutions every- where take rise partly from ideas of natural justice and partly (perhaps chiefly) from ideas of supposed utility, two principles which, when properly under- stood, are, I believe, always in harmony with each other, and which it ought to be the great aim of every legislator to reconcile to the utmost of his power. Among those questions, however, which fall under the cognizance of positive laws, there .are many on which natural justice is entirely silent, and which, of consequence, may be discussed on principles of utility solely. Such are most of the questions concerning the regulation of the succession to a man's property after IMS death; uf some of which it perhaps may be found that the determination ought to vary with the circumstances of the society, and which have certainly, in fact, boon frequently determined by the caprice of the legislator, or by some principle uiti CH*P. XTV. ON PRODUCTION. 120 land, capital and labour, is the most powerful inducement to render them productive? Or who is dull enough to doubt, that no one knows so well as the proprietor how to make the best use of his property? Yet how often in practice is that inviolability of pro- perty disregarded, which, in theory, is allowed by all to be so immensely advantageous 1 How often is it broken in upon for the most insignificant purposes ; and its violation, that should naturally excite indignation, justified upon the most flimsy pretexts] So few persons are there who have a lively sense of any but a direct injury, or, with the most lively feelings, have firmness enough to act up to their sentiments! There is no security of property, where a despotic authority can possess itself of the property of the subject against his consent. Neither is there such security, where the consent is merely nominal and delusive. In England, the taxes are imposed by the national representation; if, then, the minister be in the possession of an absolute majority, whether by means of electioneering influence, or by the overwhelming patronage foolishly placed at his disposal, taxation would no longer be in reality imposed by the national repre- sentatives ; the body bearing that name would, in effect, be the repre- sentatives of the minister; and the people of England would be forcibly subjected to the severest privations, to further projects that possibly might be every way injurious to them.* It is to be observed that the right of property is equally invaded, by obstructing the free employment of the means of production, as by violently depriving the proprietor of the product of his land, capital, or industry : for the right of property, as defined by jurists, is the right of use or even abuse. Thus, landed property is violated by arbitrarily prescribing tillage or plantation ; or by interdicting particular modes of cultivation ; the property of the capitalist is violated, by prohibiting particular ways of employing it ; for instance, by interdicting large purchases of corn, directing all bullion to be carried to the mint, forbidding the proprietor to build on his own soil, or prescribing the form and requisites of the building. It is a further violation of the capitalist's property to prohibit any kind of industry, or to load it with duties amounting to prohibition, after he has once embarked his capital in that way. Jt is manifest, that a prohibition upon sugar would annihilate most of the capital of the sugar refiners, vested in furnaces, utensils, &c. &c. f The property a man has in his own industry, is violated, whenever mately resolvable into an accidental association of ideas. Indeed, various case? may be supposed in which it is not only useful, but necessary, that a rule should be fixed; while, at the same time, neither justice nor utility seem to be much interested in the particular decision." AMERICAN EDITOR. * Adam Smith has asserted, that the security afforded to property by the law* of England has more than counteracted the repeated faults and blunders of its government. It may be doubted, whether he would now adhere to that opinion. t It would be vain to say to him, why not employ your works in some other way ? Probably, neither the spot nor the works of a refinery could be otheiwi?* employed without enormous loss. 130 ON PRODUCTION. BOOK I ne is forbidden the free exercise of his faculties ar. i f ilents, except insomuch as they would interfere with the rights or' third parties. A similar violation is committed when a man's labour is put in requi- sition for one purpose, though designed by himself for another ; as when an artisan or trader is forced into the military life, whether permanently or merely for the occasion. I am well aware, that the importance of maintaining social order, whereon the security of property depends, takes precedence of pro- perty itself; for which very reason, nothing short of the necessity of defending that order from manifest danger can authorise these or similar violations of individual right. And this it is which impresses upon the proprietors the necessity of requiring, in the constitution of the body politic, some guarantee or other, that the public service shall never be made a mask to the passions and ambition of those in power. Thus taxation, when not intended as an engine of national depres- sion and misery, must be proved indispensable to the existence of social order; every step it takes beyond these limits, is an actual spoliation ; for taxation, even where levied by national consent, is a violation of property ; since no values can be levied, but upon the produce of the land, capital, and industry of individuals. But there are some extremely rare cases, where interference between the owner and his property is even beneficial to production itself. For example, in all countries that admit the detestable right of slavery, a right standing in hostility to all others, it is found expe- dient to limit the master's power over his slave, (a) Thus also, if a * The industrious faculties are, of all kinds of property, the least questiona- ble ; being derived directly either from nature, or from personal assiduity. The property in them is of higher pretensions than that of the land, which may generally be traced up to an act of spoliation ; for it is hardly possible to show an instance, in which its ownership has been legitimately transmitted from the first occupancy. It ranks higher than the right of the capitalist also ; for even taking it for granted, that this latter has been acquired without any spoliation whatever, and by the gradual accumulations of ages, yet the succession to it could not have been established without the aid of legislation, which aid may have been granted on conditions. Yet, sacred as the property in the faculties of industry is, it is constantly infringed upon, not only in the flagrant abuse of personal slavery, but in many other points of more frequent occurrence. A government is guilty of an invasion upon it, when it appropriates to itself a particular branch of industry, the business of exchange and brokerage for exam- ple ; or when it sells the exclusive privilege of conducting it. It is still a greater violation to authorize a gendarme, commissary of police, or judge, to arrest and detain individuals at discretion, on the plea of public safety or security to the constituted authorities ; thus depriving the individual of the fair and reasonable certainty of having his time and faculties at his own disposal, and of being able to complete what he may begin upon. What robber or despoiler could commit n more atrocious act of invasion upon the public security, certain as he is of being speedily put down, and counteracted by private as well as public opposition 1 \a) This is merely an instance of the necessity of counteracting one poison dv another. T. CHAP. XIV. ON PRODUCTION. 131 society stand in urgent need of timber for the shipwright or carpen- ter, it must reconcile itself to some regulations respecting the felling of private woods ;* or the fear of losing the veins of mineral that intersect the soil, may sometimes oblige a government to work the mines itself. It may be readily conceived, that, even if there were no restraints upon mining, want of skill, the impatience of avarice, or the insufficiency of capital, might induce a proprietor to exhaust the superficial, which are commonly the poorest loads, and occasion the loss of superior depth and quality. (1) Sometimes a vein of mineral passes through the ground of many proprietors, but is acces- sible only in one spot. In this case, the obstinacy of a refractory proprietor must be disregarded, and the prosecution of the works be compulsory ; though, after all, I will not undertake to affirm, that it would not be more advisable on the whole to respect his rights, or that the possession of a few additional mines is not too dearly pur- chased by this infringement upon the inviolability of property. Lastly, public safety sometimes imperiously requires the sacrifice of private property ; but that sacrifice is a violation, notwithstanding an'indemnity given in such cases. For the right of property implies the free disposition of one's own ; and its sacrifice, however fully indemnified, is a forced disposition. When public authority is not itself a spoliator, it procures to the nation the greatest of all blessings, protection from spoliation by others. Without this protection of each individual by the united force of the whole community, it is impossible to conceive any con- siderable development of the productive powers of man, of land, and of capital ; or even to conceive the existence of capital at all ; for it is nothing more than accumulated value, operating under the safe- guard of authority. This is the reason why no nation has ever arrived at any degree of opulence, that has not been subject to a regular government Civilized nations are indebted to political organization for the innumerable and infinitely various productions, that satisfy their infinite wants, as well as for the fine arts and the opportunities of leisure that accumulation affords, without which the * Probably, also, were it not for maritime wars, originating, sometimes in puerile vanity, and sometimes in national errors of self-interest, commerce would be the best purveyor of timber for ship-building; so that, in reality, the abuse of the interference of public authority, in respect to the growth of private timber, is only a consequence of a previous abuse of a more destructive and less excusable character. (1) [If no one knows so well as the proprietor, how to make the best use of his property, as our author has just remarked, what advantage can result to society from the interference, in any case, of public authority, with the rights of individuals in the business of production. Nothing but the absolute maintenance of the social order should ever be permitted, for an instant, to violate the sacred right of private property. Quite as specious, though equally unsound reasons may be assigned for imposing restraints upon a variety of other employments besides mining.] AMERICAN EDITOR. 132 ON PRODUCTION. BOOK L faculties of the mind could never be cultivated, or man by their means attain the full dignity, whereof his nature is susceptible. The poor man, that can call nothing his own, is equally interested with the rich in upholding the inviolability of property. His personal services would not be available, without the aid of accumulations previously made and protected. Every obstruction to, or dissipation of these accumulations, is a material injury to his means of gaining a livelihood ; and the ruin and spoliation of the higher is as certainly followed by the misery and degradation of the lower classes. A confused notion of the advantages of this right of property has been equally conducive with the personal interest of the wealthy, to make all civilized communities pursue and punish every invasion of pro- perty as a crime. The study of political economy is admirably calculated to justify and confirm this act of legislation; inasmuch as it explains why the happy effects, resulting from the right of pro- perty, are more striking in proportion as that right is well guarded by political institutions. CHAPTER XV. OF THE DEMAND OR MARKET FOR PRODUCTS. IT is common to hear adventurers in the different channels of industry assert, that their difficulty lies not in the production, but in the disposal of commodities; that products would always be abun- dant, if there were but a ready demand, or market for them. When the demand for their commodities is slow, difficult, and productive of little advantage, they pronounce money to be scarce ; the grand object of their desire is, a consumption brisk enough to quicken sales and keep up prices. But ask them what peculiar causes and circum- stances facilitate the demand for their products, and you will soon perceive that most of them have extremely vague notions of these matters ; that their observation of facts is* imperfect, and their ex- planation still more so ; that they treat doubtful points as matter of certainty, often pray for what is directly opposite to their interests, and importunately solicit from authority a protection of the most mischievous tendency. To enable us to form clear and correct practical notions in regard to markets for the products of industry, we must carefully analyse the best established and most certain facts, and apply to them the inferences we have already deduced from a similar way of proceed- ing; and thus perhaps we may arrive at new and important truths, that may serve to enlighten the views of the agents of industry, and to give confidence to the measures of governments anxious to afford them encouragement. CHAP. XV. ON PRODUCTION. 133 A man who applies his labour to the investing of objects with value by the creation of utility of some sort, can not expect such a value to be appreciated and paid for, unless where other men have the means of purchasing it. Now, of what do these means consist? Of other values of other products, likewise the fruits of industry, capital, and land. Which leads us to a conclusion that may at first sight appear paradoxical, namely, that it is production which opens a demand for products. Should a tradesman say, " I do not want other products for my woollens, I want money," there could be little difficulty in convinc- ing him" that his customers could not pay him in money, without having first procured it by the sale of some other commodities of their own. "Yonder farmer," he may be told, "will buy your woollens, if his crops be good, and will buy more or less according to their abundance or scantiness ; he can buy none at all, if his crops fail altogether. Neither can you buy his wool nor his corn yourself, unless you contrive to get woollens or some other article to buy withal. You say, you only want money ; I say, you want other commodities, and not money. For what, in point of fact, do you want the money? Is it not for the purchase of raw materials or stock for your trade, or victuals for your support?* Wherefore, it is products that you want, and not money. The silver coin you will have received on the sale of your own products, and given in the purchase of those of other people, will the next moment execute the same office between other contracting parties, and so from one to another to infinity; just as a public vehicle successively transports objects one after another. If you can not find a ready sale for your commodity, will you say, it is merely for want of a vehicle to trans- port it ? For, after all, money is but the agent of the transfer of values. Its whole utility has consisted in conveying to your hands the value of the commodities, which your customer has sold, for the purpose of buying again from you ; and the very next purchase you make, it will again convey to a third person the value of the pro- ducts you may have sold to others. So that you will have bought, and every body must buy, the objects of want or desire, each with the value of his respective products transformed into money for the moment only. Otherwise, how could it be possible that there should now be bought and sold in France five or six times as many commodities, as in the miserable reign of Charles VI.? Is it not obvious, that five or six times as many commodities must have been produced, and that they must have served to purchase one or the other?" Thus, to say that sales are dull, owing to the scarcity of money, is to mistake the means for the cause; an error that proceeds from the circumstance, that almost all produce is in the first instance * Even when money is obtained with a view to hoard or bury it, the ultimata object is always to employ it in a purchase of some kind. The heir of the lucky finder uses it in that way, if the miser do not ; for money, as money, has no otlie* use than to buy with. 12 134 ON PRODUCTION. BOOK L exchanged for money, before it is ultimately converted into other produce : and the commodity, which recurs so repeatedly in use, appears to vulgar apprehensions the most important of commodities, and the end and object of all transactions, whereas it is only the medium. Sales cannot be said to be dull because money is scarce, but because other products are so. There is always money enough to conduct the circulation and mutual interchange of other values, when those values really exist. Should the increase of traffic require more money to facilitate it, the want is easily supplied, and is a strong indication of prosperity a proof that a great abundance of values has been created, which it is wished to exchange 'for other values. In such cases, merchants know well enough how to find substitutes for the product serving as the medium of exchange or money : * and money itself soon pours in, for this reason, that all produce naturally gravitates to that place where it is most in demand. It is a 'good sign when the business is too great for the money ; just in the same way as it is a good sign when the goods are too plentiful for the warehouses. When a superabundant article can find no vent, the scarcity of money has so little to do with the obstruction of its sale, that the sellers would gladly receive its value in goods for their own con- sumption at the current price of the day : they would not ask f&r money, or have any occasion for that product, since the only use they could make of it would be to convert it forthwith into articles of their own consumption.! This observation is applicable to all cases, where there is a supply of commodities or of services in the market. They will universally find the most extensive demand in those places, where the most of values are produced ; because in no other places are the sole means of purchase created, that is, values. Money performs but a moment- ary function in this double exchange ; and \vhen the transaction is finally closed, it will always be found, that one kind of commodity has been exchanged for another. It is worth while to remark, that a product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it ; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus, the mere circum- * By bills at sight, or after date, bank-notes, running-credits, write-offs, &c. us at London and Amsterdam. f I speak here of their aggregate consumption, whether unproductive and de- signed to satisfy the personal wants of themselves and their families, or expended in the sustenance of reproductive industry. The woollen or cotton manufacturer operates a two-fold consumption of wool and cotton : 1. For his personal wear. 2. For the supply of his manufacture; hut, be the purpose of his consumption what it may, whether personal gratification or reproduction, he must needs buy Vhat he consumes with what he produces. CHAP. XV. ON PRODUCTION. 135 stance of the creation of one product immediately opens a vent for other products. For this reason, a good harvest is favourable, not only to the agriculturist, but likewise to the dealers in all commodities generally. The greater the crop, the larger are the purchases of the growers. A bad harvest, on the contrary, hurts the sale of commodities at large. And so it is also with the products of manufacture and com- merce. The success of one branch of commerce supplies more ample means of purchase, and consequently opens a market for the products of all the other branches ; on the other hand, the stagnation of one channel of manufacture, or of commerce, is felt in all the rest. But it may be asked, if this be so, how does it happen, that there is at times so great a glut of commodities in the market, and so much difficulty in findings vent for them ? Why cannot one of these super- abundant commodities be exchanged for another? I answer that the glut of a particular commodity arises from its having outrun the total demand for it in one or two ways ; either because it has been pro- duced in excessive abundance, or because the production of other commodities has fallen short. It is because the production of some commodities has declined, that other-commodities are superabundant. To use a more hackneyed phrase, people have bought less, because they have made less profit :* and they have made less profit for one or two causes; either they have found difficulties in the employment of their productive means, or these means have themselves been deficient It is observable, moreover, that precisely at the same time that one commodity makes a loss, another commodity is making excessive profit.f And, since such profits must operate as a powerful stimulus to the cultivation of that particular kind of products, there must needs be some violent means, or some extraordinary cause, a politi- cal or natural convulsion, or the avarice or ignorance of authority, to perpetuate this scarcity on the one hand, and consequent glut on the other. No sooner is the cause of this political disease removed, than the means of production feel a natural impulse towards the vacant channels, the replenishment of which restores activity to all the others. One kind of production would seldom outstrip every other, and its products be disproportionately cheapened, were production left entirely free.J * Individual profits must, in every description of production, from the general merchant to the common artisan, be derived from the participation in the values produced. The ratio of that participation will form the subject of Book II., infra. f The reader may easily apply these maxims to any time or country he is ac- quainted with. We have had a striking instance in France during the years 1811, 1812, and 1813; when the high prices of colonial produce of wheat, and other articles, went hand-in-hand with the low price of many others that could find no advantageous market. | These considerations have hitherto been almost wholly overlooked, thotign forming the basis of correct conclusions in matters of commerce, and of its regu- lation by the national authority. The right course where it has, by good luck 130 ON PRODUCTION. BOOK I. Should a producer imagine, that many other classes, yielding no material products, are his customers and consumers equally with the classes that raise themselves a product of their own ; as, for example, public functionaries, physicians, lawyers, churchmen, &c., and thence infer, that there is a class of demand other than that of the actual producers, he would but expose the shallowness and superficiality of his ideas. A priest goes to a shop to buy a gown or a surplice ; he takes the value, that is to make the purchase, in the form of money. Whence had he that money 1 From some tax-gatherer who has taken it from a tax-payer. But whence did this latter derive it 1 From the value he has himself produced. This value, first produced by the tax-payer, and afterwards turned into money, and given to the priest for his salary, has enabled him to make the purchase. The priest stands in the place of the producer, who might himself been pursued, appears to have been selected by accident, or, at most, by a con- fused idea of its propriety, without either self-conviction, or the ability to con- vince other people. Sismondi, who seems not to have very well understood the principles laid down in this and the three first chapters of Book II. of this work, instances the im- mense quantity of manufactured products with which England has of late inun- dated the markets of other nations, as a proof, that it is impossible for industry to be too productive. (Nouv. Prin. liv. iv. c. 4.) But the glut thus occasioned proves nothing more than the feebleness of production in those countries that have been thus glutted with English manufactures. Did Brazil produce where- withal to purchase the English goods exported thither, those goods would not glut her market. Were England to admit the import of the products of the United States, she would find a better market for her own in those States. The English government, by the exorbitance of its taxation upon import and consump- tion, virtually interdicts to its subjects many kinds of importation, thus obliging the merchant to offer to foreign countries a higher price for those articles, whose import is practicable, as sugar, coffee, gold, silver, &c. for the price of the precious metals to them is enhanced by the low price of their commodities, which accounts for the ruinous returns of their commerce. I would not be understood to maintain in this chapter, that one product can not be raised in too great abundance, in relation to all others ; but merely that nothing is more favourable to the demand of one product, than the supply of another; that the import of English manufactures into Brazil would cease to be excessive and be rapidly absorbed, did Brazil produce on her side returns sufficiently ample ; to which end it would be necessary that the legislative bodies of either country should consent, the one to free production, the other to free importation. In Brazil every thing is grasped by monopoly, and property is not exempt from the invasion of the government. In England, the heavy duties are a serious obstruc- tion to the foreign commerce of the nation, inasmuch as they circumscribe the choice of returns. I happen myself to know of a most valuable and scientific collection of natural history, which could not be imported from Brazil into Eng- land by reason of the exorbitant duties, (a) (a) The views of Sismondi, in this particular, have been since adopted by our own Malthus, and those of our author by Ricardo. This difference of opinion lias given rise to an interesting discussion between our author and Malthus, to whom he has recently addressed a correspondence on this and other parts of the science. Were any thing wanting to confirm the arguments of this chapter, it would be supplied by a reference to his Lettre 1, a M. Malthus. Sismondi has vainly attempted to answer Kicardo, but has made no mention of his original antagonist, Vide Annales de Legislation, No. 1. art. 3. Geneve, 1820. T. CHAP. XV. ON PRODUCTION. 137 have laid the value of his product on his own account, in the pur- chase, perhaps, not of a gown or surplice, but of some other more serviceable product. The consumption of the particular product, the gown or surplice, has but supplanted that of some other product. It is quite impossible that the purchase of one product can be affected, otherwise than by the value of another.* From this important truth may be deduced the following important conclusions : 1. That, in every community the more numerous are the pro- ducers, and the more various their productions, the more prompt, numerous, and extensive are the markets for those productions ; and, by a natural consequence, the more profitable are they to the pro- ducers ; for price rises with the demand. But this advantage is to be derived from real production alone, and not from a forced circulation of products ; for a value once created is not augmented in its passage from one hand to another, nor by being seized and expended by the government, instead of by an individual. The man, that lives upon the pi eductions of other people, originates no demand for those pro- ductions ; he merely puts himself in the place of the producer, to the great injury of production, as we shall presently see. 2. That each individual is interested in the general prosperity of all, and that the success of one branch of industry promotes that of all the others. In fact, whatever profession or line of business a man may devote himself to, he is the better paid and the more readily finds employment, in proportion as he sees others thriving equally around him. A man of talent, that scarcely vegetates in a retrograde state of society, would find a thousand ways of turning his faculties to account in a thriving community that could afford to employ and reward his ability. A merchant established in a rich and populous town, sells to a much larger amount than one who sets up in a poor district, with a population sunk in indolence and apathy. What could an active manufacturer, or an intelligent merchant, do in a small deserted and semi-barbarous town in a remote corner of Poland or Westphalia? Though in no fear of a competitor, he could sell but little, because little was produced ; whilst at Paris, Amster- dam, or London, in spite of the competition of a hundred dealers in his own line, he might do business on the largest scale. The reason is obvious: he is surrounded with people who produce largely in an infinity of ways, and who make purchases, each with his respective products, that is to say, with the money arising from the sale of what he may have produced. This is the true source of the gains made by the towns' people out of the country people, and again by the latter out of the former; both * The capitalist, in spending the interest of his capital, spends his portion of the products raised by the employment of that capital. The general rules that, regu- late the ratio he receives will be investigated in Book II., infra. Should he ever spend the principal, still he consumes products only ; for capital consists of pro- ducts, devoted indeed to reproductive, but susceptible of unproductive consump- tion ; to which it is in fact consigned whenever it is wasted or dilapidated, 12* S 138 ON PRODUCTION. BOOK L of them have wherewith to buy more largely, the more amply they themselves produce. A city, standing in the centre of a rich sur- rounding country, feels no want of rich and numerous customers ; and, on the other hand, the vicinity of an opulent city gives addi- tional value to the produce of the country. The division of nations into agricultural, manufacturing, and commercial, is idle enough. For the success of a people in agriculture is a stimulus to its manu- facturing and commercial prosperity ; and the flourishing condition of its manufacture and commerce reflects a benefit upon its agri- culture also.* The position of a nation, in respect of its neighbours, is analogous to the relation of one of its provinces to the others, or of the country to the town ; it has an interest in their prosperity, being sure to profit by their opulence. The government of the United States, therefore, acted most wisely, in their attempt, about the year 1802, to civilize their savage neighbours, the Creek Indians. The design was to introduce habits of industry amongst them, and make them producers capable of carrying on a barter trade with the States of the Union ; for there is nothing to be got by dealing with a people that have nothing to pay. It is useful and honourable to mankind, that one nation among so many should conduct itself uniformly upon liberal principles. The brilliant results of this enlightened policy will cfe- monstrate, that the systems and theories really destructive and falla- cious, are the exclusive and jealous maxims acted upon by the old European governments, and by them most impudently styled prac- tical truths, for no other reason, as it would seem, than because they have the misfortune to put them in practice. The United States will have the honour of proving experimentally, that true policy goes hand-in-hand with moderation and humanity.f * A productive establishment on a large scale is sure to animate the industry of the whole neighbourhood. " In Mexico," says Humboldt, " the best culti- vated tract, and that which brings to the recollection of the traveller the most beautiful part of French scenery, is the level country extending from Salamanca as far as Silao, Guanaxuato, and Villa de Leon, and encircling the richest mines of the known world. Wherever the veins of precious metal have been discovered and worked, even in the most desert part of the Cordilleras, and in the most barren and insulated spots, the working of the mines, instead of interrupting the business of superficial cultivation, has given it more than usual activity. The opening of a considerable vein is sure to be followed by the immediate erection of a town ; farming concerns are established in the vicinity; and the spot so lately insulated in the midst of wild and desert mountains, is soon brought into contact with the tracts before in tillage." Essai pol. sur. la Nouv. Espagne. f It is only by the recent advances of political economy, that these most important truths have been made manifest, not to vulgar apprehension alone, but even to the most distinguished and enlightened observers. We read in Voltaire that "such is the lot of humanity, that the patriotic desire for one's country's grandeur, is but a wish for the humiliation of one's neighbours; that it is clearly impossible for one country to gain, except by the loss of another." (Di-.t. Phil. Art. Patrie.} By a continuation of the same false reasoning, he goes on to declare, that a thorough citizen of the world cannot wish his country to bo greater or less, richer or poorer. It is true, that he would not desire her to extend ihe limits of her dominion, because, in so doing, she might endanger her o\vn CHAP. XV. ON PRODUCTION. 139 3. From this fruitful principle, we may draw this further conclu- sion, that it is no injury to the internal or national industry and pro- duction to buy and import commodities from abroad ; for nothin odious injustice and extortion. In support of these opinions, the advocates for the corporate sys tern appeal to the example of Great Britain, where industry is \\c\- known to be greatly shackled, and yet manufactures prosper. BuJ in this they expose their ignorance of the real causes of that pros- perity. " These causes," Smith tells us, " seem to be the genera', liberty of trade, which, notwithstanding some restraints, is at least equal, perhaps superior, to what it is in any other country ; the liberty of exporting, duty free, almost all sorts of goods, which are the produce of domestic industry, to almost any foreign country; * Wealth of Nations, book i. c. 10. CHAP. XVII. ON PRODUCTION. 179 and, what perhaps is of still greater importance, the unbounded liberty of transporting them from any one part of our own country to any other, without being obliged to give any account to any pub- lic office, without being liable to question or examination of any kind," &c.* Add to these, the complete inviolability of all property whatever, either by public or private attack, the enormous capital accumulated by her industry and frugality, and lastly, the habitual exercise of attention and judgment, to which her population is trained from the earliest years ; and there is no need of looking farther for the causes of the manufacturing prosperity of Britain. Those who cite her example in justification of their desire to enthral the exertions of industry, are not perhaps aware that the most thriving towns in that kingdom, those on which her character for manufacturing pre-eminence is mainly built, are the very places where there are no incorporations of crafts and trades; Manchester, Birmingham, and Liverpool,! were mere villages a century or two ago, but now rank in point of wealth and population next to London, and much before York, Canterbury, and even Bristol, cities of the greatest antiquity and privileges, and the capitals of her most thriv- ing provinces, but still subjected to the shackles of these Gothic institutions. " The town and parish of Halifax," says Sir John Nickols,J a writer of acknowledged local information, " has, within these forty years, seen the number of its inhabitants quadrupled : whilst many other towns, subjected to corporations, have expe- rienced a sensible diminution of theirs. Houses situated within the precincts of the city of London hardly find tenants, and numbers of them remain empty ; whilst Westminster, Southvvark, and the other suburbs are continually increasing. These suburbs are free, whilst London supports within itself four-score and twelve exclusive com- panies of all kinds, of which we may see the members annually adorn, with a silly pageantry, the tumultuous triumphal procession of the Lord Mayor." The prodigious manufacturing activity of some of the suburbs of Paris is notorious ; of the Faubourg St. Antoine, in particular, where industry enjoyed many exemptions. Some products were made no- where else. How happened it, that without apprenticeships, or the necessity of being free of the craft, the manufacturer acquired a greater degree of skill, than in the rest of the city, which was subject to those institutions that are held up as so indispensable 1 For a very simple reason : because self-interest is the best of all instructors. An example or two will serve better than all reasoning in the world, to show the impediments thrown in the way of the develop- * Wealth of Nations, book iv. c. 7. I Baert. vol. 1. p. 107. I Remarks on the Advantages and Disadvantages of France and of Great Britain, 12mo. 1754, 4, p. 142. Q) , (a) This work was originally published in French in 1752, with great success, under the fictitious name of Sir John Nickols, and is supposed to have been the production of a foreigner employed about the court of Versailles. It contain* many judicious remarks upon the internal policy of Britain. T. 180 ON PRODUCTION. BOOK L ment of industry by incorporations of trades and crafts. Argand, the inventor of the lamps that go by his name, and yield, at the same expense, triple the amount of light, was dragged before the Parle- rnenl de Paris, by the company of tinmen, locksmiths, ironmongers, and journeymen farriers, who claimed the exclusive right of making lamps.* Lenoir, the celebrated Parisian philosophical and mathe- matical instrument maker, had set up a small furnace for the con- venience of working the metals used in his business. The syndics of the founders' company came in person to demolish it ; and he was obliged to apply to the king for protection. Thus was talent dependent upon court favour. The manufacture of japanned hard ware was altogether excluded from France until the era of the revo- lution, by the circumstance of its requiring the skill and implements of many different trades, and the necessity of being admitted to the freedom of them all, before an individual could carry it on. It would be easy to fill a volume with the recapitulation of the disheartening vexations that personal industry had to encounter in the city of Paris alone, under the corporate system ; and another with that of the suc- cessful efforts made, since that system was abolished by the revolution. For the same reason that the free suburb of a chartered town, or a free town in the midst of a country embarrassed by the officious- ness of a meddling government, will exhibit an unusual degree of prosperity, a nation that enjoys the freedom of industry, in the midst of others following the corporate system, would probably reap simi- mr advantages. Those have thriven the most, that have been the least shackled by the observance of formalities, provided, of course, that individuals be secured from the exactions of power, the chica- nery of law, and the attempts of dishonesty or violence. Sully, whose whole life was spent in the study and practice of measures for improving the prosperity of France, entertained this opinion.f In his memoirs, he notices the multiplicity of useless laws and ordi- nances, as a direct barrier to the national progress.! * " Why not get himself made free of the company 1" say those who are ever ready to palliate or justify official abuse. The corporation, which had the con- trol over admissions, was itself interested in thwarting a dangerous competitor. Besides, why compel the ingenious inventor to waste in a personal canvass, that time which would be so much more profitably occupied in his calling ! t L?v. xix. I ColberCs early education in the counting-house of the Messrs. Mascrani, of Lyons, a very considerable mercantile establishment, very early imbued him with the principles of the manufacturers. Commerce and manufacture thrived prodigiously under his powerful and judicious patronage ; but, though he liberated them from abundance of oppression, he was himself hardly sparing enough of ordinances and regulations ; he encouraged manufactures at the expense of agri- culture, and saddled the people at large with the extraordinary profits of monopo- list;!. We cannot shut our eyes to the fact, that to this system, acted upon ever pince the days of Colbert, France owed the striking inequalities of private for- tune, the overgrown wealth of some, and the superlative misery of others ; the contrast of a few splendid establishments of industry, with a wide waste of poverty and degradation. This is no ideal picture, but one of sad reality, wt.ich .lie study of principles will help us to explain. CHAP. XVII. ON PRODUCTION. 1S1 It may, perhaps, be alleged, that, were all occupations quite free, a large proportion of those who engaged in them would fall a sacri- fice to the eagerness of competition. Possibly they might, in some few instances, although it is not very likely there should be a great excess of candidates in a line, that held out but little prospect of gain ; yet, admitting the casual occurrence of this evil, it would be of infinitely less magnitude, than permanently keeping up the prices of produce at a rate that must limit its consumption, and abridge the power of purchasing in the great body of consumers. If the measures of authority, levelled against the free disposition of each man's respective talents and capital, are criminal in the eye of sound policy, it is still more difficult to justify them upon the principles of natural right. " The patrimony of a poor man," says the author of the Wealth of Nations, " lies in the strength and dex- terity of his hands : and to hinder him from employing this strength and dexterity in what manner he thinks proper, without injury tc his neighbour, is a plain violation of his most sacred property." However, as society is possessed of a natural right to regulate the exercise of any class of industry, that without regulation might pre- judice the rest of the community, physicians, surgeons, and apothe- caries, are with perfect justice subjected to an examination into their professional ability. The lives of their fellow-citizens are dependent upon their skill, and a test of that skill may fairly be established ; but it does not seem advisable to limit the number of practitioners nor the plan of their education. Society has no interest further than to ascertain their qualification. On the same grounds, regulation is useful and proper, when aimed at the prevention of fraud or contrivance, manifestly injurious to other kinds of production, or to the public safety, and not at pre- scribing the nature of the products and the methods of fabrication. Thus, a manufacturer must not be allowed to advertise his goods to the public as of better than their actual quality : the home consumer is entitled to the public protection against such a breach of faith ; and so, indeed, is the mercantile character of the nation, which must suf- fer in the estimation and demand of foreign customers from such practices. And this is an exception to the general rule, that the best of all guarantees is the personal interest of the manufacturer. For, possibly, when about to give up business, he may find it answer to increase his profit by a breach of faith, and sacrifice a future objec* he is about to relinquish for a present benefit A fraud of this kind ruined the French cloths in the Levant market, about the year 1783; since when the German and British have entirely supplanted them.* We may go still further. An article often derives a value from the name, or from the place of its manufacture. When we judge from long experience, that cloths of such a denomination, and * The loss of this trade has been erroneously imputed to the liberty or' com- merce, consequent upon the revolution. But Felix Beaujour, in his Tableau dv Commerce de la Grece, has shown that it must be referred to an earlier perietl, when restrictions were still in force. 16 182 ON PRODUCTION. BOOK I. made at such a place, will be of a certain breadth and substance, it is a fraud to fabricate, under the same name and at the same place, a commodity of inferior substance and quality to the ordinary stand- ard, and thus to send it into the world under a false certificate. Hence we may form an opinion of the extent to which govern- ment may carry its interference with benefit. The correspondence with the sample of conditions, express or implied, must be rigidly enforced, and government should meddle with production no further. I would wish to impress upon my readers, that the mere interference is itself an evil, even where it is of use :* first, because it harasses and distresses individuals ; and, secondly, because it costs money, either to the nation, if it be defrayed by government, that is to say, charged upon the public purse, or to the consumer, if it be charged upon the specific article ; in the latter case, the charge must of course enhance the price, thereby laying an additional tax upon the home consumer, and pro tanto discouraging the foreign demand. If interference be an evil, a paternal government will be most sparing of its exercise. It will not trouble itself about the certifica- tion of such commodities, as the purchaser must understand better than itself; or of such as cannot well be certified by its agents ; for, unfortunately, a 'government must always reckon upon the negli- gence, incapacity, and misconduct of its retainers. But some arti- cles may well admit of certification ; as gold and silver, the standard of which can only be ascertained by a complex operation of chem- istrv, which few purchasers know how to execute, and which, if they did, would cost them infinitely more than it can be executed for by the government in their stead. In Great Britain, the individual inventor of a new product or of a new process may obtain the exclusive right to it, by obtaining what is called a patent. While the patent remains in force, the absence 01 competitors enables him to raise his price far above the ordinary return of his outlay with interest, and the wages of his own in- dustry. Thus he receives a premium from the government, charged upon the consumers of the new article ; and this premium is often very large, as may be supposed in a country so immediately produc- tive as Great Britain, where there are consequently abundance of affluent individuals, ever on the look-out for some new object of enjoyment. Some years ago a man invented a spiral or worm spring for insertion between the leather braces of carriages, to ease their motion, and made his fortune by the patent for so trifling an invention. Privileges of this kind no one can reasonably object to ; for they neither interfere with, nor cramp any branch of industry, previously In operation. Moreover, the expense incurred is purely voluntary ; and those who choose to incur it, are not obliged to renounce the satis- faction of any previous wants, either of necessity or of amusement. * " Every restraint, imposed by legislation, upon the freedom of human action must inevitably extinguish a portion of the energies of the community, and abridge its annual product." Verri. Refl. sur VEcon. Pol. c. 12. CHAP. XVII. ON PRODUCTION. 183 However, as it is the duty of every government to aim at the constant amelioration of" its subjects' condition, it cannot deprive other producers to eternity of the right to employ part of their industry and capital in this particular channel, which perhaps they might sooner or later have themselves discovered, or preclude the con- sumer for a very long period from the advantages of a competition- price. Foreign nations being out of its jurisdiction, would of course grant no privilege to the inventor, and would, therefore, in this par- ticular, during the operation of the patent, be better otf than the nation where the invention originated. France* has imitated the wise example of England, in assigning a limit to the duration of these patent rights, after which the invention is free for all the world to avail themselves of. It is also provided, that, if the process be capable of concealment, it shall be divulged at the expiration of the term. And the patentee, who in this case, it may be supposed, could do without the patent, has this advantage : that if his secret be discovered by any body in the interim, it cannot be made available till the expiration of the term. Nor is it at all necessary that the government sriouid inquire into the novelty or utility of the invention ; for, if it be useless, so much the worse for the inventor, and, if it be already known, every body is competent to plead and prove that fact, and the previous right of the public ; so that the only sufferer is the inventor, who has been at the expense of a patent for nothing. Thus the public is no loser by this species of encouragement, but, on the contrary, may derive prodigious advantage. The regulations tending to direct either the object or the method of production, which have been above observed upon, by no means comprise all the measures adopted by different nations with those views. Indeed, were I to specify them all, my catalogue would soon be incomplete ; for new ones are every day brought into prac- tice. The great point is, to lay down certain principles, that may enable us beforehand to judge of their consequences. But there are two other branches of commerce, that have been the subject of more than usual regulation, and are, therefore, worthy of more special investigation. I shall devote the two succeeding sections to their exclusive examination. j SECTION IIL Of Privileged Trading Companies. A government sometimes grants to individual merchants, and much oftener to trading companies, the exclusive privilege of buying and selling specific articles, tobacco for example ; OF of trafficking with a particular country, as with India. * Vide the laws dated 7th Jan. and 25th May, 1791, and 120th Sept. 1792 Also the arret of the government, dated 5 Vandemaire, an. ix. 184 ON PRODUCTION. Boon L The privileged traders, being thus exempted from all competition by the exertion of the public authority, can raise their prices above the level that could be maintained under the operation of a free trade. This unnatural ratio of price is sometimes fixed by the government itself, which thus assigns a limit to the partiality it ex- ercises towards the producers, and the injustice it practises upon the consumers: otherwise, the avarice of the privileged company would be bounded only by the dread of losing more by the reduction of the gross amount of its sales, in consequence of increased prices, than it would gain by their unnatural elevation. At all events, the consumer pays for the commodity more than its worth ; and govern- ment generally contrives to share in the profits of the monopoly. It has been said, for the most ruinous expedient is sure to find some plausible argument or other to support it, that the commerce with certain nations requires precautionary measures, which privi- leged companies only can enforce. At one time thg plea is, that forts must be built, and marine establishments kept up ; as if in truth it were worth while to traffic sword in hand, or an army were neces- sary to protect plain dealing ; or as if the state did not already main- tain at great charge a military force for the protection of its subjects ! At another, that diplomatic address is indispensable. The Chinese, for instance, are a people so bigoted to form and prone to suspicion so entirely independent of other nations, by reason of their remote position, the extent of their territory, and the peculiar character of their wants, that is a matter of special and precarious favour to be allowed to deal with them. We must, therefore, elect either to go without their teas, silks, and nankeens, or be content to submit tc precautions, which can alone insure the continuance of the trade ; for the dealings of individuals might endanger the continuance of that good humour, without which the mutual intercourse of the two nations would be at an end. But, let me ask, is it so certain that the agents of a company, who are too apt to presume upon the support of the military power, either of the nation or at least of the company, is it quite certain, that such agents are more likely to keep alive an amicable feeling than private traders, in whom more deference to local institutions might be expected, and who would have an immediate interest in keeping clear of any misunderstanding that should endanger both their persons and their property ?* But, supposing the worst that could happen, and granting, for argument's sake, that the trade with China can not be conducted otherwise than by a privileged company, does it follow, that with out one we must needs give up the taste for Chinese productions? * This has been exemplified in the commercial relations of the United States with China. The American traders conduct themselves at Canton with more discretion, and are regarded by the Chinese authorities with less jealousy than the agents of the English company. The Portuguese, for upwards of a century, carried on the trade with the Eastern seas, without the intervention of a corn- nan y, and with greater success than any of their contemporaries. CHAP. XVII. ON PRODUCTION. 135 Certainly not. The trade in Chinese goods will always exist, for this plain reason, that it suits both parties, the Chine'se and their customers. But shall we not pay dearer for those goods '? There is no ground for thinking so. Three-fourths of the European states have never sent a single ship to China, and yet are abundantly sup- plied with teas, with silks, and with nankeens, and that too at a very cheap rate. There is another argument of more general application, and still more frequently urged ; viz. that a company, having the exclusive trade of any given country, is exempt from the effects of competi- tion, and, therefore, buys at a less price. But, in the first place, it is not true that the exclusive privilege exempts from the effect of competition : the only competition it removes, is that of the national traders, which would be of the utmost benefit to the nation ; but it excludes neither the competition of foreign companies, nor of foreign private traders. In the next place, there are many articles that would not rise in price in consequence of the competition, which some people affect to be alarmed at, though in truth it is a mere bugbear. Suppose Marseilles, Bordeaux, L'Orient, were all to fit out vessels to bring tea from China, we have no reason to believe that all their ventures together would import more tea into France, than France could consume or dispose of. All we have to fear is, that they should not import enough. Now, if they were to import no more than other merchants would have imported for them, the demand for tea in China will have been just the same in both cases ; consequently, the commodity will not have become more scare there. ' Our merchants would hardly have to pay dearer for it, unless the price should rise in China itself; and what sensible effect could the purchases of a few merchants of France have upon the price of an article consumed in China itself, to one hundred times the amount of the whole consump- tion of Europe ? But, granting that European competition would operate to raise the price of some commodities in the eastern market, is that a suffi- cient motive for excepting the trade to that part of the world from the general rules that are acted upon in all other branches of com- merce ? Are we to invest an exclusive company with the sole con- duct of the import or export trade between Germany and France, for the sole purpose of getting our cottons and woollens from Germany at a cheaper rate ? If the commerce of the East were put upon the same footing as foreign trade in general, the price of any one article of its produce could never long remain much above the cost of pro- duction in Asia; for the rise of price would operate as a stimulus to increased production, and the competition of sellers would soon be on a par with that of purchasers. But, admitting the advantage of buying cheap to be as substantial as it is represented, the nation at large has a right to participate in that cheapness ; the home consumers ought to buy cheap as well as the company. Whereas in practice it is just the reverse, and, for a 16* Y 186 ' * ON PRODUCTION. BOOK L very simple reason: the company is not exempt fiom competition as a purchaser, for other nations are its competitors : but as a seller it is exempt; for the rest of the nation can buy the articles it deals in no- where else, the import by foreigners being wholly prohibited. It asks its own price, and can command the market, especially if it be attentive to keep the market always understocked, as the English call it ; that is, if the supply be just so far short of the demand, as to keep alive the competition of purchasers.* In this manner, trading companies not only extort exorbitant profits from the consumer, but moreover saddle him with all the fraud and mismanagement inseparable from the conduct of these unwieldy bodies, with their cumbrous organisation of directors and factors without end, dispersed from one extremity of the globe to the other. The only check to the gross abuses of these privileged bodies is the smuggling, or contraband trade, which, in this point of view, may lay claim to some degree of utility. This analysis brings us to the point in question; are the gains of the privileged company, national gains? Undoubtedly not; for they are wholly taken from the pockets of the nation itself. The whole excess of value, paid by the consumer, beyond the rate at which free trade could afford the article, is not a value produced, but so much existing value presented by the government to the trader at the con- sumer's expense. It will probably be urged, that it; must at least bo admitted, that this profit remains and is spent at home. Granted . but by whom is it spent 1 that is the point. Should one member of a family possess himself of the whole family income, dress himself in fine clothes, and devour the best of every thing, what consolation would it be to the rest of the family, were he to say, what signifies it whether you or I spend the money ? the income spent is the same, so it can make no difference. The exclusive as well as excessive profits of monopoly would soon glut the privileged companies with wealth, could they depend upon the good management of their concerns ; but the cupidity of agents, tne long pendency of distant adventures, the difficulty of bringing factors abroad to account, and the incapacity of those interested, are causes of ruin in constant activity. Long and delicate operations of commerce require superior exertion and intelligence in the parties interested. And how can such qualities be expected in shareholders, amounting sometimes to several hundreds, all of them having other matters of more personal importance to look after ?f Such are the consequences of privileges granted to trading compa- * It is well known, that, when the Dutch were in possession of the Moluccas, they were in the habit of burning part of the spices they produced, for the sake of keeping up the price in Europe. f The answer of La Bourdonnais to one of the directors of the French East India Company, who asked how it was, that he had managed his own interests so much better than those of the company, will long be remembered: "Be- cause," said he, " I manage my own affairs according to the dictates of my own judgment but am obliged to follow your instructions in regard to those of the company." CHAP. XVII. ON PRODUCTION. 187 nies : and these consequences, it must be observed, are in the nature of things inseparable ; circumstances may reduce their efficacy, but can never remove them altogether. The English East India Com- pany has met with more success than the three or four French ones that at different times made the experiment.* This company is sovereign as well as merchant ; and we know, by experience, that the most detestable governments may last for several generations ; wh> ness that of the Mamelukes in Egypt. (1) There are some minor evils also incident to commercial privileges. The grant of exclusive rights frequently exiles from a country a branch of industry and a portion of capital that would readily have taken root there, but are compelled to settle abroad. Towards the close of the reign of Louis XIV. the French East India Company, being unable to support itself, notwithstanding its exclusive rights, transferred the exercise of its privileges to some speculators at St. Malo, in consideration of a small share in their profits. The trade began to revive under the influence of this comparative liberty, and would, on the expiration of the company's charter, in 1714, have been as active as the then melancholy condition of France would have permitted : but the company petitioned for a renewal, and ob- tained one, pending the ventures of some private traders. Soon afterwards, a vessel of St. Malo, commanded by a Breton of the name of Lamerville, appeared upon the French coast, on its return from the East Indies, but was refused permission to enter the har- bour, on the plea, that it was in contravention of the company's rights. Consequently, he was compelled to prosecute his voyage to the nearest port in Belgium, and carried his vessel into Ostend, where he disposed of the cargo. The governor of the Low Coun- tries, hearing of the enormous profits he had made, proposed to the captain a second voyage, with a squadron to be fitted out for the express purpose ; and Lamerville afterwards performed many simi- * The first French East India Company was established in the reign of Henry IV. A. D. 1604, at the instance of a Fleming of the name of Gerard Leroi. It met with no success. (1) The commercial monopoly of the English East India Company was finally abolished by three acts of Parliament, passed during the year 1833, namely, chapters 85, 93, and 101 of the 3d and 4th William IV. The first is entitled, an act for effecting an arrangement, with the East India Company, and for the better government of "His Majesty's Indian territories, till the 30th day of April, 1851; the second, an act to regulate the trade of China and India ; and the third, an act to provide for the collection and management of duties on tea. By these acts the trade with both China and India is thrown open, for the first time, to British enterprise and capital, and British subjects are also permitted to take up their residence in these countries. It is needless to point out the vast importance of these enactments, and the great advantages that must result from them, not only to British subjects, but to the whole commercial world. The resources of regions of rich countries that have hitherto lain dormant will now be called into activity, and the general wealth of the country, and its capacity of absorbing foreign commodities, immensely increased. AMERICAN EDITOR. 188 ON PRODUCTION. BOOK I. lar voyages for different employers, and laid the foundation of the Ostend Company.* Thus, the French consumer must necessarily have suffered by this monopoly : and so, in fact, he did. But, at any rate, it will be supppsed, the company must have benefited. Just the contrary: the company was itself ruined ; in spite of the monopoly of tobacco, the lotteries, and other subsidiary grants bestowed on them by the government.! " In short," says Voltaire,J " all that remained to France in the East was the regret of having, in the course of forty years, squandered enormous sums, to bolster up a company that never made a six-pence profit, never made any dividend from the resources of its commerce, either to its share-holders or creditors ; and supported its establishments in India, solely by the underhand practice of pillage and extortion upon the natives." The only case in which the establishment of an exclusive com- pany is justifiable, is, when there is no other way of commencing a new trade with distant or barbarous nations. In that case, the charter is a kind of patent of invention, and confers an advantage, commensurate to the extraordinary risk and expense of the first experiment. The consumers have no reason to complain of the dearness of products, which, but for the grant of the charter, they would either not have enjoyed at all, or have enjoyed at a still dearer rate. But such grants should, like patents, be limited to such duration only, as will repay and fully indemnify the adventurers for the advances and risk incurred. Any thing further is a mere free gift to the company, at the expense of the nation at large, who have a natural right to get what they want wherever they can, and at the lowest possible price. What has been said with respect to commercial is equally applica- ble to manufacturing privileges. The reason why governments are so easily entrapped into measures of this kind is, partly because they see a statement of large profits, and do not trouble themselves to in- quire whence they are derived ; and partly because this apparent profit is easily reduced to numerical calculation, no matter whether wrong or right, correct or incorrect ; whereas the loss and mischief resulting to the nation are infinitely subdivided amongst the mem- bers of the community, and operate after all in a very indirect, com- plex, and general way, so as to escape and defy calculation. Some writers maintain arithmetic to be the only sure guide in political economy ; for my part, I see so many detestable systems built upon arithmetical statements, that I am rather inclined to regard thai science as the instrument of national calamity. * Taylor's Letters on India f Raynal. Hist. phil. et polit, des Eslabl. des Europeens, dans les deux Indes '.iv. iv. j 19. J Siecle de Louis XV. CHAP. XVH. ON PRODUCTION. 189 SECTION IV. Of regulations affecting the Corn Trade. IT would seem that the general principles, which govern the com- merce of all other commodities, should be equally applicable to the commerce of grain. But grain, or whatever else may happen to be the staple article of human subsistence to any people, deserves more particular notice. It i universally found, that the numbers of mankind increase, in proportion to the supply of subsistence. The abundance and cheap- ness of provisions are favourable to the advance of population ; their scarcity is productive of the opposite effect ;* but neither cause ope- rates so rapidly as the annual succession of crops. The crop of one year may, perhaps, exceed or fall short of the usual average, by as much as one-fifth or one-fourth ; but a country, that, like France, has thirty millions of inhabitants one year, cannot have thirty-six mil- lions the next ; nor could its population be reduced to twenty-four millions in the space of one year, without the most dreadful degree of suffering. Therefore it is the law of nature, that the population shall one year be' superabundantly supplied with subsistence, and another year be subjected to scarcity in some degree or other of intensity. ~. And so, indeed, it is with all other objects of consumption ; but, as the most of them are not absolutely indispensable to existence, the temporary privation of them amounts not to the absolute extinction of life. The high price of a product, which has wholly or partially failed at home, is a powerful stimulus to commerce to import it from a greater distance and at a greater expense. But it is unsafe to leave wholly to the providence of individuals the care of supplying an article of such absolute necessity : the delay of which, but for a few days, may be a national calamity ; the transport of which exceeds the ordinary means of commerce; and whose weight and bulk would make its distant transport, especially by land, double or triple its average price. If the foreign supply of corn be relied upon, it may happen to be scarce and dear in the exporting and importing country at the same moment. The government of the exporting country may prohibit the export, or a maritime war may interrupt the transport. But the article is one the nation cannot do without ; or even wait for a few days longer. Delay is death to a part of the population at least. For the purpose of equalizing the average consumption to the average crop, each family ought literally to lay by, in years of plenty for the deficiency of years of scarcity. But such providence canno' be reckoned upon in the bulk of the population. A great majority, to say nothing of their utter want of foresight, are destitute of the means of keeping such a store in reserve sometimes several vears * Vide infra. Book II. chap. 11. 190 ON PRODUCTION. BOOK L together ; neither have they the accommodations for housing it, or the means of taking it along with them on a casual change of abode. Can speculative commerce be depended upon for this reserve against a deficiency ? At first sight it might appear that it could, that self-interest would be an adequate motive ; for the difference of the price of corn in years of abundance and those of scarcity is very gieat. But the recurrence of the oscillation is too irregular in dis- tance of time, and too infrequent also, to give rise to a regular traffic, 01 one that can be repeated at pleasure. The purchase of the grain, the number and size of the storehouses, require a very large advance of capital and a heavy arrear of interest: it is an article that must be repeatedly shifted and turned, and is much exposed to fraud and damage, as well as to popular violence. All these are to be covered by a profit of rare occurrence. Wherefore, it is possible, that the article may not hold out sufficient temptation to the speculator, although this would be the most commendable kind of speculation, being framed upon the principle of buying from the producer when he is eager to sell, and selling to the consumer wher^he finds it diffi- cult to purchase. In default of the individual providence of the consumer, and of speculative accumulation and reserve, neither of which it would seem can be safely depended upon, can the public authority, as represent- ing the aggregate interest, undertake the charge of providing against a scarcity with any prospect of success 1 I am aware, that, in a few very limited communities, blessed with a very economical govern- ment, like some of the Swiss cantons, public granaries for storing a casual surplus have answered the purpose well enough. But I should pronounce them impracticable in large and populous countries. The advance of capital and its accruing interest would affect the govern- ment in the same manner as private speculators, and even in a gi eater degree; for there are few governments, that can borrow on such low terms as individuals in good credit. The difficulties of managing a commercial concern, of buying, storing, and re-selling to so large an extent, would be still more insuperable. Turgot, in his letters on the commerce of grain, has clearly proved, that, in matters of this kind, a government never can expect to be served at a reasonable rate ; all its agents having an interest in swelling its expenditure, and none of them in curtailing. It would be utterly im- possible to answer for the tolerable conduct of a business left to the discretion of agents without any adequate control, whose actions are, for the most part, governed by the superior dignitaries of the state, who seldom have either the knowledge or condescension requisite for such details. A sudden panic in the public authorities might prematurely empty the granaries ; a political measure, or a war, divert their contents to quite a different destination. Generally speaking, it appears that there is no safe dependence for a reserve of supply against a season of scarcity, unless the business be confided to the discretionary management of mercantile houses of the first capital, credit, and intelligence, willing to undertake the CHAP. XVIL ON PRODUCTION. 191 purchase, and the filling and replenishment of the granaries upon cer- tain stipulated terms, and with the prospect of such advantages, sa may fairly recompense them for all their trouble. The operation would then be safe and effectual, for the contractors would give secu- rity for due performance ; and it would also be cheaper executed in this way than in any other. Different establishments might be con- tracted vrith for the different cities of note ; and these being thus supplied in times of scarcity from the stores in reserve, would no longer drain the country of the subsistence destined to the agricul- tural population, (a) Public stores and granaries are after all but auxiliary and tempo- rary expedients of supply. The most abundant and advantageous supply will always be that furnished by the utmost freedom of com- merce, whose duties in respect to grain consist chiefly in trans- porting the produce from the farmyard to the principal markets, and thence in smaller quantities from the markets of the districts where it is superabundant to those of others that may be scantily supplied ; or in exporting when cheap, and importing when dear. Popular prejudice and ignorance have universally regarded with an evil eye those concerned in the corn-trade ; nor have the deposi- tories of national authority been always exempt from similar illibe- rality. The main charge against them is, that they buy up corn with the express purpose of raising its price, or at least of making an unreasonable profit upon the purchase and re-sale, which is in effect so much gratuitous loss to the producer and consumer. First, I would ask, what is meant by this charge 1 If it be meant to accuse the dealers of buying in plentiful seasons, when corn is cheap, and laying by in reserve against seasons of scarcity, we have just seen that this is a most beneficial operation, and the sole means of accommodating the supply of so precarious an article to the regu- larity of an unceasing demand. Large stores of grain laid in at a >ow price contribute powerfully to place the subsistence of the popu- lation beyond risk of failure, and deserve not only the protection, but the encouragement of the public authorities. But, if it be meant to charge the corn-dealers with buying up on a rising market and on the approach of scarcity, and thereby enhancing the scarcity and the price, although I admit that this operation has not the same (a) It is singular, that, after the very careful revision which this section has undergone in the last edition, this paragraph should have been suffered to stand. Indeed, one would almost suspect that our author had left it rather in compli- ment to the popular notions of his own country, than from personal conviction of the propriety of the measure he suggests ; which is impugned by the whole con- text of the remaining part of the section. The best security against famine is, the total absence of all official interference whatever, whether permanent or temporary, as the example of Great Britain will testify. There the government has at all times abstained from taking a personal part in the supply either of town or country, and has limited its interference to the mere export and import, which have only been cramped and impeded by ill-advised operations. Another important ground of security is, the variety of the national food. Upon this ou author has observed. Vide, infra. T. 192 ON PRODUCTION. BOOK I. recommendation of utility, and that the consumer is saddled with the additional cost of the operation without any direct equivalent benefit, for in this instance the deficiency of one year is not made good by the hoarded surplus of a preceding one ; yet I cannot think it has ever been attended with any very alarming or fatal conse- quences. Corn is a commodity of most extended production; and its price cannot be arbitrarily raised, without disarming the competi- tion of an infinity of sellers, and without an extent of dealing and of agency scarcely practicable to individuals. It is, besides, a most cumbersome and inconvenient article in comparison with its price, and, consequently, most expensive and troublesome in the carriage and warehousing. A store of any considerable value can not escape observation.* And its liability to damage or decay often makes sales compulsory, and exposes the larger speculators to immense loss. Speculative monopoly is, therefore, extremely difficult, and little to be dreaded. The kind of engrossment most prejudicial, as well as most difficult of prevention, is that practised by the domestic pru- dence of individuals in apprehension of a scarcity. Some, from excess of precaution, lay by rather more than they want; while farm- ers, farming proprietors, millers, and bakers, who habitually keep a stock on hand, take care somewhat to swell that stock, in the idea that they shall sell to a profit whatever surplus there may be ; and the infinite number of these petty acts of engrossment makes them greatly exceed, in the aggregate, all the united efforts of speculation. But what if it should turn out, after all, that even the selfish and odious views of such speculators are productive of some good ? When corn is cheap, it is consumed with less providence and fru- gality, and used as food for the domestic animals. The distant prospect of scarcity, or even a slight rise of price, is insufficient to check this improvidence betimes. If the great holders shut up their stores, however, the consequent anticipation of a rise of price imme- diately puts the public on their guard, and awakens the particular frugality and care of the little consumers, of whom the great mass of consumption is composed. Ingenuity is set at work to find a sub- stitute for the scarce article of food, and not a particle is wasted. Thus, the avarice of one part of mankind operates as a salutary check upon the improvidence of the rest; and, when the stock with- held at length appears in the market, its quantity tends to lower the price in favour of the consumer. With regard to the tribute which the dealer is supposed to exact from both producer and consumer, it is a charge that will attach with equal justice upon every branch of commerce whatsoever. There would be some meaning in it, could products reach the hnit'is of the consumer without any advance of capital, without warehouses, trou * Lamm re, who was a gre-it advocate for the interference of authority in these matters, and was commissioned by the government, in the scarcities of the years 1699 1709, todiscover all concealed hoards, and bring to light the nxmnpoiists, frankly confesses, that he was not able to make seizure of so much as 100 qnar tens altogether, Traite de la Police, Supplement au tome 11. CHAP. XVIL ON PRODUCTION. 193 ble, combination, or any kind of difficulty. But, so long as difficul- ties shall exist, nobody will be able to surmount them so cheaply, as those who make it their special business. Legislation should take an enlarged view of commerce in the aggregate, small and great ; it will find its agents busied in traversing the whole surface of the territory, watching every fluctuation of demand and supply, adjusting the casual or local deficiency of price to meet the charges of pro- duction and excess of price above the capacity of consumption. Is it to the cultivator, to the consumer, or to the public administration that we can safely look for so beneficial and powerful an agency 1 Extend, if you please, the facility of intercourse, and particularly the capacities of internal navigation, which alone is suited to the transport of a commodity so cumbrous and bulky as grain; vigilantly watch over the personal security of the trader; and then leave him to follow his own track. Commerce cannot make good the failure of the crop; but it can distribute whatever there may be to distribute, in the manner best suited to the wants of the community, as well as to the interests of production. And doubtless it was for this reason that Smith pronounced the labour of the corn dealer to be favourable to the production of corn, in the next degree to that of the cultivator himself. The prevalence of erroneous views of the production and com- merce of articles of human subsistence, has led to a world of mis- chievous and contradictory laws, regulations, and ordinances, in all countries, suggested by the exigency of the moment, and often ex- torted by popular importunity. The danger and odium thus heaped upon the dealers in grain have frequently thrown the business into the hands of inferior persons, qualified neither by information nor ability for the business ; and the usual consequence has followed ; namely, that the same traffic has been carried on in secret, at far greater expense to the consumers; the dealers tq whom it was abandoned being of course obliged to pay themselves for all the risk and inconvenience of the occupation. Whenever a maximum of price has been affixed to grain, it has immediately been withdrawn or concealed. The next step was to compel the farmers to bring their grain to market, and prohibit the private sales. These violations of property, with all their usual accompaniments of inquisitorial search, personal violence, and in- justice, have never afforded any considerable resource to the govern- ment employing them. In polity as well as morality, the grand secret is, not to'constrain the actions, but to awaken the inclinations of mankind. Markets are not to be supplied by the terror of the bayonet or the sabre.* When the national government attempts to supply the population * The French minister of the interior, in his report, presented in December, 1817, admits that the markets were never so ill supplied as immediately alter the decree of May 4, 1812, prohibiting all sales out of open market. The con- sumers crowded thither, having nowhere else to resort to; while the formers, beino- obliged to sell below the current price, pretended to have nothing for sale. IT Z 194 ON PRODUCTION. BOOK I by becoming itself a dealer, it is sure to fail in satisfying the national wants itself, and at the same time to extinguish all the resources that freedom of commerce would offer; for nobody else will knowingly embark in a losing trade, though the government may. During the scarcity prevalent throughout many parts of France, in the year 1775, the municipalities of Lyons and some other towns attempted to relieve the wants of the inhabitants, by buying up corn in the country, and re-selling it at a loss in the towns. To defray the expense of this operation, they at the same time obtained an in- crease of the octroi or tolls upon goods entering their gates. The scarcity grew worse and worse, for a very obvious reason ; the ordi- nary dealers naturally abandoned markets where goods were sold below the cost price, and which they could not resort to without paying extra toll upon entry.* The more necessary an article is, the more dangerous it is to reduce its price below the natural level. An accidental dearness of corn, though doubtless a most unwelcome occurrence, is commonly brought about by causes out of all human power to remove.f There is no wisdom in heaping one calamity upon another, and passing bad laws because there has been a bad season. Governments have met with no better success in the matter of importation, than in the conduct of internal commerce. The enor- mous sacrifices made by the commune of Paris and the general government, to provision the metropolis in the winter of 1816-17 with grain imported from abroad, did not protect the consumer from an exorbitant advance in the price of bread, which was besides de- ficient both in weight and quality ; and the supply was found inade- quate after all.J * In all ages and in all places this effect will follow. The Emperor Julian, A. D. 362, caused to be sold at Antioch 420,000 modii of wheat imported from Chalsis and Egypt for the purpose, at a price lower than the average of the market; the supplies of private commerce were immediately stopped in conse- quence, and the famine was aggravated. Vide Gibbon, c. 24. The principles of political economy are eternal and immutable ; but one nation is acquainted with them, and another not. The metropolis of the Roman empire was always destitute of subsistence, when .the government withheld the gratuitous largesses of grain drawn from a tributary world; and these very largesses were the real cause of the scarcity felt and complained of. f One of the most frequent causes of famine is, indeed, of human creation, and that is "war, which both interrupts production, and wastes existing products. This cause is, therefore, within human control ; but we can hardly expect it to be effectually exerted, until governments shall entertain more accurate notions of their own, as well as of the national interests ; and nations be weaned of the puerility of attaching sentiments of admiration and glory to perils encountered without necessity or reason. J It is mere mockery to talk of the paternal care, solicitude, or beneficence of government, which are never of any avail, either to extend the powers of authority, or to diminish the suffering of the people. The solicitude of the government can never be doubted ; a sense of intense personal interest will Jilways guide it to the conservation of social order, by which it is sure to be the principal gainer. And its beneficence ran have little merit ; for it can exert none, but at the expense of its subjects. CHAP. XVII. ON PRODUCTION. 195 On the subject of bounties on import, it is hardly necessary to touch. The most effectual bounty is the high price of the article in the country where the scarcity occurs, amounting sometimes to as much as 200 or 300 per cent. If this be not sufficient to tempt the importer, I know of no adequate inducement that the government could hold out to him. * Nations would be less subject to famine, were they to employ a greater variety of aliments. When the whole population depends upon a single product for subsistence, the misery of a scarcity is extreme. A deficiency of corn in France is as bad as one of rice in Hindostan. When their diet consists of many articles, as butcher's meat, poultry, esculent roots, vegetables, fruits, fish, &c., according to local circumstances, the supply is less precarious ; for these arti- cles seldom fail all at a time.* Scarcity would also be of less frequent occurrence, if more atten- tion were paid to the dissemination and perfection of the art of preserving, at a cheap rate, such kinds of food, as are offered in superabundance at particular seasons and places ; fish, for instance ; their periodical excess might in this way be made to serve for times of scarcity. A perfect freedom of international maritime intercourse would enable the inhabitants of the temperate latitudes to partake cheaply of those productions, that nature pours forth in such pro- fusion under a tropical sun.f I know not how far it would be possi- ble to preserve and transport the fruit of the banana ; but the expe- * Custom, the tyrant of weak minds, and of such, unfortunately, is the great mass of mankind, and of the lower classes in particular, is always a formidable opponent to the introduction of a new article of food. I have observed in some provinces of France, a decided distaste for the paste prepared in the Italian method, although a most nutritious substance, and well calculated for keeping the flour sound and good. Probably, nothing but the frequent recurrence of scarcity during the political agitations of the nation could have extended the cultivation and consumption of the potatoe, so as to have made it a staple article of food in many districts. The appetite for that vegetable would be still more general, were a little more attention bestowed upon preserving and ameliorating the species, and the practice of raising it from the seed rather than the root more strictly observed. f Humboldt tells us, in his Essai pol. sur la Nouvelle Espagne, c. ix. that an equal area of land in that country will produce bananas, potatoes, and wheat, in the following proportions of weight : Kilogrammes. Bananas 106,000 Potatoes 2,400 Wheat * - 800 The product of bananas is, therefore, in weight, 133 times that of wheat, and 44 times that of potatoes. But a large deduction must be made for the aqueous particles of the banana. A demi-hectare of fertile land in Mexico, by proper cultivation of the larger species of banana, may be made to feed more than 50 individuals ; whereas the same extent of surface in Europe, supposing it to yield eight-fold, will give an annual' product of no more than 576 kils. of wheat flour, which is not enough for the sustenance of two persons. It is natural that Europeans, on their first arrival in a tropical region, should be surprised at the very limited extent of cultivated ground, encircling the crowded cabins of the native population. 196 ON PRODUCTION. BOOK L nment has in a great measure succeeded with respect to the sugar- cane, which furnishes, in a thousand shapes, an agreeable and wholesome article of diet, and is produced so abundantly by all parts of the world, lying within 38 of latitude, that, but for our present absurd legislative provisions, it might be had much cheaper than butcher's meat, and for the same price as many indigenous fruits and vegetables.* To return to the corn-trade, I must protest against the indiscrimi- nate and universal application of the arguments I have adduced to show the benefits of liberty. Nothing is more dangerous in prac- tice, than an obstinate, unbending adherence to system, particularly in its application to the wants and errors of mankind. The wiser course is, to approximate invariably to the standard of sound and acknowledged principles, to lead towards them by the never-failing influence of gradual and insensible attraction. It is well to fix beforehand a maximum of price beyond which exportation of grain shall either be prohibited, or subjected to heavy duties ; for, as smug- gling cannot be prevented entirely, it is better that those who are resolved to practise it should pay the insurance of the risk to the state than to individuals. We have hitherto regarded the inflated price of grain as the only evil to be apprehended. But England, in 1815, was alarmed by a prospect of an opposite evil ; viz. that its price would be reduced too low by the influx of foreign grain. The production of this article is, like that of every other, much more costly in England than in the neighbouring states, owing to a variety of causes, which it is im- material here to explain ; amongst others, chiefly to the exorbitance of her taxation. Foreign grain could be sold in England at two- thirds of its cost price to the English grower. It, therefore, became a most important question, whether it were better to permit the free importation, and thus, by exposing the home producer to a ruinous competition with the foreign grower, to render him incapable of paying his rent and taxes, to divert him from the cultivation of wheat altogether, and place England in a state of dependence for subsistence upon foreign,^ perhaps hostile nations ; or, by excluding foreign grain from her market, to give a monopoly to the home pro- ducer, at the expense of the consumer, thereby augmenting the diffi- culty of subsistence to the labouring classes, and, by the advanced price of the necessaries of life, indirectly raising that of all the manufactured produce of the country, and proportionately disabling it to sustain the competition of other nations. This great question has given rise to the most animated contest both of the tongue and the pen ; and the obstinate contention of two parties, each of which had much of justice on its side, leaves the by- * The same author informs us, that, in St. Domingo, a superficial square of '5403 toises, is reckoned at an average capable of producing 10,000 Ibs. weiglii of sugar; and that the total consumption of that commodity in France, taking it at the fair average of 20,000.000 kils. might be raised upon a superficial area of seven square leagues. CHAP. XVII. 'ON PRODUCTION. 197 standers to infer, that neither has chosen to notice the grand cau?e of mischief; that is to say, the necessity of supporting the arrogant pretensions of England to universal influence and dominion, by sacri- fices out of all proportion to her territorial extent. At all events, the great acuteness and intelligence, displayed by the combatants on either side, have thrown new light upon the interference of authority in the business of the supply of grain, and have tended to strengthen the conclusion in favour of commercial liberty. The substance of the argument of the prohibitionists may be re- duced to this ; that it is expedient to encourage domestic agriculture, even at the expense of the consumer, to avoid the risk of starvation by external means ; which is seriously to be apprehended on two occasions in particular ; first, when the power or influence of a bel- ligerent is able to intercept or check the import, which might become necessary ; secondly, when the corn-growing countries themselves experience a scarcity, and are obliged to retain the whole of their crops for their own subsistence.* It was replied by the partisans of free-trade, that if England were to become a regular and constant importer of grain, not one, but many foreign countries would grow into a habit of supplying her : the raising of corn for her market in Poland, Spain, Barbary, and North America, would be more extensively practised, and the sale of their produce would become equally indispensable to them, as the purchase would be to England : that even Bonaparte, the most bitter enemy England had ever encountered, had taken her money for the license to export corn: that crops never fail at the same time all over the world ; and that an extensive commerce of grain would lead to the formation of large stores and depots, which will offer the best possible security against the recurrence of scarcity ; and that, accord- ingly, as they asserted, there are no countries less subject to that calamity, or even to violent fluctuations of price, than those that grow no corn at all ; for which they cited the example of Holland and other nations similarly circumstanced-! However, it cannot be disputed that, even in countries best able to reckon on commercial supply, there are many serious inconve- niences to be apprehended from the ruin of internal tillage. Sub- sistence is the primary want of a nation, and it is neither prudent nor safe to become dependent upon distant supply. Admitting that laws, which, for the protection of the agricultural prohibit the im- port of grain to the prejudice of the manufacturing interest, are both unjust and impolitic, it should be recollected that, on the other hand, excessive taxation, loans, overgrown establishments, civil, militaiy, or diplomatic, are equally impolitic and unjust, and fall more heavily upon agriculture than upon manufacture. Perhaps one abuse may make another necessary, to restore the equilibrium of production, * Mai thus. Inquiry into the Nature and Progress of Rent. Grounds of an Opinion, &c. 76 ON PRODUCTION. BOOK L commercial enterprise, any funds for the construction of ships or machinery, for the digging of mines or canals, for the bringing of waste land into cultivation, or the commencement of 'long-winded speculations ; any funds, in short, to be employed as vested capital. The indispensable requisite of credit-paper is, its instant converti- bility into specie ; when the sum total of the paper issued does not exist in the coffers of the bank, under the shape of specie, the deficit should at least be supplied by securities of very short dates ; where- as, an establishment, that should lend its funds to be vested in enter- prises, whence they could not be withdrawn at pleasure, could never be prepared with "such securities. An example will illustrate this position. Suppose a bank of circulation to lend 6,000 dollars oi its notes, circulating as cash, to a landholder on mortgage of his land, presenting the amplest security. This loan is destined by the landholder to the construction of necessary buildings, for the culti- vation of the estate ; for which purpose he contracts with a builder and pays him the 6,000 dollars of notes advanced by the bank. Now, if the builder, after a short lapse of time, be desirous of turn- ing the notes into specie, the bank can not pay him by a transfer of the mortgage. The only property the bank has to meet the 6,000 dollars of notes is a security, ample beyond doubt, but not available at the moment. The securities in the hands of a bank, I hold to be a solid basis for the whole of its issues of notes, provided those securities be of solvent persons, and have not too long to run ; for the securities will be redeemed either with specie, or with the notes of the bank itself. In the first case, the bank is supplied with the means of paying its notes ; in the second, it is saved the trouble of providing for them. If, by any circumstance, the notes be deprived of their power of circulating as specie, the task of replacing the metal for the paper- money does not devolve upon the bank ; nor was it at the first sad- dled with the business of turning to account the metal-money its notes rendered superfluous. For, as we have already observed, the bank can extinguish the whole of its paper with the private securi- ties it holds. The inconvenience falls upon the public, which is under the necessity of finding a new agent of circulation, either by a . re-import of the metal-money, or by the substitution of private paper; but probably the public would, in such circumstances, apply again to a bank conducted on sound principles.* * Since the first publication of this passage, this very circumstance has hap- pened in respect to the bank of Paris, in 1814 and 1815, when that capital was besieged and occupied by the allied armies. The advances of the bank to the government, and to individuals, which could not be recalled immediately, did not exceed the capital of the establishment, for which the shareholders can not be called upon ; and its paper-issues, payable to bearer, were all covered, either bv specie in hand, or by commercial paper of short. dates. By this means, not- Withstanding the very critical circumstances of the moment, the merchants con- tinued to employ its notes.: which they could not well do without; and they wore pnid as usual in cash without interruption, during the whole of the hostile occupation : which shows at once the utility of a bank of circulation, and the uivantage of leaving inviolate the convertibility of paper-issues. CHAP. XXII. ON PRODUCTION. This will serve to explain, why so many schemes of agricultural banks for the issue of circulating and convertible notes on ample landed security, and so many other schemes of a similar nature, havo fallen to the ground in very little time, with more or less loss to the shareholders and the public.* Specie is equivalent to paper of per- fect solidity, and payable at the moment ; consequently it can only be supplanted by notes of unquestionable credit, and payable on de- mand ; and such notes cannot be discharged by a bare security, even of the best possible kind. For the same reason, bills of exchange in the nature of accommo- dation-paper, as it is called, can never be a sound basis for an issue of convertible paper. Such bills of exchange are paid when due by fresh bills, that have a further term to run, and are negotiated with the deduction of discount. When the latter fall due, they are met by a third set payable at a still later date, which are discounted in like manner. If the bank discounts such bills, the operation is no more than an expedient for borrowing of the bank in perpetuity ; the first loan being paid with a second, the second with the third, and so on. And the bank experiences the evil of issuing more of its notes, than the circulation will naturally absorb, and the credit of the establishment will support ; for the notes, borrowed upon such bills, do not help to circulate and diffuse real value, because they represent and contain no real value themselves ; consequently, they continually recur to be exchanged for specie. It is on this account, that the discount-bank of Paris, while it continued to be well ad- ministered, did, as the present banks of France and England do still refuse, as far as it is able, to discount accommodation-paper. The consequences are similar and equally mischievous, when a bank makes advances to government in perpetuity, or even for a very long period, (a) This was the cause of the failure of the bank of England. Not being able to obtain payment from government, it was unable to withdraw the notes in which the loan was made. From that moment its notes ceased to be convertible; and until the resumption of cash payments in 1822, enjoyed a forced circulation. The government, being itself unable to supply the bank with the means of payment, discharged that body from its liability to its own creditors.f * In 1803, the land-bank of Paris was, for this reason, obliged to suspend the payment of its notes in cash ; and to give notice, that they would be paid off by instalments out of the proceeds of its real securities. f Thornton, in his tract on the Paper Credit of Great Britain, written expressly (o) That is to say, advances its notes. A bank, like an individual, may ad- vance its capital, which then becomes more or less vested and fixed. The whole capital of the bank of England has been thus advanced ; and there would have been no danger, had it not advanced its notes also. When the advances of paper are made upon transferable securities, stock, exchequer bills, and the like, those securities may be sold for cash, or for the notes of the bank itself, so long as they rr-tain their value, and thus the safety and solvency of the bank maintained. But this operation is unnecessarily complex; for the government might itsel^ have sold, and thus have saved the brokerage or profit accruing upon the opera linn to the bank. T. 24 278 ON PRODUCTION. BOOK L The holders of the notes of a bank issuing convertible money run little or no risk, so long as the bank is well administered, and inde- j>endent of the government. Supposing a total failure of confidence to bring all its notes upon it at once for payment, the worst that can happen to the holders is, to be paid in good bills of exchange at short dates, with the benefit of discount ; that is to say, to be paid with the same bills of exchange, whereon the bank has issued its notes. If the bank have a capital of its own, there is so much addi- tional security ; but, under a government subject to no control, or to nominal contiol only, neither the capital of the bank, nor the assets in its hands, offer any solid security whatever. The will of an arbi- trary prince is all the holders have to depend upon : and every act of credit is an act of imprudence. As far as I am capable of judging, such is the effect of banks of circulation and of their paper issues upon individuals and national wealth. This effect is described by Smith in a quaint and ingenious metaphor. The capital of a nation he likens to an extensive tract of country, whereupon the cultivated districts represent the produc- tive capital, and the high roads the agent of circulation, that is to say, the money, that serves as the medium to distribute the produce among the several branches of society. He then supposes a machine to be invented, for transporting the produce of the land through the air ; that machine would be the exact parallel of credit-paper. Thenceforward the high roads might be devoted to cultivation. ' The commerce and industry of the country, however,' he .con- tinues, ' though they may be somewhat augmented, cannot be alto- gether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper-money, as when they travel about upon the with a view to justify the suspension of cash-payments by that establishment, has attacked the positions of Smith upon this subject. He tells us, that the extraordinary run upon the bank, which brought about the suspension, was oc- casioned, not by the excess of its issues, but, on the contrary, by their partial contraction. " An excessive limitation of bank-notes," he observes, " will pro- duce failures, failures must cause consternation, and consternation must lead to a run upon the bank for guineas." By this reference to an extreme case, he en- deavours to support his paradoxical opinions. When a convertible paper has succeeded in driving out of the country too large a portion of the metallic money, and the confidence in the paper happens suddenly to decline, great confusion and embarrassment will doubtless ensue, because the remaining agent of circulation is insufficient to effect the business ; but it is a great mistake to suppose, that the deficiency can be remedied by the multiplication of a paper, not enjoying the confidence of the public. If the bank of England was able to survive the shock, it was because of the indispensable necessity of some agent of transfer, of some money or other, of paper in default of all others, in so commercial a country ; be- cause the government and the bankers of London, who w"ere interested in the safety of the bank, unanimously agreed not to call upon it for cash, until it should be in a condition to pay ; that is to say, until the government should have paid its advances in actual value. The bank had lent to the government more than its whole capital ; for to that extent it might have gone with safety, its capital not being wanted for the discharge or convertibility of its paper ; had it not so done, the short bills in its possession would have been sufficient for the extinc- tion of its convertible paper. CHAP. XXIL ON PRODUCTION. x 279 solid ground of gold and silver. Over and above the accidents, to which they are exposed from the unskilfulness of the conductors of this paper-money, they are liable to' several others, from which no prudence or skill of those conductors can guard them. An unsuc- cessful war, for example, in which the enemy get possession of the capital, and consequently of that treasure, which supported the credit of the paper-money, would occasion a much greater confusion in a country, where the whole circulation was carried on by paper, than in one, where the greater part of it was carried on by gold and silver The usual instrument of commerce having lost its value, no ex- changes could be made except by barter or upon credit. All taxes having usually been paid in paper-money, the prince would not have wherewithal either to pay his troops, or to furnish his magazines ; and the slate of the country would be much more irretrievable, than if the greater part of its circulation had consisted in gold and silver. A prince, anxious to maintain his dominions at all times in the state in which he can most easily defend them, ought upon this account to guard, not only against that excessive multiplication of paper- money, which ruins the very banks which issue it, but even against that multiplication of it, which enables them to fill the greater part of the circulation of the country with it.'* Forgery alone is enough to derange the affairs of the be'st con- ducted and most solid bank. And forgery of notes is more to be apprehended, than counterfeits of specie. The stimulus of gain is greater. For there is more profit to be made by converting a sheet of paper into money, than by giving the appearance of precious metal to another metal, that has some though very little, intrinsic value, especially if it be compounded or covered with a small por- tion of the counterfeited metal; and perhaps, too, the materials for the former operation are less liable to discovery. Besides, the coun- ' terfeits of specie can never reduce the value of the specie itself, because the latter has an intrinsic and independent value as a com- modity ; whereas, the mere belief that there are forged notes abroad, so well executed, as to be scarcely distinguishable from the genuine, s enough to bring both forged and genuine into discredit. For which reason, banks have sometimes preferred the loss of paying notes they know to be forged, to the hazard of bringing the genuine ones into discredit, by the exposure of the fraud. One method of checking the immoderate use of notes is, to limit them to a fixed and high denomination of value ; so as to make them adapted to the circulation of goods from one merchant to another, but inconvenient for the circulation between the merchant and the consumer. It has been questioned whether a government has any right to prohibit the issue of small notes, where the public is willing to take them; and whether such limitation be not a violation of that, liberty of commerce, which it is the chief duty of a government to protect. But the right undoubtedly is just as complete, as that of * Wealth of Nations, book ii. chap. 2. 2ftO ON PRODUCTION. BOOK I. ordering a building to be pulled down, because it endangers the public safety. SECTION IV. Of Paper-Money. The distinctive appellation of paper-money, I have reserved exclusively for those obligations, to which the ruling power may give a compulsory circulation in payment for all purchases, and discharge all debts and contracts, stipulating a delivery of money. I call them obligations, because, though the authority that issues, is not bound to redeem them, at least not immediately, yet they commonly express a promise of redemption at sight, which is abso- lutely nugatory ; or of redemption at a date expressed, for which there is no sort of security ; or of territorial indemnity, the value of which we shall presently inquire into. Such obligations, whether subscribed by the government or by individuals, can be converted into paper-money by the public au- thority only, which alone can authorise ihe owners of money to pay in paper. The act is, indeed, an exertion, not of legitimate, but of arbitrary authority ; being a deterioration of the national money in the extreme degree. Upon the principles above established, it should. seem, that a mo- ney destitute of all value as a commodity, ought to pass for none in all free dealing subsequent to its issue ; and this is always the case in practice sooner or later. The notes of what was improperly called Law's Bank, and the assignats issued during the French revolution, were never regularly called in or cancelled ; yet those of the highest denomination would not pass at present for a single so/. How then, came they ever to pass for more than their real value? Because there are many expedients of fraud and violence, which will always have a temporary efficacy. In the first place, a paper, wherewith debts can be legally, though fraudulently, discharged, derives a kind of value from that single circumstance. Moreover, the paper-money may be made efficient to discharge the perpetually recurring claims of public taxation. Sometimes a tariff" or maximum of price is established ; which, in- deed, soon extinguishes the production of the commodities affected by it, but gives to the paper-money a portion of the value of those actually in existence. Besides, the very creation of a paper-money with forced circulation occasions the disappearance of metallic mo- ney ; for, as it is made to pass at par with paper, it naturally seeks a market, where it can find its true level of value. The paper-money is thus left in the exclusive possession of the business of circulation; and the absolute necessity of some agent of transfer, in every civil- ized community, will then operate to maintain its value.* So urgent * Wherever a paper-money has been established, the difference between its CHAP. XXII. ON PRODUCTION. 251 is this necessity, that the paper-money of England, consisting of the notes of the bank, has been kept at par with specie, simply by the limitation of the issues to the demands of circulation. Nations precipitated into foreign wars, before they have had time previously to accumulate the requisite capital for carrying them on, and destitute of sufficient credit to borrow of their neighbours, have almost always had recourse to paper-money, or some similar expe- dient. The Dutch, in their struggle with the Spanish crown for in- dependence, issued money of paper, of leather, and of many other materials. The United States of America, under similar circum- stances, likewise had recourse to paper-money ; and the expedient that enabled the French republic to foil the formidable attack Of the first coalition, has immortalized the name of assignats. Law has been unjustly charged with the whole blame of the calamities resulting from the scheme that bears his name. That he entertained just ideas respecting money, may be gathered from tho perusal of a tract* he published in his native country, Scotland, to induce the Scotch government to establish a bank of circulation. The bank established in France, in 1716, was founded on the princi- ples there set forth. Its notes were expressed in these words : "The bank promises to pay the bearer at sight ******* Kvres in money of the same weight and standard as the money of this day. Value received at Paris,," &c. The bank, which was then but a private association, paid its notes regularly on demand: they were not yet metamorphosed into paper- money. Matters remained on this footing, and went on very well, till the year 1719 ;f at which period the king, or rather the regent, repaid the shareholders, and took the management into his own hands, calling it the Royal Bank. The notes were then altered to this form : value in the home market, where it has utility, and its value in foreign markets, where it has no utility, has afforded a fruitful field for speculation, that has en- riched many adventurers. In 1811, 100 guineas in gold would purchase at Paris a bill of exchange on London, for 140Z. sterling, payable in the paper which was the only currency of England. Yet the difference between gold and paper in the London market at the same period, was only 15 per cent. It was in this way, that the paper was of higher value in England than abroad. Accordingly, I find from returns with which I have been favoured, that gold in guineas or bullion was smuggled into the ports of Dunkirk and Grayelines alone, in the years 1810, 11, 12, and 13, to the amount of 33,875,090 dollars. There wa a similar speculation in other commodities at large ; but it was attended with more risk and difficulty ; the import into France being very hazardous, although the export from England was encouraged in every possible way. Yet this traffic would soon have found its level, for it must have produced bills on England in such quantity, as to have brought the exchange to par at least, had not the con- tinental subsidies of England furnished a continual supply of bills on London without any return. *This work was translated into French while Law continued in the office of Controller-General of France ; and is entitled Considerations on Commerce and Money. f Vide Dutot. torn. ii. p. 200, for a detail of the beneficial effects ol the insti tution, as originally conducted. 24* 2L 282 ON PRODUCTION. BOOK L " The bank promises to pay the bearer at sight ******* Uvres in silver coin. Value received at Paris," &c. This alteration, slight as it was in appearance, was a radical one in substance. The first note stipulated to pay a fixed quantity of silver, viz. the quantity contained in the HVTKS current at the date of issuing the notes. The second merely engaged to pay Uvres, and so opened a door for whatever alterations an arbitrary power might think proper to make in the real value expressed by the word livre. And this was called fixing the rate of the paper-money ; whereas, on the contrary, it was unfixing, and making it a fluctuating value ; and the fluctuations were truly deplorable. Law strenuously opposed the innovation; but principle was compelled to give way to power; and the crimes of power, when the consequences began to be felt, were confidently attributed to the fallacy of the principle. The assignats issued by the revolutionary government were worth even less than the paper-money of the regency. The latter gave a promise, at least, of paying in silver : and, though the payment might be greatly curtailed by a deterioration of the silver coin, yet sooner or later the paper might have been redeemed, if the govern- ment had but been more moderate in its issues, and more scrupulous in fulfilling its engagements. But the assignats conveyed no right to call for silver; nothing but a right to purchase or obtain the na tional domains. Let us see what this right was really worth. The original assignats purported to be payable at sight, at the Caisse de FExtraordinaire,^where they were, in fact, never paid at all. It is true, they were received in payment for the national domains bought by individuals at a competition-price; but the value of these domains could never give any determinate value to the assignats, because their nominal value increased exactly in propor- tion as that of the assignats declined. The government was not sorry to find the price of national domains advance, because it was thereby enabled to withdraw a greater amount of assignats, and consequently, to re-issue new ones, without enlarging the quantity ufloat. It was not aware, that, instead of the national domains advancing in price, the assignats were undergoing a rapid deprecia- tion, and that the further that depreciation was pushed, the more assignats must be issued in payment of an equal quantity of supplies. The last assignats no longer purported to be payable at sight. The alteration was little attended to, because neither first nor last were, in fact, ever paid at all. But their vicious origin was made more apparent. The paper contained these words : "National domains Assignat of one hundred francs," &c. Now, what was the meaning of the term one hundred francs ? What value did they convey the notion of? Was it the value of the quan- lity of silver, heretofore known under the designation of one hundred francs? No; for 100/r. could not possibly be obtained with an issignat to that amount. Did it convey the idea of as much land, as might be purchased for 100 /?. in silver? Certainly not; for that CHAP. XXII. ON PRODUCTION. 283 quantity of land could no more be obtained, even from the govern- ment, by an assignat of 100 fr. than 100/r. in specie. The domains were disposed of at public auction for as many assignats as they would fetch; and the value of this paper had latterly so far declined, that one of 100 fr. would not buy an inch square of land. In short, setting aside all consideration of the discredit attached to that government, the sum expressed in an assignat presented the idea of no definite value whatever ; and those securities could not but have fallen to nothing, even had the government inspired all the con- fidence, of which it was so eminently destitute. The error was dis- covered in the end, when it was impossible any longer to purchase the most trifling article with any sum of assignats, whatever might De its amount. The next measure was to issue mandats, that is to say, papers purporting to be an order for the absolute transfer of the specific portion of the national domains expressed in the mandat: but, besides that it was then too late, the operation was infamously executed BOOK II. CHAPTER L OF THE BASIS OF VALUE ; AND OF SUPPLY AND DEMAND. THE principal phenomena of production have been investigated >n the first book; wherein I have shown how human industry, with .he aid of capital and of natural agents and properties, creates every kind of utility, which is the primary source of value ; and in what way social institutions and public authority operate to the benefit or the prejudice of production. This second book will be devoted to the consideration of the distribution of wealth : to which end it will be necessary, first, to analyze the nature of value, the object of dis- tribution ; secondly, to a'scertain the laws, which regulate the dis- tribution of value, when once created amongst the various members of society, so as to constitute individual revenue. The valuation of an object is nothing more or less than the affirma- tion, that it is in a certain degree of comparative estimation with some other specified object ; and any ot\ier object possessed of value may serve as the point of comparison. A house, for instance, may be valued in corn or in money. To say that it is worth 4000 dollars conveys a more accurate notion of its value, than to say that it is worth 4000 bushels of wheat, solely because the habit of reckoning the value of all commodities in coin makes it easier for the mind to form an idea of the value of 4000 dollars in other commodities, that is to say, of the quantity of other commodities obtainable for that sum, than of that obtainable for 4000 bushels of wheat. Yet, if wheat be 1 dollar a bushel, the degree of value expressed by each is the same. In every act of valuation, the object valued is the fixed datum. In the instance first given, the house is the datum : it is a definite amount of materials, put together in a definite manner, upon a defi- nite site. But the point of comparison is variable in amount, ac- cording to the degree of estimation in the mind of the valuer. If valued at 4000 dollars, the house is reckoned to be equivalent to so many pieces of silver coin of the weight of 416 grains, with a mix- CHAP. I. ON DISTRIBUTION. 285 ture of 179-1664 parts of alloy; if at 4500 dollars, or 3500 dollars, it is but a variation of the quantity of the commodity, that is the specific point of comparison. So likewise, if that point be wheat, the variable quantity of that commodity would express the degree of value. Valuation is vague and arbitrary, when there is no assurance that it will be generally acquiesced in by others. The owner of the house may reckon it worth 4500 dollars, while an indifferent per- son would value it at no more than 3500 dollars, and probably nei- ther would be right. But if another, or a dozen other persons be willing to give for it a specific amount of other commodities, say 4000 dollars, or 4000 bushels of wheat, we may conclude the esti- mate to be a correct one. A house that will fetch 4000 dollars in the market is worth that sum.* But if one bidder only will give that price, and he is unable to re-sell it without loss, he will give more than it is worth. The only fair criterion of the value of an object is, the quantity of other commodities at large, that can be readily obtained for it in exchange, whenever the owner wishes to part with it; and this, in all commercial dealings, and in all money valuations, is called the current price.^ What is it, then, that determines this current price of commodities ? The want or desire of any particular object depends upon the physical and moral constitution of man, the climate he may live in, the laws, customs, and manners of the particular society, in which he may happen to be enrolled. He has wants, both corporeal and intellectual, social and individual ; wants for himself and for his family. His bear-skin and reindeer are articles of the first necessity to the Laplander; whilst their very name is unknown to the lazzn- rone of Naples, who cares for nothing in the world if he get but his meal of macaroni. In Europe, courts of justice are considered in- dispensable to the maintenance of social union; whereas the Indian of America, the Tartar, and the Arab, feel no want of such establish- ments. It is not our business here to inquire, wherein these wants originate ; we must take them as existing data, and reason upon them accordingly. * My brother, Louis Say, of Nantes, has attacked this position in a short tract entitled, Principales Causes de la Richesse et de la Misere des Peuples et des Particuliers, 8vo. Paris. Deterville. He lays down the maxim, that objects are items of wealth, solely in respect of their actual utility, and not of their admitted or recognised utility. In the eye of reason, his position is certainly correct; but in this science relative value is the only guide. Unless the degree of utility be measured by the scale of comparison, it is left quite indefinite and vague, and, even at the same time and place, at the mercy of individual caprice. The nosi- tive nature of value was to be established, before political economy could pre- tend to the character of a science, whose province it is to investigate its origin, and the consequences of its existence. f In the earlier editions of this work, I had described the measure of value to be the value of the other product, that was the point of comparison, which was incorrect. The quantity and not the value of that other product, is the mea- sure of value in the object of valuation. This mistake gave rise to mucn ambi- guity of demonstration, which the severity of criticism, both fair and unfair, lion taught me to correct. Fas est et ab hoste doceri. 286 ON DISTRIBUTION. BOOK II. Of these wants, some are satisfied by the gratuitous agency ol natural objects; as of air, water, or solar light. These may be deno minated natural wealth, because they are the spontaneous offering of nature ; and, as such, mankind is not called upon to earn them by any sacrifice or exertion whatever ; for which reason, they are never possessed of exchangeable value. Other wants there are, that can only be satisfied by the employment of objects possessed of an utility, which they could not have been invested with without some modification by human agency, without having undergone some change of condition, and without some difficulty having been sur- mounted for the purpose. Of this kind are the products of agricul- ture, commerce, and manufacture, in all their infinite ramifications. To them alone is any value attached; and for a very obvious reason; because the very act of production implies an act of mutual exchange, in which the producer has given his personal agency for the product obtained by its exertion. Wherefore, he will hardly resign it with- out receiving what is, in his estimation, an equivalent. These may be called social wealth, both because an act of exchange is in itself a social act, and because exclusive property in the product obtained by personal exertion, or by an act of exchange, can only be secured by social institutions. Social wealth, it is to be observed, is the only part of human wealth, that can form the subject of scientific research. 1. Because it is the only part that is the object of human estimation, or at least of such estimation, as is not altogether arbitrary and men- tal. 2. Because it is the only one which is created, distributed, and destroyed, according to any rules that can be assigned by human science. The knowledge of the ground-work of the quality, value, or rather exchangeable value, leads to the perception of its origin. The items of social wealth are invested with value by the necessity of giving something to obtain them ; and that something is produc- tive exertion. When once obtained, when this sacrifice has been made in the attainment, the party is really more wealthy ; he has wherewithal to satisfy more wants ; and, if the object obtained by this sacrifice be unsuited to the personal wants of the owner, he may make use of it for the attainment of some object of personal desire, by the way of exchange for some other product ; which other pro- duct will itself be the result of similar productive exertion ; so that, in fact, the exchange will be a mere mutual transfer of the productive exertion on either side, whereof the two products respectively are the result. When a bushel of wheat is given for seven pounds of coffee, there is a mere transfer of the productive agency exerted in creating the one, for that exerted in the creation of the other.* * It is scarcely necessary to mention, that when commodities are exchanged, .tot for one another, but for money, the case is nowise varied. No seller ever lakes money for his own consumption, or for any other purpose, than as an object of a second exchange ; so that, in reality, the product sold is exchanged for the product bought with the price. When a bushel of wheat has been sold for dollar, and 7 Ibe. of coffee bought with that dollar, the wheat has .actually been CHAT. I. ON DISTRIBUTION. 287 Wherefore, there is a current value or price established for pro- ductive service as well as for products. For, if the agency exerted in the creation of a bushel of wheat can obtain, as its reward, in the way of exchange, either a bushel of wheat or seven pounds of coffee indifferently, what is there to prevent its obtaining in the same way any other equivalent product, say a yard of cotton cloth, 5 yards of ribbon, a dozen plates, or any thing else? Should the bushel of wheat be exchangeable for a less amount of any of these commodi- ties respectively, the productive agency exerted in the creation of wheat would be proportionately less rewarded, than that exerted in the creation of the specific commodity ; and a portion of the former would be attracted to the latter branch of production, until the recompense of labour in each department should find its fair level. Each class of productive agency has a current price peculiar to itself. " If the productive agency exerted in the production of a bushel of wheat can obtain for itself but 1-15 of its own product, it will be entitled to no more than 1-15 of the value of any other pro- duct obtainable by exchange for that quantity of wheat; for instance to 1-15 of a dollar: and so of other products. Thus it is obvious, that the current value of productive exertion is founded upon the value of an infinity of products compared one with another ;* that the value of products is not founded upon that of productive agency, as some authors have erroneously affirmed ;f and that since the desire of an object, and consequently its value, origin- ates in its utility, it is the ability to create the utility wherein ori- ginates that desire, that gives value to productive agency ; which value is proportionate to the importance of its co-operation in the business of production, and forms, in respect to each product indivi- dually, what is called, the cost of its production. The utility of a product is not confined to one human being, but applies to a whole class of society at the least, as in the case of parti- cular articles of clothing; or to a whole community, as in that of most of the articles of food that are adapted to human consumption in general, without distinction of sex or age. For this reason, the demand for a specific object, or product, or act of productive exer- tion, has a certain degree of extent. The aggregate demand for sugar in France is said to exceed 500,000 quintals per annum. Even the individual demand of a specific product for individual consumption may be more or less urgent. Whatever be its intensity, it may be bartered for the coffee, and the money that has intervened has withdrawn itself as completely, as if it had never appeared at all in the transaction. Wherefore it is quite correct to say, that relative value is determined by the relation of com- modities one to another, and not solely by that of each commodity to money. * It must not be inferred from this passage, that I mean to say, that the pro- ductive agency exerted in raising a product, whose charges of production have amounted to a dollar, although it is saleable for 75 cents only, is therefore worto but 75 cents. My position merely implies, that this amount of productive ser- vice has, in such case, raised a value of 75 cents only, though it might have raised a value of a dollar. f Ricardo, Prin. Pol. Econ. and Taxation, 288 ON DISTRIBUTION. BOOK 11 called by the general name of demand; and the quantity attainable at a given time, and ready for the satisfaction of those who are in want of the specific article, may be called the supply or amount in circulation. But this must be understood with some limitation ; for there is no object of pleasure or utility, whereof the mere desire may not be unlimited, since every body is always ready to receive whatever can contribute to his benefit or gratification. There must, therefore, be some bounds to demand; and the most effectual limitation is, the ability to give some other equivalent product for the object of desire. All the porters in a. commercial city might desire to have a coach and six for the more comfortable execution of their business, without raising the price of horses and carriages a tittle. The objects, which each individual has to give as an equivalent for the object of his desire, are no other than the products of his own productive means, which are limited even in the case of the most wealthy member of society. WeaM is, in all countries, distributed in every degree of grada- tion, from the populous level of mediocrity to the solitary pinnacle of extreme affluence. Accordingly, the products most generally desirable are really demanded by a limited number only, because they alone have wherewithal to obtain them ; and even their ability may be more or less according to circumstances. Whence it may be further concluded, that the same product or products may be in greater demand at a lower scale of price, and when attainable by less productive exertion, although nowise increased in utility, merely because accessible to a greater number of consumers; and, on the contrary, less in demand at a higher scale of price, because accessible to a smaller number. Suppose that, in a severe winter, a method should be hit upon of manufacturing knit-waistcoats of woo\|enat2 dollars each; probably all who should have 2 dollars left, after satisfying more urgent wants, would provide themselves with these waistcoats ; but those who should have but a dollar and a half left must still go without. If the same article could be produced at one dollar and a half, these latter also might all be provided and become consumers; and the consump- tion would be still further extended, if they should be produced at one dollar only. In this manner, products formerly within reach of the rich alone have been made accessible to almost every class of society, as in the case of stockings. When a product is raised in price, whether by taxation or other- wise howsoever, the contrary effect is experienced; the number of its consumers is reduced ; for it can only be obtained by such as can afford to pay for it; and the ability to purchase is not increased by trie same causes, that operate to raise the price. Thus, in England, the great majority of the population is wholly precluded from the consumption of vinous liquors, and of many other articles; for their attainment involves so large a sacrifice of products, or of productive agency, that those only can attempt it, who have a great deal of CHAP. L ON DISTRIBUTION. 289 either to spare. In such cases, not only is the number of consumers diminished, but the consumption of each consumer is reduced also. Though a consumer of coffee may not be compelled, by a rise of its price, to relinquish that beverage altogether, he must at all events curtail the amount of his consumption ; which is then like that of two individuals, of whom one discontinues, and the other remains able and willing to continue the use of the article. In commercial speculation, as the purchaser does not buy for his own consumption, he proportions his purchases to what he expects to sell. Since, then, the quantity he can sell depends upon the price he can afford to sell at, he will buy less according as the price rises, and more according as it falls. In poor countries, objects of even the commonest use, and of infe- rior price, frequently exceed the means of a great proportion of the population. There are countries, where shoes, though cheap, are oui of teach of most of the inhabitants. The price of this commo- dity does not fall to a level with the means of the people ; because that level is siili bolcv the bare cost of production. But, shoes of leather not being absolutely necessary to existence, those who are unable to procure these, wear wooden shoes, (sabots) or go barefoot. When this is unhappily the case with an article of primary neces- sity, part of the population must perish, or at least cease to be renewed. These are the causes of a general nature, that limit the demand for each product, and for all products in general. In respect to supply, it consists of l .he whole of any commodity which the owners for the time being rent to the one, and wages to the oiher ; to the one, the revenue of his land, to the other, the revenue of his industry. The aggregate of all these is defrayed out of the value of the cloth, the wholef of which forms the revenue of some one or other, and is entirely ab- sorbed in that way. * In the above instance of the watch, many of the artisans are themselves the adventurers in respect to their own industry; in which case their receipts are profits, not wages. If the maker exclusively of the chain himself, buys the steel in its rude state, works it up, and sells the chain on his own account, he is the adventurer in respect to this particular part of the manufacture. A flax- spinner buys a few penny-worth of flax, spins it, and converts her thread into money. Part of this money goes to the purchase of more flax; this is hei eap- ital ; another portion is spent in satisfying her wants ; this is the joint profit of her industry and her little capital, and forms her revenue. f Even that portion of the gross value, which is absorbed in the maintenance or restoration of the vested capital or machinery. If his works need repairs, which are executed by the proper mechanic, the sum expended in them forms the revenue of that mechanic, and is to the clothier a simple advance, which it refunded, like any other, by the value of the product when completed. 27* 3l 8 ON DISTRIBUTION. BOOK U. Whence it appears, that the term net produce applies only to the individual revenue of each separate producer or adventurer in industry; but that the aggregate of individual revenue, the total revenue of the community, is equal to the gross produce of its land, capital, and industry. Which entirely subverts the system of the economists of the last century, who considered nothing but the net produce of the land as forming revenue, and therefore concluded that this net produce was all that the community had to consume , instead of admitting the obvious inference, that the whole of what has been created, may also be consumed by mankind.* If national revenue consisted of the mere excess of value produced above value consumed, this most absurd consequence would be ine- vitable, namely, that, where a nation consumes in the year the total of its annual product, it will have no revenue whatever. Is a man possessed of an income of 2000 dollars a year, to be said to have no revenue, because he may think proper to spend the whole of it ? The whole amount of profit derived by an individual from 'his land, capital, and industry, within the year, is called his annual revenue. The aggregate of the revenues of all the individuals, whereof a nation consists, is its national revenue, f Its sum is the gross value of the national product, minus the portion exported ; for the relation of one nation, is like that of one individual to another. The profits of .an individual are limited to the excess of his income above his expenditure, which expenditure, indeed, forms the reve- nue of other persons, but, if those persons be foreigners, must be reckoned in the estimate of the revenue of the respective nations they may belong to. Thus, for instance, when a consignment of ribbons is made to Brazil to the amount of 2000 dollars, and the returns received in cotton, in estimating the resulting product to France from this act of dealing, the export made to Brazil in pay- ment of the cotton must be deducted. Supposing the investment of - ribbons to procure, say 40 bales of cotton, which, when they reach France, will fetch 2400 dollars,*400 dollars only of that sum will go to the revenue of France, and the residue to that of Brazil. Did all mankind form but one vast nation or community, it would be equally true in respect to mankind at large, as to the internal pro- duct of each insulated nation, that the whole gross value of the product would be revenue. But so long as it shall be necessary to consider the human race as split into distinct co.mmunities, taking * Part of the value created is due to natural agency, amongst which that of land is comprised. But, as stated above in Book I., land is treated as a machine or instrument, and its appropriator as the producer that sets it in motion ; in like manner as the productive quality of capital is said to be the productive quality of the capitalist to whom it belongs. Mere verbal criticism is of little moment, when once the meaning is explained ; it is the correctness of the idea, and not of the expression, that is material. t The term national revenue, has been sometimes incorrectly applied to the financial receipts of the state. Individuals, indeed, pay their taxes out of their respective revenues; but the sum levied by taxation is not revenue, but rather a ax upon revenue, and sometimes unhappily upon capital too. CHAP. V. ON DISTRIBUTION 319 each an independent interest, this circumstance must be taken into the account. Wherefore, a nation, whose imports exceed its ex- ports in value, gains in revenue to the extent of the excess ; which excess constitutes the profit of its external commerce. A nation that should export to the value of 20,000 dollars, and import to the value of 24,000 dollars wholly in goods, without any money passing on either side, would make a profit of 4000 dollars, in direct contra- diction to the theory of the partizans of the balance of trade.* The voluminous head of perishable products consumed within the year, nay, often at the very moment of production, as in the case of all immaterial products, is nevertheless an item of national revenue. For what are they but so many values produced and consumed in the satisfaction of human wants, which are the sole characteristics of revenue ? The estimation of individual and of national revenue is made in the same way, as that of every collection of values, under whatever varieties of form ; as of the estate of a deceased person. Each pro- duct is successively valued in money or coin. For instance, the revenues of France are said to amount to 1300 millions of dollars which by no means implies, that the commerce of France produces a return of that amount in specie. Probably a very small amount of specie, or none at all, may have been imported. All that is meant by the assertion is, that the aggregate annual products of the nation, valued separately and successively in silver coin, make the 'total value above stated. The only reason of making the estimate in money is, the greater facility acquired by habit of forming an idea of the unchangeable value of a specific amount of money, than of other commodities. Were it not for that facility, it would be quite as well to make the estimate in corn ; and to say, that the revenues of France amounted to 1,300,000,000 bushels of wheat, which at one dollar the bushel, would make precisely the same amount. Money facilitates the circulation from hand to hand of the values composing both revenue and capital ; but is itself not an item of annual revenue, not being an annual product, but a product of previous commerce or metallurgy, of a date more or less remote. The same coin has effected the circulation of the former year, possibly of the former century, and has all the while remained the same in amount ; nay, if the value of its material have declined in the interim, the nation will even have lost upon its capital existing under the form of money; just in the same way as a merchant would lose upon the fall of price of the goods in his warehouses. Thus, although the greater part of revenue, that is to say, of value produced, is momentarily resolved into money, the money, the quantity of silver coin itself, is not what constitutes revence ; reve- nue is value produced, wherewith that quantity of silver coin has * Their profit arises from increase of value effected by the transport upon Doth the export and the import, by the time they have reached their destination espectively. 32() ON DISTRIBUTION. BOOK II. been bought ; and, as that value assumes the form of money but for a moment, the same identical pieces of money are made use of many times in the course of a year, for the purpose of paying or receiving specific portions of revenue. Indeed, some portions of revenue never assume the form of money at all. The manufacturer, that boards his workmen himself, pays part of their wages in food ; su that this fai greater oortjon of the mechanic's revenue is paid, received, and consumed, without having once taken the shape of money, even for an instant. In the United States of America, and in countries similarly circumstanced, it is not uncommon for the colonist to derive from the produce of his own estate, food, lodging, and raiment for the whole of his establishment; receiving and con- suming his whole revenue in kind, without any intervention of money whatsoever. I think I have said enough to warn the reader against confound- ing the money, into which revenue may be converted, with revenue itself; and to establish a conviction that the revenue of an indivi- dual, or of a nation, is not composed of the money received in lieu of the products of his or their creation, but is the actual product or its value, which, by a process of exchange, may undoubtedly arrive ut its destination in the shape of a bag of crown pieces, or in any tlier shape whatsoever. No value, whether received in the shape of money or otherwise, r,an form a portion of annual revenue, unless it be the product, or .ie price of a product, created within the year : all else is capital, s property passing from one hand to another, either in exchange, as -. gift, or by inheritance. For an item of capital, or one of revenue, nay be transferred or paid any bow, whether in the shape of per- :onal or real, of movcable or imrrjcveable property, or of money But, no matter what shape it assume, revenue differs from capital essentially in this, that it is the result or product of a pre-existing source, whether land, capital, or industry. . It has with some been a matter of doubt, whether the same value, which has already been received by one individual as the profit or revenue of his land, capital, or industry, can constitute the revenue of a second. For instance, a man receives 100 crowns in part of his personal revenue, and lays it out in books; can this item of revenue, thus converted into books, and in that shape destined to his consumption, further contribute to form the revenue of the printer, bookseller, and all the other concurring agents in the production of the books, and be by them consumed a second time? The difficulty may be solved thus. The value forming the revenue of the first individual, derived from his land. Capital, or industry, and by him consumed in the sfcape of books, was not originally produced in that form. There has been a double production: 1. Of corn perhaps by the land and the industry of the farmer, which has been converted into crown pieces, and paid as rent to the proprietor : 2. Of books by ihe capital and industry of the bookseller. The two products have been subsequently interchanged one for the other, and consumed CHAP. VL ON DISTRIBUTION. 321 each by the producer of the other: having arrived at the particular form adapted to their respective wants. So likewise of immaterial products. The opinion of the lawyer, the advice of the physician, is t K s product of their respective talents and knowledge, which are their peculiar productive means. If the merchant have occasion to purchase their assistance, he gives for it a commercial product of his own converted into money. Each of them ultimately consumes his own revenue respectively, transformed into the object best adapted to his peculiar occasions. CHAPTER VI. OF WHAT BRANCHES OF PRODUCTION YIELD THE MOST LIBERAL RECOMPENSE TO PRODUCTIVE AGENCV. THE aggregate value of a product, in the way just described, refunds to its different concurring producers the amount of their advances, with the addition in most cases, of a profit, that constitutes the ; r revenue. But the profits of productive agency are not of equal amount in all its branches; some yielding but a very scanty revenue for the land, capital, or industry, embarked in them ; while others give tvn exorbitant return. True it is, that productive agents always endeavour to direct their agency ..o those employments, in which the profits are the greatest, and thus, by their competition, have as much tendency to lower price, as demand Kas to raise it ; but the effects of competition can not always so nicely proportion the supply to the demand, as in every case to ensure an equal remuneration. Some kinds of labour are scantily supplied, in countries where people are not accustomed to them ; and capital is ofteh so sunk in a particular channel of production, that it can never be transferred to any other from that wherein it was originally embarked. Besides, the land may stubbornly resist that kind of cultivation, whose products are in the greatest demand. One cannot trace the fluctuation of profit on each particular occa- sion. A wonderful change may be effected by a new invention, a hostile invasion, or a siege. Such partial circumstances may influence or derange the operation of general causes, but can not destroy their general tendency. No dissertation, however voluminous, could be made to embrace every individual circumstance, that by possibility may influence the relative value of objects ; but one may specify general causes, and such as have an uniform activity; thereby enabling every one, -when the particular occasion may present itself, to estimate the effect produced by the operation of partial and Iran sient circumstances. 2Q 322 ON DISTRIBUTION. BOOK H It may appear extraordinary at first sight, but will on inquiry be found generally true, that the. largest profit is made, not on the dearest commo'dities or upon those which are least indispensable, but rather on those, which are the most common and least to be dis- pensed with. In fact the demand for these latter is necessarily per- manent ; for it is stimulated by actual want, and grows with every increase of the means of production ; inasmuch as nothing tends to increase population more, than providing the means of its subsistence. The demand for superfluities, on the contrary, does not expand with the increased power of producing them. An extraordinary run, which, by the way, can never take place but in large towns, may raise the current considerably above the natural price ; that is to say, above the actual cost of production ; or a change of fashion may again depress it infinitely below that point. Superfluities are, after all, but objects of secondary want even to the rich themselves ; and the demand for them is limited to the very small number of persons that can indulge in them. When a casual calamity obliges individuals to reduce their expenditure, when their revenues are curtailed by the ravages of war, by taxation, or by natural scarcity, the first items of retrenchment are always the arti- cles of least necessary consumption. And this may serve, perhaps, to explain, why the productive agency directed to the raising of superfluities, is "generally worse paid than that otherwise employed. I say generally, for it is possible enough that, in a great metropolis, where the demand for luxuries is more urgent than elsewhere, and the dictates of fashion, however absurd, more implicitly obeyed than the eternal laws of nature ; where a man will, perhaps, be content to lose his dinner, so he may appear in the evening circle in embroi- dered ruffles, it is possible, that in such a place the price of the gew- gaws may sometimes very liberally reward the labour and capital devoted to their production. But, except in such particular ca^es, balancing one year's profits with another, and allowing for contin- gent losses, it has been ascertained, that the adventurers in the production of superfluities make the most scanty profits, and that their workmen are the worst paid. The manufacturers of the finest laces in Normandy and Flanders are a very indigent set of people; and at Lyons, the workers of gold-embroidery are absolutely clothed in rags. Not but that very considerable profits have occasionally been derived from such articles. A hat-maker has been known to make a fortune by a fancy hat ; but, taking all the profits made on superfluities, and deducting the value of goods remaining unsold, or, though sold, never paid for, we shall find that this class of products affords, on the whole, the scantiest profit. The most fashionable tradesmen are oftenest in the list of bankrupts. Commodities of general use are attainable by a greater number of persons, and are in demand with almost every class of society. The i.handelier is to be found only in the mansions of the rich ; but the meanest cottage is furnished with the convenience of a candlestick : CHAP. VI. ON DISTRIBUTION. 333 the demand for candlesticks is, therefore, regular, and always more brisk than that for chandeliers; and, even in the most opulent coun- try, the total value of the candlesticks is far greater than that of the chandeliers. The articles of human food are unquestionably those of most indispensable use; the demand for them recurs daily ; and no occu- pations are so regular as those which minister to human sustenance. Wherefore, it is they that yield the most certain profit, notwithstand- ing the effects of brisk competition.* The butchers, bakers, and porkmen, of Paris, are pretty sure to retire with a fortune sooner or later; indeed, I have it from pretty good authority in such matters, that half the houses and real property sold in Paris and the environs, is bought up by tradesmen in those lines. It is on this account, that individuals and nations, who understand their true interest, unless they have very cogent reasons for acting otherwise, apply themselves in preference to the production of what tradesmen call current articles. Mr. Eden, who, in 1706, negotiated on the part of Great Britain the treaty of commerce concluded by M. de Vergennes, went upon this principle, in stipulating the free import of the common English earthenware into France. " The few dozens of plates we may sell you," said the English agent, " will be a poor set-off against the magnificent services of Sevres porcelain we shall take of you." This appeal to the vanity of the French agent was decisive. But, as soon as the English earthenware was admit- ted, its lightness, cheapness, convenience and simplicity of form, recommended it to the most moderate establishments; its regular import, in a short time, amounted to many millions, and continued increasing every year until the war. The exportation of Sevres china, was a mere trifle in comparison. The scale for current articles, besides being more considerable, is likewise more steady. A tradesman is never long in disposing of common linen shirting. The examples I have selected from the class of manufacture might easily be paralleled in the agricultural and commercial branches. A much larger value is Consumed in lettuces than in pine-apples, throughout Europe at large ; and the superb shawls of Cachemere are, in France, a very poor object in trade, in comparison with the plain cotton goods of Rouen. Wherefore, it is a bad speculation for a nation to aim at the export of objects of luxury, and the import of objects of general utility. France supplies Germany with fashions and finery, which very few persons can make use of; and Germany makes the return in tapes * I speak here of the adventurers, masters, or tradesmen ; the mere labourer or journeyman benefits only, as it were, by re-action. The farmer, who is an adventurer in agriculture, employed in raising products for human sustenance, lies under disadvantages, that very much curtail his profits. His concerns are too much at the mercy of his landlord, and of the financial exactions of public authority, to say nothing of the vicissitudes of seasons, to be very gainful DD the average. 324 ON DISTRIBUTION. BOOK II. and other merceries, in files, scythes, shovels, tongs, and other hard- ware of common use. But for the wines and oils of France, the annual product of a soil highly favoured by nature, together with a few products of superior execution, France would derive less ad- vantage from Germany than Germany from France. The same may be said of the French trade with the north of Europe. (,) CHAPTER VH. OF THE REVENUE OF INDUSTRY SECTION I. Of the Profits of Industry in general. THE general motives, which stimulate the demand of products, have been above investigated.* When the demand for any product whatever, is very lively, the productive agency, through whose means alone it is obtainable, is likewise in brisk demand, which necessarily raises its ratio of value: this is true generally, of every kind of productive agency. Industry, capital, and land, all yield, ceteris paribus, the largest profits^ when the general demand for products is most active, affluence most expanded, profits most wide- ly diffused, and production most vigorous and prolific. In the preceding chapter, we have seen that the demand for some products is always more steady and active than for others. Whence, we have inferred, that the agency directed to those particular pro- ducts, receives the most ample remuneration. Descending in our progress more and more into particular detail, * Book I, c. 15. (a) The reasoning of this whole chapter is superfluous and inconclusive. Where value is left to find its natural level, one class of productive agency will, in the long run, be equally recompensed with another, presenting an equi- poise of facility or difficulty, of repute or disrepute, of enjoyment or suffering, in the general estimation of mankind ; this he states fully in the next chapter. If our author means here to say merely, that a large class of productive agency will receive a larger portion of the general product as its recompense or revenue, or that agency in permanent employ will obtain a regular and permanent recom- pense, he has taken a very circuitous mode of expressing a position, which is, vndeed, almost self-evident. The grand division of productive agency is into t-nrporeal and intellectual ; whereof the former is, on the average, the more amply rewarded by the rest of mankind, because the latter, in some measure, rewards itself. -Thus, the profits of printing and bookselling are, on the whole, tnorejiberal than those of authorship; because the latter is partly paid in wif gratification, in vanity or conscious merit. T. CHAP. VII. ON DISTRIBUTION. 325 we shall examine in this, and some following chapters, in what cases the profits of industry bear a greater or a less proportion to those of capital and of land, and vice versa ; together with the reasons why certain ways of employing industry, capital, or land, are more profit- able than others. To begin, then, with the comparison of the relative profits of in- dustry, to those of capital and land, we shall find these bear the highest ratio, where abundance of capital creates a demand for a great mass of industrious agency ; as it did in Holland before the revolution. Industrious agency was very dearly paid there ; as it still is in countries like the United States of America, where popu- lation, and consequently, the human agents of production, spite of their rapid increase, bear no proportion to the demands of an unli- mited extent of land, and of the daily accumulation of capital by the prevalence of frugal habits. In countries thus circumstanced, the condition of man is generally the most comfortable ; because those, who live in idleness upon the profits of their capital and land, are better able to live on moderate profits, than those who live upon- the profits of their own industry only; the former, besides the resource of living on their capital, can, when they please, add the profits of industry to their other revenue ; but the mere mechanic or labourer can not add at pleasure to the profits of his industry those of capital and land, of which he possesses none. Proceeding next to compare the profits of different branches of industrious agency one with another, we shall find them greater or less in proportion, 1st, To the degree of danger, trouble, or fatigue, attending them, or to their being more or less agreeable ; 2dly, 1o the regularity or irregularity of the occupation ; 3dly, To the degree of skill or talent that may be requisite. Every one of these causes tends to diminish the quantity of labour in circulation in each department, and consequently to vary its natu- ral rate of profit. It is scarcely necessary to cite examples in support of propositions so very evident. Among the agreeable or disagreeable circumstances attending an occupation, must be reckoned the consideration or contempt which it entails. Some professions are partly paid in honour. Of any given price, the more is paid in this coin, the less may be paid in any other, without deducing the ratio of price. Smith remarks, that the scholar, the poet, and the philosopher, are almost wholly paid in personal consideration. Whether with reason or from pre- judice, this is not entirely the case with the professions of a comic actor, a dancer, and innumerable others; they must, theiefore, be paid in money what they are denied in estimation. " It seems absurd at first sight," says Smith, "that we should despise their persons, and yet reward their talents with the most profuse liberality \V hilst we do the one, however, we must of necessity do the othei Should the public opinion or prejudice ever alter with regard to such occupations, their pecuniary recompense would quickly diminish- 28 326 ON DISTRIBUTION. BOOK II. More people would apply to them, and the competition would quickly reduce the price of their labour. Such talents, though far from being common, are by no means so rare as is imagined. Many people possess them in great perfection, who disdain to make this use of them ; and many more are capable of acquiring them, if any thing could be honourably made by them."* In some countries, the functions of national administration are requited at the same time with high honour and large emolument ; but it is only so, where, instead of being open to free competition, like other occupations and professions, they are in the disposal of royal favour. A nation, awake to its true interest, is careful not to lavish this double recompense upon official mediocrity ; but to husband its pecuniary bounty, w r here it is prodigal of distinction and authority. Every temporary occupation is dearly paid ; for the labourer must be indemnified as well for the time he is employed, as for that during which he is waiting for employment. A job coachmaster must charge more for the days he is employed, than may appear sufficient for his trouble and capital embarked, because the busy days must pay for the idle ones ; any thing else would be ruin to him. The hire of masquerade dresses is expensive for the same reason ; the receipts of the carnival must pay for the whole year. Upon a cross road, an innkeeper must charge high for indifferent entertainment; for he may he some days before the arrival of another traveller. However, the proneness of mankind to expect, that, if there be a single lucky chance, it will be sure to fall to their peculiar lot, attracts towards particular channels a portion of industry dispropor- tionate to the profit they hold out. ' In a perfectly fair lottery,' says the author of the Wealth of Nations, ' those who draw prizes ought to gain all that is lost by those who draw blanks. In a pro- fession, where twenty fail for one that succeeds, that one ought to gain all that should have been gained by the unsuccessful twenty. 'f Now many occupations are far from being paid according to this rate. The same author states his belief, that, how extravagant soever the fees of counsellors at law of celebrity may appear, the annual gains of all the counsellors of a large town bear but a very small proportion to their annual expense; so that this profession, must, in great part, derive its subsistence from some other indepen- dent source of revenue. It is hardly necessary to state, that these several causes of differ- ence in the ratio of profit may act all in the same, or each in an opposite direction ; or that,, in the former case, the effect is more intense ; whereas, in the latter, the opposite action of one controls and neutralizes the other. It would be a waste of time to prove, Inat the agreeable circumstances of a profession may balance the uncertainty of its product : or that a business that does not furnish * Wealth of Nations, book i. c. 10. t Ibid. CHAP. VII. ON DISTRIBUTION. 327 constant occupation, and is moreover attended with danger, must be indemnified by a double increase of salary. The last, and perhaps the principal cause of inequality in the pro- fits of industry in general is, the degree of skill it may require. When the skill requisite to any calling, whether of a superior or subordinate character, is attainable only by long and expensive training, that training must every year have involved a certain expense, and the total outlay forms an accumulated capital. In such case, its remuneration includes, over and above the wages of labour, an interest upon the capital advanced in the training, and an interest higher than the ordinary rate ; for the capital advanced has been actually sunk, and exists no longer than the life of the individual. It should, therefore, be calculated as an annuity.* It is for this reason, that all employments of time and talents, which require a liberal education, are better paid than those, which require less education. Education is capital which ought to yield interest, independent of the ordinary profits of industry. There are facts, it is true, that militate against this principle ; but they are capable of explanation. The priesthood is sometimes very ill paid ;f yet a religion, founded upon very complicated doctrines, and obscure historical facts, requires in its ministers a long course of study and probation, and such study and probation necessarily call for an advance of capital; it would seem requisite, therefore, for the continued existence of the clerical profession, that the salary of the minister should pay the interest on the capital expended, as well as the wages of his personal trouble, which the profits of the inferior clergy rarely exceed, particularly in Catholic countries. It must, however, be ascertained, whether the public have not themselves advanced this capital in the maintenance and education of clerical students at the public charge ; in which case, the public advancing the capital, may find people enough to execute the duties for the mere wages of their labour, or a bare subsistence, especially where there is no family to be provided for. * Nay, even more than annuity interest on the sums spent in the education of the person who receives the salary ; strictly speaking, it should be annuity inter- est upon the total sum devoted to the same class of study, whether it have or have not been made productive in its kind. Thus the aggregal^ of the fees of a physician ought to replace not only what has been spent in their studies, but, in addition, all the sums expended in the instruction of the students, who may have died during their education, or whose success may not have repaid the care bestowed upon them ; for the stock of medical industry in actual existence could never have been reared, without the loss of some part of the outlay devoted to medical instruction. However, there is little use in too minute attention to accuracy in the estimates of political economy, which are frequently found at variance with fact, on account of the influence of moral considerations in the matter of national wealth, an influence that does not admit of mathematical esti- mation. The forms of algebra are therefore inapplicable to this science, and serve only to introduce unnecessary perplexity. Smith has not once had recourse to them. 1 1 do not mean to include the superior orders of the clergy, whose benefice* are extremely rich and well paid, though upon principles of state policy. 328 ON DISTRIBUTION. BOOK H When, besides expensive training, peculiar natural talent is required for a particular branch of industry, the supply is still more limited in proportion to the demand, and must consequently be bet- ter paid. A great nation will probably contain but two or three artists capable of painting a superior picture, or modelling a beau- tiful statue ; if such objects, then, be much in demand, those few can charge almost what they please ; and, though much of the profit is but the return with interest of capital advanced in the acquisition of their art, yet the profit it brings leaves a very large surplus, (a) A celebrated painter, advocate, or physician, will have spent, of his own or relations' money, six or eight thousand dollars at most, in acquiring the ability from which his gains are derived ; the interest of this sum calculated as aa annuity, is but 800 dollars; so that, if he make 6000 dollars by his art, there remains an annual sum of 3000 dollars, which is wholly the salary of his skill and industry. If every thing affording revenue is to be set down as property, his for- tune at ten years' purchase may be reckoned 50,000 dollars, even supposing him not to have inherited a sol. SECTION II. y the Profits of the Man of Science. The philosopher, the man who makes it his study to direct the laws of nature to the greatest possible benefit of mankind, receives a very small proportion of the products of that industry, which derives such prodigious advantage from the knowledge, whereof he is at the same time the depository and the promoter. The cause of his disproportionate payment seems to be, that, to speak technically, he throws into circulation, in a moment, an immense stock of his product, which is one that suffers very little by wear ; so that it is long before operative industry is obliged to resort to him for a fresh supply. The scientific acquirements, without which abundance of manu- facturing processes could never have been executed, are probably the result of long study, intense reflection, and a course of experi- ments equally ingenious and delicate, that are the joint occupation of the highest degree of chemical, medical, and mathematical skill But the knowledge, acquired with so much difficulty, is probably transmissible in a few pages ; and, through the channel of public lee- (a) From which, however, is to be deducted the average loss on the general balance of less successful competitors in the same line. It does not appear, that, in England at least, any allowance is to be made for personal consideration, which is seldom attached in a high ratio even to the greatest excellence in the department of pure art. There is no instance of a sculptor or a painter arriving t the honours of the peerage, which have been placed within the reach of suc- cessful commercial enterprise. T. CHAP. VIL ON DISTRIBUTION. 329 tures, or of the press, is circulated in much greater abundance, than is required for consumption; or, rather, it spreads of itself, and, being imperishable, there is never any necessity to recur to those, from whom it originally emanated. Thus, according to the natural laws, whereby the price of things is determined, this superior class of knowledge will be very ill paid; that is to say, it will receive a very inadequate portion of the value of the product, to which it has contributed. It is from a sense of this injustice, that every nation, sufficiently enlightened to conceive the immense benefit of scientific pursuits, has endeavoured, by spe- cial favours and flattering distinctions, to indemnify the man of sci- ence, for the very trifling profit derivable from his professional occu- pations, and from the exertion of his natural or acquired faculties. Sometimes a manufacturer discovers a process, calculated either to introduce a new product, to increase the beauty of an old one, or to produce with greater economy; and, by observance of strict secrecy, may make for many years, for his whole life perhaps, or even bequeath to his children, profits exceeding the ordinary ratio of his calling. In this particular case the manufacturer combines two different operations of industry: that of the man of science, whose profit he engrosses himself, and that of the adventurer too. But few such discoveries can long remain secret; which is a fortunate cir- cumstance for the public, because this secrecy keeps the price of the particular product it applies to above, and the number of con- sumers enabled to enjoy it below, the natural level.* , It is obvious, that I am speaking only of the revenue a man of science derives from his calling. There is nothing to prevent his being at the same time a landed proprietor, capitalist or adventurer and possessed of other revenue in these different capacities. SECTION III. Of the Profits of the Master-agent, or Adventurer, in Industry. We shall, in this section, consider only that portion of the profits of the master-agent, or adventurer, which may be considered as the recompense of that peculiar character. If a master-manufacturer have a share in the capital embarked in his concern, he must be ranked pro tanto in the class of capitalists, and the benefits thence derived be set down as part of the profits of the capital so em- barked.f * Such of my readers as may imagine, that the sum of the production of a country is greater, when the scale of price is unnaturally high, are requested to refer to what has been said on the subject, supra, Chap. 3, of this Book. t Smith is greatly embarrassed by his neglect of the distinction between the profits of superintendency, and those of capital. He confounds them under the general head of profits of stock ; and all his sagacity and acuteness have scarcely been sufficient to expound the causes, which influence their fluctuations. Wcal'k 28* 2R 330 ON DISTRIBUTION. BOOK II. It very seldom happens, that the party engaged in the manage- ment of any undertaking, is not at the same time in the receipt of interest upon some capital of his own. The manager of a concern rarely borrows from strangers the whole of the capital employed. If he have but purchased some of the implements with his own capi- tal, or made advances from his own funds, he will then be entitled to one portion of his revenue in quality of manager, and another in that of capitalist. Mankind are so little inclined to sacrifice any par tide of their self-interest, that even those, who have never analyzed these respective rights, know well enough how to enforce them to their full extent in practice. Our present concern is, to distinguish the portion of revenue, which the adventurer receives as adventurer. We shall see by and-by, what he, or somebody else, derives in the character of capitalist ' '.>' It may be remembered, that the occupation of adventurer is com- prised in the second class of operations specified as necessary for the setting in motion of every class of industry whatever; that is to say, the application of acquired knowledge to the creation of a product for human consumption.* It will likewise be recollected, that such application is equally necessary in agricultural, manufacturing, and commercial industry ; that the labour of the farmer or cultivator on nis own account, of the master-manufacturer and of the merchant, all come under this description; they are the adventurers in each de- partment of industry respectively. The nature of the profits of these three classes of men, is what we are now about to consider. The price of their labour is regulated, like that of all other objects, by the ratio of the supply, or quantity of that labour thrown into circulation, to the demand or desire for it. There are two principal causes operating to limit the supply, which, consequently, maintain at a high rate the price of this superior kind of labour. It is commonly requisite for the adventurer himself to provide the necessary funds. Not that he must be already rich ; for he may work upon borrowed capital ; but he must at least be solvent, and 'have the reputation of intelligence, prudence, probity, and regular- ity ; and must be able, by the nature of his connexions, to procure the loan of capital he may happen himself not to possess. These requisites shut out a great many competitors. In the second place, this kind of labour requires a combination of moral qualities, that are not often found together. Judgment, per- severance, and a knowledge of the world, as well as of business. He is called upon to estimate, with tolerable accuracy, the import- ance of the specific product, the probable amount of the demand, and the means of its production: at one time he must employ a great of Nations, book i. c. 8. And no wonder he found himself thus perplexed; their value is regulated upon entirely different principles. The profits of labour de- yend upor the degree of skill, activity, judgment, &c. exerted ; those of capital, on the abundance or scarcity of capital, the security of the investment, &c. * Vide supra, Book I. chap. 6. CHAP. VII. ON DISTRIBUTION. 331 number of hands ; at another, buy or order the raw material, collect labourers, find consumers, and give at all times a rigid attention to order and economy; in a word, lie must possess the art of superin- tendence and administration. He must have a ready knack of cal- culation, to compare the charges of production with the probable value of the product when completed and brought to market. In the course of such complex operations, there are abundance of obstacles to be surmounted, of anxieties to be repressed, of misfor- tunes to be repaired, and of expedients to be devised. Those who are not possessed of a combination of these necessary qualities, are unsuccessful in their undertakings ; their concerns soon fall to the ground, and their labour is quickly withdrawn from the stock in circulation ; leaving such only, as is successfully, that is to say, skilfully directed. Thus, the requisite capacity and talent limit the number of competitors for the business of adventurers. Nor is this all: there is always a degree of risk attending such undertak : ings; however well they may be conducted, there is a chance of failure ; the adventurer may, without any fault of his own, sink his fortune, and in some measure his character ; which is another check to the number of competitors, that also tends to make their agency so much the dearer. All branches of industry do not require an equal degree of capa- city and knowledge. A farmer who adventures in tillage, is not expected to have such extensive knowledge as a merchant, who adventures in trade with distant countries. The farmer may do well enough with a knowledge of the ordinary routine of two or three kinds of cultivation. But the science necessary for conduct- ing a commerce with long returns is of a much higher order. It is necessary to be well versed, not only in the nature and quality of the merchandise in which the adventure is made, but likewise to have some notion of the extent of demand, and of the markets whither it is consigned for sale. For this purpose, the trader must be constantly informed of the price-current of every commodity in different parts of the world. To form a correct estimate of these prices, he must be acquainted with the different national currencies, and their relative value, or, as it is termed, the rate of exchange. He must know the means of transport, its risk and expense, the cus- tom and laws of the people he corresponds with ; in addition to all which, he must possess sufficient knowledge of mankind to preserve him from the dangers of misplaced confidence in his agents, corre- spondents, and connexions. If the science requisite to make a good farmer is more common than that which can make a good merchant, it is not surprising, that the labour of the former is but poorly paid, in comparison with that of the latter. It is not meant by this to be understood, that commercial industry in every branch, requires a combination of rarer qualifications th.m agricultural. The retail dealers for the most part pursue the routine of their business quite as mechanically as the generality of farmers, and, in some kinds of cultivation, very uncommon care and sagacity 332 ON DISTRIBUTION. BOOK II are requisite. It is for the reader to make the application : the busi- ness of the teacher is, firmly to establish general principles ; whence it will be easy to draw a multitude of inferences, varied and modified by circumstances, which are themselves the consequences of other principles laid down in other parts of the subject. Thus, in astro- nomy, when we are told, that all the planets describe equal areas in the same space of time, there is an implied reservation of such derangements, as arise from the proximity of other planets, whose attractive powers depend on another law of natural philosophy; and this must be attended to in the examination of the phenomena of each in particular. It is for him, who would apply general laws to particular and isolated cases, to make allowance for the influence of each of those laws or principles, whose existence is already recog- nised. In reviewing presently the profit of mere manual labour, we shall see the peculiar advantage, which his character of master gives to the adventurer over the labourer ; but it may be useful to observe by the way the other advantages within reach of an intelligent su- perior. He is the link of communication, as well between the va- rious classes of producers, one with another, as between the producer and the consumer. He directs the business of production, and is the centre of many bearings and relations; he profits by the know- ledge and by the ignorance of other people, and by every accidental advantage of production. Thus, it is this class of producers, which accumulates the largest fortunes, whenever productive exertion is crowned by unusual suc- cess. SECTION IV. Of the Profits of the Operative Labourer.* Simple, or rude labour may be executed by any man possessed of life and health ; wherefore, bare existence is all that is requisite to insure a supply of this description of industry. Consequently, its wages seldom rise in any country much above what is absolutely necessary to subsistence ; and the quantum of supply always re- mains on a level with the demand ; nay, often goes beyond it ; for the difficulty lies not in acquiring existence, but in supporting it. Whenever the mere circumstance of existence is sufficient for the * By the term labourer, I mean, the person who works on account of a mas- ter-agent, or adventurer, in industry ; for such as are masters of their own labour, like the cobbler in his stall, or the itinerant knife-grinder, unite the two charac- ters of adventurer and labourer; their profits being in part governed by the cir- cumstances detailed in the preceding section, and partly by those developed in this. It is necessary also to premise, that the labour spoken of in the present sec- ion is that, which requires little or no study or training; the acquisition of any talent or personal skill entitles the possessor to a further profit, regulated upon me orinciples explained, supra, sect. 1. of this chapter. CHAP. VH. ON DISTRIBUTION. 333 execution of any kind of work, and that work affords the means of supporting existence, the vacuum is speedily filled up. There is, however, one thing to be observed. Man does not come into the world with the size and strength sufficient to perform labour even of the rudest kind. He acquires this capability not till the age of fifteen or twenty, more or less, and may be regarded as an item of capital, formed of the growing annual accumulation of the sums spent in rearing him.* By whom, then, is this accumulation effected ? In general by the parents of the labourer, by persons of his own calling, or of one akin to it In this class of life, therefore, the wages are somewhat more than is necessary for bare personal existence; they must be sufficient to maintain the children of the labourer also. If the wages of the lowest class of labour were insufficient to maintain a family, and bring up children, its supply would never be kept up to the complement; the demand would exceed the supplv in circulation; and its wages would increase, until that class were again enabled to bring up children enough to supply the deficiency. This would happen, if marriage were discouraged amongst the labouring class. A man without wife or children may afford his labour at a much cheaper rate, than one who is a husband and a lather. If celibacy were to gain ground amongst the labouring class, that class would not only contribute nothing to recruit its own members, but would prevent others from supplying the deficiency. A temporary fall in the price of manual labour, arising from the cheaper rate, at which single men can afford to work, would soon be followed by a disproportionate rise; because the number of workmen would fall off. Thus, even were it not more to the inter- est of masters to employ married men, on account of their steadi- ness, they should do so, though at a greater charge, to avoid the higher price of labour, that must eventually recoil on them. Every particular line or profession does not, indeed, recruij its own numbers with children nursed among its own members. The new generation is transferred from one class of life to another, and particularly from rural occupations to occupations of a similar cast in the towns; for this reason, that children are cheaper trained in the country : all I mean to say is, that the rudest and lowest class of labour necessarily derives from its product a portion sufficient, not merely for its present maintenance, but likewise for the recruiting of its numerical strength, f When a country is on the decline, and contains less of the means * A full-grown man is an accumulated capital ; the sum spent in rearing him is indeed consumed, but consumed in a reproductive way, calculated to yield the product man. f The evidence examined before a committee of the House of Commons of England, in 1815, leads to the conclusion, that the high price of food, at that period, had the effect, of depressing, rather than elevating the scale of wages. I have myself remarked the similar effect of the scarcities in France, of the years 1811 and 1817. The difficulty of procuring subsistence either 'breed more 334 ON DISTRIBUTION. BOOK U of production and less of knowledge, activity, and capital, the de mand for raw or simple labour diminishes by degrees ; wages fai gradually below the rate necessary for recruiting^the labouring class its numbers consequently decrease, and the offspring of the othei classes, whose employment diminishes in the same proportion, is degraded to the step immediately below. On the contrary, when prosperity is advancing, the inferior classes not only fill up their own complement with ease, but furnish a surplus and addition to the classes immediately above them : and some, by great good for- tune or brilliancy of talent, arrive at a still loftier eminence, and reach even the highest stations in society. The labour of persons not entirely dependent for subsistence on the fruits of labour can be afforded cheaper, than that of such as are labourers by occupation. Being fed from other sources, their wages are not settled by the price of subsistence. The female spinners in country villages probably do not earn the half of their necessary expenses, small as they are : one is perhaps the mother, another the daughter, sister, aunt, or mother-in-law of a labourer, who would probably support her, if she earned nothing for herself. Were she dependent for subsistence on her own earnings only, she must evi- dently double her prices, or die of want ; in other words, her in- dustry must be paid doubly, or would cease to exist. The same may be said of most kinds of work performed by females. They are in general but poorly paid, because a large pro- portion of them are supported by other resources than those of their own industry, and can, therefore, supply the work they are capable of at a cheaper rate, than even the bare satisfaction of their wants. The work of the monastic order is similarly circumstanced. It is fortunate for the actual laboureVs in those countries where mona- chism abounds, that it manufactures little else but trumpery ; for, if its industry were applied to works of current utility, the necessi- tous labourers in the same department, having families to support, would be unable to work at so low a rate, and must absolutely perish by want and starvation. The wages of manufacturing, are often higher than those of agricultural labour ; but they are liable to the most calamitous oscillation. War or legislative prohibition will sometimes suddenly extinguish the demand for a particular product, and reduce the industry employed upon it to a state of ut- ter destitution. The mere caprice of fashion is often fatal to whole classes. The substitution of shoe ribands for buckles was a severe temporary blow to the population of Sheffield and Birmingham.* The smallest variations in the price of rude or simple labour have ever been justly considered as serious calamities. In classes of somewhat superior wealth and talents, which are, in fact, a species of personal wealth, a diminution in the rate of profits entails only a abourers into the market, or exacted more exertion from those already engaged; !hus occasioning a temporary glut of labour. But the necessary sufferings of the labouring class at the time must inevitably have thinned its ranks. * Malthus, Essay on Popul. ed. 5. b. iii. c. 13. CHAP. VII. ON DISTRIBUTION. 335 reduction of expense, or, at most, but trenches, in some measure, upon the capital those classes generally have at their disposal. But to those, whose whole income is a bare subsistence, a fall of wages is an absolute death-warrant, if not to the labourer himself, to part of his family at least. Wherefore, all governments, pretending to the smallest paternal solicitude for their subjects' welfare, have evinced a readiness to aid the indigent class, whenever any unexpected event has accidentally reduced the wages of common labour below the level of the labour- er's subsistence. Yet the benevolent intentions of the government have too often failed in their efficacy, for want of judgment in the choice of a remedy. To render it effective, it is necessary first to explore the cause of depression in the price of labour. If that de- pression be of a permanent nature, pecuniary and temporary aid is of no possible avail, and merely defers the pressure of the mischief. Of this nature are the discovery of new processes, the introduction of new articles of import, or the emigration of a considerable num- ber of consumers, (a) In such emergencies, a remedy must be sought in the discovery of some new arid permanent occupation for the hands thrown out of employ, in the encouragement of new channels of industry, in the setting on foot of distant enterprises, the planting of colonies, &c. If the depression be not of a permanent nature, if it be the mere result of good or bad crops, the temporary assistance should be limited to the unfortunate sufferers by the oscillation. Governments or individuals, who attempt indiscriminate benefi cence, will have the frequent mortification of finding their bounty unavailing. This may be more convincingly demonstrated by ex- ample than by argument. Suppose in a vine district the quantity of casks to be so abundant, as to make it impossible to use them all. A war, or a statute le- velled against the production of wine, may, perhaps, have caused many proprietors of vineyards to adopt a different cultivation of their lands; this is a permanent cause of surplus cooperage in the market. In ignorance of this cause, a general effort is made to as sist the labouring coopers, either by purchasing their casks withou wanting them, or by making up, in the shape of alms, the loss they have sustained in the diminution of their profits. Useless pur- () The second and last of these circumstances are neither of them necessa- rily, universally, or permanently, followed by the depression of the rate of wages. When a new object of import does not supersede one of either home or foreign production, it must tend to raise the rate of wages, as it can only be procured by. enlarged home production. The emigration of consumers, continuing to draw subsistence from the country they desert, leaves in activity an equal mass of human labour, though possibly with some variation of employment. Besides it may be temporary only, as that of the English to the continent, and of the Irish both to England and to the continent; who possibly might be brought back by an improvement of domestic finances or of domestic security and com- fort. T. 336 ON DISTRIBUTION. BOOK II. chases, or eleemosynary aid, however, can not last forever; and, the moment they cease, the poor coopers will find themselves pre- cisely in the same distressful situation, from which it was attempted to extricate them. All the sacrifices and expense will have been incurred with no advantage, other than that of a little delay in the date of their hopeless sufferings and privations. Suppose on the contrary, the cause of the superabundance of casks to be but temporary; to be nothing more than the failure of the an- nual crop. If, instead of affording temporary relief to the working coopers, they be encouraged to remove to other districts, or to enter upon some other branch of industry, it will follow, that the next vear, when wine may be abundant, there will be a scarcity of casks to receive it ; the price will become exorbitant, and be settled at the suggestion of avarice and speculation; which being unable them- selves to manufacture casks, after the means of producing them have been thus destroyed, part of the wine will probably be spoiled for want of casks to hold it. It will require a second shock and derange- ment of the rate of wages, before the manufacture of the article can be brought again to a level with the demand. Whence it is evident, that the remedy must be adapted to the par- ticular cause of the mischief; consequently, the cause must be ascer- tained, before the remedy is devised. Necessary subsistence, then, may be taken to be the standard of the wages of common raw labour ; but this standard is itself extreme- ly fluctuating ; for habit has great influence upon the extent of human wants. It is by no means certain, that the labourers of some can- tons of France could exist under a total privation of wine. In Lon don, beer is considered indispensable ; that beverage is there so much an article of necessity, that beggars ask for money to buy a pot of beer, as commonly as in France for the purchase of a morsel of bread ; and this latter object of solicitation, which appears to us so very natural, may seem impertinent to foreigners just arrived from a country, where the poor subsist on potatoes, manioc, or other still coarser diet. What is necessary subsistence, depends, therefore, partly on the habits of the nation, to which the labourer may happen to belong. In proportion as the value he consumes is small, his ordinary wages may be low, and the product of his labour cheap. If his condition be improved, and his wages raised, either his product becomes dearer to the consumer, or the share of his fellow producers is diminished. The disadvantages of their position are an effectual barrier against any great extension of the consumption of the labouring classes. Humanity, indeed, would rejoice to see them and their families dressed in clothing suitable to the climate and season ; houses in roomy, warm, airy, and healthy habitations, and fed with wholesome and plentiful diet, with perhaps occasional delicacy and variety ; but there are very few countries, where wants, apparently so moderate, arv not considered far beyond the limits of strict necessity, and CHAP. VII. ON DISTRIBUTION. 337 therefore not to be gratified by the customary wages of the mere labouring class. The limit of strict necessity varies, not only according to the more or less comfortable condition of the labourer, and his family, but likewise according to the several items of expense reputed unavoid- able in the country he inhabits. Among these is the one we have just adverted to ; namely, the rearing of children ; there are others less urgent and imperative in their nature, though equally enforced by feeling and natural sentiments ; such as the care of the aged, to which unhappily the labouring class are far too inattentive. Nature could entrust the perpetuation of the human species to no impulse less strong, than the vehemence of appetite and desire, and the anxiety of paternal love; but has abandoned the aged, whom she no longer wants, to the slow workings of filial gratitude, or, what is even less to be depended upon, to the providence of their younger years. Did the habitual practice of society imperatively subject every family to the obligation of laying by some provision for age, as it commonly does for infancy, our ideas of necessity would be somewhat enlarged, and the minimum of wages somewhat raised. It must appear shocking to the eye of philanthropy, that such is not always the case. It is lamentable to think of the little provi- dence of the labouring classes against the season of casual misfortune, infirmity, and sickness, as well as against the certain helplessness of old age. Such considerations afford most powerful reasons for for- warding and encouraging provident associations of the labouring class, for the daily deposit of a trifling saving, as a fund in reserve for that period, when age, or unexpected calamity, shall cut off the resource of their industry.* But such institutions can not be ex- * Saving-banks have succeeded in several districts of England, Holland, and Germany ; particularly where the government has been wise enough to withhold its interference. The Insurance Company of Paris has set one on foot, upon the most liberal principles and with the most substantial guarantee. It is to be hoped, that the labouring classes in general will see the wisdom of placing their little savings in such an establishment, in preference to the hazardous investments they have often been decoyed into. There is besides a further national advan- tage in such a practice, namely, that of augmenting the general mass of pro- ductive capital, and consequently extending the demand for human agency. (1) (1) [In the principal cities of the United States, Saving-banks have also oeen established, and have been attended with so much benefit, that they are now spreading through every part of the Union. To the Friendly or Beneficial Societies there are strong objections, to which the Saving-banks are not liable. The Friendly Societies have, undoubtedly, done some good ; but attended with a certain portion of evil. The following extract from a report of the Committee of the Highland Society, places these latter societies in a very proper light. " During tlie last century, a number of Friendly Societies have been estab- lished by the labourers in different parts of Great Britain, to enable them to nake provision against want. The principle of these societies usually is, thai Uie members pay a certain stated sum periodically, from which an allowance is Tiade to them upon sickness or old age, and to their families upon their death. These societies have done much good ; but they are attended with some disad vantages. In particular, the frequent meetings of the members occasion the !os M 2 S 336 ON DISTRIBUTION. BOOK D. pected to succeed, unless the labourer be taught to consider these means of precaution as a matter of duty and necessity, and hold to the obligation to carry his savings to such places of deposit, as equally indispensable with the payment of his rent or taxes : this new duty would doubtless tend in a slight degree to raise the scale of wages, so as to allow of such frugality, but for that very reason it is desirable. How can such establishments thrive in countries where habit and the interested views of the government conspire to make the labourer spend in the public-house not only what he might lay by, but frequently the very subsistence of his family, in which all his comforts and plea- sures should be centred. The vain and costly amusements of the rich are not always justifiable in the eye of reason; but how much more disastrous is the senseless dissipation of the poor ! The mirth of the indigent is invariably seasoned with tears ; and the orgies of the populace are days of mourning to the philosopher. Besides the reasons advanced in this and the preceding sections, to explain why the wages of the adventurer, even if he derive no profit as a capitalist, are generally higher than those of the mere labourer, there are others, not so solid or well founded indeed, but such as nevertheless must not be overlooked. The wages of the labourer are a matter of adjustment and compact between the conflicting interests of master and workman ; the layer endeavouring to get as much, the former to give as little, as he pos- sibly can ; but in a contest of this kind, there is on the side of the master an advantage, over and above what is given him by the nature of his occupation. The master and the workman are no doubt equally necessary to each other; for one gains nothing but with the other's assistance ; the wants of the master are, however, of the two, less urgent and less immediate. There are few masters but what could exist several months or even years, without employing a single labourer; and few labourers that can remain out of work for many weeks, without being reduced to the extremity of distress. And this circumstance must have its weight in striking the bargain for wages between them. Sismondi, in a late work* published since the appearance of my of much time, and frequently of a good deal of money spent in entertainments. The stated payments must be regularly made ; otherwise, after a certain time, the member (necessarily from its being in fact an insurance) loses the benefit of all that he has formerly paid. Nothing more than the stated payments car be made, however easily the member might be able at the moment to add a little to his store. Frequently the value of the chances on which the societies are formed, is ill calculated ; in which case either the contributors do not receive an equivalent for their payments; or too large an allowance is given at first, which brings on the bankruptcy of the institution. Frequently the sums are embezzled by artful men, who, by imposing on the inexperience of the members, get them- selves elected into offices of trust. The benefit is distant and contingent ; each member not having benefit from his contributions in every case, but only in the case of his falling into the situations of distress provided for by the society. And the whole concern is so complicated, that many have hesitation in embark ng in it their hard-earned savings."] AMERICAN EDITOR. * Nouvtaux Prin. cTEcon. Pol. liv. vii. c. 9. CHAP. VII. ON DISTRIBUTION. 339 third edition, has suggested some legislative provisions, for the avowed purpose of bettering the condition of the labouring classes. He sets out with the position, that the low rate of their wages ac- crues to the benefit of the adventurers and masters who employ them ; and thence infers, that in the moment of calamity, their claim for relief is upon the masters, and not upon society at large. Where- fore, he proposes to make it obligatory upon the proprietors and farmers of land at all times to feed the agricultural, and upon the manufacturers to provide subsistence for the manufacturing labourer. On the other hand, to prevent the probable excess of population, consequent upon the certain prospect of subsistence to themselves and their families, he would give to their respective masters the right of preventing or permitting marriage amongst their people. This scheme, however entitled to favourable consideration by the motive of humanity in which it originated, seems to me altogether impracticable. It would be a gross violation of the right of property, to saddle one class of society with the compulsory maintenance of another; and it would be a violation still more gross, to give one set of men a personal control over another ; for the freedom of per- sonal action is the most sacred of all the objects of property. The arbitrary prohibition of marriage to one class is a premium to the procreation of all the rest. Besides, there is no truth in the posi- tion, that the low rate of wages redounds exclusively to the profit of the master. Their reduction, followed up by the constant action of competition, is sure to bring about a fall of the price of products; so that it is the class of consumers, in other words, the whole com- munity, that derives the profit. m And if it be so great as to throw the subsistence of the labourers upon the public at large, the public is in a great measure indemnified by the reduced prices of the objects of its consumption. There are some evils incident to the imperfection- of the human species, and to the constitution of nature ; and of this description is the excess of population above the means of subsistence. On the whole, this evil is quite as severely felt in a horde of savages, as in a civilized community. It would be unjust to suppose it a creature of social institutions, and a mere fallacy to hold out the prospect of a complete remedy; and, however it may merit the thanks of man- kind to study the means of palliation, we must be cautious not to give a ready ear to expedients that can have no good effect, and must prove worse than the disease itself. A government ought doubtless to protect the interests of the labouring classes, as far as it can do so without deranging the course of human affairs, or cramp- ing the freedom of individual dealings; for those classes are less advantageously placed than the masters, in the common course of things; but a" wise ruler will studiously avoid all interference between individuals, lest it superadd the evils of administration to those of natural position. Thus, he will equally protect the master and the labourer from the effects of combination. The masters have he advantage of smaller numbers and easier communication; where- 340 ON DISTRIBUTION. BOOK II as, the labourers can scarcely combine, without assuming the air of revolt and disaffection, which the police is ever on the watch to repress. ' Nay, the partisans of the exporting system have gone so far as to consider the combinations of the journeymen as injurious to national prosperity, because they tend to raise the price of the com- modities destined for export, and thereby to injure their preference in the foreign market, which they look upon as so desirable. But what must be the character of that policy, which aims at national prosperity through the impoverishment of a large proportion of the home producers, with a view to supply foreigners at a cheaper rate, and give them all the benefit of the national privation and self- denial ? One sometimes meets with masters, who, in their anxiety to justify their avaricious practices by argument, assert roundly, that "he labourer would perform less work, if better paid, and that he must be stimulated by the impulse of want. Smith, a writer of no small experience and singular penetration, is of a very different opinion. Let us take his own words. " The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsist- ence increases the bodily strength of the labourer, and the comfort- able hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the work- men more active, diligent, and expeditious, than where they are low ; in England, for example, than Scotland ; in the neighbourhood of great towns, than in remote country places. Some workmen, indeed, when they can earn in four days what will maintain them through the week, will be idle the other three. This, however, is by no means the case with the greater part. Workmen, on the con- trary, when they are liberally paid by the piece, are very apt to overwork themselves, and to ruin their health and constitution in a few years."* SECTION V. Of the Independence accruing to the Moderns from the Advancement of Industry. The maxims of political economy are immutable; ere yet observed or discovered, they were operating in the way above described ; the same cause regularly producing the same effect; the wealth of Tyre and of Amsterdam originated in a common source. It is society that has been subject to change, in the progressive advancement of industry. * Wealth of Nations, book i. c. 8. CHAP. VIL ON DISTRIBUTION. 3U The ancients were not nearly so far behind the moderns in agri- culture, as in the mechanical arts. Wherefore, since agricuitura products are alone (1) essential to the multiplication of mankind, the unoccupied surplus of human labour was larger than in modern days. Those, who happened to have little or no land, unable to subsist upon the product of their own industry, unprovided with capital, and too proud to engage in those subordinate employments, which were commonly filled by slaves, had no resource but to bor- row, without a prospect of the ability to repay, and were continually demanding that equal division of property, which was utterly im- practicable. With a view to stifle their discontents, the leading men of the state were obliged to engage them in warlike enterprises, and, in the intervals of peace, to subsist them on the spoils of the enemy, or on their own private means. This was the grand source of the civil disorder and discord, which continually distracted the states of antiquity ; of the frequency of their wars, of the corruption of their suffrages, and of the connexion of patron and client, which backed the ambition of a Marius and a Sylla, a Pompey and a Caesar, an Antony and an Octavius, and which finally reduced the whole Roman people to the condition of servile attendants upon the court of a Caligula, a Heliogabalus, or some monster of equal enor- mity, whose grand condition of empire was the subsistence of the objects of his atrocious tyranny. The industrious cities of Tyre, Corinth, and Carthage, were some- what differently circumstanced; but they could not permanently resist the hostility of poorer and more warlike nations, impelled by the prospect of plunder. Industry and civilization were the continual prey of barbarism -and penury ; and Rome herself at length yielded to the attack of Gothic and Vandalic conquerors. Thus re-plunged into a state of barbarism, the condition of Europe, during the middle ages, was but a revival of the earliest scenes of Grecian and Italian history, in an aggravated form. Each baron or great landholder, was surrounded by a circle of vassals or^clients on his domain, ready to follow him in civil broils or foreign warfare. (1) The " multiplication of mankind" is not, as is here asserted by our author, alone dependent upon "agricultural products;" but, likewise, upon every other description of commodities essential to human maintenance and support; Food, or subsistence, is unquestionably indispensable to the existence of man ; but not more necessary to his prolonged being and health, than raiment, shelter, and fire. The position of Mr. Malthus, which limits population to subsistence only, and which is here taken for granted and adopted by our author, is not accurate or just; and by the more recent political economical inquirers has, therefore, either been modified or abandoned. Professor Senior, in his " Two Lectures on Population, delivered before the University of Oxford in Easter Term, 1828," in considering the general principles, adopts the following proposition, as wha. appears to him an outline of the laws of population : " That the population of given district is limited only by moral or physical evil, or by the apprehension of a deficiency in the means of obtaining those articles of wealth ; or, in other words, those necessaries, decencies and luxuries, which the habits of the mdi riduals of each class of the inhabitants of that district lead them to require " 29 * AMERICAN EDITOH. 342 ON DISTRIBUTION. BOOK II. I should trench upon the province of the historian, were I to attempt the delineation of the various causes that have aided the progress of industry since that period ; but I may be allowed merely to note, by the way, the great change that has been effected, and the consequence of that change. Industry has become a means of sub- sistence to the bulk of the population, independent of the caprice of the large proprietors, and without being to them a constant source of alarm : it is nursed and supported by the capital accumulated by its own exertions. The relation of client and vassal has ceased to exist; and the poorest individual is his own master, and dependent upon his personal faculties alone. Nations can support themselves upon their internal resources ; and governments derive from their subjects those supplies, which they were wont to dispense as a mat- ter of favour. The increasing prosperity of manufacture and commerce has raised them in the scale of estimation. The object of war is changed, from the spoliation and destruction of the sources of wealth, to their quiet and exclusive possession. For the last two centuries, where war has not been made to gratify the childish vanity of a nation or a monarch, the bone of contention has always been, either colonial sovereignty, or commercial monopoly. Instead of a contest of hungry barbarians against their wealthy and industrious neighbours, it has been one between civilized nations on either side; wherein the victor has shown the greatest anxiety to preserve the resources of the conquered territory. The invasion of Greece by the Turks, in the fifteenth century, appears to have been the final effort of pure barbarism arrayed against civilization. The present preponderance of industry and civilized habits amongst the general mass of man- kind seems to exclude all probability of a recurrence of such calami- tous events. Indeed, the improvement of military science takes away all fear of the result of such a conflict. There is yet one step more to be made ; and that can only be rendered practicable by the wider diffusion of the principles of poli- tical economy. They will some day have taught mankind that the sacrifice of their lives, in a contest for the acquisition or retention of colonial dominion or commercial monopoly, is a vain pursuit of a costly and delusive good; that external products, even those of the colonial dependencies of a nation, are only procurable with the pro- ducts of domestic growth : that internal production is, therefore, the proper object of solicitude, and is best to be promoted by political tranquillity, moderate and equal laws, and facility of intercourse. The fate of nations will thenceforth hang no longer upon the preca- rious tenure of political pre-eminence, but upon the relative degree of information and intelligence. Public functionaries will grow more and more dependent upon the productive classes, to whom they must look for supplies; the people, retaining the right of taxa- tion in their own hands, will always be well governed ; and the struggles of power against the current of improvement will end in its own subversion; for it will vainly strive against the dispensations :>f nature. CHAP. VIIL ON DISTRIBUTION. 343 CHAPTER VIIL OP THE REVENUE OF CAPITAL. THE service, rendered by capita], in productive operations, estab- lishes a demand for capital to be so employed, and enables the pro- prietors of it to charge more or less for that service. Whether the capitalist thus employ his capital himself, or lend it to another for that purpose, it yields a profit, that is called the profit of capital, distinct from that of the industry employing it In the former case, the profit obtained constitutes the revenue of his capi- tal, which is added to that of his personal talent and industry, and often confounded with it. In the latter, the revenue of capital is precisely the interest paid for its use, the proprietor abandoning to the borrower the profit derivable from his personal employment of the capital lent. As the investigation of the interest of capital lent will help to throw light on the subject of the profit derivable from its personal employment, it may be as well, in the first instance, to acquire a just idea of the nature and variation of interest. SECTION I. Of Loans at Interest. The interest of' capital lent, improperly called the interest of money, was formerly denominated usury, that is to say, rent for its use and enjoyment; which, indeed, was the correct term; for inter- est is nothing more than the price, or rent, paid for the enjoyment of an object of value. But the word has acquired an odious mean- ing, and now presents to the mind the idea of illegal, exorbitant in- terest only, a milder but less expressive term having been substituted by common usage. Before the functions and utility of capital were known, it is pro- bable, that the demand of rent for it by lenders was considered an abuse and oppression, an expedient to favour the rich and prejudice the poor ; nay, further, that frugality, the sole means of amassing capital, was regarded as parsimony, and deemed a public mischief by the populace, in whose eyes, the sums not spent by great pro- prietors were looked upon as lost to themselves. They could not comprehend, that money, laid by to be turned to account in some beneficial employment, must be equally spent; for, if it were buried, it could never be turned to, account at all ; that it is, in fact, spent in a manner a thousand times more profitable to the poor ;* and that a * Vide infra, BookllL on the subject of re-productive consumption. ON DISTRIBUTION. BOOK II. labouring man is never sure of earning a subsistence, except where there is a capital in reserve for him to work upon. This prejudice against rich individuals, who do not spend their whole income, still exists pretty generally ; formerly it was universal ; lenders them- selves were not altogether free from it, but were so much ashamed of the part they were acting, as to employ the most disreputable agents in the collection of profits perfectly just, and highly advan- tageous to society. It is, therefore, not surprising that the ecclesiastical, and at several periods, the civil codes, likewise, should have interdicted loans at interest; and that, during the whole of the middle ages, throughout the larger states of Europe, this traffic should have been reputed infamous, and abandoned to the Jews. The little manufacturing or commercial industry of those days was kept alive by the scanty capital of the dealers and mechanics themselves: and agricultural industry, which was pursued with somewhat better success, was supported by the advances of the lords and great proprietors, who employed their serfs or retainers on their own account. Loans were contracted for, not with a view of profitably employing the money, but merely to satisfy some urgent want, so that the exactor of interest was profiting by a neighbour's distress ; and it may easily be conceived, that a religion, founded on. the principle of fraternal love, as the Christian religion is, must disapprove a calculating spirit, that even now is a stranger to generous bosoms, and repug- nant to the common maxims of morality. Montesquieu* attributes the decline of commerce to this proscription of loans at interest ; which was undoubtedly one cause, although, indeed, it was one amongst many. The progressive advance of industry has taught us to view the loan of capital in a different light. In ordinary cases, it is no longer a resource in the hour of emergency, but an agent, an instrument, which may be turned to the great benefit, as well of society, as of the individual. Henceforward, it will be reckoned no more ava- ricious or immoral to take interest, than to receive rent for land, or wages for labour; it is an equitable compensation adjusted by mutual convenience ; and the contract, fixing the terms between borrower and lender, is of precisely the same nature, as any other contract whatsoever. In ordinary cases of exchange, however, the transaction is ended as soon as the exchange is completed ; whereas, in the case of a loan, there remains to be calculated the risk the lender incurs of never recovering the whole, or at least a part, of his capital. The risk is practically estimated, and indemnified by some addition of interest, in the natuie of a premium of insurance. Whenever there happens to be a question about the interest of advances, a careful distinction snouid be made between these, its two component parts ; otherwise, is always danger of error ; and individuals, or even the agents * Esprit des Lois, liv. xxi. c. 20. CHAP. VIII. ON DISTRIBUTION. 345 of public authority, will be apt to involve themselves in useless and disastrous operations. Thus, the practice of usury has been uniformly revived, whenever it has been attempted to limit the rate of interest, or abolish it alto- gether. The severer the penalties, and the more rigid their exaction, the higher the interest of money was sure to rise ; and this is what might naturally have been expected ; for the greater the risk, the greater premium of insurance did it require to tempt the lender. At Rome, while the republican form of government lasted, the interest of money was enormous, as it was natural to suppose, even if it were not a matter of history. The debtors, who are always the plebeians, were continually threatening their patrician creditors. The laws of Mahomet have prohibited loans at interest ; and what is the consequence in the Mussulman dominions? Money is lent at in- terest, but the lender must be indemnified for the use of his capital, and, moreover, for the risk incurred in the contravention of the law. It was the same in Christian countries, so long as loans at interest were illegal : and where the necessity of borrowing enforced the toleration of the practice amongst the Jews, such were the humiliation, oppression, and extortion, to which, on one pretext or another, that nation was exposed on this score, that nothing short of a very heavy rate of interest could indemnify for such repeated loss and mortification. Leters patent of the French king John, bearing date in the year 1360, are now extant, which authorises the Jews to lend on pledges at the rate of four deniers per week for every livre of twenty sous, which is more than eighty-six per cent, per annum ; but in the year following, the same monarch, though recorded as one of the most scrupulous performers of his royal word that our annals can boast of, caused the quantity of pure metal con- tained in the coin to be reduced ; so that the lenders no longer received back a value equal to what they had lent. This explanation will alone suffice to justify the very heavy in- terest demanded, without at all taking into calculation, that at a period, when loans were negotiated, not to forward industrious enterprises, but to support war, to feed extravagance, and to further the most hazardous projects; at a period when laws were powerless, and lenders unable legally to enforce their claims against their debtors, it required a very ample premium to cover the risk of non-payment. In fact, the premium of insurance absorbed the far greater part of what passed under the name of interest, or usury: and the actual bona fide interest, the rent for the use of capital lent, was reduced to a very trifle; for, though capital was scarce, there is reason to suppose, that productive employment was still more so. Of the 86 per cent interest paid in the reign of king John, perhaps not more than 3 01 4 per cent, was the equivalent for the productive service of the capital advanced ; for all productive labour is better paid now, than it was in those days ; and even now-a-days the rent of capital can scarcely be reckoned higher than 5 per cent. ; the excess is so much premium of insurance for the lender's indemnity. 2T 340 ON DISTRIBUTION. BOOK II Thus, the ratio of the premium of insurance, which frequently forms the greater portion of what is called interest, depends on the degree of security presented to the lender ; which security consists chiefly in three circumstances : 1. The safety of the mode of employment; 2. The personal ability and character of the borrower, 3. The good government of the country he happens to reside in. We have just seen, how much the hazardous purposes, to which loans were applied in the middle ages, enhanced the premium of insurance necessarily paid to the lender. It is the same with all perilous investments of capital, with a dif- ference in degree only. The Athenians of old, made a distinction between marine interest, or interest of capital afloat, and land- interest, or interest on shore ; the former was rated at 30 per cent more or less per voyage, whether to the Euxine, or to any port in the Mediterranean.* As two such voyages were accomplished with ease in the year, the annual marine interest may be rated at about 60, while other interest was commonly not more than 12 per cent. Supposing that, of the 12 per cent, one half was assigned to cover the risk of the lender ; we shall find, that the mere annual rent or hire of money at Athens, was 6 per cent, only, which I should still tnink above the mark; yet, supposing it to have been so high, the marine interest allowed 54 per cent, for insurance of the lender's risk. So enormous a premium must be attributed in part to the bar- barous habits then prevalent among the nations with whom they traded; for different nations were then much greater strangers to each other, than they are at present, and commercial laws and cus- toms much less respected ; and in part to the imperfections of the art of navigation. There was more danger in a voyage from the Piraeus to Trapezus, though but three hundred leagues distant, than there is now in one from L'Orient to China, which is a distance of seven thousand. Thus, the improvements of geography and navi- gation have contributed to lower the rate of interest, and ultimately to reduce the cost price of products. Loans are sometimes contract- ed not for a productive investment, but for mere barren consumption. Transactions of this kind should always awaken the suspicion of the lender, inasmuch as they engender no means of repayment of either principal or interest. If charged upon a growing revenue, they are, at all events, an anticipation of that revenue ; and if charged upon any of the sources of revenue, they afford the means of dissipating the particular source itself. If there be the security neither of reve- nue nor of its source, they barely place the property of one person nt the wanton disposition of another. Among the circumstances incident to the nature of the employ- ment, which influence the rate of interest, the duration of the loan must not be forgotten ; ceteris paribus, interest is lower when the lender can withdraw his funds at pleasure, or at least in a very short period ; and that both on account of the positive advantage of having capital readily at command, and because there is less dread of a nsk, * Voyage d 1 Anacharsis, torn. iv. p. 371. CHAP. VIII. ON DISTRIBUTION. JM7 which may probably be avoided by timely retreat. The facility of immediate negotiation presented by the transferable bills and notes of modern governments, is one principal cause of the low rate of interest, at which many oi these governments are enabled to bor- row, (a) This interest, in my opinion, hardly covers the risk of the lender ; but he always reckons on the certainty of selling his securi- ties before the moment of catastrophe, should any serious alarm be entertained. The public securities that are not negotiable, bear a much higher interest ; such, for instance, as the old personal annui- ties in France, which the government generally sold at the rate of 10 per cent, a high average for young lives. Wherefore the Genevese acted with excellent judgment, in settling their annuities on thirty lives of well-known public characters. By this means, they made their annuities negotiable, and so contrived to get the rate of interest of securities not negotiable, upon securities that were negotiable. About the vast influence of personal character and ability in the borrower, in determining the amount of the premium of insurance to the lender, there can be no doubt whatever : they are the basis of what is called personal credit ; and it is hardly necessary to say, that a person in good credit borrows at a cheaper rate, than another who has none. Next to approved integrity and probity, what most contributes to the credit of an individual or of a government, is past punctuality in performance of engagements; this is, in fact, the very corner-stone of credit, and one that seldom proves insecure. But why, it may be asked, may not a man who has never yet made default in his pay- ment, fail the very next moment ? There is very little probability that he will, especially if his punctuality be of long standing. For, to have been ever punctual in his payments, he must either have always been possessed of value in hand sufficient to meet demands upon him ; that is to say, he must have been a man of property over and above his debts, which is the best possible ground of trust ; or else he must have managed matters so well, and have speculated with so much judgment and safety, as always to have had his returns arrive before the calls became due; thus evincing a degree of ability and prudence, w r hich afforded an excellent guarantee for his future punctuality. The converse of this is the reason, why a merchant, that has once failed or hesitated in the performance of his engage- ments, thenceforward loses his credit entirely. Finally, the good government of the country, where the debtor resides, reduces the risk of the creditor, and consequently, the pre- mium of insurance he is obliged "to demand to cover that risk. Hence it is, that the rate of interest rises, whenever the laws and their administration do not insure the performance of engagements. (a) This is strongly illustrated by the unfunded and the funded debt of Great Britain. The former, in the shape of exchequer and treasury bills, bears a rate of interest considerably lower than the latter in the shape of stock ; because the bills are convertible readily at par; whereas, the usual rise and fall of the capital etock is much greater, than the interest upon it for short periods. T. 348 ON DISTRIBUTION BOOK II. It is yet more aggravated, when they excite to the violation of them; as when they authorise non-payment, or do not acknowledge the validity of bonafide contracts. The resort to personal restraint against insolvent debtors has been generally considered as injurious to the borrower ; but is, on the con- trary, much in his favour. Loans are made more willingly, and on better terms, where the rights of the lender are best secured by law. (a) Besides, the encouragement to accumulate capital is thereby nlarged ; whenever individuals mistrust the mode of investing their savings, there is a strong inducement to every one to consume the whole of his income, and this consideration will, perhaps, help to explain a curious moral phenomenon; namely, that irresistible avidity for excessive enjoyment, which is a common symptom in times of political turbulence and confusion.* However, while on the subject of the necessity of personal severity towards debtors, I cannot recommend the practice of imprisonment; to confine a debtor is to command him to discharge his debts, and at the same time deprive him of the means of so doing. There seems more reason in the Hindu institution, giving the creditor the option of seizing the person of his insolvent debtor, and confining him at the creditor's own home to compulsory labour, for the creditor's benefitf But, whatever be the means, whereby the public authority enforces the payment of debts, they must always be ineffective, if law be partially or capriciously administered. The moment a debtor is, or hopes to be, out of his creditor's reach, there is a risk to be run by the creditor, which is of value, and must be indemnified. After having thus detached from the rate of bare interest all that is paid as premium of insurance to the lender against the risk of total or partial loss of his capital, it remains to consider that part, which is purely and simply interest ; that is to say, rent paid for the utility and the use of capital. Now this portion of the gross sum called interest is larger in pro- * See the description of the Plague at Florence, as given after Boccaccio by Sismondi, in his admirable Histoire des Republiques d'ltalie. A similar effect was observed at several of the most dreadful epochs of the French revolution. t Raynal, Histoire Philosophique, torn. i. (a) The personal restraint of the debtor has nowhere been carried to such extreme length as in England. Not only was a debtor at one time liable to imprisonment pendent lite, and before the debt was legally established, and that for the smallest sum ; but the term of his imprisonment in execution after judg- ment, was absolutely unlimited. The hardship, in both these particulars, was partially remedied before the erection of our insolvent code ; and that code has Btill further alleviated the condition of the debtor. But the whole system is vitiated, and in a great measure, neutralised, by total neglect of all measures for the prevention of insolvency, in limine. The grand expedient is, publicity of property ; which, in the first place, gives the creditor the means of estimating beforehand, ana with more accuracy, the grounds and fair extent of his debtor's credit ; and in the next, enables him, in case of default, to resort to those means, instead of endeavouring to discover or extort them by personal restraint. Thus * is, *.hat one error of policy is sure to engender another. T CHAP. VIII. ON DISTRIBUTION. 349 portion as the supply of capital available for loans is less; and as the demand of capital for that specific object is greater; and again, that demand is the greater in proportion to the more numerous and more lucrative employments of capital. Consequently, a rise in the rate of interest does not infallibly or universally denote, that capital is growing scarcer ; for possibly, it may be a sign, that its uses are multiplied. Smith has remarked this consequence upon the close of the very successful war on the part of England, which terminated with the peace of 1763.* The rate of interest then advanced instead of declining; the important acquisitions of England had opened a new field for her commercial enterprise and speculation; capital was not diminished in quantity, but the demand for it was increased; and the rise of interest, which ensued, though in most cases a sign of impoverishment, was, in this, a consequence of the acquisition of new sources of wealth. France, in 1812, experienced the opposite effect of a cause directly the reverse. A long and destructive war, which had annihilated almost all external communication; exorbitant taxation; the ruinous system of licenses ; the commercial enterprises of the government itself; frequent and arbitrary alterations in the duties on import; confiscation, destruction, vexation; in fine, a system of administration uniformly avaricious and hostile to private interest, had rendered all enterprises of industry difficult, hazardous and ruinous in the ex- treme. The aggregate capital of the nation was probably on the decline; but the beneficial employment of it became still more. rare as well as dangerous ; so much so, that interest never fell so low in France as at that period; and, what is in general the sign of extreme prosperity, was then the effect of extreme distress. These exceptions serve but to confirm the general and eternal law, that the more abundant is the disposable capital, in proportion to the multiplicity of its employments, the lower will the interest of bor- rowed capital fall. With regard to the supply of disposable capital, that must depend on the quantum of previous savings. On this head, I must refer to what I have before said upon the subject of the formation of capital.f * Wealth of Nations, book i. c. 9. f Supra, Book I. chap. 11. It has been remarked that the rate of interest is usually somewhat lower in towns, than in country places. Wealth of Nations, book i. c. 9. The reason is plain. Capital is for the most part in the hands of the wealthy residents of the towns, or at least of persons who resort to them for their business, and carry with them the commodity they deal in, i. e. capital, which they do not like to employ at much distance from their own inspection. Towns, and particularly great cities, are the grand markets for capital, perhaps even more than for labour itself; accordingly, labour is there comparatively dearer than capital. In the country, where there is little unemployed caoital, the contrary is observable. Thus, usury is more prevalent in" country places; it would be less so, if the business of lending were more safe and in better repute, (a) (a) These remarks are just in the main ; but the advantage of town over COUP try, in this particular, may be reduced to a very trifle, by the ease of intern.nl communication. In England the difference is scarcely perceptible. T. 30 350 ON DISTRIBUTION. BOOK II. If it be desired, that capital in search of employment, and industry in search of capital, should both be satisfied in the fullest manner, entire liberty of dealing must be allowed in all matters touching loans at interest. Disposable capital, being thus left to itself, will seldom remain long unemployed; and there is every reason to believe, that as much industry will be called into activity, as the actual state of society will admit. But it is essential to pay a strict attention to the meaning of the term, supply of disposable capital ; for this alone can have any in- fluence upon the rate of interest ; it is only so much capital, as the owners have both the power and the will to dispose of, that can be said to be in circulation. A capital already vested and engaged in production or otherwise, is no longer in the market, and therefore no longer forms a part of the total circulating capital ; its owner is no longer a competitor of other owners in the business of lending, unless the employment be one, from which capital may be easily disengaged and transferred to other objects. Thus, capital lent to a trader, and liable to be withdrawn from his hands at a short notice, and, & fortiori, capital employed in the discount of bills of exchange, which is one way of lending among commercial men, is capital, readily disposable and transferable to any other channel of employ- ment, which the owner may judge convenient. Capital employed by the owner on his own account, in a trade that may be soon wound up, in that of a grocer for instance, stands nearly in the same predicament The articles he deals in find at all times a ready market, and the capital thus employed may be realiz- ed, repaid if lent, re-lent and re-employed in other trades, or applied to any other use. It is always either in actual circulation, or at leasl on the point of being so. Of all values, the one most immediately disposable is that of money. But capital embarked in the construc- tion of a mill, or other fabric, or even in a movable of small dimen- sions, is fixed capital, which being no longer available for any other purpose, is withdrawn from the mass of circulating capital, and can no longer yield any other benefit than that of the product wherein it has been vested. Nor should it be lost sight of, that even though the mill or other fabric be sold, its value, as capital, is not by that means restored to circulation ; it has merely passed from one pro- prietor to another. On the other hand, the disposable value, where- with the buyer has made the purchase, is not thrown out of circula- tion, having merely passed from his into the seller's hands. The sale neither increases nor diminishes the mass of floating capital ir the market. Attention to this circumstance is essential to the form ing a correct estimate of the causes, that determine the rate, as web of interest on capital, as likewise of profit accruing from capita! employed, which we are about to consider presently. It has been sometimes supposed, that capital is multiplied by the operation of credit. This error, though frequently recurring IL works professing to treat of political econom^, can only anse from a total ignorance of the nature and function of cap\dl. Capital CHAP. Vin. ON DISTRIBUTION. 351 consists of positive value vested in material substance, and not of immaterial products, which are utterly incapable of being accumu- lated. And a material product evidently cannot be in more places than one, or be employed by more persons than one, at the same identical moment. The works, machinery, utensils, provisions, and stock in hand, composing the capital of a manufacturer, may possibly be wholly borrowed ; in which case, he will be acting upon a hired capital, and not on one of his own ; yet, beyond all question that capital can be made use of by no one else, so long as it remains within his control and management : the lender has parted with the power of otherwise disposing of it for the time. A hundred others might have equal security and credit to offer; but their applications could not multiply the volume of disposable capital, and could have no other effect than to prevent other capital from remaining idle and out of employ.* It is not to be expected, that I should here enter upon a compu- tation of the motives of affection, consanguinity, generosity, or gratitude, which may occasionally give rise to the loan of capital, or influence the amount of interest demanded for it. Every reader must take upon himself to appreciate the influence of moral causes upon the laws of political economy, which alone we profess to expound. To limit capitalists to the lending at a certain fixed rate only, is to set an arbitrary value on their commodity, to impose a maximum of price upon it, and to exclude, from the mass of floating or circu- lating capital, all that portion, whose proprietors cannot, or will not, accept of the limited rate of interest. Laws of this description are so mischievous, that it is well they are so little regarded as they almost always are, the wants of borrowers combining with those of lenders, for the purpose of evading them ; which is easily managed, by stipulating for benefits to the lender, not indeed bearing the name of interest, although really the *same thing in the end. The only consequence of such enactments is, to raise the rate of interest, by adding to the risks, to which the lender is exposed, and against which he must be indemnified. It is somewhat amusing to find that those governments, which have fixed the rate of interest, have * Vide supra, Book I. chap. 10, 11, on the mode of employing, and on the transformation and accumulation of capital. What is here said does not militate against the positions laid down in Book I. chap. 22. on the representatives of money. A bill of exchange, with good names upon it, is only an expedient for borrowing of a. third person actual and positive value, in the interim between the negotiation and the maturity of the bill. Bills and notes, payable on demand, or at sight, whether issued by the government, or by private banking-establish- ments, are a mere substitution of a cheap paper agent of circulation, in the place of a costly and metallic agent. The monetary functions of the metal being exe- cuted by the paper, the former is set free for other objects; and, inasmuch as it is exchangeable for other commodities or implements of industry, a positive accession is made by the substitution to the natural capital ; but no further. The degree of the accession is limited strictly to the amount of value required for the business of circulation, and dispensed with by this expedient; which amount is a mere trifle, in comparison with the total value of the national capital 352 ON DISTRIBUTION. BOOK II. almost invariably themselves set the example of breaking their own laws, by borrowing at higher than legal interest in their own case. That interest should be fixed by law is highly proper and neces- sarv; but it should be fixed only in cases, where there is no previous agreement about it ; as in the case of a legal recovery of a sum with interest. And, in such case, I think the interest fixed by law should be estimated at the lowest rate that is usually paid by individuals ; because the lowest rate is that paid by the safest investments. Now, it is quite consistent with justice, that the withholder of capital should restore it even with interest; but that is in the supposition, that it has remained all the while in his possession ; which it cannot be supposed to have done, without his having invested it in the way the least hazardous, and consequently without his having drawn from it at least the lowest interest it would have afforded. But this rate should not be denominated the legal interest, because the rate of interest ought no more to be restricted, or determined by law, than the rate of exchange, or the price of wine, linen, or any other commodity. And this is the proper place to expose a very prevalent error. Capital, at the moment of lending, commoily assumes the form of money; whence it has been inferred, that abundance of money is the same thing as abundance of capital ; and, consequently, that abundance of money is what lowers the rate of interest. Hence the erroneous expressions used by men of business, when they tell us, that money is scarce, or that money is plentiful ; which, it must be confessed, are equally just and appropriate, as the very incorrect term, interest of money. The fact is, that abundance or scarcity of money, or of its substitute, whatever it may be, no more affects the rate of interest, than abundance or scarcity of cinnamon, of wheat, or of silk. The article lent is not any commodity in particular, 01 even money, which is itself but a commodity, like all others ; but it is a value accumulated and destinetl to beneficial investment. A man, who is about to lend, converts into money the aggregate value he means to devote to that particular purpose ; and the borrower no sooner has it at command, than he exchanges it for something else; the money that has effected this operation, forthwith served to effect other similai or dissimilar operations; the payment of a tax perhaps, or the subsidy of an army. The value lent has but for a moment assumed the form of money, in the same manner, as we have traced revenue received and expended, passing through the same temporary form ; the identical pieces of money serving perhaps a hundred times in the course of a year, to transfer equivalent portions of income. So, likewise, the same sum of money, that has served to transfer a value from the hands of one lender into those of a bor- rower, may, after infinite intervening transfers, perform the like office between a second borrower and lender, without stripping the former borrower of any part of the value he has received. In reality, then, it is value which has been borrowed, and not any par- ticular sort of metal or of merchandise. All kinds of merchandise CHAP. VIII. ON DISTRIBUTION. 353 may be lent and borrowed, as well as money ; nor does the rate of interest at all depend upon the quality of, the object lent or borrowed. Nothing is more common in trade, than to lend and borrow other objects than money. When a manufacturer buys the raw material of his business at a certain credit, he, in fact, borrows the wool, or cotton, as the case may be, making use of the value of those materials in his concern ; and their quality has no influence on the interest, with which he credits the seller.* The glut or scarcity of the com- modity lent only affects its relative price to other commodities, and has no influence whatever on the rate of interest upon its advance or loan. Thus, when silver money lost three-fourths of its former relative value, although four times as much of it was necessary to pass a loan of the same extent of capita], the rate of interest remain- ed unaltered. The quantity of specie or money in the market, might increase tenfold, without multiplying the quantity of disposable, or circulating capital.f Wherefore, it is a great abuse of words, to talk of the interest of money ; and probably this erroneous expression has led to the false inference, that the abundance or scarcity of money regulates the rate of interestj Law, Montesquieu, nay, even the judicious Locke, in a work expressly treating of the means of lowering the interest of money, have all fallen into this mistake ; and it is no wonder that others should have been misled by their authority. The theory of *Many loans on interest are made without bearing that name, and without implying a transfer of money. When a retail dealer supplies his shop by buying of the manufacturer or wholesale dealer, he borrows at interest, and repays, either at a certain term, or before it, retaining the discount, which is but the return of the interest charged him in addition to the price of the goods. When a provincial dealer makes a remittance to a banker at Paris, and afterwards draws upon his banker, he lends to him, during the time that elapses between the arrival of the remittance and the payment of the draft. The interest of this advance is allowed in the interest account which the banker annexes to the merchant's account current In the Cours d'Economie Politique, compiled by Storch, for the instruction of the young grand-dukes of Russia, and printed at Petersburgh, torn. vi. p. 108, we are informed, that the English merchants, or factors, settled in Russia, sell to their customers at a credit of twelve months, which enables the Russian purchaser of current articles, to realize long before the day of payment, and turn the proceeds to account in the interim ; thereby operating with English capital, never intended to be so employed. It is to be presumed, that the English indemnify themselves for this loss of interest, by the additional price of their goods. But the average rate of profit upon capital in Russia is so high, that even this round-about way of borrowing is sufficiently profitable to the native dealers. fThis is no contradiction to the former position, that the precious metals form part of the capital of society. They form an item of capital, but not of disposable, or lendable capital ; for they are already employed, and not in search of employ- ment; employed in the business of circulating value from one hand to another. It' their supply exceed the demand for this object, they are sent to other parts, where their price continues higher; if their general abundance lower their price everywhere, the sum of their value is not increased, but a laiger quantity of them is given in exchange for the same value in other commodities. \ If interest were always low in proportion to the greater supply of money, it would be lower in Portugal, Brazil, and the West Indies, than in Germany, Switzprland, &c., which is by no means the case. 30* 2U 354 ON DISTRIBUTION. interest was wrapped in utter obscurity, until Hume and Smith* dispelled the vapour. Nor will it ever be clearly comprehended, except by such as shall have acquired a correct notion of what has, throughout this work, been denominated capital, and shall proceed in the conviction, that the object lent or borrowed, is not a particular commodity or object of merchandise, but a portion of value, of the aggregate value of the capital available for that object; and that the pe? centage paid for the use of this portion of capital, at all times and places, depends on the relative -supply and demand of capital to be lent, and is wholly independent of the specific form or quality of the commodity, wherein the loan is made, whether it be money, or any other article whatever. SECTION n. Of the Profits of Capital We have now sufficiently considered the nature and motive of the interest paid by the borrower to the lender of capital, and, though it appears pretty plainly, that this interest is compounded of the rent of the capital, and of the premium of insurance against the risk of its partial or total loss, we have also seen enough, to comprehend the ex'reme difficulty of severing and distinguishing these two ingredients. Let us then proceed, in the next place, to investigate the causes of the profit derivable from the employment of capital, whether by a borrower or by the proprietor himself: to which end it will be necessary, in the outset, to sever it from the profit of the industry, that turns it to account ; and here again we shall meet with the greatest difficulty, in drawing the line of distinction ; though it is easy to perceive, that these two classes of profit, generally speaking, are combined in the recompense or portion of the adventurer. Smith, and most of the English writers on this science, have omitted to notice this distinction; they comprise under the general -head of the profit of capital, or stock, as they term it, many items, which evi- dently belong to the head of the profit of industry.f * Essays of D. Hume, part ii. ess. 4. Wealth of Nations, book ii. c. 4. It is well for the student in political economy, that Locke and Montesquieu have not written more upon it ; for the talent and ingenuity of a writer serve only to perplex a subject he is not thoroughly acquainted with. To say the truth, a man of lively wit can not satisfy his own mind without a degree of speciousness and plausibility, which is of all things the most dangerous to the generality of readers, who are not sufficiently grounded in principle to discover an error at first sighu In those sciences, which consist in mere compilation and classifica- tion, as in botany or natural history, one can scarcely read too much ; but in those deoendent upon the deduction of general laws from particular facts, the better course is to read little, and select that little with judgment. \ This omission is justified by Smith, on the following grounds. " Let us suppose,' savs he, "that in some particular place, where the common annual CHAP. VIIL ON DISTRIBUTION. 355 Perhaps an approximation may be made to the accurate appre- ciation of that part of the aggregate profit, which appertains to the capital, and that, which appertains to the industry employing it, respectively, by comparing the mean ratio of total profit with the mean ratio of the difference of profit in the same line of business, which seems a fair index of the difference of the skill and labour engaged. We will suppose two houses, in the fur trade for example, to work each upon a capital of 100,000 dollars, and to make on the average, an annual profit, the one of 24,000 dollars, the other of 6000 dollars only; a difference of 18,000 dollars fairly referable to the different degree of skill and labour, the mean of which is 9000 dollars ; this may be considered as the gains of industry, which, de- ducted from 15,000 dollars, the mean profit of the trade, will leave 6000 dollars for the profit of the capital embarked in it This example I could suggest as a means, rather of distinguishing those items of profit thus mixed up together, than of estimating their respective ratio with any tolerable certainty. But, without any index to the precise line of demarkation between the profits of capital and those of the industry employing it, we may take it for granted, that the former will always be proportionate to the risk of partial or total loss, and to the duration of the employment. In practice, adventurers, having capital at their command, always weigh beforehand the advantages and disadvantages of the different modes of investment, as specified above,* and naturally prefer, ceteris pari- bus, those presenting the smallest risk and the quickest return ; so that there is less competition of capital for hazardous and long- winded adventurers ; indeed, none whatever is embarked in them, unless they hold out a rate of profit so much above the average rate, as to tempt the capitalist to run the risk. Theory, therefore, leads to the presumption, which is confirmed by the test of experience, that the profit of capital is high, in proportion to the hazard of the adventure, and to the length of its duration. . When a particular employment of capital, the trade with China, profits of a manufacturing stock are 10 per cent, there are two different manu- factures, in one of which the coarse materials annually wrought up cost only 700Z., while the finer materials in the other cost 7000J. If the labour in each cost 300J. per annum, the capital employed in the one will amount only to 1000Z.; whereas that employed in the other will amount to 7300/. At the rate of 10 per cent., therefore, the undertaker of the one will expect a yearly profit of 100J. only, and that of the other 7301. ;" and he goes on to infer, " that the profit is in proportion to the capital, and not to the labour and skill of inspection and direc- tion." But the instance put is altogether inconclusive ; and it is equally easy tc suppose the case of two manufactures, carried on in the same place, and in the same line, each with an equal capital of 1000/. the one under the conduct of an active, frugal, and intelligent manager, the other under that of an idle, ignorant, and extravagant one ; the former yielding a profit of 150Z. per annum, the latter one of 50t. only. The difference in this case will arise, not from any difference in the respective capitals employed, but from the difference in the skill and in- dustry employing them ; which latter qualities will be more productive in tiii one instance than in the other. * Book II. chap. 7. sect 3. 356 ON DISTRIBUTION. BOOK II. for instance, does not afford a profit proportionate, not only to the time of the detention, but likewise to the danger of loss, and the inconvenience of a long, perhaps a two years' duration of one single operation before the returns come to hand, a proportion of the capital is gradually withdrawn from that channel ; the competition slackens, and the profits advance, until they rise high enough to attract fresh capital.* This will serve also to explain, why the profits, derivable from a new mode of employment, are larger than those of common and ordinary employments, where the production and consumption have been well understood for years. In the former case, competition is deterred by the uncertainty of success ; in the latter, allured by the security of the employment. In short, in this matter, as in all others, where the interests of mankind clash one with another, the ratio is determined by the re- lative demand and supply for each mode of employment of capita] respectively. It is a maxim with Smith and those of his school, that human labour was the first price, the original purchase-money, paid for all things. They have omitted to add, that for every object of pur- chase, there is, moreover, paid, the agency and co-operation of the capital employed in its production. Is not capital itself, they will say, composed of accumulated products, of accumulated labour'' Granted : but the value of capital, like that of land, is distinguishable from the value of its productive agency; the value of a field is quite different from that of its annual rent. When a capital of 1000 dol- lars is lent, or rather lent on hire, for a year, in consideration of 50 dollars more or less, its agency is transferred for that space of time, and for that consideration; besides the 50 dollars, the lender receives back the whole principal sum of 1000 dollars, which is applicable to the same objects as before. Thus, although the capital be itself a pre-existent product, the annual profit upon it is an entirely new one, and has no reference to the industry, wherein the capital originated. Wherefore when a product is ultimately completed by the aid of capital, one portion of its value must go to recompense the agency of the capital, as well as another to reward that of the industry, that have concurred in its production. And the portion so applied is wholly distinct from the value of the capital itself, which is returned to the full amount, and emerges in a perfect state from its productive employment. Nor does this profit upon capital represent any part jf the industry engaged in its original formation. From all which it is impossible to avoid drawing this conclusion, * To say nothing of the other motives, that attract industry towards any par- licular profession or repel it thence, which have been noticed in the preceding chapter. These motives sometimes operate all in the same direction, and then Uie promts of both industry and capital rise or fall together; when they act in opposite directions, the difference on the profit of capital balances that on tne profit of industry ; or vice versa. CHAP. VIII. ON DISTRIBUTION. 357 that the profit of capital, like that of land and the othei natural sources, is the equivalent given for a productive service, which though distinct from that of human industry, is nevertheless its efficient ally in the production of wealth. SECTION IIL Of the Employments of Capital most beneficial to Society. To the capitalist himself, the most advantageous employment of capital is that, which with equal risk yields the largest profit ; but what is to him most beneficial, may perhaps not be so to the com- munity at large ; for capital has this peculiar faculty, that, besides being productive of a revenue peculiar to itself, it is, moreover, a means, whereby land and industry may generate a revenue likewise. This is an exception to the general principle, that what is the most productive to the individual, is so to the community at large. A capital lent to a foreign country, may very probably produce to the proprietors and the nation, the highest possible rate of interest; but can afford no assistance towards extending the revenue of the national territory, or for the national industry, as it would do, if employed within the pale of the nation. The portion of capital embarked in domestic agriculture is em- ployed best for the interests of a nation ; it enhances the productive power of the land and of the labour of a country. It augments at once the profits of industry and those of real property. Capital employed under intelligent direction, may make barren rocks to bear increase. The Cevennes, the Pyrenees, and the Pays de Vaud, present on every side the view of mountains, once a scene of unva- ried sterility, now covered with verdure and enriched by cultivation. Parts of these rocks have been blasted with gunpowder, and the shivered fragments employed in the construction of terraces one above another, supporting a thin stratum of earth carried thither by human labour. In this manner is the barren surface of the rock transformed into shelving platforms, richly furnished with verdure, and teeming with produce and population. The capital originally expended in these laborious improvements might, perhaps, have produced larger profits to the capitalist, if employed in external commerce; but probably the total revenue of the district would have been inferior in amount. For a similar reason, capital cannot be more beneficially employ- ed, than in strengthening and aiding the productive powers of nature. Well contrived and useful machinery produces more than the in- terest of its prime cost; and besides affording additional profit to the proprietor, benefits the consumer and the community at large, to the full extent of the saving effected by its means ; for every thing sa/ed is so much gain. The productive employments, that rank next in point of national 358 ON DISTRIBUTION. BOOK II benefit, are those of manufacture and internal commerce ; for the profits of the industry they set in motion are earned at home; whereas, capital embarked in foreign trade benefits the industry and natural resources of all nations indiscriminately. The employment of capital, that tends least to the national advan- tao'e, is the carrying trade between one foreign country and another. When a nation is possessed of an immense accumulation of capi- tal, it will do well to embark it in all these different channels of industry; for they are all lucrative, and in nearly equal degree to the capitalist, though in very different degrees to the nation at large. What prejudice can arise to the lands of Holland, which are already in a high state of cultivation and management, and want neither clearing nor enclosing, or what injury be sustained by nations pos- sessed of little territory, like the old states of Venice, Genoa, and Hamburg, from the large investments of national capital in the car- rying trade 1 It flowed into that particular channel of employment, merely because there was no other open to it. But that class of trade, and generally all external commerce, is ill adapted to a nation deficient in capital, and having not enough to keep its agriculture and manufacture in activity ; and it would be absurd for its govern- ment to give premature encouragement to those external branches of industry; for such a measure would but check the employment of capital in the manner best calculated to increase the national revenue. China, though it is the largest empire in the world, and must possess the greatest aggregate revenue, since it maintains the most numerous and dense population, abandons to foreigners almost all its external commerce. Undoubtedly, in her present condition, she would be a gainer by extending her external relations of com- merce; but she affords a very striking example of the prosperity attainable without them. It is very fortunate, that the natural course of things impels capital rather into those channels, which are the most beneficial to the community, than into those, which afford the largest ratio of profit. The investments generally preferred are those that are nearest home ; whereof the first and foremost is the improvement of the soil, which is justly considered the most safe and permanent ; the next,, manufacture and internal commerce; and the last of all, external commerce, the trade of transport, and the commerce with distant nations. The owner of a capital, especially of a moderate one, will embark it rather under his own superintendence, than in distant and remote concerns. He is apt to think his risk too hazard- ous, when he loses sight of his property for any considerable length of .time, when he consigns it to strangers, or can expect only tardy returns, or is exposed to the chances of litigation with fraudulent debtors, who may take advantage of their unsettled habits of life, or of the laws of foreign countries, with which he is himself unac- quainted Nothing, but the bait of exclusive privilege and monopoly- profit, o: the violent derangement of internal industry, can induce CHAP. IX. ON DISTRIBUTION. 359 an European nation, not possessed of a large surplus capital, to in the colonial or East India trade. (1) CHAPTER IX. OF THE REVENUE OF LAND. SECTION I. Of the Profit of Landed Property* LAND has the faculty of transforming and adapting to the use of mankind an infinity of. substances, which, without its intervention, *In the preceding chapter, I have given the interest, precedence of the profit, of capital, because the former helps to render the latter more intelligible. I have here adopted a contrary arrangement, because the consideration of the profit of land elucidates the subject of rent (1) [The reasoning of this whole section appears to me to be unsound and inconclusive. There is no distinction in point of productiveness, between any of the various employments of capital. There can, in short, be no line drawn between the different productive channels, into which capital may be directed. Whatever occupations tend to supply the wants and increase the comforts and accommodations of life, are, in the strictest sense of the word, equally produc- tive, and nearly in the same proportion augment the national wealth. The capi- tal employed in the carrying-trade between one foreign country and another is as advantageous to the individual and nation to which it belongs, as the capital employed at home. For, as has been already remaked in relation to the profits of industry (vide note page 6) in the absence of all restraints, the profits of all the different employments of capital, will be on an equality or nearly approaching it, inasmuch as any material difference will cause its diversion to a more pro* ductive channel, and thus restore the equilibrium. In a word, capital flows into the carrying-trade only because it yields a greater profit than it otherwise would do, did it not take that direction. Moreover, there is no exception to the general principle, that what is most productive to the individual is also so to the community at large. Notwithstand- ing the contrary assertion of our author, in the foregoing section, a capital lent to, or employed in, a foreign country, if it yield to the proprietors and nation the highest rate of interest, must necessarily afford the national revenue as much, and extend the same assistance to the national industry, as if it were employed within the pale of the nation. If, for example, a capital lent abroad, give em- ployment to foreign industry and natural agents, it is because its productive service, when things, I must again repeat, are left to take their natural course, will yield a larger revenue to its owners. Were not this the case, this capital would not seek employment abroad, but remain at home. The revenue produced by capital employed abroad, if the proprietor does not himself at the same time emigrate there, must be the means of calling into activity, and giving a greater development to the productive faculties of the national industry and land, as this revenue must be consumed, either productively or unproductively at home.] AMERICAN EDITOR jUO ON DISTRIBUTION. BOOK IL would be to them of no service ; it yields nutriment and vegetative juices to the grain, the fruits, and vegetables, whereon we subsist; as well as to the forests, whereof we construct our houses, ships, and furniture, and whence we derive fuel to keep us warm. Its agency in the production of all these commodities may be called, the pro- ductive service of land. And thence it is, that the profit of the pro- prietor originates. He derives a further benefit from the useful substances to be ex- tracted from its entrails ; the stone, metal, coal, peat, &c. &c. Land, as we have above remarked, is not the only natural agent possessing productive properties; but it is the only one, or almost the only one, which man has been able to appropriate, and turn to his own peculiar and exclusive benefit. The water of rivers and of the ocean has the power of giving motion to machinery, affords a means of navigation, and supply of fish ; it is, therefore, undoubtedly possessed of productive power. The wind turns our mill ; even the neat of the sun co-operates with human industry; but happily no man has yet been able to say, the wind and the sun's rays are mine, and I will be paid for their productive services. I would not be understood to insinuate, that land should be no more the object of property, than the rays of the sun, or blast of the wind. There is an essential difference between these sources of production; the power of the latter is inexhaustible ; the benefit derived from them by one man does not hinder another from deriving equal advantage. The sea and the wind can at the same time convey my neighbour's vessel and my own. With land it is otherwise. Capital and industry will be expended upon it in vain, if all are equally privileged to make use of it.; and no one will be fool enough to make the out- lay, unless assured of reaping the benefit. Nay, paradoxical as it may seem at first sight, it is, nevertheless, perfectly true, that a man, who is himself no snare-holder of land, is equally interested in its appropriation with the share-holder himself. The savage tribes of New Zealand, and of the north-western coast of America, where the land is unappropriated, have the greatest difficulty in procuring a precarious subsistence upon fish and game, and are often reduced to devour worms, caterpillars, and the most nauseous vermin :* not unfrequently even to wage war on one another, from absolute want, and to devour their prisoners as food ; whereas, in Europe, where the appropriation is complete, the meanest individual, with bodily health, and inclination to work, is sure of shelter, clothing, and sub- tsistence, at the least. In preceding chapters, we have noticed the profit resulting from industry and capital, embarked in agriculture or other branches of industry. In the present, we are to inquire, wherein consists the peculiar profit of land itself, independent of that accruing from the industry and capital, devoted to its cultivation ; and to consider the * Malthus, in his Essay on Population, book i. c. 405, has given a detail of norne of the revolting extremes, to which savage tribes have been reduced by U'*- want of a regular supply of food. CBAP. IX. ON DISTRIBUTION. 361 profit of land in the abstract, and whence it originates, without any inquiry as to who may be the cultivator, whether the proprietor himself, or a tenant under him. It is the declared opinion of many writers,* that the value of products is never more than the recompense of the human agency or surplus, that can be set apart as the peculiar profit of land, an- ductive agency of foreign land is aggravated, by the artificial difficulty inter- posed by legislative enactments. The degree of productive agency, of course, affects the amount of the product ; but rent originates in the union of that agency, or utility, with difficulty of attainment, natural and artificial, and i& regulated in its ratio by their combined intensity. T. 31 2V 362 ON DISTRIBUTION. BOOK II. on the productive powers of the soil? Evidently nothing whatever. I have endeavoured to put the argument in the clearest and most intelligible light; and I nave to observe upon it, that it proceeds upon a partial and imperfect view of the matter, and upon a total neglect of the influence of demand in the fixation of value. I will now endeavour to give a more complete view of the subject. The productive power of the soil has no value, unless where its products are objects of demand. Travellers, who have explored the interior of America, and other desert parts of the globe, make repeated mention of tracts of the richest land, capable of every kind of culture, yet wholly destitute of any useful or valuable products. But no sooner is a celony established in the vicinity, or, by some means or other, a market found where the products of the soil will, in the way of exchange, pay the usual rate of interest upon the requisite advances, than cultivation begins immediately. Up to this point, there is no difference between us. But if any circumstance operate to aggravate the demand beyond this point, the value of agricultural products will exceed, and sometimes very greatly ex- ceed, the ordinary rate of interest upon capital ; and this excess it is, which constitutes the profit of land, and enables the actual cultivator, when not himself the proprietor, to pay a rent to the proprietor, aftei having first retained the full interest upon his own advances, and the full recompense of his own industry. Land is an agent gratuitously furnished to mankind at large, by whom it is afterwards exclusively appropriated ; but its appropria- tion* does not begin to be profitable to the individual, in whoso favour it is made, until its products are an object of demand, and until their supply ceases to be co-extensive with the desire for them, as it is with respect to some other natiral objects, air, water, &c. From those products of the soil only, thus raised in value by the demand, can there accrue that profit to the proprietor which has been called the profit of land ; and which is paid in all civilized coun- tries, and especially where manufacture and commerce multiply the objects of exchange. It may sometimes happen, that in a particular district of such a country, the rent of land may be very trifling; as in our own district of Sologne, where it is no more than 20 cents an acre ; but this is owing to the want of roads, and particularly of water-carriage, which makes the charge of bringing its agricultural produce to market, added to the charge of cultivation, absorb nearly the whole value it will there sell for. In some 1 countries, highly- civilized and productive in the extreme, land pays no more than 3 or 4 per cent, upon its price or purchase-money. Yet, this is no proof of the poverty of the soil ; it proves only, that it sells dear. A landed estate may yield 24 dollars the acre, and require very little expense of cultivation; as if it be laid down in pasture, for instance; in such case it must owe most of its value to its natural properties; yet, ;*'it have cost the proprietor 800 dollars the acre, it will yield a return ot 3 per cent. only. And herein consists the difference between the profit and the rent of land : profit is high or low, according to the CHAP. IX. ON DISTRIBUTION. 363 quantum of the product ; rent, according to the quantum of the pur chase-money or price. An acre of land, yielding a profit of one dollar only, will bring as high a rent as an acre yielding a profit of 50 dollars, if 50 times as much has been paid for the one as for the other. Whenever land is bought with capital, or capital with land, occa- sion is given for a comparison of the returns of the one species of property with the returns of the other. It is possible, that an estate, bought with a capital of 100,000 dollars, may produce but 3 or 4000 dollars per annum, whilst the same amount of capital would yield 5 or 6000 dollars. The lower rate of interest, which the proprietor is content to take on a purchase of land, maybe attributed, in the first place, to the superior stability of the investment. Capital can seldom be made productive, without undergoing several changes both of form and of place, the risk of which is always more or less alarming to persons unaccustomed to the operations of industry ; whereas, on the contrary, landed property produces without any change of either quality or position. The satisfaction and pleasure attached to terri- torial possession, the consideration, weight, and dignity it communi- cates, and the titles and privileges with which it is in some countries accompanied, contribute greatly to increase this natural preference. It is true, that land is more exposed than other property to the burden of public taxation, and to the arbitrary exactions of power, precisely because it can neither be removed nor concealed. A float- ing capital may take any shape whatever, and be removed at will. It can escape tyranny and civil commotions more readily, than even the person of its proprietor. It is a safer object of property ; for it is often impossible to attach it, or to make it specifically responsible for the debts of the proprietor. Moreover, it is much less exposed to litigation than landed property. Yet, it is clear, that all these advantages are more than counterpoised by the superior risk of investment; and, that landed property is still preferred to floating capital ; since land is dearer, in proportion to its annual returns. Whatever may be the exchangeable price of land and capital one to the other, it is proper to observe, that their interchange makes no variation in the supply of productive agency of land and capital respectively in circulation, and disposable for the purpose of produc- tion ; consequently, that exchangeable price can nowise affect the real and positive profit of land and of capital. When Richard sells his estate to Thomas, the productive service of the land is at the dis- posal of Thomas instead of Richard; and that of the capital, given in exchange for it, is at the disposal of Richard instead of Thomas. The only thing, which really varies the amount of productive agency of land in circulation, is the actual amelioration of the soil, by clearing and bringing new land into cultivation, or enlarging the productive power of old land, and thus increasing its product. Savings and accumulations of capital are, in the shape of agricul- tural improvements, transformed into landed property, and made to participate in all the peculiar advantages and disadvantages attached to it. The same may be said of houses, and generally of all Capita 364 ON DISTRIBUTION. BOOK II. invested in a fixed and permanent object ; it thenceforth loses the character of capital, and assumes that of landed property. Whence we may draw this invariable maxim ; that the productive agency of land is possessed of value, which value, like value in gene- ral, increases in the direct ratio of the demand, and the inverse ratio of the supply; and that, since land differs as much in quality, as in site and position, there is a peculiar demand and supply for each peculiar quality. A demand for so much wine, more or less, what- ever it arise from, creates a specific demand for as much productive agency of the soil, as may be requisite for its growth;* and the extent of surface, adapted to the culture of the grape, determines the supply of that productive service. If the soil, capable of growing good wine, be very limited in extent, and the demand for such wine very brisk, the profit of the soil itself will be extravagantly high. It is worthy of remark, that all land, that yields any profit at all, however trifling the amount, even so little as 20 cents the acre, or even less, may be kept in a state of cultivation : and there have been many instances of its cultivation under such circumstances. Herein it differs from capital and industry. A labourer, if he finds himself settled in a place, where his labour does not yield him what he has reason to expect, can migrate to another. So, likewise, capital quickly flows from a channel, that affords a less, to one that affords a greater return. But land has not the same facilities: it is of necessity im- moveable ; consequently, out of its gross product, after the deduction in the first instance of all advances of capital, with interest, as well as of the profits of industry, without which there could be no product whatever, there still remains to be deducted the expense of carrying the product to the market, or place of exchange. When these seve- ral deductions absorb the whole product of the land, the land itself yields no profit at all, and the proprietor can never succeed in getting a rent from it. Even if he cultivate it himself, he can only gain a profit on his capital and industry, but will receive none what- ever from the bare ownership of the land. In Scotland, there are tracts of unproductive land thus cultivated by the proprietors, which it would not answer for any one else to undertake. So, likewise, in the back settlements of the United States, there are tracts of great extent and fertility, whose revenue alone would not maintain the proprietors ; yet they are, nevertheless, cultivated with success : but it is by the proprietors themselves, who consume the product at the place of growth, and are obliged to superadd to the profit of the land, which is Iktle or nothing, the further profit of capital and personal industry, which afford a handsome competency. It is obvious, that land, though in a state of cultivation, yields no profit, when no farmer will pay rent for it, which is a convincing proof that it gives no surplus, after allowing for the profit of the capital and industry requisite for its cultivation. In the instance just mentioned, the effect is occasioned by the dis- * As well as a demand for the capital and industry requisite for the cultivation. CHAP. IX. ON DISTRIBUTION. 365 tance of the market; the expense of transport swallows up the profit, which might otherwise be made of the land. Other instances might be adduced, in which badness of seasons, war, or taxation, have pro- duced the same effect, and partially or totally absorbed the profit of land, and thus thrown it out of cultivation.* SECTION IL Of Rent. When a farmer takes a lease of land, he pays to the proprietor the profit accruing from its productive agency, and reserves to himself, besides the wages of his own industry the profit upon the capital he embarks in the concern ; which capital consists in implements of husbandry, carts, cattle, &c. He is an adventurer in the business of agricultural industry; and, amongst the means he has to work with, there is one that does not belong to him, and for which he pays rent, i. e. the land. The preceding section was occupied in explaining the source of the profit of land. Its rent is generally fixed at the highest rate of that profit, and for the following reason. Agricultural adventure requires, on the average, a smaller capi- tal, (a) in proportion, than other classes of industry, reckoning the land itself as no part of the capital of the adventurer. Wherefore, there is a greater number of persons able, from their pecuniary cir- cumstances, to embark in agricultural, than in any other speculations; consequently, a greater competition of bidders for land upon lease- On the other hand, the quantity of land fit for cultivation is limited in all countries ; whereas the quantity of capital and the number of cultivators have no assignable limitation. Landed proprietors, therefore, at least in those countries which have been long peopled and cultivated, are enabled to enforce a kind of monopoly against the farmers. The demand for their commodity, land, may go on continually increasing; but the quantity of it can never be extended. This circumstance is equally applicable to the nation at large, and to each particular province or district. The number of acres to be rented in each province is incapable of extension ; whilst the * This catalogue of adverse circumstances, all bearing more strongly upon the profit of land, than upon that of other sources of revenue, explains the fre- quent and unavoidable remission of rent to the farmer, and proves the accuracy of M. de Sevigne's judgment, when she writes from the country: "I wish my son could come here and convince himself of the fallacy of fancying oneself possessed of wealth, when one is only possessed of land." Lettre 224. (a) This is not universally true. In England, where agriculture has attained a high degree of perfection, arable farms require much larger capitals than for- merly ; and a farmer is commonly a much richer man, than the majority of tins tradesmen in his neighbourhood. T. 31* 360 ON DISTRIBUTION. BOOK II. number of persons in a condition to rent them has no fixed and absolute limit. Whenever this is the case, the bargain between the land-holder and the tenant must always be greatly in favour of the former ; and, whenever there is any portion of the soil, which yields to the latter move than the interest of his capital and the wages of his industry, a higher bidder will soon offer himself. The liberality of a few pro- prietors, the distance at which they happen to reside, the ignorance of others, and even of the farmers themselves, and the imprudence of a few more, may sometimes operate to depress the ratio of rent below the maximum of profit; but these are accidental circum- stances, which act for a season only, and can never prevent the regular and constant action of natural causes, which must in the end prevail. Besides this advantage accruing to the land-holder, derived from the very nature of things, he has likewise in general the advantage of possessing, or being able to accumulate greater wealth, and some- times credit, patronage and influence, into the bargain : but the first advantage is alone sufficient to insure him the sole benefit of any circumstances, that may happen to enhance the profit of land. The opening of a canal or road, the increase of population, wealth, and affluence in the province, always operate to raise his rent. He also benefits by every improvement in the cultivation; for a man can afford to pay dearer for the hire of an instrument, when he knows how to turn it to better account. When the proprietor himself expends a capital in the improvement of his land, in draining, irrigation, fences, buildings, houses, or other erections, the rent then includes, in addition to the profit of the land, the interest likewise of the capital so expended.* The farmer may sometimes undertake these expenses of ame- lioration himself; but he can only calculate on receiving interest on the outlay during the continuance of his lease: at the expira- tion of which, the benefit must devolve to the land-holder, being wholly incapable of removal : thenceforward the landlord derives the whole profit, without having made any of the advances : for he receives a pi-oportionate increase of rent in consequence. The farmer should, therefore, engage only in those improvements, whose effects will last no longer than his lease ; unless the lease be long enough, to allow the profit arising from his improvements to repay the whole outlay, together with the interest. It is in this way, that long leases operate to increase the product of the land; ind it is evident the effect will be the greatest, when the land is farmed by the proprietor himself; for he is far less likely, than the farmer, to lose the benefit of such advances ; every judicious improvement Yields him a permanent profit, and the original outlay is amply repaid, when the land is finally disposed of. The farmer's certainty * The capital, vested in improvements upon land, is sometimes of greater ralue than the land itself. This is the case with dwelling-houses CHAP. IX. ON DISTRIBUTION. 367 of reaping the advantage till the end of his lease, is equally conducive to the improvement of landed property with the length of leases. On the contrary, such laws and customs, as authorize the cancelling of leases in specified cases, as in case of sale by the proprietor, are highly prejudicial to agriculture ; since Vhe farmer will hardly ven- ture to undertake any considerable improvement, if kept in continual fear of seeing an intrusive successor appropriate the recompense of his ingenuity, labour, and capital. In tact, every improvement he should make would but increase the risk of that injustice ; for land is far more saleable in good condition than otherwise. Leases are nowhere more sacredly regarded than in England ; and the privilege, enjoyed by leasees to the amount of 40s. (about 10 dollars) and upwards, of voting at Parliamentary elections, has, in some measure, restored the equipoise of power and influence between landlords and tenants, which seldom exists in practice. In no other country do we see tenants so confident of undisturbed posses- sion, as to build upon ground held on lease. Such tenants improve the land, as if it were their own ; and their landlords are punctually paid; which is less frequently the case elsewhere. The land is sometimes cultivated by persons possessed of no capi- tal whatever: the proprietor furnishes himself the requisite capital, as well as the land. They are called in France, metayers, and com- monly pay to the landlord half the gross product. This arrangement is to be met with only in the infancy of agriculture, and is of all others the least conducive to improvement ; for the party who bears the expense of amelioration, whether landlord or tenant, makes the other a gratuitous present of half the interest on his advances. This kind of tendency was more common in the feudal times, than it is at present. The lords were above tilling the land themselves, and their vassals had not the means. The largest incomes were then derived from the land, because the lords were large proprietors; but they bore no proportion to the extent of the land. Nor was this owing to the defect of agricultural skill, so much as to the scarcity of capital devoted to improvements. The lord felt little anxiety to improve his property, and expended, in a way more liberal than productive, an income that he might easily have tripled. He levied war, gave feasts and tournaments, and maintained a numerous retinue. If we look at the then degraded condition of commerce and manufacture, superadded to the insecurity of the agricultural interest, we need go no further for the explanation of the reason, why the bulk of the community was in the extreme of indigence ; and why, independently of every political cause, the nation itself was weak and impotent. Five departments would now be able to repel attacks, which overwhelmed all France at that period : t>u' happily for her, the other states of Europe were nowise in a bette- condition. 368 ON DISTRIBUTION. BOOK II CHAPTER X. OF THE EFFECT OF REVENUE DERIVED BY ONE NATION FROM ANOTHER. O.VE nation cannot take from another the revenues of its industry. A German tailor, establishing himself in France, there makes a profit, in which Germany had no participation. But, if this tailor contrive to amass a little capital, and after the lapse of several years carry it back with him to his native country, he injures France to the same extent as a French capitalist, who should emigrate with .the same amount of fortune.* In a political view, the injury to the wealth of the nation is equal in both cases ; but in a moral light, it is otherwise; for I reckon that a native Frenchman in quitting his country, robs it of an affectionate attachment, and a spirit of exclu- sive nationality, which it can never look for in a stranger born. A nation, receiving a stray child into its bosom again, acquires a real treasure; inasmuch as in him it receives an addition to its popu- lation, an accession to the profits of national industry, and an acqui- sition of capital. It at the same time recovers a lost citizen, and the means for him to subsist upon. If the exile bring back his industry only, at any rate the profits of industry are added to the national stock. It is true, that a source of consumption is likewise super- added ; but supposing it to counterbalance the advantage, there is no diminution of revenue, while the moral and political strength of the country is actually augmented, (a) With regard to the capital lent by one nation to another, the effect upon their respective wealth is precisely analogous to that, resulting from every loan from one individual to another. If France borrow capital from Holland, and devote it to a productive purpose, she will gain the profit of industry and land accruing from the employment of that capital ; and she will do so even though she pay interest ; in like manner as a merchant or manufacturer borrows for the pur- * If, however, this capital be the'fruit of his personal frugality, he robs France of no part of her wealth existing previous to his arrival. Had he continued resident there, the aggregate of the capital of France would have been increased to the full extent of his* accumulation; but, in taking the whole away with him, he takes no more than his own earnings, and no value but what is of his own creation, in so doing, he commits no individual, and, therefore, no national wrong. (a) In the common course of things, such an addition is a national benefit, because it is an accession to the secondary source of production, i. e. industry. But. defective human institutions may convert a benefit into a curse; as where a poor-law system gives gratuitous subsistence to a part of the population, capable of labour, but not incited by want. In such case, every additional human being may be a burthen instead of a prize; for he may be one more on the list of idle (pensioners. T CHAP. X. ON DISTRIBUTION. 369 poses of his concern, arid gains a residue of profit, even aftei paying the interest of the loan. But, if one state borrow from another, not for productive pur- poses, but for those of mere expenditure, the capital borrowed will then yield no return, and the national revenue be saddled with the interest to the foreign creditor. Such was the condition of France, when she borrowed from the Genoese, the Dutch, and the Genevese, for the support of her wars, or to feed the prodigality of a court. Yet it was better to borrow from strangers than from natives, even for the purpose of dissipation ; because, the amount so borrowed was not withdrawn from the national productive capital of France. In either case, the French people wpuld have to pay the interest;* but had they likewise lent the capital, they would have had to pay the interest, and at the same time have lost the benefit, which their industry and land might have derived from its employment and agency. With regard to such landed property, as may belong to foreigners residing abroad, the revenue arising from it is an item of foreign, and forms no part of the national revenue. But it is to be remem- bered, that the foreigner cannot have purchased it without a remit- tance of capital equal in value to the land; which capital is an equally valuable acquisition, particularly if the nation be possessed of im- proveable land in abundance, but of little capital to set industry in motion. 'In making his purchase of land, the foreigner exchanges a revenue of capital, which he leaves the nation to profit by, for a revenue of land ; which he thenceforth receives : thus bartering in- terest of money for rent of land. If the national industry be active and skilfully directed, more benefit may be derived from the interest, than was before obtained from the rent; the purchaser, however, acquires a fixed and permanent property, in lieu of one more perish- able, transferable, and destructible. Mismanagement may soon annihilate the capital the nation has acquired ; but the land remains a permanent possession of the purchaser, and he may sell it and get back the value when he pleases. There is therefore nothing to be apprehended from the purchase of land by foreigners, provided there be wisdom enough, to employ in reproduction the value received in exchange. The particular form, in which one nation may draw revenue from another, is of no importance whatever. It may be remitted in specie, in bullion, or in any other kind of merchandise: indeed it is of the greatest consequence to leave individuals to take it in the shape that best suits their convenience; for what suits them will infallibly be the best for both nations; in like manner as in the conduct of inter- national trade, the commodity, which individuals export or import in preference, is that which best suits the mutual national interests. The agents of the English East India Company drew from that * It will be shown in Book III. that the interest is equally lost, whether spent internally or external h*, 2W 370 ON DISTRIBUTION. BOOK II country, either an annual revenue, or an accumulated fortune, which they returned to England to enjoy and live upon : they took good care not to withdraw these remittances in the shape of gold or silver, because the precious metals were of more relative value in Asia than in Europe ; they remitted in the shape of India goods and products, on which a fresh piofit was made on arrival in Eu- rope: every million they remitted, swelled, perhaps, to so much as 1,200,000, by the time it reached the place of destination. Thus, Europe gained to the amount of 1,200,000, while India lost only a million. If these despoilers of India*(a) insisted on transmitting this whole sum in specie, they must have robbed Hindostan, perhaps, of 1,500,000, or upwards, for every 1,200,000 that England received. The same sum may, perhaps, have been amassed originally in specie; but it was always remitted in the shape of that commodity, which, for the time being, answered best as an object of transport. As long as exportation of any kind is allowed, and exportation has always been regarded by statesmen with a favourable eye, it is easy to receive in one country, the revenue and capital derived from another And the remittance cannot be prevented by the government, without the interdiction of all external commerce, which, after all, would leave the resource of smuggling and contraband. In the eyes of political economy, nothing is more absurd, than to see governments prohibit the export of the national specie, as a means of checking the emigration of wealth.f *Raynal tells us, that, inasmuch as the East India Company derived a revenue from Bengal, to be consumed in Europe, it must infallibly' drain it of specie in the end, since the company is the only merchant, and imports no specie itself. But Raynal is mistaken in this. In the first place, private merchants do carry the precious metals to India, because they are of more value there than in Europe ; and that very reason also deters the servants of the company, who may have made fortunes in Asia, from remitting them in specie. And if it were to be suggested, that a fortune, remitted to Europe, is less sub- stantial and more speedily dissipated, when it arrives in the shape of goods, than when in that of specie, this again would be an error. The form, that property happens to assume, does not affect its substantiality ; when once transferred to Europe, it may be converted into specie, or land, or what not. It is the amount of values, and not the temporary form they appear under, which, in this colonial connexion, as in that of international trade, is the essential circumstance. fThe complete interception of all export of objects of value would not help them towards the point of intent ; because free communication occasions a much greater influx than efflux of wealth. Value, or wealth, is by nature fugitive and independent. Incapable of all restraint, it is sure to vanish from the fetters that are contrived to confine it, and to expand and flourish under the influence of liberty. (a) This is a harsh word, yet probably justified by the history of the original acquisition. But the scene has now changed ; the servants of the sovereign company no longer look to spoliation as a public or private resource, but are content with the liberal remuneration of laborious duties, civil, military, and financial. A slight examination of- the connexion between Britain and her Asiatic dependencies will show, how small a balance is remitted to the former in any shape ; and it should be remembered that part, even of this, is but the interest of loans raised in England, for the purposes of Indian administration, Uiough not always of a wise or paternal character. T. CHAP. XL ON DISTRIBUTION. CHAPTER XL OP THE MODE IN WHICH THE ClUANTITY OF THE PRODUCT AFFECTS POPULATION. SECTION I. Of Population, as connected with Political Economy. HAVING, in Book I, investigated the production of the articles necessary to the satisfaction of human wants, and in the present Book, traced their distribution among the different members of the community, let us now further extend our observations to the in- fluence those products exercise upon the number of individuals, of which the community is composed ; that is to say, upon population. In her treatment of all organic bodies, nature seems to neglect the individual, and afford protection only to the species. Natural history presents very curious examples of her extraordinary care to per- petuate the species ; but the most powerful means she adopts for that purpose, is the multiplication of germs in such vast profusion, that notwithstanding the immense variety of accidents occurring to prevent their early development, or destroy them in the progress to maturity, there are always left more than sufficient to perpetuate the species. Did not accident, destruction, or failure of the means of development, check the multiplication of organic existence, there is no animal or plant that might not cover the face of the globe in a very few years. This faculty of infinite increase is common to man, with all other organic bodies ; and although his superior intelligence continually enlarges his own means of existence, he must sooner or later arrive at the ultimum. Animal existence depends upon the gratification of one sole and immediate want, that of food and sustenance ; but man is enabled, by the faculty of communication with his species, to barter one product for another, and to regard the value, rather than the nature, of the product The producer and owner of a piece of furniture of twenty dollars value, may consider himself as possessing as much human food, as may be procurable for that price. And with respect to the relative price of products, it is in all cases determined by the inten- sity of the desire, the degree of utility in each product for the time beinor. We may safely take it for granted, that mankind in general will not barter an object of more, for one of less urgent necessity In a season of agricultural scarcity, a larger quantity of furniture will be given for a smaller quantity of human aliment; but it is in- variably true, that whenever barter takes place, the object given on 372 ON DISTRIBUTION. BOOK JL one side is worth that given on the other, and that the one is pro- curable for the other.* Trade and barter, as we have seen above, adapt the products to the general nature of the demand. The objects, whether of food or raiment, or of habitation, for which the strongest desire is felt, are of course the most in request ; and the wants of each family or individual, are more or less fully satisfied, in proportion to the ability to purchase these objects; which ability depends upon the produc- tive means and exertion of each respectively; in plain terms, upon the revenue of each respectively. Thus, in the end, if we sift this matter to the bottom, we shall find, that families, and nations, which are but aggregations of families, subsist wholly on their own pro- ducts; and that the amount of product in each case necessarily limits the numbers of those who can subsist upon it. Such animals as are incapable of providing for future exigencies, after they are engendered, if they do not fall a prey to man, or some of their fellow brutes, perish the moment they experience an im- perative want, which they have not the means of gratifying. But man has so many future wants to provide for, that he could not answer the end of his creation, without a certain degree of provi- dence and forethought; and this provident turn can alone preserve the human species from part of the evils it would necessarily endure, if its numbers were to be perpetually reduced by the process of destructive violence.f Yet notwithstanding the forethought ascribed to man, and the restraints imposed on him by reason, legislation, and social habits, the increase of population is always evidently co-extensive, and even something more than co-extensive, with the means of subsistence. It is a melancholy but an undoubted fact, that, even in the most * Although all products are necessary to the social existence of man, the ne- cessity of food being of all others most urgent and unceasing, and of most fre- quent recurrence, objects of aliment are justly placed first in the catalogue of the means of human existence. They are not all, however, the produce of the national territorial surface ; but are procurable by commerce as well as by inter- nal agriculture ; and many countries contain a greater number of inhabitants than could subsist upon the produce of their land. Nay, the importation of another commodity may be equivalent to an importation of an article of food. The export of wines and brandies to the north of Europe is almost equivalent to an export of bread ; for wine and brandy, in great measure, supply the place of beer and spirits distilled from grain, and thus allow the grain, which would otherwise be employed in the preparation of beer or spirits, to be reserved for that of bread. fThe practice of infanticide in China proves, that the local prejudices of cus- tom and of religion there counteract the foresight which tends to check the in- crease of population ; and one can not but deplore such prejudices ; for the human misery resulting from the destruction is great, in proportion as its object is more fully developed, and more capable of sensation. For this reason it would be still more barbarous and irrational policy to multiply wars, and other means of human destruction, in order to increase the enjoyments of the survivors; because the destructive scourge would affect human beings in a state more perfect, more sus- ceptible of feeling and suffering, and arrived at a period of life when the mature tlteplav of his faculties renders man more valuable to himself and to others. CHAP. XI. ON DISTRIBUTION. 373 thriving countries, part of the population annually dies of mere want. Not that all who perish from want absolutely die of hunger; though this calamity is of more frequent occurrence than is generally sup- posed.* I mean only that they have not at command all the neces- saries of life,, and die for want of some part of those articles of necessity. A sick or disabled person may, perhaps, require nothing more than a little rest, or medical advice, together with, perhaps, some simple remedy, to set him up again ; but the requisite rest, or advice, or remedy, is denied, or not afforded. A child may require the attentions of the mother, but the mother may perhaps be taken away to labour, by the imperious calls of necessity ; and the child perish through accident, neglect, or disease. It is a fact vyell esta- blished by the researches of all who have turned their attention to statistics, that out of an equal number of children of wealthy and of indigent parents, at least twice as many of the latter die in infancy as of the former. In short, scanty or unwholesome diet, the insuffi- cient change of linen, the want of warm and dry clothing, or of fuel, ruin the health, undermine the constitution, and sooner or later bring multitudes of human beings to an untimely end ; and all, that perish in consequence of want beyond their means to supply, may be said to die of want Thus, to man, particularly in a forward state of civilization, a variety of products, some of them in the class of what have been denominated immaterial products, are necessaries of existence; these are multiplied in a degree proportionate to the desire for them, respectively, because its intensity causes a proportionate elevation * The Hospice de Bicetre, near Paris, contains, on the average, five or six thousand poor. In the scarcity of the year 1795, the governors could not afford them food, either so good or so abundant as usual ; and I am assured by the house- steward of the establishment, that at that period almost all the inmates died. It would appear from the returns given in a tract entitled " Observations on the Condition of the Labouring- Classes" by J. Barton, that the average of deaths, in seven distinct manufacturing districts of England, has been projw- tionate to the dearness, or, in other words, to the scarcity of subsistence. I subjoin an extract from his statements. Average price of Wheat Years. per qr. Deaths, s. d. 1801 118 3 55,965 1804 60 1 44,794 1807 73 3 48,108 1810 106 2 54,864 From tne same returns it appears, that the scarcity occasioned less mortality hi the agricultural districts. The reason is manifest: the labourer is there more commonly paid in kind, and the high sale-price of the product enabled the farmer to give a high purchase-price for labour, (a) (a) The latter reason is not very satisfactory ; for the total receipts of :ne . corn-growers are probably not larger in years of scarcity, than in those cC abundance. ' T. 32 374 ON DISTRIBUTION. BOOK D. of their price: and it may be laid down as a genera] maxim, that the population of a state is always proportionate to the sum of its production in every kind.* This is a truth acknowledged by most writers on political economy, however various and discordant their opinions on most other points.f (1) It appears to me, however, that one very natural consequence, deducible from this maxim, has escaped their observation ; which is, that nothing can permanently increase population, except the encou- ragement and advance of production ; and that nothing can occa- sion its permanent diminution, but such circumstances as attack production in its sources. The Romans were forever making regulations to repair the loss of population, occasioned by their state of perpetual external warfare. Their censors preached up matrimony ; their laws offered premiums *Not but that accidental causes may sometimes qualify these general rules. A country, where property is very unequally distributed, and where a few indi- viduals consume produce enough for the maintenance of numbers, will doubtless subsist a smaller population, than a country of equal production, where wealth is more equally diffused. The very opulent are notoriously averse to the burthen of a family ; and the very indigent are unable to rear one. . f Vide Stewart, On Political Economy, book i. c. 4. Quesnay Encyclopedic, art. Grains. Montesquieu, Esprit des Lois, liv. 18. c. 10. and liv. 23. c. 10. Bujfon, ed. de Bernard, torn. iv. p. 266. Forbonnais, Principes et Observa- tions, p. 39, 45. Hume, Essays, part 2. Ess. 2. CEuvres de Poivre, p. 145, 146. Condillac, Le Commerce et le Gouvernement, part 1. chap. 24, 25. Verri, Reflexions sur V Economic Politique, c. 210. Mirabeau, Ami des Hommes, torn, i. p. 40. Raynal, Histoire de V ' Etablissement, liv. 21. s. 23. Chastellux, de la Felicite Publique, torn. ii. p. 205. Necker, Administration des Finances de France, c. 9. and Notes sur VEloge de Colbert. Condorcet, Notes sur Voltaire, ed. de Kepi. torn. xlv. p. 60. Smith, Wealth of Nations, book i. c. 8, 11. Gar- nier, Abrege Elementaire, part 1. c. 3. and Preface de sa Traduction de Smith. Canard, Principes a" Economic Politique, p. 133. Godwin, On Political Jus- tice, book viii. c. 3. Claviere, De la France et des Etats Unis, ed. 2. p. 60, 315. Brown-Duignan, Essay on the Principles of National Economy, p. 97. Lond. 1776. Beccaria, Elemenli di Economia Publica, par. prim. c. 2, 3. Gorani, Recherches sur la Science du Gouvernement, torn. ii. c. 7. Sismondi, Nouv. Prin. d'Econ. Pol. liv. vii. c. 1. et seq. Vide also, more especially, Mai- thus, Essay on Population, a work of considerable research ; the sound and powerful arguments of which would put this matter beyond dispute, if it indeed had been doubted. (1) The simple laws of population, or their general principles, which are few and plain, are examined, discussed, and established with great ability by Pro- fessor Senior, of Oxford, as well in the two lectures on Population we have already referred to, as in his subsequent correspondence with Mr. Malthus, to which these lectures gave rise, and which Mr. Senior has subjoined to them, in an appendix. Full justice is done, by Mr. Senior, to the originality and depth of Mr. Malthus's views on Population, as well as to their great importance, at the time he first gave them to the public ; the inaccuracy, nevertheless, in his statement of the general proposition, namely, the tendency of every people to increase in their numbers, more rapidly than in their wealth, is clearly pointed out, and the errors which flow from it satisfactorily e' '^ted. "If a single country,'' says Mr. Senior, "can be found in which' " .e is now less poverty than is universal in a savage state, it must be true, that under the circumstances, in which that country has been placed, the means of subsistence have a greatei tendency to increase than the population." AMERICAN EDITOR. CHAP. XL ON DISTRIBUTION. 375 and honours to plurality of children ; but these measures were fruit- less. There is no difficulty in getting children ; the difficulty lies in maintaining them. They should have enlarged their internal pro- duction, instead of spreading devastation amongst their neighbours. All their boasted regulations did not prevent the effectual depopula- tion of Italy and Greece, even long before the inroads of the bar- barous northern hordes.* The edict of Louis XVI. in favour of marriage, awarding pensions to those parents who should have ten, and larger ones to those who should have twelve chidren, was attended with no better success. The premiums that monarch held out in a thousand ways to indo- lence and uselessness, were much more adverse, than such poor encouragements could be conducive, to the increase of population. It is the fashion to assert, that the discovery of the new world has tended to depopulate old Spain; whereas her depopulation has re- sulted from the vicious institutions of her government, and the small amount of her internal product, in proportion to her territorial extent, f The most effectual encouragement to population is, the activity of industry, and the consequent multiplication of the national products. It abounds in all industrious districts, and, when a virgin soil happens to co-operate with the exertions of a community, whence idleness is altogether discarded, its rapid increase is truly astonishing. In the United States of America, population has been doubling in the course of twenty years. For the same reasons, although temporary calamities may sweep off multitudes, yet, if they leave untainted the source of reproduc- tion, they are sure to prove more afflicting to humanity, than fatal to population. It soon trenches again upon the limit, assigned by the aggregate of annual production. Messance has given some very curious calculations, whereby it appears, that after the ravages occa- sioned by the famous plague of Marseilles in 1720, marriages through- out Provence were more fruitful than before. The Abbe d'Expilly comes to the same conclusion. The same effect was observable in Prussia, after the plague of 1710. Although it had swept off a third of the population, the tables of SussmilchJ show the number of births, which, before the plague, amounted annually to about 26,000, to have advanced in the year following, 1711, to no less than 32,000, It might have been supposed, that the number of marriages, after so terrible a mortality, \vou,d have been at least considerably reduced, on the contrary, it actually doubled ; a strong indication of the ten- dency of population to keep always on a level with the national resources. The loss of population is not the greatest calamity resulting from * Vide Livii Hist. lib. vi. Plutarchi Moralia, xxx. De defectu oraculorum Strabonif, lib. vii. j- Ustariz has remarked, that the most populous provinces of Spain are tncee, from which there has been the greatest emigration to America. I Quoted by Malthus, in his Essay on Popul. voL il 376 ON DISTRIBUTION. BOOK h such temporary visitations ; the first and greatest is, the misery they occasion to the human race. Great multitudes can not be swept from the land of the living by pestilence, famine or war, without the endurance of a vast deal of suffering and agony, by numbers of sen- tient beings; besides the pain, distress, and misery of the survivors; the destitution of widows, orphans, brothers, sisters, and parents. It is a subject of additional regret, if among the rest, there happen to fall one or two of those superior and enlightened men, whose single talents and virtues have more effect upon the happiness and wealth of nations, than the grovelling industry of a million of ordinary mortals. Moreover, a great loss of human beings, arrived at maturity, is certainly a loss of so much acquired wealth or capital ; for every grown person is an accumulated capital, representing all the ad- vances expended during a course of many years, in training ana making him what he is. A bantling a day old by no means replaces a man of twenty; and the well-known expression of the Prince de Conde, on the victorious field of Senef, was equally absurd and unfeeling.* The destructive scourges of the human species, therefore, if not injurious to population, are at least an outrage on humanity; on which account alone, their authors are highly criminal.f But though such temporary calamities are more afflicting to hu- manity than hurtful to the population of nations, far other is the effect of a vicious government, acting upon a bad system of political economy. This latter attacks the very principle of population, by drying up the sources of production; and since the numbers of mankind, as before seen, always approach nearly to the utmost * "Une nuit de Paris reparera tout cela." It requires the care and expendi- ture of twenty successive years to replace the full-grown man, that a cannon- ball has destroyed in a moment. The destruction of the human race by war is far more extensive than is commonly imagined. The ravage of a cultivated district, the plunder of dwelling-houses, the demolition of establishments of industry, the consumption of capital, &c. &c. deprive numbers of the means of livelihood, and cause many more to perish, than are left on the field of battle. f Upon this principle, no capital improvement of the medicinal or chirurgical art, like that of vaccination for instance, can permanently influence national population ; yet its influence upon the lot of humanity may be very considerable ; for it may operate powerfully to preserve beings already far advanced in age, in strength, and in knowledge : whom to replace, would cost fresh births and fresh advances ; in other words, abundance of sacrifices, privations, and sufferings both to the parents and the children. When population must be kept up by addi- tional births, there is always more of the suffering incident to the entrance and the exit of human existence ; for they are both of more frequent occurrence. Population anay be kept up with half the number of births and deaths, if the average term of life be advanced from forty to fifty years. There will, indeed, be a greater waste of the germs of existence; but the condition of mankind must be measured by the quantum of human suffering, whereof mere germs are not susceptible. The waste of them is so immense, in the ordinary course of nature, that the small addition can be of no consequence. Were the vegetable creation endowed with sensation, the best thing that could happen to it would be, that 'he seeds of all the vegetables, now rooted up and destroyed, should be decom- posed before the vegetable faculties were awakened. CHAP. XI. ON DISTRIBUTION. 377 limits the annual revenue of the nation will admit of, if the govern- ment reduce that revenue by the pressure of intolerable taxation, forcing the subject to sacrifice part of his capital, and consequently diminishing the aggregate means of subsistence and reproduction possessed by the community, such a government not only imposes a preventive check on further procreation, but may be fairly said to commit downright murder; for nothing so effectually thins the effective ranks of mankind, as privation of the means of subsistence. The evil effects of monastic establishments upon population, have been severely and justly inveighed against ; but the mode, in which they operate, has been misunderstood; it is the idleness, not the celibacy, of the monastic orders, that ought to be censured. They put their lands into cultivation, it is true, but where is the merit of that? Would the lands remain untilled, if the monastic system were abolished ? So far from that evil resulting from the abolition, wherever these establishments have been converted into manufac- tories, of which the French revolution has offered many examples, equal agricultural produce has continued to be raised, and the pro- duce of the manufacturing industry has been all clear gain; while the increased total product, thus created, has been followed by an increase of population also. From these premises, may likewise be drawn this further conclu- sion ; that the inhabitants of a country are not more scantily supplied with the necessaries of life, because their nunlber is on the increase; nor more plentifully, because it is on the decline. Their relative condition depends on the relative quantity of products they have at their disposal; and it is easy to conceive these products to be con- siderable, though the population be dense ; and scanty, though the population be thinly spread. Famine was of more frequent occur- rence in Europe during the middle ages, than it has been of late years, although Europe is evidently more thickly peopled at present. The product of England, during the reign of queen Elizabeth, was not nearly so abundant as it is now, although her population was then less by half; and the population of Spain, reduced to but eight millions, enjoys not nearly so much affluence, as when it amounted to twenty-four.* Some writers! have considered a dense population as an index of national prosperity ; and, doubtless, it is a certain sign of enlarged national production. But general prosperity implies the general dif- fusion and abundance of all the necessaries, and some of the super- fluities of life amongst all classes of the population. Some parts of India and of China are oppressed with population, and with misery also ; but their condition would be nowise improved by thinning its * If population depends on the amount of product, the number of births is a very imperfect criterion, by which to measure it. When industry and produce are increasing, births are multiplied disproportionately to the existing population, so as to swell the estimate; on the contrary, in the declining state of national wealth, the actual population exceeds the average ratio to the births. f Wallace, Condorcet, Godwin. 32* 2X 378 ON DISTRIBUTION. BOOK H. numbers, at least if it were brought about by a diminution of the aggregate product. Instead of reducing the numbers of the popula- tion, it were far more desirable to augment the gross product; which may always be effected by superior individual activity, industry, and frugality, and the better administration, that is to say, the less frequent interference of public authority. But it will naturally be asked, if the population of a country re- gularly keeps pace with its means of subsistence, what will become of it in years of scarcity and famine ? Hear what Stewart* says on the subject : " There is a very great deception as to the difference between crops ; a good year for one soil is bad for another." " It is far from being true," he continues, " that the same number of people consume always the same quan- tity of food. In years of plenty, every one is well fed ; food is not so frugally managed ; a quantity of animals are fatted for use ; and people drink more largely, because all is cheap. A year of scarcity comes; the people are ill fed; and when the lower classes come to divide with their children, the portions are brought to be very small;" instead of saving, they consume their previous hoard; and after all, it is unhappily too true, that part of that class must suffer and perish. This calamity is most "common in countries overflowing with population, like Hindostan, or China, where there is little external or maritime commerce, and where the poorer classes have always been strictly limited to the mere necessaries of life. There, the produce of ordinary years is barely sufficient to allow this miserable pittance; consequently, the slightest failure of the crop leaves mul- titudes wholly destitute of common necessaries, to rot and perish by wholesale. All accounts agree in representing that famines are, for this reason, very frequent and destructive in China and many parts of Hindostan. Commerce in general, and maritime commerce in particular facilitates the interchange of products, even with the most remote countries, and thus renders it practicable to import articles of sub- sistence, in return for several other kinds of produce; but too great a dependence on this resource, leaves the nation at the mercy of every natural or political occurrence, which may happen to intercept or derange the intercourse with foreign countries. The intercourse must then be preserved at all events, no matter whether by force or fraud, competition must be got rid of by every means, however unjustifiable; a separate province, or weak ally, perhaps, is obliged to purchase the national products, under restrictions equally galling, as the exaction of actual tribute ; and a commercial monopoly en- forced, even at the hazard of a war; all which evils make the state of the nation extremely precarious indeed. The produce of England, in articles of human subsistence, had undoubtedly increased largely towards the end of the 18th century; * Sir Tames, of Coltness, book i. c. 17. CHAP. XL ON DISTRIBUTION. 379 but its produce in articles of apparel and household furniture had probably increased still more rapidly. The consequence has been, that immensity of production, which enables her to multiply her population beyond what the produce of her soil can support,* and to bear up under the pressure of public burthens, to which there is no parallel nor even approximation. But England has suffered severely, whenever foreign markets have been shut against her produce ; and she has sometimes been obliged to resort to violent means to preserve her external intercourse. She would act wisely, perhaps, in discontinuing those encouragements, that impel fresh capital into the channels of manufacture and external commerce, and directing it rather towards that of agricultural industry. It is probable, that in that case, several districts, which have not yet received the utmost cultivation of which they are susceptible, par- ticularly many parts of Scotland and Ireland, would raise agricul- tural produce enough to purchase most part, if not the whole, of the surplus product of her manufactures and commerce beyond her present consumption.! Great Britain would thereby create for her- self a domestic consumption, which is always the surest and the nost advantageous. Her neighbours, no longer offended by the necessarily jealous and exclusive nature of her policy, would proba- bly lay aside their hostile feelings, and become willing customers. But, after all, if her manufactured should still be disproportioned to her agricultural produce, what is there to prevent her from adopting a system of judicious colonization, and thus creating for herself fresh markets for the produce of her domestic industry in every part of the globe, whence she might derive, in return, a supply of food foi her superfluous population ?J In this particular, the position of France appears to be precisely opposite to that of Great Britain. It would seem, that her agricul- tural product is equal to the maintenance of a much larger manu- facturing and commercial population. The face of the countuy pre- * In a pamphlet entitled, Considerations on British Agriculture, published in 1814, by W. Jacob, a member of the Royal Society, and a well-informed writer upon agricultural topics, we are told, (p. 34,) that England ceased to be an ex- porter, and became an importer, of wheat, about the year 1800. f The writer last cited enters into long details to show, that the soil of the British isles could be made to produce at least a third more than their present product, ibid. p. 115. et seq. I By judicious colonization, I mean colonization formed on the principles of complete expatriation, of self-government without control of the mother-country, and of freedom of external relations; but with the enjoyment of protection only by the mother-country, while it should continue necessary. Why should no. political bodies imitate in this particular the relation of parent and child 1 When arrived at the age of maturity, the personal independence of the child is both just and natural; the relation it engenders is, moreover, the most lasting and most beneficial to both parties. Great part of Africa might be peopled with European colonies formed on these principles. The world has yet room enough, and the cultivated land on the face of the globe is far inferior in extent to the fertile land remaining untilled. The earl of Selkirk has thrown much light on this matter, in his tract on Emigration and the State of the Highlands, 380 ON DISTRIBUTION. BOOK IL sents the picture of high and general cultivation ; but the villages and country towns are, for the most part, surprisingly small, poor, ill-built, and ill-paved, the few shops scantily supplied, and the public houses neither neat nor comfortable. It is plain, the agricultural product must either be less than the appearance would indicate, or it must be consumed in a thriftless and unprofitable manner ; proba- bly both these causes are in operation. In the first place, the production is far less than it might be ; and that is chiefly owing to three causes : 1. The want of capital, parti- cularly in enclosures, live stock, and amelioration:* 2. The indolenco of the cultivators, and the too general neglect of weeding, trimming the hedges, clearing the trees of moss, destroying insects, &c. &c. 3. The neglect of a proper alternation of crops, and of the most approved methods of cultivation. In the second place, the consumption is unthrifty and unprofitable; for a great part of it is mere waste, and yields no human gratifica- tion whatever. To speak of one article alone, that is, of firing, which is an object of great value in districts, where coal and wood are scarce ; the waste of it is enormous in the huts of the peasantry lighted as they often are by the door-way only, and admitting the rain down the chimney while the fire is burning. Unwholesome beverage or food, and the indulgence of the alehouse, are like injuri- ous modes of consumption. In fine, towns and villages would be more thickly spread,' and would besides present an appearance of greater affluence, were the generality of the inhabitants more active and industrious, and actu- ated by the laudable emulation, tinctured perhaps with some little vanity, rather of possessing every object of real utility, and exhib- iting in their domestic arrangements the utmost order and neatness, than of living in indolence upon the rent of a trifling patrimony, or the scanty salary of some useless public employ. The small proprietor, with an income of 3 or 400 dollars per annum, just suffi- cient to vegetate upon, might double or triple it perhaps by adding the revenue derivable from personal industry; and even those en- gaged in useful occupations do not push them to the full extent of their activity and intelligence. Moreover, the spirit of inquiry and improvement has probably been disheartened by the example of frequent ill success; although the failure has commonly been occa sioned by the want of judgment, perseverance, and frugality. National population is 'uniformly proportionate to the quantum of national production ; but it may vary locally within the limits ot each state, according to the favourable or unfavourable operation of local circumstances. A particular district will be rich, because its soil is fertile, its inhabitants industrious, and possessed ot capi- * The want of capital prevents the employment of machinery for expediting the operations, like the thrashing machine in common use in England. This makes a larger supply of human agency requisite in agriculture ; and the more mouths there are to be fed, die smaller will be the surplus produce, which alone ib disposable. CHAP. XI. ON DISTRIBUTION. 381 tal accumulated by their frugality ; in like manner as a family will surpass its neighbours in wealth, because of its superior intelli- gence and activity. The boundaries and political constitutions of states affect population only, inasmuch as they affect the national production. The influence of religion and national habits upon population is precisely analogous. All travellers agree, that pro- testant are both richer and more populous than catholic countries ; and the reason is, because the habits of the former are more con- ducive to production. SECTION II. Of the influence of the Quality of a national product upon the local dis- tribution of the Population. For the earth to be cultivated, it is necessary that population should be spread over its surface; for industry and commerce to flourish, it is desirable to collect together in those spots, where the arts may be exercised with the most advantage; that is to say, where there can be the greatest subdivision of labour. The dyer naturally establishes himself near the clothier; the druggist near the dyer ; the agent, or owner, of a vessel employed in the transport of drugs will approximate in locality to the druggist ; and so of other producers in general. At the same time, all such as live without labour on the interest of capital, or the rent of landed property, are attracted to the towns, where they find brought to a focus, every luxury to feed their appetites, as well as a choice of society, and a variety of pleasure and amusement. The charms of a town life attract foreign visitors, and all such as live by their labour, but are free to ex- ercise it wherever they like. Thus, towns become the abode of literary men and artizans, and likewise the seats of government, of courts of justice, arid most other public establishments; and their population is enlarged by the addition of all the persons attached to such establishments, and all who are accidentally brought thither by business. * Not but what there is always a number of country residents, that are employed in manufacturing industry, exclusive of such as make it their abode in preference. Local convenience, running water, the contiguity of a forest or a mine, will draw a good deal of machinery, and a number of labourers, in manufacture, out of the precincts of towns. There are, likewise, some kinds of work, which must be performed in the neighbourhood of the consumers, that of the tailor, the shoemaker, or the farrier; but these are trifling compared with the manufacturing industry of all kinds exe- cuted in towns. Writers on political economy have calculated, that a thriving country fs capable of supporting in its towns, a population equa' 382 ON DISTRIBUTION. BOOK II. to that of the country. Some examples lead to an opinion, that it could support a still greater proportion, were its industry directed with greater skill and its agriculture conducted with more intelligence and less waste, even supposing its soil to be of very moderate fer- tility.* Thus much at least is certain, that, when the towns raise a product for foreign consumption, they are then enabled to draw from abroad provisions in return, and may sustain a population much larger in proportion to that of the country. Of this we have instances in the numerous petty states, whose territory alone is barely suffi- cient to afford subsistence to one of the suburbs of their capital. Again, the cultivation of pasture land, requiring much Jess human labour than that of arable, it follows, that, in grazing countries, a greater proportion of the inhabitants can apply themselves to the arts of industry; whiclo are therefore more attended to in pasture than in corn countries. Witness Flanders, Holland, and Normandy that was. (b) * There is good reason to believe, that the total population of England is more than the double of that employed in her internal agriculture. From the returns laid before parliament, 1811, it appears there were in Great Britain, inclusive of Wales and Scotland, 895,998 families employed in agriculture ; and that the total number of families amounted to 2,544,215, which would give but a third of the population to the purposes of agriculture. According to Arthur Young, the country population of France, within her old limits, was 20,521,538 And that of the cities and towns 5,709,270 Making a total of 26,230,808 Supposing him to be correct, France, within her old boundary, could main- tain, on this principle, a population of 41 millions, supposing her merely to double her agricultural population; and of 60 millions, supposing her industry were equally active with that of Great Britain, (a) It is the general rema'rk of travellers, that the traffic of the great roads of France is much less, than might be expected, in a country possessing so many natural advantages. This may be attributed chiefly to the small number and size of her towns ; for it is the communication from town to town that peoples the great road ; that of the rural population being principally from one part of the village or farm to another. (a) Our author has here fallen into a palpaple error. The ratio of the agri- cultural, to the total population of Great Britain, has not been varied as above stated, solely, or even chiefly by the multiplication of the commercial and manu- facturing classes; but by the transfer of the human labour spared in agriculture to the two other branches of industry. Agriculture might occupy one third only of the population of France, and yet the total population be decreased and not multiplied. T. (6) This position is too general. A pastoral nation, devoting the whole of its territory to pasture, could spare a very small proportion of its population for commerce and manufacture ; witness Tartary and the Pampas of South America. Where a dense manufacturing and commercial population makes it advantageous to the land-holder to devote his land to pasture, and look to foreigners for the supply of corn, as in Holland, a small proportion of the population may, indeed, be required for domestic, but a large proportion will be required for the anima tion of foreign agriculture. T. CHAP. XL ON DISTRIBUTION. 383 From the period of the irruption of the barbarians into the Roman empire, down to the 17th century, that is to say, to a date almost within living memory, the towns made but little figure in the larger states of Europe. That portion of the population, which was thought to live upon the cultivators of the land, was not then, as now, composed principally of merchants and manufacturers, but con- sisted of a nobility, surrounded by numerous retainers, of churchmen and other idlers, the tenants of the chateau, the abbey, or the con- vent, with their several dependencies ; very few of them living within the towns. The products of manufacture and commerce were very limited indeed ; the manufacturers were the poor cottagers, and the merchants mere pedlars ; a few rude implements of husbandry, and some very clumsy utensils and articles of furniture, answered all the purposes of cultivation and ordinary life. The fairs, held three or four times in the year, furnished commodities of a superior quality, which we should now look upon with contempt; and what rare household articles, stuffs, or jewels, of price, were from time to time imported from the commercial cities of Italy, or from the Greeks of Constantinople, were regarded as objects of uncommon luxury and magnificence, far too costly for any but the richest princes and nobles. In this state of things, the towns of course made but a poor figure. Whatever magnificence they may possess in our time is of very modern date. In all the towns of France together, it would be impossible to point out a single handsome range of buildings, or fine street, of two hundred years' antiquity. There is nothing of an- terior date, with the exception of a few Gothic churches, but clumsy tenements huddled together in dirty and crooked streets, utterly impassable to the swarm of carriages, cattle, and foot-passengers, that indicates the present population and opulence. No country can yield the utmost agricultural produce it is equa* to, until every part of its surface be studded with towns and cities. Few manufactures could arrive at perfection, without the conve- niences they afford ; and, without manufactures, what is there to give in exchange for agricultural products ? A district whose agricultural products can find no market, feeds not half the number of inhabit- ants it is capable of supporting; and the condition, even of those it does support, is rude enough, and destitute both of comfort and refinement ; they are in the lowest stage of civilization. But, if an industrious colony comes to establish itself in the district, and gra- dually forms a town, whose inhabitants increase till they equal the numbers of the original cultivators, the town will find subsistence on the agricultural product of the district, and the cultivators be enriched by the product of the industry of the town. Moreover, towns offer indirect channels for the export of the agricultural values of the district to a distant market. The raw products of agriculture are not easy of transport, because the expense soon swallows up the total price of the commodity trans- ported. Manufactured produce has greatly the advantage in this 384 ON DISTRIBUTION. BOOK IL respect; for industry will frequently attach very considerable value to a substance of little bulk and weight. By the means of manufac ture, the raw products of national agriculture are converted into manufactured goods of much more condensed value, which will defray the charge of a more distant transport, and bring a return of produce adapted to the wants of the exporting country. There are many of the provinces of France, that are miserable enough at present, yet want nothing but towns to bring them into high cultivation. Their situation would, indeed, be hopeless, were we to adopt the system of that class of economists, which recom- mends the purchase of manufactures from foreign countries, with the raw produce of domestic agriculture. (1) However, if towns owe their origin and increase to the concen tration of a variety of manufactures, great and small, manufactures, again, are to be set in activity by nothing but productive capital; and productive capital is only to be accumulated by frugality of con- sumption. Wherefore, it is not enough to trace the plan of a town, and give it a name; before it can have real existence, it must be gra- dually supplied with industrious hands, mechanical skill, implements of trade, raw materials and the necessary subsistence of those engaged (1) [The slow progress of agriculture in these provinces of France is not attributable to the want of towns in the midst of them ; towns and cities are a consequence, not the cause of the general prosperity of a country. Nor would the adoption of a different policy from that which recommends the purchase of manufactures from foreign countries with the raw produce of domestic agricul- ture, improve the situation of these districts. A system of policy which should attempt by restraints or encouragements, to divert a portion of the capital and industry employed in agriculture or commerce from those channels towards the erection of a town, or the establishment of a manufactory, with a view to pro- mote the better cultivation of the soil, would be subversive of this end. To what causes then must the misery, said by our author to prevail in those provinces, be ascribed, or what has retarded their agricultural improvement? The prosperity of agriculture, as well as that of every other branch of industry, depends upon the unrestrained operation of individual interest; not only furnish- ing motives to exertion, but knowledge to direct that exertion. All that is necessary to enable a state to reach the highest pitch of opulence, is not to dis- turb the action of this important principle. The obstacles, it will accordingly be found, which have opposed the progress of improvement in the countries alluded to, may be traced to the interference by the public authorities with the salutary operation of this powerful motive of action, or, in other words, to their bad laws and political institutions. Sometimes imposing restraints on the culti- vator, and exposing him to numberless oppressions, either by prescribing the mode in which the soil shall be cultivated, or the products it shall yield.. And, when noi thus directly interfering with the business of production, prohibiting 1 '.he exportation of the raw produce of the soil, and thereby depriving it of the best market. At other times harassing the husbandman with taxation, the shameful inequalities of which, whilst they relieve the higher orders, permit the burden to fall, almost exclusively, on his shoulders, or depriving him of the freedom of trade from province to province within his own country ; but, above all, by perpetuating the inheritance of landed property in particular bodies or families, without the power of alienation. These are a few of the corrupt and barbarous laws which have retarded the agriculture, not of these particulat provinces of France only, but of many of the fairest portions of Europe.] AMERICAN EDITOR. C'HAP. XT. ON DISTRIBUTION. 385 in industry, until the completion and sale of their products. Other- wise, instead of founding a city, a mere scaffolding is run up, which must soon fall to the ground, because it rests upon no solid founda- tion. This was the case with regard to Ecatherinoslaw, . in the Crimea ; and was, indeed, foreseen by the emperor Joseph II., who assisted at the ceremony of its foundation, and laid the second stone in due form : " The empress of Russia and myself," said he to his suite, " have completed a great work in a single day : she has laid the first stone of a city, and I have laid the finishing one." Nor will capital alone suffice to set in motion the mass of industry and the productive energy necessary to the formation and aggran dizement of a city, unless it present also the advantages of locality and of beneficent public institutions. The local position of Washing- ton, it should seem, is adverse to its progress in size and opulence: for it has been outstripped by most of the other cities of the Union ;(1) whereas, Palmyra, in ancient times, grew both wealthy and popu- lous, though in the midst of a sandy desert, solely because it had become the entrepot of commerce between Europe and eastern Asia. The same advantage gave importance and splendour to Alexandria, and, at a still more remote period, to Egyptian Thebes. The mere will of a despot could never have made it a city of a hundred gates, and of the magnitude and populousness recorded by Herodotus. Its grandeur must have been owing to its vicinity to the Red Sea and the channel of the Nile, and to its central position between India and Europe, (a) If a city cannot be raised, neither does it seem, that its further aggrandizement can be arrested by the mere fiat of the monarch. Paris continued to increase, in defiance of abundance of regulations issued by the government of the day to limit its extension. The only effectual barrier is that opposed by natural causes, which it would be very difficult to define with precision, for it consists rather of an aggregate of little inconveniences, than of any grand or posi- (a) There is some stretch of imagination in this. Probably the Egyptian Thebes was itself the centre of manufacture and commerce in its day, and not its entrepot ; indeed, there is no reason to suppose a very active intercourse be- tween India and Europe to have existed at so early a period ; and, if it had, Thebes would hardly have been the entrepot. But central India furnishes itself instances of cities containing as large a population. Nineveh and Babylon seem to have been quite as populous ; each was probably the central point of an enormous domestic industry. T. (1) [The local position of Washington, perhaps, is not as advantageous as that of some of the other cities of the Union; it certainly, however, has not been adverse to its progress in population and wealth. In the year 1800, when Washington became the seat of the general government, its whole population amounted to 3,210 ; according to the census, it contained in 1810, 8,208 inhabit- ants, in 1820, 13,247 inhabitants, and in 1830, 18,828 inhabitants. In the year 1820 the whole number of buildings was 2,208, of which 925 were of brick. By the assessment valuation of the year 1830, the whole number of buildings was 3,125. It cannot, therefore, be said to have been outstripped by most of the otlier cities in the progress of improvement.] AMERICAN EDITOU. 33 2 Y 386 ON DISTRIBUTION. BOOK II. live obstruction. In overgrown cities, the municipal administration is never well attended to ; a vast deal of valuable time is lost in going from one quarter to another: the crossing and jostling is immense in the central parts: and the narrow streets and passages, having been calculated for a much smaller population, are unequal to the vast increase of horses, carriages, passengers, and traffic of all sorts. This evil is felt most seriously at Paris, and accidents are growing more frequent every day ; yet new streets are now building on the same defective plan, with a certain prospect of a like inconvenience in i very few years hence. BOOK III OF THE CONSUMPTION OF WEALTH CHAPTER I. OP THE DIFFERENT KINDS OF CONSUMPTION. IN the course of my work, I have frequently been obliged to an- ticipate the explanation of terms and notions which in the natural order should have been postponed to a later period of the investiga- tion. Thus I was obliged in the first book to explain the sense, in which I used the term, consumption, because production cannot be effected without consumption. My reader will have seen from the explanation there given, that, in like manner as by production is meant the creation, not of sub- stance, but of utility, so by consumption is meant the destruction of utility, and not of substance, or matter. When once the utility of a thing is destroyed, there is an end of the source and basis of its value ; an extinction of that, which made it an object of desire and of demand. It thenceforward ceases to possess value, and is no longer an item of wealth. Thus, the terms, to consume, to destroy the utility, to annihilate the value of any thing, are as strictly synonymous as the opposite terms to produce, to communicate utility, to create value, and convey to the mind precisely the same idea. Consumption, then, being the destruction of value, is commensurate, not with the bulk, the weight, or the number of the products consumed, but with their value. Large consumption is the destruction of large value, whatever form that value may happen to have assumed. Every product is liable to be consumed ; because the value, which can be added to, can likewise be subtracted from, any object. If it has been added by human exertion or industry, it may be subtracted by human use, or a variety of accidents. But it cannot be more than once consumed; value once destroyed cannot be destroyed a second time. Consumption is sometimes rapid, sometimes gradual. A house, a ship, an implement of iron, are equally consumable as ?i loaf, a joint of meat, or a coat. Consumption again may be twt 388 ON CONSUMPTION. BOOK III. partial. A horse, an article of furniture, or a house when re-sold by the possessor, has been but partially consumed ; there is still a residue of value, for which an equivalent is received in exchange on the re-sale. Sometimes consumption is involuntary, and either accidental, as when a house is burnt, or a vessel shipwrecked, or contrary to the consumer's intention, as when a cargo is thrown overboard, or stores set on fire to prevent their falling into enemies' hands. . Value may be consumed, either long after its production, or al the very moment, and in the very act of production, as in the case of the pleasure afforded by a concert, or theatrical exhibition. Time and labour may be consumed ; for labour, applicable to an useful purpose, is an object of value, and when once consumed, can never be consumed again. Whatever cannot possibly lose its value is not liable to consump- tion. A landed estate cannot be consumed; but its annual productive agency may; for when once that agency has been exerted, it cannot be exerted again. The improvements of an estate may be consumed, although their value may possibly exceed that of the estate itself; for these improvements are the effect of human exertion and indus- try ; but the land itself is inconsumable.* So likewise it is with any industrious faculty. One may consume a labourer's day's work, but not his faculty of working; which, however, is liable to destruction by the death of the person pos- sessing it. All products are consumed sooner or later ; indeed they are pro- duced solely for the purpose of consumption, and, whenever the con- sumption of a product is delayed after it has reached the point of absolute maturity, it is value inert and neutralized for the time. For as all value may be employed re-productively, and made to yield a profit to the possessor, the withholding a product from consumption is a loss of the possible profit, in other words, of the interest its value would have yielded, if usefully employed.f * Some materials are capable of receiving and discharging the same kind of value many times over; as linen, which will undergo repeated washing. The cleanliness given it by the laundress, is a value wholly consumed on each occa- sion, along with a part of that of the linen itself. f The values not consumed sooner or later in a useful way are of little mo- ment; such are provisions spoiled by keeping, products lost accidentally, and those whose use has become obsolete, or which have never been used at all, owing to the failure of the demand for them, wherein value originates. Values buried, or concealed, are commonly withdrawn but for a time from consumption ; when found, it is always the interest of the finder to turn them to account, \vhich he cannot do without submitting them to consumption. In this case, the only loss is that of the profit derivable from them during the period of their disappearance, and may be reckoned equivalent to the interest for that time. The same observation applies to the minute savings, successively laid by until the moment of investment, the aggregate of which is, doubtless, conside- rable. The loss, resulting from this inertness of capital, may be partially reme- died by moderating the duties on transfer, by extending to the utmost the facility of circulation, and by the establishment of banks of deposite, in which capita CHAP. I. ON CONSUMPTION. 389 But, products being universally destined for consumption, and that too in the quickest way, how, it may be asked, can there be ever an accumulation of capital, that is to say, of values produced? I answer that value may be accumulated, without being neces- sarily vested all the while in the same identical product, provided only it be perpetuated in some product or other. Now, values em- ployed as capital are perpetuated by reproduction; the various products of which capital consists, are consumed like all other pro- ducts : but their value is no sooner destroyed by consumption, than it re-appears in another, or a similar substance. A manufactory can not be kept up, without a consumption of victuals and clothes for the workmen, as well as of the raw material of manufacture; but, while value in those forms is undergoing consumption, new value is communicated to the object of manufacture*. The items that com- posed the capital so expended, are consumed and gone; but the capital, the accumulated value, still exists and re-appears under a new form, applicable to a second course of consumption. Whereas, if consumed unproductively, it never re-appears at all. The annual consumption of an individual, is, the aggregate of all the values consumed by that individual within the year. The annual consumption of a nation is, the aggregate of values consumed within the year by all the individuals and communities, whereof the nation consists. In the estimate of individual or national consumption, must be included every kind of consumption, whatever be its motive or con- sequence, whether productive of new value or not ; in like manner, as the estimate of the annual production of a nation comprises the total value of its products raised within the year. Thus, a soap manufactory is said to consume such or such a quantity or value of alkali in a year, although this value be re-produced from the manu- factory in the shape of soap ; on the other hand, it is said to produce annually such and such a quantity or value of soap, although the production may have cost the destruction of a great variety of values, which, if deducted, would vastly reduce the apparent pro- duct. By annual production, or consumption, national or individual, is therefore meant, the gross and not the net amount.* Whence it naturally follows, that all the commodities, which a na- tion imports, must be reckoned as a part of its annual product, and all its exports as part of its annual consumption. The trade of France consumes the total value of the silk it exports to the United States; and produces, on the other hand, the total value of cotton received in return. And, in like manner, the manufacture of France con- miy be safely vested, and wnence it may readily be withdrawn. In times of political confusion, and under an arbitrary government, many will prefer to keep their capital inactive, concealed, and unproductive, either of profit or gratification, rther than run the risk of its display. This latter evil is never felt under a gr>otl government. * For the distinction between the gross and the net product, vide sujn a, lloo* II. chap. 5. 33* 396 ON CONSUMPTION. BOOK III. sumes the value of alkali employed by the soap-boiler, and produces the value of soap derived from the concern. The total annual consumption of a nation, or an individual, is a very different thing from the aggregate of capital. A capital may be wholly or partially consumed several times a year. When a shoe- maker buys leather, and cuts and works it up into shoes, there is so much capital consumed and reproduced. Every time he repeats the operation, there is so much more capital consumed. Suppose the leather purchased to amount to 40 dollars, and the operation to be repeated 12 times in the year, there will have been an annual consumption of 480 dollars upon a capital of 40 dollars. On the other hand, there may be portions of his capital, implements of trade, for instance, which it may take several years to consume. Of this part of his capital* he may consume annually but 1-4 or 1-10 perhaps. In each country the wants of the consumer determine the quality of the product. The product most wanted is most in demand ; and that which is most in demand yields the largest profit to industry, capital, and land, which are therefore employed in raising this particular product in preference; and, vice versa, when a product becomes less in demand, there is a less profit to be got by its produc- tion; it is, therefore, no longer produced. All the stock on hand falls in price ; the low price encourages the consumption, which soon absorbs the stock on hand. The total national consumption may be divided into the heads of public consumption* and private consumption ; the former is effected by the public, or in its service ; the latter by individuals or families. Either class may be productive or unproductive. In every community each member is a consumer; for no one can subsist, without the satisfaction of some necessary wants, however confined and limited; on the other hand, all, who do not live on mere charity, or gratuitous bounty, contribute somehow to produc- tion, by their industry, their capital, or their land ; wherefore, the consumers may be said to be themselves the producers ; and the great bulk of consumption takes place amongst the middling and poorer classes, whose numbers more than counterbalance the small- ness of the share allotted to each.* * It is probable, that, in all countries, anywise advanced in industry, the reve- nues of industry exceed those of capital and land united, and, consequently, that the consumption of those deriving income solely from industry, and wholly de- pendent for subsistence upon their personal faculties, exceeds that of Doth capi- talists and landlords together. It is not uncommon to meet with a manufactory, that, with a capital, say of 120,000 dollars, will pay daily in wages to its people, 60 dollars, which, with the deduction of Sundays and holidays, makes 18,0()0 dollars per annum ; if to this be added, 4000 dollars more for the net profits of personal superintendence and management, it will give a total of 22,000 dollars per annum, for the revenue of industry alone. The same capital, vested in land at bu 20 years' purchase would yield a revenue of 6000 dollars only. Tne cultivation by metayers, the very lowest description of farmers, gives to them, and their subordinate labourers' industry, a revenue equal to that of the land jointly with the capital, which is advanced by the proprietor. CHAP. II. ON CONSUMPTION. 391 Opulent, civilised, and industrious nations, are greater consumers than poor ones, because tney are infinitely greater producers. They annually, and in some cases, several times in the course of the yeai, re-consume their productive capital, which is thus continually reno- vated ; and consume unproductively, the greater part of their reve- nues, whether derived from industry, from capital, or from land. It is not uncommon to find authors proposing, as the model for imitation, those nations whose wants are few; whereas, it is far preferable to have numerous wants, along with the power to gratify them. This is the way at once to multiply the human species, and to give to each a more enlarged existence. Stewart* extols the Lacedaemonian policy, which consisted in practising the art of self-denial in the extreme, without aiming at progressive advancement in the art of production. But herein the Spartans were rivalled by the rudest tribes of savages, which are commonly neither numerous nor amply provided. Upon this prin- ciple, it would be the very acme of perfection to produce nothing and to have no wants ; that is to say, to annihilate human existence. CHAPTER H. OP THE EFFECT OF CONSUMPTION IN GENERAL THE immediate effect of consumption of everjfckind is, the loss of value, consequently, of wealth, to the owner of the article consumed. This is the invariable and inevitable consequence, and should never be lost sight of in reasoning on this matter. A product consumed is a value lost to all the world and to all eternity ; but the further consequence, that may follow, will depend upon the circumstances and nature of the consumption. If the consumption be unproductive, there usually results the gratification of some want, but no reproduction of value whatever; if productive, there results the satisfaction of no want, but a creation of new value, equal, inferior, or superior in amount to that consumed, and profitable or unprofitable to the adventurer accordingly.f * Book II. chap. 14. f This may be illustrated by the burning of fuel in a grate or furnace. The fuel burnt, serves either to give warmth, or to cook victuals, boil dyeing ingre- dients, and the like, and thereby to increase their value. There is no utility in the mere gratuitous act of burning, except inasmuch as it tends to satisfy some human want, that of warmth for instance ; in which case, the consumption is unproductive; or inasmuch as it confers upon a substance submitted to its action, a value, that may replace the value of the fuel consumed ; in whicli case the consumption is productive. If the fuel, burnt for the sake of warmth, produce either no warmth at all, 01 very little ; or that burnt to give value to a substance, give it no value, or a less value than the value consumed in fuel, the consumption will be ill-judged anre CHAP. IIL ON CONSUMPTION. 395 cisely the same, as if the land were, in China, proportionately more productive than in Europe.* In manufacture, when the raw material used is of no value what- ever, it is not to be reckoned as forming any part of the requisite consumption of the concern ; thus, the stone used by the lime-burner, and the sand employed by the glass-blower, are no part of their respective consumption, whenever they have cost them nothing. A saving of productive agency, whether of industry, of land, or of capital, is equally real and effectual, as a saving of raw material ; and it is practicable in two ways ; either by making the same pro- ductive means yield more agency ; or by obtaining the same result from a smaller quantity of productive means. Such savings generally operate in a very short time to the bene- fit of the community at large ; they reduce the charges of produc- tion ; and in proportion as the economical process becomes better understood, and more generally practised, the competition of pro- ducers brings the price of the product gradually to a level with the charges of production. But for this very reason, all, who do not learn to economise like their neighbours, must necessarily lose, while others are gaining. Manufacturers have been ruined by hundreds, because they would go to work in a grand style with too costly and complex an apparatus, provided of course at an excessive expense of capital. Fortunately, in the great majority of cases, self-interest is most sensibly and immediately affected by a loss of this kind ; and in the concerns of business, like pain in the human frame, gives timely warning of injuries, that require care and reparation. If the rash or ignorant adventurer in production w r ere not the first to suffer the punishment of his own errors or misconduct, we should find it far more common than it is to dash into improvident speculation ; which is quite as fatal to public prosperity, as profusion and extravagance. A merchant, that spends 10,000 dollars in the acquisition of 6000 dollars, stands, in respect to his private concerns and to the general wealth of the community, upon exactly the same footing, as a man of fashion, who spends 4000 dollars in horses, mistresses, gluttony, or ostentation ; except, perhaps, that the latter has more pleasure and personal gratification for his money.f * One of the suite of Lord Macartney estimated the saving of grain in China, by this method alone, to be equal to the supply of the whole population of Great Britain. f There is almost insuperable difficulty in estimating with precision the con- sumption and production of value ; and individuals have no other means of knowing, whether their fortune be increased or diminished, except by keeping: regular accounts of their receipt and expenditure ; indeed, all prudent persons* are careful to do so, and it is a duty imposed by law in the case of traders. An adventurer could otherwise scarcely know whether his concern were gainful or losing, and might be involving himself and his creditors in ruin. Besides keep- ing regular accounts, a prudent manager will make previous estimates of the value that will be absorbed in the concern, and of its probable proceeds; the use of which, like that of a plan or design in building, is to give an approximation, though it can afford no certainty. X f 396 ON CONSUMPTION. BOOK in. What has been said on this subject in Book I, of this work, makes it needless to enlarge here on the head of productive consumption. I shall, therefore, henceforward direct my reader's attention to the subject of unproductive consumption, its motives, and conse- quences ; premising, that in what I am about to say, the word con- sumption, used alone, will import unproductive consumption, as it does in common conversation. CHAPTER IV. OF THE EFFECT OF UNPRODUCTIVE CONSUMPTION IN GENERAL. HAVING just considered the nature and effect of consumption in general, as well as the general effect of productive consumption in particular, it remains only to consider, in this and the following chapters, such consumption as is effected with no other end or object in view, than the mere satisfaction of a want, or the enjoyment of some pleasurable sensation. Whoever has thoroughly comprehended the nature of consump tion and production, as displayed in the preceding pages, will have arrived at the conviction, that no consumption of the class denomi- nated unproductive, has any ulterior effect, beyond the satisfaction of a want by the destruction of existing value. It is a mere ex- change of a portion of existing wealth on the one side, for human gratification on the other, and nothing more. Beyond this, what can be expected? reproduction? how can the same identical utility be afforded a second time? Wine can not be both drunk and dis- tilled into brandy too. Neither can the object consumed serve to establish a fresh demand, and thus indirectly to stimulate future pro- ductive exertion; for it has already been explained that the only effectual demand is created by the possession of wherewithal to purchase, of something to give in exchange; and what can that be, except a product, which, before the act of exchange and con- sumption, must have been an item, either of revenue or of capital ? The existence and intensity of the demand must invariably depend upon the amount of revenue and of capital : the bare existence of revenue and of capital is all that is necessary for the stimulus of production, which nothing else can stimulate. The choice of one object of consumption necessarily precludes that of another; what is consumed in the shape of silks cannot be consumed in the shape of linens or woollens; nor can what has once been devoted to pleasure or amusement, be made productive also of more positive 01 substantial utility Wherefore the sole object of inquiry, with regard to unpro ductive consumption, is, the degree of gratification resulting from the net of consump ion itself: and this inquiry will, in the remainder of CHAP. IV. ON CONSUMPTION. 397 this chapter, be pursued in respect of unproductive consumption in general, after which we shall give in the following chapters, a sepa- rate consideration to that of individuals, and that of the public, or community at large. The sole point is, to weigh the loss, occasioned to the consumer by his consumption, against the satisfaction it affords him. The degree of correctness, with which the balance of loss and gain is struck, will determine whether the consumption be judicious or otherwise ; which is a point that next to the actual pro- duction of wealth, has the most powerful influence upon the well or ill-being of families and of nations. In this point of view, the most judicious kinds of consumption seem to be : 1. Such as conduce to the satisfaction of positive wants; by which term I mean those, upon the satisfaction of which depends the exist- ence, the health, and the contentment of the generality of mankind ; being the very reverse of such as are generated by refined sensuali- ty, pride, and caprice. Thus, the national consumption will, on the whole, be judicious, if it absorb the articles rather of convenience than of display : the more linen and the less lace; the more plain and wholesome dishes, and the fewer dainties ; the more warm clothing, and the less embroidery, the better. In a nation whose consump- tion is so directed, the public establishments will be remarkable rather for utility than splendour, its hospitals will be less magnificent than salutary and extensive ; its roads well furnished with inns, rather than unnecessarily wide and spacious, and its towns well paved, though with few palaces to attract the gaze of strangers. The luxury of ostentation affords a much less substantial and solid gratification, than the luxury of comfort, if I may be allowed the expression. Besides, the latter is less costly, that is to say, involves the necessity of a smaller consumption ; whereas the former is insatiable ; it spreads from one to another, from the mere proneness .to imitation ; and the extent to which it may reach, is as absolutely unlimited, (a) " Pride," says Franklin, " is a beggar quite as clam- orous as want, but infinitely more insatiable." Taking society in the aggregate, it will be found that, one with another, the gratification of real wants is more important to the community, than the gratification of artificial ones. The wants of the rich man occasion the production and consumption of an exqui- site, perfume, perhaps those of the poor man, the production and consumption of a good warm winter cloak ; supposing the value to (a) It is strange, that so acute a writer should not have perceived, that the mischief of pure individual vanity can never be very formidable, because the pleasure it affords loses in intensity, in proportion to its diffusion. Indeed as far as individual consumption is concerned, attacks upon luxury are mere idle declamations ; for the productive energies of mankind will always be directed towards an object, with a force and in a degree porportionate to the intensity of the want for it. It is the extravagance of public luxury alone that can ever be formidable; this, as well as public consumption of every kind, it is always the interest of the community at large to contract, and that of public functionaries to expand, to thes utmost T. 34 398 ON CONSUMPTION. BOOK III. be equal, the diminution of the general wealth is the same in both cases ; but the resulting gratification will, in the one case, be trifling, transient, and scarcely perceptible ; in the other, solid, ample, and of long duration.* 2. Such as are the most gradual, and absorb products of the best quality. A nation or an individual, will do wisely to direct con- sumption chiefly to those articles, that are the longest time in wear- ing out, and the most frequently in use. Good houses and furniture are, therefore, objects of judicious preference ; for there are few pro- ducts that take longer time to consume than a house, or that are of more frequent utility ; in fact, the best part of one's life is passed in it. Frequent changes of fashion are unwise; for fashion takes upon itself to throw things away long before they have lost their utility, and sometimes before they have lost even the freshness of novelty, thus multiplying consumption exceedingly, and rejecting as good for nothing what is perhaps still useful, convenient, or even elegant. So that a rapid succession of fashions impoverishes a state, as well by the consumption it occasions, as by that which it arrests. There is an advantage in consuming articles of superior quality, although somewhat dearer, and for this reason : in every kind of manufacture, there are .some charges that are always the same, whether the product be of good or bad quality. Coarse linen will have cost, in weaving, packing, storing, retailing, and carriage, before it comes to the ultimate consumer, quite as much trouble and labour, as linen of the finest quality, therefore in purchasing an infe- rior quality, the only saving is the cost of the raw material : the labour and trouble must always be paid in full, and at the same rate ; yet the product of that labour and trouble are much quicker con- sumed, when the linen is of inferior, than when it is of superior quality. This reasoning is applicable indifferently to every class of pro- duct; for in every one there are some kinds of productive agency, that are paid equally without reference to quality ; and that agency is more profitably bestowed in the raising of products of good than of bad quality ; therefore, it is generally more advantageous for a nation to consume the former. But this can not be done, unless the nation can discern between good and bad, and have acquired taste for the former; wherein again appears the necessity of knowledgef to the furtherance of national prosperity ; and unless, besides, the bulk of the population be so far removed above penury, as not to be obliged to buy whatever is the cheapest in the first instance, al though it be in the long-run the dearest to the consumer. It is evident, that the interference of public authority in regu- *The lending at interest what might have been spent in frivolity is of thia latter class ; for interest can not be paid, unless the loan be productively em- ployed ; in which case it will go in part to the maintenance of the labouring Classes. f By knowledge, I would always be understood to mean, acquaintance with .he true state of things, or generally with truth in every branch. CHAP. IV. ON CONSUMPTION. 399 lating the details of the manufacture, supposing it to succeed in making the manufacturer produce goods of the best quality, which is very problematical, must be quite ineffectual in promoting their consumption ; for it can give the consumer, neither the taste of \vhat is of the better quality, nor the ability to purchase. The difficulty lies, not in finding a producer, but in finding a consumer. It will be no hard matter to supply good and elegant commodities, if there be consumers both willing and able to purchase them. But such a demand can exist only in nations enjoying comparative affluence ; it is affluence, that both furnishes the means of buying articles of good quality, and gives a taste for them. Now the interference of author- ity is not the road to affluence, w r hich results from activity of pro- duction, seconded by the spirit of frugality; from habits of industry pervading every channel of occupation, and of frugality tending to accumulation of capital. In a country, where these qualities are prevalent, and in no other, can individuals be at all nice or fasti- dious in what they consume. On the contrary, profusion and em- barrassment are inseparable companions ; there is no choice when necessity drives. The pleasures of the table, of play, of pyrotechnic exhibitions, and the like, are to be reckoned amongst those of shortest duration. I have seen villages, that, although in want of good water, yet do not hesitate to spend in a wake or festival, that lasts but one day, as much money as would suffice to construct a conduit for the supply of that necessary of life, and a fountain or public cistern on the vil- lage green; the inhabitants preferring tq get once drunk in honour of the squire or saint, and to go day after day with the greatest in- convenience, and bring muddy water from half a league distance. The filth and discomfort prevalent in rustic habitations are attributa- ble, partly to poverty, and partly to injudicious consumption. In most countries, if a part of what is squandered in frivolous and hazardous amusements, whether in town or country, were "spent in the embellishment and convenience of the habitations, in suitable clothing, in neat and useful furniture, or in the instruction of the population, the whole community would soon assume an appearance of improvement, civilization, and affluence, infinitely more attractive to strangers, as well as more gratifying to the people themselves. 3. The collective consumption of numbers. There are some kinds of agency, that need not be multiplied in proportion to the increased consumption. One cook can dress dinner for ten as easily as for one ; the same grate will roast a dozen joints as well as one ; and this is the reason, why there is so much economy in the mess-table of a college, a monastery, a regiment, or a large manufactory, in the supply of great numbers from a common kettle or kitchen, and in the dispensaries of cheap soups. 4. And lastly, on grounds entirely different, those kinds of con sumption are judicious, which are consistent with moral rectitude ; and, on the contrary, those, which infringe its laws, generally end in public, as well as private calamity. But it would be too wide a 400 ON CONSUMPTION. BOOK IIL digression from my subject to attempt the illustration of this posi- tion. It is observable, that great inequality of private fortune is hostile to those kinds of consumption, that must be regarded as most judi- cious. In proportion as that inequality is more marked, the artifi- cial wants of the population are more numerous, the real ones more scantily supplied, and the rapid consumption more common and de- structive. The patrician spendthrifts and imperial gluttons of an- cient Rome thought they never could squander enough. Besides, immoral kinds of consumption are infinitely more general, where the extremes of wealtli and poverty are found blended together. In such a state of society, there are few, who can indulge in the re- finement of luxury, but a vast number, who look on their enjoy- ments with envy, and are ever impatient to imitate them. To get into the privileged class is the grand object, be the means ever so questionable; and those who are little scrupulous in the acquire- ment, are seldom more so in the employment of wealth, (a) The government has, in all countries, a vast influence, in deter- mining the character of the national consumption; not only because it absolutely directs the consumption of the state itself, but because a great proportion of the consumption of individuals is gained by its will and example. If the government indulge a taste for splendour and ostentation, splendour and ostentation will be the order of the day, with the whole host of imitators ; and even those of better judgment and discretion must, in some measure, yield to the tor rent. For, how seldom are they independent of that consideration and good opinion, which* under such circumstances, are to be earned, not by personal qualities, but by a course of extravagance they can not approve 1 First and foremost in the list of injudicious kinds of consumption stand those which yield disgust and displeasure, in lieu of the grati- fication anticipated. Under this class may be ranged, excess and intemperance in private individuals; and, in the state, wars under- taken with the motive of pure vengeance, like that of Louis XIV. in revenge for the attacks of a Dutch newspaper, or with that of empty glory, which leads commonly to disgrace and odium. Yet such wars are even less to be deplored for the waste of national wealth and resources, than for the irremediable loss of personal virtue and talent sacrificed in the struggle ; a loss which involves (a) In a wholesome state of society, when public institutions are not needless- ly multiplied, and all tend to the common purpose of public good, this very im- patience and anxiety is conducive to the welfare, and not to the injury,- of so- ciety. Indeed, great inequality of fortune seems to be a necessary accompani- ment to social wealth and great national productive power. It is the prospect of great prizes only, that can stimulate to the extreme of intellectual and cor- poreal industry ; and there is no instance on record of a nation far advanced in industry, in which great inequality of fortune has not existed. One bishopric of Durham will tempt more clerical adventurers, than five hundrqd moderate bene- fices and the example of a single Arkwright or Peel will stimulate manufac- turing science and activity more than a whole Manchester of moderate cotton spinning concerns. T. V. ON CONSUMPTION. 401 families in distress enough, when exacted by the public good, and by Jit, ,.ressure of inexorable necessity ; but must be doubly shock- ing and afflicting, when it originates in the caprice, the wickedness, Uie lolly, or -the ungovernable passions of national rulers. CHAPTER V. OP INDIVIDUAL CONSUMPTION-ITS MOTIVES AND ITS EFFECTS. THE consumption of individuals, as contrasted with that of the public or community at large, is such as is made with the object of satisfying the wants of families and individuals. These wants chiefly consist in those of food, raiment, lodging, and amusement. They are supplied with the necessary articles of consumption in each department, out of the respective revenue of each family or individual, whether derived from personal industry, from capital, or from land. The wealth of a family advances, declines, or remains stationary, according as its consumption equals, exceeds, or falls short of its revenue. The aggregate of the consumption of all the individuals, added to that of the government for public purposes, forms the grand total of national consumption. A family, or indeed a community, or nation, may certainly con- sume the whole of its revenue, without being thereby impoverished ; but it by no means follows, that it either must, or w r ould act wisely, in so doing. Common prudence would counsel to provide against casualties. Who can say with certainty, that his income will not fall off, or that his fortune is exempt from the injustice, the fraud, or the violence of mankind ? Lands may be confiscated ; ships may be wrecked ; litigation may involve him in its expenses and uncertain- ties. The richest merchant is liable to be ruined by one unlucky speculation, or by the failure of others. Were he to spend his whole income, his capital might, and in all probability would, be continually on the decline. But, supposing it to remain stationary, should one be content with keeping it so? A fortune, however large, will seem little enough, when it comes to be divided amongst a number of children. And, even if there be no occasion to divide it, what harm is there in en- larging it ; so it be done by honourable means ? what else is it, but the desire of each individual to better his situation, that suggests the frugality that accumulates capital, and thereby assists the pro gress of industry, and leads to national opulence and civilisation 7 Had not previous generations been actuated by this stimulus, t no present one would now be in the savage state ; and it is impossible to say, how much" farther it may yet be possible to carry civilizat.'cru It has never been proved to my satisfaction, that nine-tenths of the 34 * 3 A 402 ON CONSUMPTION. BOOK III population must inevitably remain in that degree of misery and semi-barbarism, which they are found in at present in most coun- tries of Europe. The observance of the rules of private economy keeps the con- sumption of a' family within reasonable bounds : that is to say, the bounds prescribed in each instance by a judicious comparison of the value sacrificed in consumption, with the satisfaction it affords. None but the individual himself, can fairly and correctly estimate the loss and. gain, resulting to himself or family from each particu- lar act of consumption ; for the balance will depend upon the for- tune, the rank, and the wants of himself and family ; and, in some degree, perhaps, upon personal taste and feelings. To restrain con- sumption within too narrow limits, would involve the privation of gratification that fortune has placed within reach ; and, on the other hand, a too profuse consumption might trench upon resources, that it might be but common prudence to husband.* Individual consumption has constant reference to the character and passions of the consumer. It is influenced alternately by the noblest and the vilest propensities of our nature; at one time it is stimulated by sensuality ; at another by vanity, by generosity, by revenge, or even by covetousness. It is checked by prudence or foresight, by groundless apprehension, by distrust, or by selfishness. As these various qualities happen in turn to predominate, they direct mankind in the use they make of their wealth. In this, as in every other action of life, the line of true wisdom is the most difficult to observe. Human infirmity is perpetually deviating to the one side or the other, and seldom steers altogether clear of excess.f In respect to consumption, prodigality and avarice are the two faults to be avoided : both of them neutralize the benefits that wealth is calculated to confer on its possessor ; prodigality by exhausting, avarice by not using, the means of enjoyment. Prodigality is, indeed, the more amiable of the two, because it is allied to many amiable and social qualities. It is regarded with more indulgence, because it imparts its pleasures to others; yet it is of the two the more mischievous to society ; for it squanders and makes away with the capital that should be the support of industry ; it destroys indus- * On this ground sumptuary laws are superfluous and unjust. The indulgence proscribed is either within the means of the individual or not : in the former case, it is an act of oppression to prohibit a gratification involving no injury to others, equally unjustifiable as prohibition in any other particular ; in the latter, it is at all events nugatory to do so ; for there is no occasion for legal interfer- ence, where pecuniary circumstances alone are an effectual bar. Every irregu- larity of this kind works its own punishment. It has been said, that it is th duty of the government to check those habits, which have a tendency to lead people into expenses exceeding their means ; but it will be found, that such habits can only be introduced by the example and encouragement of the public authorities themselves. In all other circumstances, neither custom nor fashion will ever lead the different classes of society into any expenses, but what are suitable to their respective means. f The weaker sex is, from the very circumstance of inferiority inslrengtr) ot mind; exposed to greater excess both of avarice and prodigality. CHAP. V. ON CONSUMPTION. try, the grand agent of production, by the destruction of the other agent, capital. If, by expense and consumption, are meant those kinds only which minister to our pleasures and luxuries, it is a great mistake to say that money is good for nothing but to be spent, and that products are only raised to be consumed. Money may be em- ployed in the work of re-production ; when so employed, it* must be productive of great benefit; and, every time that a fixed capital is squandered, a corresponding quantity of industry must be extinguisn- ed, in some quarter or other. The spendthrift, in running througn his fortune, is at the same time exhausting, pro tanlo, the source of the profits upon industry. The miser, who, in the dread of losing his- money, hesitates to turn it to account, does, indeed, nothing to promote the progress of indus- try ; but at least he can not be said to reduce the means of produc- tion. His hoard is scraped together by the abridgment of his per- sonal gratifications, not at the expense of the public, according to the vulgar notion ; it has been withdrawn from no productive occu- pation, and will at any rate re-appear at his death, and be available for the purpose of extending the operations of industry, if it be not squandered by his heirs, or so effectually concealed, as to evade all search or recovery. It is absurd in spendthrifts to boast of their prodigality, which is quite as unworthy the nobleness of our nature, as the sordid mean- ness of the opposite character. There is no merit in consuming all one can lay hands upon, and desisting only when one can get no more to consume; every animal can do as much; nay, there are some animals that set a better example of provident management. It is more becoming the character of a being gifted with reason and foresight, never to consume, in any instance, without some reasona- ble object in view. At least, this is the course that economy would prescribe. In short, economy is nothing more than the direction of human consumption with judgment and discretion, the knowledge of our means, and the best mode of employing them. There is no fixed rule of economy ; it must be guided by a reference to the fortune condition, and wants of the consumer. An expense, that may be authorized by the strictest economy in a person of moderate fortune, would, perhaps, be pitiful in a rich man, and absolute extravagance in a poor one. In a state of sickness, a man must allow himself in- dulgences, that he would not think of in health. An act of benefi- cence, that trenches on the personal enjoyments of the benefactor, is deserving of the highest praise ; but it would be highly blamable, if done at the expense of his children's subsistence. Economy is equally distant from avarice and profusion. Avarice hoards, not for the purpose of consuming or re-producing, but for the mere sake of hoarding ; it is a kind of instinct, or mechanical impulse, much to the discredit of those in whom it is detected ; whereas, true economy is the offspring of prudence and sound rea son. and does not sacrifice necessaries to superfluities, like the miser 404 ON CONSUMPTION. BOOK UI. when he denies himself present comforts, in the view of luxury, e\er prospective and never to be enjoyed. The most sumptuous enter tainment may be conducted with economy, without diminishing, but rather adding to its splendour, which the slightest appearance of avarice would tarnish and deface. The economical man balances his means against his present or future wants, and those of his family and friends, not forgetting the calls of humanity. The miser regards neither family nor friends ; scarcely attends to his own personal wants, and is an utter stranger to those of mankind at large. Econ- omy never consumes without an object ; avarice never willingly consumes at all ; the one is a sober and rational study, the only one that supplies the means of fulfilling our duties, and being at the same time just and generous; the other, a vile propensity to sacrifice every thing to the sordid consideration of self. Economy has not unreasonably been ranked among the virtues of mankind ; for, like the other virtues, it implies self-command and control ; and is productive of the happiest consequences ; the good education of children, physical and moral ; the careful attendance of old age ; the calmness of mind, so necessary to the good conduct of middle life ; and that independence of circumstances which alone can secure against mercenary motives, are all referable to this quality. Without it there can be no liberality, none at least of a permanent and wholesome kind ; for, when it degenerates into prodi- gality, it is an indiscriminate largess, alike to deserving and unde- serving ; stinting those who have claims in favour of those who have none. It is common to see the spendthrift reduced to beg a favour from people that he has loaded with his bounty ; for what he gives now, one expects a return will some day be called for ; whereas, the gifts of the economical man are purely gratuitous ; for he never gives except from his superfluities. The latter is rich with a mode- rate fortune; but the miser and the prodigal are poor, though in possession of the largest resources. Economy is inconsistent with disorder, which stumbles blindfold over wealth, sometimes missing what it most desires, although close within its reach, and sometimes seizing and devouring what it is most interested in preserving; ever impelled by the occurrences of the moment, which it either can not foresee, or can not emancipate itself from ; and always unconscious of its own position, and utterly incapable of choosing the proper course for the future. A house- hold, conducted without order, is preyed upon by all the world : neither the fidelity of the servants, nor even the parsimony of the master, can save it from ultimate ruin. For it is exposed to the perpetual lecurrence of a variety of little outgoings, on every occa- sion, however trivial.* * I remember being once in the country a witness of the numberless minute losses that neglectful housekeeping entails. For want of a trumpery latch, the irate of the poultry-yard was forever open: there being no means of closing it "'ternally, it was on the swing every time a person went out; and many of the CHA.P. V. ON CONSUMPTION. 405 Among the motives that operate to determine the consumption nf individuals, the most prominent is luxury, that frequent theme of declamation, which, however, I should probably not have dwelt upon, could I expect that every body would take the trouble of ap- plying the principles I have been labouring to establish ; and were it not always useful to substitute reason for declamation. Luxury has been defined to be, the use of superfluities.* For my own part, I am at a loss to draw the line between superfluities and necessaries ; the shades of difference are as indistinct and completely blended as the colours of the rainbow. Taste, education, temperament, bodily health, make the degrees of utility and necessity infinitely variable, and render it impossible to employ in an absolute sense, terms, which always of necessity convey an idea of relation and comparison. The line of demarcation between necessaries and superfluities shifts with the fluctuating condition of society. Strictly speaking, man- kind might exist upon roots and herbs, with a sheepskin for clothing, and a wigwam for lodging ; yet, in the present state of European society, we cannot look upon bread or butcher's meat, woollen- clothes or houses of masonry, as luxuries. For the same reason, the line varies also according to the varying circumstances of indi- vidual fortune ; what is a necessary in a large town, or in a particu- lar line of life, may, in another line of life, or in the country, be a mere superfluity. Wherefore, it is impossible exactly to define the boundary between the one and the other. Smith has fixed it a little in advance of Stewart; including in the rank of necessaries, besides natural wants, such as the established rules of decency and propriety have made necessary in the lower classes of society. But Smith was wrong in attempting to fix at all what must, in the nature of things, be ever varying. Luxury may be said, in a general way, to be, the use or consump- poultry were lost in consequence. One day a fine young porker made his es- cape into the woods, and the whole family, gardener, cook, milk-maid, &c., pre- sently turned out in quest of the fugitive. The gardener was the first to dis- cover the object of pursuit, and in leaping a ditch to cut off his further escape, got a sprain that confined him to his bed for the next fortnight : the cook found the linen burnt that she had left hung up before the fire to dry; and the milk- maid, having forgotten in her haste to tie up the cattle properly in the cow-house, one of the loose cows had broken the leg of a colt that happened to be kept in the same shed. The linen burnt and 4,he gardener's work lost, were worth lull twenty crowns ; and the colt about as much more : so that here was a loss in a few minutes of forty crowns, purely for want of a latch that might have cost a few sous at the utmost ; and this in a household where the strictest economy was necessary, to say nothing of the suffering of the poor man, or the anxiety and other troublesome incidents. The misfortune was to be sure not very serious, nor the loss very heavy ; yet when it is considered, that similar neglect was the occasion of repeated disasters of the same kind, and ultimately of the ruin of a worthy family, it was deserving of some little attention. * Stewart, Essay on Pol. Econ. book ii. c. 20. The same writer lias in an other passage observed, that every thing not absolutely necessary to tare exisl- euce is a superfluity. 406 ON CONSUMPTION. BOOK IIL tion of dear articles ; for the term dear is one of relation, and there- lore may be properly enough applied in the definition of another term, whose sense is likewise relative. Luxury* with us in France conveys the idea rather of ostentation than of sensuality; applied to dress/it denotes rather the superior beauty and impression upon the beholder, than superior convenience and comfort to the wearer; ap- plied to the table, it means rather the splendour of a sumptuous ban- quet, than the exquisite farce of the solitary epicure. The grand aim of luxury in this sense is to attract admiration by the rarity, the cost- liness, and the magnificence of the objects displayed, recommended probably neither by utility, noi convenience, nor pleasurable quali- ties, but merely by their dazzling exterior and effect upon the opinions of mankind at large. Luxury conveys the idea of ostentation ; but ostentation has itself a far more extensive meaning, and comprehends every quality assumed for the purpose of display. A man may be ostentatiously virtuous, but is never luxuriously so ; for luxury im plies expense. Thus, luxury of wit or genius is a metaphorical expression, implying a profuse display or expenditure, if it may be so called, of those qualities of the intellect, which it is the character- istic of good taste to deal out with a sparing hand. Although, with us in France, what we term luxury is chiefly directed to ostentatious indulgence, the excess and refinement of sen- suality are equally unjustifiable, and of precisely similar effect : that is to say, of a frivolous and inconsiderable enjoyment or satisfaction", obtained by a large consumption, calculated to satisfy more urgent and extensive wants. But I should not stigmatise as luxury that degree of variety or abundance, which a prudent and well-informed person in a civilised community would like to see upon his table upon domestic and common occasions, or aim at in his dress and abode, when under no compulsion to keep up an appearance. I should call this degree of indulgence judicious and suitable to his condition, but not an instance of luxury. Having thus defined the term luxury, we may go on to investigate its effect upon the well-ordering or economy of nations. Under the head of unproductive consumption is comprised the satisfaction of many actual and urgent wants, which is a purpose of sufficient consequence to outweigh the mischief, that must ensue from the destruction of values. But what is there to compensate that mischief, w r here such consumption has not for its object the satis- faction of such wants 1 where money is spent for the mere sake of spending, and the value destroyed without any object beyond its destruction ? It is supposed to be beneficial, at all events, to the producers of the articles consumed. But it is to be considered, that the same expenditure must take place, though not, perhaps, upon objects quite * The English term luxury has a much more sensual meaning than the French luxe, and seems to comprise both luxe and luxure, the luxus, or luxuria, and luxuries of the Latin writers. CHAP. V. ON CONSUMPTION. 407 so frivolous; for the money withheld from luxurious indulgences is not absolutely thrown into the sea ; it is sure to be spent either upon more judicious gratifications or upon reproduction. In one way or other, all the revenue, not absolutely sunk or buried, is con- sumed by the receiver of it, or by some one in his stead ; and in all cases whatever, the encouragement held out by consumption to the producer is co-extensive with the total amount of revenue to be ex- pended. Whence it follows : 1. That the encouragement which ostentatious extravagance affords to one class of production is necessarily withdrawn from another. 2. That the encouragement resulting from this kind of consump- tion cannot increase, except in the event of an increase in the reve- nue of the consumers : which revenue, as we can not but know by this time, is not to be increased by luxurious, but solely by repro- ductive consumption. How great, then, must be the mistake of those, who, on observing the obvious fact, that the production always equals the consumption, as it must necessarily do, since a thing can not be consumed before it is produced, have confounded the cause with the effect, and laid it down as a maxim, that consumption originates production ; there- fore that frugality is directly adverse to public prosperity, and that the most useful citizen is the one who spends the most. The partisans of the two opposite systems above adverted to, the economists, and the advocates of exclusive commerce, or the balance of trade, have made this maxim a fundamental article of their creed. The merchants and manufacturers, who seldom look beyond the actual sale of their products, or inquire into the causes which may operate to extend their sale, have warmly supported a position, ap- parently so consistent with their interests ; the poets, who are ever apt to be seduced by appearances, and do not consider themselves bound to be wiser than politicians and men of business, have been loud in the praise of luxury;* and the rich have not been backward * Though it is not every subject that allows equal scope to poetical genius, it does not seem, that error affords a finer field than truth. The lines of Voltaire on the system of the world, and on the discoveries of Newton regarding the properties of light, are strictly conformable to the rules of science, and nowise inferior in beauty to those of Lucretius on the fanciful dogmas of the Epicurean school. But if Voltaire had been better acquainted with the principles of poli- tical economy, he would never have given utterance to such sentiments as the following : Sachez surtout que le luxe enrichit IJn grand etat, s'il en perd un petit. Cette splendeur, cette pompe mondaine, D'un regne heureux est la marque certain. Le riche est ne pour beaucoup depenser .... The progress of science compels those who covet literary fame, to make themselves acquainted with general principles at the least ; without a close ad- herence to truth and nature, there is little chance of permanent reputation, even iii the poetical department. 408 ON CONSUMPTION. BOOK 111. in adopting principles, that exalt their ostentation into a virtue, ana tneir self-gratification into benevolence.* This prejudice, however, must vanish as the increasing knowledge of political economy begins to reveal the real sources of wealth, the means of production, and the effect of consumption. Vanity may take pride in idle expense, but will ever be held in no less contempt by the wise, on account of its pernicious effects, than it has been all along, for the motives by which it is actuated. These conclusions of theory have been confirmed by experience. Misery is the inseparable companion of luxury. The man of wealth and ostentation squanders upon costly trinkets, sumptuous repasts, magnificent mansions, dogs, horses, arid mistresses, a portion of value, which, vested in productive occupation, would enable a mul- titude of willing labourers, whom his extravagance now consigns to idleness and misery, to provide themselves with warm clothing nourishing food, and household conveniences. The gold buckle? of the rich man leave the poor one without shoes to his feet ; and the labourer will want a shirt to his back, while his rich neighbour glitters in velvet and embroidery. It is vain to resist the nature of things. Magnificence may do what it will to keep poverty out of sight, yet it will cross it at every urn, still haunting, as if to reproach it for its excesses. This con- j-ast was to be met with at Versailles, at Rome, at Madrid, and in every seat of royal residence. In a recent instance, it occurred in France in an afflicting degree, after a long series of extravagant and ostentatious administration; yet the principle is so undeniable, that one would not suppose it had required so terrible an illustration.! * La Republique a bien affaire De Gens, qui ne dependent rien>; Je ne sais d'homme necessaire, Que celui dont le luxe epand beaucoup de bien. La Fontaine, Avantage de la Science. " Were the rich not to spend their money freely," says Montesquieu, " the poor would starve." Esprit des Lois, liv. vii. c. 4. f There are other circumstances that contribute to veil the residence of the court in an atmosphere of human misery. It is there, that personal service is consumed by wholesale; and that is of all things the most rapidly consumed, being, indeed, consumed as fast as produced. Under this denomination, is to be comprised, the agency of the soldiery, of menial servants, of public function- aries, whether useful or not, of clerks, lawyers, judges, civilians, ecclesiastics, actors, musicians, drolls, and numerous other hangers-on, who all crowd towards the focus of power and occupation, civil, judicial, military, or religious. It is there also, that material products seem to be more wantonly consumed. The choicest viands, the most beautiful and costly stuffs, the rarest works of art and fashion, all seem emulous to reach this general sink, whence little or nothing ever emerges. Yet, if the accumulated values, that are drained from every quarter of the national territory to feed the consumption of the seat of royalty, were distributed with any regard to equity, they would probably suffice to maintain all classes in comfort and plenty. Though such drains must always be calamitous, because they absorb value, and yield no return, at any rate the local population might be pretty well off; but it is notorious that wealth is nowhere less equally diffused. CHAP. V. ON CONSUMPTION. 409 Those who are little in the habit of looking through the appear- ance to the reality of things, are apt to be seduced by the glitter and the bustle of ostentatious luxury. They take the display of con- sumption as conclusive evidence of national prosperity. If they could open their eyes, they would see, that a nation verging to- wards decline will for some time continue to preserve a show of opulence ; like the establishment of a spendthrift on the high road to ruin. But this false glare can not last long; the effort dries up the sources of reproduction, and, therefore, must infallibly be fol- lowed by a state of apathy and exhaustion of the political frame, which is only to be remedied by slow degrees, and by the adoption of a regimen the very reverse of that, by which it has thus been reduced. It is distressing to see the fatal habits and customs of the nation one is attached to by birth, fortune, and social affection, extending their influence over the wisest individuals, and those best able to appreciate this danger and foresee its disastrous consequences. The number of persons, who have sufficient spirit and independence of fortune to act up to their principles, and set themselves forward as an example, is extremely small. Most men yield to the torrent, ana rush on ruin with their eyes open, in search of happiness; although it requires a very small share of philosophy to see the madness of this course, and to perceive, that, when once the common wants of nature are satisfied, happiness is to be found, not in the frivolous enjoyments of luxurious vanity, but in the moderate exercise of our physical and moral faculties. Wherefore, those, who abuse great power, or talent, by exerting it in diffusing a taste for luxury, are the worst enemies of social hap- piness. If there is one habit, that deserves more encouragement than another, in monarchies as well as republics, in great as well as small, it is this of economy. Yet, after all, no encouragement is wanted ; it is quite enough to withdraw favour and honour from habits of profusion; to afford inviolable security to all savings and acquirements; to give perfect freedom to their investment and occu- pation in every branch of industry, that is not absolutely criminal. It is alleged, that, to excite mankind to spend or consume, is to excite them to produce, inasmuch as they can only spend what they may acquire. This fallacy is grounded on the assumption, that production is equally within the ability of mankind as consumption ; that it is as easy to augment as to expend one's revenue. But, sup posing it were so, nay further, that the desire to spend, begets a The prince, the favourite, a mistress, or a bloated peculator, takes the lion'3 share, leaving to the subordinate drones the pittance assigned to them by the generosity or caprice of their superiors. The residence of an overgrown proprietor upon his estate then only tends to diffuse abundance and cheerfulness around him, when his expenditure is directed to objects of utility, rather than of pomp; in which case he is really an adven- turer in agriculture, and an accumulator of capital in the shape of iniprovemenw and ameliorations. 35 3B 410 ON CONSUMPTION. BOOK IIL liking for labour, although experience by no means warrants such a conclusion, yet there can be no enlargement of production, without an augmentation of capital, which is one of the necessary elements of production; but it is clear, that capital can only be accumulated by frugality; and how can that be expected from those, whose only stimulus to production is the desire of enjoyment. Moreover, when the desire of acquirement is stimulated by the love of display, how can the slow and limited progress of real pro- duction keep pace with the ardour of that motive ? Will it not find a shorter road to its object, in the rapid and disreputable profits of jobbing and intrigue, classes of industry most fatal to national wel- fare, because they produce nothing themselves, but only aim at appropriating a share of the produce of other people? It is this motive, that sets in motion the despicable art and cunning of the knave, leads the pettifogger to speculate on the obscurity of the laws, and the man of authority to sell to folly and wickedness that patronage which it is his duty to dispense gratuitously to merit and to right. Pliny mentions having seen Paulina at a supper, dressed in a network of pearls and emeralds, that cost 40 millions of sestertii, (1) as she was ready to prove by her jeweller's bills. It was bought with the fruit of her ancestor's speculations. " Thus," says the Roman writer, " it was to dress out his grand-daughter in jewels at an entertainment, that Lollius forgot himself so far, as to lay waste whole provinces, to become the object of detestation to the Asiatics he governed, to forfeit the favour of Caesar, and end his life by poison." This is the kind of industry generated by love of display. If it be pretended, that a system, which encourages profusion, operates only upon the wealthy, and thus tends to a beneficial end, inasmuch as it reduces the evil of the inequality of fortune, there can be little difficulty in showing, that profusion in the higher, begets a similar spirit in the middling and low;er classes of society, which last must, of course, the soonest arrive at the limits of their income; so that, in fact, the universal profusion has the effect of increasing, instead of reducing, that inequality. Besides, the profusion of the wealthier class is always preceded, or followed, by that of the govern- ment, which must be fed and supplied by taxation, that is always sure to fall more heavily upon small incomes than on large ones.* * In favour of luxury, the followi ig paradoxical argument has been advanced ; for what is too ridiculous to be hazarded in sucfi a cause ] " That since luxury consumes superfluities only, the objects it destroys are of little real utility, and therefore the loss to society can be but small." There is this ready answer: the value of the objects consumed by luxury must have been reduced by the compe- tition of producers to a level with the charges of production, wherein are com- prised the profits of the producers. Objects of luxury are equally the product of land, capital, and industry, which might have been employed in raising objects of real utility, had the demand taken that direction ; for production invariably accommodates itself to the taste of the consumers. (t) [About 140,000 dollars. Some English ladies wear jewels of greatei CHAP. V. ON CONSUMPTION. 411 The apologists of luxury have sometimes gone so far as to cry up the advantages of misery and indigence ; on the ground, that, without the stimulus of want, the lower classes of mankind could never be impelled to labour, so that neither the upper classes, nor society at large, could have the benefit of their exertions. Happily, this position is as false in principle as it would be cruel in practice. Were nakedness a sufficient motive of exertion, the savage would be the most diligent and laborious, for he is the nearest to nakedness, of his species. Yet his indolence is equally notorious and incurable. Savages will often fret themselves to death, if com- pelled to work. It is observable throughout Europe, that the laziest nations are those nearest approaching to the savage state; a mechanic in good circumstances, at London or Paris, would execute twice as much work in a given time, as the rude mechanic of a poor district. Wants multiply as fast as they are satisfied ; a man who has a jacket is for having a coat ; and, when he has his coat, he must have a great- coat too. The artisan, that is lodged in an apartment by himself, extends his views to a second ; if he has two shirts, he soon wants a dozen, for the comforts of more frequent change of linen ; whereas, if he has none at all, he never feels the want of it. No man feels any disinclination to make a further acquisition, in consequence of having made one already. The comforts of the lower classes are, therefore, by no means in- compatible with the existence of society, as too many have main- tained. The shoemaker will make quite as good shoes in a warm room, with a good coat to his back, and wholesome food for himself and his family, as when perishing with cold in an open stall ; he is not less skilful or inclined to work, because he has the reasonable conveniences of life. Linen is washed as well in England, where washing is carried on comfortably within doors, as where it is exe- cuted in the nearest stream in the neighbourhood. It is time for the rich to abandon the puerile apprehension of losing the objects of their sensuality, if the poor man's comforts be pro- moted. On the contrary, reason and experience concur in teaching, that the greatest variety, abundance, and refinement of enjoyment are to be found in those countries, where wealth abounds most, and is the most widely diffused. value ; but some read the passage in Pliny Quadringenties, instead of Quad* ragies Sestertium, This would make the jewels of Paulina worth 1,400,000 dollars ; the more probable sum.] AMERICAN EDITOR. 412 ON CONSUMPTION. BOOK III CHAPTER VI. ON PUBLIC CONSUMPTIOV SECTION I. Of the Nature and general Effect of Public Consumption. BESIDES the wants of individuals and of families which it is the object of private consumption to satisfy, the collection of many indi- viduals into a community gives rise to a new class of wants, the wants of the society in its aggregate capacity, the satisfaction of which is the object of public consumption. The public buys and consumes the personal service of the minister, that directs its affairs, the soldier, that protects it from external violence, the civil or crimi- nal judge, that protects the rights and interests of each member against the aggression of the rest. All these different vocations have their use, although they may often be unnecessarily multiplied or overpaid; but that arises from a defective political organization, which it does not fall within the scope of this work to investigate. We shall see presently whence it is, that the public derives all the values, wherewith it purchases the services of its agents, as well as the articles its wants require. All we have to consider in this chap- ter is, the mode in which its consumption is effected, and the conse- quences resulting from it. If I have made myself understood in the commencement of this third book, my readers will have no difficulty in comprehending, that public consumption, or that which takes place for the general utility of the whole community, is precisely analogous to that consumption, which goes to satisfy the wants of individuals or families. In either case, there is a destruction of values, and a loss of wealth ; although, perhaps, not a shilling of specie goes out of the country. By way of insuring conviction of the truth of this position, let us trace from first to last the passage of a product towards ultimate consumption on the public account. The government exacts from a tax-payer the payment of a given tax in the shape of money. To meet this demand, the tax-payer exchanges part of the products at his disposal for coin, which he pays to the tax-gatherer:* a second set of government agents is * Although the capitalist and landholder receive their interest and rent origi- nally in the shape of money, and have, therefore, no occasion to go through any previous act of exchange, to obtain wherewithal to pay the tax, yet such a pre- vious exchange must have been effected by the adventurer, who turns the land or capital to account. The effect is precisely the same, as if the rent or interest had been paid in kind ; that is, in the immediate products of the land or capital ; and the landholder or capitalist had paid the tax either by the direct transfer of CHAP. VI. ON CONSUMPTION. 413 busied in buying with that coin, cloth and other necessaries for the soldiery. Up to this point, there is no value lost or consumed : there has only been a gratuitous transfer of value, and a subsequent act of barter : but the value contributed by the subject still exists in the shape of stores and supplies in the military depot. In the end, however, this value is consumed ; and then the portion of wealth, which passes from the hands of the tax-payer into those of the tax- gatherer, is destroyed and annihilated. Yet it is not the sum of money that is destroyed : that has only passed from one hand to another, either without any return, as when it passed from the tax-payer to the tax-gatherer ; or in exchange for an equivalent, as when it passed from the government agent to the contractor for clothing and supplies. The value of the money sur- vives the whole operation, and goes through three, four, or a dozen hands, without any sensible alteration ; it is the value of the clothing and necessaries that disappears, with precisely the same effect, as if the tax-payer had, with the same money, purchased clothing and necessaries for his own private consumption. The sole difference is, that the individual in the one case, and the state in the other enjoys the satisfaction resulting from that consumption. The same reasoning may be easily applied to all other kinds of public consumption. When the money of the tax-payer goes to pay the salary of a public officer, that officer sells his time, his tal- ents, and his exertions, to the public, all of which are consumed for public purposes. On the other hand, that officer consumes, instead of the tax-payer, the value he receives in lieu of his services ; in the same manner as any clerk or person in the private employ of the tax-payer would do. There has been long a prevalent notion, that the values, paid by the community for the public service, return to it again in some shape or other; in the vulgar phrase, that what government and its agents receive, is refunded again by their expenditure. This is a gross fallacy; but one that has been productive of infinite mis chief, inasmuch as it has been the pretext for a great deal of shame- less waste and dilapidation. The value paid to government by the tax-payer is given without equivalent or return: it is expended by the government in the purchase of personal service, of objects of consumption; in one word, of products of equivalent value, which are actually transferred. Purchase or exchange is a very different thing from restitution.* part of those products, or by first selling them, and afterwards paying over the proceeds. On this subject, vide supra, Book II. chap. 5, for the mode in which revenue is distributed amongst the community. * Dr. Hamilton, in his valuable tract upon The National Debt of Great Bri- tain, illustrates the absurdity of the position here attacked, by comparing it to the " forcible entry of a robber into a merchant's house, who should take away his money, and tejl him he did him no injury, for the money, or part of it, would be employed in purchasing the commodities he dealt in, upon which he would receive a profit." The encouragement afforded by the public expenditure is ore ciselv analogous. "35* 414 ON CONSUMPTION. BOOK III. Turn it which way you will, this operation, though often very complex in the execution, must always be reducible by analysis to this plain statement. A product consumed must always be a pro- duct lost, be the consumer who he may ; lost without return, when- ever no value or advantage is received in return ; but, to the tax- payer, the advantage derived from the services of the public func tionary, or from the consumption effected in the prosecution oi public objects, is a positive return. If, then, public and private expenditure affect social wealth in the same manner, the principles of economy, by which it should be regulated, must be the same in both cases. There are not two kinds of economy, any more than two kinds of honesty, or of morality. If a government or an individual consume in such a way, as to give birth to a product larger than that consumed, a successful effort of productive industry will be made. If no product result from the act of consumption, there is a loss of value, whether to the state or to the individual ; yet, probably, that loss of value may have been productive of all the good anticipated. Military stores and sup- plies, and the time and labour of civil and military functionaries, engaged in the effectual defence of the state, are well bestowed, though consumed and annihilated ; it is the same with them, as with the commodities and personal service, that have been consumed in a private establishment. The sole benefit resulting in the latter case is, the satisfaction of a want; if the want had no existence, the expense or consumption is a positive mischief, incurred without an object. So likewise of the public consumption ; consumption for the mere purpose of consumption, systematic profusion, the creation of an office for the sole purpose of giving a salary, the destruction of an article for the mere pleasure of paying for it, are acts ot extravagance either in a government or an individual, in a small state or a large one, a republic or a monarchy. Nay, there is more criminality in public, than in private extravagance and profusion; inasmuch as the individual squanders only what belongs to him ; but the government has nothing of its own to squander, being, in fact, a mere trustee of the public treasure.* What, then, are we to think of the principles laid down by those writers, who have laboured to draw an essential distinction between public and private wealth; to show, that economy is the way to increase private fortune, but, on the contrary, that public wealth increases with the increase of public consumption : inferring thence this false and dangerous conclusion, that the rules of conduct in the management of private fortune and of public treasure, are not only different, but in direct opposition ? If such principles were to be found only in books, and had never ciept into practice, one might suffer them without care or regret to * It is mere usurpation in a government, to pretend to a right over the property ot individuals, or to act as if possessing such a right; and usurpation can never constitute right; although it may confer possession. Were it otherwise, a thief, who had once, by force or fraud, obtained possession of another man's property, could never be called upon to make restitution, when overpowered and taken prisoner, for he might set up the plea of legitimate ownership. CHAP VL ON CONSUMPTION. 415 swell the monstrous heap of printed absurdity; but it must excite our compassion and indignation to hear them professed by men of eminent rank, talents, and intelligence ; and still more to see them reduced into practice by the agents of public authority, who can enforce error and absurdity at the point of the bayonet or mouth of the cannon.* Madame de Maintenon mentions in a letter to the Cardinal de Noailles, that, when she one day urged Louis XIV. to be more liberal in charitable donations, he replied, that royalty dispenses charity by its profuse expenditure; a truly alarming dogma, and one that shows the ruin of France to have been reduced to principle.! False principles are more fatal than even intentional misconduct ; because they are followed up with erroneous notions of self-interest, and are long persevered in without remorse or reserve. If Louis XIV. had believed his extravagant ostentation to have been a mere gratification of his personal vanity, and his conquests the satisfaction of personal ambition alone, his good sense and proper feeling would probably, in a short time, have made it a matter of conscience to desist, or at any rate, he would have stopped short for his own sake ; but he was firmly persuaded, that his prodigality was for the public good as well as his own ; so that nothing coufd stop him, but mis- fortune and humiliation-^ * The reader will readily perceive, that this and many other passages, were written under the pressure of a military despotism, which had assumed the ab- solute disposal of the national resources, and suffered no one to express a doubt of the justice and policy of its acts. f Fenelon, Vauban, and a very few more, of the most distinguished talent, had a confused idea of the ruinous tendency of this system ; but they failed in im- pressing the rest of the world with the same conviction; for want of just notions on the subject of the production and consumption of wealth. Thus Vauban, in his Dixme royale, says, ' the present misery of France is attributable, not to the rigour of the climate, the character of the inhabitants, or the barrenness of the boil : for the climate is most favourable, the people active, diligent, dexterous, and numerous : but to the frequency and long continuance of war, and the ignorance and neglect of economy.' Fenelon had expressed the same sentiments in seve- ral admirable passages of his Telemaque, but they passed for mere declamation, as well they might ; for he was not qualified to prove their truth and accuracy. I When Voltaire tells us, speaking of the superb edifices of Louis XIV., that they were by no means burthensome to the nation, but served to circulate money in the community, he gives a decisive proof of the utter ignorance of the most celebrated French writers of his day upon these matters. He looked no further than the money employed on the occasion ; and, when the view is limited to that alone, the extreme of prodigality exhibits no appearance of loss ; for money is, in fact, an item, neither of revenue, nor of annual consumption. But a little closer attention will convince us of the fallacy of this position, which would lead us to the absurd inference, that no consumption whatever has occurred within the year, whenever the amount of specie at the end. of it is found to be nowise di- minished. The vigilance of the historian should have traced the 167 millions of dollars expended on the chateau of Versailles alone, from the original produc- tion by the laborious efforts of the productive classes of the nation, to the first exchange into money, wherewith to pay the taxes, through the second exchange into building materials, painting, gilding, &c. to the ultimate consumption in that shape, for the personal gratification of the vanity of the monarch. The money acted as a mere means of facilitating the transfers cf value in the course 16 ON CONSUMPTION. BOOK III. So little were the true principles of political economy understood, even by men of the greatest science, so late as the 18th century, that Frederick II. of Prussia, with all his anxiety in search of truth, nis sagacity, and his merit, writes thus to D'Alembert, in justifica- tion of his wars: "My numerous armies promote the circulation of money, and disburse impartially amongst the provinces the taxes paid by the people to the state." Again I repeat, this is not the fact ; the taxes paid to the government by the subject are not refunded oy its expenditure. Whether paid in money or in kind, they are converted into provisions and supplies, and in that shape consumed and destroyed by persons, that never can replace the value, because they produce no value whatever.* It was well for Prussia that Frederick II. did not square his conduct to his principles. The good he did to his people, by the economy of his internal administration, more than compensated for the mischief of his wars. Since the consumption of nations or the governments which re- present them, occasions a loss of value, and consequently, of wealth, it is only so far justifiable, as there results from it some national advantage, equivalent to the sacrifice of value. The whole skill of government, therefore, consists in the continual and judicious com- parison of the sacrifice about to be incurred, with the expected benefit to the community; for I have no hesitation in pronouncing every instance, where the benefit is not equivalent to the loss, to be an instance of folly, or of criminality, in the government. It is yet more monstrous, then, to see how frequently govern- ments, not content with squandering the substance of the peoplef of the transaction ; and the winding up of the account will show, a destruction of value to the amount of 167 millions of dollars, balanced by the production of a palace, in need of constant repair, and of the splendid promenade of the gardens. Even land, though imperishable, may be consumed in the shape of the value received for it. It has been asserted, that France lost nothing by the sale of her national domains after the revolution, because they were all sold and transferred to French subjects ; but what became of the capital paid in the shape of purchase- money, when it left the pockets of the purchasers 1 Was it not consumed and lost ? *Tn the execution of the national military enterprise, two different values pass through the hands of the government or its agents,- 1. The value paid in taxes by the public at large: 2. The value received in supplies and services from the par- ties affording them. For the first of these no return whatever is made ; for tl.e second, an equivalent is paid in wages or purchase-money. Wherefore, there it has no ground for saying that the government refunds with one hand what is received with the other ; that the whole transaction is a mere circulation of value, and causes no loss to the nation ; for the government returns but one, where it receives two; the loss of the other half falls upon the community at largo. Thus, the national, being but the aggregate of individual wealth, is diminished to the extent of the total consumption of the government, minus the product of the public establishment ; as we shall presently see more in detail. tit has been seen in the concluding chapter of Book II. that, inasmuch ag population is always commensurate with production, the obstruction of the pro. gres?siv, multiplication of products is a preventive check to the further multipli- cation of the human race ; and that the waste of capital, the extinction of in- dustry, and the exhaustion of the sources of production, amount to positive deci- mation of th.^y m actual existence. A wicked or ignorant administration may, in this way, be a far more destructive scourge, than war with all its atrocities. CHAP VI. ON CONSUMPTION. 417 in folly and absurdity, instead of aiming at any return of value, actually spend that substance in bringing down upon the nation calamities innumerable; practise exactions the most cruel and arbi- ti ary, to forward schemes the most extravagant and wicked ; first rifle the pockets of the subject, to enable them afterwards to urge him to the further sacrifice of his blood. Nothing, but the obstinacy of human passion and weakness, could induce me again and again to repeat these unpalatable truths, at the risk of incurring the charge of declamation. The consumption effected by the government* forms so large a portion of the total national consumption, amounting sometimes to a sixth, a fifth, or even a fourth partf of the total consumption of the * By government, I mean, the ruling power in all its branches, and under whatever constitutional form ; it would be wrong to limit the term to the execu- tive branch alone; the first enactment of a law is as much an act of authority, as its subsequent enforcement. f The consumption of a nation may undoubtedly exceed its aggregate annual icvenue; but we can hardly suppose that of Great Britain to have done so; for she has evidently been advancing in opulence, up to the present time, whence it may be inferred, that her consumption, at the very utmost, only equals her reve- nue. Gentz, who will hardly be accused of underrating the financial resources of that country, estimated her total annual revenue at no more than two hundred millions sterling; Dr. Beeke at two hundred and eighteen millions, inclusive of one hundred millions for the revenues of industry. Granting her to have made some farther progress since those estimates were made, and that her total reve- nue in 1813 had advanced to two hundred and twenty-four millions, we are told by Colquhoun, in his Wealth, Power, and Resources of the British Empire, that her public expenditure in that year amounted to one hundred and twelve mil- lions. By this statement it should seem, that her public expenditure then amounted to the half of the total expenditure of the nation ! Moreover, the ex- penses of her central government do not include all her public charges; there are to be- added, county and parish rates, poor rates, &c. &c. The business of government might be conducted, even in extensive empires, at a charge of not more than one per cent, upon the aggregate of individual revenue ; but, to attain this degree of perfection, a vast improvement is still requisite in the department of practical policy. (!) (1) We copy f-om a Treatise on the Taxation of the British Empire, by R. Montgomery Martin, published in London, in 1833, the following note: "Lord Liverpool s-iH, m 1822, that the annual income of Great Britain, after making allowances for the reduction of rents, and the diminution of the profits of trade since the war, may be stated to be from 250,000,000*. to 280,000,000*. sterling. Now if the population of Great Britain in 1833 be taken in round numbers at 16 millions, and the average expenditure for each individual be so low as one shilJinif per day, or 18*. 5s. a-year, the annual income would be 452,000,000*. and double that sum if the average expenditure of each individual were taken at (wo shillings per day, which would not be an unreasonable calculation: applying the same rule to Ireland, but giving the average expenditure of each individual FO low as sixpence a-day, on a population of eight millions, the annual income of Ireland would be 73,000,000*. Thus the annual income of the United King dom in 1833, is upwards of 500,000,000*. sterling on the lowest computation." Estimating, on s:ich authority, the annual income of Great Britain and Ireland at 500 millions sterling, we perceive that this income, even after the payment of the taxes, enormous as they have been, is much greater now than at any former period of her history ; and there therefore can be no doubt that a continue*' 3C 416 ON CONSUMPTION. BOOK IIL community, that the system acted upon by the government, must needs have a vast influence upon the advance or decline of the na- tional prosperity. Should an individual take it into his head, that the more he spends the more he gets, or that his profusion is a virtue ; or should he yield to the powerful attractions of pleasure, or the suggestions of perhaps a reasonable resentment, he will in all proba- bility be ruined, and his example will operate upon a very small circle of his neighbours. But a mistake of this kind in the govern- ment, will entail misery upon millions, and possibly end in the na- tional downfal or degradation. It is doubtless very desirable, that private persons should have a correct knowledge of their personal interests ; but it must be infinitely more so, that governments should possess that knowledge. Economy and order are virtues in a private station ; but, in a public station, their influence upon national happiness is so immense, that one hardly knows how sufficiently to extol and honour them in the guides and rulers of national cond'uct. An individual is fully sensible of the value of the article he is consuming; it has probably cost him a world of labour, perseverance, and economy; he can easily balance the satisfaction he derives from its consumption against the loss it will involve. But a government is not so immediately interested in regularity and economy, nor does it so soon feel the ill consequences of the opposite qualities. Besides, private persons have a further motive than even self-interest ; their feelings are concerned; their economy may be a benefit to the objects of their affection ; whereas, the economy of a ruler accrues to the benefit of those he knows very little of; and perhaps he is but husbanding for an extravagant and rival successor. Nor is this evil remedied, by adopting the principle of hereditary rule. The monarch has little of the feelings common to other men in this respect. He is taught to consider the fortune of his descend- ants as secure, if they have ever so little assurance of the succes- sion. Besides, the far greater part of the public consumption is not personally directed by himself; contracts are not made by himself, but by his generals and ministers; the experience of the world hitherto all tends to show, that aristocratical republics are more economical, than cither monarchies or democracies. Neither are we to suppose, that the genius which prompts and excites great national undertakings, is incompatible with the spirit of public order and economy. The name of Charlemagne stands among the foremost in the records of renown ; he achieved the con- quest of Italy, Hungary, and Austria ; repulsed the Saracens ; broke the Saxon confederacy ; and obtained at length the honours of the purple. Yet Montesquieu has thought it not derogatory to say of augmentation of the national capital must take place, even in defiance of many obstructions. The public expenditure, too, of the same kingdom, is in course of pradual reduction. During the late war, as has been observed by our author, on the authority of Colquhoun, the public expenditure of the year 1813 amounted to 112 millions, whereas in 1830 it was about 34 millions, in 1831, 33 millions, and in 1832 not so much by 100.000Z. sterling. AMERICAN EDITOR. CHAP. VI. ON CONSUMPTION. 419 him, that " the father of a family might take a lesson of good house- keeping from the ordinances of Charlemagne. His expenditure was conducted with admirable system ; he had his demesnes valued with care, skill, and minuteness. We find detailed in his capitularies the pure and legitimate sources of his wealth. In a word, such were his regularity and thrift, that he gave orders for the eggs of his poultry-yards, and the surplus vegetables of his garden, to be brought to market."* The celebrated Prince Eugene, who dis- played equal talent in negotiation and administration as in the field, advised the Emperor Charles VI. to take the advice of mer- chants and men of business, in matters of finance.f Leopold, when Grand Duke of Tuscany, towards the close of the 18th century, gave an eminent example of the resources, to be derived from a rigid adherence to the principles of private economy, in the ad- ministration of a state of very limited extent. In a few years, he made Tuscany one of the most flourishing states of Europe. The most successful financiers of France, Suger, Abbe de St. Dennis, the Cardinal D'Amboise, Sully, Colbert, and Necker, have all acted on the same principle. All found means of carrying into effect the grandest operations by adhering to the dictates of private economy. The Abbe de St. Dennis furnished the outfit of the second crusade ; a scheme that required very large supplies, although one I am far from approving. The Cardinal furnished Louis XII. with the means of making his conquest of the Milanese. Sully accumu- lated the resources, that afterwards humbled the house of Austria. Colbert supplied the splendid operations of Louis XIV. Necker provided the ways and means of the only successful war waged by France in the 18th century. J Those governments, on the contrary, that have been perpetually pressed with the want of money, have been obliged, like individuals, to have recourse to the most ruinous, and sometimes the most dis- graceful, expedients to extricate themselves. Charles the Bald put his titles and safe-conducts up to sale. Thus, too, Charles II. of England sold Dunkirk to the French king, and took a bribe of 80,000/. from the Dutch, to delay the sailing of the English expe- dition to the East Indies, 1680, intended to protect their settlements in that quarter, which, in consequence, fell into the hands of the Dutchmen.^ Thus, too, have governments committed frequent acts * Esprit des Lois, liv. xxxi. c. 18. f Memoires du Prince Eugene par luimeme, p. 187. The authenticity of this work has been contested, as well as the Testament Politique of Richelieu. If not themselves the authors, they must at least have been men of eq^al capacity, of which there is still less probability. I He contrived to meet the charges of the American war, without the impo- sition of any additional taxes. He has been reproached, indeed, with having incurred heavy loans ; but it is obvious, that, so long as he found means to pay the interest upon them without fresh taxation, they were nowise burthensome upon the nation ; and that the interest must have been defrayed by letrenchmem of the expenditure. } Raynal. Histoire des Etab. des Europ. dans les Indes, torn. iL p. 36 420 ON CONSUMPTION. BOOK III. of ban ruptcy, sometimes in the shape of adulteration of their coin, and sometimes by open breach of their 'engagements. Louis XIV. towards the close of his reign, having utterly ex- hausted the resources of a noble territory,. was reduced to the paltry shift of creating the most ridiculous offices, making his counsellors of state, one an inspector of fagots, another a licenser of barber-wig- makers, another, visiting inspector of fresh, or taster of salt, butter, and the like. Such paltry and mischievous expedients can never long defer the hour of calamities, that must sooner or later befal the extravagant and spendthrift governments. " When a man will not listen to reason," says Franklin, " she is sure to make herself felt." Fortunately, an economical administration soon repairs the mis- chiefs of one of an opposite character. Sound health can not be restored all at once ; but there is a gradual and perceptible improve- ment ; every day some cause of complaint disappears, and some new faculty comes again into play. Half the remaining resources of a nation, impoverished by an extravagant administration, are neutral- ized by alarm and uncertainty ; whereas, credit* doubles those of a nation, blessed with one of a frugal character. It would seem, that there exists in the politic, to a stronger degree than even in the natural, body a principle of vitality and elasticity, which can not be extinguished without the most violent pressure. One can not look into the pages of history, without being struck with the rapidity, with which this principle has operated. It has nowhere been more strikingly exemplified, than in the frequent vicissitudes that our own France has experienced since the commencement of the revo- lution. Prussia has afforded another illustration in our time. The successor of Frederick the Great squandered the accumulations of that monarch, which were estimated at no less a sum than 42 millions of dollars, and left behind him, besides, a debt of 27 millions. In less than eight years, Frederick William III. had not only paid off his father's debts, but actually began a fresh accumulation ; such is the power of economy, even in a country of limited extent and resources. * The expressions, credit is declining, credit is reviving, are common in the mouths of the generality, who are, for the most part, ignorant of the precise meaning of credit. It does not imply confidence in the government exclusively ; for the bulk of the community have no concern with government, in respect to their private affairs. Neither is it exclusively applied to the mutual confidence of individuals; fora person in good repute and circumstances, does not forfeit them all at once ; and, even in times of general distress, the forfeiture of indi- vidual character is by w means so universal, as to justify the assertion, that credit is at an end. It \\-rjuld rather seem to imply, confidence in future events. The temporary dread of taxation, arbitrary exaction, or violence, will deter num- bers from exposing their persons or their property ; undertakings, however pro- mising and well-planned, become too hazardous; new ones are altogether dis- coiimgwl, old ones feel a diminution of profit; merchants contract their opera- tions;, and consumption in general falls off, in consequence of the decline and the uncertainty of individual revenue. There can he no confidence in future ?vents, either under an enterprising, ambitious, or unjust government, or under one, that is wanting in strength, decision, or method. Credit, like crystalliza- tion, can only take place in a state of quiescence. CHAP. VI. ON CONSUMPTION. 491 SECTION II. Of the principal Objects of National Expenditure. In the preceding section, it has been endeavoured to show, that, since all consumption by the public is in itself a sacrifice of value, an evil balanced only by such benefit, as may result to the commu- nity from the satisfaction of any of its wants, a good administration will never spend for the mere sake of spending, but take care to ascertain that the public benefit, resulting, in such instance, from the satisfaction of a public want, shall exceed the sacrifice incurred in its acquirement. A comprehensive view of the principal public wants of a civilized community, can alone qualify us to estimate with tolerable accuracy the sacrifice it is worth while for the community to make for their gratification.* The public consumes little else, but what have been denominated Immaterial products, that is to say, products destroyed as soon as created ; in other words, the services or agency, either of human beings, or of other objects, animate or inanimate.! It consumes the personal service of all its functionaries, civil, judicial, military, or ecclesiastical. It consumes the agency of land and capital. The navigation of rivers and seas, utility of roads and f round open to the public, are so much agency derived by the pub- c from land, of which either the absolute property, or the beneficial enjoyment, is vested in the public. Where capital has been vested in the land, in the shape of buildings, bridges, artificial harbours, causeways, dikes, canals, &c. the public then consumes the agency, or the rent of the land, plus the agency, or the interest, of the capi- ta) so vested. Sometimes the public maintains establishments of productive industry for instance, the porcelain manufacture of Sevres, the Gobelin tapestry, the salt-works of Lorraine and of the Jura, &c., in France. When concerns of this kind bring more than their ex- penditure, which is but rarely the case, they furnish part of the na- tional revenue, and must by no means be classed among the items of national charge. Of the Charge of Civil and Judicial Administration. Tht chaige of civil and judicial administration is made up, partly of the specific allowances of magistrates ana other officers, * A mere sketch is all that can be expected in a work like the present: a com- plete treatise on government would be equally appropriate with a survey of the arts, when it became incidentally necessary to touch upon the processes of manufacture. Yet, either would be a valuable addition to literary wealth. fThis rule must be taken with some qualification. The habitual largesses of corn, distributed by the emperors to the people of ancient Rome, were material objects of public consumption. So likewise the provisions of all kinds consumed in hospitals and prisons, and the fireworks used on occasions of public display or or, for the amusement of the people at large. 36 422 ON CONSUMPTION. BOOK HI. and partly of such degree of pomp and parade, as may be deemed necessary in the execution of their duties. Even if the burthen of that pomp and parade be thrown wholly or partially upon the public functionary, it must ultimately fall upon the shoulders of the public, tor the salary of the functionary must be raised, in proportion to tho appearance he is expected to make. This observation applies to every description of functionary, from the prince to the constable include- consequently, a nation, which reverences its prince only when &ur rounded with the externals of greatness, with guards, horse and foot, laced liveries, and such costly trappings of royalty, must pay dearly for its taste. If, on the contrary, it can be content, to lespect simplicity rather than pageantry, and obey the laws, though unaided by the attributes of pomp and ceremony, it will save in p/oportion. This is what made the charges of government so light in many of the Swiss cantons, before the revolution, and in the North American colonies before their emancipation. It is well known, that those colonies, though under the dominion of England, had separate governments, of which they respectively defrayed the charge ; yet the whole annual expenditure all together amounted to no more than 64,7007. sterling. " An ever memorable example," observes Smith, " at how small an expense three millions of people may not only be governed, but well governed."* * It should be recollected, however, that they were at no charge of defence from external attack, except in respect to the savage tribes of the interior. From the official account of the receipts and disbursements of the United States, in the year 1806, presented by Mr. Gallatin, then Secretary of the Trea- sury, it appears that the total expenditure fell short of twelve millions of dollars. of which eight millions went to pay the interest of the public debt ; leaving a sum of four millions only for the charge of government, that is to say, the civil, judicial, military, and other public functions of a population of twelve millions: which is wholly defrayed by taxes on imports. (1) (1) At the period to which our author here refers, namely, the year 1806, the actual expenditure by the government of the United States, for that year, accord- ing to the report of the Secretary of the Treasury, was 15,070,093 dollars 97 cents, and of this amount, according to the same authority, 8,989,884 dollars 61 cents, was on account of the extinguishment of the principal and interest of the public debt. The population of the United States, for the same year, was only about 6 millions ; for, according to the official enumerations, the population, in the year 1800, was 5,305,925, and in the year 1810, was 7,239,814. Now the charges of the government, exclusive of the payment of the public debt, it will be seen, amounted then t*6,080,209 dollars 36 cents, or an expenditure equal to more than treble the 'amount given by our author. The whole public 'expenditure of the people of the United States necessarily embraces the local disbursements of the different states, as well as the expendi- ture of the general government. Of the former, we have, as yet, no means of presenting our readers with any accurate or official account, and we will not venture to indulge in any loose estimates. Of the latter, however, we are en- abled to furnish a tabular view, extracted from the letter of the Secretary of the Treasury to the Chairman of the Committee of the House of Representatives on Retrenchment, April 9, 1830, and from the subsequent annual Treasury Re- ports, which will exhibit an authentic and accurate view of the receipts and expenditures of the Federal Government, from the 4th of March, 1789, the period of its commencement, to the 31st of December, 1832, the last date to which the accounts have been all made up. CHAP. VI. ON CONSUMPTION. 423 Causes entirely of a political nature as well as the form of govern- ment which they help to determine, have an influence in apportion- ing the salaries of public officers, civil and judicial, the charge of public display, and those likewise of public institutions and establish- We also subjoin the last official revision of the population returns of the seve- ral states and territories, according to the five enumerations of the years 1790, 1800, 1810, 1820, and 1830. RECEIPTS From March 4, 1789, to December 31, 1833. YEARS. CUSTOMS. TOTAL. From March 4, 1789, to Dec. 31, 1791 $4,399,473 09 $10,210,025 75 " " 1792 3,443,070 85 8,740,766 77 " " 1793 4,255,606 56 5,720,624 28 " " 1794 4,801,065 28 10,041,101 65 , " " 1795 5,588,461 26 9,419,802 79 " " 1796 6,567,987 94 8,740,329 65 " " 1797 7,549,649 65 8,758,916 40 " * 1798 7,106,061 93 8,209,070 07 " " 1799 6,610,449 31 12,621,459 84 " " 1800 9,080,932 73 12,451,184 14 " " 1801 10,750,778 93 12,945,455 95 " " 1802 12,438,235 74 15,001,391 31 " " 1803 10,479,417 61 11,064,097 63 " " 1804 11,098,565 33 11,835,640 02 " " 1805 12,936,487 04 13,689,508 14 " " 1806 14,667,698 17 15,608,823 78 " " 1807 15,845,521 61 16,398,019 26 " " 1808 16,363,550 58 17,062,544 09 " " 1809 7,296,020 58 7,773,473 12 " " 1810 8,583,309 31 12,144,206 53 " " 1811 13,313,222 73 14,431,838 14 " " 1812 8,958,777 53 22,639,032 76 " " 1813 13,224,623 25 40,524,844 95 " " 1814 5,998,772 08 34,559,536 95 " " 1815 7,282,942 22 50,961,237 60 " " 1816 36,306,874 88 57,171,421 82 " " 1817 26,283,348 49 33,833,592 33 " " 1818 17,176,385 00 21,593,936 66 " " 1819 20,283,608 76 24,605,665 37 " " 1820 15,005,612 15 20,881,493 68 " " 1821 13,004,447 15 19,573,703 72 " " 1822 17,589,761 94 . 20,232,427 94 " " 1823 19,088,433 44 20,540,666 26 " " 1824 17,878,325 71 24,381,212 79 " " 1825 20,098,713 45 26,840,858 02 " " 1826 23,341,331 77 25,260,434 21 " " 1827 19,712,283 29 22,966,363 96 " " 1828 23,205,523 64 24,763,629 23 " " 1829 22,681,965 91 24,767,122 22 " " 1830 21,922,391 39 24,844,116 51 " " 1831 24,224,441 97 28,526,820 82 " " 1832 28,465,237 21 31,865,561 16 " " 1833 29,032,508 91 33,948,426 25 $623,941,576 17 $878,150,589 52 424 ON CONSUMPTION. BOOK IIL merits. Thus, in a despotic government, where the subject holds his property at the will of the sovereign, who fixes himself the charge of his household, that is to say, the amount of the public money which he chooses to spend on his personal necessities and pleasures, and the keeping up of the royal establishment, that charge will probably be fixed at a higher rate, than where it is arranged and EXPENDITURES From March 4, 1789, to December 31, 1833. YEARS. PUBLIC DKUT. TOTAL. From March 4, 1789, to Dec. 31, 1791 $5,287,949 50 $7,207,539 08 " " 1792 7,263,665 99 9,141,569 67 " " 1793 5,819,505 29 7,529,575 55 " " 1794 5,801,578 09 9,302,124 74 " " 1795 6,084,411 61 10,435,069 65 " " 1796 5,835,846 44 8,367,776 84 " " 1797 5,792,421 82 8,626,012 78 " " 1798 3,990,294 14 8,613,517 68 " " 1799 4,596,876 78 11,077,043 50 " " 1800 4,578,369 95 11,989,739 92 " " 1801 7,291,707 04 12,273,376 94 " " 1802 9,539,004 76 13,276,084 67 " " 1803 7,256,159 43 11,258,983 67 " " 1804 8,171,787 45 12,624,646 36 " " 1805 7,369,889 79 13,727,124 41 " " 1806 8,989,884 61 15,070,093 97 " " 1807 6,307,720 10 11,292,292 99 " " 1808 10,260,245 35 16,764,584 20 " " 1809 6,452,554 16 13,867,226 30 " " 1810 8,008,904 46 13,319,986 74 " " 1811 8,009,204 05 13,601,808 91 " " 1812 4,449,622 45 22,279,121 15 " * 1813 11,108,128 44 39,190,520 36 " " 1814 7,900,543 94 38,028,230 32 " " 1815 12,628,922 35 39,582,493 35 " " 1816 24,871,062 93 48,244,495 51 " " 1817 25,423,036 12 40,877,646 04 " " 1818 21,296,201 62 35,104,875 40 " " 1819 7,703,926 29 24,004,199 73 " " 1820 8,628,494 28 21,763,024 85 " " 1821 8,367,093 62 19,090,572 69 " ' 1822 7,848,949 12 17,676,592 63 1 ' 1823 5,530,016 41 15,314,171 00 " * 1824 16,568,393 76 31,898,538 47 " ' 1825 12,095,344 78 23,585,804 72 1826 11,041,032 19 24,103,398 46 ' ' 1827 10,003,668 39 22,656,765 04 1 ' 1828 12,163,438 07 25,459,479 52 1 ' 1829 12,383,800 77 25,071,017 59 * " 1830 11,355,748 22 24,5a5,281 55 ' " 1831 16,174,378 22 30,038,446 12 ' " 1832 17,840,309 29 34,356,698 06 " " 1833 1,543,543 38 24,257,298 49 .. $409,633,680 45 $866,534,848 56 CHAP. VI. ON CONSUMPTION. 425 contested between the representatives of the prince and of the tax payers respectively. The salaries of inferior public officers in like manner depend, partly upon their individual importance, and partly upon the gene- ral plan of government. Their services are dear or cheap to the pub- lic, not merely in proportion to what they actually cost, but likewise in proportion as they are well or ill executed. A duty ill performed is dearly bought, however little be paid for it ; it is 'dear too, if it be superfluous, or unnecessary ; resembling in this respect an article of furniture, that, if it do not answer its purpose, or be not wanted, is merely useless lumber. Of this description, under the old regime of France, were the officers of high-admiral, high-steward of the household, the king's cup-bearer, the master of his hounds, and a variety of others, which added nothing even to the splendour of royalty, and were merely so many means of dispensing personal favour and emolument. For the same reason, whenever the officers of government arc POPULATION OF THE UNITED STATES, According to Five Enumerations ; from the Official Revision. States. 1790. 1800. 1810. 1820. 1830. 96,540 141,899 85,416 378,717 69,110 238,141 340,120 184,139 434,373 59,096 319,728 748,308 393,751 249,073 82,548 35,791 73,077 151,719 183,762 154,465 423,245 69,122 251,002 586,756 211,949 602,365 64,273 341,548 880,200 478,103 345,591 162,101 ' 8,850 105,602 220,955 45,365 4,875 14,093 228,705 214,360 217,713 472,040 77,031 262,042 959,949 249,555 810,091 72,674 380,546 974,622 555,500 415,115 252,433 20,845 40,352 76,556 261,727 406,511 230,760 24,520 12,282 20,845 24,023 298,335 244,161 235,764 523,287 83,059 275,202 1,372,812 277,575 1,049,458 72,749 407,350 1,065,379 638,829 502,741 340,987 127,901 75,448 153,407 422,813 564,317 581,434 147,178 55,211 66,586 33,039 399,955 269,328 280,652 610,408 97,199 297,665 1,918,608 320,823 1,348,233 76,748 447,040 1,211,405 .737,987 581,185 516,823 309,527 136,621 215,739 681,904 687,917 937,903 343,031 157,455 140,445 39,834 34,730 31,639 30,388 i New Hampshire . . Massachusetts . . . Rhode Island . . . Connecticut .... New Jersey .... Pennsylvania . . . Delaware ..... Maryland North Carolina . . South Carolina . . Ohio Illinois Missouri District of Columbia Florida Territory . Michigan Territory Arkansas Territory 4,762 8,896 14,273 Total .... 3,929,827 5,305,925 7,239,814i9,638,131 12,866,020 AMERICAN EDIIOR. 36* 3D 426 ON CONSUMPTION. BOOB III. needlessly multiplied, the people are saddled with charges, which are not necessary to the maintenance of public order. It is only giving an unnecessary form to that benefit, or product, which is not at all the better of it, if indeed it be not worse.* A bad goverriment, that can not support its violence, injustice, and exaction, without a multitude of mercenaries, satellites, and spies, and gaols innumer- able, makes its subjects pay for its prisons, spies, and soldiers, which nowise contribute to the public happiness. On the other hand, a public duty may be cheap, although very liberally paid. A low salary is wholly thrown away upon an inca- pable and inefficient officer ; his ignorance will probably cost the public ten times the amount of his salary; but the knowledge and activity of a man of ability are fully equivalent to the pay he re- ceives; the losses he saves to the public, and the benefits derived from his exertions, greatly outweigh his personal emolument, even if settled on the most liberal scale. There is real economy in procuring the best of every thing, even at a larger price. Merit can seldom be engaged at a low rate, be- cause it is applicable to more occupations than one. The talent, that makes an able minister, would, in another profession, make a good advocate, physician, fanner, or merchant; and merit will find both employment and emolument in all these departments. If the public service offer no adequate reward for its exertion, it will choose some other more promising occupation. Integrity is like talent ; it can not be had without paying for it, which is not at all wonderful ; for the honest man can not resort to those discreditable shifts and contrivances, which dishonesty looks to as a supplemental resource. The power, which commonly accompanies the exercise of public functions, is a kind of salary, that often far exceeds the pecuniary emolument attached to them. It is true, that in a well ordered state, where law is supreme, and little is left to the arbitrary con- trol of the ruler, there is little opportunity of indulging the caprice and love of domination implanted in the human breast. Yet the discretion, which the law must inevitably vest in those who are to enforce it, and particularly in the ministerial department, together with the honour commonly attendant on the higher offices of the state, have a real value, which makes them eagerly sought for, even in countries where they are by no means lucrative. The rules of strict economy would probably make it advisable to abridge all pecuniary allowance, wherever there are other suffi- cient attractions to excite a competition for office, and to confer it on none but the wealthy, were there not a risk of losing, by the incapacity of the officer, more than would be gained by the *An example occurs to me of a city of France, whose municipal administra- tion was both mildly and efficiently conducted before 1789, at a charge of 1000 crowns per annum only, but under the imperial government, though it :ost 30,000 Jr. (5,580 dollars) afforded no security against the caprice and arbitrary will of the sovereign. CHAP. VL ON CONSUMPTION. abridgment of his salary. This, as Plato well observes in his Republic,' would be like entrusting the helm to the richest man on board. Besides, there is some danger, that a man, who gives his services for nothing, will make his authority a matter of gain, however rich he may be. The wealth of a public functionary is no security against his venality:, for ample fortune is commonly accompanied with desires as ample, and probably even more am- ple, especially if he have to keep up an appearance, both as a man of wealth and a magistrate. Moreover, supposing what is not altogether impossible, namely, that one can meet with wealth united with probity, and with, besides, the activity requisite to the due performance of public duty, is it wise to run the risk of adding the preponderance of authority to that of wealth, which is already but too manifest ? With what grace could his employers call to account an agent, who could assume the merit of generosity, both with the people and with the government! There are, however, some ways, in which the gratuitous services of the rich may be employed with advantage; particularly in those departments, that confer more honour than power : as in the administration of institutions of public char- ity, or of public correction or punishment. In France under the old regime, the government, when harassed with the want of money, was in the habit of putting up its offices to sale. This is the very worst of all expedients; it introduces all the mischiefs of gratuitous service; for the emolument is then no more, than the interest of the capital expended in the purchase of the office; and has the additional evil of costing to the state as much as if the service were not gratuitously performed ; for the public remains charged with the interest of a capital, that has been con- sumed and lost. It has been sometimes the practice to consign certain civil func- tions, such as the registry of births, marriages, and deaths, to the ecclesiastical body, whose emoluments, arising from their clerical duties, may be supposed to enable them to execute these without pay. But there is always danger in confiding the execution of civil duties to a class of men, that pretend to a commission from a still higher than a national authority.* In spite of every precaution, the public or the monarch will never be served so well or so cheaply as individuals. Inferior public * Several times during the last century the Molinist priesthood refused tu execute their clerical duties in favour of the Jansenists, in spite of all the govern- ment could do; on the pretence, that it was better to obey the divine command as conveyed by the voice of the Pope, than that of any human authority (a) (a) This inconvenience can arise only in countries, where there is an exclusive national church, subjected, in matters of doctrine and discipline, to an indepen- dent or external superior : as in countries embracing the faith of Rome. But there is anoiVr inconvenience, that has been much dwelt upon by an eminent divine of the^cottish church; viz. the inconvenience of directing the attention of the priesthood from its clerical to civil functions, and, by a confusion of such different duties, abridging the benefit of division of labour T 428 ON CONSUMPTION. BOOK III. agents can not be so narrowly watched by their superiors, as pri- vate ones; nor have the superiors themselves an equal interest in vigilant superintendence. Besides, it is easy enough for under- lings to impose on a superior, who has many to look after, is per- haps placed at a distance, and can give but little attention to each individually; and whose vanity makes him more alive to the offi- cious zeal of his inferior, than to the real service and utility, that the public good requires. As to the monarch and the nation, who are the parties most interested in good public administration, because it consolidates the power of the one and enlarges the hap- piness of the other, it is next to impossible for them to exert a per- petual and effectual control. In most cases, this duty must of necessity devolve on agents, who will deceive them when it is their interest to do so, as is proved by abundance of examples. " Pub- lic services," says Smith, " are never better performed than when their reward comes only in consequence of their being performed, and is proportioned to the diligence employed in performing them." Accordingly, he recommends, that the salaries of judges should be paid at the final determination of each suit, and the share of each judge proportioned to their respective trouble in the progress of it. This would be some encouragement to the diligence of each parti- cular judge, as well as to that of the court, in bringing litigation to an end. There would be some difficulty in applying this method to all the branches of the public service; and it would probably introduce as great abuses in the opposite way ; but it would at least be productive of one good ; viz. preventing the needless multipli- cation of offices. It would likewise give the public the same advantage of competition as is enjoyed by individuals, in respect to the services they call for. Not only are the time and labour of public men in general better paid for than those of other persons, besides being often wasted by their own mismanagement, without the possibility of an efficient check; but there is often a further enormous waste, occasioned by compliance with the customs of the country, and court etiquette. It would be curious to calculate the time wasted in the toilet, or to estimate, if possible, the many dearly-paid hours lost, in the course of the last century, on the road between Paris and Versailles. Thus, in the governments of Asia, there is an immense waste of the time of the superior public servants in tedious and ceremo- nious observances. The monarch, after allowing for the hours of customary parade, and those of personal pleasure, has little time left to look after his own affairs, which, consequently, soon go to ruin. Frederick II. of Prussia, by adopting a contrary line of conduct, and by the judicious distribution and apportionment of his time, contrived to get through a great deal of business himself. By this means, he really lived longer than older men than himself, and succeeded in raising his kingdom to a first-rate power. His other gieat qualities, doubtless, contributed to his success; but they would not have been sufficient, without a methodical arrangement of his e. CHAP. VL ON CONSUMPTION. 429 Of Charges, Military and Naval. When a nation has made any considerable progress in commerce, manufacture, and the arts, and its products have, consequently, become various and abundant, it would be an immense inconve- nience, if every citizen were liable to be draggeu from a productive employment, which has become necessary to society, for the pur- poses cf national defence. The cultivator of the soil works no longer for the sustenance of himself and family only, but also for that of many other families, who are either owners of the soil, and share in its produce, or traders and manufacturers, that supply him with articles he cannot do without. He must, therefore, cultivate a larger extent of surface, must vary his tillage, keep a larger stock of cattle, and follow a complex mode of cultivation that will fully occupy his leisure between seed-time and harvest.* Still less can the trader and manufacturer afford thus to sacrifice time and talents, whereof the constant occupation, except during the intervals of rest, is necessary to the production, from which they are to derive their subsistence. The owners of land let out to farm may, undoubtedly, serve as soldiers without pay; as, indeed, the nobility and gentry do, in some measure, in monarchical states; but they are, for the most part, so much accustomed to the sweets of social existence, so little goaded by necessity towards the conception and achievement of great enter- prises, and feel so little of the enthusiasm of emulation and esprit de corps, that they commonly prefer a pecuniary sacrifice to that of comfort, and possibly of life. And these motives operate equally with the owners of capital. All these reasons have led individuals, in most modern states, to consent to a taxation, that may enable the monarch or the republic to defend the country against external violence with a hired and pro- fessional soldiery, who are, however,- too apt to become the tools of their leader's ambition or tyranny. When war has become a trade, it benefits, like all other trades, from the division .of labour. Every branch of human science is pressed into its service. Distinction or excellence, whether in the capacity of general, engineer, subaltern, or even private soldier, can not be obtained without long training, perhaps, and constant prac- tice. The nation, which should act upon a different principle, would lie under the disadvantage of opposing the imperfection, to the per- fection, of art. Thus, excepting the cases, in which the enthusiasm of a whole nation has been roused to action, the advantage has uni- * The Greeks, until the second Persian war, and the Romans, until the siege if Veii, regularly made their military campaigns in that interval. Nations of hunters or '"shepherds, that pay little attention to the arts, and none to agriculture, like the Tartars and Arabs, are less circumscribed in time, and can prosecute their warlike enterprises in any quarter, that promises booty, and furnishes pasturage Hence the vast area of the conquests of Attila, Genghis Khan, and Tamerlane and of the Moors and the Turks. 430 ON CONSUMPTION. BOOK III. formly been on the side of a disciplined and professional soldiery. The Turks, although professing the utmost contempt for the arts of their Christian neighbours, are compelled by the dread of extermi- nation, to be their scholars in the art of war. The European powers were all forced to adopt the military tactics of the Prussians; and, when the violent agitation of the French revolution pressed every resource of science to the aid of the armies of the republic, the ene- mies of France were obliged to follow the example. This extensive application of science, and adaptation of fresh means and more ample resources to military purposes, have made war far more expensive now than in former times. It is necessary now-a-days, to provide an army beforehand, with supplies of arms, ammunition, magazines of provision, ordnance, &c., equal to the con- sumption of one campaign at the least. The invention of gunpowder has introduced the use of weapons more complex and expensive, and very chargeable in the transport, especially the field and battering trains. Moreover, the wonderful improvement of naval tactics, the variety of vessels of every class and construction, all requiring the utmost exertion of human genius and industry; the yards, docks, machinery, store-houses, &c. have entailed upon nations addicted to war almost as heavy an expense in peace, as in times of actual hos- tility ; and obliged them not only to expend a great portion of their income, but to vest a great amount of capital likewise in military establishments. In addition to which, it is to be observed, that the modern colonial system, that is to say, the system of retaining the sovereignty of towns and provinces in distant parts of the world, has made the European states open to attack and aggression in the most remote quarters of the globe, and the whole world the theatre of warfare, when any of the leading powers are the belligerents.* Wealth has, consequently, become as indispensable as valour to the prosecution of modern warfare ; and a poor nation can no longer withstand a rich one. Wherefore, since wealth can be acquired only by industry and frugality, it may safely be predicted, that every nation, whose agriculture, manufacture, and commerce, shall be ruined by bad government, or exorbitant taxation, must infallibly fall under the yoke of its more provident neighbours. We may further conclude, that henceforward national strength will accom- pany national science and civilization ; fop none but civilized nations can maintain considerable standing armies ; so that there is no reason to apprehend the future recurrence of those sudden overthrows of civilized empires by the influx of barbarous tribes, of which history affords many examples. War costs a nation more than its actual expense; it costs besides, all that would have been gained, but for its occurrence. When Louis XIV. in 1672, resolved in a fit of passion, to chas- * It has been calculated that every soldier, brought into the field by Great Britain, during her last war with America, cost her twice as much as one on the continent of Europe. And the other charges of warfare must of course be ag- gravated by the distance in an equal ratio. CHAP. VL ON CONSUMPTION. 43] tise the Dutch for the insolence of their newspaper writers, Boreel. the Dutch ambassador, laid before him a memorial showing that France through the medium of Holland, sold produce annually to foreign nations, to the amount of sixty millions />. at the then scale of price; which will fall little short of 120 millions (22,000,000 of dollars) at the present. But the court treated his representations as the mere empty bravado of an ambassador. To conclude: the charges of war would be very incorrectly esti- mated, were we to take no account of the havoc and destruction it occasions ; for that one at least of the belligerents, whose territory happens to be the scene of operations, must be exposed to its ravages. The more industrious the nation, the more does it suffer from warfare. When it penetrates into a district abounding in agri- cultural, manufacturing, and commercial establishments, it is like a fire in a place full of combustibles; its fury is aggravated, and the devastation prodigious. Smith calls the soldier an unproductive labourer ; would to God he were nothing more, and not a destruc- tive one into the bargain ! he not only adds no product of his own (a) to the general stock of wealth, in return for the necessary subsist- ence he consumes, but is often set to work to destroy the fruits of other people's labour and toil, without doing himself any benefit. The tardy, but irresistible expansion of intelligence will probably operate a still further change in external political relations, and with it a prodigious saving of expenditure for the purposes of war. Nations will be taught to know that they have really no interest in fighting one another; that they are sure to suffer all the calamities incident to defeat, while the advantages of success are altogether illusory. According to the international policy of the present day, the vanquished are sure to be taxed by the victor, and the victor by domestic authority: for the interest of loans must be raised by tax- ation. There is no instance on record, of any diminution of national expenditure being effected by the most successful issue of hostilities. And, what is the glory it can confer more than a mere toy of the most extravagant price, that can never even amuse rational minds for any length of time? Dominion by land or sea will appear equally destitute of attraction, when it comes to be generally understood, that all its advantages rest with the rulers, and that the subjects at large derive no benefit whatever. To private individuals, the greatest possible benefit is entire freedom of inter- course, which can hardly be enjoyed except in peace. Nature prompts nations to mutual amity; and, if their governments take upon themselves to interrupt it, and engage them in hostility, they are equally inimical to their own people, and to those, they wa. against. If their subjects are weak enough to second the ruinous vanity or ambition of their rulers in this propensity, I know not (a) This is too generally expressed. Where security from external attack is only to he had by means of a professional soldiery, the soldier is a productive Agent productive of the immaterial product, security from external attack, thai, which, under certain circumstances, none can be more valuable. T. 432 ON CONSUMPTION. BOOK TIL now to distinguish such egregious folly and absurdity, from that of the brutes that are trained to fight and tear each other to pieces, for the mere amusement of their savage masters. But human intelligence will not stand still ; the same impulse lhat has hitherto borne it onwards, will continue to advance it yet further.* The very circumstance of the vast increase of expense attending national warfare has made it impossible for governments henceforth to engage in it, without the public assent, express or implied ; and that assent will be obtained with the more difficulty, in proportion as the public shall become more generally acquainted with their real interest. The national military establishment will be reduced to what is barely sufficient to repel external attack ; for which purpose little more is necessary, than a small body of such kinds of troops as can not be had without long training and exercise; as of cavalry and artillery. For the rest, nations will rely on their militia, and on the excellence of their internal polity: for it is next to impossible to conquer a people unanimous in their attachment to their national institutions ; and their attachment will always be proportionate to the loss they will incur by a change of domination.! Of the Charges of Public Instruction. Two questions have been raised in political economy; 1. Whether the public be interested in the cultivation of science in all its branches 1 2. Whether it be necessary, that the public should be af the expense of teaching those branches, it has an interest in cultivat ing ? Whatever be the position of man in society, he is in constant de- pendence upon the three kingdoms of nature. His food, his clothing, his medicines, every object either of business or of pleasure, is sub ject to fixed laws; and the better those laws are understood, the more benefit will accrue to society. Every individual, from tho common mechanic, that works in wood or clay, to the prime minis- ter that regulates with the dash of his pen the agriculture, the breed- ing of cattle, the mining, or the commerce of a nation,* will perform his business the better, the better he understands the nature of things, and the more his understanding is enlightened. For this reason, every advance of science is followed by an in- * Those who deny the progressive influence of human reason must have studied history to very little purpose. The perfidy and cruelty of war have con- siderably abated, in Europe, more than in Asia or America, and most of all amongst the most polished of the European nations. The ungenerous character of some recent military enterprises roused so much public indignation, as to make them recoil upon the projectors with ruinous violence. f I am here speaking of the only sure reliance in an enlightened age. A pen- pie, that has nothing to lose by a change of domination, may defend itself with the most determined gallantry. The Mussulman will rush on certain destruc- tion, in defence of a prince and a faith, that are neither of them worth defending. ftut political and religious prejudice will sooner or later fall to the ground; :tnd nave mankind to seek for some more reasonable object of devotion. CHAP. VL ON CONSUMPTION. 433 crease of social happiness. A new application of the lever, or of the power of wind or water, or even a method of reducing the friction of bodies, will, perhaps, have an influence on twenty different arts. An uniformity of weights and measures, arranged upon mathematical principles, would be a benefit to the whole commercial world, if it were wise enough to adopt such an expedient. An important dis- covery in astronomy or geology may possibly afford the means of ascertaining the longitude at sea with precision, which would be an immense advantage to navigation all over the world. The naturali- sation in Europe of a new botanical genus or species might possibly influence the comfort of many millions of individuals.* Among the numerous classes of science, theoretical and practical, which it is the interest of the public to advance and promote, there are fortunately many, that individuals have a personal interest in pursuing, and which the public, therefore, is not called upon to pay the expense of teaching. Every adventurer in any branch of indus- try is urged most strongly by self-interest to learn his business and whatever concerns it. The journeyman gains in his apprenticeship, besides manual dexterity, a variety of notions and ideas only to be learnt in the work-shop, and which can be no otherwise recompensed, than by the wages he will receive. But it is not every degree or class of knowledge, that yields a benefit to the individual, equivalent to that accruing to the public. In treating abovef of the profits of the man of science, I have shown the reason, why his talents are not adequately remunerated; yet theoretical is quite as useful to society as practical knowledge; for how could science ever be applied to the practical utility of mankind, unless it were discovered and preserved by the theorist? It would rapidly degenerate into mere mechanical habit, which must soon decline ; and the downfall of the arts would pave the way for the return of ignorance and barbarism. In every country that can at all appreciate the benefits to be de- rived from the enlargement of human faculties, it has been deemed by no means a piece of extravagance, to support academies and learned institutions, and a limited number of very superior schools, intended not as mere repositories of science, and of the most approved mode of instruction, but as a means of its still further extension. But it requires some skill in the management, to prevent such esta- blishments from operating as an impediment, instead of a further- ance, to the progress of knowledge, and as an obstruction rather than as an avenue to the improvement of education. Long before the revolution, it had become notorious, that most of our French univer- sities had been thus perverted from the intention of their founders. * Should the expected success attend the attempt to naturalise in Europe the flax of New Zealand, which is greatly superior to that of Europe in the length and delicacy of the fibre, as well as in the abundance of the crop, it is possibis that fine linon may be produced at the rate now paid for the coarsest quality; which would greatly improve the cleanliness and health of the lower classes f Bmk II. chap. 7. sect 2. 37 3E 434 ON CONSUMPTION. BOOK III. All the principal discoveries were made elsewhere; and most of them had to encounter the weight of their influence over the rising generation and credit with men in power.* (1) From this example, we may see how dangerous it is, to entrust them with any discretionary control. If a candidate presents him- self for examination, he must not be referred to teachers, who are at the same time judges and interested parties, sure to think well of their own scholars, and ill of those of every body else. The merit of the candidate should alone decide, and not the place where he happens to have studied, nor the length of his probation; for to oblige a student in any science, medicine for instance, to learn it at a par- ticular place, is, possibly, to prevent his learning it better elsewhere; and, to prescribe any fixed routine of study, is, possibly, to prevent his fixing a shorter road. Moreover, in deciding upon comparative merit, there is much unfairness to be apprehended from the esprit de corps df such communities. Encouragement may, with perfect safety, be held out to a mode of instruction of no small efficacy ; I mean, the composition of good elementary! works. The reputation and profit of a good book in *What was denominated an University, under the reign of Napoleon, was a still more mischievous institution ; being, in fact, but a most expensive and vexa- tious contrivance, for depraving the intellectual faculties of the rising genera- tion, by substituting, in the place of just and correct notions of things, opinions calculated to perpetuate the political slavery of their country. f Under this head, I would include, the fundamental parts of knowledge in every department, and the familiar instruction adapted to each specific calling, respectively ; such as would impart at a cheap rate to the hatter, the metal- founder, the potter, the dyer, &c., the general principles of their respective arts. Works of this kind keep up a constant channel of communication between t)>e practical and theoretical branches, and enable them to profit mutually by each other's experience. (1) [" It is chiefly," observes DUGALD STEWART, " in judging of questiom coming home to their business and bosoms, that casual associations lead mankind astray ; and of such associations, how incalculable is the number arising from false systems of religion, oppressive forms of government, and absurd plans ot' education. The consequence is, that while the physical and mathematical dis- coveries of former ages present themselves to the hand of the historian, like masses of pure and native gold, the truths which we are here in quest of may be compared to iron, which although at once the most necessary and the most widely diffused of all the metals, commonly requires a discriminating eye to detect its existence, and a tedious as well as nice process, to extract it from the ore." " To the same circumstance it is owing, that improvements in Moral and m Political Science do not strike the imagination with nearly so great force as the discoveries of the Mathematician or of the Chemist. When an inveterate preju- dice is destroyed by extirpating the casual associations on which it was grafted, how powerful is the new impulse given to the intellectual faculties of man ! Yet how slow and silent the process by which the effect is accomplished ! Were it not, indeed, for a certain class of learned authors, who, from time to time, heave the log into the deep, we should hardly believe that the reason of Jhe species is progressive. In this respect, the religious and academical estab- lishments in some parts of Europe are not without their use to the historian of tno human mind. Immovably moored to the same station by the strength of CHAP. VL ON CONSUMPTION. 435 this class do not indemnify the labour, science, antf skill, requisite to its composition, (a) A man must be a fool to serve the public in this line where the natural profit is so little proportioned to the benefit derived to the public. The want of good elementary books will never be thoroughly supplied, until the public shall hold out tempta- tions, sufficiently ample to engage first-rate talents in their compo- sition. It does not answer to employ particular individuals for the express purpose ; for the man of most talents will not always suc- ceed the best: nor to offer specific premiums; for they are often bestowed on very imperfect productions, and the encouragement ceases the moment the premium is awarded. But merit in this kind should be paid proportionately to its degree, and always liberally. A good work will thus be sure to be superseded by a better, till per- fection is at last attained in each class. And I must observe, by the way, that there is no great expense incurred by liberally rewarding excellence ; for it must always be extremely rare ; and what is a great sum to an individual, is a small matter to the pockets of a nation. These are the kinds of instruction most calculated to promote national wealth, and most likely to retrograde, if not in some measure supported by the public. There are others, which are essential to the softening of national manners, and stand yet more in need of that support. When the useful arts have arrived at a high degree of perfection, and labour has been very generally and minutely subdivided, the occupation of the lowest classes of labourers is reduced to one or two operations, for the most part simple in themselves, and continually repeated: to these their whole thought and attention are directed; and from them they are seldom diverted by any novel or" unforeseen occurrence: their intellectual faculties, being rarely or never called into play, must of course be degraded and brutified, and themselves rendered incapable of uttering two words of common sense out of their peculiar line of business, and utterly devoid of any generous ideas or elevated notions. Elevation of mind is generated by enlarg- ed views of men and things, and can never exist in a being incapa- ble of conceiving the general bearings and connexions of objects. A plodding mechanic can conceive no connexion between the inviola- bility of property and public prosperity, or how he can be more interested in that prosperity, than his more wealthy neighbour; but is apt to consider all these important benefits as so many encroach- ments on his rights and happiness. A certain degree of education, (a) This can only be true where the demand for such works is limited. In England, works of instruction are probably amongst the most profitable to the authors. T. their cables, and the weight of their anchors, they enable him to measure Ihe rapidity of the current by which the rest of the world are borne along." Vide P^ eface to Stewart's Dissertations, p. 28, Boston edition.} AMERICAN EDITOR 436 ON CONSUMPTION. BOOK III. of reading, of reflection while at work, and of intercourse with per- sons of his own condition, will open his mind to these conceptions, as well as introduce a little more delicacy of feeling into his conduct, as a father, a husband, a brother, or a citizen. But, in the vast machinery of national production, the mere ma- nual labourer is so placed, as to earn little or nothing more than a bare subsistence. The most he can do is, to rear his young family, and bring them up to some occupation : he cannot be expected to give them that education, which we have supposed the well-being of society to require. If the community wish to have the benefit of more knowledge and intelligence in the labouring classes, it must dispense it at the public charge. This object may be obtained by the establishment of primary schools, of reading, writing, and arithmetic. These are the ground- work of all knowledge, and are quite sufficient for the civilization of the lower classes. In fact, one can not call a nation civilized, nor consequently possessed of the benefits of civilization, until the peo- ple at large be instructed in these three particulars : till then it will be but partially reclaimed from barbarism. With the help of these advantages alone, it may safely be affirmed, that no transcendent ge- nius or superior mind will long remain in obscurity, or be prevented from displaying itself to the infinite benefit of the community. The faculty of reading alone, will, for a few dollars, put a man in pos- session of all that eminent men have said or done, in the line to which the bent of genius impels. Nor should the female part of the creation be shut out from this elementary education ; for the public is equally interested in their civilization ; and they are indeed the first, and often the only teachers of the rising generation. It would be the more unpardonable in governments to neglect the business of education, and abandon to their present ignorance the great majority of the population in those nations of Europe, that pretend to the character of refinement and civilization, now that the improved methods of mutual instruction, that have been tried with such complete success, afford a ready and most economical means of universally diffusing knowledge amongst the inferior classes.* * According to the new method, introduced by Lancaster, and perfected by subsequent teachers, a single master with very little aid of books, pens, or paper, can rapidly and effectually teach reading, writing, and vulgar arithmetic, to five or six hundred scholars at a time. This truly economical result is produced, by taking advantage of the slightest superiority of intelligence of one above another, and directing the motive of emulation, natural to the human breast, towards an useful object. A large school is commonly divided into forms, con- sisting each of eight children, as nearly equal in advancement as possible, and instructed by a child somewhat more advanced, called the Monitor. These forms again are divided into eight classes ; of which the lowest learns to pro- nounce the letters of the alphabet, and to trace their figures rudely with the finger upon sand spread out upon a flat board ; and the highest is able to write upon paper, and to practise the four rules of arithmetic. The children of each form sre ranged according to their progress; and whoever cannot give the answer, is 'inrnediatelj superseded by a more apt scholar. As soon as a child is pe-f'ected ia vne class., he is tiansferred to the next in degree. The lessons are received. VL ON CONSUMPTION. 437 Thus, none but elementary and abstract science, the highest and the lowest branches of knowledge, are so much less favoured in the natural course of things, and so little stimulated by the competition of demand, as to require the aid of that authority, which is created purposely to watch over the public interests. Not that individuals have no interest in the support and promotion of these, as well as of the other, branches of knowledge ; but they have not so direct an interest, the loss occasioned by their disappearance is neither so immediate nor so perceptible ; a flourishing empire might retrograde, until it reached the confines of barbarism, before individuals had observed the operating cause of its decline. I would not be understood to find fault with public establishments for purposes of education, in other branches than those I have been describing. I am only endeavouring to show, in what branches a nation may wisely, and with due regard to its own interest, defray the charge out of the public purse. Every diffusion of such know- ledge, as is founded upon fact and experience, and does not proceed upon dogmatical opinions and assertions, every kind of instruction, that tends to improve the taste and understanding, is a positive good ; and, consequently, an institution calculated to diffuse it must be ben- eficial. But care must be taken, that encouragement of one branch shall not operate to discourage another. This is the general mis- chief of premiums awarded by the public ; a private teacher or in- stitution will not be adequately paid, where the same kind of in- struction is to be had for nothing, though, perhaps, from inferior teachers. There is, therefore, some danger, that talent may be superseded by mediocrity; and a check be given to private exertions, from which the resources of the state might expect incalculable benefit. The only important science, which seems to me not susceptible of being taught at the public charge, is that of moral philosophy, which may be considered as either experimental or doctrinal. The former consists in the knowledge of moral qualities, and of the chain of connexion between events dependent upon human will; and forms indeed a part of the study of man, which is best pursued by social converse and intercourse. The latter is a series of max- ims and precepts, possessing very little influence upon human con- duct, which is best guided in the relations of public and of private life, by the operation of good laws, of good education, and of good example.* ______^_ sometimes in a sitting posture, and sometimes upright, with slates affixed to the walls. The instruction is thus always accommodated to the age .and faculties of the child ; it necessarily arrests and rewards his attention ; and involves that personal activity, essential to the infant frame. The whole is conducted in a single apartment, and usually under the superintendence of a single mater ot mistress. The general adoption of this method will probably be for some timo >>pposed by custom and prejudice; but its utility and conformity to the order ot nature will ensure its ultimate and universal prevalence. * I am strongly disposed to say the same of logic. Were nothing taught, but i fhat is consistent with truth and good sense, logic would follow of iteelf as a 37* 438 ON CONSUMPTION. BOOK IIT. The sole encouragement to virtue and good conduct, th;;t can be relied on, is, the interest that every body has in discovering and em- ploying no persons but those of good character. Men the most in- dependent in their circumstances want something more to make them happy; that is to say, the general esteem and good opinion of their fellow-creatures ; and these can only be acquired by putting on the appearance at least of estimable qualities, which it is much easier to acquire than to simulate. The influence of the sovereign or ruling body, upon the manners of the nation, is very extensive, because it employs a vast number of people ; but it operates bss ben- eficially than that of individuals, because it is less interested in em- ploying none but persons of integrity. If to its luke warn mess in this particular be added, the example of immorality and contempt for honesty and economy too frequently held out to people by their rulers, the corruption of national morals will be wonderfully accele- rated.* But a nation may be rescued from moral degradaton by the re-action of opposite causes. Colonies are, for the most part, composed of by no means the most estimable classes of the mother- country : in a very short time, however, when the hopes of return are wholly abandoned, and the settlers have made up their minds to pass the rest of their lives in their new abode, they gradual 'y feel the necessity of conciliating the esteem of their fellow-citizens, and the morals of the colony improve rapidly. By morals, I mean the general course of human conduct and behaviour. These are the causes, that have a positive influence upon national morality. To these must be added, the effect of education in gene- ral, in opening the eyes of mankind to their real interests, and soft- ening the temper and disposition. Religious instruction ought, strictly speaking, to be defraye \ by the respective religious communions and societies, each of \A hich regards the opinions of the rest as heretical, and naturally revo ts at the injustice of contributing to the propagation of what it d ems erroneous, if not criminal. Of the Charges of Public Benevolent Institutions. It has been much debated, whether individual distress has any title to public relief. I should say none, except inasmuch as it is an unavoidable consequence- of existing social institutions. If ir.fir- matter of course: all the teaching in the world will never make a man a good reasoner, whose notions and ideas of things are unsound and erroneous ; und, with the foundation of just notions, he will require no teaching to make him reason well. Just ideas of things are only to be acquired by attentive examina- tion; by taking account of every particular concerning them, and of nothing but what concerns them ; which is the object of all knowledge in general, and by no means of logic alone. * The bad example of a vicious prince is of the most fatal tendency ; it is noto- rious to all the world, and protected and abetted by public authority ; and it is sure to be reflected by the subservience of courtiers to the extreme point of init- iative servility CHAP. VL ON CONSUMPTION. 439 mily and want be the effect of the social system, they have a title to public relief: provided always, that it be shown, that the same system affords no means of prevention or cure. But it would be foreign to the matter to discuss the question of right in this place. All we need do is, to consider benevolent institutions with regard to their nature and consequences. When a community establishes at the public charge any institu- tion for benevolent purposes, it forms a kind of saving-bank, to which every member contributes a portion of his revenue, to entitle him to claim a benefit, in the event of accident or misfortune. The wealthy are generally impressed with an idea, that they shall never stand in need of public charitable relief; but a little less confidence would become them better. No man can reckon in his own case upon the continuance of good fortune, with as much certainty as upon the permanence of wants and infirmities; the former may desert him; but the latter are inseparable companions. It is enough to know, that good fortune is not inexhaustible, to infuse an apprehen- sion that it may some day or other be exhausted : one has but to look round, and this apprehension will be confirmed by the experi- ence of numbers, whose misfortunes were to themselves quite unex- pected. Hospitals for the sick, almshouses and asylums for old age and infancy, inasmuch as they partially relieve the poorer classes from the charge of maintaining those who are naturally dependent on them, and thereby to allow population to advance somewhat more rapidly, have a natural tendency a little to depress the wages of labour. That depression would be greater still, if such establish- ments should be so multiplied, as to take in all the sick, aged, and infants of those classes, who would then have none but themselves to provide for out of their wages. If they were entirely done away, there would be some rise of wages, although not sufficient to main- tain so large a labouring population, as may be kept up with their help ; for the demand for their labour would be somewhat reduced by the advance of its- price. From these two extreme suppositions, we may judge of the effect of those efforts to relieve indigence, which all nations have made in some degree or other ; and see the reason, why the distress and relief go on increasing together, although not exactly in the same ratio. Most nations preserve a middle course between the two extremes, affording public relief to a part only of those, who are helpless from age, infancy, or casual sickness. Of the rest they endeavour to lid themselves in one of two ways ; either by requiring certain qualifi- cations in the applicants, whether of age, of specific disease, or, perhaps, of mere interest and favouritism ; or by limiting narrowly the extent of the relief, giving it upon hard terms to the applicants, or attaching some degree of shame to the acceptance.* *At Paris, the limitation of relief afforded by the Hospice des Incurables^&nd those of Petites Maisons, of St. Louis, of Charite, and many others, is of tha 440 ON CONSUMPTION. BOOK III. It is a iistressing reflection, that there are no other methods of confining the number of applicants for relief within the means available to the community, except the offer of hard conditions, or the want of a patron. It were to be desired, that asylums of the more comfortable class, instead of favouritism, should be open to unmerited misfortune only ; and that, to prevent improper nomina- tions, the pretensions of the candidate should be ascertained by the inquest of a jury. The rest can probably be protected from too great an influx of indigence, by no other means consistent with hu- manity, except the observance of severe, though impartial, discipline, sufficfent to invest them with some degree of terror. This evil does not apply to the asylums devoted to invalid soldiers and sailors. The qualification is so plain and intelligible, that the doors ought to be shut against none who are possessed of it ; and the comforts of the institution can never increase the number of applicants. Their being nursed in the public asylums with the same domestic care and comfort, as are to be found in the homes of per- sons in the same class of life, and indulged in repose, and some even of the whims of olcl age, will undoubtedly somewhat enhance the charge, that is to say, so far as it might prolong lives, that other- wise might fall a sacrifice to wretchedness ; but this is the utmosl increase of charge ; and it is one, that neither patriotism nor hu- manity will grudge.* The houses of industry, that are multiplying so rapidly in America, Holland, Germany, and France, are noble and excellent institutions of public benevolence. They are designed to provide all persons of sound health with work according to their respective capacities ; some of them are open to any workman out of employ, that chooses to apply ; others are a kind of houses of correction, where vagrants, beggars, and offenders, are kept to work for fixed periods. Con- victs have sometimes been set to hard labour ih their respective vocations, during their confinement ; whereby the public has been wholly or partially relieved from the charge of keeping up gaols, and a method contrived for reforming the morals of the criminals, and rendering them a blessing, instead of a curse, to society. Indeed, such establishments can hardly be reckoned among the items of public charge ; for, the moment their production equals their consumption, they are no longer ah incumbrance to any body- They are of immense benefit in a dense population, where, amidst former kind ; the admissions to the Hotel-Dieu, Bicetre, Saltpetriere, and En- fans-Trouves, are subject to a limitation of the latter kind. As the number of applicants duly qualified for admission in the establishment first mentioned always exceeds their capacity, the choice must ultimately be decided by favour or interest. * Yet it is well worth consideration, whether it be not more to the advantage, both of the state and of its pensioners, to maintain them at their own homes upon a fixed income, or to board them out with individuals. The Abbe de St. Pierre, whose mind was ever actively at work for the public good, has estimated Ihe charge of maintaining the invalids in their sumptuous establishment at Paris, lo be three times as much as that of their maintenance at their respective homes Annales Polit. p. 209. CHAP. VL ON CONSUMPTION. 441 the vast variety of occupations, some must unavoidably >e in a state of temporary inaction. The perpetual shiftings of commerce, the introduction of new processes, the withdrawing of capital from a productive concern, accidental fire, or other calamity, may throw numbers out of employment ; and the most deserving individual may, without any fault of his own, be reduced to the extreme of want. In these institutions, he is sure of earning at least a subsist- ence, if not in his own line, in one of a similar description. The grand obstacle to such establishments is, the great outlay of capital they require. They are adventures of industry, and as such must be provided with a variety of tools, implements, and machines, besides raw material of different kinds to work upon. Before they can be said to maintain themselves, they must earn enough to pay the interest of the capital embarked, as well as their current ex- penses. The favour shown them by the public authority, in the gratuitous supply of the capital and buildings, and in many other particulars, would make them interfere with private undertakings, were they not subject, on the other hand, to some peculiar disadvantages. They are obliged to confine their operations to such kinds of work, as sort with the feebleness and general inferiority in skill of the inmates, and can not direct them to such as may be most in demand. More- over, it is in most of them a matter of regulation and police, to lay by always the third or fourth part of the labourer's wages or earn- ings, as a capital to set him up, on his quitting the establishment: this is an excellent precaution, but prevents their working at such cheap rates, as to drive all competition out of the market. Although the honour, attached to the direction and management of institutions of public benevolence, will generally attract the gratuitous service of the affluent and respectable part of the com- munity, yet, when the duties become numerous and laborious, they are commonly discharged by gratuitous administrators with the most unfeeling negligence. It was probably by no means wise, to subject all the hospitals of Paris to a general superintendence. At London, each hospital is separately administered ; and the whole are managed with more economy and attention in consequence. A laudable emulation is thereby excited amongst the managers of rival establishments ; which affords an additional proof of the practicabi- lity and benefit of competition in the business of oublic administra- tion. Of the Charges of Public Edifices and Works. I shall not here attempt to enumerate the great variety of works requisite for the use of the public ; but merely lay down some gene- ral rules, for calculating their cost to the nation. It is often impos sible to estimate with any tolerable accuracy the public benefit de- rived from them. How is one to calculate the utility, that is to say, the pleasure which the inhabitants of a city derive from a puolic 3F 442 ON CONSUMPTION. BOOK III. terrace or promenade? It is a positive benefit to have, wit bin an easy distance of the close and crowded streets of a populous town, some place where the population can breathe a pure and wholesome atmosphere, and take health and exercise, under the shade of a grove, or with a verdant prospect before the eye ; and where school- boys can spend their hours of recreation; yet this advantage it would be impossible to set a precise value upon. The amount of its cost, however, may be ascertained or estin aled. The cost of every public work or construction consists : 1. Of the rent of the surface whereon it is erected ; which rent amounts to what a tenant would give to the proprietor. 2. Of the interest of the capital expended in the erection. 3. Of the annual charge of maintenance. Sometimes, one or more of these items may be curtailed. When the soil, whereon a public work is erected, will fetch nothing from either a purchaser, or a tenant, the public will be charged with nothing in the nature of rent ; for no rent could be got if the spot had never been built on. A bridge, for instance, costs- nothing but the interest of the capital expended in its construction, and the annual charge of keeping it in repair. If it be suffered to fall i nto decay, the public consumes, annually, the agency of the capital vested, reckoned in the shape of interest on the sum expended, and, gradually, the capital itself, into the bargain; for, as soon as the bridge ceases to be passable, not only is the agency or rent of 'he capital lost, but the capital is gone likewise. Supposing one of the dikes in Holland to have cost in the outset, 20,000 dollars ; the annual charge on the score of interest, at 5 j er cent., will be 1000 dollars; and, if it cost 600 dollars more in the keeping it up, the total annual charge w r ill be 1600 dollars. The same mode of reckoning may be applied to roads and cana Is. If a road be broader than necessary, there is annually a loss of the rent of all the superfluous land it occupies, and, besides, of all the additional charge of repair. Many of the roads out of Paris are 180 feet wide, including the unpaved part on each side; whereas, a breadth of 60 feet would be full wide for all useful purposes, ai d would, be. quite magnificent enough, even for the approaches to a great metropolis. The surplus is only so much useless splendoui ; indeed, I hardly know how to call it so ; for the narrow pavemei t in the centre of a broad road, the two sides of which are impassable the greater part of the year, is an equal imputation upon the libei - ality, and upon the good sense and taste of the nation. It gives :i disagreeable sensation, to see so much loss of space, more particu- larly if it be badly kept. It appears like a wish to have magnificent roads, witnout having the means of keeping them uniform and in irood condition ; like the palaces of the Italian nobles, that never feel I he effects of the broom. Be it as it may, on the sides of the road I am speaking of, there .'s a space of 120 feet, that might be restored to cultivation ; that is to .say, 48 acres to the ordinary league. Add together the rent of the CHAP. VI. ON CONSUMPTION. 443 surplus land, the interest of the sum expended in the first cost and preparation, and the annual charge of keeping up the unnecessary space, which is something, badly as it is kept up ; you will then ascertain the sum France -pays annually for the very questionable honour of having roads too wide, by more than the half, leading to streets too narrow, by three-fourths.* Roads and canals are costly public works, even in countries where they are under judicious and economical management. Yet, proba- bly, in most cases, the benefits they afford to the community far ex- ceed the charges. Of this the reader may be convinced, on reference to what has been said above of the value generated by the mere commercial operation of transfer from one spot to another,! and of the general rule, that every saving in the charges of production is so much gain to the consumer.^ Were we to calculate what would be the charge of carriage upon all the articles and commodities that now pass along any road in the course of a year, if the road did not exist, and compare it with the utmost charge under present circumstances, the whole difference that would appear, will be so much gain to the consumers of all those articles, and so much positive and clear net profit to the community. Canals are still more beneficial ; for in them the saving of carriage is still more considerable.! Public works of no utility, such as palaces, triumphal arches, monumental columns, and the like, are items of national luxury. They are equally indefensible, with instances of private prodigality. The unsatisfactory gratification afforded by them to the vanity of the prince Or the people, by no means balances the cost, and often the misery they have occasioned. * With all this waste of space in the great roads of France, there are in none of them either paved or gravelled foot-ways, passable at all seasons, or stone seats, for the travellers to rest upon, or places of temporary shelter from the weather, or cisterns to quench the thirst; all which might be added with a very trifling expense. -j- Book I. chap. 9. t Book H- cha P- 3 - To say, that if the road were not in existence, the charge of transport could never be so enormous as here suggested, because the transport would never take place at all, and people would contrive to do without the objects of transport, would be a strange way of eluding the argument. Self-denial of this kind, enforced by the want of means to purchase, is an instance of poverty, not of wealth. The poverty of the consumer is extreme, in respect to every object he is thus made too poor to purchase ; and he becomes richer in respect to it, in pro- portion as its price or value declines. II In lieu of canals, iron rail-roads from one town to another will probably be one day constructed. The saving in the cost of transport would probably exceed the interest of the very heavy expense in the outset. Besides the addi- tional facility of movement, roads of this kind would remedy the violent jolting of passengers and goods. Undertakings of such magnitude can only be ^rose- cuted in countries where capital is very abundant, and where the government inspires the adventurers with the firm assurance of reaping themselves the profit of the adventure. 444 ON CONSUMPTION. BOOK III CHAPTER VH. OF THE ACTUAL CONTRIBUTORS TO PUBLIC CONSUMPTION. A PORTION of the objects of public consumption have, in some very rare instances, been provided by a private individual. We see occa- sional acts of private munificence, in the erection of a hospital, the laying out of a road, or of public gardens upon the land, and at the cost, of an individual. In ancient times, examples of this kind were more frequent, though much less meritorious. The private opulence of the ancients was commonly the fruit of domestic, or provin- cial, plunder and peculation, or perhaps the spoil of a hostile nation, purchased with the blood of fellow-citizens. Among the moderns, though such excesses do sometimes occur, individual wealth is, in the great majority of cases, the fruit of personal industry and economy. In England, where there are so many institutions founded and sup- ported by private funds, most of the fortunes of the founders and supporters have been acquired in industrious occupations. It re- quires a greater exertion of generosity to sacrifice wealth, acquired by a long course of toil and self-denial, than to give away what has been obtained by a stroke of good fortune, or even by an act of lucky temerity. Among the Romans, a further portion of the public consumption was supplied directly by the vanquished nations who were subjected to a tribute which the victors consumed. In most modern states, there is some territorial property vested, either in the nation at large, or in the subordinate communities, cities, towns, and villages, which is leased out, or occupied directly by the public. In France, most of the public lands of tillage and pasturage, with their appurtenances, are let out on lease ; the government re- serving only the national forests under the direct administration of its agents. The produce of the whole forms a considerable item in the catalogue of public resources. But these resources consist, for the most part, of the produce of taxes levied upon the subjects or citizens. These taxes are some- times national, that is, levied upon the whole nation, and paid into the general treasury of the state, whence the public national expendi- ture is defrayed ; and sometimes local, or provincial, that is, levied upon the inhabitants of a certain canton or province only, and paid into the local treasury, whence are defrayed the local expenses. It is a principle of equity, that consumption should be charged to those who derive gratification from it ; consequently, those countries must be pronounced to be the best governed, in respect of taxation, where each class of inhabitants contributes in taxation proportionately to the benefit derived by it from the expenditure. Every individual and class in the community is benefitted by the central administration, or, in other words, the general government . CHAP, m ON CONSUMPTION. 445 so likewise of the security afforded by the national military estab lishment ; for the provinces can hardly be secure from external attack, if the enemy have possession of the metropolis, and can thence overawe and control them; imposing laws upon districts where his force has not penetrated, and disposing of the lives and property even of such as have not seen the face of an enemy. For the same reason the charge of fortresses, arsenals, and diplomatic agents is properly thrown upon the whole community. It would seem, that the administration of justice should be classed among the general charges, although the security and advantage it affords have more of a local character. When the magistracy of Bordeaux arrests and tries an offender, the public internal security of France is unquestionably promoted. The charge of gaols and court- houses necessarily follows that of the magistracy. Smith has ex- pressed an opinion, that civil justice should be defrayed by the liti- gating parties ; -which would be more practicable than at present, were the judges in the appointment of the parties in each particular case, and no otherwise in the nomination of the public authority, than inasmuch as the choice might be limited to specified persons of approved knowledge and integrity. They would then be arbitra- tors, and a sort of equitable jurors, and might be paid proportion- ately to the matter in dispute without regard to the length of the suit; and would thus have an obvious interest in simplifying the process, and sparing their own time and trouble, as well as in attracting business by the general equity of their decisions, (a) But local administration and local institutions of utility, pleasure, instruction, or beneficence, appear to yield a benefit exclusively to the place or district where they are situated. Wherefore, it should seem, that their expenses ought to fall, as in most countries they do, upon the local population. Not but that the nation at large derives some benefit from good provincial administration, -or institutions. A stranger has access to the public places, libraries, schools, walks, and hospitals of the district ; but the principal benefit unquestionably results to the immediate neighbourhood. It is good economy to leave the administration of the local re- ceipts and disbursements to the local authorities; particularly where (a) Our author seems in this passage to have become a convert to the opinion of Smith, in respect to the civil tribunals of a nation, from which he had ex- pressed his dissent, in former editions. Though arbitration may be a very good mode of settling civil suits, where the parties are both anxious to come to a set- tlement, and indeed is frequently resorted to, and should always be encouraged; yet it is manifest, that there must be a compulsory tribunal for the obstinate, or refractory. And, since security of person and property is the main object of social institutions, it is but just, that invasion in a particular instance should be repelled and deterred at the public charge. In strict justice, the invader shou'd be held to make good the whole damage ; and so he is or ought to be, in the shape of costs, fine, damages, or otherwise. But it is not consistent with equity that the sufferer should be deterred from pursuing his claim, by superadding a proportion of the outlay upon the judicial establishments to the charge of wit- nesses and agents, which he must necessarily advance, and to the risk of In- in the delinquent, even in the event of ultimate success. T. 38 446 ON CONSUMPTION. BOOK III. they are appointed by those, whose funds they administer. There is much less waste, when the money is spent under the eye of those who contribute it, and who are to reap the benefit ; besides, the ex- pense is better proportioned to the advantage expected. When one passes through, a city or town badly paved and ill-conditioned, or sees a canal or harbour in a state of dilapidation, one may conclude, in nine cases out of ten, that the authorities, who are to administer the funds appropriated to those objects, do not reside on the spot. In this particular, small states have an advantage over more exten- sive ones. They have more enjoyment from a less expenditure upon objects of public utility or amusement; because they are at hand to see that the funds, destined to the object, are faithfully applied. CHAPTER VIII. OP TAXATION. SECTION L Of the Effect of all kinds of Taxation in general. TAXATION is the transfer of a portion of the national products from the hands of individuals to those of the government, for the purpose of meeting the public consumption or expenditure. What- ever be the denomination it bears, whether tax, contribution, duty, excise, custom, aid, subsidy,* grant, or free gift, it is virtually a bur- then imposed upon -individuals, either in a separate or corporate character, by the -ruling power for the time being, for the purpose of supplying the consumption it may think proper to make at their expense; in short, an impost, in the literal sense. It would be foreign to the plan of this work, to inquire in whom the right of taxation is or ought to be vested. In the science of political economy, taxation must be considered as matter of fact, and not of right; and nothing further is to be regarded, than its nature, * What avails it, for instance, that taxation is imposed by consent of the peo- ple or their representatives, if there exists in the state a power, that by its acts can leave the people no alternative but consent! De Lolme, in his Essay on the English Constitution, says that the right of the Crown to make war is nu- gatory, while the people have the right of refusing the supplies for carrying it on. May it not be said, with much more truth, that the right of the people to deny the supplies is nugatory, when the crown has involved them in a predica- ment that makes consent a matter of necessity 1 The liberiies of Great Britain have no real security, except in the freedom of the press , which rests itself, rather upon the habits and opinions of the nation, than upon legal enactments or judicial decisions. A nation is free, when it is bent on freedom ; and the most formidable obstacle to the establishment of civil liberty is the absence of the desire for it. CHAP. VII L ON CONSUMPTION. 447 the source whence it derives the values it absorbs, and its effect upon national and individual interests. The province of this science ex- tends no further. The object of taxation is, not the actual commodity, but the value of the commodity, given by the tax-payer to the tax-gatherer. Its being paid in silver, in goods, or in personal service, is a mere accidental circumstance, which may be more or less advantageous to the subject or to the sovereign. The essential point is, the value of the silver, the goods, or the service. The moment that value is part- ed with by the tax-payer, it is positively lost to him ; the momen it is consumed by the government or its agents, it is lost to all the world, and never reverts to, or re-exists in society, This, I appre- hend, has already been demonstrated, when the general effect of pub- lic consumption was under consideration. It was there shown, that however the money levied by taxation may be refunded to the na- tion, its value is never refunded ; because it is never returned gra- tuitously, or refunded by the public functionaries, without receiving an equivalent in the way of barter or exchange. The same causes, that we have found to make unproductive con- sumption nowise favourable to reproduction, prevent taxation from at all promoting it. Taxation deprives the producer of a product, which he would otherwise have the option of deriving a personal gratification from, if consumed unproductively, or of turning to profit, if he preferred to devote it to an useful employment. One pro- duct is a means of raising another; and, therefore, the subtraction of a product must needs diminish, instead of augmenting, productive power. It may be urged, that the pressure of taxation impels the produc- tive classes to redouble their exertions, and thus tends to enlarge the national production. I answer, that, in the first place, mere exertion can not alone produce, there must be capital for it to work upon, and capital is but an accumulation of the very products, that taxation takes from the subject : that, in the second place, it is evident, that the values, which industry creates expressly 'to satisfy the demands of taxation, are no increase of wealth; for they are seized on and de- voured by taxation. It is a glaring absurdity to pretend, that taxa- tion contributes to national wealth, by engrossing part of the national produce, and enriches the nation by consuming part of its wealth. Indeed, it would be trifling with my reader's time, to notice such a fallacy, did not most governments act upon this principle, and had not well-intentioned and scientific writers endeavoured to support and establish it* * By the same reasoning it has been attempted to prove, that luxury and bar- ren consumption oporate as a stimulus to production. Yet they are less mis- chievous than taxation; inasmuch as they redound to the personal gratification of the party himself: whereas, to use the expedient of taxation as a stimulative to increased production, is to redouble the exertions of the community, for lh<; sole purpose of multiplying its privations, rather than its enjoyments. For, il increased taxation bo applied to the support of a complex, overgrown, and osten tatious internal administration, or of a superfluous and disproportionate military establishment, that joay act as a drain of individual wealth, and of the flowr 448 ON CONSUMPTION. BOOK III If, from the circumstance, that the nations most grievously taxed ire those most abounding in wealth, as Great Britain, for example, we are desired to infer, that their superior wealth arises from their heavier taxation, it would be a manifest inversion of cause and effect. A man is not rich, because he pays largely ; but he is able to pajr largely, because he is rich. It would be not a little ridiculous, if a man should think to enrich himself by spending largely, because he sees a rich neighbour doing so. It must be clear, that the rich man spends, because he is rich ; but never can enrich himself by the act of spending Cause and effect are easily distinguished, when they occur in suc- cession 5 hut are often confounded, when the operation is continuous and simultaneous. Hence, it is manifest, that, although taxation maybe, and often is., productive of good, when the sums it absorbs are properly applied", yet, the act of levying is always attended with mischief in the outset. And this mischief good princes and governments have always en- deavoured to render as inconsiderable to their subjects as possible, by the practice of economy, and by levying, not to the full extent of the people's ability, but to such extent only as is absolutely una- \oidable. That rigid economy is the rarest of princely virtues, is owing to the circumstance of the throne being constantly beset with individuals, who are interested in the absence of it; and who are al- ways endeavouring, by the most specious reasoning, to impress the conviction, that magnificence is conducive to public prosperity, and that profuse public expenditune is beneficial to the state. It is the object of this third book to expose the absurdities of such repre- sentations. Others there are, who are not impudent enough to pretend, thai public profusion is a public benefit ; yet undertake to show by arith- metical deduction, that the people are scarcely burthened at all, and are equal to a much higher scale of taxation. As Sully tells us in his Memoirs, " The ear of the prince is assailed by a set of flattering advisers, who think to make their court to him by perpetually sug- gesting new ways of raising money; discharged functionaries, for the most part, whose experience of the sweets of office has left no other impression, than the tincture of the baneful art of fiscal extor- tion; and who seek to recommend themselves to power and favour, by commending it to the lips of royalty."* Others suggest financial projects, and ways and means for filling the coffers of the prince, as they assert, without fleecing the subject. But no plan of finance can give to the government, without taking either from the people, or from the government itself in some other way; unless it be a downright adventure of industry. Something '*nn not be produced out of nothing by a mere touch of the wand. However an operation may be cloaked in mystery, however often Dt" the nutional youth, and an asrtrressor upon the peace and happiness of domes- lie life, will not this be paying as dearly for a grievous public nuisance, as if it were r. benefit of the first magnitude 1 * Memaires, liv. xx. ON CONSUMPTION. 449 we may twist and turn and transform values, there are but two ways of obtaining them, namely, creating oneself, or taking from others. The best scheme of finance is, to spend as little as possible; and the best tax is always the lightest. Admitting these premises, that taxation is the taking Irom in- dividuals a part of their property* for public purposes; that the value levied by taxation never reverts to the members of the community, after it has once been taken from them ; and that taxation is not itself a means of reproduction ; it is impossible to deny the conclusion, that the best taxes, or, rather those that are least bad, are 1 Such as are the most moderate in their ratio. 2. Such as are least attended with those vexatious circumstances, that harass the tax-payer without bringing any thing into the public Exchequer. 3. Such as press impartially on all classes. 4. Such as are least injurious to reproduction. 5. Such as are rather favourable than otherwise to the national morality; that is to say, to the prevalence of habits, useful and bene- ficial to society. These positions are almost self-evident; yet I shall proceed to illustrate them successively, with some few observations. 1. Of such as are most moderate in their ratio. Since taxation does, in point of fact, deprive the tax-payer of a product, which is to him, either a means of personal gratification, or a means of reproduction, the lighter the tax is, the less must be the privation. Taxation, pushed to the extreme, has the lamentable effect of impoverishing the individual, without enriching the state. We may readily conceive how this can happen, if we recall to our attention the former position ; viz. that each tax-payer's consumption, whether productive or not, is always limited to the amount of his revenue. No part of his revenue, therefore, can be taken from him without necessarily curtailing his consumption in the same ratio. This must needs reduce the demand for all those objects he can no longer con- sume, and particularly those affected by taxation. The diminution of demand must be followed by diminution of the supply of pro- duction; and, consequently, of the articles liable to taxation. Thus, the tax-payer is abridged of his enjoyments, the producer of his profits, and the public exchequer of its receipts/)- t *Tt is hardly necessary to controvert an opinion, entertained by sovereigns in times past, respecting the property of their subjects. We find Louis XIV. writing in these terms, professedly for the instruction of his son in matters of government : " Kings are absolute lords naturally possessing the entire and un- controlled disposal of all property, whether belonging to the church or to the. laity, to be exercised at all times with due regard to economy, and to the general interests of the state." (Euvres de Louis XIV., Memoires Hist. A. D. 1666. fin France, before 1789, the average annual consumption of salt was esti. mated at 9 Ibs. per head in the districts subject to the gabdle, and at 18 Iba. per head in those exempt from that impost. De Monthieu, Influence des divet Imnots p 141 Thus, taxation in this form obstructed the production of \ 38* 3G 450 ON CONSUMPTION. BOOK III. This is the reason why a tax is not productive to the public exchequer, in proportion to its ratio ; and why it has become a sort of apophthegm, that two and two do not make four in the arithmetic of finance. Excessive taxation is a kind of suicide, whether laid upon objects of necessity, or upon those of luxury ; but there is this distinction, that, in the latter case, it extinguishes only a portion of the products on which it falls, together with the gratification they are calculated to afford ; while, in the former, it extinguishes both production and consumption, and the tax-payer into the bargain. Were it not almost self-evident, this principle might be illustrated, by abundant examples of the profit the state derives from a moderate scale of taxation, where it is sufficiently awake to its real interests. When Turgot, in 1775, reduced to \ the market-dues and duties of entry upon fresh sea-fish sold in Paris, their product was nowise diminished. The consumption of that article must, therefore, have doubled, the fishermen and dealers must have doubled their conceins and their profits; and, since population always increases with increasing production, the number of consumers must have been enlarged; and that of producers must have been enlarged likewise; for an increase of profits, that is to say of individual revenue, mul- tiplies savings, and thus generates the multiplication of capital and of families ; and that very increase of production will, beyond all doubt, augment the product of taxation in other branches; to say nothing of the popularity accruing to the government from the alle- viation of the national burthens. The government agents, who farm or administer the collection of the taxes, very often abuse their interest and authority, to construe of this article in the districts subjected to it, and reduced to \ the enjoyment it was capable of affording ; to say nothing of the other mischiefs-resulting from it; the injury to tillage, to the feeding of cattle, and to the preparation of salted goods; the popular animosity against the collectors of tax, the consequent in- crease of crime and conviction, and the consignment to the galleys of numerous individuals, whose industry and courage might have been made available to the increase of national opulence. In 1804, the English government raised the duties on sugar 20 per cent. It might have been expected, that their average product to the public exchequer would have been advanced in the same ratio; i. e. from 2,778,OOOZ. the former amount, to 3,330,OOOJ. : instead of which the increased duties produced but 2,537,OOOZ. ; exhibiting an absolute deficit. Speech of Henry Brougham, Esq., M, P., March 13, 1817. The people of Great Britain might consume French wines at a very little advance upon the prices of France, and have the enjoyment of an unadulterated, wholesome, and exhilarating beverage, costing perhaps a shilling a bottle. But the exorbitant duty upon this article has reduced its import and the product of the duty to a very trifle; and thus, the sole benefit resulting from the tax to the British nation is, the total privation of a cheap and wholesome object of con- sumption. The two last examples are a sufficient answer to the objection taken by Ricardo to this passage of my text ; on the ground that taxation is not injurious to production ij ihe aggregate, inasmuch as the consumption of the state itself replaces that of individuals, which is annihilated by the tax. A tax, that robs '.he ind : vidual, without benefit to the exchequer, substitutes no public consump- tion w'-atever. the same Review, " for closeness of reasoning, has not perhaps been equalled, and for excellence of style, has certainly never been surpassed." AMERICAN EDITOR. CHAP. VHI. ON CONSUMPTION. 457 not proportionate to the income of the suitors, but to accident, to the complexity of family interests, and to the imperfections of the law itself. Forfeitures are equally a tax on capital. The influence of taxation upon production is not confined to the circumstance of diminishing one of its sources, that is to say, capital ; it operates besides in the nature of a penalty, inflicted upon certain branches of production and consumption. Patents, licenses to fol- low any specified calling, and, generally, all taxes, that bear directly upon industry, are liable to th ; s objection ; but, when moderate in their ratio, industry will contrive to surmount such obstacles with- out much difficulty. Nor is industry affected only by taxes bearing directly upon it ; it is indirectly affected by such also, as bear upon the consumption of the articles it has to work upon. The products consumed in reproduction are, for the most part, those of primary necessity; and taxes, that discourage such products, must be injurious to reproduction. This is more especially the case in respect to those raw materials of manufacture, which can only be consumed reproductively. An excessive duty upon cotton, checks the production of all articles, wherein that substance is worked up.* Brazil is a country abounding in animal productions, that might be cured and exported, if they were allowed to be salted. Its fisheries are very productive, and cattle so abundant, that they are killed merely for the sake of the hide. Indeed, it is thence that our tanneries in Europe are in a great measure supplied. But the salt duties prevent the export of either fish or meat ; and thus, for the sake of a revenue of about 200,000 dollars perhaps, incalculable mischief is done to the productive powers of the country, as well as to the public revenue, which they might be made to yield. In like manner, as taxation operates in the nature of a penalty, to discourage reproductive consumption, it may be employed to check consumption of an unproductive kind ; in which case it has the two-fold advantage, of subtracting no value from reproductive in- vestment, and of rescuing values from unproductive consumption, to be employed in a manner more beneficial to the community. This is the advantage of all taxes upon luxuries-! *In both England and France, premiums are given upon the importation of specific raw materials, with a view to encourage manufacture. This is an error on the opposite side. Upon this principle, instead of a tax on the product of iand, a bounty should be given to all who would take the trouble to cultivate , for domestic agriculture furnishes the raw material of most manufactures; as grain in particular, which is transformed, through the mediation of human exer- tion, into value of various kinds, exceeding that consumed in the process. Cus- toms or duties of import upon any article whatever are equally equitaoie with direct taxes upon land; both are positive evils; but the lighter the tax, the smaller the injury. f- When it is absolutely necessary to lay a tax upon a particular kind of con- sumption or industry, which it is desirable not to extinguish altogether, the bur- then must be light in the commencement, and increased gradually and cau- 39 3H 458 ON CONSUMPTION. BOOK HL When sums, levied by taxation upon capital, instead of being simply expended by the government, are laid out upon productive objects; or, when individuals contrive to make good the deficiency out of their private savings, the positive mischief of taxation is then balanced by a counteracting benefit. The proceeds of taxation are reproductively vested, when laid out in improving the internal com- munications, constructing harbours, or other such works of utility. Governments sometimes employ a part of the revenue thus realised in adventures of industry. Colbert did so, when he made advances to the manufacturers of Lyons. The governments of Hamburgh, and of some other places in Germany, were in the habit of embarking their revenues in productive undertakings; and it is said, that the authorities of Berne were in the habit of so employing a part of its revenues every year: but such instances are of very rare occurrence. 5. Such as are rather favourable than otherwise to the national morality; that is to say, to the prevalence of habits, useful and bene- ficial to society. Taxation influences the habits of a nation, in the same way as it operates upon its production and consumption, that is, by imposing a pecuniary penalty upon specified acts ; and it is, moreover, pos- sessed of the grand requisites to render punishment effectual; namely, moderation and difficulty of evasion.* Without reference, therefore, to the purposes of finance and revenue, it is a powerful engine in the hands of government, for either corrupting or reform- ing the national morals, and may be directed to the promotion of idleness or industry, extravagance or economy. The tax of five per cent, upon all lands devoted to productive husbandry, and the exemption of pleasure-grounds, which existed in France before the revolution, operated, of course, as a premium upon luxury, and a penalty upon agricultural enterprise. The tax of one per cent, upon the redemption of ground-rents and rent-charges was virtually a penalty upon- an act, equally advantage- ous to the parties and to the community at large ; a fine upon the meritorious exertions of prudent land-owners to pay off their incum- brances. The law of Napoleon, exacting from each scholar, educated in a private academy, a specified payment into the chests of the public universities, operated as a penalty upon that mode of education, which alone can soften national manners and fully develope the faculties of the human mind.f tiously. But if it be desired to repress or annihilate a mischievous class of con- sumption or industry, the full weight of the tax should be thrown upon it at once. * The efficacy of the characteristics of punishment has been placed beyond all doubt by Beccaria, in his tract, Dei delitti e delle pene. I- This species of tax is still more iniquitous, because it must fall either upon ornhans. or upon parents, who are disposed to submit to personal privations, for the purpose of rearing valuable citizens ; because it is heavier in proportion to the number of children, and the degree of privation of the parent; and because it is disproportionate to the means of the individual, poor and rich being taxed alike. CHAP. Vm. ON CONSUMPTION. When a government derives a profit from the licensing of lotteries and gambling-houses, what does it else but offer a premium to a vice most fatal to domestic happiness, and destructive of national pros- perity? How disgraceful is it, to see a government thus acting as the pander of irregular desires, and imitating the fraudulent conduct it punishes in others, by holding out to want and avarice the bait of hollow and deceitful chance!* On the contrary, taxes, that check and confine the excesses of vanity and vice, besides yielding a revenue to the state, operate as a means of prevention. Humboldt mentions a tax upon cock-fight- ing, which yields to the Mexican government 45,000 dollars per annum, and has the further advantage of checking that cruel and barbarous diversion. Exorbitant or inequitable taxation promotes fraud, falsehood, and perjury. Well-meaning persons are presented with the distressing alternative, of violating truth, or sacrificing their interests in favour of less scrupulous fellow-citizens. They can not but feel involun- tary disgust, at seeing acts, in themselves innocent, and sometimes even useful and meritorious, branded with the name, and subjected to all the consequences, of criminality. These are the principal rules, by which present or future taxa- tion must be weighed, with a view to the public prosperity. After these general remarks, which are applicable to taxation in all its A parent of moderate fortune, with one son only, pays as much to the university as all the rest of his taxes together : if he have more sons than one, he is still worse off. Thus was this institution converted by the usurper into an instru- ment of fiscal extortion, sufficient of itself to have insured the relapse into bar- barism, even had it never been made the medium of instilling false ideas or habits of servility. The pretext, of making the profits of private establishments contribute to the expense of compulsory tuition, is by no means satisfactory Supposing the tuition of the public Lycees to be, of all others, the best calculated to train up useful citizens ; and, admitting the justice of compelling a father, or a teacher to his choice, to bring his pupil to the lectures of the authorized pro- fessors, still the parties, least in need of this instruction, are those already placed in private establishments of education, and entrusted to teachers of their own selection. It may be for the interest of the community at large, to dispense par- ticular classes of learning gratuitously ; but it is the greatest oppression to force learning upon individuals, and make them pay dear for it into the bargain. If any one class in particular ought to defray the charge of moderate gratuitous tuition, it is that, which has no children of its own, and is in the reception of all the benefits of social life, without being subject to all its burthens. * Lotteries and games of hazard, besides occupying capital unprofitably, in volve the waste of a vast deal of time, that might be turned to useful account, and this item of expenditure can never redound to the profit of the exchequer. They have the further mischievous effect of accustoming mankind to look to chance alone for what their own talents or enterprise might attain ; and to seek for personal gain, rather in the loss of others, than in the original sources of wealth. The reward of active energy appears paltry beside the bait of a capital prize. Moreover, lotteries ace a sort of tax, that, however voluntarily incurred, falls almost wholly upon the necessitous; for nothing, but the pressure of want can drive mankind to adventure, with the chances manifestly against them. The sums thus embarked are, for the most part, the portion of misery , or, wha is worse, the fruit of actual crime. 460 ON CONSUMPTION. BOOK IF branches, it may be useful to examine the various modes of assess ment : in other words, the methods adopted for procuring money from the subject ; as well as to inquire, upon what classes of the community the burthen principally falls. SECTION IL Of the different Modes of Assessment, and the Classes they press upc . respectively. Taxation, as we have seen above, is a requisition by the govern- ment upon its subjects for a portion of their products, or of their value. It is the business of the political economist to explain the effects resulting from the nature of the products put in requisition, and from the mode of apportioning the burthen, as well as upon whom the burthen of the charge really falls, since it must inevitably fall upon some one or other. The application of the above principles in a few specific instances will show, how they may be applied in all others. The public authority levies the values taken in the way of tax- ation, sometimes in the shape of money, sometimes in kind, accord- ing to its own wants, or the ability of the tax-payer. In whatever shape it is paid, the actual contribution of the tax-payer is always of the value of the article he gives. If the government, wanting or pretending to want corn, or leather, or woollens, makes a requisi- tion of those articles upon the tax-payer, and obliges him to furnish them in kind, the tax paid amounts exactly to what the payer has expended in procuring those articles, or what he could have sold them for, if the government had not taken them from him. This is the only way of ascertaining the amount of the tax, whatever price or rate the government may set upon it in the plenitude of its power. So, likewise, the charges of collection, in whatever shape they may appear, are always an aggravation of the assessment, whether they accrue to the profit of the state or not. If the tax-payer be obliged to lose his time, or transport his goods, for the purpose of paying the tax, the whole of the time lost, or expense of transport, is an aggravation of the tax. Among the contributions* that a government exacts from its sub- jects, should likewise be comprised, all the expenses which its politi- cal conduct may bring upon the nation. Thus, in estimating the expenses of war, we must include the value of equipment and pocket-money, with which the military are supplied by them- selves or their families ; the value of the time lost by the militia ; the sums paid for exemption and substitutes; the full charge of quarters for the troops; the pillage and destruction they maybe guilty of; the presents and attentions lavished on them by friends or countrymen on their return ; to all which must be added, the CHAP. VIII. ON CONSUMPTION. 401 alms extorted from pity and compassion by the misery consequent upon such misrule. For, in fact, none of these values need have been taken from the members of the community under a better system of government. And, although none of them have gone into the treasury of the monarch, yet have they been paid by the people, and their amount is as completely lost, as if they had contributed to the happiness of the human species. Hence, we may form some notion of the extent of the national sacrifices. But, from what source are they drawn ? Doubtless, either from the annual product of the national industry, land, and capital ; that is to say, from the national revenue ; or from the values previously saved and accumulated ; that is to say, from the national capital. When taxation is moderate, the subject can not only pay his taxes wholly out of his revenue, but will not be altogether disabled from besides saving some part of that revenue : and although some of the tax-payers may be obliged to trench upon their capital for the payment of their taxes, the loss to the general stock is amply reimbursed by the savings, which this happy state of affairs allows others to effect. But it is far otherwise, when military despotism or usurped au- thority extorts excessive contributions. Gieat part of the taxes is then taken from the vested and accumulated capital ; and, if the country be long subjected to its domination, the revenues of each successive year are progressively reduced, and the ruin and depopu- lation of the country, will recoil upon its rulers, unless their down- fall be accelerated by their own folly and excesses. Under the protecting influence of just and regular government, on the contrary, there is a progressive annual enlargement of the profits and revenues, on which taxation is to be levied ; and that taxation, without any alteration of its ratio, gradually becomes more productive by the mere multiplication of taxable products. Nor is the government more deeply interested in moderating the ratio of taxation, than its impartial assessment upon every class of individual revenue, and its equal pressure upon all. In fact, when revenue is partially affected, taxation sooner reaches the extreme limits of the ability of some classes, while others are scarcely touched at all : it becomes vexatious and destructive, before it arrives at the highest practical ratio. The burthen is galling, not because of its weight, but because it does not rest upon all shoulders alike. The different methods employed to reach individual revenues, may be classed under two grand divisions direct, and indirect, - taxation ; the former is the absolute demand of a specific portion of an individual's real or supposed revenue ; the latter, a demand of a specific sum on each act of consumption of certain specified objects, to which that income may be applied. In neither case, is the real subject of taxation that commodity, on which the estimate is made, and which forms the grounu-work of the demand for the tax ; or of necessity that value, whereof a part is 39* 462 ON CONSUMPTION. . BOOK III. taken by the state ; individual revenue is the only real subject of tax- ation; and the specific, .commodity is selected only as a more or less effective means of discovering and attacking that revenue. If indi- vidual honesty could in every case be relied on, the matter would be simple enough ; all that would be requisite would be, to ask each person the amount of his annual profits, that is to say, his annual reve- nue. The contingent of each would be readily settled, and one tax only necessary, which would be at the same time the most equitable, and the cheapest in the collection. This was the method adopted at Hamburgh, before that city fell into misfortune ; but it can never be practised, except in a republic of small extent, and very moderately taxed. As a means of assessing direct taxation proportionately to the respective revenues of the tax-payers, governments sometimes com- pel the production of leases by landlords, or, where there is no lease, set a value on the land, and demand a certain proportion of that value from the proprietor ; this is called a land-tax.* Sometimes they estimate the revenue by the rent of the habitation, and the number of servants, horses, and carriages kept, and make the assessment accordingly. This is called in France, the tax on moveables.f Sometimes they calculate the profits of each person's profession or calling, by the extent of the population and district where it is fol- lowed. This is called in France, the license-tax. J All these differ- ent modes of assessment are expedients of direct taxation. In the assessment of indirect taxation, and such as is intended to bear upon specific classes of consumption, the object itself is alone attended to, without regard to the party who may incur the charge. Sometimes a portion of the value of the specific product is demanded at the time of production ; as in France, in the article of salt. Some- times the demand is made on entry, either into the state, as in the duties of import; or into the towns only, as in the duties of entry.)] Sometimes a tax is demanded of the consumer at the moment of transfer to him from the last producer; as in the case of the stamp duty in England, and the duty on theatrical tickets in France. Sometimes the government requires a commodity to bear a particular mark, for which it makes a charge, as in the case of the assay-mark of silver, and stamp on newspapers. Sometimes it monopolizes the manufacture of a particular article, or the performance of a particular kind of business ; as in the monopoly of tobacco, and the postage of letters. Sometimes, instead of charging the commodity itself, it charges the payment of its price ; as in the case of stamps on receipts and mercantile paper. All these are different ways of raising a reve- nue by indirect taxation ; for the demand is not made on any person in particular, but attaches upon the product or article taxed.TI * Contribution-fonciere. f Mobiliere. J Les Patentes. Douanes. \\ Octroi. IT Not because they affect the tax-payer indirectly; for this circumstance is equally applicable to many items of direct taxation ; as, for instance, to the license- tax fpntentes,') part of which falls indirectly upon the consumer, who buys of *i Jirensed dealer. CHAP. VIIL ON CONSUMPTION. 463 It may easily be conceived, that a class of revenue, which may escape one of these taxes, will be affected by another; and that the multiplicity of the forms of taxation gives a great approximation to its equal distribution ; provided always, that all are kept within the bounds of moderation. Every one of these modes of assessment has peculiar advantages and peculiar disadvantages, besides the general evil of all taxation, to wit, that of appropriating a part of the products of the community to purposes little conducive to its happiness and reproductive powers. Direct taxation, for instance, is cheap in the collection ; but, on the other hand, it is paid with reluctance, and must be enforced with considerable harshness and rigour. Besides, it bears very inequitably upon the individual. A rich merchant, charged only 120 dollars for nis license, makes an annual profit, perhaps, of 20,000 dollars; while the retailer, who can scarcely be supposed to make more than 300 dollars, is charged for his license 20 dollars, which is the lowest rate. The revenue of the landholder is already affected by the land-tax, before it is further reduced by the tax on moveables ; while the capitalist is subjected to the latter burthen only. Indirect taxation has the recommendation of being levyable with more ease, and with less apparent vexation or hardship. All taxes are pud with reluctance, because the equivalent to be expected for them, 'hat is, the security afforded by good order and government, is a negative benefit, which does not immediately interest indivi- duals ; tb: m the benefit afforded consists rather in prevention of ill, than ;n the diffusion of good. But the buyer of the taxed commodity does not suspect himself to be paying for the protection of govern- ment, which probably he cares very little about ; but merely for the commodity itself, which is an object of his urgent desire, although, in fact, that pri 'e is aggravated by the tax. The inducement to consume is strorg enough to include the demand of the government; and he readily parts with a value, that procures an imnjediate 'grati- fication. It is this circumstance, that makes such taxes appear to be volun tary. And, indeed, so much so were they considered by the United States before tluur emancipation, that, although the right of the British Parliament to tax America without her consent was stoutly denied, yet she was ready to acknowledge the right of imposing taxes upon consumption, which every body could evade if he pleased, by abstaining from the articles taxed.* Personal taxes are * Vide Examination of B. Franklin, at the bar of the House of Commons, 1767. Mfmmrs, vol. i. Appendix 6. (a) (a) Tlio denial went to the whole of what is called internal taxation; the admission, which appears on the part of the American agents to have been a concossi i) for the sake of peace, went no farther than to external taxes for the regulation of trade. And even this concession on the part of some of the agents \vns M,-ry srxm retracted, and the right of taxation denied in toto. Ibid. vol. u iaxsim T 4G4 ON CONSUMPTION. BOOK Til. viewed in a different light, and have more of the character of osten- sible spoliation. Indirect taxation is levied piecemeal, and paid by individuals according to their respective ability at the moment. It involves none of the perplexity of separate assessments on each province, department, or individual; or of the inquisitorial inspection into private circumstances; nor does it make one person suffer for the default of another. The inconvenience of appeals and private ani- mosities, as well as of levy by distress or imprisonment, is avoided altogether. Another advantage of indirect taxation is, that it enables the government to bias the different classes of consumption; favouring such as promote the public prosperity, as does reproductive con- sumption of all kinds; and checking such as tend to public im- poverishment, as do all kinds of unproductive consumption; dis- couraging the costly and insipid indulgences of the wealthy, and promoting the simpler and cheaper enjoyments of the poor and industrious. It has been objected to indirect taxation, that it entails a heavy expense of collection and management, and a large establishment of clerks, officers, directors, and subordinate agents ; but it is ob- servable, that these charges may be vastly reduced by good admin- istration. The excise and stamp-duties in England cost but 3|- per cent, in the collection, in the year 1799.* There are few classes of direct taxation, that are managed so economically in France. It has been further objected, that its product is uncertain and fluctuating; whereas, the public exigencies require a regular and certain supply: but there has never been any lack of bidders, when- ever such taxes have been let out to farm ; and experience has shown, that the product of every class of taxation may always be nearly estimated and safely reckoned upon, except in very rare and extraordinary emergencies. Besides, taxes on consumption are necessarily various; so that, the deficit of one is covered by the surplus of another. Indirect taxation is, however, an incentive to fraud, and obliges governments to brand with the character of guilt, actions that are innocent in their nature; and, consequently, to resort to a distressing severity of punishment. But this mischief is never considerable, until taxation has grown excessive, so as to make the temptation to fraud counterbalance the danger incurred. All excess of taxation is attended with this evil ; that, without enlarging the receipts of (he public purse, it multiplies the sufferings of the population. It may be observed, that consumption, and, consequently, indivi- dual revenue, are unequally affected by indirect, as well as by direct, taxation : for the private consumption of many articles is not pro- * Gamier, Traduction de Smith,tom. iv. p. 438. According to Arthur Young 1 , Uie stamp-duties in his time cost but 5,691/. in the collection, upon the receipt of l,330,0()OZ. ; which is less than \ per cent. CHAP. VIIL ON CONSUMPTION. portionate to the revenue of the consumer. The possessor of an annual revenue of 20.000 dollars does not consume in the year an hundred times as much salt, as the possessor of a revenue of 200 dollars only. But this inequality may be obviated by the variety of taxes on consumption. Moreover, it is to be recollected, that such taxes fall upon incomes already charged with the taxes on land and pn moveables. A person, whose whole income is derived from land, in respect to which he is taxed in the first instance, pays on the same income a second tax under the head of moveables; and a third on every taxed article, that he buys and consumes. Although all these kinds of taxes be paid in the outset, by the persons of whom they are demanded by the public authority, it would be wrong to suppose, that they always ultimately fall on the original payers, who, in many instances, are not the parties really charged, but merely advance the tax in the first instance, and con- trive to get indemnified wholly or partially by the consumers of .heir own peculiar products. But the rate of indemnity is infinitely diversified by the respective circumstances of the individuals. Of this diversity, we may form some notion, by the consideration of the following general facts : When the taxation of the producers of a specific commodity ope- rates to raise its price, part of the tax is paid by the consumers of the commodity. If its price be nowise raised, it falls wholly upon the producers. If the commodity, instead of being thereby ad- vanced in price, is deteriorated in quality, a portion of the tax at least must fall upon the consumer; for a purchase of inferior quality at equal price is equivalent to a purchase of equal quality and superior price. Every addition to price must needs reduce the number of those possessed of the ability to purchase ; or, at any rate, must diminish the extent of that ability.* There is much less salt consumed, when it sells for three cents, than when it sells for one cent per Ib. Now, the ratio of the demand to the means of production being lowered, productive agency in this department is worse paid ; that is to say, the master-manufacturer of salt, and all the subordinate agents and labourers, together with the capitalist that supplies the funds, and the landlord of the premises where the concern is carried on, must be content with smaller profits, because their product is less in de- mand.f The productive classes, indeed, naturally strive to indemnify * Supra, Book II. chap. I. f The position, that the interest of the capitalist and the rent of the landlord are thereby lowered, however paradoxical it may appear, is nevertheless quite true. It may be asked, why should the capitalist, who makes the advance to the manufacturer, or the landlord, whose land he occupies, lower their demands, in consequence of a portion of the product being subtracted by taxation 1 But is no allowance to be made for consequent delay of payment, claims of allow- ances, failures, and legal expenses? All, or at least a portion, of which must fall upon the landlord and capitalist: and often without any suspicion on theit part, that they are thus made to participate in the burthen. In a complex organization the pressure of taxation is often imperceptible. 31 466 ON CONSUMPTION.* BOOK EL themselves to the amount of the tax ; but, they can never succeed to the full extent, because the intrinsic value of the commodity, that, I mean, which goes to pay the charges of production, is really dimin- ished. So that, in fact, the tax upon an article never raises its tota" price by the full amount of the tax ; because, to do so, the total demand must remain the same ; which it never can do. Wherefore, in such cases, the tax falls, partly upon those, who still continue to consume, notwithstanding the increase of price, and partly upon the producers, who raise a less product, and find that, in consequence of the reduced demand, they really obtain less on the sale, when the tax comes to be deducted. The public revenue gains the whole excess of price to the consumer, and the whole of the profit, which the produce is thus compelled to resign. The effect is analogous to that of gunpowder, which at the same time propels the bullet, and makes the piece recoil. By laying a tax upon the consumption of woollens, their consump- tion is reduced, and the revenue of the wool-grower suffers in con- sequence. It is true, he may take to a different kind of cultivation, but we may fairly suppose, that, under all the circumstances of soil and situation, the rearing of sheep was the most profitable kind of culture ; otherwise, he would not have chosen it. A change in the mode of cultivation must, therefore, involve a loss of revenue. But the clothier and the capitalist will each be subjected to a portion of the loss resulting from the tax. Each concurrent producer is affected by a tax on an article of consumption, in proportion only to the share he may have in raising the product taxed. When the owner of the soil furnishes the greatest part of the value of a product, as he does in respect to products consumed nearly in the primary state, he it is that bears the greatest part of that por- tion of the tax, which falls on the producers. A duty of entry upon the wine imported into the towns, falls heavily upon the wine- grower ; but an exorbitant excise upon lace will affect the flax-grower in a degree hardly perceptible ; whereas, all the other producers, the dealers, the operative and speculative manufacturers, who create the far greater proportion of the value of the lace, will suffer very severely. When the value of a product is partly of foreign, and partly of domestic creation, the domestic producers bear nearly the whole burthen of the tax. A tax upon cottons in France will reduce the earnings of her cotton manufacturers, by lowering the demand for their product ; thus, part of the tax will fall on them. But the wages of the productive agency of the cotton-growers in America will be very little affected indeed, unless there be a concurrence of other circumstances. In fact, the tax would reduce the consumption in This shows the danger of adherence to invariable principle ; and of abandon- ing the experimental method of Smith, and constructing a system of theoretical led action, as some recent English writers have done, in imitation of the econiv oiists of the last century. CHAP. VnL ON CONSUMPTION. 467 France 10 per cent, perhaps, and demand in America 1 per cent only, if the demand from France were but one-tenth of the general demand upon America. The taxation of an object of consumption, if it be one of primary necessity, operates upon the price of almost all other products, and consequently falls upon the revenues of all the other consumers. An octroi upon meat, corn, and fuel, at their entry into a town, enhances the price of every thing manufactured in it; while a tax upon the tobacco there consumed makes no other commodity dearer; the producers and consumers of tobacco alone are affected; and for a very plain reason; the producer who indulges in superfluities has to maintain a competition with another, who abstains from them ; but, if he pays a tax upon necessaries, he need fear no competition ; for his neighbours will be all in the same predicament. The direct taxation of the productive classes must, & fortiori, affect the consumers of their products, but can never raise the prices of those products so much, as completely to indemnify the producer; because, as I have repeatedly explained, the increased price abridges the demand, and the contraction of the demand reduces the profits of all the productive agency, that has been exerted in the supply. Of the concurrent producers of a specific product, some can more easily evade the effect of the tax than others. The capitalist, whose capital is not absolutely vested and sunk in a particular business, may withdraw it and transfer it elsewhere, from a concern that yield's him a reduced interest, or has become more hazardous. The ad- venturer or master-manufacturer may, in many cases, liquidate his account, and transfer his labour and intelligence to some other quarter. Not so the land-owner and proprietor of fixed capital.* An acre of vineyard or corn-land will only produce a given quantity of corn or wine, whatever be the ratio of taxation ; which may taks the % or even f of the net produce, or rent as it is called, and yet the land be tilled for the sake of the remaining or .f The rent, that is to say, the portion assigned to the proprietor, will be reduced, and that is all. The reason will be manifest to any one, who con- siders, that in the case supposed, the land continues to raise and supply the market with the same amount of produce as before ; while on the other hand, the motives in which the demand originates remain just as they were.J If, then, the intensity of supply and * Vide Supra, Book I. chap. 4. for the explanation of the mode, in which the land-holder concurs in production by the advance of his land ; and must, there- fore, be included amongst the productive classes. fThe cultivation need never be abandoned altogether, until taxation tafceh more than the whole surplus product applicable to the payment of rent ; it is then worth nobody's while to cultivate at all ; for not only could the proprietor receive nothing, the whole being appropriated by the state; but me fanner would be compelled to pay to the state a higher rent, than he could afford. f There is this peculiarity attending the products of agricultural industry, v'z. that their average price is not raised by growing scarcity, because population in eure to decline co-extensively with the declining supply of human aliment; so that the demand necessarily diminishes equally with the supply. Thus it is not 468 ON CONSUMPTION. BOOK HL demand must both remain the same, in spite of any increase or diminution of the ratio of the direct taxation upon the land, the price of the product supplied will likewise remain unchanged, and nothing but a change of price can saddle the consumer with any portion whatever of that taxation.* Nor can the proprietor evade the tax even by the sale of the estate ; for the price or purchase-money will be calculated according to the revenue which may be left him by taxation. The purchaser makes his estimate according to the net revenue, charges and taxes deducted. If the ordinary interest on such investments of capital be five per cent., an estate that before would have sold for 20,000 dollars, will fetch but 16,000 dollars when it comes to be charged with an annual tax of 200 dollars ; for its actual product to the pro- prietor will not exceed 800 dollars. The effect is precisely the same, as if government were to appropriate to itself 1-5 of the land in the country ; which would make no difference at all to the consumers of its produce.f But property in dwelling-houses is otherwise circumstanced ; a tax upon the ownership raises the rents ; for a house, or rather the satisfaction it yields to the occupier, is a product of manufacture and not of land ; and the high rate of house-rent reduces the production and consumption of houses, in the like manner as of cloth or any other manufactured commodity. Builders, finding their profits re- duced, will build less ; and consumers, finding the accommodation dearer, will content themselves with inferior lodging. From all those circumstances, we may judge of the temerity of asserting as a general maxim, that taxation falls exclusively upon any specific class or classes of the community. It always falls upon those who can find no means of evasion ; for every one naturally tries to shift the burthen off his own shoulders if possible ; but the ability to evade it is infinitely varied, according to the various forms found, that wheat is dearer in those countries where great part of the land is thrown out of tillage, than where it is all in a high state of cultivation. In Spain, wheat is not now dearer, than in the time of Ferdinand and Isabella, though it is there produced in much less abundance ; for the number of mouths to be fed is also much less. On the contrary, the lands of both England and France were less cultivated in the middle ages than at the present day ; and their product of grain less abundant; yet it does not appear, from a comparison of other values, that it was then much dearer than at present. The product and the population were both greatly inferior ; and the slackness of demand counter- balanced the slackness of supply. * It is a mistake to suppose, that the tax must bear equally upon the proprietor and the farmer, who finds the requisite capital and industry ; for taxation can iiave no effect, either in reducing the quantity of land capable of cultivation, or in multiplying the number of farmers, able and willing to undertake it; and, if neither supply nor demand in this branch be varied, the ratio of the rent must needs remain unaltered likewise. fThe economists were quite correct in their position, that a land or territorial tax falls wholly upon the net product, and consequently, upon the proprietors ; but they were wrong in extending the doctrine so far as to assert, that all othn\ taxes were defrayed out of the same fund. CHAP. VI1L ON CONSUMPTION. 469 of assessment, and the position of each individual in the social system. Nay, more; it varies at different times even in the same channel of production. When a commodity is in great request, the holder will not part with the possession, unless indemnified for all his advances, of which the tax he has paid is a part: he will take nothing short of a full and complete indemnity. But, if any unlooked- for occurrence should happen to lower the demand for his product, he will be glad enough to take the tax upon himself, for the sake of quickening the sale. There are few things so unsteady and variable, as the ratio of the pressure of taxation upon each respective class of the community. Those Writers, who have maintained, that it bears upon any one or more classes in particular, or in any fixed or cer- tain proportion, have found their theory contradicted by experience at every turn. Furthermore, the effects I have been describing, and which are equally consonant to experience and to reason, are uniform in their operation and of equal duration with the causes in which they origi- nate. The owner of land will never be able to saddle the consumers of its produce with any part of his land-tax ; not so the manufacturer A manufactured commodity will invariably feel a diminution in its consumption, in consequence of the price being raised by taxation, supposing other circumstances to be stationary; and its production will be a less profitable occupation. A person, who is neither pro- ducer nor consumer of an object of luxury, will never bear any portion whatever of the tax that may be laid upon it. What, then, must we think of a proposition, unfortunately sanctioned by the ap- probation of an illustrious body,* that has too much neglected this branch of science, namely, that it is of little importance whether a tax press upon one branch of revenue or another, provided it be of long standing ; because every tax in the end affects every class of revenue, in like manner, as bleeding in the arm reduces the circu- lating blood of the whole human frame. The object of comparison has no analogy whatever with taxation. Social wealth is not a fluid, tending constantly to find a level. It rather resembles the vegetable creation, which admits of the loss of a limb without the destruction of the trunk, and in which the loss is more to be la- mented, if the branch be productive, than if it be barren. But the tree will bear cutting and hacking in every part, before it becomes barren all over, or necessarily falls into decay. This is a far more apposite case ; but neither will do to reason upon. Comparisons are not proofs, but mere illustrations, tending to make that intelligible, which can be made out in proof without their assistance. When speaking of taxes^upon products, which I have sometimes called taxes upon consumption, although not paid entirely in all cases by the consumer, I have hitherto made no mention of the particular stage of production, at which the tax may be demanded. * The French institute, which awarded the prize of merit to an Essay of HL Canard, in support of this doctrine. 40 170 ON CONSUMPTION. BOOK III. or of the consequence of this particular circumstance, which deserves a little of our attention. Products increase in value progressively, as they pass through the hands of the different concurrent producers: and even the most simple undergo a variety of modifications, before they arrive at a fit state for consumption. Wherefore, a tax does not take the pro- portion of the value of a product which it professes, unless it be levied at the precise moment, when it has arrived at the full value, and has undergone all the productive modifications. If a tax be im- posed on the raw material in the outset, proportioned, not to its then value, but to the value it is about to receive, the producer, in whose hands it happens to be, is obliged to advance a tax out of proportion to the value in hand ; which advance, besides being highly incon- venient to himself, is refunded with equal inconvenience bv every successive producer, till it reach the hands of the last, who is in turn but partially indemnified by the consumer. And there is this further mischief in such an advance of tax; that it prevents the class of in- dustry, which is called upon to make it, from being originally set in motion, without a larger capital than the nature of the business requires ; and that the additional interest of the capital, which must be paid, part by the consumers, and part by the producers, is so much additional taxation, without any addition of public revenue.* Thus, both theory and experience lead to the conclusion precisely opposite to that drawn by the sect of economists; and show that por- tion of the tax, which presses upon the consumer's revenue, to be always the more burthensome, the earlier it is levied in the process of production. Direct and personal taxes, which operate to raise the price of necessaries, or such as fall immediately upon necessaries, are liable to this inconvenience in the highest degree : for they oblige each producer t6 advance the personal tax on all the producers that have preceded him: so that the same amount of capital will set in motion a smaller amount of industry ; and the tax-payers pay the tax, plus a compound interest upon it, yielding no benefit to the exchequer. Nor is this mere theory : the neglect of these principles has occa- sioned may serious practical errors; like that of the Constituent * The duty on the import of cotton into France was, in 1812, as high as 200 dollars per bale, one bale with another. There were several manufactories ave- raging a consumption of two bales per day ; and as the amount of duty was a dead outlay, during the whole interval between the purchase of the raw material and the realization of the manufactured product, which may be taken at twelve months, they must each have required an additional capital of 120,000 dollars more than would have been requisite but for th* tax ; the interest of which they must have charged to the consumer, or have paid out of their own profits. The whole of it was so much addition of price to the French consumer, and aggra- vation of the pressure of taxation, unproductive of a single additional dollar to the public revenue. The heaviest of the national burthens of that period were ihose that made the least figure in the annual budget of the ministry : the people suffered, in very many instances, without knowing the nature of tie grievance, as in the example, just cited. CHAP. VIH ON CONSUMPTION. 471 Assembly of France, which carried to excess the system of direct taxation, especially upon land ; being misled by the prevailing and fashionable doctrine of the economists; that land is the source of all wealth, the agriculturist the only productive labourer, and France naturally and essentially an agricultural country. It seems to me that, in the present stage of political economy, the principles of taxation will be more correctly laid down as follows: Taxation is the taking 'a portion of the general product of the community, which never returns to the community in the channel of consumption. It takes from the community over and above the values actually brought into the exchequer, the charges of collection, and the per sonal trouble it entails ; together with all those values, of which it obstructs the creation. The privation resulting from taxation, whether voluntary or com- pulsory, affects the tax-payer in his quality of producer, whenever it operates to curtail his profits ; that is to say, his income or reve- nue; and affects him in his character of consumer, whenever it increases his expenditure, by raising the prices of products. And, since an increase of expenditure is precisely the same thing as a diminution of revenue, whatever is taken by taxation may be said to be so much deducted from the revenues of the community. In a great majority of cases, the tax-payer is affected by taxation in both his characters, of producer and consumer; and, when he can not manage to pay the public burthens out of his revenue, along with his personal consumption, he must encroach upon his capital. When this encroachment of one person is not counterbalanced by the sav- ings of another, the wealth of the community must gradually decline. The individual actually paying the tax to the tax-gatherer is not always the party really charged with it, at least, not the party charged with the whole that is paid. He frequently does no more than advance the tax, either wholly or partially; being afterwards reimbursed by the other classes of the community, in a very com- plicated way, and perhaps after a vast variety of intermediate opera- tions ; so that a great many persons are paying portions of the tax, at a time when probably they least suspect it, either in the shape of the advanced price of commodities, or of personal loss, which they feel but can not account for. The individuals, on whose revenues the tax ultimately falls, are the real tax-payers, and contribute value greatly exceeding the suti that is brought into the exchequer, even with the addition of the charges of collection. The misconduct of the government in the matter of taxation, is proportioned to this excess of the payment above the receipt. A country heavily taxed may be considered in the same light as one labouring under natural impediments to production. With a heavy charge of production, it raises a very small product Per son*/ exertion, capital, and the productive agency of land are all 472 ON CONSUMPTION. BOOK III but poorly recompensed : and more is expended in earning a less profit. It is worth while on this head to recur to the principles explained in the preceding book,* when describing the difference between positive and relative dearness. High price resulting from taxation is positive dearness: it indicates a smaller product raised by the efforts of a larger amount of productive agency. Besides which, taxation generally occasions a cotemporary advance of commodi- ties in comparison with silver ; that is to say, raises their money price: and for this reason; because specie is not an annual, regene- rative product, like those that are swallowed up by taxation. Go- vernment is not a consumer of specie, except when it happens to export it for the payment of its armies, or foreign subsidies: it refunds in the purchases it makes all the specie it obtains by taxa- tion: but the value levied is never refunded, f Wherefore, since taxation paralyzes one part of the sources of production, and effects the rapid destruction of the product of the other, when its ratio is excessive, it must gradually render products more scarce in propor- tion to the specie, which is not varied in quantity by the operation. Now, whenever the commodities to be circulated become fewer in proportion to the specie that is to circulate them, their relative value to the specie must rise ; the same money will purchase a smaller quantity of products. It might be supposed, that such a superabundance of gold and silver specie ought to operate in exoneration of the public : yet it can not have that effect; for, however plentiful it may be in pro- portion to other commodities, still individuals can only obtain it by giving their own products in exchange, and the raising of those pro- ducts has become more difficult and more costly. Besides, when money-prices grow high, and specie is conse- quently reduced in relative value, it gradually takes its departure, and becomes scarcer, like all other commodities: and thus a country, burthened with a taxation too heavy for its productive powers, is lirst drained of its commodities, and next of its specie; till it gradu- ally reaches the extreme of penury and depopulation. The careful study of these principles will give some insight into the mode, in which the annual and really monstrous expenditure of national governments, in modern times, has habituated the subject to severer toil and exertion, without which it would be impossible that, after providing for the subsistence, comfort, and pleasures of himself and family, according to the habits of the time and place, he should be able to meet the consumption of the state, and the collate- ral waste and destruction it occasions, the amount of which it is impossible to ascertain, though in the larger states it is confessed!) enormous. * Book II. chap. 3. j- For the reason already stated, viz. that purchases, made with the proceeds of taxation, are acts o*" exchange, and not of restitution. CHAP. Vm. ON CONSUMPTION. 473 This very profusion, though it proves the vices and defects of the political system and organization, has been attended with one advan- tage at any rate; it has operated to stimulate the approximation to perfection in the art of production, by obliging mankind to turn the natural agents to better account. In this point of view, taxation hasr certainly helped to develope and enlarge the human faculties; so that, when the progress of political science shall limit taxation to the supply of real public wants only, the improvements in the art of production will prove a vast accession to human happiness. But, should the abuses and complexity of the political system lead to the prevalence, extension, increase, and consolidation of oppressive and disproportionate taxation, it is much to be feared, that it may plunge again into barbarism those nations, whose productive powers are now the most astonishing; and the condition of the labouring classes, who are always the bulk of the community, may in such nations present a picture of drudgery so incessant and toilsome, as to make them cast a wistful eye upon the liberty of savage existence ; which, though it offer no prospect of domestic comfort, at least promises emancipation from perpetual exertion to supply the prodigality of a public expenditure, yielding to them no satisfaction, and, perhaps even operating to their prejudice, (a) SECTION III. Of Taxation in Kind. Taxation in kind is the specific and immediate appropriation of a portion of the gross product to the public service. It has this advantage, of calling on the producer only for what he (a) This ground of apprehension is certainly just. It has been doubted by many political theorists, whether the total remission of taxation would operate to improve the condition of the inferior productive classes: inasmuch, as all that is now paid into the public exchequer, would quickly be appropriated by the classes, who should happen to be in possession of those sources and means of production, which are capable of exclusive appropriation ; and the owners of mere personal agency would nowise benefit. But it should be observed, that private persons have an immediate personal interest in making the most of their property ; and will, on their own account, so conduct themselves, as to promote their own advantage, which is the advantage of the public also, where equality of personal right prevails. Wherefore, the strongest impulse of private cupidity can never operate to retard the advance of productive power and national wealth, or to make them retrograde ; but just the contrary. Thus, although the present con- dition of the mere labourer might not be improved, his means of bettering his condition would be enlarged, by the growing increase of wealth, and by greater freedom of personal agency. The extortion of private cupidity, unaided by authority, must, for its own sake, regulate itself by the ability of the object of it : but that of public authority is inexorable, and is restrained by no considera- tion of immediate personal interest. Besides, personal suffering, occasioned by the hard-heartedness of primate task-masters, is not so strong an incentive of odium against public authority, as where that authority is itsfcJ the ostensible task-master. T 40* 3K 474 ON CONSUMPTION. BOOK IE. has actually in hand, in the identical shape which it happens to be under. Belgium, after its conquest by France, found itself at times unable to pay its taxes, in spite of abundant crops ; the war, and the prohibition of exportation, obstructed the sale of its produce, which the government enforced by demanding payment in money ; whereas, the taxes might have been collected without difficulty, had the government been content to take payment in kind. It has the further advantage of making it equally the interest of government and of the farmer to obtain plentiful crops, and improve the national agriculture. The levying of taxes in kind in China, was probably the origin of the peculiar encouragement, bestowed by its government upon the agricultural branch of production. But, why Favour one branch, when all are equally entitled to protection, be- cause all contribute to bear the public burthens 1 And, why has not government an equal interest in supporting the other branches, which it takes the trouble of extinguishing ? It has likewise the advantage of excluding all exaction and injus- tice in the collection; the individual, when he gathers in his harvest, Knows exactly what he has to pay ; and the state knows what it has to receive. This tax, which might appear at first sight to be of all others the most equitable, is nevertheless of all others the most inequitable ; for it makes no allowance for the advances made in the course of pro duction, but is taken upon the gross, instead of the net, product Take two farmers in different branches of cultivation ; the one farm ing tillage-land of moderate quality; his expenses of cultivation, amounting, one year with another, say to 1600 dollars, and the gross product of his farm, say to 2400 dollars, so as to yield him a net pro- duct of 800 dollars only ; the other farming pasturage or wood-land, yielding a gross product of precisely the same amount of 2400 dol- lais: with an expense of cultivation, amounting, perhaps, to but 400 dollars, leaving him a net product, one, year with another, of 2000 dollars. Suppose a tax in kind to be imposed in the ratio of 1-12 of the annual product of land of all descriptions indiscriminately. The former will have to pay in sheaves of corn to the amount of 200 dol- lars; the latter will pay, in cattle or in wood, an equal value of 200 dollars. What is the result? The one will have paid the fourth part of a net revenue of 800 dollars ; the other but a tenth part of a net revenue of 2000 dollars. The revenue, that each person has for his own share, is the net residue only after replacing the capital he has embarked, whatever may be its amount. Is the gross amount of the sales he effects in the year the annual income of the merchant? Certainly not; all the income he gets is the surplus of his receipts above his ad- vances ; on this surplus alone can he pay taxes, without ruin to his concerns. The ecclesiastical tithe levied in France under the old system was liable to this inconvenience in part only. It attached neither upon meadow, nor wood-land, nor kitchen-ground, nor many other CHAP. VHI. ON CONSUMPTION. 475 kinds of cultivation; and in some places was 1-18, in others 1-15 or 1-10 of the gross product; so that the real, was corrected by the apparent inequality. The marechal de Vauban, in his work entitled, Dixime Roijak, a book replete with just views, and well worth the study of those who manage national finances, proposes a tax of 1-20 of the pro- duct of the land, which, in times of great emergency, might be raised to 1-10. But this proposition was made as a substitute for a still more inequitable system : namely, the saddling of the lands of the commonalty with the whole tax, and altogether exempting the lands of the nobles and clergy. The public-spirited writer, who had occasion, in his character of engineer, to become personally acquainted with every part of France, speaks most feelingly of trie hardships resulting from the land-tax (a) of those days. And there is no doubt, that the adoption of his plan at that time would have been a vast relief to the country. But it was disregarded. Why ? Because every courtier had an interest to, resist it: and this fine country was left to flounder through its distresses. The conse- quence was, a heavier loss of population from famine, than from the sword, in the war of the Spanish succession. The difficulty and expense of collection, together with the abuses to which it is liable, are another objection to taxation in kind. The immense number of agents must open a fine field for peculation. The government may be imposed upon, in respect to the amount collected, upon the subsequent sale and disposal, in respect to the quantity damaged, as well as in the charges of storing, preservation ' and carriage. If the tax be farmed to contractors, the profits and expenses of numberless farmers and contractors must all fall upon the public. The prosecution of the farmers and contractors would require the active vigilance of administration. 'A gentleman of great fortune,' says Smith, 'who lived in the capital, would be in danger of suffering much by the neglect, and more by the fraud, of his factors and agents, if the rents of an estate in a distant province were to be paid to him in this manner. The loss of the sovereign, from the abuse and depredation of his tax-gatherers, would neces- sarily be much greater.'* Various other objections have been urged against taxation in kind, which it would be useless and tedious fo enumerate. I shall only take the liberty of remarking the violent operation upon re- lative price, which must follow from so vast a quantity of produce being thrown upon the market by the agents of the public revenue, who are notoriously equally improvident as buyers and as sellers. The necessity of clearing the storehouses to make room for the fresh crop, and the ever urgen*demands upon the public puise, would oblige them to sell below the level, to which the price would * Wealth of Nations, book v. c. 2. art. I. (a) Taille ; for the explanation of this tax, vide Wealth of Nations, book v c 2. art. 2, T. 476 ON CONSUMPTION. BOOK III. naturally be brought by the rent of the land, the wages of labour, and the interest of the capital, engaged in agriculture; and private dealers would be unable to maintain the competition. Such taxation not only takes from the cultivator a portion of his product, but pie- vents his turning the residue to good account. SECTION IV. Of the Territorial or Land -Tax of England. In the year 1692, whicn was four years after the happy revolu- tion, that placed the prince of Orange upon the British throne, a general valuation was made of the income of all the land in the country; and, upon that valuation, the land-tax continues to be levied to this day ; so that the tax of four shillings in the pound, upon the rents of land, is a fifth of its rent in 1692, and not of the actual rent at the present day. It may easily be conceived how much this tax must operate to encourage improvements of the land. An estate that has been improved so as to double the rent, does not pay double the original tax ; neither does it pay a less tax if it be suffered to fall into neglect and impoverishment ; thus, it operates as a penalty upon negligence. To this fixation of the tax, many writers attribute the high state of the cultivation of the land in England : and doubtless it may have done much to promote improvement. But, what would be thought of a government that should say to a tradesman in a small way of busi- ness, "You are trading in a small way upon a small capital, and con- sequently pay very little in direct taxes. Borrow, and enlarge your capital, extend your dealings, and increase your profits as much as you can, and we will not charge you with any increase of taxes. Nay, fur- ther, when your heirs succeed to the business, and have still further extended it, they shall be assessed at precisely the same rate, and shall continue subject to the same taxes only." All this might be a vast encouragement to trade and manufacture ; but would there be any equity in such a proceeding? and might they not advance without such assistance? Has not England herself presented the example of a still more rapid improvement in commercial and manufacturing industry, without any such unjust partiality? A land-owner, by attention, economy, and intelligence, improves his annual income to the amount, say of 1000 dollars: if the state claim a fifth of this advance, there will still be a bonus of 800 dollars to stimulate and reward his exertions. t It would be easy to put cases, in which the tax, becoming by its fixation disproportionate to the means of the tax-payers and the condition of the soil, might be productive of as much mischief, as it has done good in other instances: where it would operate to throw out of cultivation a class of land, that, by one cause or other, had become incompetent to pay the same ratio of taxation. We have CHAP. IX. ON CONSUMPTION. 477 seen an example of this in Tuscany. There, a census or terrier was made in 1496, wherein the plains and valleys were rated very low, on account of the frequent floods and inundations, which prevented any regular and profitable cultivation ; while the uplands, that were then the only cultivated spots, were rated very high. Since then, the torrents and inundations have been confined by drainage and embankment, and the plains reduced to fertility; their produce, being comparatively exempt from tax, came to market cheaper than that of the uplands, which, consequently, were unable to maintain the competition, under the pressure of disproportionate taxation, and have gradually been abandoned and deserted.* Whereas, had the tax been adjusted to the change of circumstances, both might have been cultivated together. In speaking of a tax, peculiar to a particular nation, I have used it merely in illustration of general and universal principles. CHAPTER IX. OP NATIONAL DEBT. | SECTION I. Of the Contracting Debt by National Authority, and of its general Effect. THERE is this grand distinction between an individual borrower and a borrowing government, that, in general, the former borrows capital for the purpose of beneficial employment, the latter for the purpose of barren consumption and expenditure. A nation bbr- rows, either to satisfy an unlooked-for demand, or to meet an extra- ordinary emergency ; to which ends, the loan may prove effectual or ineffectual: but, in either case, the whole sum borrowed is so much value consumed and lost, and the public revenue remains burthened with the interest upon it. Melon maintains, that a national debt is no more than a debt from the right hand to the left, which nowise enfeebles the body politic. But he is mistaken ; the state is enfeebled, inasmuch as the capital lent to its government, having been destroyed in the consumption of it by the government, can no* longer yield any body the profit, or in other words, the interest, it might earn, in the character of a productive means. Wherewith, then, is the government to pay the interest of its debt ? Why, with a portion of the revenue arising * Forbonnois, Principes et Observ. &c. torn. ii. p. 247. 478 ON CONSUMPTION. BOOK IIL from some other source, which it must transfer from the tax-payer to the public creditor for the purpose. Before the act of borrowing, there will have been in existence two productive capitals, each of them yielding, or capable of yield- ing, revenue ; that is to say, a capital about to be lent to government, and a capital whereon the future tax-payers derive that revenue, which is about to be applied in satisfaction of the interest upon the capital lent. After the act of borrowing, there will remain but one of these capitals ; viz. the latter of the two, whereof the revenue is thenceforward no longer at the disposal of its former possessors, the present tax-payers, since it must be taken in some form of tax- ation or other by the government, for the sake of providing the payment of interest to its creditors. The lender loses no part of his revenue : the only loser is the payer of taxes. People are apt to suppose, that, because national loans do not necessarily occasion any diminution of the national money or specie, therefore, they occasion, not a loss but merely a transfer, of national wealth. With a view to the more ready exposure of this fallacy, I have subjoined a synoptical table, showing what becomes of the sum borrowed, and whence the public creditor's interest is satisfied.* When a government borrows, it either does or does not engage to repay the principal. In the latter case, it grants what is called a perpetual annuity. Redeemable loans are capable of infinite variety in the terms. The principal is contracted to be repaid, sometimes gradually, and in the way of lottery ; sometimes by instal- ments payable together with the interest, sometimes in the way of increased interest, with condition to expire on the death of the lender ; as in the case of tontines and life-annuities, whereof the latter determine on the death of the individual lender ; whereas, in tontines, the full interest continues to be divided amongst the sur- vivors, until the whole of the lives have expired. Tontines and life-annuities are very improvident modes of bor- rowing ; for the borrower remains throughout liable to the full rate of interest, although he annually repays a part of the principal Besides, they savour of immorality ; offering a premium to egotism, and a stimulus to the dilapidation of capital, by enabling the lender to consume both principal and interest without fear of personal beggary. The governments best acquainted with the business of borrowing and lending have not, of late years at least, given any engagement to repay the principal of the loan. Thus, public creditors have no other way of altering the investment of their capital, except by selling their transferable security, which they can do with more or less advantage to themselves, according to the buyer's opinion of the solidity of the debtor government, that has granted the perpetual annuity, f Despotic governments have always found a great diffi- * Vide App. A. \ In tne next section it will be explained how an unredeemable debt may be evtinjruished by purchase at the market price. CHAP. IX. ON CONSUMPTION. 479 culty in negotiating such loans. Where the sovereign is powerful enough to violate his contracts at pleasure, or where there is a mere personal contract with the reigning monarch, with a risk of dis- avowal by the successor, lenders are loth to advance their money, without a near and definite period of payment. The appointment to posts and offices, under condition of an annual payment, or of deposit for which the government engages to pay interest, is a mode of borrowing in perpetuity, in which the loan is compulsory. When once this paltry expedient is resorted to, it re- quires very little ingenuity to find plausible grounds, for converting almost every occupation, down to the dust-man and street-porter, into patent and saleable offices. Another mode of borrowing is, by the anticipation of revenue , by which is meant, the assignment by a government of revenues not yet due, with allowance in the nature of discount, the taking up mo- ney in advance from lenders, who charge a discount proportionate to the risk they run from the instability of the government and pos- sible deficiency of the revenue. Engagements of this kind contract- ed by a government, and satisfied either out of the revenue when collected, or by the issue of fresh bills upon the public treasury, con- stitute what bears the uncouth English denomination of foaling debt ; the consolidated debt being that, whereon the creditor can demand the interest only, and not the principal. National loans of every kind are attended with the universal dis- advantage of withdrawing capital from productive employment, and diverting it into the channel of barren consumption ; and, in coun- tries wherq the credit of the government is at a low ebb, with the further and particular disadvantage, of raising the interest of capital. Who can be expected to lend at 5 per cent, to the farmer, the manu- facturer, or the merchant, while he can readily get an offer of 7 or 8 per cent, from the government?' That class of revenue which has been called, profit of capital, is thereby advanced in its ratio, at the expense of the consumer: the consumption falls off, in consequence of the advance in the real price of products ; the productive agency of the other sources of production are less in demand, and conse- quently worse paid ; and the whole community is the sufferer, with the sole exception of the capitalist. The ability to borrow affords one main advantage to the state, namely, the power of apportioning the burthen entailed by a sudden emergency among a great number of successive years. In the pre- sent state of public affairs, and on the present scale of international warfare, no country could support the enormous expense from its ordinary annual revenue. The larger states pay in taxation nearly as much as they are able ; for economy is by no means the order of the day with them; and their ordinary expenditure seldom falls much short of the income. If the expenditure must be doubled to save the nation from ruin, borrowing is usually the only resource unless it can make up its mind to violate all subsisting engagements and be guilty of spoliation of its own subjects and foreigners too 480 ON CONSUMPTION. BOOK III. The faculty of borrowing is a more powerful agent, than even gun- powder ; but probably the gross abuse that is made of it, will soon destroy its efficacy. Great pains have been taken, to find in the system of borrowing, as well as in taxation, some inherent advantage beyond that of sup- plying the public consumption. But a close examination will expose the hopelessness of such an attempt. It iias been maintained, for instance, that the debentures and secu- rities, which form a national debt, become real and substantial values, existing within the community ; that the capital, of which they are the evidence or representative, is so much positive wealth, and must be reckoned as an item of the total substance of the nation.* But it is not so ; a written contract or security is a mere evidence, that such or such property belongs to such an individual. But wealth consists in the property itself, and not in the parchment, by which its ownership is evidenced ; therefore ct fortiori, a security is not even an evidence of wealth, where it does not represent an actual existing value, and when it operates as a mere power of at- torney from the government to its creditor, enabling him to receive annually a specified portion of the revenue expected to be levied upon the tax-payers at large. Supposing the security to be cancelled, as it might be by a national bankruptcy, would there be any the least diminution of wealth in the community ? Undoubtedly not. The only difference would be, that the revenue, which before went to the public creditor, would now be at the disposal of the tax-payer, from whom it used to be taken. Those who tell us, that the annual circulation is increased by the whole amount of the annual disbursements of the government,"! forget that these disbursements are made out of the annual products and are a portion of the annual revenue, taken from the tax-payer, which would have been brought into the general circulation just the same, although no such thing as national debt had existed. The tax-payer would have spent what is now spent by the public credit- or*; that is all. The sale or purchase of debentures or securities is not a produc- tive circulation, but a mere substitution of one public creditor in place of another. When these transfers degenerate into stock-job- bing, that is to say, the making of a profit by the rise and fall ol their price, they are productive of much mischief; in the first place, by the unproductive employment on this object of the agent of cir- culation, money, which is an item of the national capital ; and, in the * Considerations sur les Advantages del" 1 Existence ffunc. Dette publiquf,p. 8. f The transferable nature of these securities does not invest them with the properties of money, since they do not act in that capacity. But the use of con- vertible paper, as money, operates to create a positive addition to the total na tional capital, because, but for their agency in the transfer of value in general it must be executed by specie, or some equally substantial item of capital. Go vernmen* debentures of stock require money to circulate them, instead of acting themselves as money. CHAP IX. ON CONSUMPTION. 481 next, by procuring a gain to one person by the loss of another ; which is the characteristic of all gaming. The occupation of the stock-jobber yields no new or useful product; consequently having no product of his own to give in exchange, he has no revenue to subsist upon, but what he contrives to make out of the unskilfulness or ill-fortune of gamesters like himself. A national debt has been said to bind the public creditors more firmly to the government, and make them its natural supporters by a sense of common interest; and so it does, beyond all doubt. But, as this common interest may attach equally to a bad or a good go- vernment, there is just as much chance of its being an injury, as a benefit to a nation. If we look at England, we shall see a vast num- ber of well-meaning persons, induced by this motive to uphold the abuses and misgovernment of a wretched administration. It has been further urged, that a national debt is an index of the public opinion, respecting the degree of credit which the government deserves, and operates as a motive to its good conduct, and endea- vours to preserve the public opinion, of which such a debt furnishes the index. This can not be admitted without some qualification. The good conduct of government in the eyes of the public creditors, consists in the regular payment of their own dividends ; but in the eyes of the tax-payers, it consists in spending as little as possible. The market-price of stock does, indeed, furnish a tolerable index of the former kind of good conduct, but not of the latter. Perhaps it would be no exaggeration to say, that the punctual payments of the dividends, instead of being a sign of good, is in numberless instances a cloak to bad, government ; and, in some countries, a boon for the toleration of frequent and glaring abuses. Another argument in favour of national debt is, that it affords a prompt investment to capital, which can find no ready and profitable employment, and thus must, at any rate, prevent its emigration. If it do, so much the worse : it is a bait to tempt capital towards its destruction, leaving the nation burthened with the annual interest, which government must provide. It is far better that the capital should emigrate, as it would probably return sooner or later : and then its interest for the mean time will be chargeable to foreigners. A national debt of moderate amount, the capital of which should have been well and judiciously expended in useful works, might indeed be attended with the advantage of providing an investment for minute portions of capital, in the hands of persons incapable of turning them to account, who would probably keep 'hem locked up, or spend them by driblets, but for the convenience of such an invest- ment. This is perhaps the sole benefit of a national debt; and even this is attended with some danger ; inasmuch as it enables a govern- ment to squander the national savings. For, unless the principal be spent upon objects of permanent public benefit, as on roads, canals. or the like, it were better for the public, that the capital should re- main inactive, or concealed ; since, if the public lost the use of it, ai least it would not have to pay the interest. 41 3L 482 ON CONSUMPTION. BOOK III. Thus, it may be expedient to borrow, when capital must be spent by a government, having nothing but the usufruct at its command but we are not to imagine, that, by the act of borrowing, the pub'ic prosperity can be advanced. The borrower, whether a sovereign, or an individual, incurs an annual charge upon his revenue, besides impoverishing himself to the full amount of the principal, if it be consumed; and nations never borrow but with a view to consume outright. SECTION II. Of public Credit, its Basis, and the Circumstances that endanger its Solidity. Public credit is the confidence of individuals in the engagements of the "ruling power, or government. This credit is at the extreme point of elevation, when the public creditor gets no higher interest, than he would by lending on the best private securities; which is a clear proof, that the lenders require no premium of insurance to cover the extra risk they incur, and that in their estimation there is no such extra risk. Public credit never reaches this elevation, ex- cept where the government is so constituted, as to find great diffi- culty in breaking its engagements, and where, moreover, its re- sources are known to be equal to its wants ; for which latter reason, public credit is never very high, unless where the financial accounts of the nation are subject to general publicity. Where the public authority is vested in a single individual, it is next to impossible, that public credit should be very extensive : for there is no security, beyond the pleasure and good faith of the monarch. When the authority resides in the people, or its repre- sentatives, there is the further security of a personal interest in the people themselves, who are creditors in their individual, and debtors in their aggregate character ; and therefore, can not receive in the former, without paying in the latter. This circumstance alone would lead us to presume, that now, when great undertakings are BO costly as to be effected by borrowing alone, representative go- vernments will acquire a marked preponderance in the scale of national power, simply on account of their superior financial re- sources, without reference to any other circumstance. In one light, the obligations of government inspire more confi- dence than those of individuals, that is to say, by the greater solidity of its resources. Tne resources of the most responsible individual may fail suddenly and totally, or at least to such an extent, as to disable him from performing his engagements. Numerous commercial failures, political or national calamities, litigation, fraud or violence, may ruin him entirely; but the sup- plies of a government are derived from such various quarters, that the individual calamities of its subjects can operate but partially upon CHAP. IX. ON CONSUMPTION. 483 the revenue of the state. There is also another thing, that facilitates the borrowing of government even more than the credit it is fairly entitled to ; and that is, the great facility of transfer presented to the stockholder. Public creditors always reckon upon the possibility of withdrawing by the sale of their debentures, before the occurrence of embarrassment or bankruptcy; and, even where they contemplate such a risk, generally consider some advance of the rate of interest a sufficient premium of insurance against it Moreover, it is observable, that the sentiments of lenders and indeed of mankind upon all occasions, are more powerfully operated upon by the impressions of the moment, than by any other motive; experience of the past must be very recent, and the prospect of the future very near, to have any sensible effect. The monstrous breach of faith on the part of the French government in 1721, in regard to its paper-money and the Mississippi share-holders, did not prevent the ready negotiation of a loan of 200,000,000 liv. in 1759; nor did the bankrupt measures of the Abbe Terrai in 1772 prevent the negotiation of fresh loans in 1778 and every subsequent year. In other points of view, the credit of individuals is better founded than that of the government. There is no compulsory process against the latter, for the breach of its engagements; nor do govern- ments ever husband the national resources with nearly the care and attention of individuals. Besides, in the event of external or internal subversion, individuals may withdraw their property from the wreck much better than governments can. Public credit affords such facilities to public prodigality, that many political writers have regarded it as fatal to national pros- perity. For, say they, when governments feel themselves strong in the ability to borrow, they are too apt to intermeddle in every political arrangement, and to conceive gigantic projects, that lead sometimes to disgrace, sometimes to glory, but always to a state of financial exhaustion; to make war themselves, and stir up others to do the like; to subsidize every mercenary agent, and deal in the blood and the consciences of mankind ; making capital, which should be the fruit of industry and virtue, the prize of ambition, pride, and wickedness. A nation, which has the power to borrow, and yet is in a state of political feebleness, will be exposed to the requisitions of its more powerful neighbours. It must subsidize them in its defence; must purchase peace ; must pay for the toleration of its independence, which it generally loses after all ; or perhaps must lend, with the certain prospect of never being repaid. These are by no means hypothetical cases : but the reader is left to make the application himself. By the establishment of sinking-funds, well-ordered governments have found means to extinguish and discharge their redeemable debt. The constant operation of this contrivance contributes more than any thing else to the consolidation of public credit The mode of proceeding is simply this: 484 ON CONSUMPTION. BOOK III Suppose that the state borrows 100 millions of dollars at an in- terest of 5 per cent. ; to pay that interest, it must appropriate a portion of the national revenue to the amount of 5 millions of dollars. For this purpose, it usually imposes a tax calculated to produce this sum annually. If the tax be made to produce somewhat more, say 5,462,400 dollars, and the surplus of 462,400 dollars be thrown into a particular fund, and laid out annually, in the purchase of govern- ment debentures to that amount in the market, and if, moreover, in addition to this surplus, the interest likewise upon the debt thus extinguished, be annually employed in such purchases, the whole principal debt w r ill be extinguished at the end of fifty years. This is the mode in which a sinking-fund operates. The efficacy of this expedient depends upon the progressive power of compound in- terest; that is to say, the gradual augmentation of the interest of capital, by the addition of interest upon the arrears of interest, reckoned from certain stated periods. It is obvious, that, by an annual instalment of not more than 10 per cent, upon its own interest, the principal of a debt bearing an interest of 5 per cent, may be extinguished in less than 50 years. However, the sale of the debentures being voluntary, if the holders will not sell at par, that is to say, at 20 years purchase, the redemp- tion, in this way, will take somewhat longer time ; but this very state of the market will be a convincing proof of the high ratio of national credit. On the other hand, if the credit decline, so that the same sum will purchase a larger amount of debentures, the extinc- tion of the debt will be effected in a shorter period. So that the lower public credit falls, the more powerful is the operation of a sinking-fund to revive it; and that fund grows less efficient, exactly in proportion as it becomes less requisite. To the establishment of such a fund, has the long-continued public credit of Great Britain been attributed, and her ability still to go on borrowing, in spite of a debt of more than 800 millions sterling. (1) (1) In a note, here subjoined, the author stated the amount of the British na- tional debt, in the year 1815, on the authority of a speech made in parliament in February, of that year, by the chancellor of the exchequer, Mr. Vansittart. We now have it in our power, in place of the note in question, to furnisli the reader with an exact statement of the British national debt, from its commence- ment, at the revolution of 1G88, to the 5th of January, 1832. The abstract we give is extracted from the Tables to Part II. of " Pebrer on the Taxation, Debt, Capital, Resources, &,c. of the whole British Empire," a work which we before had occasion to refer to, and of the highest statistical authority. Pounds sterling. National debt at the revolution, 1688, -------- 664,263 Increase during the reign of William and Mary, - - - - 15,730,439 Debt at accession of Anne, 1702, 16,394,702 Increase during reign of Anne, -.-.-.---- 37,750,661 Debt at accession of George I., 1714, 54,145,363 Oecrease during reign of George I., ....-'-.- 2,053,128 CHAP. IX. ON CONSUMPTION. 485 And doubtless this it is, that has made Smith declare sinking-funds, which were contrived expressly to reduce national debt, the main instruments of their increase. Had not governments the happy knack of abusing resources of every kind, they would soon grow too rich and powerful. A sinking-fund is a complete delusion, whenever a government continues borrowing on one hand, as much as it redeems on the other; and & fortiori, when it borrows more than it redeems, as England has constantly done, since the year 1793 to the present time. Whencesoever the amount of the sinking-fund be derived, whether it be merely the product of a fresh tax, or that product, augmented by the interest on the extinguished debt, if the govern- ment borrow a million for every million of debt that it pays off, it creates an annual charge of precisely the same amount as that ex- tinguished : it is precisely the same thing, as lending to itself the million devoted to the purpose of redemption. Indeed, the latter course would save the expense of the operation. This position has been fully established in an excellent work, by professor Hamilton,* which is quite conclusive upon the subject. The enormous burthens * On the National Debt of Great Britain. 8vo., Edinburgh, 1813. Debt at accession of George II., 1727, 52,092,235 Decrease during the peace, ----------- 5,137,612 Debt at commencement of Spanish war, 1739, - ... 46,954,623 Increase during the war, - 31,338,689 Debt at end of Spanish war, 1748, 78,293,312 Decrease during the peace, ----------- 3,721,472 Debt at commencement of war, 1755, ------- 74,571,840 Increase during the war, ------------ 72,111,004 Debt at conclusion of the peace, 1762, 146,682,844 Decrease during the peace, ----------- 10,739,793 Debt at commencement of American war, 1776, - - - - 135,943,051 Increase during the war, ------------ 102,541,819 Debt at conclusion of American war, 1783, ----- 238,484,870 Decrease during the peace, ----------- 4,751,261 Debt at commencement of French revolutionary war, 1793, 233,733,609 Increase during the war, ------------ 295,105,668 Debt at peace of Amiens, 1st February, 1801, 528,839.277 Increase during the second war, .--- 335,983,164 Debt at peace of Paris, 1st February, 1816, 864,822,441 Decrease since the poace, ----------- 82,155,207 Debt on 5th January, 1832, - - 782,667,234 Equal to 3,756,802,723 dollars. AMERICAN EDITOR. 41 486 ON CONSUMPTION. BOOK lit of the people of England, the scandalous abuse its government has made of the power of borrowing, and her substitution of paper-mo- ney in place of specie, will have produced some benefit at least; inasmuch as they have assisted the solution of many problems, highly interesting to the happiness of nations, and given warning to all future generations, to beware of the like excesses. It must be evident, that the grand requisite to the efficiency of a sinking-fund is, the punctual and inviolable application of the sums appropriated to the purpose of redemption. Yet this has never been rigidly adhered to, even in England, where consistency and good faith to the creditors are a point of honour with the government. So that English writers put no faith in the extinction of the debt by the operation of the sinking-fund : nay, Smith makes no scruple of declaring, that national debts have never been extinguished except by national bankruptcy. It has been sometimes a matter of speculation, to inquire into the effect of a national bankruptcy upon the relative condition of indi- viduals, and the internal economy of the nation. In ordinary cases, when a government commits an act of bankruptcy, it adds to the revenues of the tax-payers the whole amount that it discontinues paying to the public creditors. Nay, it goes somewhat further : for it remits likewise the charges of collection and management of the revenue and the debt. A nation burthened with 100 millions of annual interest on its debt, whereon the charges above mentioned should amount to 30 per cent.* more, might by a bankruptcy remit to the tax-payers 130 millions, while it stript its creditors of 100 mil- lions only. In England the effect would be more complicated ; because she does not pay the dividends on her debt wholly out of the annual proceeds of taxation ; at least, not at the moment of my writing ; but annually borrows a sum nearly equal to the interest of her debt.f Were she to commit an act of bankruptcy, the annual loans of 40 millions sterling, more or less, would be withdrawn from unproduc- tive consumption by the public creditors, and be applicable to the purposes of re-productive consumption: for it may fairly be suppos- ed, that the capitalists who accumulate and lend to the state, would look out for some profitable investment. In this point of view, the operation would tend vastly to the increase of the national capital and revenue : but the execution would be attended with very disas- trous immediate consequences : for this annual amount of 40 mil- lions would be withdrawn from the class of consumers, who have no other means of subsistence, and would be utterly unable to make * In England and the United States they are not nearly so high in proportion . out the ratio is even higher in some states that shall be nameless. f Colquhoun, Wealth, Power, and Resources of the British Empire, 4to. Lon- don, 1814. Stokes, Revenue and Expenditure of Great Britain, London, 1815. Should a continuance of peace enable her to. square her income with her annual expenditure, inclusive of the interest of her debt, it would still afford no relief, out merely arrest the further progress of the evil. CHAP. IX. ON CONSUMPTION. 437 good their losses in any other way, for want of both personal indus- try, and of the command of capital. A bankruptcy would probably obviate the necessity of fresh loans ; but would not release an atom of the former taxation, where the interest of the debt is habitually paid, not with the proceeds of tax- ation, but with new loans. Thus, the burthens of the people would not be alleviated,* nor the charges of production reduced: conse- quently there would be no sensible reduction in the price of commo- dities ; nor would British products find a readier market either at home or abroad. The classes liable to taxation would be diminished in numerical strength, by the whole of the suppressed stockholders ; and taxation less productive, although not lower in ratio. The 40 millions of revenue, withdrawn from the public creditors, would pay taxes only upon the annual profit or revenue, they might yield in the character of productive capital. The ruin of the public creditors would be attended with abundance of collateral distress ; with private failures and insolvency without end; with the loss of employment to aU their tradesmen and servants, and the utter destitution of all their dependants. On the other hand, if she persevere in borrowing to pay the inter- est of the former loans, that interest and with it taxation also, must go on increasing to infinity. It is impossible to avoid a precipice, when one follows a road that leads nowhere else. The potentates of Asia, and all sovereigns, who have no hopes of establishing a credit, have recourse to the accumulation of treasure. Treasure is the reserve of past, whereas a loan is the anticipation of future revenue. They are both serviceable expedients in case of emergency. A treasure does not always contribute to the political security of its possessors. It rather invites attack, and very seldom is faithfully applied to the purpose for which it was destined. The accumula- tion of Charles V. of France fell into the hands of his brother, the duke of Anjou ; those which pope Paul II. destined to oppose the Turkish arms, and drive them out of Europe, supplied the extrava- gancies of Sixtus IV. and his nephews. The treasures amassed by Henry IV., for the humiliation of the house of Austria, were lavish- ed upon the favourites of the queen-mother : and, at a later period, we have seen the political power of Prussia brought into imminent hazard by those very savings, which were destined by Frederick III. to its consolidation. The command of a large sum is a dangerous temptation to a national administration. 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" 'Tis to create, and in creating live A being more intense, that we endow With form or fancy, gaining as we Rive The lite we image, even as I do now." Sketches of a romantic character, displaying a warm imagination and an ornate style. Philada. Ledger. Their perusal, we doubt not, will diffuse a general satisfaction ; for they are beautiful, though brief. M'Makin's Courier. 46 v * A 000 492 647 3