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ESSAYS 
 
 POLITICAL ECONOMY. 
 
 BY 
 
 THOMAS EDWARD CLIFFE LESLIE, LL.D. 
 
 
 
 SECON EDLLLION. 
 
 DUBLIN: HODGES, FIGGIS, & CO., GRAFTON-ST. 
 LONDON: LONGMANS, GREEN, & CO., PATERNOSTER-ROW. 
 
 1888. 
 
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 PREFATORY NOTE, 
 
 THE present Volume is a new edition, modified in 
 certain respects, of the ‘ Essays in Moral and Political 
 Philosophy,’ originally published in 1879, and now 
 for some time out of print. 
 
 The alterations in the present Edition consist of— 
 (1), omissions; (2), additions; and (3), changes in 
 arrangement. 
 
 To render the Work more suitable for Students of 
 Economics, those Essays which dealt mainly with the 
 non-economic aspects of social life have been omitted. 
 It is not thereby intended to depreciate their merits, 
 which are, in our judgment, of a high order; but their 
 preservation having been secured by the publication 
 of the former Edition, it has been thought. desirable in 
 the present, which is specially designed for University 
 use, to aim at greater unity of subject. 
 
 Seven Essays, published after the appearance of 
 the former edition, have here been added. In the 
 opinion of the Editors, they bear all the distinctive 
 marks of Mr. Lesuiz’s best work, and deserve to 
 appear in a permanent form. 
 
 52018 
 
v1 Prefatory Note. 
 
 A different arrangement has been adopted for the 
 purpose of bringing together Essays of a similar 
 character. The guiding conception has been to group 
 —(1) the Critical Essays ; (2) those which are ex- 
 pository of the Author’s general view of Economics; 
 and (3), those dealing with the interpretation of 
 actual phenomena, or with economic policy. In the 
 first group are comprised Essays 1.—xui.; in the 
 second, Essays xiIv.—xvul.; and in the last, Essays 
 XVIII.-XXVI. : 
 
 The Student who desires to trace the development 
 of Mr. Lxsiin’s views can obtain the dates of publica- 
 tion of each Essay from the footnotes appended to 
 the titles. 
 
 JOHN K. INGRAM. 
 C. F. BASTABLE. 
 
 July, 1888. 
 
CONTENTS. 
 
 eres 
 
 PAGE 
 
 PREFATORY NotE, . : ; : ‘ : : ; ; : Vv 
 
 BrogRAPHIcAL Novick OF THE AUTHOR, . : : : d ; ix 
 
 I. THE Love or Money, . - : : : : : F 
 
 11. THE WEALTH OF NATIONS AND THE SLAVE PowER, q ; 9 
 
 vy 10. THe PotiricaAt Economy or ADAM SMITH, . ; : abaya 
 Iv. ‘Some Leapine Principles oF PotrtTicaL EcoNomMY NEWLY 
 
 EXPOUNDED.’ By PROFESSOR CAIRNES, . 7 ; ie Al 
 
 y. JoHN STvaRT WEE, o; : : : , : : . 4 
 
 vi. PRoFEssoR CAIRNES, . 2 - : : : : OU 
 
 vit. Mr. BaGEHOT, . : ! : : : ; : geass: 
 
 , Vu. JEvons’ ‘ THEory oF PorrricaL Economy,’ . : : ee OU 
 
 1x. MarsHatt’s ‘ Economics oF InpustTRY,’ : : ‘ a 
 
 x. THE History oF GERMAN PoLiITIcAL ECONOMY, . : Oe 
 
 x1. RoscHEr’s ‘ PrincrpLes oF Poriticat Economy,’ : ane to 
 
 XII. Lionce DE LAVERGNE, d : : : i - HOE 
 
 __ xm. PoriticaAL Economy IN THE UNITED SraTEs, : . 126 
 
 ~ xiv. Economic Scrence anv Statistics, : : : " . 155 
 
 xv. On THE PHiILosopHicaL Metnop oF PoriticAL Economy, . 163 
 
 Sxvr. Poxrrican Economy anp SocroLoey, . ‘ . , lot 
 
 xviI. THE KNOWN AND THE UNKNOWN IN THE Economic WoRLD,. 221 
 
 xvi. THE History AND FUTURE OF INTEREST AND PROFIT, . . 243 
 
Vlll Contents. 
 PAGE 
 x1x. Tur DISTRIBUTION AND VALUE OF THE Precious METALS 
 IN THE SIXTEENTH AND NINETEENTH CENTURIES, . . 269 
 
 xx. Tor New Gortp MInzEs AnD PRICES IN EUROPE IN 1865, . 301 
 xxI, Pricks In GERMANY IN 1872, _.. : ; ; é . 332 
 xx1r. Prices In ENGLAND IN 1873, : ; : : : . 9356 
 Xx1II.. THe MoveMENTS OF AGRICULTURAL WAGES IN EUROPE, . 364 
 
 xxtv. THE INCIDENCE OF IMPERIAL AND LocaL TAXATION ON THE 
 WoRKING CLASSES, : : 5 : : : . 384 
 
 xxv. British CoLuMBIA IN 1862, ; 4 ‘ : ‘ . 409 
 
 XXVI. AUVERGNE, . ; 5 : : : : , : . 414 
 
 
 
BIOGRAPHICAL NOTICE OF THE AUTHOR 
 
 Tomas Epwarp Cuirre Lestin, one of the ablest and most original 
 English economists of the present century, was born in the county 
 of Wexford, in (as is believed) the year 1827. He was the 
 second son of the Rev. Edward Leslie, Prebendary of Dromore, 
 and Rector of Annahilt, in the county of Down. His family was of 
 Scotch descent, but had been connected with Ireland since the reign 
 of Charles I. Amongst his ancestors were that accomplished and 
 energetic prelate, John Leslie, bishop first of Raphoe and afterwards 
 of Clogher, who, when holding the former See, offered so stubborn a 
 resistance to the Cromwellian forces, and the bishop’s son, Charles, 
 the well-known non-juror. Cliffe Leslie received his elementary edu- 
 cation from his father, who resided in England, though holding 
 Church preferment, as well as possessing some landed property, in 
 Ireland. By him he was taught Latin, Greek, and Hebrew at an 
 unusually early age. He was afterwards for a short time under the 
 care of a clergyman at Clapham, and was then sent to King William’s 
 College, in the Isle of Man, where he remained until, in 1842, being then 
 only fifteen years of age, he entered Trinity College, Dublin.t He was 
 a distinguished student there, obtaining, besides other honours, a Classi- 
 eal Scholarship in 1845, and a Senior Moderatorship (Gold Medal) in 
 Mental and Moral Philosophy at his Degree Examination in 1846. 
 He became a law student at Lincoln’s Inn, was for two years a pupil 
 at a conveyancer’s chambers in London, and was called to the English 
 Bar. But his attention was soon turned from the pursuit of legal 
 
 * Reprinted, by permission, from the Encyclopedia Britannica, 9th ed. 
 
 TIt is noteworthy that John Elliot Cairnes, William Edward Hearn (author 
 of Plutology, 1864), and Richard Hussey Walsh (author of an Elementary Treatise 
 on Metallie Currency, 1853), were in the same Junior Freshman Class of 1842-3. 
 
 b 
 
x Biographical Notice of the Author. 
 
 practice, for which he never seems to have had much inclination, by 
 his appointment, in 18538, to the Professorship of Jurisprudence and 
 Political Economy in Queen’s College, Belfast.* The duties of this 
 Chair requiring only short visits to Ireland in certain Terms of each 
 year, he continued to reside and prosecute his studies in London, and 
 became a frequent writer on economic and social questions in the 
 principal Reviews and other periodicals.t| In 1870 he collected a 
 number of his Essays, adding several new ones, into a volume, entitled, 
 ‘Land Systems and Industrial Economy of Ireland, England, and 
 Continental Countries.’ J.S. Mill gave a full account of the contents 
 of this work in a Paper in the ‘Fortnightly Review,’ in which he 
 pronounced Leslie to be ‘one of the best living writers on applied 
 political economy.’ Mill had sought his acquaintance on reading his 
 first article in ‘Macmillan’s Magazine.’ He admired his talents, and 
 took pleasure in his society, and treated him with a respect and kind- 
 ness which Leslie always gratefully acknowledged. 
 
 In the frequent visits which Leslie made to the Continent, 
 especially to Belgium and some of the less known districts of France 
 and Germany, he occupied himself much in economic and social obser- 
 vation, studying the effects of the institutions and system of life, which 
 prevailed in each region, on the material and moral condition of its 
 inhabitants. In this way he gained an extensive and accurate 
 acquaintance with Continental rural economy, of which he made 
 excellent use in studying parallel phenomena at home. The accounts 
 he gave of the results of his observations were among his happiest 
 efforts. ‘No one,’ said Mill, ‘was able to write narratives of foreign 
 
 *In the Preface to the former edition of this work Mr. Leslie has clearly 
 explained the way in which his economic doctrine was formed :—‘‘ Whereas 
 Mr. Mill, in his youth, attended the lectures of Mr. Austin, the author had the 
 good fortune to attend those of Sir Henry Maine at the Middle Temple, and to learn 
 first from them the historical method of investigation, followed with such brilliant 
 success in Ancient Law, Village Communities in the East and West, and the 
 Lectures on the Early History of Institutions. Holding a Professorship of both 
 Jurisprudence and Political Economy, he was led to apply that method to the 
 examination of economic questions, and to look at the present economic structure 
 and state of society from Sir Henry Maine’s point of view, as the result of a long 
 evolution. Further investigation has convinced him that the English economist 
 of the future must study in the schools of both Mr. Stubbs and Sir Henry Maine, 
 as well as in that of Mr. Mill.” 
 
 t In 1869 he was appointed Examiner in Political Economy to the University 
 of London, which post he held for five years. 
 
Biographical Notice of the Author. Xl 
 
 visits at once so instructive and so interesting.’ In these excur- 
 sions he made the acquaintance of several distinguished persons, 
 amongst others of M. Léonce de Lavergne and M. Emile de Laveleye. 
 To the memory of the former of these he afterwards paid a graceful 
 tribute in a biographical sketch (Essay x11. in the present volume), 
 and to the close of his life there existed between himself and M. de 
 Laveleye relations of mutual esteem and cordial intimacy. 
 
 Two essays of Leslie’s appeared in volumes published under the 
 auspices of the Cobden Club, one on the ‘Land System of France,’ 
 containing an earnest defence of la petite culture, and still more 
 of la petite propriété; the other on ‘Financial Reform’ (1871), in 
 which he exhibited in detail the impediments to production and 
 commerce arising from indirect taxation. Many other articles 
 were contributed by him to Reviews, including several discussions 
 of the history of prices and the movements of wages in Europe, 
 and a sketch of life in Auvergne in his best manner; the most 
 important of them, however, related to the philosophical method 
 of political economy, notably a memorable one which appeared in the 
 Dublin University periodical ‘Hermathena.’ In 1879 the Provost 
 and Senior Fellows of Trinity College published for him a volume in 
 which a number of these articles were collected, under the title of 
 ‘Essays in Political and Moral Philosophy.’ These and some later 
 essays, which ought one day to be united with them,* together with 
 the earlier volume on ‘ Land Systems,’ form the essential contribution 
 of Leslie to our economic literature. He had long contemplated, and 
 had in part written, a work on English economic and legal history, 
 which would have been his magnum opus—a more substantial fruit of 
 his genius and his labours than anything he has left us. But the manu- 
 script of this treatise, after much pains had already been spent on it, 
 was unaccountably lost at Nancy in 1872; and though he hoped to be 
 able speedily to reproduce the missing portion and finish the work, it 
 is feared that but a small part of it, if any, has been left in a state fit 
 for publication.t What the nature of it would have been may be 
 gathered from an Essay on the ‘ History and Future of Interest and 
 Profit’ (Essay xvii. in the present volume), which is believed to have 
 been in substance an extract from it. 
 
 * The later Essays, here spoken of, are included in the present volume. 
 t+ The fear expressed above has since been confirmed; no part of the work was 
 left in such a state as would admit of its publication. 
 
X11 Biographical Notice of the Author. 
 
 That he was able to do so much may well be a subject of wonder, 
 when it is known that his labours had long been impeded by a painful 
 and depressing malady, from which he suffered severely at intervals, 
 whilst he never felt secure from its recurring attacks. To this disease 
 he in the end succumbed at Belfast, whither he had gone to discharge 
 his professorial duties, on the 27th of January, 1882, in the fifty-fifth 
 year of his age. 
 
 A ed Ca Fp 
 
ESSAYS IN POLITICAL ECONOMY. 
 
 I. 
 THE LOVE OF MONEY.* 
 
 Tue Love of Money has always been in more or less disrepute 
 with moralists. They have almost universally assigned to it 
 nearly the lowest place in the scale of human affections. We 
 say of human affections, for it is one which distinguishes man 
 from all other animals, however intelligent. ‘You call me 
 dog,’ said Shylock to the Christian merchant; ‘hath a dog 
 money?’ Phrenologists have indeed laid down that all the 
 propensities—combativeness, destructiveness, philoprogenitive- 
 ness, alimentiveness, love of life, &c.—are ‘common to man 
 with the lower animals;’ but we are suprised that they have 
 not discovered a peculiar protuberance on the outside of the 
 human head corresponding with a peculiar propensity for money 
 inside it. It is the more to be regretted that they have not 
 - ascertained the locality of this organ, since a claim has been set 
 up on behalf of the lower animals to a close relationship to the 
 human family. Ifa bump of philargyriveness or philonomis- 
 mativeness could be shown on the human head, a conspicuous 
 absence of this manifestation on the cranium of the former 
 would enable us to disprove the connection, to the satisfaction 
 at least of believers in phrenology. It would not, however, 
 enable us, without further inquiry, to determine whether 
 the love of money, which distinguishes us from the brutes, 
 
 * This Essay was published in November, 1862, in a periodical which has 
 ceased to exist. 
 
 \ B 
 
2 7 The Love of Money. 
 
 places us above or below them in moral character. To satisfy 
 ourselves on this point, we must begin by inquiring what 
 this thing ‘Money,’ of which men, and men only, are so fond, 
 consists of. Sir Robert Peel’s celebrated question—‘ What 
 is the meaning of that word, a Pound, with which we are all 
 familiar ?’—was answered by himself in terms to the effect that 
 a pound of money is a fixed quantity of gold or silver. But 
 this answer, though highly appropriate to a discussion on the 
 currency, is irrelevant to our present inquiry, whether money is 
 a good or an evil; and whether the love of it is a good or a bad 
 quality in mankind. Sir Robert Peel very justly ridiculed the 
 definition given by one writer on the currency of a pound, 
 as ‘a sense of value in reference to currency as compared with 
 commodities.’ Yet in practical life this is really something like 
 what men generally mean and want by money. ‘They mean so 
 much goods; so much of the commodities for sale in the market 
 of the world. A pound to a ‘navvy,’ for instance, is so much 
 beer and tobacco; to his‘mother it is so much tea and sugar. 
 But these two cases are sufficient to show the extreme difficulty 
 of pronouncing any moral judgment whatever upon the love of 
 money, considered as a general human propensity ; for the love 
 of tea and sugar is universally admitted to be in itself an innocent 
 affection, while the love of beer and tobacco is often condemned 
 as combining two most pernicious desires. The love of money 
 is really only a phrase for the love of a vast number of different 
 things, which may be good, bad, or indifferent, regarded from a 
 moral, religious, eesthetical, political, or medical point of view, 
 but which are alike in one respect—namely, that they are all to 
 be had for money, and are not to be had without it. As Solomon 
 said, ‘A feast is made for laughter, and wine maketh merry ; 
 but money answereth all things.’ The love of money is that 
 universal desire for wealth from which political economists have 
 deduced a theory of commercial values, along with several 
 important truths respecting the conditions of industrial energy 
 and prosperity. Everybody wishes for some kind of wealth, and 
 money is convertible into every other kind; and therefore every- 
 body loves money for some purpose or other, from which we get 
 
The Love of Money. 3 
 
 the laws of competition, prices, wages, profits, and rent. Yet 
 this general principle of pecuniary interest or love of riches by 
 no means explains all the phenomena of the economic world. 
 Tor it is, as we have said already, only a single expression for 
 a great variety of wants, wishes, and tastes, which are not always 
 the same from age to age, or from country to country, nor felt 
 alike by every individual in any one age or country, and which, 
 moreover, lead to very different consequences as regards the 
 nature, amount, and distribution of wealth, and as regards the 
 material as well as the moral welfare of human society. 
 
 That disease of language which metaphysicians call the 
 realism of the sehools still infests many of the terms and phrases 
 which philosophy must employ. <A host of different things are 
 alike in some one respect, and a common name is given to them 
 in reference to the single quality or ciremustance which they 
 have in common. Itis simply a name for their common feature, 
 but it puts their numerous differences out of sight and out of 
 mind, and they come to be thought of in a lump as one sort of 
 thing. Those moralists, accordingly, who feel themselves the 
 better for heartily denouncing the general principle of the love 
 of money or pursuit of wealth with which political economy sets 
 out, confound, in their horror of a mere abstraction, the love of 
 health, cleanliness, decency, and knowledge, with sensuality, 
 avarice, and vanity. And perhaps political economists have not 
 escaped a bias from their own phraseology, and are apt to imagine 
 in their scientific discussions a much fuller explanation of the 
 complete phenomena of wealth, and a much closer approximation 
 to the complete philosophy of the subject, than lies within their 
 province as commonly circumscribed by themselves at present. 
 
 It is obvious that the love of money includes a demand for 
 yarious things, the production of which variously affects both 
 the material interests of the consumers and the quality and dis- 
 tribution of the revenue of the whole community. It includes 
 a love of pictures, toys, jewellery, plate, furniture, clothing, 
 opium, soap, bibles, brandy, and, in short, everything in the 
 International Exhibition, and many things not exhibited there. 
 It includes a love of eating and drinking, both in moderation 
 
 B2 
 
4 The Love of Money. 
 
 and in excess; of literature and science; of architecture; of 
 the fine arts; of indolence and ease, and of business and sport; 
 of foreign travel, and of a country house ; of music; of charity, 
 sensuality, cruelty, and power; of horses and dogs. It expresses: 
 sometimes a desire for the comforts of an old bachelor, and some- 
 _times an inclination for matrimony ; and when it takes the latter 
 direction, it means with one young lady love in a cottage, and 
 with another a palace without love; in one man it is fortune- 
 hunting—in another, a disinterested attachment to Miss Aurora 
 Penniless. The disciples of Malthus know how to discriminate 
 between the economic consequences of these diverse matrimonial 
 tendencies, and the important differences of their influence on 
 the price of beef. Napoleon III. seems to behold in money the 
 sinews of war; his friend Mr. Cobden connects it with commerce 
 and peace. The poor man’s love of money is a different feeling 
 from the rich man’s, and, accordingly, the writer of this essay 
 never throbs with the emotions which must animate the breasts: 
 of Baron Rothschild and Lord Overstone. The American 
 Southerner worships in the almighty dollar the giver of African 
 slaves; the negro slave of Brazil adores it chiefly as the 
 purchaser of liberty. The wealth which is coveted by men in 
 the East is not that which is most prized by the men of the 
 West. An Indian Rajah’s chief wealth is a plurality of wives, 
 personal attendants and elephants, and a load of gold trappings. 
 on both his elephant’s body and his own—all which, not exclusive. 
 of the wives, would be more than an English duke or prince could 
 bear. An old writer gives an account of a religious ceremony 
 which he witnessed in Turkey, at which Prince Mustapha—a. 
 boy of eleven years old—‘ was so overloaded with jewels, both 
 himself and his horse, that one might say he carried the value. 
 of an empire about him.’ That is to say, the wealth which, in 
 the hands of English capitalists, would have made a whole 
 territory prosperous, and been distributed in wages through 
 many hundred families, was concentrated upon making one 
 small Turkish child vain and uncomfortable. And the oriental 
 lust for jewels not only has effects upon the economic condition 
 of the world which merit the attention of the political economist, 
 
The Love of Money. 5 
 
 but it has also, in a great measure, sprung from the absence, for 
 many ages, of the conditions essential to general prosperity, and 
 the accumulation of wealth in really useful forms. Wherever 
 insecurity has long prevailed, a spirit of hoarding must exist, 
 with a desire for that sort of wealth which contains much value 
 in a durable and portable form, and which is easily hidden, 
 easily removed, and none the worse for being buried for months 
 or years in the ground. It is probable, therefore, that the love 
 of gold chains and jewels for which the European Jew is remark- 
 able has a Huropean as well as an Asiatic origin, being inherited 
 from his persecuted, plundered, and usurious ancestors in the 
 middle ages, who found it necessary to pack their wealth into 
 the smallest possible compass. 
 
 The existence of security, banks, and paper currency, have 
 long exterminated from England that curious animal the 
 genuine miser, with his treasure in a strong box, doing no good 
 to anyone. Dr. Johnson, talking of misers to Boswell, said, 
 ‘A man who keeps his money has, in reality, more use of it 
 than he can have by spending it. Why, sir, Lowther, by 
 keeping his money, had the command of the county, which his 
 family has lost by spending it.’ But an English millionaire 
 does: not keep his money to himself, as the ancient miser, 
 whether he spends it or not. If he saves it, instead of locking 
 it up or carrying it about on his body, he puts it in a bank, and 
 the banker’s customers make use of the wealth he does not 
 himself consume. 
 
 But when we say that the form of the love of money which 
 displays itself in a love of dress, ornaments, and jewels, is almost 
 confined to the men of Eastern countries, we must be understood 
 as speaking of men in the narrowest sense, and as making no 
 allusion in that comparison to the ladies of the two hemispheres. 
 Women have everywhere their own peculiar notions of the 
 value of money; and a world of either men alone or of women 
 alone would contain a very different assortment of articles of 
 wealth from that in the great mundane shop for both sexes 
 which exists. With most species of animals, the male is more 
 gorgeously dressed than the female; but so it seems to be with 
 
6 The Love of Money. 
 
 the human species generally, only in its less civilized forms. 
 For we may perceive, with the growth of European civiliza- 
 tion, a marked decline in the taste of men for the display of 
 wealth onthe body. A medieval baron was much more expen- 
 sively got up than his wife or daughter. Even in the last 
 century the toilette of a gentleman was nearly as elaborate and 
 splendid as that of a lady. Now, a gentleman thinks he makes 
 a smart appearance with a flower in his button-hole, at an 
 assembly at which the ladies are blazing with diamonds. It 
 
 .— 
 
 ee 
 
 might be an instructive inquiry how far this difference in the 
 desire for wealth is traceable to a radical difference in the 
 natural mental constitutions of the sexes, and how far to 
 restraints which confine the ambition of women in general to 
 paltry objects, leading them to waste their time in hunting 
 husbands, while men hunt seats in parliament, and foxes. 
 Addison remarks, in the ‘ Spectator,’ that ‘One may observe that 
 women in all ages have taken more pains than men to adorn 
 the outside of their heads.’ Perhaps one reason for this is, that 
 men have in all ages prevented them from taking so much pains 
 to adorn the inside. While we are on the subject of dress as 
 one of the equivalents of money, and one of the objects of its 
 pursuit, we may make a remark upon that singular revolution 
 of the human mind through which it has come to be thought, 
 by all men of a certain rank, in the Western world, becoming 
 to attire themselves every evening in black from head to foot, 
 as if for a funeral; and by most men, of all ranks, in that 
 civilized region, becoming to clothe themselves in the dingiest 
 hues all day long. The male apparel which is the last product 
 of civilization appears to display a remarkable mixture of good 
 sense and bad taste. The mistake made by the ladies of our 
 time seems to be that of aiming at show and accomplishing 
 waste; while the mistake of the gentlemen is that of aiming at 
 plainness and accomplishing gloom. 
 
 Many other illustrations might be given of the curious turns 
 taken by the fancy for clothing, as one of the uses of money. 
 In the north of Ireland, for example, it is common to see a girl 
 on the road with a smart bonnet, an extensive petticoat, and a gay 
 
The Love of Money. 7 
 
 parasol carried in the usual manner, but with a pair of shoes 
 not upon her feet, but in her hands. Five-and-twenty years ago 
 such a girl would have no more minded the effect of the sun on 
 the skin of her face, than she now minds the effect of the earth 
 on the skin of her foot; and five-and-twenty years hence it 
 may be safely predicted that such a girl will not only think it 
 advisable to wear her shoes on her feet, but will discover that 
 they really hurt less there, when one is used to them, than the 
 stones upon the road. At the same time, we must admit that 
 the shoemakers of mankind—and of womankind, too, we pre- 
 - sume—haye left nothing undone to perpetuate a prejudice 
 against their own particular production, and to weaken the 
 force of the love of money for the sake of obtaining it. There 
 is, again, in the inventory of modern wealth, and among the 
 civilized uses of money, another article of dress of so obvious 
 and simple a character that many persons may naturally suppose 
 that it descends from the most remote antiquity. Yet, some 
 centuries ago, all the wardrobes in England did not comprise a 
 single night-dress for lady or gentleman, king or queen. Take 
 again, another institution of the modern dressing-room—the 
 bath. There is a history of civilization in the Tale of a Tub. 
 There is a letter to the old ‘Spectator,’ on the effects of the love 
 of money, in which the writer says that it is to that we owe the 
 politician, the merchant, and the lawyer; ‘Nay,’ he adds, ‘I 
 believe to that also we are indebted for our ‘ Spectator.’ We 
 are not prepared to explain the various motives which inspire 
 the pens of authors. Did Shakspeare write for money? Did 
 Pope? Did Dr. Johnson? Did Lord Macaulay? Does Sir 
 Edward Bulwer Lytton? We are concerned at present with 
 the motives of consumers rather than producers; and one thing 
 at least is clear, that it is highly to the credit of the former to 
 elicit such productions from the latter, and that the love of 
 money in the modern world is to a great extent the love of 
 good, elevating, and instructive objects—a love which meets 
 with its return. New desires for health, decency, knowledge, 
 refinement, and intellectual pleasures, have, in fact, revolu- 
 tionised production. The antithesis to modern wealth is not 
 
8 The Love of Money. 
 
 so much poverty as a different kind of wealth. The change 
 is more remarkable in the quality than in the quantity. 
 No inconsiderable part of human wealth, it is true, still con- 
 sists of the means of unhappiness rather than of happiness, and 
 of the gratification of vice rather than of virtue. On the whole, 
 however, there is a transformation in the moral character of 
 wealth, and of the desires involved in the general love of money. 
 For the most part, instead of representing wickedness, brutal 
 delight, and idle pomp, or conquest, tyranny, and plunder, the 
 wealth of Europe represents peace, culture, liberty, and the 
 comfort of the many rather than the magnificence of the few. 
 Where man’s treasure is, there his heart is also; and the trea- 
 sures of modern civilization seem,to us to show as remarkable an 
 improvement in the moral as in the intellectual and physical 
 condition of society. ‘ Riches,’ said Milton, ‘ growin hell;’ for 
 even in his time much of the wealth that grew on earth bore 
 many marks of being the property of bad and unhappy beings. 
 But we may venture now to ask those well-meaning persons who, 
 without regard to time and place, and without discrimination 
 between good and evil, repeat ancient warnings against the love 
 of money and the pursuit of wealth, whether they mean fo 
 praise dirt under the name of poverty, and whether they think 
 idleness better than industry, ignorance better than science and 
 art, and barbarism better than civilized progress? ‘To political 
 economists, on the other hand, we venture to suggest the cul- 
 tivation of a department of the philosophy of riches which has 
 never been scientifically investigated. ‘The laws which regulate 
 the value of the supply forthcoming from producers have been 
 almost exhaustively developed in political economy ; but the 
 deeper laws which regulate the demand of the consumers, and 
 which give the love of money all its force and all its meaning, 
 have never yet received the regular attention of any school of 
 philosophers. 
 
IL. 
 
 THE WEALTH OF NATIONS AND THE SLAVE 
 POWER.* 
 
 Ir has long been a prevalent notion, that political economy is 
 a series of deductions from the principle of selfishness or private 
 interest alone. ‘The common desire of men to grow rich by the 
 shortest and easiest methods—to obtain every gratification with 
 the smallest sacrifice on their own part—has been supposed to 
 be all that the political economist desires to have granted in 
 theory, or to see regulating in practice the transactions of the 
 world, to ensure its material prosperity. A late eminent writer 
 has described as follows the doctrine of Adam Smith, in the 
 “Wealth of Nations’: ‘He everywhere assumes that the great 
 moving power of all men, all interests, and all classes in all 
 ages and in all countries, is selfishness. He represents men as 
 pursuing wealth for sordid objects, and for the narrowest 
 personal pleasures. ‘The fundamental assumption of his work 
 is that each man follows his own interest, or what he deems to 
 be his interest. And one of the peculiar features of his book 
 is to show that, considering society as a whole, it nearly always 
 happens that men, in promoting their own, will unintentionally 
 promote the interest of others.’ 
 
 But, in truth, the acquisitive and selfish propensities of 
 mankind, their anxiety to get as much as possible of everything 
 they like, and to give as little as possible in return, are in their 
 very nature principles of aggression and injury instead of 
 mutual benefit: the mode of acquisition to which they im- 
 
 
 
 * Macmillan’s Magazine, February, 1863. 
 t Buckle’s History of Civilization, vol. il. 
 
10 The Wealth of Nations and the Slave Power. 
 
 mediately prompt is that of plunder or theft, and the compe- 
 tition which they tend to induce is that of conflict and war. 
 Their first suggestion is not, ‘I will labour for you,’ but ‘you 
 shall labour for me;’ not, ‘Give me this, and I will give you 
 what will suit you better in exchange,’ but, ‘Give it to me, or 
 else I will take it by force.’ The conqueror rather than the 
 capitalist, the pirate rather than the merchant, the brigand 
 rather than the labourer, the wolf rather than the watch-dog, 
 obey the impulses of nature. The history of the pursuit of 
 gain is far from being the simple history of industry, with 
 growing national prosperity; it is the history also of depreda- 
 tion, tyranny, and rapine. One passage in it is thus given, in 
 the early annals of our own country: ‘Every rich man built 
 his castle, and they filled the land with castles. They greatly 
 oppressed the wretched people by making them work at their 
 castles, and, when they were finished, they filled them with evil 
 men. ‘Then they took those whom they suspected to have any 
 goods, seizing both men and women by night and day; and 
 they put them in prisons for their gold and silver, and tortured 
 them with pains unspeakable. . . . The earth bare no corn; 
 you might as well have tilled the sea; for the land was all 
 ruined by such deeds.’ 
 
 But if misery and desolation are the natural fruits of the 
 natural instincts of mankind, how has the prosperity of Hurope 
 steadily advanced in spite of the enemy to it which nature 
 seems to have planted in every man’s breast? How has the 
 predatory spirit been transformed into the industrial and com- 
 mercial spirit ? Under what conditions are individual efforts 
 exerted, for the most part, for the general good? ‘These are 
 the chief problems solved in Adam Smith’s ‘Inquiry into the 
 Nature and Causes of the Wealth of Nations.’ He has been 
 careful to point out that ‘the interests of individuals and par- 
 ticular orders of men, far from being always coincident with, 
 are frequently opposed to, the interests of the public;’ and he 
 observes that ‘all for themselves and nothing for other people 
 seems to have been, in every age, the vile maxim of the masters 
 of mankind.’ The effort of every man to improve his own 
 
The Wealth of Nations and the Slave Power. 11 
 
 condition is, it is true, in Adam Smith’s philosophy, a principle 
 of preservation in the body politic; but his aim was to demon- 
 strate that this natural effort is operative for the good of society 
 at large only in proportion to the just liberty secured to every 
 member of it to employ his natural powers as he thinks proper, 
 whether for his own advantage or for that of others. Every 
 infraction of, and every interference with, individual liberty he 
 denounced as being as economically impolitic as morally unjust. 
 His systematic purpose was to expose the losses which a nation 
 suffers, not only from permission of the grosser forms of violence 
 and oppression, but from every sort of restriction whatever upon 
 voluntary labour and enterprise. Of laws regulating agriculture 
 and manufactures for the supposed advantage of the public, he 
 said, ‘ both were evident violations of natural liberty, and there- 
 fore unjust, and they were both too asimpolitic asthey were unjust. 
 That security, he added, which the laws in Great Britain give 
 to every man, that he shall enjoy the fruits of his own labour, 
 is alone sufficient to make any country flourish. The history 
 of Europe, in so far as it is the history of the progress of 
 opulence, is not, in his pages, the history of selfishness, but of 
 improving justice; of emancipated industry, and of protection 
 for the poor and weak. It is, accordingly, the history of 
 strengthening restraints upon the selfish disposition of mankind 
 to sacrifice the happiness and good of others to their advantage 
 or immediate pleasure. The fundamental principles on which 
 the increase of the wealth of nations rests are thus summed up, 
 at the end of Adam Smith’s Fourth Book: ‘ All systems, either 
 of preference or restraint, being thus completely taken away, 
 the obvious and simple system of natural liberty establishes 
 itself of its own accord. Every man, so long as he does not 
 violate the laws of justice, is left perfectly free to pursue his 
 own interest his own way, and to bring both his industry and 
 his capital into competition with those of any man or order of 
 men.’ 
 
 The treatise on the ‘Wealth of Nations’ is, therefore, not to 
 be regarded, as it was by Mr. Buckle, as a demonstration of the 
 public benefit of private selfishness. Adam Smith denies neither 
 
12 The Wealth of Nations and the Slave Power. 
 
 the existence nor the value of higher motives to exertion. The 
 springs of industry are various. Domestic affection, public 
 spirit, the sense of duty, inherent energy and intellectual tastes, 
 make busy workmen, as well as personal interest. And personal 
 interest is itself a phrase for many different motives and pursuits, 
 deserving the name of selfishness or not according to their 
 nature and degree ; just as wealth under a single term includes 
 many things of very different moral quality, according to their 
 character and use. The aims of men in life may be high or low; 
 they may seek for riches of very different kinds and for very 
 different purposes. In a recent essay in the ‘ Revue des Deux 
 Mondes,’ the eminent economist, M. de Lavergne, maintains 
 that political economy and religion are, though essentially 
 distinct, related to each other as the soul and body are. Wealth, 
 he says, means food, clothes, and houses; and religion, though 
 it treats of higher things, does not teach that men should be 
 left to perish of hunger and cold. Political economy has for its 
 special end the satisfaction of the bodily wants, and religion 
 that of the spiritual wants, of man. M. de Lavergne seems to 
 have been led astray by the economic use of general terms, such 
 as material wealth, material interests, and material progress. 
 For wealth is not really or properly limited in political economy 
 to such things as satisfy the bodily or material wants of humanity. 
 It comprehends many things, the use of which is to minister to 
 man’s intellectual and moral life, but which have, notwith- 
 standing, a price or value. Books, for example, as well as bread 
 and meat, are wealth. Spiritual and other instructors are paid 
 for as well as butchers and doctors. Wealth means, in fact, 
 many different things, more or less material or immaterial, in 
 different ages and countries. The highest kinds of wealth will 
 be found where there is most general freedom for the develop- 
 ment of the highest powers of humanity, and where no class 
 have a licence for the gratification of their selfish passions at the 
 expense of any other class. But what Adam Smith contended 
 for was, that no class of men, be their motives good or bad, 
 should be suffered, under any pretext, to encroach upon the 
 industrial liberty of other men. The true moving power of 
 
The Wealth of Nations and the Slave Power. 13 
 
 the economic world, according to his system, is not individual 
 selfishness, but individual energy and self-control. His funda- 
 mental principle is perfect liberty. The ‘ Wealth of Nations’ 
 is, in short, an exhaustive argument for free labour and free 
 trade, and a demonstration of the economical policy of justice 
 and equal laws. Arguing against the law of apprenticeship, 
 the philosopher said: ‘The property which every man has in 
 his own labour, as it is the original foundation of all other 
 property, so it is the most sacred and inviolable. The patrimony 
 of a poor man lies in the strength and dexterity of his hands; 
 and to hinder him from employing his strength and dexterity in 
 what manner he thinks proper for his own advantage is a plain 
 violation of that most sacred property. It is a manifest 
 encroachment upon the just liberty both of the workman and 
 of those who might be disposed to employ him. As it hinders 
 the one from working at what he thinks proper, so it hinders 
 the others from employing whom they think proper.’ 
 
 The system, therefore, which is most subversive of the 
 doctrines of political economy, as taught by Adam Smith, is 
 that most selfish of all possible systems—slavery. The political 
 economist must condemn it as loudly as the moralist. It attacks 
 the life of industry, and prevents the existence of exchange. It 
 robs the labourer of his patrimony; it robs those who would 
 hire him in the market of their lawful profits; and it is a 
 fraudulent abstraction from the general wealth of nations, the 
 quantity and quality of which depend upon the degree of 
 industrial liberty secured to every individual throughout the 
 world for the exercise of his highest powers. Of the property 
 of the slaveholder in the industry of his slaves, the paradox, /a 
 propriété cest le vol, is a literal truth according to political 
 economy as well as common morality, and as regards not only 
 the slaves, but the whole commercial world. Yet slavery is a 
 system within the legitimate range of economic inquiry, 
 which is by no means limited, as has sometimes been con- 
 tended, to the phenomena of an imaginary world of free ex- 
 changes, but extends to all the economic phenomena of the real 
 world, in which wealth is produced and distributed according 
 
14 The Wealth of Nations and the Slave Power. 
 
 to very different systems. Injustice and oppression have their 
 natural train of economic consequences as well as liberty and 
 equal laws, and the economist is concerned with both, as the 
 physician studies the laws of disease as well as health. ‘ Writers 
 on political economy,’ says the chief among them in our time, 
 ‘propose to investigate the nature of wealth, and the laws of its 
 production and distribution, including, directly or remotely, the 
 operation of all the causes by which the condition of human 
 beings is made prosperous or the reverse.’ ‘There is not a 
 country in Europe at this day, not excepting our own, the 
 economic phenomena of which the principle of exchange would 
 be sufficient to interpret. But, even if pure commercial com- 
 petition now regulated, throughout the whole of Europe, the 
 production and distribution of every article of wealth, the 
 whole domain of history, and the breadths of Asia, Africa, and 
 America, would remain for the economist to explore, and to 
 account on other principles for the direction and results of 
 human industry, the use of natural resources, and the division 
 of the produce. The economy of the Slave States of America, 
 for example, afforded an opportunity for this inquiry, of which 
 Mr. Cairnes availed himself in his admirable essay on the 
 Slave Power. In an earlier essay, he described political 
 economy as belonging to ‘the class of studies which includes 
 historical, political, and social investigations,’ and defined it as 
 ‘the science which traces the phenomena of the production and 
 distribution of wealth up to their causes in the principles of 
 human nature, and the laws and events of the external world.’* 
 In the later essay, instead of deducing unreal consequences 
 from the hypothesis of industrial liberty, he has traced the 
 origin and consequences of the opposite order of things. Instead 
 of the theory of wages, profit, and rent, applicable to a free 
 society, he lays bare the structure of a society which excludes 
 wages, for the labourer is fed and flogged like a beast of burden; 
 in which there is no profit, according to the economist’s defi- 
 
 
 
 * Logical Method of Political Economy. By J. E. Cairnes, Professor of 
 Political Economy in the University of Dublin. 
 
The Wealth of Nations and the Slave Power. 15 
 
 nition, for labour is not hired, but stolen; in which there 
 is little or no rent, for only the best soils can be cultivated, 
 and they are constantly becoming worthless instead of grow- 
 ing in value; in which fear is substituted for the hope of 
 bettering his condition, and torment for reward, as the stimulus 
 to the labourer’s exertion; and in which wealth exists only in 
 its rudest forms, because the natural division of employments 
 has no place, and only the rudest instruments of production can 
 be used. Adam Smith had previously examined the milder 
 conditions of feudal servitude, demonstrating that the backward- 
 ness of medizeval Kurope was attributable to these and similar 
 discouragements to industry, and showing how it was forced 
 into unnatural channels by such obstructions. For, through 
 every part of his philosophy, ‘ Dr. Smith sought,’ as Dugald 
 Stewart relates, ‘ to trace, from the principles of human nature 
 and the circumstances of society, the origin of the positive in- 
 stitutions and conditions of mankind.’ The‘ Wealth of Nations’ 
 contains the substance of the last division of a complete course 
 of lectures upon moral science, in which Adam Smith expounded, 
 in succession, Natural Theology, Ethics, Jurisprudence, and 
 Political Economy. His lectures on Jurisprudence have not 
 survived ; but his pupil, Dr. Miller, states that ‘he followed in 
 them the plan suggested by Montesquieu, endeavouring to trace 
 the gradual progress of jurisprudence from the rudest to the 
 most refined ages, and to point out the effect of those arts which 
 contribute to subsistence and to the accumulation of property, 
 in producing corresponding improvements or alterations in law 
 and government.’ From this it is clear that his conception of 
 the true scope and method of jurisprudence agreed with his con- 
 ception of the true scope and method of economic inquiry. And 
 in the ‘ Wealth of Nations,’ accordingly, he traced the operation 
 both of the causes which rescued Europe from barbarism and 
 occasioned its progress in opulence, and of those which impeded 
 the action of the natural principles of preservation and improve- 
 ment. In short, his treatise included an inquiry into the causes 
 of the poverty as well as of the wealth of nations, and an 
 investigation of the actual constitution and career of industrial 
 
16 The Wealth of Nations and the Slave Power. 
 
 society. He showed how rural industry and progress were 
 thwarted in the middle ages by such impediments that, but 
 for the happier circumstances of its towns, Europe could never 
 have emerged from the calamities which befel it after the 
 dissolution of the Roman Empire. The servile and insecure 
 position of the cultivators of the soil prevented industry from 
 achieving its first triumphs in the country according to the 
 course of nature, which makes agriculture the primary, because 
 the most necessary, business of mankind. ‘Order and good go- 
 vernment, on the other hand, and along with them the liberty 
 and security of individuals, were established in cities at a time 
 when the occupiers of land in the country were exposed to every 
 sort of violence. But men in this defenceless condition naturally 
 content themselves with a bare subsistence, because to acquire 
 more might only tempt the injustice of their oppressors. On 
 the contrary, when they are secure of enjoying the fruits of 
 their industry, they naturally exert it to better their condition, 
 and to acquire, not only the necessaries, but the comforts and 
 elegancies of life. That industry, therefore, which aims at 
 something more than necessary subsistence, was established in 
 cities long before it was commonly practised by the occupiers of 
 land in the country.’ In this manner, Adam Smith has traced 
 the causes of the actual and, as he calls it, the ‘unnatural’ course 
 of industry in the slow and chequered progress of modern 
 Europe. He investigated the phenomena of what was, happily 
 for us, on the whole, a progressive society. Mr. Cairnes, on the 
 contrary, has investigated those of a retrograde one. 
 
 In the Slave States of America Mr. Buckle might have seen 
 the economical results of a society based upon selfishness instead 
 of justice. The negro shows elsewhere* his capacity to take 
 
 * The following statement, affording evidence as to the character, capacity, and 
 enterprise of the negroes, is contained in a letter to the writer of this Paper from 
 one of the principal English residents in Victoria, the Capital of Vancouver’s 
 Island, It formed part of a general description of the Colony, furnished without 
 any reference to the question of slavery :—‘ Before the gold excitement, but during 
 the same year (1858), the Legislature of California passed a law forbidding the 
 immigration of negroes. This caused the latter to appoint a deputation, which 
 visited the British possession of Vancouver’s Island; and so favourable was their 
 
The Wealth of Nations and the Slave Power. 17 
 
 his part in the free division of labour, and the consequent 
 multiplication of the productions of the different arts, which 
 occasions, in the words of Adam Smith, in a well-governed 
 society that universal opulence which extends itself to the lowest 
 ranks of the people. In the squalid and comfortless homes even 
 of the higher ranks of the people in the American Slave States 
 we see the consequence of oppressed and degraded industry. 
 ‘Tt may be,’ says Adam Smith again, ‘ that the accommodation 
 of a European prince does not always so much exceed that of 
 an industrious and frugal peasant, as the accommodation of 
 the latter exceeds that of an African king, the absolute master 
 of the lives and liberties of ten thousand naked savages.’ The 
 American slave-owner is, as it were, a petty African king, and 
 in real penury, as well as in power, resembles such aruler. It 
 is said, indeed, that we owed to slavery the produce which 
 supplied the principal manufacture of Great Britain. But the 
 whole of this production was in truth to be credited to free 
 industry, while all the waste and ruin which accompanied it 
 must be ascribed to slavery. The possibility of the profitable 
 growth of so much cotton was caused by the commerce and 
 invention of liberty, while the barbarism of the poor whites, the 
 brutifying of the negro population, and the exhaustion of the 
 American soil, are the net results of slavery. In truth, to Watt, 
 Hargreaves, Crompton, and Whitney—free citizens of England 
 and the Northern States—the southern planters owed the whole 
 value of their cotton. What slavery may really claim as its 
 own work is that, by exhausting the soil it occupies by a 
 barbarous agriculture, which sets the laws of chemistry as well 
 as of political economy at defiance, it hastens its own extinction 
 from the day that its area is once definitely and narrowly 
 
 report, that it not only caused many coloured people to leave California, but: also 
 aroused general attention, particularly that of British subjects; for by all who 
 had occasionally heard of the island before it was considered a sort of petty 
 Siberia. While people were reading accounts of the climate, soil, and low price 
 of town lots in Victoria, there came rumours of rich gold sands on the banks 
 of the Frazer River in British Columbia. Two or three small coasting vessels 
 had previously sailed with coloured passengers; but the demand for passages 
 by white people became so great, that large steamships departed every few 
 
 Cc 
 
18 The Wealth of Nations and the Slave Power. 
 
 circumscribed. This its own advocates admit, but with @ 
 singular inference: ‘Slavery has, by giving to the laws of 
 nature free scope, moved over a thousand miles of territory, 
 leaving not a slave behind. Why should good men attempt to 
 check it in its progress? If the laws of nature pass slavery 
 farther and farther south, why not let it go, even though, in 
 process of time it should, by the operation of natural laws, pass 
 away altogether from the territory where it now exists?” Why, 
 we may ask, should devastation be suffered to spread? Should 
 fires in a city be suffered to burn themselves out by advancing 
 from street to street until not a house remains to feed the con- 
 flagration? ‘The slaveholder, as he moves southward or west- 
 ward, not only carries moral and material destruction with him, 
 but leaves it behind for those who come after him. The rich 
 slavebreeder follows him with his abominable trade, and the poor 
 white sinks back into barbarism in the wilderness the slaveholder 
 has made. The order of European progress has been reversed. 
 In Europe, justice, liberty, industry, and opulence grew together, 
 as Adam Smith described. In the Slave States of America, as. 
 Mr. Cairnes has shown, the Slave Power constitutes ‘ the most 
 formidable antagonist to civilized progress which has appeared 
 for many centuries, representing a system of society at once 
 
 
 
 days with from 300 to 1000. Among them were some coloured people, and 
 they have increased in number until, I think, we may safely estimate them at 
 500. The occupations of these coloured people in Victoria are, to the best of my 
 recollection, porters, sawyers, draymen, day-labourers, barbers, and bathkeepers ; 
 eating-house keepers; one hosier, as black as a coal, with the best stock in the 
 town; and two or three grocers. Some of them went to the mines, and were 
 moderately successful. Their favourite investment is in a plot of ground, on which 
 they build a neat little cottage and cultivate vegetables, raise poultry, &c. 
 Nearly all had been prosperous, and a few had so judiciously invested that they 
 were in receipt of from £10 to £40 a month from rents. They are industrious, 
 economical, and intend to make the colony their permanent home; the outskirts: 
 of the town are well sprinkled with their humble but neat dwellings, and their 
 land is yearly increasing in value. By this showing they are a quiet, industrious, 
 and law-abiding people; but there is a drawback, taking them altogether as. 
 citizens, which arises from their earnest desire to be on a perfect social equality 
 with the whites at church, the théatre, concerts, and other public places of 
 assembly. When you consider the strong disinclination for their company, not 
 only of our large American population, but also of Englishmen, who very quickly 
 imbibe the American prejudice, you can readily conceive that a number of 
 disagreeable scenes occur.’ 
 
The Wealth of Nations and the Slave Power. 19 
 
 retrograde and aggressive—a system which, containing within 
 it no germ from which improvement can spring, gravitates 
 inevitably towards barbarism, while it is impelled by exigencies 
 inherent in its position and circumstances to a constant extension 
 of its territorial domain.’ 
 
 &vw woTamay lepOv xwpovor tayal 
 kal Sika kal mdvta mad oTpepeTau. 
 
 For the perpetuation and extension of the system to which 
 
 is owing this retrogressive movement of the English race, in 
 a region endowed with every natural help to progress, the slave- 
 holders are in arms. They have not been slow to point, indeed, 
 at General Butler’s misrule in a southern city, and to ask if the 
 cause of their adversaries is the cause of liberty? But such 
 men as General Butler are living arguments against a Slave 
 Power. General Butler was absolute master at New Orleans ; 
 and, even in the words of an ardent apologist for slavery, ‘ that 
 cruelties may be inflicted by the master upon the slave, that 
 instances of inhumanity have occurred and will occur, are ne- 
 cessary incidents of the relation which subsists between master 
 and slave, power and weakness.’* There was never a more 
 striking example of the ease with which men are cheated by 
 words than the generous sympathy given in England to the 
 cause of the slaveholders, as the cause of independence, and 
 therefore of liberty! It is the cause of independence, such as 
 absolute power enjoys, of every restraint of justice upon pride 
 and selfish passions. The power of England is in a great 
 measure a moral power, founded on the respect of the civilized 
 world for the courageous opposition of her people for centuries 
 to such independence both at home and abroad. And, if the 
 public opinion of England and the leaning of her policy be found 
 ultimately upon the side of the maintenance and extension of 
 the Slave Power in America, she will sustain in the end as great 
 a loss of actual power, as well as of moral dignity, as if she 
 entered into a league with the despots of Europe, and closed her 
 
 * The South Vindicated, p. 82. 
 C2 
 
20 The Wealth of Nations and the Slave Power. 
 
 cities of refuge against their victims. The Slave Power fights 
 against all the principles of civil and religious liberty on which 
 England rests her glory, and all the principles of political 
 economy to which she ascribes her wealth. In policy, as well 
 as in justice, England must refuse her countenance to that 
 Power, as the enemy of the liberty as well as of the wealth of 
 nations. 
 
III. 
 
 THE POLITICAL ECONOMY OF ADAM SMITH.* 
 
 ‘ PotiticaL Economy belongs to no nation ; it is of no country: 
 it is the science of the rules for the production, the accumulation, 
 _ the distribution, and the consumption of wealth. It will assert 
 itself whether you wish it ornot. It is founded on the attributes 
 of the human mind, and no power can change it.’t In these 
 words—accompanying an admission that the Irish Land Bill, 
 which he nevertheless defended on other grounds, ‘ offended 
 against the principles of political economy’—Mr. Lowe gave 
 expression last session to the conception of one school of the 
 followers of Adam Smith, that Political Economy is, not what 
 Adam Smith called his own treatise, ‘An Inquiry into the 
 Nature and Causes of the Wealth of Nations,’ but a final 
 answer to the inquiry—a body of necessary and universal truth, 
 founded on invariable laws of nature, and deduced from the 
 constitution of the human mind. 
 
 I venture to maintain, to the contrary, that political economy 
 is not a body of natural laws in the true sense, or of universal 
 and immutable truths, but an assemblage of speculations and 
 doctrines which are the result of a particular history, coloured 
 even by the history and character of its chief writers; that, so 
 far from being of no country, and unchangeable from age to 
 age, it has varied much in different ages and countries, and even 
 with different expositors in the same age and country; that, in 
 fact, its expositors, since the time of Adam Smith, are substan- 
 
 
 
 * Fortnightly Review, November 1st, 1870. 
 t+ Speech on the Irish Land Bill, April 4th, 1870. 
 
22 The Political Economy of Adam Smith. 
 
 tially divisible into two schools, following opposite methods ; 
 and that the method of one of them, of which the fundamental 
 conception is, that their political economy is an ascertained body 
 of laws of nature, is an offshoot of the ancient fiction of a Code 
 of Nature and a natural order of things, in a form given to 
 that fiction in modern times, by theology on one hand, and a 
 revolt against the tyranny of the folly and inequality of such 
 human codes as the world had known on the other. 
 
 No branch of philosophical doctrine, indeed, can be fairly 
 investigated or apprehended apart from its history. All our 
 systems of politics, morals, and metaphysics would be different 
 if we knew exactly how they grew up, and what transformations 
 they have undergone; if we knew, in short, the true history of 
 human ideas. And the history of political economy, at any 
 rate, is notlost. It would not be difficult to trace the connection 
 between every extant treatise prior to the ‘ Wealth of Nations,’ 
 and conditions of thought at the epoch at which it appeared. 
 But there is the less occasion, for the purpose of these pages, or 
 of ascertaining the origin and foundation of the economic 
 doctrines of our own day, to go behind the epoch of Adam 
 Smith, that he has himself traced the systems of political 
 economy antecedent to his own to a particular course of history, 
 to ‘the different progress of opulence in different ages and 
 | nations,’ and ‘the private interests and prejudices of particular 
 orders of men.’ What he did not see was, that his own system, 
 in its turn, was the product of a particular history; that what 
 he regarded as the System of Nature was a descendant of the 
 System of Nature as conceived by the ancients, in a form 
 fashioned by the ideas and circumstances of his own time, and 
 coloured by his own disposition and course of life. Still less 
 could he see how, after his time, ‘the progress of opulence’ 
 would govern the interpretation of his doctrines, or how the 
 system he promulgated as the system of liberty, justice, and 
 divine benevolence, would be moulded into a system of selfish- 
 ness by ‘the private interests and prejudices of particular 
 orders of men.’ 
 
 ‘The Wealth of Nations,’ says Mr. Buckle, ‘is entirely 
 
The Political Economy of Adam Smith. — 23 
 
 deductive. Smith generalizes the laws of wealth, not from the 
 phenomena of wealth, but from the phenomena of selfishness. 
 He makes men naturally selfish; he represents them as pursu- 
 ing wealth for sordid objects, and for the narrowest personal 
 pleasures.* ‘This description is not misapplied to a political 
 economy of later days, which has guided Mr. Buckle’s inter- 
 pretation of the system of Adam Smith; but with respect to 
 that system itself, it involves two fundamental misconceptions. 
 Selfishness was not the fundamental principle of Adam Smith’s 
 theory ; and his method, though combining throughout a vein 
 of unsound a priori speculation, was in a large measure inductive. 
 The investigation which establishes this will be found also to 
 
 exhibit the connection between his economic system and the ~ 
 
 chief problems pressing for solution in his time; the methods 
 which the philosophy of the age provided for their solution ; 
 and the history and phenomena of the economic world in which 
 he lived, and from which his ideas, his inductions, and his 
 verifications were drawn. 
 
 One consideration to be carried in mind in the interpretation of 
 
 the ‘ Wealth of Nations’ is that its author’s system of philosophy .., 
 
 
 
 a complete system of social, or, as he called it, moral philosophy. 
 Mr. Buckle, who on other points has much misconceived the 
 “Wealth of Nations,’ properly says of it, and the ‘Theory of 
 Moral Sentiments,’ that the two must be taken together and 
 considered as one, both forming part of the scheme embraced 
 in his course of moral philosophy at Glasgow—a course which, 
 it is important to observe, began with Natural Theology, and 
 included, along with Ethics and Political Hconomy, the 
 Philosophy of Law. Again, as his social philosophy should be 
 considered as a whole, so the whole should be considered in 
 connection with the philosophical systems or methods of 
 investigation of his time. ‘Two essentially opposite systems 
 of reasoning respecting the fundamental laws of human society 
 were before the world at that epoch, which may be respectively 
 
 * History of Civilization in England, i. 228; ii. 449, 
 
24 The Political Economy of Adam Smith. 
 
 designated as the theory of a Code of Nature, and the inductive — 
 system of Montesquieu—the former speculating a priori about 
 ‘Nature,’ and seeking to develop from a particular hypothesis 
 the ‘Natural’ order of things; the latter investigating in history 
 and the phenomena of the actual world the different states of 
 society and their antecedents or causes—or, in short, the real, 
 
 - as contrasted with an ideal, order of things. ‘The peculiarity of 
 
 Adam Smith’s philosophy is, that it combines these two opposite 
 methods, and hence it is that we have two systems of political 
 economy claiming descent from him—one, of which Mr. Ricardo 
 was the founder, reasoning entirely from hypothetical laws or 
 principles of nature, and discarding induction not only for the 
 ascertainment of its premises, but even for the verification of 
 
 » its deductive conclusions; the other—of which Malthus in the 
 
 generation after Adam Smith, and Mr. Mill in our own, may 
 be taken as the representatives—combining, like Adam Smith 
 himself, the a priori and the inductive methods, reasoning some- 
 times, it is true, from pure hypotheses, but also from experience, 
 and shrinking from no corrections which the test of experience 
 may require in deductions. Of the two schools, distinguished 
 by their methods, the first finds in assumptions respecting the 
 nature of man, and the course of conduct it prompts, a complete 
 ‘natural’ organization of the economic world, and aims at the 
 discovery of ‘natural prices,’ ‘natural wages,’ and ‘natural 
 profits.’ 
 
 An examination of Adam Smith’s philosophy enables us to 
 trace to its foundation the theory upon which the school in 
 question has built its whole superstructure. We shall see that 
 the original foundation is in fact no other than that theory of 
 Nature which, descending through Roman jural philosophy 
 from the speculations of Greece, taught that there is a simple 
 Code of Nature which human institutions have disturbed, 
 though its principles are distinctly visible through them, and 
 a beneficial and harmonious natural order of things which 
 appears wherever Nature is left to itself. In the last century 
 this theory assumed a variety of forms and disguises, all of 
 them, however, involving one fundamental fallacy of reasoning 
 
The Political Economy of Adam Smith. 20 
 
 @ priori from assumptions obtained, not by the interrogation 
 but by the anticipation of Nature; what is assumed as Nature 
 being at bottom a mere conjecture respecting its constitution 
 and arrangements. ‘The political philosophy flowing from this 
 ideal source presents to us sometimes an assumed state of nature 
 or of society in its natural simplicity ; sometimes an assumed 
 natural tendency or order of events, and sometimes a law or 
 principle of human nature; and these different aspects greatly 
 thicken the confusion perpetually arising between the real and 
 the ideal, between that which by the assumption ought to be 
 and that which actually is. The philosophy of Adam Smith, 
 though combining an inductive investigation of the real order 
 of things, is pervaded throughout by this theory of Nature, in 
 a form given to it by theology, by political history, and by the 
 cast of his own mind. ‘The great and leading object of his 
 speculations,’ says Dugald Stewart, by no means intending a 
 criticism, for Mr. Maine had not then explored the fallacies 
 lurking in the terms Nature and Natural Law, ‘is to illustrate 
 the provisions made by Nature in the principles of the human 
 mind, and in the circumstances of man’s external situation, for 
 a gradual and progressive augmentation in the means of 
 national wealth, and to demonstrate that the most effectual 
 means of advancing a people to greatness is to maintain that 
 order of things which Nature has pointed out.’ At the end of 
 Book IY. of the ‘ Wealth of Nations’ we find the Code of Nature 
 and its institutions definitely marked out: ‘ All systems either 
 of preference or restraint being completely taken away, the 
 obvious and simple system of natural liberty establishes itself 
 of its own accord. According to the system of natural liberty, 
 the State has only three duties to attend to:’ namely, to pro- 
 tect the nation from foreign aggressions, to administer justice, 
 and to maintain certain great institutions beyond the reach of 
 individual enterprise—a supposed natural limitation of the 
 province of law and government which has been the cause of 
 infinite error in both theoretical political economy and practical 
 legislation. 
 
 The same fundamental conception pervades both Smith’s 
 
26 The Political Economy of Adam Smith. 
 
 system of ethics and his philosophy of law. Investigating the 
 character of virtue, he treats first of ‘the order in which Nature 
 recommends objects to the care of individuals’ for their own 
 personal happiness; next, of ‘the order which Nature has 
 traced. out for the direction of our powers of beneficence: first, 
 towards other individuals; and, secondly, towards societies.’ 
 So, in the description given by himself of his proposed history 
 of jurisprudence, he states that ‘every system of positive law 
 may be regarded as a more or less imperfect attempt towards a 
 system of natural jurisprudence ;’ and that the main end of jural 
 inquiry is to ascertain ‘what were the natural rules of justice, 
 independent of all positive institutions’—a description, perfectly 
 coinciding with Mr. Maine’s, of the place which the law of 
 Nature filled in the conception of the Roman jurist. ‘After 
 Nature had become a household word, the belief gradually 
 prevailed among the Roman lawyers that the old Jus Gentium 
 was in fact the lost Code of Nature. The Roman conceived 
 that, by careful observation of existing institutions, parts of 
 them could be singled out which either exhibited already, or 
 could by judicious purification be made to exhibit, the vestiges 
 of the reign of Nature.’* 
 
 But abstraction would never have played so great a part in 
 Adam Smith’s philosophy, would never have resulted in such 
 sweeping generalizations respecting the beneficent and equitable 
 economy resulting from the play of the natural inclinations 
 and individual interests of men, had not the classical conception 
 of Nature’s harmonious code become blended with the theological 
 conception of ‘that great, benevolent, and all-wise Being, who 
 directs all the movements of Nature, and who is determined to 
 maintain in it at all times the greatest possible quantity of 
 happiness.’ Ideas thus derived from early philosophy became 
 converted into the plans of Providence. Mr. Buckle displays 
 less than his customary erudition when he states that theology 
 had been finally separated from morals in the seventeenth 
 century—from politics before the middle of the eighteenth. 
 
 
 
 * Ancient Law, pp. 56, 88. 
 
The Political Economy of Adam Smith. at 
 
 Y{, 
 
 Natural theology makes the first part of Adam Smith’s ba) 
 «course of moral philosophy, and its principles pervade every 
 other part. The law of Nature becomes with him an article of 
 religious belief; the principles of human nature, in accoydance 
 with the nature of their Divine Author, necessarily tend to the 
 most beneficial employments of man’s faculties and resources. 
 And as the classical conception of Nature supposed simplicity, 
 harmony, order, and equality in the moral as in the physical 
 world, in Adam Smith’s philosophy it becomes associated with 
 divine equity and equal benevolence towards all mankind, and 
 ‘by consequence with a substantially equal distribution of wealth, 
 as the means of material happiness. Nothing, therefore, is 
 needed from human legislation—and this conclusion was power- 
 fully fortified, as we shall afterwards see, by the political ideas 
 of the age—beyond the maintenance of equal justice and 
 security for every man to pursue his own interest in his own 
 way. ‘In the ‘ Wealth of Nations,’ after laying it down that 
 every individual endeavours as much as he can both to employ 
 his capital in the support of domestic industry, and so to direct 
 that industry that its produce may be of the greatest value, and 
 therefore necessarily labours to render the annual revenue of 
 his own nation as great as he can, Adam Smith adds: ‘ He 
 generally, indeed, neither intends to promote the public interest, 
 nor knows how much he is promoting it. ‘By preferring the 
 support of domestic to that of foreign industry, he intends only 
 his own security; and by directing that industry that its 
 freedom may be of the greatest value, he intends only his own 
 gain, and he is in this, as in many other cases, led by an 
 invisible hand to promote an end which was no part of his 
 intention.’ 
 
 So in the ‘ Theory of Moral Sentiments :’* ‘ The produce of 
 the soil maintains at all times nearly that number of inhabitants 
 which it is capable of maintaining. ‘The rich only select from 
 the heap what is most precious and agreeable. They consume 
 little more than the poor, and, in spite of their natural selfish- 
 
 
 
 * Theory of Moral Sentiments, Part 1v., chap. 1. 
 
28 The Political Economy of Adam Simath. 
 
 ness and rapacity, though they mean only their own con- 
 veniency, though the sole end which they propose from the 
 labours of all the thousands whom they employ he the gratifica- 
 tion of their own vain and insatiable desires, they divide with 
 the poor the produce of all their improvements. They are led 
 by an invisible hand to make nearly the same distribution of 
 the necessaries of life which would have been made had the 
 earth been divided into equal portions among all its inhabitants ;: 
 and thus without intending it, without knowing it, advance the 
 interest of the society, and afford means to the multiplication 
 of the species. When Providence divided the earth among a 
 few lordly masters, it neither forgot nor abandoned those who 
 seemed to have been left out in the partition.’ 
 
 The mischief done in political economy by this assumption 
 respecting the beneficent constitution of Nature, and therefore 
 of all human inclinations and desires, has been incalculable. It 
 became an axiom of science with many economists, and with 
 all English statesmen, that by a natural law the interests of 
 individuals harmonize with the interests of the public; and’one 
 pernicious consequence is, that the important department of the 
 consumption of wealth has—though Mr. Lowe properly includes. 
 it in his definition of political economy—been in reality either 
 altogether set aside, as lying beyond the pale of economic 
 investigation, or passed over with a general assumption, after 
 the manner of Mandeville, that private vices are public benefits. 
 The real interests which determine the production, and subse- 
 quently, in the course of consumption, in a great degree the 
 distribution, of wealth, are the interests of consumers; although 
 the truth is veiled by the division of labour, the process of 
 exchange, and the intervention of money, which makes wealth 
 in the abstract, or pecuniary interest, seem the motive of pro- 
 ducers. If every man produced for himself what he desires to 
 consume or use, it would be patent how diverse are the interests. 
 summed up in one vague general term, self-interest—interests 
 which vary in different individuals, different classes, different 
 nations, and different states of civilization. And economic 
 investigation would long since have penetrated beneath the 
 
The Political Economy of Adam Smith. 29 
 
 surface of pecuniary interest to the widely different character 
 
 of the real aims determining the nature and uses of wealth, 
 
 but for that assumption of an identity between public and oe. 
 
 private interest which Adam Smith’s authority converted into 
 
 an axiom. Under its influence we find him assuming that the 
 
 great landowners of the sixteenth century, in enclosing their 
 
 manors and dismissing tenants, retainers, and labourers, to 
 
 purchase luxuries for themselves, employed no less national 
 
 labour than before ; although the land fed sheep instead of men, 
 
 and the wool of the sheep, in place of clothing labourers at 
 
 home, went from the country to foreigners in exchange for 
 
 wines, silks, velvets, and trinkets, for the personal consump- 
 
 tion of the lord of the manor. When William tlie Conqueror 
 
 afforested at once some three-score parishes, he did only what 
 
 landowners have done from the fifteenth century to the present 
 
 time. ‘To take the children’s food and give it unto dogs is, by 
 
 this reasoning, to give it back to the children ! Dyaii : 
 The Nature hypothesis had, however, with Adam Smith (Va, 
 
 another powerful ally besides theology in the idea of liberty. ~ 
 
 The idea of civil and religious liberty, of resistance to arbitrary 
 
 government and unequal laws, of confidence in individual 
 
 reason and private judgment as opposed to the dictates of 
 
 external authority, had begun even in the seventeenth century 
 
 to spread from the world of religion and politics to the daily 
 
 business of life. At the beginning of the second half of the 
 
 eighteenth century the predominant form which this idea took 
 
 was the liberation of individual effort in the world of industry 
 
 and trade from oppressive restrictions and arbitrary and unequal 
 
 imposts; and it found in the Code of Nature a quasi-philosophical 
 
 basis on which to build a complete economic ‘ system of natural 
 
 liberty.” The French Revolution, of which the seeds were then 
 
 being sown by the Economistes (or Physiocrates, as they were 
 
 afterwards called, from the name they gave to their system, a 
 
 name denoting the government of society by nature or natural 
 
 laws), was, in its origin, an economic revolution, a ‘rebellion of 
 
 the belly,’ stirred up ab initio by the Economistes, who saw in 
 
 the fetters and insecurity of industry the cause of the poverty 
 
~~ 
 
 30 The Political Economy of Adam Smith. 
 
 of France, and in the superior freedom and security of its culti- 
 vators and tradespeople the secret of the superior prosperity of 
 Great Britain. Living in such a world of human misgovernment 
 and suffering toil, beholding, as the Physiocrates did, all the 
 natural sources of wealth locked up by human laws, it is not 
 surprising that the doctrine of a Code of Nature, of natural rights - 
 of liberty and property, of a natural organization of society for 
 the increase of human prosperity and a just distribution of the 
 fruits of the earth and of industry, came upon them like a new 
 revelation, and carried the authority of one. Thus, like Adam 
 Smith, on whom their doctrines had no small influence, the: 
 Physiocrates invested the ideal Code of Nature, which had come 
 to them through the lawyers of their country from the juris- 
 prudence of Rome, with a divine origin, and found in it a. 
 complete circumscription and definition of the province of human 
 
 ‘sovereignty. ‘The three same fundamental conceptions derived 
 
 from the three same sources—from Grseco-Roman speculation, 
 from Christian theology, and from the revolt of the age against 
 arbitrary interference with private industry and unequal imposts. 
 on the fruits of labour, formed the groundwork of the political 
 economy of Adam Smith and the Physiocrates: the sole- 
 difference in this respect is, that the latter gave the name 
 political economy to the whole of social philosophy, while Adam 
 Smith limits the particular name to a department of social 
 philosophy relating to wealth, and that they enunciated these 
 doctrines as laws of Nature and God with more passionate 
 emphasis. Adam Smith had not derived any of the three funda- 
 mental ideas of his political economy from the Physiocrates— 
 for those ideas came to both from the history and philosophy of 
 the past, and from the circumstances of the age—but he was. 
 strongly confirmed in them by his visits to France, his personal 
 intercourse with them, and his study of their writings; he 
 caught from them, moreover, not only particular propositions 
 and expressions, but something of the form which his doctrine 
 of natural distribution has taken, and also the precise limitation 
 which he gives to the functions of the State. 
 
 Smith was himself so sensible of his debt to the Physiocrates, 
 
The Political Economy of Adam Sinith. dl 
 
 that he not only speaks of Quesnay’s system as ‘the nearest 
 approximation to the truth that had been published upon the/+— 
 subject of political economy,’ but was prevented only by 
 Quesnay’s death from dedicating to him his own great treatise. 
 He was, however, under amuch more solid obligation to a much 
 greater Hrenchman, the illustrious Montesquieu. Mr. Buckle, 
 who in his excellent chapters on the ‘ Intellectual History of 
 France’ justly traces to England the origination of the spirit 
 of liberty which in the eighteenth century took possession of 
 French philosophy, nevertheless does injustice at once to France 
 and to Great Britain in overlooking the influence of Montesquieu 
 over Scotch philosophy in Adam Smith’s age. And the same 
 oversight, coupled with a view of political economy which 
 Mr. Buckle himself adopted from Ricardo and his school, leads 
 him to describe Adam Smith’s method as entirely deductive. The 
 philosophy of Great Britain, Mr. Buckle affirms, owes nothing 
 to France ; and he represents the intellect of Scotland as having, 
 under clerical guidance, become wholly deductive, referring as 
 a crucial example to Adam Smith, Scotland’s most eminent 
 political philosopher. The clerical system of deductive reasoning 
 certainly runs through and warps the whole philosophy of Adam 
 Smith. Nevertheless, his philosophical love of truth, and of 
 interrogating nature itself in its real phenomena, and the 
 inductive method of doing so which Scotch philosophy in his 
 age had adopted from Montesquieu, preserved him from many 
 errors into which the method of deduction from assumptions 
 respecting Nature and its laws has led one school of his followers, 
 which at the present day is not backward in claiming the 
 clerical prerogative of orthodoxy. It has already been observed 
 that two opposite systems of reasoning were before the world in 
 Adam Smith’s age, and that he combined them both—the 
 system of reasoning from a theoretical law df Nature, and the 
 historical inductive method of Montesquieu, which traces the 
 real order of things, and secks in the circumstances and history 
 of society the explanation of its different states in different ages. 
 and countries. The latter method had a powerful attraction for 
 a new school of political and jural philosophy in Scotland to 
 
<< 
 
 32 The Political Economy of Adam Smith. 
 
 which Adam Smith belonged. Lord Kaimes, his literary 
 patron, and Millar, his own pupil, alike followed Montesquieu’s 
 method. Dalrymple, also a disciple of Lord Kaimes, states in 
 the dedication of his ‘ History of Feudal Property ’—a work 
 which seems to have afforded Adam Smith not a few important 
 suggestions—that much of his manuscript had actually been 
 ‘revised by the greatest genius of the age, President Montes- 
 quieu.’ And Millar expressly states that in his lectures on the 
 Philosophy of Law, his great master ‘followed the plan which 
 seems to have been suggested by Montesquieu ; endeavouring to 
 trace the gradual progress of jurisprudence from the earliest to 
 the most refined ages, and to point out the effect of those arts 
 which contribute to subsistence and to the accumulation of 
 property in producing corresponding improvements in law and 
 government.’ But, as Mr. Buckle himself says, Adam Smith’s 
 political economy and the rest of his philosophy were ‘ part of 
 a single scheme.’ And a comparison of Books 111., 1v., and v. 
 (chapter 1.) of the ‘ Wealth of Nations ’ with Adam Smith’s own 
 description, on the one hand, of the work he had previously 
 contemplated on the History of Law, and Millar’s account of 
 his lectures, on the other, shows how closely connected were his 
 economic and his jural researches. So closely indeed were they 
 so, that internal evidence confirms the statement of Dugald 
 Stewart, that he actually published in the ‘ Wealth of Nations’ 
 a valuable part of the work he had long before announced on 
 the jural history of mankind; and we have in this fact a pro- 
 bable explanation of the story that he destroyed a few days 
 before his death the manuscript of his lectures on jurisprudence. 
 He preserved in the ‘ Wealth of Nations’ what he probably 
 thought their most valuable results.* 
 
 * An eminent Scotch philosopher of the present day, Mr. Alexander Bain, has 
 expressed to me a doubt that Adam Smith destroyed anything which he considered 
 valuable ; adding, that he was little disposed to consider anything to which 
 he had given research and thought of small value. The preservation of the chief 
 results of his jural studies in the Wealth of Nations reconciles Mr. Bain’s opinion 
 on this point with the destruction of the manuscripts, of which there seems to me 
 conclusive evidence. | 
 
The Political Economy of Adam Smith. 33 
 
 The problem which Adam Smith proposed to himself was by 
 no means only the illusive one, What is a priori the order of 
 Nature, or ‘ the natural progress of opulence ?? He inquired 
 further ‘ What had been the actual order of things, the actual 
 progress of opulence, and its causes ?? What had occasioned 
 the slow progress of Europe from the time of the barbarian con- 
 quests down to modern times? What the more rapid advance of 
 Great Britain than of France and other parts of the continent ? 
 T’o answer these inquiries he subjected the phenomena of history 
 and the existing state of the world to a searching investigation, 
 traced the actual economic progress of different countries, the 
 influences of laws of succession, and of the political distribution 
 of property, the action and reaction of legal and industrial 
 changes, and the real movements of wages and profits so far as 
 they could be ascertained. Nor was he content with the induc- 
 tions of the closet from written evidence—though necessarily the 
 most important field of inductive investigation in social philosophy 
 —he compared all the phenomena which careful personal obser- 
 vation, both in his own country and in France, had brought under 
 his view. In short, he added to the experience of mankind a 
 large personal experience for inductive investigation. Even the 
 Physiocrates, although their study of actual phenomena was 
 much less comprehensive and minute, though they were far more 
 given to accepting at once their own unverified ideas as laws of 
 nature, yet by no means neglected experience entirely. They 
 had studied the economic condition of their own country, and 
 compared it with what they knew of Great Britain; and they 
 
 believed their theories of the natural order of things founded on 
 the evidence of the results of interference with industry and 
 spoliation of its fruits on the one hand, and of individual liberty 
 and security of property on the other. The extent to which 
 observation guided their doctrines is remarkably illustrated by 
 their division substantially into two schools, whose conclusions, 
 though converging in the main, were reached by different 
 paths of personal experience, and moulded by it. Quesnay, the 
 son of a small farmer, reared in the country amid the sufferings 
 of the peasantry and the stagnation of agriculture under despotic 
 
 D 
 
34 The Political Economy of Adam Smith. 
 
 restriction and ruinous imposts, and knowing of what imprisoned 
 riches the soil was possessed, taught that land was the sole 
 original source of wealth, agriculture the sole really productive 
 employment, to whose fruits other industries gave only changes 
 of form or place. Gournay, on the other hand, a merchant 
 himself, and of a line of merchants, made the freedom of trade 
 his staple doctrine, and summed up in the maxim, Laissez faire 
 et passer, the duties of government.* The distinction exemplifies, 
 moreover, that influence of personal history on the forms of 
 political economy to which reference has been made. 
 
 There ran thus through the political economy of both Adam 
 Smith and the Physiocrates, though much more extensively and 
 systematically in the former, a combination of the experience 
 philosophy, of inductive investigation, with a priori speculation 
 derived from the Nature hypothesis. Hence, while on one hand 
 the inductive method preserved the great Scotchman from grave 
 errors into which not a few of his English followers in the 
 mother-country of inductive philosophy have been led by the a 
 / priort method, on the other hand the bias given by preconceived 
 ideas was so strong in the case of Smith himself, as to cause him 
 to see in all his inductions proofs of a complete code of nature— 
 of a beneficent order of nature flowing from individual liberty 
 and the natural desires and dispositions of men. Like the 
 Physiocrates, he blended the so-called ‘ evidence,’ or self-evidence, 
 of the law of nature in itself, with the evidence of phenomena 
 carefully collated and sifted. The truth is, that Smith wrote 
 before the physical sciences had developed canons of induction, 
 and he thought an induction complete when he had obtained an 
 immense number of instances, and a theory proved when it 
 seemed to fit every observed case. ‘Throughout history, and 
 over Europe, he saw nothing but disorder and misery from such 
 human legislation as the world had known, wherever it went 
 beyond protecting personal liberty and property ; he saw on all 
 sides a mass of poverty traceable to State interference; the only 
 
 * Les Economistes Francais du XVILIme Siecle, by M. Léonce de Lavergne, 
 pp. 173-5. 
 
The Political Economy of Adam Smith. 30 
 
 sources of whatever wealth and prosperity existed were the 
 natural motives to industry, and the natural powers of production 
 of individual men, and he leaped to the conclusion that nothing 
 was requisite but to leave Nature to itself, that complete harmony 
 existed between individual and public interests, and that the 
 natural conduct of mankind secured not only the greatest 
 abundance, but an equal distribution of wealth. He thought he 
 found in phenomena positive proof of the Law of Nature, and of 
 the character of its enactments. We find here the explanation 
 of the seeming contradiction which Adam Smith’s combination of 
 the theory of natural Law with the inductive historical method 
 gives to Mr. Maine’s proposition ‘that the book of Montesquieu, 
 with all its defects, still proceeded on that Historical Method, 
 before which the Law of Nature has never maintained its footing 
 for an instant.’ It is incontrovertible that historical investi- 
 gation convicts the Nature hypothesis of reproducing a mere 
 fiction of ancient philosophy ; nevertheless Adam Smith, partly 
 under the bias given by the theory itself, partly because the 
 method of interrogating Nature itself was new, and the canons 
 of induction unsettled, conceived that the method of Montesquieu 
 proved the truth of the theory of Nature ; in short, that nature, 
 when interrogated, confirmed his anticipations of Nature. 
 
 One cause of the misconception that Adam Smith’s economic 
 method was one of mere a priori deduction is the arrangement 
 he has adopted in the order of the five books of the ‘ Wealth of 
 Nations.’ In the order of logic the third and fourth books come 
 before the first and second. They contain the induction on 
 which is based the conclusion that the State has only to protect 
 individual liberty, and the natural effort of every individual to 
 better his own condition—or, in one word (with which his first 
 book begins), labour —will supply in the most ample manner all 
 the necessaries and conveniences of life, will divide its functions 
 spontaneously in the best manner, and will distribute its produce 
 in a natural order, and with the utmost equality. It has 
 already been suggested that no such complete organization for 
 the distribution of wealth is made by individual action, or what 
 Adam Smith called Nature. Mr. Mill has shown the fallacy of 
 
 D 2 
 
36 The Political Economy of Adam Smith. 
 
 defining political economy as the science of exchanges ; a defini- 
 tion which, besides omitting some of the most important conditions: 
 determining the production of wealth, overlooks the truth that 
 human institutions, laws of property and succession, are neces- 
 sarily chief agencies in determining its distribution. And it 
 affords an instructive exemplification of the two methods which 
 Adam Smith combined, a priori deduction from supposed 
 principles of Nature, and inductive investigation of facts, that 
 when the order of Nature is present to his mind, he finds a com- 
 plete natural organization for the distribution of wealth, and no 
 function for the State in the matter; but when he traces the 
 actual progress of opulence, his readers are confronted at once 
 with laws of succession, to which he traces the slow and irregular 
 course of European progress after the barbarian conquests ; 
 laws founded on those conquests, and designed to perpetuate the 
 unequal distribution of wealth they effected; laws which are 
 potent agencies in the distribution of wealth in England to this. 
 day, and in the determination of its whole social and industrial 
 economy. 
 
 But even while tracing in his first book the ‘ natural’ distri- 
 bution of wealth by exchange, or as he expresses it, ‘the order 
 according to which the produce of labour is naturally distributed 
 among the different ranks of the people,’ Adam Smith has been , 
 preserved by the inductive method which he combined with 
 a priort deduction from enormous fallacies into which the school 
 of Ricardo has since been betrayed by their method of pure 
 deduction. The ancient theory of natural law involved the idea 
 of uniformity and equality; and this idea in Adam Smith’s 
 case was powerfully reinforced both by that of an ideal order 
 deducible from the equity and equal benevolence towards man- 
 kind of the Author of Nature, and by the love of system,. 
 symmetry, and harmonious arrangement which plays a conspicu- 
 ous part in the ‘ Theory of Moral Sentiments,’ because it did so- 
 in the author’s own mind. With all these conceptions the theory 
 of a complete equality of the advantages and disadvantages of 
 different human occupations, and an equality, in that sense, 
 of wages-and profits, had obviously a powerful attraction for 
 
The Pohtical Economy of Adam Smith. Ot 
 
 Smith. It affords surprising evidence of his true philosophical 
 spirit of inquiry into facts that he should nevertheless have 
 denied the actual equality of wages and profits, traced the great 
 actual inequalities to their causes, and defined the conditions of 
 equality and inequality, and the actual effect of industrial pro- 
 gress on these movements, in such a manner as to indicate the 
 very progressive divergence which can be shown to have since 
 taken place, and which a school of modern economists not only 
 ignores, but sometimes angrily denies, as inconsistent with its 
 « priori deductions. Adam Smith, for his own part, not only 
 limited ab initio the tendency to equality to what was practically 
 the same neighbourhood, but pointed out that the kingdom was 
 in fact divided into a number of different neighbourhoods with 
 very different rates. Secondly, he traced many of the actual 
 inequalities to pernicious institutions, a class of causes of 
 inequality which later economists have done much to perpetuate 
 by affirming a substantial equality. Thirdly, in place of 
 insisting that competition alone determines the rate of wages, 
 and gives the labourer the utmost value of what he produces, 
 Adam Smith maintained that combination on one hand, tacit or 
 open, on the part of employers, was the normal condition of 
 things; while, on the other, the necessitous position of the 
 labourer exposed him to the exaction of very unequal terms. 
 Fourthly, he expressly confined the tendency to equality in the 
 case of both wages and profits, even where competition was in 
 full and free activity, to a stationary and simple condition of 
 the industrial world. Fifthly, he showed that in place of 
 equalizing wages, industrial progress had already produced 
 great inequalities in England, and was beginning to do so in 
 Scotland. 
 
 After observing that the price of labour varied much more 
 in England than in Scotland, he adds: ‘ In the last century the 
 most usual day wages of common labour through the greater 
 part of Scotland were sixpence in summer and fivepence in 
 winter. ‘Three shillings a-week, the same price very nearly, 
 still continues to be paid in some parts of the Highlands. 
 Through the greater part of the low country the most usual 
 
38 The Political Economy of Adam Smith. 
 
 wages of common labour are now eightpence a-day ; tenpence, 
 and sometimes a shilling about Edinburgh, in the counties 
 which border upon England, and in a few other places where 
 there has lately been a considerable rise in the demand for labour, 
 about Glasgow, Carron, Ayrshire, &c. In England the improve- 
 ments of agriculture, manufactures, and commerce began much 
 earlier than in Scotland. The demand for labour, and conse- 
 quently its price, must necessarily have increased with those 
 improvements.’ 
 
 Manufactures and trade on a great scale were only beginning 
 in Scotland ; the steam-engine had not yet been brought to bear 
 on the mine or the loom when the ‘ Wealth of Nations’ was 
 composed; and the great inequalities in the local demand for 
 labour throughout the kingdom, which have followed in the 
 wake of steam, were yet to appear. Adam Smith, in truth, 
 lived in a very early industrial world; the only steam-engine 
 he refers to is Newcomen’s; the word ‘ manufacture’ had not 
 lost its true meaning and become as inappropriate as hideous. 
 In the clothing manufacture, he expressly says, the division of 
 labour was nearly the same as it had been for a century, and 
 the machines employed were the same; adding that only three 
 improvements in them of any importance had taken place since 
 the reign of Edward IV. In place of the infinite diversities of 
 complexity and difficulty in the different employments of capital 
 which have followed the progress of mechanics and chemistry, 
 all modes of employing capital were, he says, about equally easy. 
 The foreign trade of the kingdom was so small that he computed 
 the annual importation of corn at only 23,000 quarters, and 
 concluded that the freest importation never could sensibly affect 
 prices in the home market. 
 
 In short, he applied the doctrine of equality only to a simple 
 and almost stationary condition of industry and neighbourhood 
 trade, in which few changes in the mode of production or the 
 channels of trade took place from one century to another, and 
 in which the inhabitants of each neighbourhood might com- 
 paratively easily estimate the profits and prospects of each 
 different employment; and even to such a world, only with 
 
The Political Economy of Adam Smith. 39 
 
 many modifications and exceptions. To sucha world, in positive 
 terms, he limited the tendency to equality which has been made 
 by his successors, not only an unconditional assumption, but the 
 basis of finance. The truth is, that the doctrine of a tendency 
 to equality is a mere theorem in political economy; and a 
 theorem which imports the tendency only under special conditions 
 well enunciated by Adam Smith—conditions the opposites of 
 those which prevail in the present industrial world. 
 
 A state of the industrial world which was exceptional in 
 Adam Smith’s time is the normal state in our own; and it is 
 certain, both from his positive doctrine and from his close 
 attention to the realities of life, that had he lived even two 
 generations later, his general theory of the organization of the 
 economic world and the results of the competition for economic 
 life would have been cast in a very different mould. Alike in 
 the theory of Nature which pervades his entire philosophy of 
 society, and in his general conceptions of the industrial world, 
 we trace the influence of the early world in which he lived. 
 One striking example of this is that one-half of society has been 
 almost entirely overlooked in his philosophy. His language 
 appears at first sight to point to unrestricted liberty as the 
 unconditional principle of a true political economy, and the 
 indispensable requisite of the full development of the economic 
 resources of nature; but on closer inspection it will be found 
 that where he speaks of ‘the natural effort of every individual 
 to better his own condition, when suffered to exert itself with 
 freedom and security,’ as the cause of national wealth and 
 prosperity, he had only the half of the nation denoted by the 
 masculine pronoun in his mind; he meant only what he else- 
 where says, ‘ the natural effort of every man.’ He seems to 
 have been perfectly content—though it involves an inconsistency | 
 which is fatal to his whole theory—with the existing restraints 
 on the energies of women; and the only effort on the part of a 
 woman to better her own condition which he has in view is ‘ to 
 become the mistress of a family.’ In the only passage in the 
 ‘ Wealth of Nations’ in which women are referred to, we discover 
 at once how far was he from having developed universal laws of 
 
40 The Political Economy of Adam Smith. 
 
 industry and wealth, how far he was from escaping from the 
 ideas of a primitive world. ‘There are,’ he said, ‘ no public 
 institutions for the education of women, and there is accordingly 
 nothing useless, absurd, or fantastical, in the common course of 
 their education. They are taught what their parents or guardians 
 judge it necessary or useful for them to learn, and they are 
 taught nothing else. Every part of their education tends 
 evidently to some useful purpose—either to improve the natural 
 attractions of their person, or to form their minds to reserve, to 
 modesty, to chastity, and to economy; to render them both 
 likely to become the mistresses of a family, and to behave 
 properly when they have become such. In every part of her 
 life a woman feels some convenience or advantage from every 
 part of her education.’ 
 
 Although ‘ the obvious and simple system of natural liberty ’ 
 is the foundation of Smith’s whole system, though he regarded 
 
 it as the law of the beneficent Author of Nature, it turns out 
 
 that he applied it only to one-half of mankind. ‘The reason is 
 that the law and the exception alike came to him from the age 
 in which he lived, and the ideas of a yet earlier state of society. 
 The insurrection against the oppressive and unequal economic 
 régime of the past was as yet only on the part of men; and the 
 very theory of the Law of Nature which men invoked for their 
 own emancipation, as it was the offspring of the speculation of 
 the ancient world, so it bore the impress of its narrowness and 
 injustice. 
 
IV. 
 
 «SOME LEADING PRINCIPLES OF POLITICAL ECONOMY 
 NEWLY EXPOUNDED,’ BY PROFESSOR CAIRNES.* 
 
 Any new work by Mr. Cairnes would be sure of a succes d’estime, 
 but the present is one, the importance of which the economist 
 most opposed to some of the principles it expounds with so much 
 force, clearness, and skill, will not call in question. Its very 
 importance, on the other hand, the high reputation of its author, 
 and the consummate literary art it displays, impose on a re- 
 viewer the duty of sifting it closely. Mr. Cairnes himself sets 
 an example of independent criticism. Thus he speaks of Mr. 
 Mill’s doctrine of cost of production as ‘radically unsound, 
 confounding things in their own nature distinct and even anti- 
 thetical, setting in an essentially false light the incidents of 
 production and exchange, and leading to practical errors of a 
 serious kind, not merely with regard to value, but also with 
 regard to some other important doctrines of the science.’ 
 
 As we, for our own part, think not a few of Mr. Cairnes’ 
 own positions, including his doctrine of the relation of cost of 
 production to value, untenable, we must claim for ourselves like 
 independence of judgment and freedom of speech. Mr. Cairnes, 
 we may observe, overestimates sometimes the amount of authority 
 opposed to his own views, sometimes the amount on their side. 
 In the case just referred to he too hastily assumes that the 
 view he dissents from ‘has the general concurrence of econo- 
 mists.’ The English market for economic publications is ex- 
 tremely limited ; the works on the subject are necessarily few ; 
 but it is notorious that various doctrines to be met with in the 
 
 
 
 * The Academy, June 27, 1874. 
 
42 Cairnes’ ‘ Leading Principles of 
 
 English text-books have often been questioned in lectures, 
 articles, discussions, and private conversation; and that the 
 general concurrence even of English economists—of whom 
 alone English economists are apt to take account—ought not 
 to be assumed from the agreement of those books. In the 
 second place, the definition of cost of production which Mr. 
 Cairnes puts forward had, in fact, been set forth in very similar 
 terms in a treatise which has gone through many editions. 
 Mr. Senior, criticising Malthus for terming profit a part of the 
 cost of production, says, ‘Want of the term abstinence has 
 led Mr. Malthus into inaccuracy . . . an inaccuracy pre- 
 cisely similar to that committed by those who term wages a 
 part of the cost of production.’ Mr. Senior proceeds to define 
 cost of production as ‘the sum of the labour and abstinence 
 necessary to production.’ Mr. Senior’s analysis is, indeed, de- 
 fective in omitting the element of risk, but that defect is beside 
 the question, and in respect to it we may observe that Mr. 
 Cairnes too narrowly limits it, in the case of the labourer, to 
 risk to mental and bodily faculties. ‘The labourer often shares 
 the pecuniary risks of the capitalist’s enterprise; he runs the 
 risk of being thrown out of work and wages at a critical time ; 
 and this is only one of a number of facts inconsistent with the 
 assumption of an equality of wages, even within the limits. 
 which Mr. Cairnes sets to it. 3 
 
 The doctrine of cost of production involves the whole theory 
 of wages and profit: and an immense superstructure which has 
 been built on what Mr. Cairnes would call the orthodox theory, 
 must stand or fall with that theory. The subject may be con- 
 veniently approached by an examination of the doctrine of ‘ the 
 Wages Fund’ and an ‘ average rate of wages,’ for which Mr. 
 Cairnes contends. An instance has just been noticed of an 
 over-estimate, on his part, of the amount of difference between 
 his own views and those of other economists: we here meet with 
 one of an over-estimate of the amount of support from autho- 
 rity which Mr. Cairnes is entitled to claim for his own view. 
 He terms his own side of the question with respect to the Wages. 
 Fund ‘ the orthodox side.’ If orthodoxy in economies is to be 
 
Political Economy Newly Expounded.’ 43. 
 
 determined by authority, some weight surely is to be attached to 
 continental authority. And in Germany, as Dr. Gustay Cohn 
 has lately pointed out, the doctrine of a Wages Fund was con- 
 troverted more than fifty years ago, and has been repeatedly 
 assailed since; nor does it now form, we believe we may affirm, 
 an article of the creed of any scientific school of German 
 economists. It is condemned by M. Emile de Laveleye, of 
 Belgium, to whom Mr. Cairnes will not deny a place in the 
 front rank of European economists. French economists have 
 never been polled on the question, but it is at least certain 
 that the notion that there is an aggregate national wages fund, 
 the proportion of which to the entire number of labourers 
 determines the general rate of wages, is incompatible with the 
 exposition which M. Léonce de Lavergne—who, it is needless 
 to say, combines the highest theoretical attainments with the 
 most extensive knowledge of the actual economic phenomena of 
 his own country—has given of the diversity of the rates of 
 wages and the causes determining them, in different parts of 
 France. In England the doctrine was, after mature considera- 
 tion, abandoned by Mr. Mill; it has been vigorously assailed by 
 Mr. “Thornton ; it is repudiated by Mr. Jevons; and among 
 other economists in this country the present reviewer long ago 
 combated it. On the whole, we believe that the chief weight 
 of European authority is against the doctrine, and that it is a 
 heresy, if that constitutes one. But the terms orthodoxy and 
 heresy are singularly inappropriate in philosophical discussions. 
 What philosophy seeks is reason and truth, not authority ; and 
 we will briefly state some of the grounds of reason and fact on 
 which we take our stand in maintaining that an aggregate 
 wages fund and an average rate of wages are mere fictions— 
 fictions which have done much harm, both theoretically and 
 practically, by hiding the real rates of wages, the real causes 
 which govern them, and the real sources from which wages 
 proceed. In every country in Europe, the rates of wages even 
 in the same occupation vary from place to place ; in other words, 
 the same amount of labour and sacrifice of the same kind is 
 differently remunerated in different localities. ‘The Devonshire, 
 
44 Carnes’ ‘ Leading Principles of 
 
 Somersetshire, or Dorsetshire labourer has been earning for the 
 last fifty years less than half what the same man might have 
 earned in Northumberland; the pay of Belgian farm labour is 
 three times higher in the valley of the Meuse than in the 
 ‘Campine, and twice as high as in Flanders; it varies likewise 
 prodigiously in Germany, even in adjoining districts. Whence 
 these diversities? The reason, obviously, is that distinct and 
 dissimilar conditions determine wages in different parts of each 
 country. , Mr. Cairnes urges: ‘A rise of wages, let us suppose, 
 occurs in the coal trade : does anyone suppose that this could 
 continue without affecting wages, not merely in other mining 
 industries in full competition with coal mining, but in industries 
 the most remote from coal mining—industries alike higher and 
 lower in the industrial scale? Most undoubtedly it could not.’ 
 We answer, most undoubtedly it could, and actually did. 
 Wages rose continuously for a century in mining and other in- 
 dustries in some counties in England, while in others the earn- 
 ings of the agricultural labourer remained stationary through- 
 out the whole period. In 1850, Mr. Caird found the rate of 
 agricultural wages in one northern parish 16s. a week, in another 
 parish in the south only 6s. a week. In the former parish, 
 mines and manufactures competed with farming for labour; in 
 the latter, the one employer was a farmer holding 5000 acres. 
 Would it be reasonable to say there was an average rate in the 
 two parishes of 11s. a-week, resulting from the ratio of the 
 aggregate wages fund to the number of labourers in both ? 
 What share had the southern labourer in the funds from which 
 his fellow in the north earned his 16s. a-week P In like manner 
 the funds expended in wages in the Rhine Province no more 
 govern the price of labour in Pomerania and Posen than in 
 Cornwall or Kent. A farm labourer in Flanders earns 1 fr. 
 50.c. a-day ; an inferior labourer in another part of Belgium 
 may earn 3 fr. 50 c. and upwards. Why? Because the 
 Fleming no more shares in the funds which afford such high 
 wages around Charleroi and Liége than a provincial journalist 
 does in the funds from which the writers of the ‘ Times’ are 
 remunerated. Moreover, to speak of the ratio of an aggregate 
 
Political Economy Newly Expounded.’ 45, 
 
 wages fund to the number of labourers as determining wages in 
 each country surely implies that the sum expendible in wages at 
 any given time is a fixed quantity; and, accordingly, M. de Lave- 
 leye remarks that one of many facts which give a practical refuta- 
 tion to the doctrine is that wages have recently risen in some parts 
 of Belgium at the expense of rent. The demand for labour in 
 manufactures on the one hand, and the novel attitude of the 
 Belgian farm labourer on the other, have compelled farmers in 
 certain districts to raise wages to a point at which farming has 
 become a losing business; rents, therefore, are falling. It was 
 seriously urged against trade-unions and combinations of 
 labourers in England a few years ago by some advocates of the 
 doctrine of the wages fund, that wages could not be raised by 
 combination in one trade or locality without a proportionate fall 
 of wages elsewhere, there being only a certain aggregate fund 
 to be distributed. Mr. Heath’s statement, however, is incontro- 
 vertible, that the mere report of the formation of an agricultural 
 labourers’ union in Warwickshire raised wages immediately 
 in several neighbouring counties, and it will hardly be con- 
 tended that there was a corresponding fall in other counties. 
 
 It is evident that the result has been mistaken for the cause; 
 that the aggregate amount of wages is nothing but the sum of 
 the particular amounts in all particular cases taken together ; 
 and that it would be as rational to say that the income of each 
 individual in the United Kingdom depends on the proportion 
 of the total national income to the number of individuals, as to 
 say that the wages of each labourer in every place and in every 
 occupation depend on the ratio of the sum total of wages to the 
 total number of labourers. The statistician may find some 
 interest in calculating the average rate resulting from the ratio 
 of the aggregate amount of wages, if it could be ascertained, to 
 the number of labourers in the kingdom; but the economist 
 deludes himself and misleads others by representing this as the 
 problem of wages. If farm wages be 10s. a-week in Devonshire, 
 and 20s. in Northumberland, to say that the average rate is 15s. 
 a-week is to speak of a rate which has no existence in either, 
 and to withdraw attention from the causes of the real rates in 
 
46 Cairnes’ ‘ Leading Principles of 
 
 both. In every country, instead of an average or common rate 
 of wages, there is a great number of different rates, and the real 
 problem is, What are the causes which produce these different 
 rates? Hence we are driven to conclude that Mr. Cairnes is 
 not ‘justified,’ to use his own words, ‘in generalizing the various 
 facts of wages into a single conception, and in discussing 
 “oeneral”’ or “ average wages.” ’ 
 
 At this point we are brought to inquire whether there is any 
 better reason for maintaining the existence of an average rate 
 of profit. The doctrine of average profit is closely connected in 
 Mr. Cairnes’ exposition with that of average wages. While 
 contending, erroneously as we have shown, for an equality of 
 wages throughout all similar occupations in the same country, 
 he admits that working classes of very different degrees of skill 
 do not compete, and may be paid at different rates for equal 
 sacrifice and exertion. But, he adds, ‘though labourers in 
 certain departments of industry are practically cut off from 
 competition with labourers in other departments, the competition 
 of capitalists is effective over the whole field. The communica- 
 tion between the different sections of industrial life, which is not 
 kept open by the movements of labour, is effectually maintained 
 by the action of capital constantly moving towards the more 
 profitable employments. In this way our entire industrial 
 organization becomes a connected system, any change occurring 
 in any part of which will extend itself to others, and entail 
 complementary changes.’ 
 
 In Mr. Cairnes’ view, if wages were below par in any trade 
 or locality, although the labourers there might not be able to 
 migrate, a movement of capital seeking cheap labour would at 
 once set in. It might almost be a sufficient refutation of this 
 doctrine, in relation both to wages and to profit, to point out 
 that no migration of capital has equalized the wages of agricul- 
 tural labourers in any country in Europe. What migration 
 there has been—and it has been altogether inadequate to produce 
 an approach to equality of wages—has been almost altogether 
 a migration of labour. Moreover, if in a single occupation so 
 simple as that of agricultural labour there has been no such 
 
Political Economy Newly Expounded.’ 47 
 
 effective competition as Mr. Cairnes assumes, there seems some 
 antecedent reason for suspecting error in the assumption of such 
 an effective competition among capitalists as to equalize the 
 rates of profit in all the countless employments of capital. 
 There is something like a circular movement in Mr. Cairnes’ 
 reasoning on this subject. He first argues—‘ Each competitor, 
 aiming at the largest reward in return for his sacrifices, will be 
 drawn towards the occupations which happen at the time to be 
 the best remunerated; while he will equally be repelled from 
 those in which the remuneration is below the average level. 
 The supply of products proceeding from the better paid employ- 
 ments will thus be increased, and that from the less remunera- 
 tive reduced, until supply, acting on price, corrects the inequality, 
 and brings remuneration into proportion with the sacrifices 
 undergone.’ 
 
 But afterwards we read—‘ The one and sufficient test of the 
 existence of an effective industrial competition is the corre- 
 spondence of remuneration with the sacrifices undergone—a 
 substantial equality, that is to say, making allowance for the 
 different circumstances of different industries, of profits and 
 wages. Such a test applied to domestic transactions shows the 
 existence of a very large amount of effective industrial competi- 
 tion throughout the various industries carried on within the 
 limits of a single country. The competition of different capitals 
 within such limits may be said to be universally effective.’ 
 
 Is not this very like arguing that the equality of profits is 
 proved by the fact that there is an effective competition of 
 capital, and that the equality of profits proves the fact of an 
 effective competition? Nor is this the only seeming flaw in 
 Mr. Cairnes’ logic. In proof of the equalization of profits, he 
 urges that capital deserts or avoids occupations which are known 
 to be comparatively unremunerative; while if large profits are 
 known to be realized in any investment, there is a flow of capital 
 towards it. Hence it is inferred that capital finds its level like 
 water. But surely the movement of capital from losing to 
 highly profitable trades proves only a great inequality of profits. 
 There is, in like manner, a considerable emigration of labourers 
 
48 Cairnes’ ‘ Leading Principles of 
 
 from Europe to America: does that prove that wages are 
 equalized over the two continents? Let Mr. Cairnes himself 
 answer—‘ Great as has been the emigration from Europe to the 
 United States, it may be doubted if any appreciable effect has. 
 been produced on the rates of wages in the latter country. 
 Throughout the Union, wages remain in all occupations very 
 considerably higher than in the corresponding occupations in 
 this country.’ 
 
 Elsewhere he estimates American wages at twice the 
 English, and four times the German rate. The emigration 
 of labour, thus, is neither sign nor cause of an equality of 
 wages; it is, on the contrary, consequence and proof of their 
 inequality; and the migration of capital from losing or un- 
 profitable to promising businesses, in like manner, only lands 
 those who refer to it in evidence of the equalization of profits 
 in an ignoratio elenchi. Mr. Cairnes, it seems clear, has not 
 taken into consideration the main objections to the doctrine he 
 espouses. ‘The only objections he notices are the difficulty of 
 transferring buildings, plant, and material from one use to 
 another, and of learning a new branch of business. The fact 
 is, that there are, in the first place, no means whatever of 
 knowing the profits and prospects of all the occupations and 
 investments of capital. No capitalist knows so much as the 
 names, or even the number of the trades in the London Direc- 
 tory, only a part of the trades of the kingdom; and their 
 number and names are yearly increasing. If, again, there 
 were any statistics showing the actual gains of the different 
 trades, they would show that the profits of the individual 
 members of each trade vary immensely. 
 
 The business of insurance used to be thought one in which 
 there was a certain general rate of profit. But a few years ago 
 the subject was investigated by Mr. Black, and also in the 
 ‘Economist,’ and the result arrived at was the fact of ‘ extremes 
 of success and disaster in the experience of companies still 
 underwriting.’ Mr. Cairnes’ reasoning assumes that the profits 
 of every business are well known; but as they vary greatly 
 with different companies and different individuals, the assump- 
 
Political Economy Newly Expounded.’ 49 
 
 tion implies that individual profits are known. If they were, 
 it would be seen that to speak of the average profits, even of a 
 single business, is idle. Moreover, even if the past profits of 
 every individual in every trade were known, it would be a 
 serious error on the part of capitalists, though one which they 
 often commit, to judge of the future from the past. The changes 
 in production and the conditions of trades, in international 
 competition, and in prices, the effects of speculation, fluctuations 
 of credit, and commercial crises, of scarce and abundant seasons, 
 wars and other political events, new discoveries and inventions, 
 would upset all these calculations. Curiously enough, Mr. 
 Cairnes himself has maintained that the new gold mines intro- 
 duced a disturbing element which will probably affect profits 
 for thirty or forty years. Ricardo admitted that at the very 
 time he was building a pile of theory on the assumption of an 
 equality of profits, the return of peace had made them in fact 
 very unequal. Had he looked back for a quarter of a century, 
 he would have found abundant proof that they had been very 
 unequal throughout the long war; and had he been able to 
 foresee the immediate future, he would have learned from the 
 erisis of 1825, which Mr. Tooke so well described, how blindly 
 mercantile men often reason, how far they are from possessing 
 the knowledge, sagacity, and prescience his theory supposed. 
 So far, indeed, are men in business from knowing the conditions 
 on which future prices and profits depend, that they are often 
 ignorant, after the event, of the causes of their own past profits 
 and losses. Nota single farmer or corn merchant, no witness 
 whatever before the parliamentary committees save himself, 
 Mr. Tooke states, dreamt of referring the high prices of corn in 
 the early part of this century to the succession of bad harvests. 
 It is not even true that losing businesses are always abandoned. 
 Hope springs eternal in the human breast, and it is an old 
 saying that all the mines in Cornwall are worked at a loss— 
 that is to say, the average result is a balance on the wrong side. 
 Mr. Mill, indeed, has reduced the supposed equality to one not 
 of actual profits, but of expectations of profit. ‘There is not 
 however, even this: no capitalist ever attempts to survey the 
 E 
 
50 Cairnes’ ‘ Leading Principles of 
 
 whole field, or to estimate the probable relative gains of every 
 investment. 
 
 The doctrine of average profit, like that of average wages, 
 thus falls to the ground, and with it falls the superstructure 
 built on it, including Mr. Cairnes’ doctrine of value. ‘ The 
 indispensable condition,’ he states, ‘to the action of cost of 
 production is the existence of an effective competition amongst 
 those engaged in industrial pursuits ’—that is to say, a com- 
 petition which equalizes profits ; and we have seen that no such 
 competition is possible. If we are, in economic theory, to 
 exhaust space and time of their contents, and to suppose a 
 vacuum in which no obstacles to the movements of labour and 
 capital in pursuit of gain exist within the limits of each country, 
 so that wages and profits are equalized, why not apply the same 
 supposition to international trade and international values ? 
 We might, in like manner, theorise about wages, profit, prices, 
 and rent at the bottom of the ocean on the supposition of the 
 absence of water. The truth is—and it is a truth which Mr. 
 Cairnes has missed, though he has made an important step 
 towards it—that the principle regulating domestic as well as 
 international values is not cost of production, but ‘ the equation 
 of demand,’ or ‘demand and supply;’ though the formula is 
 one which requires much interpretation, and by no means 
 contains in its very terms the full explanation of values and 
 prices which many people suppose. 
 
 But more than the superstructure of economic theory built 
 on the doctrine of cost of production falls to the ground along 
 with it. The method of deduction from assumption, conjecture, 
 and premature generalization falls too. Mr. Cairnes speaks in 
 his preface of certain ‘ assumptions respecting human character 
 and the physical conditions of external nature,’ as constituting 
 ‘the ultimate premisses of economic science ;’ and of the ‘ method 
 of combined deduction and verification by comparison with 
 facts, as ‘the only fruitful or, indeed, possible method of 
 economic inquiry.’ But is a theorist likely to be very searching 
 in his verification of assumptions on which he has built his 
 whole science and his own reputation? Have the economists 
 
Political Economy Newly Expounded.’ 51 
 
 of the deductive school ever verified their doctrines respecting 
 the equality of profits and of wages? If they are at liberty to 
 set aside as ‘ disturbing causes,’ all the obstacles to the pursuit 
 of gain resulting from other principles of human nature, and 
 from external circumstances, and to theorise respecting wages, 
 profits, and prices in vacuo, what right have they to assume the 
 existence of the love of gain itself in such an imaginary world ? 
 The only facts in human nature, we may add, which abstract 
 political economy takes account of are far indeed from being 
 ultimate facts, or from being susceptible of treatment in economic 
 reasoning as simple, universal, and invariable principles. Self- 
 interest and the desire of wealth are both names for a multitude 
 of different passions, ideas, and aims, varying in different ages 
 and countries, and with different classes and different individuals; 
 and each having its own peculiar effects on the nature, produc- 
 tion, and distribution of wealth. 
 
 The ‘ principle of population,’ again, so far from being an 
 ultimate fact in human nature from which general conclusions 
 can be drawn, is a highly artificial and widely varying principle, 
 inseparably interwoven with religious and moral ideas and 
 historical causes. Its force in Bengal is the result mainly of a 
 particular superstition ; and, owing to causes which have never 
 been probed to the bottom, its force varies greatly, not only in 
 neighbouring countries like England and France, but in 
 different parts of the same country, Normandy and Britanny 
 for example. 
 
 Our limits prevent our even alluding to many special ques- 
 tions of great interest raised by Mr. Cairnes, but we will take 
 two or three examples from the chapter ‘On some Derivative 
 Laws of Value.’ In the early stages of a nation’s growth, 
 tillage for the production of corn steadily gains ground on 
 pasture; but Mr. Cairnes treats it as a ‘law of industrial 
 progress ’ that in the later stages this process is reversed, and 
 pasture constantly encroaches on tillage. We think we find 
 here an instance of the economic error resulting from inattention 
 to both continental phenomena and continental literature. Save 
 in exceptional situations, the increasing supply of meat in 
 
 E 2 
 
o2 Cairnes’ ‘ Leading Principles of 
 
 Europe is obtained by stall-feeding and tillage, not by the 
 extension of pasture. As Professor Nasse states, the aridity of 
 the climate and the character of the soil preclude pasture 
 throughout the greater part of Germany. M. de Laveleye main- 
 tains that, by means of stall-feeding, Flanders, in spite of the 
 poverty of its soil, supports more cattle to the acre than Eng- 
 land. It is noticeable that both these distinguished economists 
 point to one condition unnoticed by Mr. Cairnes, which may in 
 future, to some extent, counteract the causes hitherto operating 
 so decisively in favour of tillage for the production of meat over 
 most of the Continent—namely, the rise in the price of labour. 
 How far mechanical art, on the other hand, may neutralize this 
 condition it is useless here to inquire; but M. de Laveleye 
 makes the important observation, that even where a country 
 like England, with exceptional advantages for pasture, imports. 
 a great part of its corn, the importing and exporting countries 
 become virtually one economic region in which tillage is 
 constantly advancing. Hence an enormous extension of tillage 
 in the United States, for the supply both of its own population 
 and that of Europe, is as certain as any fact in the economic 
 future can be. Connected with the foregoing question is one 
 respecting the price of corn, which, according to Mr. Cairnes, 
 ‘at length, in the progress of society, reaches a point beyond 
 which (unless so far as it is affected by changes in the value of 
 money) it manifests no tendency to advance further.’ This point, 
 in Mr. Cairnes’ judgment, was already reached in England 
 three centuries ago, if not, as he has no doubt, some centuries. 
 earlier; the reason he assigns being that, after a certain point, 
 an advance in the price of corn reacts on population and checks 
 the demand. There are, however, several methods by which a 
 nation may meet an advancing cost of corn—by a diminished 
 consumption of animal food, for instance, or a diminished cost of 
 manufactures. Asamatter of fact, the labouring population of 
 England has much diminished its use of animal food since the 
 fifteenth century, while it clothes itself cheaper. The enormous 
 prices of corn towards the close of the last, and during the 
 early part of the present century, again, show how an advance 
 
Political Economy Newly Expounded, 53 
 
 in the price of bread may be met by privation. The whole 
 population of the United States is now a meat-consuming one; 
 but if Macaulay’s prediction should be fulfilled, at no very 
 distant future an increased cost of corn would be met by relin- 
 quishing meat; and a part of ‘the nation might possibly even 
 fall back on potatoes, or some other cheap vegetable; so that 
 the future price of corn can only be matter of speculation. The 
 price of timber, it may be observed, has followed a different 
 course on the Continent from that which Mr. Cairnes lays down 
 for it. Its value, he says, ‘rises in general slowly, but never 
 attains a very great elevation, reckoning from its height at 
 starting.’ Professor Rau, however, has given the following 
 prices of a given measure of the same wood in Wirtemberg, in 
 florins and kreuzers :—1690-17380, 57 kr.; 1748-1780, 2 fl. 
 14 kr.; 1790-18380, 8 fl. 22 kr. And Dr. Engel’s statistics 
 show that the price of wood in another part of Germany nearly 
 quadrupled itself between 1830 and 1865. 
 
 While we dissent altogether from most of the fundamental 
 propositions of Mr. Cairnes’ book, from the economic method 
 it follows, and from not a few of its inferences and speculations, 
 we see much to admire in it. It abounds in valuable criticisms, 
 such as that of Mr. Brassey’s proposition that dear labour is 
 the great obstacle to British trade, and of the argument of 
 American protectionists that the States with their high-priced 
 labour cannot compete with the cheap labour of Europe. 
 
Ve 
 
 JOHN STUART MILL.* 
 
 THE volume which completes the series of Mill’s ‘ Dissertations 
 and Discussions’ illustrates a passage in his Autobiography, in 
 which he describes his own as ‘ a mind which was always pressing 
 forward, equally ready to learn either from his own thoughts 
 or from those of others.’ History affords scarcely another 
 example of a philosopher so ready to review his positions, to- 
 abandon them if untenable, and to take lessons from his own 
 disciples, as the discussion, for instance, of Mr. Thornton’s book 
 ‘On Labour’ shows Mr. Mill to have been. On the other hand, 
 the volume adds links to a chain of evidence against another 
 judgment pronounced by Mr. Mill on his own intellect, in a 
 passage of his Autobiography which speaks of his natural powers 
 as not above par but rather below it, and of his eminence being 
 due, ‘among other fortunate circumstances, to his early training.” 
 His early training had undoubtedly a remarkable effect on his 
 intellectual career—though in our judgment a very different one 
 from that attributed to it by himself; and certainly, without 
 reference to it, neither his system of philosophy nor his mental 
 calibre can be properly estimated. It ought to be taken into 
 particular account in connexion with some phases of his. 
 economics exhibited in the volume before us; but the question 
 with respect to its influence has a much wider importance. It 
 is a special instance of the great general question concerning not 
 only the causes which produce great minds and direct their 
 energies, but also those which govern the general course of 
 
 
 
 
 
 * The Academy, June 5, 1875.—This Article appeared as a review of Volume IV.. 
 of Mr. Mill’s Dissertationsand Discussions. 
 
John Stuart Mill. 55 
 
 philosophy and thought, since Mr. Mill’s works had no small 
 share in determining the ideas held in his time by a great part 
 of the civilized world on some of the principal subjects of both 
 theoretical speculation and practical opinion. For it will not be 
 disputed that he was looked up to in several countries as the 
 writer of chief authority on logic, political economy, and politics, 
 and one of the first on psychology and morals. Latterly, how- 
 ever—not to speak of the passing influence of a political reac- 
 tion on his popularity—it has been generally admitted that his 
 methods in mental and social philosophy were inadequate; and 
 his political economy is now censured, especially in Germany, 
 for inconsistency and insufficient breadth of conception. ‘ His 
 eround-plan,’ says Dr. Roscher in his “ History of German 
 Political Economy,” ‘is a mere theory of the tendencies of undis- 
 turbed individual interest, yet he frequently admits the existence 
 of practical exceptions to the theoretical rules thus arrived at, 
 and the presence of other forces and motives.’ Other writers, 
 English, Germans, and Americans, have expressed astonishment 
 that he could ever have adopted the doctrine of the wages- 
 fund, which two of the dissertations in the present volume show 
 that he finally discarded. The inquiry follows, Are the de- 
 fects of his system to be traced to his own mind, or to his 
 education ? 
 
 One thing is plain in the matter. Education can nurture, 
 develop, and direct the application of great mental powers; it 
 can also misdirect, and even cramp and distort, but cannot 
 create them. And no man without great and varied powers 
 could have produced such works as Mr. Mill’s ‘System of Logic,’ 
 ‘ Principles of Political Economy,’ ‘ Examination of Sir W. Ha- 
 milton’s Philosophy,’ and the four volumes of ‘ Dissertations and 
 Discussions’ ; not to speak of minor works, such as his essays on 
 ‘Utilitarianism’ and ‘Liberty.’ One of his Dissertations shows 
 that even a poetical fibre—one rarely found in the logician or the 
 economist—was not absent from his mental constitution and 
 more than one of them refutes Dr. Roscher’s criticism that ‘ his 
 was not an historical mind,’ if by that is meant that he lacked 
 the genius for historical inquiry ; though it must be confessed 
 
56 John Stuart Mill. 
 
 that the historical method is rarely applied in his philosophy. 
 Add to this, that thirty-six of the best years of his life were 
 spent in a public office, in which he displayed administrative 
 powers of the first order, and discharged his official duties not 
 only with efficiency, but such ease and despatch, that he found 
 time to distinguish himself among the foremost writers in 
 several departments of intellectual speculation ; and that he 
 afterwards took a considerable place as a debater in Parliament. 
 The man who did all these things also exhibited.in private society 
 remarkable conversational powers, quickness of apprehension 
 and reply, a facility of allusion and anecdote, with a vem of 
 gentle humour, and such felicity and force of expression, that 
 even when his conversation was grave, the present writer was 
 often reminded of Steele’s description of Sir Andrew Freeport 
 that ‘the perspicuity of his discourse gave the same pleasure 
 that wit would in another man.’ | 
 
 If, however, Mr. Mill’s ‘early training’ does not account for 
 his intellectual eminence, it assuredly went far to form his 
 philosophy; but a great deal more than the peculiar mental 
 discipline to which his father subjected him must be included in 
 that early training. We must include the fundamental concep- 
 tions, and the method of inquiry, of the leading intellects of the 
 age from which he received his education. It was an age in 
 which Bentham was justly regarded as the first social philosopher 
 —Ricardo, less justly, as the highest authority in political eco- 
 nomy, in spite of the protest of Malthus against his abstractions 
 and precipitate generalization; Mr. Mill’s father, James Mill, 
 as the most eminent political thinker and writer of the time, 
 and one of its chief lights in psychology ; and John Austin as 
 facile princeps in jurisprudence. No leaders of thought ever 
 reposed more unbounded confidence in their own systems than 
 did this famous band. They seemed to themselves to hold in 
 their hands the keys to every problem in the science of man. 
 In psychology the master-key was the association of ideas; in 
 morals it was utility ascertained by a balance of pleasures and. 
 pains ; in political philosophy it was utility combined with 
 representative government; in political economy it was pecu- 
 
John Stuart Mill. 4¥ A 
 
 niary self-interest together with the principle of population ; in 
 jurisprudence it was a particular definition of law and classifica- 
 tion of rights. All these methods the younger Mill applied 
 with a power never surpassed, and in addition he in good part 
 created a system of logic which may be corrected and improved, 
 but will ever hold a place among the chief works of the human 
 mind. It was the fault of his age and of his education if the 
 doctrine of evolution found no place in his psychology or his 
 social science; if the historical method was taken up in his 
 ‘ Political Economy,’ as it was in the preliminary remarks of his 
 treatise, only to be laid aside; and if corrections from observa- 
 tion and fact of the inferences from a priori reasoning appear, 
 both in that treatise and in the present volume of his ‘ Disserta- 
 tions and Discussions,’ only in the form of practical exceptions 
 to abstract theory, or of ‘applications’ of economic science, when 
 the fault really lay in the original conception of the science 
 itself. It was not possible to weld the abstractions of Ricardo 
 and the actual forces governing economic phenomena into a 
 consistent and scientific system ; or to furnish an adequate theory 
 of the origin and growth of human ideas without investigation 
 of the entire history of human society. Butifany one individual 
 is especially to be blamed for the shortcomings of his system, it 
 is not John, but James Mill. No training ever was more care- 
 fully adapted at once to crush all originality and to inspire 
 excessive confidence in the methods adopted, than that which 
 the younger Mill received from his father. It should, too, be 
 borne in mind that the a priori political economy had its chief 
 charm for John Mill, not in the simplicity and symmetry which 
 recommended it to narrower and shallower minds, but in the 
 complete individual liberty which it supposes. How far he was 
 from trusting to individual interest to secure the best economy 
 in all cases is sufficiently shown in the remarks in the first 
 dissertation in the present volume (on Endowments) with 
 respect to free trade in general, and to the doctrine that educa- 
 tion should be left to demand and supply, in particular. 
 
 The action of demand and supply in another economic 
 
58 John Stuart Mill. 
 
 aspect, namely on value, is discussed with conspicuous ability in 
 the second dissertation on Mr. Thornton’s book. The theory 
 of a wages-fund, the proportion of which to the number of 
 labourers in the country determines the price of labour, is there 
 rejected ; and it should be observed that this doctrine was not 
 originated by Miil, but appeared in its most uncompromising 
 and fallacious forms in the works of his predecessors, MacCulloch 
 and Senior. It is, in fact, a corollary to the doctrines of an 
 average rate of profit and an average rate of wages. If profits 
 could not be higher, nor wages lower, in one employment or 
 place than in another, there would really be such a mobility of 
 capital and such a connexion between the funds out of which 
 wages are everywhere paid, that it would not be very inaccurate 
 to speak of them as forming a general fund on which the price 
 of labour depends; though even in that case the combination of 
 labourers might produce a higher general rate of wages and a 
 lower general rate of profit than competition had done. What 
 neither Mr. Mill nor Mr. Thornton seems to us sufficiently to 
 bring out, is that the main power of trades unions to raise wages: 
 in particular cases has arisen from the actual inequalities of both 
 profits and wages. Where extraordinary gains have been made 
 in a business, the labourers have been enabled by concerted 
 action to extort a share which competition would not have 
 assigned to them; and again, where wages have been abnormally 
 low, they have been able in like manner to compel arise. The 
 dissertation on the land question, and the papers on land reform 
 in this volume, show that Mr. Mill, like most people of all 
 political parties when they were written, underrated the strength 
 of the forces on the side of the existing land systems; and the 
 same remark is applicable to some passages in a review of 
 Sir H. Maine’s ‘ Village Communities,’ which deserves particular 
 notice for the generous interest and admiration which it shows. 
 that Mr. Mill felt for works of genius and learning, even when 
 allied to far more conservative tendencies than his own. The 
 essay on Bishop Berkeley’s works, besides its great intrinsic 
 merits as a piece of psychological criticism, is remarkable like- 
 
John Stuart Mill. 59 
 
 wise for the sympathy it evinces with genius allied to religious 
 opinions widely opposed to Mr. Mill’s. 
 
 The volume contains, besides other instructive essays, a re- 
 view of Grote’s Aristotle by one to whom few will deny the 
 highest claim to be listened to as a critic on such a subject, and 
 to whom many will assign a place beside Bacon among the most. 
 illustrious successors of the original founder of logic. 
 
VI. 
 
 PROFESSOR CAIRNES.* 
 
 ProFressor Carrnes has been laid to rest with extraordinary 
 honour. No other author’s death in our time, save Mr. Mill’s, 
 has called forth so strong and general an expression of feeling ; 
 and Mr. Mill had been a leader of a philosophical school for a 
 generation, and for several years a distinguished and active 
 member of Parliament, while Mr. Cairnes had resided in England 
 only for a few years, during the greater number of which he was 
 the victim of a cruel malady which secluded him from the world 
 and deprived him latterly even of the use of his pen. It is but 
 thirteen years since Professor Cairnes, then holding a chair of 
 Political Economy in Ireland, and known only to a few of the 
 more studious economists in England, suddenly attained a wide 
 celebrity by the publication, at the most critical moment in the 
 American civil War, of ‘The Slave Power;’ one of the most 
 masterly essays in the literature of political controversy, and, 
 even now that American slavery is extinct, one of the most 
 instructive and interesting treatises which students either of 
 politics or of economics can find in the English language. The 
 progress of economic science, and the changes in the views of 
 economists, of which there are indications all over Europe, may 
 disturb some of the conclusions of Mr. Cairnes’ other works, but 
 ‘The Slave Power’ will ever defy criticism; and no serious answer 
 was attempted to be made to it, even when the war was at its 
 height, and when the Southern States had the sympathy and | 
 support of some of the most powerful organs of the English press. 
 
 * The Academy, July 17, 1875.—This Article appeared as an obituary notice 
 immediately after the death of Mr. Cairnes. 
 
Professor Cairnes. 61 
 
 The practical object for which ‘ The Slave Power’ was published 
 has been triumphantly accomplished, but it had also a philoso- 
 phical purpose which gives it a permanent value as an economic 
 classic, for its subject was originally selected by Mr. Cairnes for 
 a course of lectures ‘ to show that the course of history is largely 
 determined by economic causes.’ The skill and ability with 
 which this purpose was carried into effect will, we believe, make 
 future economists regret more and more as their science advances 
 that Mr. Cairnes did not in his subsequent works develop another 
 side of the relation between history and political economy, 
 namely, the connexion between the whole social history of a 
 country and its economic condition as one of the phases of the 
 entire movement, and not as the result of a single principle or 
 desire. 
 
 Before the publication of ‘ The Slave Power,’ two essays in 
 ‘Fraser’s Magazine,’ ‘towards the solution of the Gold Question,’ 
 had attracted the attention of economists in this country, 
 especially Mr. Mill, to Mr. Cairnes’ remarkable talent for 
 deductive reasoning and exposition in economics. We think 
 for our own part, and we have reason to believe that such was 
 subsequently Mr. Mill’s view, that in his practical conclusion 
 Mr. Cairnes took insufficient account of the influence on prices 
 of the acquisition by France, Germany, and other continental 
 countries, of the power of production and communication by 
 steam, contemporaneously with the diffusion of the new gold ; 
 but those who dissent from the proposition that prices have risen 
 more in England since the discovery of the new gold mines than 
 in any continental country, will nevertheless find nothing to 
 dispute in the principles which Mr. Cairnes applied with con- 
 summate skill to the solution of the problem. The causes which 
 have raised prices on the continent so greatly above their former 
 low level are causes of the same order with those whose operation 
 Mr. Cairnes discussed in relation to England. 
 
 Although an invalid, impeded in every physical movement 
 by the malady from which he suffered, Mr. Cairnes took an 
 active, though sometimes an unseen, part in the discussion of all 
 the chief political controversies in this country during the last 
 
62 Professor Cairnes. 
 
 ten years, especially the Irish land question and Irish University 
 education ; and to him more than to any other single person it 
 is due that University education in Ireland is not now under 
 the control of an Ultramontane hierarchy, and that some of 
 the chief subjects of historical and philosophical study have not 
 been banished from the University of Dublin and the Queen’s 
 Colleges. 
 
 Last year, although then no longer able to write with his 
 own hand, Mr. Cairnes published his ‘ Leading Principles of 
 Political Economy newly Expounded,’ a work which ought to 
 be regarded, even by those who dissent most from some of its 
 principles, as an important contribution to economic science. 
 To state with the greatest possible clearness and force the reasons 
 for espousing one side of a scientific controversy, is to render 
 one of the best services to those who seek to know all that can 
 be said on both sides. And if any position which Mr. Cairnes 
 takes up is unsuccessfully maintained, the student may feel 
 assured that if literary and dialectical skill could have defended 
 it, it would be impregnable. The second edition of Mr. Cairnes’ 
 “ Logical Method of Political Economy,’ which has recently been 
 published, and which we hope on a future occasion to review, 
 ought in like manner to be welcomed by those economists who 
 incline to the inductive or historical method, not only for the 
 intellectual interest which the reasoning of a powerful mind 
 must always excite, but also as a masterly exposition of the 
 deductive method, and a complete presentation of all that can be 
 said for it or got out of it. 
 
 We have no words to express our admiration of the heroic 
 fortitude and public spirit without which no amount of intellec- 
 tual power would have enabled Mr. Cairnes, under sufferings of 
 the most prostrating kind, to maintain so high a place in the 
 philosophical and political history of his time as that which is 
 assigned to him by universal consent. His moral as well as his 
 intellectual qualities won for him the reputation which has now 
 become historical. 
 
VIL. 
 MR. BAGEHOT.* 
 
 Mr. Watter Baceuot, the eminent editor, author, and political 
 economist, died on Saturday last, at the same early age as the 
 late Professor Cairnes, having reached only his fifty-second year. 
 He was educated at University College, and graduated with 
 distinction in the University of London, in which he was lately 
 examiner in Political Hconomy. He was known to the public 
 chiefly as editor of the ‘ Hconomist,’ and by his books and essays ; 
 but he was also a partner in a bank, and was thus one of four 
 remarkable men of letters in this century who have also been 
 English bankers—Samuel Rogers, the poet ; Grote, the historian ; 
 and Sir John Lubbock making the other three. As editor of 
 the ‘Economist,’ Mr. Bagehot was the successor of its founder, the 
 late Right Honourable James Wilson, whose son-in-law he was. 
 He conducted that journal with consummate ability, and raised 
 it.to the first rank, both as a financial and as a political authority. 
 He might, doubtless, have augmented his fortune by lending 
 adroit support from time to time to particular financial and 
 commercial speculations, but no line of the Economist ever 
 showed the smallest favour of that kind, and it did honour to 
 the English press under his management, alike by its absolute 
 integrity and impartiality, and by its intellectual calibre. 
 
 As a political economist Mr. Bagehot belonged to the older 
 deductive school, but his recent essays in the‘ Fortnightly Review’ 
 mark an epoch in the history of English political economy, by 
 abandoning the ground hitherto claimed by the leaders of that 
 school for their method and doctrines. It is not many years 
 
 
 
 * The Academy, March, 31, 1877.—This Article appeared as an obituary notice. 
 
64 Mr. Bagehot. 
 
 since Mr. Lowe affirmed that ‘political economy belongs to no 
 nation, is of no country, and no power can change it.’ Mr. 
 Bagehot, on the contrary, emphatically limited the application 
 of the postulates of the a priori and deductive method to England 
 at its present commercial stage. And within this limit he further 
 circumscribed and qualified what he termed ‘ the fundamental 
 principle of English political economy,’ by. assuming only ‘ that 
 there is a tendency, a tendency limited and contracted, but still 
 a tendency, to an equality of profits through commerce.’ Thus 
 circumscribed, the principle can no longer serve as a foundation 
 for the superstructure erected upon it, which is built on the 
 assumption that the tendency is so effectual, and so arithmetically 
 true and exact in its operation, that every shilling of cost to 
 which every producer is put by any special tax or burden is 
 nicely recovered, with neither more nor less than ordinary profit 
 in the market. Besides the essays referred to, and the numerous 
 articles which he wrote in the ‘ Economist,’ Mr. Bagehot contri- 
 buted to economic literature an excellent work on banking and 
 the money-market, under the title of ‘ Lombard Street.’ He was 
 the author, also, of a work entitled ‘Physics and Politics,’ which 
 embodies a series of ingenious, though rather fragmentary, essays. 
 on the natural history of political society. 
 
 The work which displays in the highest degree both the 
 original powers and some of the peculiar characteristics of Mr. 
 Bagehot’s mind is his ‘ English Constitution,’ which is unques- 
 tionably entitled to a place among English political classics. It 
 is not without a tinge of cynicism, but it undoubtedly brings 
 to light principles overlooked in all previous works on the Con- 
 stitution, and which must be admitted by the disciples of Mr. 
 Mill as qualifying to some extent the doctrines of that great 
 writer’s ‘Representative Government.’ One of the curious prac- 
 tical contradictions which, as Mr. Bagehot has pointed out, the 
 political history of England gives to political theory is, that 
 the £10 householders, who, under the Reform Act of 1832, 
 formed the bulk of the constituency, were, above all classes, the 
 one most hardly treated in the imposition of taxes; so little did 
 representation secure especial care for their interests. 
 
Mr. Bagehot. 65 
 
 Although of the Liberal party, Mr. Bagehot was, by disposition 
 and cast of thought, what, for want of a more appropriate word, 
 we must call an aristocrat in political opinion and feeling—a 
 Whig, not a Radical. In his‘ English Constitution’ he speaks of 
 the order of nobility as useful, not only for what it creates, but 
 for what it prevents, and in particular as preventing the absolute 
 rule of gold, ‘the natural idol of the Anglo-Saxon,’ who is 
 ‘always trying to make money,’ and who ‘ bows down before a 
 great heap, and sneers as he passes a little heap.’ If Mr. 
 Bagehot did not himself bow down before the great heap, he 
 was a little disposed to sneer at the little heap. Thus in ‘ Lom- 
 bard Street,’ speaking of the democratic structure of English 
 commerce as preventing a long duration of families of great 
 merchant princes, he says ‘ they are pushed out, so to say, by 
 the dirty crowd of little men.’ And in the discussions which 
 arose out of the agitation for a reform of the Irish law of land- 
 lord and tenant, he could not conceal his scorn for little farms 
 and little properties in land, such as form the main foundation 
 of the prosperity of France. 
 
 Mr. Bagehot unsuccessfully sought at one time a seat in 
 Parliament, but with all his political sagacity, knowledge, and 
 talent, he was scarcely qualified to make a considerable figure 
 in the House of Commons; for, although he might have made 
 an administrator of a high order in a public office, he remarkably 
 exemplified the essential difference between the qualifications 
 of a writer and those of a speaker. ‘The position that actually 
 fell to him in life was the one he was best fitted for, and it was 
 one really more honourable and more useful than that of many 
 eminent members of Parliament. 
 
Vib. 
 
 JEVONY’ ‘ THEORY OF POLITICAL ECONOMY.™* 
 
 Tux high reputation of the author, and the unsettled state of 
 opinion with respect to both the limits and the method of poli- 
 tical economy, make it the duty of every economist to master the 
 doctrines of this work; and that can be done only by careful 
 study of the book itself. A reviewer limited to a few dozen 
 sentences can at best only assist a reader to form a judgment on 
 some of its main topics. The principal questions it raises are, 
 whether political economy should be confined within the limits 
 that Mr. Jevons assigns to it, and whether the method which he 
 applies to the solution of the problems within those limits is 
 legitimate and adequate. On both questions our own opinion 
 differs from that of Mr. Jevons; but, with respect to the first, 
 the difference, though important, is one mainly of classification 
 and naming. For Mr. Jevons fully concurs in the necessity of 
 historical induction to ascertain the economic phenomena of 
 society and their laws, but would set it apart as a branch of the 
 general science of society under the name of ‘ economic sociology,’ 
 confining the term ‘ political economy’—or, as he prefers to call 
 it, ‘economics’ —to a theory deduced from known facts, axioms, 
 or assumptions, respecting the conduct dictated by personal 
 interest, such as, ‘ that every person will choose the greater 
 apparent good, that human wants are more or less quickly satis- 
 fied, and that prolonged labour becomes more and more painful.’ 
 The theory of population, accordingly, though pronounced by 
 
 Mr. Jevons ‘as scientific in form as consonant with facts,’ — 
 forms, in his view, ‘no part of the direct problem of economics,’ 
 
 
 
 * The Academy, July 26, 1879. 
 
Jevons’ ‘ Theory of Political Economy.’ 67 
 
 and is not discussed in his present work. The majority of the 
 most eminent economists of all schools—including Mr. Senior, 
 who attempted to make political economy purely deductive, and 
 whom Mr. Jevons estimates highly—are, it need hardly be said, 
 against so narrow a limitation of the province of the science, 
 and Mr. Jevons gives only the following reason for it :—‘ The 
 problem of economics may be stated thus: given a certain popu- 
 lation, with various needs and powers of production, in possession 
 of certain lands and other sources of material; required the 
 mode of employing their labour which will maximise the utility 
 of the produce.’ He adds, that ‘it is an inversion of the prob- 
 lem to treat labour as a varying quantity, when we originally 
 start with labour as the first element of production, and aim at 
 its most economical employment.’ The answer seems to be 
 that land, like labour, is a primary element of production, and 
 the area in cultivation and the productiveness of that area are 
 both varying quantities. Were labour, moreover, not a varying 
 quantity—as it is, because population is so—inferior soils and 
 costlier methods of cultivation would not have been resorted to, 
 and rent, to which Mr. Jevons gives a high place in economies, 
 would not have arisen. But if, for these reasons, the laws of 
 population come properly within the pale, political economy is 
 clearly not limited to an assemblage of deductions or calculations 
 from self-interest. Nor can any other natural laws, directly 
 and deeply affecting the amount and distribution of wealth, be 
 in consistency excluded. Admit the theory of population, and 
 all that Mr. Jevons classes apart, under the name of economic 
 sociology, has a logical title to a place within the domain of 
 political economy. 
 
 Since Mr. Jevons, however, is an advocate, not an opponent, 
 of the most extensive historical and inductive investigation, it is, 
 as we have said, mainly a question of naming and classification, 
 whether the term ‘political economy’ or ‘economics’ should 
 be confined to a narrower field. But the question follows— 
 Within that narrower field can we proceed, as Mr. Jevons 
 contends, not only by simple deduction, but by mathematical 
 process? ‘There can be,’ he says, ‘ but two classes of sciences— 
 
 F 2 
 
68 Jevons’ * Theory of Political Economy.’ 
 
 those which are simply logical, and those which, besides being 
 logical, are also mathematical. If there be any science which 
 determines merely whether a thing be or not, whether an event 
 will or will not happen, it must be a purely logical science ; but 
 if the thing may be greater or less, or the event may happen 
 sooner or later, nearer or farther, quantitative notions enter, and 
 the science must be mathematical in nature, by whatever name 
 we callit.? Nevertheless, it can hardly be contended that Adam 
 Smith’s reasoning respecting the nature and causes of the wealth 
 of nations is in its essence, and ought to be in actual form, 
 mathematical ; or that the process by which his main propositions 
 are established is anything wore than logical. We might add 
 that they rest in good part on inductive, and not simply on 
 deductive, logic; but the question before us is whether mathe- 
 matical methods could properly be applied to their demonstration. 
 That wealth consists, not of money only, but of all the necessaries 
 and conveniences of life supplied by labour, land, and capital ; 
 that man’s natural wants are the strongest incentives to industry ; 
 that the best assistance a government can give to the augmenta- 
 tion of national opulence is the maintenance of perfect liberty 
 and security ; that the division of labour is the great natural 
 organization for the multiplication of the products of industry ; 
 that it is limited by the extent of the market; and that the 
 number of persons employed in production depends in a great 
 measure upon the amount of capital and the modes of its. 
 employment—these are the chief propositions worked out in the 
 ‘Wealth of Nations,’ and it can hardly be said that mathe- 
 matical symbols or methods could fitly be used in their proof. 
 We need not controvert Mr. Jevons’ proposition that ‘ pleasure, 
 pain, labour, utility, value, wealth, money, capital, are all notions. 
 admitting of quantity ; nay, the whole of our actions in industry 
 and trade depend upon comparing quantities of advantage or 
 disadvantage.” But the very reference which Mr. Jevons 
 proceeds to make to morals militates against the assumption 
 that ‘ political economy must be mathematical, simply because it 
 deals with quantities,’ and that ‘wherever the things treated 
 are capable of being greater or less, there the laws and relations 
 
Jevons’ ‘ Theory of Political Economy.’ 69 
 
 must be mathematical.’ The author instances Bentham’s utili- 
 tarian theory, according to which we are to sum up the pleasures 
 on one side and the pains on the other, in order to determine 
 whether an action is good or bad. Comparing the good and 
 evil, the pleasures and pains, consequent on two courses of con- 
 duct, we may form a rational judgment that the advantages of 
 one of them preponderate, that its benefits are greater, its 
 injurious results, if any, less; but it by no means follows that 
 we can measure mathematically the greater or less, or that the 
 application of the differential calculus would be appropriate or 
 possible in the matter. We do not go the length of saying that 
 there are no economic questions to which mathematical calculation 
 could be fairly applied. The precious metals, for instance, move 
 so easily between adjacent countries, that the variations of the 
 foreign exchanges might perhaps be mathematically treated. 
 But the immense inequalities in wages and profits, and the 
 extraordinary fluctuations of prices under the uncertain influence 
 of credit and speculation, are enough to baffle any attempt to 
 apply the calculus to questions of value in general. 
 
 Were the application of mathematical processes and symbols 
 to all economic reasoning, however, possible, it does not follow 
 that it would be expedient. Bastiat’s conception of the main 
 problem of political economy was not very different from that of 
 Mr. Jevons, who says, that ‘to satisfy our wants to the utmost, 
 with the least effort—to procure the greatest amount of what is 
 desirable at the expense of the least that is undesirable—is the 
 problem of economics.’ Suppose that Bastiat could have put 
 his ‘Sophismes Economiques’ into a mathematical form, with 
 symbols for words, and equations for syllogisms and epigrams, 
 would not political economy and the world have suffered a heavy 
 loss by his doing so? ‘The ‘Times’ might be printed in short- 
 hand, and much ink and paper thereby saved, but would it 
 conduce to the enlightenment of the public to make that 
 economy? We regret that so much of Mr. Jevons’ own 
 reasoning is put into a mathematical form, because it is one 
 unintelligible or unattractive to many students of considerable 
 intellectual power and attainments. On the other hand, we not 
 
70 Jevons’ ‘ Theory of Political Economy.’ 
 
 only concede that a mathematical shape might have been given 
 to a great part of Ricardo’s system, but we regret that it ever 
 recelved any other, because his theory of value, wages, profits, 
 and taxation is misleading and mischievous. Assume that the 
 products of equal quantities of labour and abstinence are neces- 
 sarily of equal value and price, and that exertions and sacrifices 
 of different kinds are commensurable, and a number of mathe- 
 matical equations and calculations can be based on those 
 assumptions. But since the basis is false, the more the 
 superstructure is hidden the better; and we should be glad to 
 see it obscured, in every treatise in which it is put forward, by 
 a liberal use of the calculus. Taking utility in the sense in 
 which Mr. Jevons uses the word, we should acquiesce in his 
 ‘general law that the degree of utility varies with the quantity 
 of commodity, and ultimately decreases as that quantity in- 
 creases.’ Yet, in one case only are the variations of utility and 
 value, consequent on variations in the quantity of commodity, 
 susceptible of mathematical measurement and calculation. ‘The 
 purchasing power or value of currency is inversely as its quantity, 
 because there is an unlimited demand for it; but the variations 
 in the value of other commodities bear no regular ratio to their 
 quantity. Davenant’s estimate, to which Mr. Jevons refers, 
 that a defect of one-tenth in the harvest raises the price of corn 
 three-tenths, and that a defect of one-half more than quadruples 
 its price, is useful as an illustration, and made a rough, though 
 only a rough, approximation to truth, so long as little corn came 
 from abroad. Now the supply comes from the harvests of the 
 world, and a defect of one-tenth in our own harvest might be 
 followed by a fall instead of a rise in the price of grain. Could 
 we even get accurate statistics of the harvests of the world, it 
 would be found that its price is affected by so many other 
 conditions that it bears no constant mathematical ratio to the 
 amount of supply. — 
 
 On the other hand, the stress which Mr. Jevons lays on the 
 relation between value and quantity of supply seems to us to. 
 afford an answer to an objection which Mr. Cairnes has made 
 to the proposition for which Mr. Jevons contends, that ‘ value 
 
Jevons’ ‘ Theory of Political Economy.’ 71 
 
 depends on utility.’ When Mr. Cairnes asks whether commo- 
 dities are exchanged for each other simply in proportion as they 
 are useful, we should reply in the affirmative, if by usefulness is 
 meant, what Mr. Jevons and most other economists mean by 
 it, the power of satisfying any human desire. If, in a siege or 
 a famine, a loaf is refused in exchange for a large diamond, it is 
 because the loaf is more desired or more useful ; if, in ordinary 
 times, a large diamond would not be given for a thousand loaves, 
 the reason is that the diamond is preferred, or has greater utility 
 in the economist’s sense. It may, indeed, be urged that the com- 
 parative usefulness of diamonds and loaves, in the two cases, 
 gives only the proximate cause of their relative value in exchange, 
 and that the ulterior cause is comparative limitation of supply. 
 A loaf contains as much nourishment in a time of plenty as in 
 a famine; but in the former case no particular loaf is much 
 wanted, or has any particular utility, while in a famine every 
 loaf has a utility proportionate to the amount of food it contains. 
 Mr. Jevons’ proposition is in substantial accordance with the 
 generally accepted doctrine that value depends mainly on limita- 
 tion of supply. It depends, however, also, on other conditions, 
 which defy all mathematical powers of calculation. Given the 
 supply of a commodity, the urgency of the desire for it, and the 
 amount of the funds in the hands of the persons desirous to 
 purchase it, its price is still indeterminate. It will vary, accord- 
 ing as buyers and sellers combine or compete, according to the 
 activity of credit and speculation, and according to other con- 
 ditions which are subject to no ascertainable laws. 
 
 A proposition laid down by Mr. Jevons, in which we fully 
 concur, is, ‘that economics must be founded on a full and ac- 
 curate investigation of the conditions of utility, and to under- 
 stand this element we must examine the wants and desires of 
 man.’ An urgent desideratum in political economy is certainly 
 the substitution of a true theory of what Mr. Jevons terms 
 ‘the laws of human wants’ for vague abstractions, such as the 
 love of wealth and the aversion to labour. But wide historical 
 investigation must precede the construction of the true theory. 
 The authors to whom Mr. Jevons refers have made some instruc- 
 
72 Jevons’ ‘ Theory of Political Economy.’ 
 
 tive suggestions respecting the subordination and successions of 
 human wants; but they seem not to have perceived that these 
 wants vary under different surrounding conditions and in dif- 
 ferent states of society. The order which the evolution of human 
 wants follows is one of the inquiries that await a rising historical 
 and inductive school of economists, which happily has no oppo- 
 sition to encounter from Mr. Jevons. But with respect to the 
 deductive method, Mr. Jevons does not quite fairly represent 
 the view of that school when he says, ‘I disagree altogether 
 with my friend, Mr. Leslie; he is in favour of simple deletion ; 
 I am for thorough reform and reconstruction.’ We are, it is” 
 true, for deletion of the deductive method of Ricardo: that is 
 to say, of deduction from unverified assumptions respecting 
 ‘natural values, natural wages, and natural profits.’ But we 
 are not against deduction in the sense of inference from true 
 generalizations and principles, though we regard the urgent 
 work of the present as induction, and view long trains of deduc- 
 tion with suspicion. 
 
 We have been able to touch only a few of the problems 
 discussed in Mr. Jevons’ treatise. It is one which requires a 
 considerable intellectual effort on the part of the reader, but the 
 effort will bring its reward, even where it may not end in entire 
 assent to the views of the eminent author. 
 
ID 
 
 MARSHALL'S ‘ ECONOMICS OF INDUSTRY.”* 
 
 Aw eminent scholar lately said to the writer that he preferred 
 the old kind of review, which simply told what a book contained. 
 The preference is intelligible on the part of a man who likes to 
 know the gist of every new book, and to judge for himself of 
 its soundness. ‘The system would save readers both money and 
 time. or threepence they might get the pith of a number of 
 new works in a weekly review. Yet there are objections to 
 this definition of the province of the reviewer. The editor of a 
 famous journal, who knew his public well, used to tella new — 
 writer, when sending him a book, that he wanted an original 
 article on the subject, not a mere review. Competent critics, 
 indeed, would not be content to write summaries—a business 
 which could be done by mere drudges. Nor is it quite fair to 
 an author to sell a little compendium of his work. Even a 
 reader may sometimes object. The novel-reader, as well as the 
 novelist, has no such enemy as the reviewer who tells the whole 
 story in a few words. We shall, therefore, not attempt to 
 summarise the contents of Mr. and Mrs. Marshall’s work. Mr. 
 Marshall has been known for several years, though less widely 
 than if his pen had been more active, as one of the most accom- 
 plished and learned economists in England ; and Mrs. Marshall 
 bore a high reputation as lecturer at Newnham Hall, Cambridge. 
 The theory of the economics of industry, set forth by two such 
 authors, is not to be compressed into a few columns, to say 
 nothing of the right and duty of criticism. 
 
 The book before us makes greater changes in economic 
 
 
 
 * The Academy, November 8, 1879. 
 
74 Marshall’s ‘Economics of Industry.’ 
 
 method and doctrine, compared with previous text-books, than 
 might be perceived at first sight; for they are made without 
 sound of trumpet, and for the most part without controversy. 
 Sometimes, indeed, they seem to us made without sufficient 
 warning to call the student’s attention. Still, the authors have, 
 in their statement of general principles, adhered to the main 
 lines of the economic system hitherto generally followed in 
 England. Like a lecturer, the writer of a text-book ought to 
 put the reader in possession of the system hitherto in vogue, 
 and may find it necessary to begin with propositions which he 
 afterwards subjects to such qualifications, exceptions, and 
 limitations, that they turn out to be mere introductory obser- 
 vations and provisional assumptions; though, unfortunately, it 
 is the custom, in political economy, to dignify preliminary 
 generalities of this sort with the title of laws. 
 
 One characteristic merit of Mr. and Mrs. Marshall’s work is 
 that they do not make use of provisional doctrines or generaliza- 
 tions, of the class just referred to, as premisses from which 
 trains of deduction can be made, but as starting-points for the 
 investigation of actual phenomena, and the ascertainment of 
 the presence and operation of their actual causes and conditions. . 
 Thus, the ‘theory of normal value,—a term, indeed, the 
 appropriateness of which we shall have to question—which 
 assumes the equalization of wages and of profits, and the 
 conformity of prices with the expenses of production, is only 
 used by the authors ‘as the starting-point from which we must 
 set out to explore all the various irregularities and unevennesses 
 of market values.’ <A provisional assumption that competition 
 tends to equalize the earnings of labour in the same trade in 
 different localities may, for example, lead to the discovery of 
 the causes of their actual inequalities. Suppose agricultural 
 wages more than fifty per cent. lower in Dorsetshire than in 
 Yorkshire, the inference from the assumption would be that 
 there are obstacles to the migration of labourers, and the causes 
 determining the actual market rates in the two counties might 
 be thence ascertained. The discussion of local variations of 
 value, of market fluctuations, and of the influence of trade 
 
Marshall’s ‘Economics of Industry, 75 
 
 unions on wages, in Mr. and Mrs. Marshall’s book, is admirable, 
 and, among other results, ought finally,to dispose of the doctrine 
 of the wages fund. ‘The whole net annual income of the 
 country, say the authors, ‘consists of all those commodities 
 and conveniences of life which are produced during the year, 
 after replacing the auxiliary capital that is consumed or worn 
 out during the year. This net annual income is divided into 
 —firstly, earnings of all kind of work, including business 
 management ; secondly, interest on capital; thirdly, rent 
 obtained for the use of land or any other property that is 
 artificially limited ; fourthly, taxes paid to the State.’ The 
 first remark which this passage suggests is, that the authors 
 appear to include, like Mr. Senior and most German economists, 
 not only material commodities, but services and utilities which 
 bear a price in the market, in the wealth of a nation; and 
 accordingly the definition of wealth in their first chapter ought 
 to be enlarged. Much thin sophistry has been expended by 
 some English economists on an attempt to exclude services and 
 the conveniences of life, when not, to use Adam Smith’s phrase,. 
 fixed in some material and vendible commodity, from the ca- 
 tegory of wealth, although useful, limited in supply, exchange- 
 able for commodities, and not to be had without purchase. The 
 consequence is, that a fundamental change is overlooked which 
 takes place in the real revenue and wealth of a nation as civili- 
 zation advances—namely, that it consists more and more of 
 material and durable articles, and less and less of perishable 
 services, to perform which much trouble is undergone, but which 
 leave nothing behind them. ‘lhe medieval baron sometimes 
 maintained thousands of attendants and followers, whose ser- 
 vices, not the commodities he gave for them, constituted a large 
 part of his real wealth; for the commodities became the wealth 
 of the retainers. On the fall of the baronial power, services of 
 this kind gave place to commodities, some of which were of a 
 durable kind, and made lasting additions to the national wealth. 
 
 But the point which especially calls for consideration in the 
 passage cited relates to the remuneration of superintendence, 
 or, as Adam Smith called it, of the labour of inspection. By 
 
76 Marshall’s ‘ Economies of Industry.’ 
 
 Mr. Mill this element is treated as forming, along with interest, 
 a constituent of profit. Mr. and Mrs. Marshall, on the other 
 hand, transfer it from the profit side of the account to that of 
 wages, classing it, under the name of earnings of management, 
 with the earnings or wages of skilled labour in general. ‘There 
 are some tendencies in modern industrial economy to make this 
 eventually the proper classification, but it requires, at least, more 
 explanation and qualification than it has received from the 
 authors. They say, only, that ‘ We shall find it best to class 
 earnings of management with the earnings of other kinds of 
 work, because they are similar in nature to other earnings, and 
 are, in the long run, governed by the same laws. For though, 
 in the passing vicissitudes of trade it is somewhat difficult to 
 draw a clear line between the interest on a business-man’s 
 capital and his earnings of management, yet we shall find that 
 there is little in common between those fundamental laws which 
 determine, in the long run, the normal rate of interest, and those 
 which determine, in the long run, the normal earnings of 
 management.’ The authors do not seem to have had in view 
 the objection to their classification suggested by Adam Smith’s 
 observation, that the earnings of two men of business, whose 
 labour of inspection may be nearly the same, may differ widely, 
 because varying, like interest, with the amount of capital they 
 turn over, not with the amount of their labour. ‘If,’ he said, 
 ‘we suppose two manufacturers, the one employing a capital 
 of £1000 and the other of £7300, in a place where the common 
 profits of stock are ten per cent., the one will expect a profit of 
 about £100 a-year, while the other will expect about £730. 
 Yet their labour of inspection may be nearly or altogether the 
 same.’ ‘T'o put the case in another way: a grocer, with a 
 capital of £1000, sells at prices which leave him, let us say, 
 after replacing his stock with insurance, a profit of £100 a-year 
 for interest and trouble together. A neighbouring grocer, with 
 ten times the capital, gets the same prices, and makes a net 
 profit of £1000 a-year, with perhaps little more trouble. In 
 such a case the earnings of management are surely not deter- 
 mined by the laws which regulate wages in general, and have 
 
Marshall’s ‘Economies of Industry. (7 
 
 much more in common with those which govern the rate of 
 interest. Nevertheless, causes are at work, though the authors 
 do not bring them out clearly, tending to regulate ultimately 
 the earnings of management by the amount of skill and trouble 
 it requires, instead of by the amount of capital. The scale on 
 which modern business is carried on, and the growth of joint- 
 stock companies, have given rise to a class of managers who are 
 not partners, but paid by salaries for their work. And it isa 
 tendency of competition to force the owners of the capital so em- 
 ployed to sell at prices which yield only what the management 
 actually costs in this way. The system tends to drive small 
 producers and dealers out of the market; for, a large salary to 
 the manager of a big business may make no sensible addition to 
 prices, while a proportionate remuneration to a small capitalist 
 for his trouble would seriously raise the price of his goods. 
 The growth, too, of the system of doing business on borrowed 
 capital, due largely to modern banking facilities, has a similar 
 tendency. The man working with borrowed capital may be 
 content with an equivalent toa large salary, and his competitors, 
 with capital of their own, must sell at the same prices. ‘These 
 tendencies are, however, to a great extent counteracted by other 
 causes, which make profit include an element, over and above 
 interest, that varies with the amount of capital, not with the 
 labour of management, and which tend to assign this element 
 chiefly to the owners of the capital as such, not to the managers 
 as such. According to the authors, net profit contains no 
 elements, save interest and the earnings of management, which 
 they say are regulated by the same laws as the earnings of 
 skilled labour. If so, the profits of trade ought to exceed 
 interest only by the amount of a good manager’s salary, and 
 the ordinary fees of directors. Yet it is certain that the divi- 
 dends received by the shareholders of a company may much 
 exceed bare interest, in consequence partly of good management, 
 while the managing staff receive only the ordinary remuneration. 
 One reason for this is, that profit includes elements which cannot 
 be disentangled and measured so as to determine the share due 
 to the management. ‘Luck, situation, connexion, prestige, and 
 
78 — Marshall’s ‘Economies of Industry,’ 
 
 other elements enter, along with interest and superintendence, 
 into profit ; and it is impossible to say how much is due to each. 
 The returns to all together usually vary in proportion to the 
 amount of the capital embarked, not to the skill and trouble of 
 management, and its owners legitimately claim the surplus. 
 The authors’ analysis of profit, accordingly, appears to us not 
 quite complete, and we cannot think the subject is really made 
 clearer by getting rid of the term profits altogether, as they 
 seek to do, and speaking only of interest in reference to the 
 gains of capital. 
 
 Another aspect of the problem of the rate of profit, as to ~ 
 which Mr. and Mrs. Marshall’s exposition seems to us not 
 entirely satisfactory, relates to the amount of the fund to be 
 divided between capital and labour. ‘ The total net annual 
 produce of a country’s capital and industry,’ they say, ‘ after 
 rent and taxes have been deducted from it, consists of the 
 interest on capital, and the earnings of different kinds of 
 industry, and we have called it the earnings-and-interest fund.’ 
 The share, they add, which capital obtains, depends, first, upon 
 the amount of the fund, secondly, on the manner in which it is 
 divided between labour and capital. The amount of this ‘net 
 annual produce of the country,’ or aggregate national ‘ earn- 
 ings-and-interest fund,’ depends, as they show, on the productive 
 powers of land, labour, and capital, the state of science and art, 
 and so forth; and their exposition of this subject is full, though 
 concise. It is, too, undoubtedly important to the economist to 
 have a clear view of the causes determining the amount of the 
 annual revenue of the nation as a whole. Yet the problem 
 respecting the rate of profit is a different one. The capitalists 
 and labourers in a trade do not simply divide between them 
 a share in a definite national fund, created by the general 
 productiveness of the whole national capital and labour; they 
 themselves, in a great measure, create the particular fund which 
 they divide, and the amount which they will receive depends 
 largely on the amount of their own produce, and the economy, 
 as well as the skill and energy, which they exercise in its pro- 
 duction. Much waste and loss practically arises from the 
 
Marshall’s ‘Economics of Industry.’ 79 
 
 tendency of both capitalists and workmen to regard the amount 
 of profits and wages as a question, simply, of sharing a given 
 fund, when the most important matter is to produce it. 
 
 The authors next inquire, ‘ how the earnings-and-interest 
 fund is divided into the share which capital takes as interest, 
 and that which industry takes as earnings.’ ‘They proceed, 
 accordingly, to discuss the problem of the rate of interest, and 
 it is certainly one which calls for investigation in a treatise on 
 the economics of industry. Yet the owners of capital in busi- 
 ness have much else to look to. For them the point is not 
 merely what interest they could get on the best security, but 
 what profit the particular businesses or investments they have 
 under their eye are likely to afford: here they must take into 
 account the influence of many conditions and elements which 
 but remotely and slightly affect the general rate of interest. 
 But, confining ourselves to the question of the rate of interest, 
 the general proposition which Mr. and Mrs. Marshall lay down 
 is, that ‘it will be found to depend upon the urgency of the 
 demand of industry for tne aid of capital.’ Industry is rather 
 a vague term, and one of its misfortunes is, that it is commonly 
 used by French economists in a narrow and special sense. The 
 authors appear to mean by it, in the proposition before us, 
 simply labour, since they say that, ‘The demand of industry 
 for the aid of capital will not be urgent if there is a large 
 supply of capital in proportion to the population. Industry 
 will not then be compelled to resign.to capital enough of the 
 produce to afford a high rate of interest.’ But labour has 
 many competitors at home and abroad for capital. Our National 
 Debt, and the sums which foreign States have raised in Great 
 Britain since the Crimean War, show how formidable is the 
 competition of public borrowers, and to their demand must be 
 added that of private borrowers for unproductive purposes, of 
 the intensity of which the extent to which land in the United 
 Kingdom is mortgaged affords an indication. Looking, how- 
 ever, only to the side of the question which the authors discuss, 
 it seems to us important to bear in mind that the shares of 
 labour and capital will depend, not merely on the demand of 
 
80 Marshall's ‘Economics of Industry.’ 
 
 labour for capital, but also on the demand of capital for labour, 
 which varies much with the mode of production. When, in the 
 sixteenth century, pasture largely superseded tillage, labourers 
 suffered heavily from a diminished demand on the part of 
 capital. The authors clearly show that ‘ The progress of 
 civilization increases the demand of industry for the aid of 
 capital, independently of any increase in the population, for it 
 causes a continual increase in the amount and expensiveness of 
 the machinery and other things which men use as means to the 
 attainment of their ends.’ Several writers have inferred from 
 this fact that the increase of fixed capital is detrimental to 
 labourers. But this is not a necessary consequence, nor has it 
 been the usual consequence hitherto. The construction of rail- 
 ways, it is true, resulted in the conversion of much circulating 
 capital into rails, rolling stock, and plant. But the railways 
 themselves, instead of diminishing, vastly augmented, the de- 
 mand for labour. It was not men, but horses, they superseded 
 in the business of carriage, and more men are now employed by 
 railway companies in London alone than were employed for- 
 merly by all the coaches in England. The power-loom, again, 
 superseded the hand-loom, but it did not diminish the demand 
 for manual labour in spinning and weaving; on the contrary, 
 largely augmenting it. And wherever railways and machinery 
 have made their way on the Continent the demand for labour 
 has gone up with a bound. 
 
 In connexion with the constituents of the rate of profit, it is 
 observable that the authors ignore altogether Mr. Mill’s analysis 
 of gross profit into indemnity for risk or insurance, as well as 
 interest and remuneration of superintendence. Their reason 
 appears to be that they include insurance among the expenses 
 of production, not in the net income which the owners of capital 
 receive; but the point is one which ought to be made clear to 
 the student. Moreover, the actual indemnity for risk that 
 business investments afford by no means corresponds accurately 
 with the actual amount of risk. In a country like America, 
 and in a less degree in England, the love of speculation and 
 enterprise is such that risk is commonly underrated. On the 
 
Marshall’s ‘ Economics of Industry, 81 
 
 Continent of Europe, on the other hand, it has hitherto been 
 generally over-estimated through timidity, and the reluctance 
 of people to trust money out of their sight. These different 
 tendencies of national character would pro tanto cause the 
 average net rate of profit in business to be higher on the 
 Continent of Europe than in the United States or Great 
 Britain, in proportion to the rate of interest. 
 
 Another remark which the subject suggests is, that the rate 
 of interest on the best security, or the price of the funds, by no 
 means affords a measure of the amount which ought to be set 
 aside as insurance, and therefore as part of the cost of produc- 
 tion. Some of the most lucrative businesses have the good 
 fortune to be also the safest; others, whose returns are scanty, 
 are at the same time shaky, and perhaps on their last legs. It 
 is not true of trade that high profits are another name for bad 
 security, nor does the converse hold good. ‘The equality of 
 profits is an illusion. 
 
 The authors distinguish emphatically between what they 
 call normal values, or those which would result from the un- 
 disturbed action of competition, and market values, or those 
 actually resulting from the existing constitution and usages of 
 the industrial world. ‘The theory of normal value ’ is, in their 
 words, ‘ the starting-point from which we must set out to explore 
 all the various irregularities and unevennesses of market values.’ 
 The normal value of a thing, in their view, is equal to its 
 expenses of production ; its market value, they show, may widely 
 deviate from that standard. The deviations are actually greater 
 than they show; but the main comment we have to make is, 
 that competition itself is the main cause of these deviations, 
 and of the irregularities and unevennesses of market values. 
 Industrial liberty, and the eager pursuit of gain, produce an — 
 economic world, the vastness, variety, complexity, incessant 
 change, speculation, and potent influence of chance in which are 
 absolutely incompatible with the knowledge and nice calculation 
 of relative profits, upon which the theory rests that the prices of 
 commodities are regulated in the long run by their cost of pro- 
 duction. Market values, in fact, with all their ‘ irregularities 
 
 G 
 
82 Marshall’s ‘Economics of Industry.’ 
 
 and unevennesses,’ are the true normal values, if by that phrase 
 be meant what the authors mean—the values resulting from 
 the action of competition. That even in the long run—to use 
 the somewhat lax and unscientific phrase which we are not a 
 little surprised to find writers of their powers of accurate thought 
 and expression repeatedly and emphatically employing—profits 
 are not equalized, or prices adjusted to the expense of production, 
 as their theory of normal value assumes, appears by their own 
 statement. Even in little villages, they say, in which one 
 might imagine at first that everyone knows all his neighbours’ 
 affairs, and what profit every trade yields, it is not so, and very 
 little beyond the fact that one man seems to be prosperous, 
 another the reverse, is really known. Some of the villages in 
 which this is so have existed for several centuries—a tolerably 
 long run. How much less can the relative gains of all the dif- 
 ferent occupations of the great industrial world be known to the 
 owners of capital, and equalized by their competition ? The more 
 people investigate market values by such lights as the book before 
 us affords, the less heed they will give to the values of Ricardo’s 
 theory, and the more they will be led to reverse his mode of 
 procedure, and to make market values the starting-point from 
 which to arrive at true normal values—that is to say, those 
 resulting from the operation of unrestricted competition. 
 
 Mr. and Mrs. Marshall’s book is full of information and 
 novel and apposite illustration. It will, we hope, pass through 
 several editions ; and among the changes which we venture to 
 suggest are, the total dismissal of the phrase ‘in the long run’ 
 from their pages, and a less sparing application of the term 
 ‘laws’ to provisional and hypothetical assumptions. There is 
 a kind of brain that is prodigiously fertile in the production of 
 ‘ economic laws,’ giving the name to every crude and hasty 
 generalization or guess that occurs to it; but authors of the 
 scientific culture and ability which the work before us displays 
 need no such parade of scientific terminology to command re- 
 spectful attention. 
 
X. 
 
 THE HISTORY OF GERMAN POLITICAL 
 ECONOMY.* 
 
 Two different conceptions of Political Economy now divide 
 economists throughout Europe; of which, looking to their 
 origin, one may be called English, the other German, though 
 neither meets with universal acceptance in either England or 
 Germany. English writers in general have treated Political 
 Economy as a body of universal truths or natural laws; or at 
 least as a science whose fundamental principles are all fully 
 ascertained and indisputable, and which has nearly reached 
 perfection. The view, on the other hand, now almost unani- 
 mously received at the universities, and gaining ground among 
 practical politicians, in Germany, is that it is a branch of 
 philosophy which has received various forms in different times 
 and places from antecedent and surrounding conditions of 
 thought, and is still at a stage of very imperfect development. 
 Each of these conceptions has its appropriate method; the first 
 proceeding by deduction from certain postulates or assumptions, 
 the second by investigation of the actual course of history, or 
 the historical method. In England it is usual to speak of in- 
 duction as the method opposed to a priori deduction, but the 
 inductive and historical methods are identical. Both aim at 
 discovering the laws of succession and co-existence which have 
 produced the present economic structure and condition of society. 
 A subsidiary branch of historical investigation traces the progress 
 of thought and philosophical theory, but this branch has the 
 closest relation to the main body of economic history, since one 
 
 
 
 * Fortnightly Review, July 1, 1875. 
 G 2 
 
84 The History of German Political Economy. 
 
 of the chief conditions determining the subjects and forms of 
 thought at each period has been the actual state of society ; 
 and ideas and theories, again, have powerfully influenced the 
 actual phenomena and movement of the economic world. Dr. 
 Wilhelm Roscher’s ‘ History of Political Economy in Germany’ 
 (Geschichte der National-Ockonomik in Deutschland) is by far 
 the most considerable contribution that has yet been made to 
 this subsidiary branch of inquiry. It would be impossible in 
 a few pages to review a book which ranges over several centuries, 
 and discusses the doctrines of several hundred authors, besides 
 drawing from numerous unnamed works. What is sought here 
 is to indicate some of the leading features in the history of this 
 department of German thought, with some observations sug- 
 gested by Roscher’s book, or by its subject. 
 
 An English historian cited by Roscher speaks as if the 
 history of political economy had begun and almost ended with 
 Adam Smith. MRoscher himself begins with the Middle Ages, 
 and ends with the conflicting doctrines of different schools and 
 parties in Germany at the present day. The structure and 
 phenomena of medieval society in Germany, as elsewhere, were 
 far from suggesting an economic theory based on individual 
 interest and exchange. Common property in land, common 
 rights over land held in severalty; scanty wealth of any kind, 
 and no inconsiderable part of it in mortmain, or otherwise 
 intransferable ; labour almost as immovable as the soil ; pro- 
 duction mainly for home consumption, not for the market; the 
 division of labour in its infancy, and little circulation of money ; 
 the family, the commune, the corporation, the class, not indivi- 
 duals, the component units of society: such are some of the 
 leading features of medieval economy. In the intellectual 
 world the division of labour was even less advanced than in 
 material production; philosophy was in the hands of an ec- 
 clesiastical order, antagonistic to both the individual liberty 
 and the engrossing pursuit of wealth which modern political 
 economy assumes. Moscher points to the Canon Law as 
 embodying the earliest economic theory, and it is deeply tinc- 
 tured with both communism and asceticism; poverty is the 
 
The History of German Political Economy. 85 
 
 state pleasing to God, superfluous wealth should be given to 
 the Church and the poor, interest on money is unlawful, to buy 
 in the cheapest and sell in the dearest market is a twofold 
 wrong. Nor did the secular law harmonize better with modern 
 economic assumptions. Every system of positive law, as 
 Roscher observes, has a corresponding economic system as its 
 background ; and the economic system at the back of the secular 
 law was based on status, not on contract—on duty and loyalty, 
 not on individual interest. Thus whether we look to the actual 
 economy of medieval Germany, to its moral philosophy, or to 
 its positive law, we find a condition of things incompatible with 
 the economic doctrines of modern times. 
 
 A new era opened with the Reformation, and Roscher 
 divides the history of modern political economy in Germany 
 into three periods, the first of which he calls a theological and 
 humanistic one (das theologisch-humanistische Zeitalter), on 
 account of the influence of both the doctrines of the Reformers 
 and the literature of classical antiquity. But the economic 
 movement of society itself tended to awaken new ideas. The 
 Reformation not only created considerable economic changes of 
 a material kind, but was in fact the result of general social 
 progress, one aspect of the economic side of which shows itself 
 in the discovery of the new world, and the consequent revolution 
 in prices. In Germany, too, though to’a less extent than in 
 England, something doubtless was visible of that change from 
 status to contract, and from service for duty to service for per- 
 sonal gain, which struck the great English poet, who was 
 himself among the productions of the new age.* We may take 
 Erasmus and Luther as representatives of the economic influences 
 of the new theology and classical literature in Germany. The 
 saying of the mendicant friars with respect to theology is true 
 
 * “QO good old man! how well in thee appears 
 The constant service of the antique world, 
 When service sweat for duty, not for meed! 
 Thou art not for the fashion of these times, 
 When none will sweat but for promotion.’ 
 As You Like It, act ii., se. 3. 
 
86 The History of German Political Economy. 
 
 also, Roscher observes, in the region of economics, that Erasmus 
 laid the egg which Luther hatched. ‘ Erasmus, going back to 
 the best age of classical antiquity as well as to pure Christianity, 
 proclaimed that labour was honourable.’ Luther preached the 
 same doctrine, and moreover anticipated Adam Smith’s proposi- 
 tion, that labour is the measure of value. Luther’s enthusiasm 
 for the increase of population illustrates the connexion of the 
 economic ideas of the age with both its theology and its material 
 condition, since it sprang on the one hand from antagonism to 
 monastic celibacy, and on the other hand from the rapid increase 
 in the means of subsistence. The chief economic influences of 
 classical antiquity are classed by Roscher under five heads. Its 
 literature, being that of a high state of civilization, furthered 
 the rise of Germany to a higher social stage. The States from 
 which this literature emanated were cities, whose example 
 fostered the development of town life and economy. They 
 were also highly centralized States, with the liveliest national 
 spirit ; and their history and ideas could not but promote the 
 development of the modern State and of national unity, as 
 opposed to the medieval division of each nation into innu- 
 merable petty groups and governments. They were also either 
 monarchical or democratic States,-the study of which tended to 
 accelerate the decline of the feudal aristocracy. Lastly, types 
 of life and thought so unlike those which the medizval world 
 had bequeathed could not but nurture a critical and inquiring 
 spirit, which made itself felt in the economic, as in other 
 directions of the German mind. ‘The only indications, however, 
 of an independent economic literature in this period seem to 
 have been the writings of Camerarius and Agricola on currency. 
 Germany seems to have produced nothing so remarkable as the 
 famous tract by W.S., once attributed to Shakespeare, which 
 the revolution in prices and the contemporary economic changes 
 gave birth to in England.* The period closes with the Thirty 
 Years’ War,’ in connexion with which Roscher adverts to the 
 
 * See an Essay by the present writer on the ‘ Distribution of the Precious Metals 
 in the Sixteenth and Nineteenth Centuries,’ reprinted in this volume. 
 
The History of German Political Economy. 87 
 
 influence on Germany, both for good and for evil, of its 
 geographical position; including among its beneficial effects a 
 disposition to learn from all sides, which is visible in the 
 subsequent history of its economic ideas and literature. 
 
 The second period in the history of German political economy, 
 which covers more than a century from the Thirty Years’ War 
 to the period of Frederick the Great, is called by Roscher das 
 poliseilicheameralistiche Zeitalter, as being one of State regula- 
 tion and fiscal science. ‘The term ‘ cameralistic,’ which makes a 
 great figure in early German economics, originated (as Roscher 
 mentions in another work) in the office or chamber (Cammer), 
 which in each German State was charged with the supervision 
 and administration of the Crown revenues. Hence the science 
 called cameralistische Wissenschaft, which is perhaps best explained 
 by reference to one of the two objects which Adam Smith, at 
 the beginning of his account of the Mercantile system, says 
 political economy, ‘ considered as a branch of the science of the 
 statesman or legislator,’ has in view. It proposes, he says, ‘to 
 provide a plentiful revenue both for the State and the people. 
 Cameralistic science aimed at augmenting the revenue of the 
 State or the sovereign, rather than the people. Roscher’s second 
 period might, more intelligibly to English readers, be dis- 
 tinguished as the Mercantile period, since one of its chief 
 features was the Mercantile system, interwoven with the system 
 of State regulation and finance. It is a modern error, which, 
 as Roscher remarks, is not attributable to Adam Smith, to 
 ascribe to the Mercantile school the notion that money is the 
 only wealth. What that school really taught was that money, 
 in Locke’s words, was the most solid and substantial part of the 
 moveable wealth of a country; that it had more extensive utility 
 than any other kind of wealth, on account of its universal 
 exchangeability abroad as well as at home; and that a consider- 
 able stock of the precious metals in the treasury of the State, or 
 within its reach, was requisite as a provision for foreign wars. 
 Money had really acquired great additional usefulness and 
 importance by the change from the medizval to the modern 
 economy, with the substitution of payments in coin for payments 
 
88 The History of German Political Economy. 
 
 in kind, and the great increase in the division of labour, and in 
 trade, both internal and foreign. And as the Mercantile system 
 was thus connected on the economic side with the actual move- 
 ment of society, so on the political side it was connected with 
 the growth of monarchical States, increased activity and in- 
 terference on the part of the central governments, and the 
 maintenance of monarchical armies, and increased need for 
 money in State finance. A circumstance not adverted to by 
 Roscher, which doubtless contributed to the growth of the 
 Mercantile system, was the revolution in prices, and in interna- 
 tional trade, consequent on the influx of American gold and 
 silver, which really placed the countries with a small stock of 
 money and a low range of prices at a disadvantage. They 
 bought dear and sold cheap in the foreign market. The system 
 was thus not so irrational in its objects as many modern writers 
 have supposed; but its history is chiefly important, in the point 
 of view with which we are concerned, as illustrative of the 
 connexion between economic theories and surrounding pheno- 
 mena and conditions of thought. 
 
 The first period in Roscher’s division is, as already said, 
 classed by him as theological and humanistic. In the second 
 period German Political Economy in his view disengaged itself 
 finally from both theology and jurisprudence, and became an 
 independent science. It is, however, a fact of no small impor- 
 tance to a right understanding of economic history, and to a due 
 appreciation of the authority of some of the economic doctrines 
 of our own day, that economic philosophy was so far from 
 emancipating itself in the seventeenth century completely and 
 finally from theological and juridical theories, that the system 
 not only of the French Physiocrates, but also of Adam Smith, 
 whose ‘ Wealth of Nations’ had a prodigious influence over 
 Germany, was in great part built on an ancient juridical theory 
 in a modern theological form, and penetrated by a theological 
 spirit. Roscher’s third period, which reaches down to the 
 present day, begins with the introduction of the system of the 
 Physiocrates into Germany, where, he says, it influenced only 
 some individual minds, adding that in England it could gain 
 
The History of German Political Economy. 89 
 
 almost no ground. But the influence of the ‘ Wealth of Na- 
 tions,’ both in Germany and elsewhere, was so great that ‘the 
 whole of political economy might be divided into two parts— 
 before and since Adam Smith—the first part being a prelude, 
 and the second a sequel (in the way either of continuation or 
 opposition) to him.’ The system of the Physiocrates had 
 
 doubtless some peculiar features, traceable to its country and 
 _ parentage, the study of which throws much light on the causes 
 which have shaped economic ideas, and forms an instructive 
 chapter in the general history of philosophy. Nevertheless its 
 main foundation was essentially the same as that on which 
 Adam Smith’s political economy rested. Roscher himself, along 
 with other eminent German economists, has drawn attention 
 to the connexion between both systems and the idea of a Law of 
 Nature, which eighteenth century philosophy had derived from 
 Roman jurisprudence. What they seem to have overlooked is, 
 that both with the Physiocrates and with Adam Smith the Law 
 of Nature distinctly assumed a theological form. The simple, 
 harmonious, and beneficent order of Nature which human laws 
 should leave undisturbed and only protect, became of divine 
 institution, and Nature in short became Providence. Dupont 
 de Nemours, who invented the name Physiocratie, to signify 
 the reign of natural law, says in the dedication of the system 
 to the sovereigns of the world, ‘ Vous y reconnaitrez la source 
 de vos droits, la base et l’étendue de votre autorité, qui n’a et 
 ne peut avoir de borne que celle imposée par Dieu méme.’ 
 In Adam Smith’s lectures on moral philosophy, political 
 economy formed one part of.a course of which natural theology 
 was another part, and the real ground of his confidence in the 
 beneficial economy resulting from the undisturbed play of indi- 
 vidual interest is expressly stated in the ‘ Wealth of Nations,’ 
 as well as in his ‘ Theory of Moral Sentiments,’ to be the 
 guidance of Providence. ‘ Every individual necessarily labours 
 to render the annual revenue of the society as great as he can. 
 He generally, indeed, neither intends to promote the public 
 interest, nor knows how much he is promoting it. He intends 
 only his own gain, and he is in this, as in many other cases, led 
 
90 The History of German Political Economy. 
 
 by an invisible hand to promote an end which was no part of 
 his intention.’* The process of specialization, which has diffe- 
 rentiated one branch of secular knowledge after another from 
 theology, had not reached political economy in Adam Smith’s 
 age, nor with many of his successors. Scientifically regarded, 
 the theory of Malthus was fatal to the assumption of a beneficent 
 tendency of the natural desires of mankind, but it did not 
 prevent Archbishop Whately from finding in political economy 
 the strongest evidences of natural theology ; and the harmony 
 of a beneficent economy of Nature with the theism of modern 
 times unquestionably contributed, though often by an unper- 
 ceived connexion, to the success which the political economy of 
 Adam Smith and the system of Jaisses faire met with in Germany 
 as well as England.t The principal merit of Adam Smith’s 
 economic philosophy has been generally overlooked. He com- 
 bines the historical method of Montesquieu with the theory 
 of Natural Law; and although that theory, together with his 
 theological system, gave a bias to his inductive study of the real 
 order of social progress, he has a true title to be regarded as the 
 founder of the historical method in political economy, in the 
 sense at least of having been the first to apply it. In Germany, 
 it is true, this method has been of indigenous and more recent 
 growth, having been transferred from other branches of German 
 historical science, especially in relation to law. And as Adam 
 Smith’s system has been generally associated only with that 
 portion of it which is based on Natural Law, the historical school 
 of German economists have for the most part assumed an attitude 
 of antagonism to what they call Smithianismus. 
 
 The last chapter of Roscher’s history describes the tenets. 
 and methods of the different schools and parties which the 
 economic and political condition of Germany on the one hand, 
 and the progress of science on the other, have evolved during 
 the last thirty years. Dr. Roscher does not exclude even 
 
 * Wealth of Nations, book iv. chap. ii. 
 t American political economy to this day is theistical, and its principles drawn 
 in great measure from assumptions respecting the method of Divine government. 
 
The History of German Political Economy. 91 
 
 socialism from a place in his history, his object being to portray 
 all the principal phases of German thought on the subject of the 
 production and distribution of wealth. Two conditions con- 
 curred to stimulate economic inquiry and discussion in Germany 
 in recent years: the material progress of the country in popula- 
 tion, production, trade, and means of communication, presenting 
 new economic phenomena and raising new problems, especially 
 in relation to the working classes; and the great contemporary 
 progress of the sciences of observation, especially history. 
 Political causes, too, have had a share in producing a diversity 
 of economical creed. Roscher distinguishes five different groups, 
 designated as free traders, socialists, reactionary conservative 
 economists, officials, and the historical or ‘realistic’ school. Of 
 these five groups, two, however (the ‘ reactionary’ and the ‘ offi- 
 cial’ economists), may be left out of consideration here—the for- 
 mer as insignificant in number, and the latter as distinguishable 
 only in reference to the subjects on which they write, and the 
 special knowledge they bring to bear on them. We need 
 concern ourselves only with the free-trade school—sometimes 
 called, by way of reproach, the Manchester party—the socialists, 
 or socialist-democrats (Socialdemokraten\, and the realistic or 
 historical school. ‘The free traders, under the leadership of 
 Prince Smith, Michaelis, and Julius Faucher, formed, some 
 years ago, an association called the German Economic Congress 
 (Volkswirthschaftlicher Congress), and all German economists 
 are agreed that they rendered great service to Germany by their 
 _ strenuous exertions for industrial and commercial liberty. 
 Roscher, too, refuses to stigmatize them with the name ‘ Man- 
 chester party,’ on account of their patriotism; but he objects to 
 their economic theory, which was that of Bastiat and the old 
 English Jaissez faire school, as too abstract, too optimist, and 
 too regardless of history and reality. But many of the younger 
 members are broader in their creed, and by no means opposed. 
 to the historical or realistic method of economic inquiry. The 
 socialists or social democrats, of whom Karl Marx and the late 
 Ferdinand Lassalle may be taken as the exponents, aim both at 
 political revolution and at the abolition of private property in 
 
92 The History of German Political Economy. 
 
 land and capital; and Roscher points out that they are even 
 more unhistoricalin their method, and more given to misleading 
 abstractions—for example, the argument that capital 1s accumu- 
 lated labour, and labour therefore should have all its produce— 
 than the extremest of the elder free traders. Signor Pozzoni 
 signally errs in classing, in a recent article in this Review, the 
 realistic German school with the socialists. The realistic school, 
 which has its chief strength in the universities, is no other than 
 the historical school, which Signor Pozzoni classes apart; and 
 the Association for Social Politics (Verein fur Social-politik) 
 which its members have formed, and which, by a play on words, 
 led to the nickname of Katheder-Socialisten, now includes some 
 of the Economic Congress, or free-trade party, along with 
 Government officials, merchants, and manufacturers, as well as 
 professors and working men. The true meaning of the term 
 ‘realistic’ is sufficiently explained by Roscher’s words :—‘ ‘The 
 direction of the political economy now prevailing at our univer- 
 sities is with reason called realistic. It aims at taking men as 
 they really are, influenced by various and withal other than 
 economic motives, and belonging to a particular nation, state, 
 and period of history.’ Man, in the eyes of the historical or 
 realistic school, is not merely ‘an exchanging animal,’ as 
 Archbishop Whately defined him, with a single unvarying 
 interest, removed from all the real conditions of time and place 
 —a, personification of an abstraction ; he is the actual human 
 being such as history and surrounding circumstances have made 
 him, with all his wants, passions, and infirmities. The econo-: 
 mists of this school investigate the actual economy of society 
 and its causes, and are not content to infer the distribution of 
 wealth from the possible tendencies of undisturbed pecuniary 
 interest. Such a practical investigation cannot be without 
 practical fruit, but its chief aim is light. And it is needless to 
 say what a boundless field of instruction the study of the econo- 
 mic progress and condition of society on this method opens up. 
 Among the works which it has recently produced in Germany 
 may be mentioned Roscher’s ‘ Nationalokonomik des Ackerbaues,’ 
 Schmoller’s ‘Geschichte der deutschen Kleingewerbe,’ Brentano’s 
 
The History of German Political Economy. 93 
 
 ‘ Arbeitergilden der Gegenwart,’ and Nasse’s well-known ‘ Essay 
 on the Agricultural Community of the Middle Ages in England.’ 
 Nor has the historical method been unproductive in England. 
 A great part of the ‘ Wealth of Nations’ belongs to it; and to 
 it we owe Malthus’ ‘ Treatise on Population,’ Tooke’s ‘ History 
 of Prices,’ and Thorold Rogers’ ‘ History of Agriculture and 
 Prices.’ Sir Henry Maine’s works on ‘ Ancient Law,’ ‘ Village 
 Communities in the East and West,’ and the ‘ Karly History of 
 Institutions,’ not only afford models of the historical method, 
 but actually belong to economic as well as to legal history, and 
 exemplify the nature and extent of the region of investigation 
 which those English economists who are not content with barren 
 abstraction have before them. 
 
 Nothing can be more unfounded than the imputation of 
 socialist or destructive tendencies which the nickname of 
 Katheder-Socialisten has linked with the historical school of 
 German economists. Historical philosophy has assuredly no 
 revolutionary tendencies: it has been with more justice accused 
 of tending to make its disciples distrustful of reforms which do 
 not seem to be evolved by historical sequence and the sponta- 
 neous births of time. But, as a matter of fact, a great diversity 
 of opinion is to be found among the economists of this school in 
 Germany; some being conservative and others liberal in their 
 polities; but no revolutionary or socialist schemes have emanated 
 from its most advanced Liberal rank. Their principal practical 
 aims would excite little terror in England. Some legislation 
 after the model of the English Factory Laws, some system of 
 arbitration for the adjustment of disputes about wages, and the 
 legalization of trade-unions under certain conditions, are the 
 main points in their practical programme; and they are sup- 
 ported by some of the warmest friends of the German throne 
 and aristocracy. 
 
 It is impossible to praise too highly the extraordinary 
 erudition, the immense industry, and the manysidedness of 
 intellectual sympathy which distinguish Roscher’s history of 
 German political economy ; but we venture to suggest to him a 
 revision of the brief notice which it includes of the history of 
 
94 The History of German Political Economy. 
 
 English political economy in the last thirty years. Generous 
 in the extreme in his estimate of the earlier economic literature 
 of this country, he is less than just in his criticism of it in recent 
 years—an injustice of which the present writer may speak 
 without prejudice, being excepted along with Thornton and 
 Thorold Rogers from Dr. Roscher’s unfavourable judgment : 
 one for which no other reasons are assigned than some defects 
 in Mr. Mill’s system, on the one hand, which are really attribu- 
 table to Mr. Mill’s predecessors, and the doctrines of a writer,* 
 on the other hand, who represents no English School, and has 
 no supporter among authors of economic works or professors of 
 political economy in this country. In this single instance Dr. 
 Roscher has deviated from the impartiality which is one of the 
 great merits of his ‘History.’ Readers interested in the historical 
 study of political economy will find an excellent companion to 
 Dr. Roscher’s ‘ History’ in Dr. Karl Knies’ highly philosophical 
 treatise, ‘ Die Politische Oekonomie vom Standpunkte der 
 geschichtlichen Methode.’ 
 
 a 
 
 * Mr. H. D. Macleod. 
 
XI. 
 
 ROSCHER’S ‘PRINCIPLES OF POLITICAL 
 ECONOMY.’ * 
 
 MontaLEmBeErtT said he came to England from time to time to 
 take a bath of liberty, and the economists of his day, in England 
 as well as France, might have done well to take a bath now and 
 then of both liberty and learning in Germany, although indus- 
 trial life was less free there than even in France at that time. 
 It is an indication of the narrow groove in which the study of 
 political economy has moved in this country under the influence 
 of the a priori method, that the first translation into English of 
 one of Roscher’s works should be that before us by Mr. Lalor, 
 an American, who has thus done a service to literature and 
 philosophy that might have been done more than twenty years 
 ago by an Englishman. 
 
 A French translation of an earlier edition of this very work 
 was made in 1857—a period at which it is doubtful if there was 
 an economist in the United Kingdom, besides Mr. Mill, who 
 knew so much as the names of the three most eminent German 
 economists then living— Roscher, Knies, and Hildebrand. Ger- 
 many is, indeed, so entirely overlooked to this day by English 
 opponents of the historical method, that they speak of its 
 advocates as followers, or at least admirers, of Auguste Comte. 
 The German historical school is, in point of fact, strangely 
 ignorant of the ‘Positive Philosophy :’ a curious instance of 
 which is, that the only Comte referred to in Roscher’s erudite 
 pages before us is, not Auguste, but Charles, while so little 
 
 
 
 * The Academy, March 29, 1879. 
 
96 oscher’s ‘ Principles of Political Economy.’ 
 
 known a French writer of the last century as Cantillon is often 
 cited in them. 
 
 Sympathy with the working classes led in recent years to a 
 strong reaction on the part of a number of German professors 
 against the optimism of ‘ orthodox’ political economy, and to 
 the rise of the so-called or nicknamed Katheder-Socialisten, some- 
 times ignorantly or artfully confounded with socialists; but the 
 historical method, which Roscher, Knies, and Hildebrand had 
 long before begun to apply, and the tendencies of German 
 philosophical inquiry, must in any case have produced a revolt 
 against the abstractions and fictions of the a priori method. 
 As Erasmus is said to have laid the egg that Luther hatched, 
 so doctrines of economic reform, now strong on the wing in 
 Germany, may owe their origin in good part to Roscher, though 
 their incubation may not be seen in his works. At first sight 
 one might say, indeed, that the difference between Ricardo’s 
 work on the ‘Principles of Political Economy’ and Roscher’s 
 lies rather in the amount of historical research in the latter than 
 in fundamental diversity of doctrine. So far as doctrine is 
 concerned, the difference is for the most part one more of tone 
 than of principle, and often makes itself felt chiefly in the 
 absence of dogmatic formula, and of the use of rigorous and 
 infallible logic affected by Ricardo’s school. Mr. Cairnes and 
 Mr. Bagehot might have put Roscher’s chapters on profits, cost 
 of production, and price, for example, into the hands of their 
 followers without fear of shaking their faith: indeed, the 
 dissent from this part of the Ricardian system originated here, 
 not in Germany. Again, like most English and French econo- 
 mists, Roscher treats Ricardo as the discoverer of the law of 
 rent, observing that, although he may not have given it the 
 best form, he is as unquestionably entitled to the honour of 
 having discovered it as Malthus to that of having discovered the 
 law of population. ‘The truth is, that putting aside the claim 
 of Dr. Anderson, we might as well speak of the Ricardian 
 doctrine of population as of the Ricardian theory of rent, 
 Ricardo having borrowed both alike from Malthus. His own 
 words are :—‘ In all that I have said concerning the origin and 
 

 
 Roscher’s ‘ Principles of Political Economy.’ 97 
 
 progress of rent, I have repeated the principles which Mr. 
 Malthus laid down in his “ Enquiry into the Nature and Pro- 
 gress of Rent,” a work abounding in original ideas.’ 
 
 On the subject of population, as on that of rent, Roscher’s 
 doctrine coincides substantially with that of Malthus, Ricardo, 
 and John Mill. Those who imagine that the rapid growth of 
 the English population in the last three generations, while 
 general wealth has advanced with equal rapidity, refutes the 
 Malthusian doctrine of an inevitable check, preventive or posi- 
 tive, to its increase at the potential rate, would do well to consider 
 the evidence in Roscher’s book as to what the potential rate is : 
 for instance, that a woman between fifty and sixty years old has 
 been known to have two hundred and four descendants in her 
 lifetime. Had the population of England increased at the 
 potential rate, even since the beginning of the present century, 
 it would now much exceed a hundred millions, and would be 
 more than two hundred millions at its close. At that pace, 
 after a few more generations, there would not be standing-room 
 not to say breathing-room, for the nation. The most rigorous 
 Malthusian may, however, be content with Roscher’s language 
 respecting the relation between population and wages. The 
 working class can, indeed, he says, exercise little control over 
 the immediate supply of labour, on account of their immediate 
 need of subsistence; but the future supply depends on their own 
 will; and it is here that a permanent working-men’s union, 
 controlling the whole class, might exert powerful influence. 
 A higher economic condition of the class is maintainable only 
 on condition that they create families no larger than can be 
 supported consistently with the maintenance of a higher standard 
 of wants. It might, perhaps, be suggested that a higher standard 
 of economy is in England more needed than a higher standard 
 of wants, and that a working-man might better be required by 
 public opinion or by the opinion of his class to save a certain 
 amount before marriage than merely to be earning some speci- 
 fied rate of wages. The reason for the necessity of external 
 influence or moral control in the matter, one may add, is that it 
 is not his own wife and children, but other people’s, that raise 
 
 H 
 
98  Roscher’s ‘Principles of Political Economy.’ 
 
 the price of food and lower the price of labour against the 
 working-man. His own wife is generally worth more than her 
 keep as a housekeeper and cook, and his children soon bring in 
 more than they take out of the family till. Nevertheless, 
 Roscher properly rejects the doctrine of a ‘ wages-fund,’ deter- 
 mining, by its proportion to the number of labourers, the 
 ‘average’ rate of wages. His arguments on the subject are, 
 however, hardly the strongest that may be advanced, and, like 
 several English writers, he ascribes the first refutation of the 
 doctrine in this country to Mr. Longe, whose essay in its original 
 shape contained no real disproof of the doctrine, while it was. 
 not itself free from fallacy. The true refutation is, that there is 
 no such mobility of capital and labour as would make all the 
 sums expendible in wages practically one fund, and the actual 
 rates of wages are determined by different conditions in different 
 cases—for example, by competition, by combination, by mono- 
 poly, and sometimes by the liberality of employers—so that the 
 ageregate amount of wages is simply the sum of all the 
 particular amounts, and the effect, not the cause, of the actual 
 rates. Mr. Longe’s essay, like Single-speech Hamilton’s 
 discourse, produced an effect beyond its desert. Had Hamilton 
 made a great number of good speeches they might have all been 
 forgotten, for people seldom remember much about anyone; but 
 a single oration was a surprise, and left an impression. Much 
 of Mr. Longe’s criticism of Mr. Mill was erroneous. There is, 
 no doubt, an element of truth in the argument put forward by 
 Roscher long before Mr. Longe, that the capital of the employer 
 is not the ultimate source of wages, but only an immediate fund 
 out of which an advance is made, afterwards replaced by the 
 buyers of the commodities produced. Roscher might have 
 added, indeed, that the immediate fund is often not the 
 employer’s own capital, but borrowed by him on the credit his. 
 sales obtain for him. Yet there remains an important truth in 
 Mr. Mill’s proposition, that the funds out of which wages are 
 paid must generally exist before commodities are made, not to 
 say sold. ‘The workmen cannot wait for their wages till the 
 commodities are sold; they may never, indeed, be sold at all, 
 
Roscher’s ‘ Principles of Political Economy. 99 
 
 and the employers may be ruined, although workmen have been 
 paid their wages in full. The accumulation, then, of capital on 
 a great scale, either by employers themselves or by lenders, is 
 a pre-requisite to the hire of labour on a great scale. Roscher’s 
 tone towards Mr. Mill in this work, it may be observed, is 
 sometimes complimentary and sometimes rather the reverse, 
 the only English economist of whom he speaks contemptuously 
 in it being Mr. H. D. Macleod; though in his ‘ History of 
 Political Hconomy in Germany’ all Ricardo’s followers are 
 slightingly mentioned. 
 
 The generalisation which Roscher makes with respect to the 
 successive part played by each of the three great productive 
 agencies—nature, labour, and capital—well deserves the reader’s 
 reflection. The history of the economic development of society, 
 he says, divides itself into three periods. In the earliest, nature 
 is the predominant element, affording subsistence almost sponta- 
 neously to a scanty population. In the second period, human 
 labour is the chief agency: handicrafts multiply, guilds are 
 established, and a respectable and solid middle class is formed. 
 In the third period, capital predominates, machinery prevails 
 over the manual workman, and the middle class may decline, 
 and colossal wealth be confronted by abject misery. One 
 cannot but admit, in reference to this generalisation, that the 
 disappearance of the small independent craftsman is a deplorable 
 feature of our present industrial economy, even if the condition 
 of the common labourer at the bottom of the scale be less 
 miserable now than it was under an earlier economy; nor does 
 co-operation at present hold out much hope of a remedy. 
 
 The historical information and illustrations with which the 
 pages of the book abound may interest many minds to which 
 ordinary economic discussions are repulsive. It should, however, 
 be known that, although a complete work in itself, Roscher’s 
 ‘Principles of Political Economy’ forms part of a more compre- 
 hensive scheme. In the preface to the first edition, its author 
 announced that the ‘ Grundlagen der Nationalokonomie,’ or 
 ‘Principles of Political Heonomy,’ as Mr. Lalor translates it, was in- 
  tendedas the first part ofa complete ‘System der Volkswirthschaft,’ 
 H 2 
 
100 Roscher’s ‘ Principles of Political Economy.’ 
 
 containing three other parts. Of these, the second, ‘ National- 
 okonomik des Ackerbaues,’ has long since been published in 
 Germany. Mr. Alfred Marshall’s lectures, and Mr. Joseph 
 Nicholson’s essay on Machinery and Wages, afford evidence 
 that a generation of economists is rising who can dispense 
 with the aid of translation to acquaint themselves with German 
 works ; but there must always be a large class of readers in 
 this country as well as in America who require it: and Mr. 
 Lalor would enhance the obligation he has already laid them — 
 under by translating also the ‘ Nationalékonomik des Acker- 
 baues.’ It is full of historical learning relating to the history 
 of landed property, and of rural economy in England as well 
 as on the Continent. A fact which English economists should 
 take to heart is, that the only historical treatise on the subject, 
 in relation to England, accessible in the English language, was 
 written by a German (Nasse, of Bonn), not an Englishman, 
 and translated, not by a political economist, but by a cavalry 
 officer, Colonel Ouvry. 
 
XII. 
 
 LEONCE DE LAVERGNE.* 
 
 Last year one of the most remarkable Frenchmen of the age 
 that has just closed—for both in England and France a new 
 and more democratic age has begun—passed away almost 
 without remark in this country, although he had peculiar 
 claims to a place in the memory of Englishmen. The name 
 of Léonce de Lavergne was, indeed, better known in England 
 in the days of the Second Empire than during the decade 
 following its collapse, notwithstanding that in the former period 
 he was excluded from public life, while in the latter the curtain 
 which the Empire had drawn over political genius was lifted, 
 and M. de Lavergne was a considerable person in the political 
 world. A younger generation, however, had grown up, and 
 many Englishmen who saw the name Lavergne recur in 
 accounts of French parliamentary proceedings and political 
 parties, were unaware that he had lived, as it were, two previous 
 lives, first, as a rising politician in the reign of Louis Philippe, 
 and afterwards as a distinguished author and economist. Four 
 political epochs—the reign of Louis Philippe, the Second Re- 
 public, the Second Empire, and the Third Republic—may be 
 said to have been represented, though in different ways, in 
 M. de Lavergne’s career. Two of these epochs were, indeed, 
 for him periods of seclusion and, politically speaking, of 
 obscurity ; yet, indirectly, they exercised a powerful influence 
 over the directions of his energies and the tenor of his thoughts. 
 In the preface to the first edition of his ‘ Essay on the Rural 
 Economy of England’ he said: ‘Je m’adresse surtout a ceux 
 
 * Fortnightly Review, February Ist, 1881. 
 
102 Léonce de Lavergne. 
 
 qui, comme moi, se sont tournés vers la vie rurale, aprés avoir 
 _ essayé d’autres carriéres, et par dégotit des révolutions de notre 
 temps.’ Repugnance alike to revolution and to despotism not 
 only turned him from politics to country life, but deeply 
 coloured his views of rural economy. His whole career might 
 be shown to throw an instructive light on the part that sur- 
 rounding social conditions on the one hand, and individual 
 powers and bent on the other, play in determining the pursuits, 
 ruling ideas, and achievements of men of unusual capacity. 
 But the object of this memoir is simply to lay before the reader 
 some account of M. de Lavergne’s life, conversation, and work, 
 by one who had the privilege of peculiar opportunities for 
 observation. 
 
 Louis Gabriel Léonce de Lavergne was born at Bergerac, in 
 the Department of Dordogne, in 1809, and was educated for 
 the legal profession, but made literature as well as law an early 
 pursuit. He was a frequent contributor to the ‘ Revue du 
 Midi,’ and in 1838 was nominated Professeur de Littérature a 
 la Faculté de Montpellier, but declined the chair. After prac- 
 tising for a short time at the Bar, he took office under M. Guizot, 
 as Sous-Directeur au Ministére des affaires étrangéres, and won 
 the entire confidence and warm friendship of his illustrious 
 chief. In 1846 he was elected a member of the Chamber of 
 Deputies, and was soon regarded as one of the most promising 
 of the younger French statesmen. The Revolution of 1848 sent 
 him back to private life and to letters and philosophy. In 1850 
 he accepted the Professorship of Rural Economy in the Institut 
 National Agronomique; but one of the first measures of the 
 Imperial Government was to suppress that Institute, in order to 
 deprive him, and others whose politics were obnoxious, of their 
 chairs. Special missions, by way of temporary compensation, 
 were offered to the deprived professors. In his zeal for the 
 improvement of French agriculture, which had become his most 
 engrossing object, M. de Lavergne undertook to report on 
 Agricultural Credit in England and Germany. In 1851 he had 
 visited the Great Exhibition and made a tour through Great 
 Britain, and he came again in 1852 and 1853. In 1854 his 
 
Léonce de Lavergne. 103 
 
 famous ‘ Essai sur ]’Agriculture de l’Angleterre, de ]’Hcosse, et 
 ‘de l’Irlande,’ was published. In 1855 he was elected member 
 of the Institute of France. In 1857 he issued a volume entitled 
 ‘L’Agriculture et la Population.’ In 1860 his great work, 
 ‘Economie Rurale de la France depuis 1789,’ appeared. ‘Two 
 later works, ‘ Les Assemblées Provinciales sous Louis XVI.’ and 
 “Les Economistes Francais du Dix-Huitiéme Siécle,’ brought 
 him additional celebrity. He was the author also of various 
 essays in the ‘ Revue des Deux-Mondes’ and the ‘ Journal des 
 Beonomistes,’ and of contributions to the Transactions of the 
 Academy of Moral and Political Sciences, which attracted much 
 attention. In 1865 he was elected President of La Société 
 Centrale de l’Agriculture, being now looked up to on all sides 
 as the highest authority in France on all subjects connected 
 with rural economy. It is pleasing to find a French official 
 concerned in the administration. of the domains of the State 
 speaking, in one of the Reports of the Enquéte Agricole, of 
 “mon illustre maitre, M. de Lavergne,’ at a time when it could 
 little conduce to the advantage of a functionary of the Govern- 
 ment to profess admiration for an avowed adherent to the 
 ‘Orleanist party, least of all one whose writings had made him 
 an object of especial disfavour in high quarters. Of the public 
 career of M. de Lavergne, after the fall of the Second Empire, 
 something will be said hereafter. To realise what manner of 
 man he was, he should be seen and heard, as it were, in private 
 life and retirement. 
 
 The controversy carried on in England in the decade 1860- 
 1870 respecting the comparative merits of /a petite and la grande 
 propriété, and la petite and la grande culture, deeply interested 
 M. de Lavergne, and having seen an essay of my own on the 
 ‘subject, he invited me to visit him at his country-house in the 
 Department of La Creuse, in Central France. I met him, 
 however, first in Germany, in the summer of 1868. He was 
 already suffering from a gouty affection of the joints, which 
 made the later years of his life a painful struggle between mind 
 and matter, and he walked with difficulty. His frame was 
 large; his face lighted by intellect and strongly expressive of 
 
104 Léonce de Lavergne. 
 
 kindness ; his manner, while unaffected and gentle, had a 
 natural dignity—one felt oneself in the company of one of the 
 true upper ten thousand of the human race. There was a 
 solidity of judgment, combined with a play of wit, in his con- 
 versation that brought to my recollection the observation of Sir 
 Thomas Overbury, nearly three centuries ago, on the character 
 of the Frenchmen of that age: ‘ For the most part they are all 
 imagination and no judgment ; but those that prove solid excel.’* 
 A solid Frenchman is rarer than a solid Englishman ; but when 
 a Frenchman is solid, he excels now as he did in the days of Sir 
 ‘Thomas Overbury, because he adds imagination and brilliancy 
 to good sense. M. de Lavergne was a thorough Frenchman, 
 but he had also sober qualities, uncommon in France. The 
 infirmity of most Frenchmen is that they give way too easily to 
 passion ; while the Englishman maintains his self-control, and. 
 has therefore time for second thoughts and circumspection. 
 Lavergne had the calm of an Englishman. 
 
 At our first meeting, M. de Lavergne spoke of his regard and 
 respect for England and English institutions, adding with a smile 
 that his wife, who was present, accused. him of Anglomania, and 
 that he in turn charged her with Anglophobia, a charge which 
 Madame de Lavergne did not repel. She was a person of a 
 character and cast of thought unlike his; but they were 
 devotedly attached to each other and inseparable, their dif- 
 ferences of opinion only making their society more interesting, 
 and never bordering upon discord. Passages in Lavergne’s 
 ‘Economie Rurale de l’Angleterre’ had left on my mind an 
 idea that some great English landowners had been careful to. 
 show him the bright side of England, and of the English land 
 system in particular. He replied to a hint to that effect that, 
 on the contrary, he had declined invitations and letters of 
 introduction in order to see things with his own eyes, but a 
 curious thing had happened in one case. He had gone to see 
 a famous ducal residence and estate, and on arriving at the 
 
 
 
 * Observations on the State of France under Henry IV., 1609; Harl. Misc.,. 
 Vili. 379. 
 
Léonce de Lavergne. 105 
 
 railway station found to his surprise one of the duke’s carriages 
 waiting for him. The duke, he was told, was absent, but had 
 given orders that he should be shown every attention, and taken 
 wherever he wished to go. Supposing that some common friend 
 had spoken of his intended visit, and that it would seem ungra- 
 cious to decline, he accepted the offered civility, and saw more 
 than he could have done had he been left to his own lights. 
 In the end it turned out that there had been a mistake; the 
 duke had given orders about a foreign visitor, and the servants 
 had taken the first foreigner they met at the station. 
 
 It was Lavergne’s practice, when visiting any new locality, 
 and one which he told me had been very useful to him in his 
 tours in Great Britain and France, with a view to a description 
 of their rural scenery, to survey the surrounding country from 
 some commanding height. He seemed to have the eye, at once 
 of a general, a sportsman, an agricultural expert, and an artist, 
 seizing immediately all the main features of a landscape in every 
 aspect. We were not far from the Rhine, and looking down on 
 it from an eminence, he observed, one day, alluding to a passage 
 in Michelet’s picture of France: ‘Like Michelet, I fear to look 
 at the heroic Rhine; not, however,’ as Michelet says, ‘ because 
 a lotus-tree grows on its banks, leading me to forget my native 
 land, but because it makes a Frenchman now think of his native 
 land with anxiety and apprehension. I dread a war for the 
 Rhine. It would be either victory for Germany or victory 
 for the Second Empire, and it is hard to say which of the 
 two would be the more injurious to France in the end. Hither, 
 moreover, must result in a permanent increase of Huropean 
 armaments, already the curse of our age.’ 
 
 In the autumn of the same year I was M. de Lavergne’s 
 guest at Peyrusse, on the brow of a mountain glen formed by 
 the river Taurion, or Thorion, in one of the most desolate 
 districts of La Creuse, where he had, through his wife, an 
 extensive though not a very profitable estate, mostly in forests, 
 from which immense quantities of wood were annually sold at 
 Limoges, chiefly for use as fuel in the manufacture of porcelain. 
 In his invitation Lavergne had spoken of his residence as ‘ notre 
 
106 Léonce de Lavergne. 
 
 ermitage,’ and though he did not lead quite the life of a hermit, 
 since Madame de Lavergne shared his seclusion, and he had a 
 household of servants, no hermit could have desired a wilder 
 solitude. One might wander for hours through his woods with- 
 out seeing a living creature—unless, perhaps, a serpent, or a 
 she-wolf and her young. On the desert hills in the neighbour- 
 hood one might meet a dergére tending a few lean animals, but 
 the masculine termination, berger, was unknown. ‘The able- 
 bodied men of the department were working as masons in great 
 towns, especially Paris, where the public expenditure on building 
 was enormous, and almost all outdoor work was done by women. 
 One day we drove to a village on a mountain some miles from 
 Peyrusse, where we saw a few women and children; but not a 
 human being was visible on the road or from it, going or 
 returning. ‘ L’empire, c’est la paix: Solitudinem faciunt, 
 pacem appellant,’ said Lavergne. The public expenditure in 
 Paris averaged more than £30,000,000 a-year, draining both 
 money and labour from the rural districts, while, at the same 
 time, the army carried off a percentage of the rustic youth. I 
 remarked that La Creuse owed to the Empire, at any rate, the 
 residence of Lavergne himself for a good part of the year; for 
 were the Orleanist dynasty restored, his political occultation 
 would cease, and he would be resident chiefly in Paris. He 
 replied that the Emperor’s policy was to make himself the only 
 conspicuous figure in France, and to allow no lesser ight, how- 
 ever faint, to be visible. Napoleonic ambition had always been 
 of the kind denounced in Bacon’s essay: ‘ He that seeketh to 
 be eminent among able men hath a great task, but that is ever 
 good for the public. But he that plots to be the only figure 
 among ciphers is the decay of a whole age.’ Lavergne added, 
 however, that he had no personal reason to dislike the Empire, 
 for the peaceful retirement of Peyrusse had great charms for 
 him, and now more than ever, since his health had become far 
 from robust. There had been a time, indeed, when his own 
 farm had been more than a mere amusement. During the 
 scare at the Red Spectre, conjured up to frighten the French 
 nation into regarding Louis Napoleon as the saviour of society, 
 
Léonce de Lavergne. 107 
 
 all business in many parts of France had been suspended. 
 Lavergne’s own wood could find no market, his tenants could 
 pay only in produce which was unsaleable, and a property he 
 had in the South remitted no income. The want, both of local 
 markets and of cheap communication with distant markets, he 
 continued, which resulted mainly from the monarchical system 
 of concentrating the public expenditure (introduced by Louis © 
 XIYV., and followed under the Empire), was the principal cause 
 of the perpetuation of the medieval tenure of métayage. The 
 soil must be made to grow, not the crops for which it might be 
 best adapted, but the necessaries of life for both owner and 
 cultivator—who, accordingly, divided its produce in kind. 
 Lavergne waged an incessant war against the Imperial finance. 
 Both the excessive amount of the public expenditure and its 
 unequal distribution were constantly pointed at in his works as 
 the main obstacles to the economic progress of the Departments 
 of France remote from the capital. He was regarded, accordingly, 
 with an evil eye at the Tuilleries as a rancorous enemy, but there 
 was nothing personal in his antagonism. His motive was not 
 antipathy to the Emperor, but sympathy with the peasant, as 
 the real saviour of French society. ‘Dans toutes nos grandes 
 crises historiques,’ he eloquently urged, ‘le paysan frangais, si 
 bien personnifié par Jacques Bonhomme, a toujours fini par nous 
 tirer d’affaire. . . . Si les autres classes de la société frangaise, 
 riches, bourgeois, artisans de villes, valaient pour leurs réles 
 ce que Jacques Bonhomme vaut pour le sien, ce n’est pas 
 Angleterre, c’est la France qui serait depuis longtemps le 
 premier peuple de l’univers.’* 
 
 ‘Much as M. de Lavergne detested the Imperial system of 
 government, a singularly mild temper and sweet disposition 
 made him incapable of personal resentment, and he never spoke 
 of Louis Napoleon with bitterness. When I applied some 
 strong epithets to the perfidious Coup d’Htat and the cruelties 
 that followed it, he said calmly, correcting one of my adjec- 
 tives, ‘ Non, il n’est pas méchant, il est grand menteur. Voila 
 
 
 
 * T Agriculture et la Population, 2nd ed., 342-8. 
 
108 Léonce de Lavergne. 
 
 tout.’ Of the falsehood pervading the administration through- 
 out all its ramifications, he gave curious instances. J inquired 
 about Prince * * *, ambassador at the court of ***. ‘ He is. 
 no more a prince than you or I,’ was the answer; ‘indeed, even 
 less, for it has never been proved in a court of law that I am 
 not a prince, and I presume it has never been proved that you 
 are not.’ In reference to the Coup d’Etat, he repeated an ex- 
 pression which he had used in Germany, ‘ Les Anglais sont 
 trés indiscrets,’ and gave an instance affecting himself. On 
 the very day of it (December 2, 1851), he had paid a visit at 
 the house of a neighbour and political friend in Paris, where 
 he met an English lady, the wife of an English author of great 
 celebrity, herself well known in the literary and social worlds. 
 of both London and Paris. Everyone spoke out, as he sup- 
 posed, in confidence and perfect security. To his dismay, a 
 few days afterwards, he saw an account of the visit in a great 
 London journal. ‘Cela pouvait précisément m’envoyer a 
 Cayenne.’ Anyone on whom suspicion fell of being hostile to- 
 Louis Napoleon’s proceedings or plans was liable to be trans- 
 ported to Cayenne without form of trial. In this instance, how- 
 ever, M. de Lavergne appears to have been so far mistaken, that 
 no breach of confidence or discretion was actually committed by 
 the English lady. Her letter, as a recent reference to the file 
 of the journal in question has satisfied me, was not written 
 for publication, and was cautiously expressed; nor was there 
 reason, at the moment at which she described what had passed, 
 to suppose that a mere allusion to M. de Lavergne, in such a 
 way as to identify him, could expose him to danger. The 
 letter was written on the evening of December 2, when some 
 arrests of eminent persons had been made, but before any mas- 
 sacres in the streets or deportations to Cayenne had taken place. 
 It found its way into the ‘'Times’ of December 6, 1851, under 
 the heading ‘The following are extracts from a lady’s letter.” 
 ‘ Paris, Tuesday evening, December 2. At about twenty 
 minutes past one o’clock I set forth with Miss B., attended by 
 my two servants on foot. Finding, however, that carriages. 
 passed through the Faubourg St. Honoré, we took a remise, 
 
Léonce de Lavergne. 109 
 
 and drove to the house of M. de F., near the Madeleine, and 
 went in and found Madame de T. and M.de L. M. de T. was 
 gone out to confer with other members of the Assembly on the 
 occurrences of the morning. M. R., Conseiller @ Etat, joined 
 us, and related some facts, of which ae following are the prin- 
 cipal.’ [The arrests of Lamoriciére, Changarnier, and other 
 generals, are described, and some other particulars given.] ‘At 
 eleven o’clock all was hushed, and so ended a day pregnant 
 with disquiet and sinister auguries which assuredly have seldom 
 been better warranted, for so monstrous an exercise of brute force 
 on the part of the executive has few precedents in history.’ 
 Seeing this letter in the Times a week afterwards, when the 
 streets were red with the blood of peaceful citizens, when men 
 were hourly disappearing to be seen no more, and all Paris was 
 quaking, it was natural that Lavergne should have been startled 
 at an allusion to himself as having been in disaffected company. 
 But the writer of the letter could hardly have foreseen such 
 ground for alarm. It is even possible that its publication did 
 more good than harm to M. de Lavergne. The persons carried 
 off to Cayenne were of inferior note, and Louis Napoleon was 
 by no means desirous of raising an outcry from the English 
 press. Looking at all the circumstances, there seems no reason 
 . for withholding the name of Mrs. Grote as the English lady of 
 whom Lavergne spoke. 
 
 This, however, was only a ists instance of English indis- 
 cretion in his eyes, from the French point of view. There was 
 the correspondence in the English newspapers during the Cri- 
 mean war. Mr. Senior’s notes of conversations with eminent 
 persons, of whom Lavergne was one, likewise appeared to him 
 a highly characteristic English proceeding. ‘ But Mr. Senior’s 
 notes are not printed,’ I suggested. ‘No,’ he replied, ‘but 
 scores of people, I might say hundreds, have seen them, and 
 many more have heard of them. And, doubtless, they will be 
 printed. No Englishman or Englishwoman can keep anything 
 from the printing-press. It is astonishing to me that printing 
 was not an English invention, and that Caxton should have 
 borrowed it from the Continent.’ On several occasions he 
 
110 Léonce de Lavergne. 
 
 recurred, half in jest, to the English lack of reticence and dis— 
 cretion in relation to printing. I told him, for instance, that I 
 had visited a ferme école near Rennes in Britanny, about which 
 he had spoken to me, and on my way back to my hotel, ob- 
 serving a number of women as well as men coming out of a. 
 large printing establishment, had asked a question about the: 
 employment of women in the business. As the foreman to 
 whom I spoke brusquely refused to answer, I explained that I 
 was a professor of political economy, and therefore took an 
 interest in the subject, as there had been combinations against 
 women in the printing trade in London. Whereupon the- 
 man gesticulated furiously, snapped his fingers in my face, and 
 made various other demonstrations of incredulity and hostility. 
 Lavergne tranquilly observed that it must have reached Bri- 
 tanny that the English were very indiscreet, above all in matters. 
 of printing. On other points he took a more favourable view 
 of the English than his wife did. He considered them mild 
 and gentle, ‘Les Anglais sont trés doux.’ Madame, on the: 
 other hand, maintained that the roughest creature to be seen on 
 the Continent was the British tourist, and that even in good 
 society the English were unmannerly. One instance was, that 
 Lord * * *, whom they had invited to dinner in Paris, kept the 
 company three-quarters of an hour waiting, and, instead of — 
 apologizing, coolly said he had been spending three charming 
 
 quarters of an hour with the Duchesse * * *. Another English- 
 man had a habit of talking of the Comte de Paris and the Due 
 d’Aumale as ‘ Paris’ and ‘ D’Aumale,’ without titles—‘as if 
 our princes were nobodies,’ said Madame de Lavergne. She 
 added that she had seen English ladies and gentlemen crowd 
 round M. Thiers in his salon, and stare at him with a grin, as. 
 though he were a monkey performing tricks. Lavergne said 
 he did not mean to pronounce on the manners of the English 
 from an esthetic point of view, but au fond they were the 
 best-tempered nation in Europe. He had never seen a furious. 
 quarrel between Englishmen, such as one might see any hour 
 in the streets of a French town. Everything seemed to work 
 smoothly without a hard word. The English railway porter,. 
 
Léonce de Lavergne. 111 
 
 compared with his fellow in Germany or France, was an angel ; 
 the English guard, an archangel. The liberality and courtesy 
 of the Company to passengers on the North-Western Railway 
 had impressed him as one of the most remarkable results of 
 modern civilization. The gentleness of the English might be 
 partly the effect of physical causes, but he attributed it chiefly 
 to a happy political and civil history, and exemption from 
 oppression ; the Germans of the same race being irascible and 
 quarrelsome. ‘The Englishman’s voice was like that of a bird ; 
 it came from the head, instead of from the seat of passion. 
 Madame de Lavergne protested that the Englishwoman’s voice 
 was sharp and imperious, while the Frenchwoman’s was soft 
 and musical. ‘ That,’ replied Lavergne, ‘is because English- 
 men are so gentle (doux) that the women have gotten a habit 
 of commanding. The men are under a Queen already; they 
 are going to give the women the suffrage, and they will before 
 long be under petticoat government altogether. The female 
 electors will control the House of Commons.’ Madame de 
 Lavergne said the female suffrage movement in England only 
 showed that Englishmen were not the sensible beings her hus- 
 band imagined. Women would tear each other’s eyes out in 
 France,. ‘ elles s’arracheraient les yeux,’ if they got the suffrage, 
 and she believed they would do the same in England. I ven- 
 tured to suggest that men as well as women were more explosive 
 and demonstrative in France than in England; the hero of a 
 French novel generally crying a great deal, whereas no man in 
 an English novel ever sheds a tear. Lavergne said the English 
 were in his opinion certainly more stoical than the French, but 
 he supposed his wife would retort that a Red Indian never weeps. 
 In Campbell’s ‘ Gertrude of Wyoming,’ he added, the Christian 
 hero melts into tears, the savage may not give way to them. 
 Although he did not speak English, Lavergne knew the older 
 English poets and novelists well, and in his essay on ‘ English 
 Rural Economy’ has eloquently traced the influences of the 
 love of rural life on the part of the upper classes in England 
 upon English literature. The breath of the country, he there 
 observes, is almost always felt in the English poem or romance 
 
112 Léonce de Lavergne. 
 
 of the eighteenth century, while in Voltaire’s ‘ Henriade’ there 
 is not so much as grass for the horses. 
 
 M. de Lavergne was a very early riser, and at his desk or 
 his books at five in the morning, although I did not see him 
 until breakfast at ten ; after which, when his health and powers 
 of locomotion permitted, he walked or drove in a pony-carriage 
 about his demesne and visited his farm. He grew a great 
 variety of plants, not with a view to profit, but to show what 
 could be done by scientific culture in so barren a region. He 
 held that even granite, of which the soil of La Creuse is mainly 
 formed, might be made to produce anything by adding other 
 constituents, and undertook to demonstrate it by experiment. 
 The practical question, however, as he well knew, remained, 
 whether such farming would pay. That, he argued, depended 
 on communication and markets. Accordingly, he had made 
 earnest and not unsuccessful exertions to improve the roads of 
 the Department. Beyond giving general directions, he did 
 not, however, seem to interfere much in the working of his 
 farm; but Madame de Lavergne was not too fine or too Parisian 
 a lady to derive amusement from a daily inspection of what 
 was going on. Both husband and wife had that faculty of 
 being easily amused which seems to distinguish the Latin from 
 the Teutonic nations, and which saves the former from ever 
 feeling bored. One day Lavergne picked up a bergére’s horn, 
 and proceeded to blow the sheep and cattle calls with great 
 zeal; Madame de Lavergne applauding the performance, which 
 lasted about twenty minutes: ‘ C’est ca; c’est ca.’ Broad and 
 cosmopolitan as his ideas generally were on large subjects, on 
 minor matters they were purely French. He told me more 
 than once, as an amazing instance of the oddity of English 
 ways, that he had seen an Englishman come with his two sons 
 into the Café Anglais at Paris and order nothing but cold meat 
 for lunch, without wine. And he could not get over his as- 
 tonishment at Lord *** having asked him to breakfast and 
 given him no wine. It seemed to him quite as odd as it would 
 to an Englishman to be offered only tea and coffee to drink at 
 a dinner-party. Madame de Lavergne was dévote, and went 
 
Léonce de Lavergne. 113 
 
 on Sundays and Saints’ days to a distant church; but Lavergne 
 himself, at least during my visits, remained at home, having, it 
 may be, the excuse of an invalid: yet, in subsequent years, 
 when in more infirm health, he took an active part in the pro- 
 ceedings of the Assemblée Nationale. Politically and socially 
 he was friendly to the Church, but his theological opinions 
 were inscrutable to me. I told him one Sunday, while Madame 
 was at Mass, how a great man in England, when someone 
 wondered that so firm a supporter of the Church was never to 
 be seen inside of one, replied that the buttresses of a church 
 were generally outside. Lavergne smiled, and said every edifice 
 must have an exterior as well as an interior, and sometimes the 
 exterior was the more important of the two. The strength of 
 a palace or a throne depended, not on the number of persons 
 who went to Court, but on the sentiments of the people outside 
 who never went. : 
 
 On my way back to Peyrusse, in the autumn of the follow- 
 ing year (1869), the distance at which its owner lived from his 
 nearest neighbour, and the unbroken solitude of his forests, 
 received a curious illustration. In a railway carriage between 
 Montlucon and Gueret, the chief town of La Creuse, I found 
 myself the object of much surprise and curiosity on the part of 
 a country gentleman of the Department, who said he had rarely 
 seen even a Frenchman from another part of France in it, 
 unless a commercial traveller, and a foreigner never before. 
 In the course of conversation, I inquired whether there were 
 wolves in his neighbourhood. ‘ Wolves!’ he replied; ‘ there are 
 none in La Creuse.’ On my stating that I had myself seen 
 some the year before, he said he had lived fourteen years in the 
 Department since his father’s death, and never had heard of a 
 wolf. Where did I imagine I had seen them? ‘At Peyrusse.’ 
 ‘Peyrusse!’ was the rejoinder. ‘ Why, that is M. de Lavergne’s 
 place, and he is my nearest neighbour.’ I could only retort 
 that I had been M. de Lavergne’s guest the year before; that I 
 had first heard of the existence of wolves in his woods from 
 himself; had next been shown one by his steward, and after- 
 wards on several occasions had come upon a she-wolf and her 
 
 I 
 
114 Léonce de Lavergne. 
 
 family. On the very day on which I left Peyrusse M. de 
 Lavergne had pointed to one near his hall-door, and I was now 
 going back to Peyrusse, and expected to see another before long. 
 Whereupon my fellow-traveller altered his tone, saying that 
 even nearest neighbours were far apart in La Creuse, and he 
 lived many miles from Peyrusse, and had never been in its 
 forests, which were so extensive, and might contain things not 
 to be found in his own small woods. At midnight we reached 
 Gueret, where the simple honesty of the people, which was one 
 of the attractions of this desert Department in Lavergne’s eyes, 
 was exemplified. I had written from Pontarlier to an innkeeper 
 whose name [ found in a Directory, to bespeak aroom. At the 
 station, late as it was, he met me himself, to explain that his 
 auberge was a very humble one, and that he had accordingly 
 ordered a room for me in the principal hotel, and told the con- 
 ductor of its omnibus to take charge of my luggage. It seemed 
 to me that the poorer the man was the more important it was 
 to him to secure a visitor, and I begged to be allowed to adhere 
 tomy original plan. But he wasinexorable. Much, he politely 
 said, as he would like to have such a guest, he would be ashamed 
 to take advantage of a mistake on the part of a foreigner. 
 Lavergne, when I told him the story, was much pleased, and, 
 as will be subsequently seen, did not forget it. 
 
 When I repeated to him my conversation with his ‘ nearest 
 neighbour,’ -he said his steward had killed a wolf only that 
 morning, on account of the loss of two lambs, though it was not 
 his custom to wage war against animals that were not numerous 
 enough to do much harm, and were interesting objects in so 
 lonely a place. Headded: ‘You have seen things in La Oreuse 
 that my neighbour, who lives in it, has never seen. But I dare 
 say, were he to go to London, he might see things that you have 
 never beheld.’ I told him I had been lately for some days at 
 Ornans, in the Département du Doubs, which detractors of 
 la petite propriété were recommended in his ‘ Economie Rurale 
 de la France’ to visit and be converted. I said I doubted 
 whether the people there would look much about them in 
 London: at least, at Ornans they seemed never to think of 
 
Léonce de Lavergne. 115 
 
 anything beyond the little world in which they lived. The 
 wife of one wealthy small landowner, with whose family I be- 
 came acquainted, had told me she had never been in Switzerland, 
 though she often went to Pontarlier, on its border, to shop, 
 adding: ‘ Your countrymen go much to Switzerland, do they 
 not? But, then, England is nearer to Switzerland than France 
 is.’ Her husband showed no surprise, and quietly remarked : 
 *Non; Angleterre c’est plus loin.’ Lavergne said, Ja petite 
 propriété certainly did not teach geography ; on the other hand, 
 an English agricultural labourer might know as little about 
 France as the wife of a small proprietor at Ornans did about 
 England, without the compensation of living in a little paradise 
 of hisown. Englishmen of a higher class, he continued, seemed 
 generally to know only Paris, not France. Passages from his 
 own works were cited on opposite sides, for and against large 
 and small property, and large and small farms, in a way that 
 showed the controversialists had looked only at books, or they 
 would understand him better. ‘After reading one of these 
 controversies, he continued, ‘I feel like the poor man with an 
 old and a young wife, one of whom pulled out the black and the 
 other the grey hairs from his head. I seem to be left bare, 
 without any definite opinion, yet I have expressed very plainly 
 a conviction that there are places to which each system is best 
 adapted ; but that, on the whole, the best cultivated parts of 
 France are those where small properties and small farms prevail. 
 What I have sought is to persuade our large proprietors to 
 cultivate their estates as large estates are cultivated in England, 
 and to take the same interest in country life that the English 
 nobility and gentry do.’ 
 
 Wespoke one day of the famous fortress of Phalsburg, which 
 Thad lately visited, and where I had a narrow escape of being 
 shot by a French sentry for attempting to take a sketch—one 
 which two years afterwards I finished unheeded under the eyes 
 of German soldiers. Lavergne said it was impossible to say 
 how soon Phalsburg might not have to stand another siege; 
 the only safeguard against a war with Germany was that the 
 French army was absolutely unprepared for it, and the Emperor 
 
 12 
 
116 Léonce de Lavergne. 
 
 himself physically incapable of any great exertion. The Em-. 
 peror, he said, was perfectly aware that systematic peculation 
 went on in every department of the administration, military and 
 civil, and that he was himself daily robbed in his household,. 
 but regarded it with apathy and cynical indifference: ‘II 
 méprise tout—méme l’argent.’ After a duration of nearly 
 twenty years, Lavergne continued, the Empire would be in 
 peril were Napoleon I., in full vigour of mind and body, at its 
 head. ‘ Le Frangais est toujours contre le gouvernement qui 
 est la. That, he said, overturned the government of Louis. 
 Philippe, the best France ever had since Henry IV. ‘The 
 English, on the contrary, are on the side of what exists, and 
 with them, as they say themselves, nothing succeeds like success. 
 This respect for material success has its bad side, but it has 
 excellent political effects. And, moreover, it proceeds in part 
 from a good quality. The English are not an envious people— 
 they like to see things well done. Their phrase, “ Well done!” 
 is characteristic.’ M.de Lavergne, it may be observed, did not 
 stand alone in this opinion. I have heard a distinguished diplo- 
 matist, who thoroughly knows the continental nations, speak of 
 the English as the only unenvious people in Europe. And the 
 late Professor Adolf Held, of Berlin, whose promising career 
 was cut short by a cruel accident last year, remarked to me in 
 London, not long before his death, ‘If you do anything well in 
 England, you are liked for it, and you make friends. If you do 
 anything well on the Continent, you make enemies. The first 
 idea is to pull you to pieces, and to prove that you have done 
 nothing at all.’ Envy and jealousy doubtless exist in England, 
 as its statesmen, authors, and professional men are sometimes 
 made to feel; but there is, at least, no disinterested dislike of 
 superiority. Lavergne himself was absolutely free from the 
 smallest tincture of jealousy. I questioned him about every 
 French author whose name occurred to me. The only one of 
 whom he said a disparaging word was Prévost Paradol: ‘C’est un 
 enfant ;”’ and even Paradol, he allowed, had great literary talent. 
 Of Emile de Laveleye, though in some degree his own rival as 
 a writer on rural economy, he spoke in enthusiastic praise. 
 
Léonce de Lavergne. 117 
 
 Lavergne’s conversation in 1869, and the facts he related 
 with respect to the incapacity of the Imperial administration, 
 the torpor and debility of Louis Napoleon, and the discredit 
 into which he had fallen, left a full conviction on my mind that 
 the Emperor could not maintain his position for twelve months 
 longer, and would be driven to some rash and unsuccessful 
 attempt to recover prestige and power. Of all the schemes 
 open to him he chose the worst. After Sedan, Lavergne wrote 
 repeatedly to me from the south of France, saying that it was 
 the interest as well as the duty of England to come to the rescue 
 of France; referring to Arthur Young’s words in a remarkable 
 passage to which he had himself, ten years earlier, drawn atten- 
 tion in his Introduction to Lesage’s French translation of 
 Young’s ‘ Travels in France:’ ‘Suppose the German flag to 
 float over Paris. Where is the security of the rest of Europe ? 
 Have we forgotten the partition of Poland? Were France in 
 real danger, it would be the duty and interest of its neighbours 
 to come to its rescue.’* When, more than a year later, I saw 
 Layergne again, he spoke with a bitterness unusual with him of 
 a want of feeling, as well as of political sagacity, shown by 
 England, which he had always admired and esteemed. At 
 length I observed that I had myself seen enough to assure me 
 that some of his own countrymen took less to heart the loss of 
 territory France had suffered than some of mine did. He asked 
 for an instance. One was a recent one. When on the way 
 to see Phalsburg again, after the long siege it had sustained, I 
 found myself in company with a French party, in a railway 
 carriage from Strasburg to Liitzelburg, and in the omnibus 
 thence to the place of our destination. ‘They chatted gaily on 
 other subjects until we came close to the drawbridge of the 
 battered and dismantled fortress, when both ladies and gentle- 
 men burst into a flood of tears. But no sooner had we crossed. 
 the bridge, and passed through the Porte d’ Allemagne into the 
 old town, than all faces brightened, and the party set off to 
 
 
 
 * Voyages en France, par Arthur Young ; Introduction par M. Léonce de Lavergne, 
 be SEX. 
 
118 Léonce de Lavergne. 
 
 breakfast at the best inn, where presently I heard them give a 
 sumptuous order. Two hours later they emerged with rosy 
 countenanees from the inn, and took their seats in the omnibus: 
 back to Liitzelburg. The town had suffered considerably from 
 the siege, and there was much to be seen, but a cheerful déjewner 
 had engaged their whole time and thought, while the British 
 visitor had gone over every spot, and finished a sketch begun 
 before the war.* Lavergne listened quietly to the story, and 
 then said, with a melancholy smile, that when King David was 
 told his child was dead, he washed his face, and ate and drank, 
 because mourning and tears could not bring back what he had 
 lost. But he never again spoke to me of English want of feel- 
 ing during the war. He was now a member of the National 
 Assembly, and a leading personage among the party of the 
 Right, while his sagacity, calmness, and moderation gave him 
 also no small influence with a considerable section of the Left. 
 Had his health been good, there was no office in the Republic to 
 which he might not have then aspired. He had at first hoped 
 for a restoration of Constitutional Monarchy ; but in 1873 he 
 declared his adhesion to the Republic in a characteristic letter, 
 which produced a great effect, and certainly conduced to the 
 peaceful establishment of a Republican form of Government. 
 ‘J’aurais préféré,’ he admitted, ‘la monarchie constitutionelle 
 et parlementaire, qui est 4 mon avis le meilleur des gouverne- 
 ments. Voyant cette monarchie impossible, j’accepte la 
 République.’ 
 
 In the summer of 1874 I joined M. and Madame de 
 Lavergne at Bourboule, a watering-place in Auvergne. He 
 was at this time very infirm, but took an interest in the life of 
 the place, and was ready to listen to its chatter and gossip, as 
 well as to discuss graver subjects. very new comer was an 
 object of curiosity to the crowd of visitors. One day the arrival 
 of another Anglais was reported, and a story about him, which. 
 much amused Lavergne, was brought to us in the evening by a 
 
 * A fuller account was given by the writer at the time in a letter to the Daily 
 News. 
 
Léonce de Lavergne. 119 
 
 young Abbé, who had sat next the stranger at the table-d’héte. 
 The Anglais had inquired eagerly whether Lord .... was 
 at Bourboule, or had been there. The Abbé had heard nothing 
 of an English lord, but said there was an économiste Anglais, a 
 friend of M. de Lavergne, at the place, and then dining in 
 M. de Lavergne’s apartments in the hotel. Asthe Englishman 
 received this information with perfect indifference, the Abbé 
 continued that he had himself seen and spoken to the economist. 
 ‘Je ne m’occupe pas de économie politique; cette science ne 
 mintéresse pas,’ replied the Englishman, looking bored, and 
 adding that he had only come to Bourboule to look for 
 Lord . . . ,not to learn political economy. ‘ C’est peut-étre le 
 domestique d’un lord,’ said the Abbé, imitating the Englishman’s 
 voice and accent. Lavergne laughed, and said the stranger 
 seemed to be following a chase which in modern England was 
 called tuft-hunting, but which was an ancient Teutonic pursuit, 
 for the companions of the German princeps were tuft-hunters. 
 Yet birth and rank, he continued, had, in some respects, a more 
 unreasonable social influence in democratic France than in 
 England. To be ofa noble family was an almost indispensable 
 key to French society. In spite of tuft-hunting, English society 
 was the least exclusive in the world; and most English peers 
 were themselves members of new families. The old families 
 were the untitled landed gentry. On this point he displayed a 
 marvellous knowledge of English pedigrees. When asked how 
 he came to master such details, he replied that he had been led 
 to do so first in his study of English political history, and the 
 part played in it by aristocracy of birth, and afterwards in 
 connexion with English rural economy, and the tendency of 
 new wealth to settle finally in the country instead of the town. 
 Referring to the decline of aristocracy as a factor in the 
 modern political world, he owned that he was becoming less and 
 less alarmed at the rapid progress of democracy—so far, at least, 
 as socialistic projects were concerned. Dangerous as he had 
 once thought it to give predominant power to the poorest classes 
 by means of universal suffrage, socialism had, in fact, become 
 much less menacing in France. He agreed with Tocqueville 
 
120 Léonce de Lavergne. 
 
 that democratic institutions tended to benefit mankind, so far as 
 their material welfare was concerned. As he laid stress on the 
 word ‘ material,’ I asked whether in his heart Tocqueville liked 
 or disliked democracy. ‘Il la détestait,’ was the emphatic 
 answer. But Lavergne added, that it was in reference to an 
 esthetic or intellectual standard that Tocqueville in his inmost 
 soul regarded it with repugnance. ‘ Who in the next century,’ 
 he had said, ‘will execute a really great work of art for a 
 multitude interested only in buying in the cheapest and selling 
 in the dearest market ? Who will spend years on a book for a 
 nation which reads only cheap newspapers? Book-making will 
 become, like everything else, a mere trade.’ 
 
 Soon after this conversation Lavergne published a letter on 
 universal suffrage in relation to socialism which attracted much 
 attention in both the political and the economic world, and 
 which has its importance still for English readers: who should 
 bear in mind, however, that it was written in a country in which 
 property, as well as political power, is widely diffused. ‘ Certes, 
 je n’ai pas désiré ’avénement du suffrage universel ; je l’ai vu, 
 au contraire, arriver avec inquiétude, mais depuis vingt ans 
 qu'il fonctionne, j’ai appris a le moins redouter. J’ai été 
 surtout frappé de cette coincidence que du moment ou il a été 
 institué, le socialisme a commencé a décliner. O’est sous l’empire 
 du suffrage restreint que les utopies socialistes se sont développéés 
 et ont pris de grandes proportions. Je ne puis m’empécher 
 d’attribuer au suffrage universel une action quelconque sur ce 
 changement. On comprend qu’en effet les faiseurs de systémes 
 subversifs se forment une arme du suffrage universel pour 
 séduire les ignorants. Si on ne met pas nos théories en 
 pratique, peuvent-ils dire, c’est que le pouvoir est entre les mains 
 d’une minorité intéressée a les étouffer. Ce langage perd 
 beaucoup de sa force apparente avec le suffrage universel. 
 Depuis que tout le monde vote, pourquoi les bases de la société 
 n’ont-elles pas changé? Les classes les plus nombreuses sont 
 devenues les plus puissantes; pourquoit n’ont-elles rien fait ? 
 C’est qu’apparemment il n’y a rien a faire. Le socialisme est 
 mis au pied du mur; dés qu’on le serre de prés il s’évanouit.’ 
 
Léonce de Lavergne. 121 
 
 We took long drives about Bourboule, but Lavergne could 
 with difficulty walk a hundred yards, leaning on two supporters. 
 “One morning he complained of fatigue, and said he should not 
 attempt to walk that day. ‘ You would be less tired to-day, 
 sir, if you had walked more yesterday,’ said his valet-—to whom 
 in that respect he was no hero—‘ and you will be more tired 
 to-morrow if you don’t walk to-day.’ In fact, Lavergne was 
 capable of any exertion that his bodily powers permitted for a 
 public object, but was not easily persuaded to take irksome 
 exercise only for the sake of health. Before dinner I found him 
 seated on a bench in front of the hotel, where I had left him at 
 eleven o'clock. ‘ The spirit was willing, but the flesh was weak,’ 
 he observed, alluding to his servant’s advice. He liked to be 
 told all that one saw and did, and a little incident connected 
 with my departure interested him considerably. As the diligence 
 from Clermont-Ferrand to Bourboule started at an inconvenient 
 hour, I had hired a carriage, and Lavergne suggested that I 
 might find someone at Mont Dore, another watering-place a 
 few miles distant, disposed to join me in a carriage back—an 
 arrangement which was easily effected. But to get to Mont 
 Dore in the customary carriage and pair was a matter of ten 
 frances, besides a pourboire; so I stipulated for a voiture ad un 
 cheval for six francs, for that part of the journey. After some 
 parley I was promised a petite voiture ad chasse. When this 
 arrangement was reported to Lavergne, he said it was as hard 
 to change the customs of a French watering-place as to reform 
 the English land laws. Were an English visitor seen in a 
 voiture ad un cheval it might become the mode, which was not 
 for the interest of the dealers. So he imagined something 
 would happen to prevent the petite voiture d chasse from 
 conveying me to Mont Dore. The following morning, at the 
 appointed time, a carriage and pair came to the door. The very 
 man who had struck the bargain with me was on the box, and 
 explained simply that he thought a two-horsed carriage would 
 be ‘ plus convenable a monsieur.’ Lavergne held up two fingers 
 significantly from a window asI drove by. The day before I 
 left Bourboule, he remarked evidently with a practical purpose, 
 
122 Léonce de Lavergne. 
 
 that the scrupulous honesty which the innkeeper at Gueret had 
 displayed could hardly be expected at a hotel in a fashionable 
 watering-place, but it was a duty which every visitor owed to: 
 others to object to any overcharge—a duty often neglected 
 from false shame. 
 
 In the following year (1875) M. de Lavergne was elected by 
 the Assemblée Nationale an irremovable member of the new 
 Senate, and for three years, in spite of bodily helplessness and 
 much suffering, continued to take a part in public affairs. Be- 
 fore his own end came he lost his beloved wife, and during his 
 last months he was afflicted with a nervous disorder which, he 
 wrote to me, left him no rest day or night. ‘II fait des sauts,” 
 said his servant, describing this tormenting affection. At length 
 one of the noblest hearts in France ceased to beat. Léonce de 
 Lavergne became only a name, but one which neither France 
 nor England ought to let die. The present French Constitu- 
 tion was in part his work; but he has left another, and perhaps 
 a more lasting monument, in his work as an author. 
 
 M. de Lavergne’s chief literary productions are undoubtedly 
 his books on the rural economy of England and France. ‘The 
 main problem in respect of the former was to account for the 
 superior productiveness of English agriculture; and he applied 
 to it what is now called the historical method. It does not 
 appear that he thought of applying a novel method; but his. 
 sagacity led him to investigate every subject inductively—that 
 is to say, In connexion with history and surrounding conditions. 
 The superiority of England had not always existed. In the 
 reigns of Henry IV. of France and James I. of England, France 
 was foremost in agriculture, as in other arts. But after the 
 middle of the seventeenth century England steadily advanced. 
 under free institutions, while France retrograded under monarch- 
 ical tyranny and misgovernment until its peasantry sank into: 
 the destitution and misery described by La Bruyére and 
 D’Argenson. Investigating further the causes at work on the 
 side of England in his own age, Lavergne laid chief stress upon 
 three : first, the love of country life felt by the opulent classes, 
 leading to the application of wealth and enterprise to the 
 
Léonce de Lavergne. 123 
 
 improvement of the soil, while in France the love of the 
 pleasures and excitement of cities caused a constant drain on 
 the country; secondly, the free and orderly spirit of the English 
 people and of their institutions, and the consequent exemption 
 of the island from both military despotism and violent revolu- 
 tions ; thirdly, the immense market for agricultural produce 
 afforded by the development of English manufactures and 
 commerce. Lavergne wrote his ‘Essai sur l’Economie Rurale 
 de l’Angleterre,’ as Tacitus wrote the ‘ Germania,’ faithful in 
 description of Teutonic manners and institutions, but with a 
 political and social moral in view, and one eye always on his 
 own country. He took for his motto the maxim of Montesquieu, 
 ‘Les pays ne sont pas cultivés en raison de leur fertilité, mais 
 en raison de leur liberté.” The Imperialist party in France 
 claimed for the Second Empire the credit of all the prosperity 
 due to science, steam, Californian and Australian gold, and the 
 general progress of the age. The zealous advocate of constitu- 
 tional and parliamentary government, on the other hand, was 
 disinclined to admit that France had made any real advance 
 under the false splendour of a profligate and corrupting 
 despotism. Hence Lavergne looked at the rural economy of 
 England with somewhat partial eyes. He ignored, or at least 
 left in the background, the fact that English institutions and 
 history had developed a love of rural life and agriculture among 
 only a small minority of the nation. A further reflection, which 
 should not be omitted, is that since Lavergne’s famous essay 
 was written a critical juncture has been reached, at which the 
 influence of the expansion of the British market for agricultural 
 produce on British agriculture cannot be clearly foreseen. 
 Lavergne looked chiefly to one side of the market, the side of 
 demand ; while the other side, that of supply, is now foremost 
 in importance. The question at present is, whether British 
 agriculture can compete in the British market itself with the 
 foreign supply. This, Lavergne would, indeed, have said, is a 
 question which concerns landlords rather than farmers, ‘ Pourvu 
 que la rente baisse en proportion de la baisse des prix, le culti- 
 
124 Léonce de Lavergne. 
 
 vateur proprement dit est 4 peu prés désintéressé.* Yet the 
 final result may be not altogether in harmony with Lavergne’s 
 views. His historical and inductive method of investigation 
 will, however, always remain proof against criticism. In the 
 application of this method he was entirely original. The 
 French statesmen and economists of his age knew nothing of 
 their great countryman, Auguste Comte; and Lavergne was as 
 unacquainted with German political economy as with the positive 
 philosophy. ‘The only German economist, indeed, whose name 
 was known twenty years ago in either England or France, 
 Professor Rau, had followed the old paths, and thrown no new 
 light on the method of economic science. 
 
 Lavergne’s work on the rural economy of France is in lke 
 manner an elaborate application of the inductive, historical 
 method. At a time when economists were accustomed to speak 
 of every country in the lump, and to occupy themselves with 
 generalities and abstractions—such as the wages fund, the 
 average rate of wages, the equality of profits—Lavergne de- 
 scribed the actual economy of France in terms before which 
 these crude formulas crumble to pieces. Instead, for example, 
 of ‘ generalizing the facts of wages,’ he showed that the 
 differences in local rates in France were so great that ‘the 
 differences resulting from differences of social position were 
 nothing in comparison with those resulting from inequalities of 
 wages.’ If the average consumption of meat per head in Paris 
 was ten times as great in Paris as in La Creuse, it was not 
 because Paris had some thousand rich inhabitants, while La 
 Creuse had only a sprinkling of country gentlemen of small 
 fortune, but because a working-man could earn on an average 
 ten times as much in the capital as in a remote rural department.t 
 ‘Under an apparent uniformity,’ Lavergne says, at the outset 
 of his treatise, ‘ France is nothing less than an epitome of 
 Europe and almost of the world. Shall we speak first of 
 climate ? Nothing can be less alike than the Département du 
 
 * Essai sur ? Econ. Rur. del’ Angleterre, 4th ed., p. 199. 
 Tt Econ. Rur. de la France, 4me ed., p. 411. 
 
Léonce de Lavergne. 1295 
 
 Nord, which forms one extremity of this vast territory, and the 
 Département du Var, which forms the opposite extremity. 
 Shall we speak of geological constitution? The mountains of 
 the east, the centre, and the south, widely differing from each 
 other, of limestone, granite, and volcanic formation respectively, 
 have nothing in common with the plains at their feet, and 
 which present in turn innumerable diversities. Shall we study 
 moral and political facts? Every province has its history, 
 which has powerfully acted on its economic development; and 
 since they became subject to the same laws, these laws have 
 had a special influence over each. Do we come to systems of 
 husbandry ? We find at once every cultivation, every system ° 
 of working the soil, all degrees in the scale from the extremest 
 poverty to the greatest rural riches. One department is fifty 
 times richer than another department—one canton a hundred 
 times richer than another canton.’* 
 
 ‘Mon illustre maitre,’ the title given to Léonce de Lavergne 
 by a French official under the Second Empire, is one which 
 every careful student of his works on rural economy ought to 
 feel disposed to accord. The illustrious master of rural economy 
 was also a statesman of first-rate capacity, an accomplished man 
 of letters, a charming member of society, and all this under 
 difficulties and sufferings tasking heroic fortitude to the utter- 
 most. 
 
 
 
 
 
 * Econ. Rur. de la France, 4me ed., pp. 59, 60. 
 
XIII. 
 
 POLITICAL ECONOMY IN THE UNITED 
 STATES.* 
 
 Tue readers who would concern themselves much about the 
 political economy of a foreign country, in order simply to know 
 what doctrines on the subject are taught in its text-books and 
 colleges, are probably few. But when the inquiry is found to- 
 include one into the influence of physical geography, history, 
 institutions, moral and religious ideas on economic theory, the 
 curiosity of a class may be excited whose interest in the con- 
 troversies of economists on their own account is but faint. A 
 wider claim to attention will be established, should it appear 
 that we are engaged in the study not merely of a chapter in the 
 intellectual history of the United States, but of one which 
 elucidates some of the causes determining the directions of the 
 mental energies of nations, their success or failure in various 
 branches of culture, and their fundamental ideas and methods 
 in philosophy. ‘lhe investigation may likewise help to verify 
 some doctrines generally accepted in England as economic laws, 
 and to ascertain how far they possess the universality or inde- 
 pendence of time and place usually attributed to them, or need 
 to be conditioned and qualified, if not abandoned. | 
 America—as for shortness we may sometimes call the United 
 States, though Canada and South America are not included in 
 the present inquiry—is the country above all others to which 
 we might naturally look for original and considerable contribu- 
 tions to the science of wealth through the inductive study of 
 
 
 
 _ * Fortnightly Review, October Ist, 1880. 
 
 as ck 
 
Political Economy in the United States. 127 
 
 new facts. The diversity of some of the economic phenomena 
 
 of this new world from those of the old; the unparalleled 
 ~ rapidity of its material progress, and the novel conditions, 
 physical and political, under which it has taken place; the 
 freedom from the limitations by which the populations of 
 European countries are restricted; the absence of monarchy, 
 aristocracy, and the military element, and of the peculiar 
 direction which they give to production and distribution, seem 
 to open a most promising field of observation.\ Nor would it 
 seem unreasonable to expect that in a country the most im- 
 portant part of whose economic development has taken place 
 within living memory, some important discoveries might have 
 been reached with respect to the laws of social evolution under 
 which this gigantic growth has been attained. It will presently 
 be seen that American political economy does really exhibit 
 some distinctive features closely connected with the physical - 
 character of the region in which it has taken shape, and with 
 the diversity of the material condition of its population from 
 that of any society of the Old World.) Yet in America itself, 
 if we except a recent Californian writer, whose claims will be 
 examined, none but the disciples of Mr. Carey would pretend 
 that any considerable discoveries have been made in relation to 
 the natural laws of the production and distribution of wealth, 
 or that any great addition has been made to the stock of 
 economic knowledge. With exceptions and qualifications that 
 will be pointed out, American political economy is in the main 
 an importation from KEurope, not an original development; it 
 has made but slight inductive study of surrounding phenomena, 
 and follows, for the most part, the method of deduction from 
 general assumptions; it has hardly attempted to investigate 
 the laws of evolution of which the present economic structure — 
 and state of American society are the outcome. In 1876 the 
 ‘North American Review’ celebrated the centenary of the 
 Declaration of Independence by a number of excellent essays 
 on the progress of the American mind during the century in 
 several directions. In one of these, on ‘ Economic Science in 
 
 America, 1776-1876,’ Mr. C. F. Dunbar, now Professor of 
 
128 Political Economy in the United States. 
 
 Political Economy in Harvard College, while admitting the- 
 value of some dissertations on special subjects, summed up the: 
 history of American political economy for a hundred years in 
 the sentence that ‘the United States had done nothing towards 
 developing the theory of political economy, notwithstanding 
 their vast and immediate interest in its practical application.’ 
 The qualities displayed in Mr. Dunbar’s own essay afford an 
 indication that, if his country has done little for the advance- 
 ment of his branch of philosophy, it has not been for want of 
 intellectual power, and the works of several of his countrymen 
 in the same field support the conclusion. It is worth notice 
 that practical jurisprudence has long engaged the American 
 intellect with success. Kiven Franklin seems never to have 
 mastered the elements of economic science; but before the 
 Declaration of Independence, Edmund Burke had noticed the 
 bent of the colonists’ mind towards the study.of law. ‘In no. 
 country in the world,’ he said, in 1775, ‘is the law so general a 
 study. All who read—and most do read—endeavyour to obtain 
 a smattering in that science.’ Mr. John Stuart Mill, happening 
 to be asked in conversation by the present writer how he ac- 
 counted for the Greeks doing nothing in jurisprudence when 
 the Romans did so much, answered that ‘the question always 
 to be asked was how a people came to do anything? Their 
 doing nothing was easily accounted for.’ Like everything 
 Mr. Mill said, the remark was sagacious and instructive. Vis 
 inertie, routine, the obstacles within and without every man to. 
 original intellectual efforts and to their success, account for 
 much being left undone, even by nations possessed of the 
 highest faculties. Yet, in reference to the slight progress of 
 political economy in America, at least down to the last fifteen 
 years, we shall do well not to rest satisfied with the explanation 
 that no explanation is needed. 
 
 Mr. Perry, in a chapter in his ‘ Klements of Political 
 Economy,’ on the history of the science, speaks of the cireum-. 
 stances of the United States as having been favourable from 
 the beginning to the cultivation of economic studies, alluding 
 to the resistance to restrictions on trade in which the Revolution 
 
 - 
 
Political Economy in the United States. 129 
 
 began, the various experiments in currency, the discussions 
 excited by tariff after tariff, and the attention directed to the 
 new gold mines. Yet the reader will, we believe, incline to the 
 opposite conclusion, that, down at least to the close of the war 
 between the Northern and Southern States, the circumstances 
 of the country were unfavourable to the cultivation of economic 
 science. ‘The most conspicuous of the causes that have with- 
 drawn the American mind from it may be classed under the 
 head of physical geography, including the natural resources of 
 the Continent, its facilities for internal commerce and migration, 
 and its separation, on the other hand, by two oceans from some 
 of the gravest troubles of the Old World. ‘Give me,’ said 
 Cousin in his ‘ Lectures on the History of Modern Philosophy,’ 
 ‘the map of a country, its configuration, its climate, its waters, 
 its winds, its natural productions, its botany, its zoology, all its 
 physical geography, and I pledge myself to tell you what will 
 be the man of that country, and what place that country will 
 occupy in history.’ Had M. Cousin been given only the map 
 and physical geography of North America, it might have 
 puzzled him to say what would be the man of that continent— 
 whether a Red Indian or a Yankee, as the red man pronounced 
 the French name of the Englishman; and what place that 
 continent would occupy in history—whether a place such as 
 it occupied before the age of Columbus, or such as it occupies 
 now. Yet the element on which M. Cousin laid excessive 
 rhetorical emphasis has in reality acted with a potency needing 
 no exaggeration. An English writer, as prone to sweeping 
 generalization as M. Cousin, has referred to America in illus- 
 tration of a distinction between Europe as the quarter of the 
 globe in which man is stronger than nature, and the other 
 quarters in which man is overpowered and reduced to insig- 
 nificance by the forces of the external world. Mr. Buckle 
 seems, however, to have had in view only the tropical regions 
 of the. New World, where nature, doubtless, is more exuberant, 
 and man less energetic and enterprising, than in its temperate 
 zone. In the latter, man’s environment has exercised an in- 
 fluence of the highest importance in relation to the inquiry 
 K 
 
130 Political Economy in the United States. 
 
 before us; but it has done so, not by overpowering and crush- 
 ing, but by stimulating and developing his energies. It has 
 not, however, exercised his faculties equally in all directions. 
 One of the conditions governing throughout the world the 
 - occupation and conquests of the human intellect is, that the 
 greater part of the mental power of every people is engaged in 
 the practical business of life, and only a small surplus is any- 
 where available for the cultivation of science and letters. But 
 two opposite kinds of physical environment tend to restrict, in 
 more than an ordinary degree, the higher ranges of intellectual 
 development. Extraordinary affluence and extraordinary bar- 
 renness of natural resources have one and the same tendency 
 to absorb in the pursuit of material welfare the energies of a 
 community. In Lapland and Greenland man’s whole strength 
 has been engrossed in supplying his first animal wants. In 
 the United States his activity has been prodigious and many- 
 sided, yet the stock of intellectual power available for achieve- 
 ments of a high order has been small. Production, accumulation, 
 exchange, and consumption, have gone on upon the grandest 
 scale, but they have engaged philosophical observation upon a 
 comparatively insignificant scale. 
 
 M. de Tocqueville, in his inquiry into the movement of 
 American intellect, observes that he regards the people of the 
 United States as the part of the English people charged with 
 the mission of subduing a new world, while the rest of the 
 nation, possessing more leisure and less occupied with the 
 material cares of life, is able to devote itself to thought and the 
 development of the spiritual life of humanity. The observa- 
 tion is applicable to political economy in common with other 
 branches of scientific and literary culture; but there are cir- 
 cumstances that have had a special tendency to repress in- 
 tellectual effort and originality in the direction of economic 
 inquiry. The very causes that were adverted to at the outset, 
 as opening a new field for the economist to explore, have not 
 only tended, in fact, to turn the national mind in other direc- 
 tions, and absorbed it in the actual acquisition of wealth instead 
 of theorising about it, but have prevented the conditions which 
 
Political Economy in the United States. 131 
 
 in Kurope chiefly contributed to fasten attention on economic, 
 subjects from arising. The problems relating to wealth that 
 have most urgently demanded solution in the Old World have 
 either never emerged or have assumed comparatively little im- 
 portance in America down to recent years. Without sickness, 
 wounds, and pain, there would have been no physiology, 
 pathology, or science of medicine. It was the distressed con- 
 dition of Kurope in the last century that gave birth to its 
 economic philosophy. Quesnay’s motto was, Pawvres paysans, 
 paurre royaume; pauvre royaume, pauvre rot. Adam Smith 
 wrote in a better governed and more prosperous kingdom, and 
 after a generation of unusual plenty; yet his inquiry into the 
 causes of the wealth of nations arose out of their general poverty 
 throughout history and in his own time. The fact that the 
 majority of the population of the whole world stood always on 
 the verge of destitution produced the doctrines of Malthus. 
 The free trade controversy in England grew out of dear bread, 
 depressed trade, low wages, and low profits; and it gave political 
 economy most of its importance in English estimation during 
 the last generation. Had Great Britain been as large, as fertile, 
 and as underpeopled as the United States, Mr. Mill might have 
 made a fortune in a counting-house instead of a reputation as 
 a, political economist. America owes doubtless in part to its 
 institutions its exemption from the necessity of attempting a 
 solution of the chief economic problems that have occupied 
 philosophers in Europe. The great writer on American de- 
 mocracy, however, seems to go too far in attributing mainly 
 to it the passion for material welfare and the eagerness and 
 enterprise with which riches are sought in the United States.* 
 In the most democratic cantons of Switzerland life has been 
 for centuries calm and tranquil enough. It is to the immense 
 prizes that nature offers, rather than to the equality of the con- 
 ditions of the race, that the ardour of the competitors in the 
 United States is to be ascribed. If democratic institutions be 
 compared with monarchic or aristocratic, abundant proof will, 
 
 
 
 
 
 * De Tocqueville, De la Démocratie en Amérique, lil. 208-11. 
 K 2 
 
132 Political Economy in the United States. 
 
 it is true, be found of the superior tendency of the first to 
 diffuse material prosperity throughout the mass of the people. 
 Switzerland is, in all its physical conditions, the antithesis to 
 America: nature has done almost nothing for its inhabitants 
 beyond the immense service, indeed, of interposing barriers 
 between them and the armies of emperors and kings; no road 
 in it leads to great fortunes. Yet, were the conditions of all 
 the countries of Europe as prosperous as that of Switzerland, it 
 may well be that a science of political economy would never: 
 have arisen, because no urgent economic problems would have 
 pressed for solution. Switzerland, however, has provided only 
 for its own people. ‘The grand achievement of America is to 
 have provided for all comers, and to have not only rescued from 
 destitution no small part of the population of Europe, but 
 placed them in such affluence that they can endure tariffs which 
 make them buy the produce of their old countrymen at twice its 
 natural cost. This, however, is an achievement not of political 
 institutions but of nature. The maintenance of the American 
 polity with its equality 1s, moreover, in a great measure due to 
 physical causes. ‘The ocean has kept it aloof from the wars of 
 the Old World, and the configuration of the continent has 
 maintained a single government. Had it been broken up into 
 rival states by deserts and mountain chains, instead of being 
 united by rich plains and noble rivers, it might have been a 
 battle-field. Thrones and military and aristocratic orders might 
 have been founded ; a Latin empire in Mexico would certainly 
 have arisen; national debts, war, taxes, and impoverishment, 
 would have followed. That the emergence of these phenomena 
 would have given a stimulus to economic inquiry we have proof, 
 not only in Kuropean history, but in the awakening of the 
 American mind itself to the study of political economy since the- 
 Civil War, with the burdens and difficulties it entailed. 
 
 The inhabitants of the New World have been the more 
 disposed to leave the production of science and literature to the 
 old, that they get their fruits at less than their cost of production 
 by importation ; and the absence of a law of international copy- 
 right has in turn been the more unfavourable to American 
 
Political Economy in the United States. 133 
 
 authorship that the rate of remuneration in other occupations 
 has been so high. The Pennsylvanian manufacturer complains 
 that he cannot compete with the cheap labour of England, 
 though freight is added to the prime cost of every pound of 
 English produce imported ; yet he is content that the American 
 author should compete with English books for which neither 
 producer nor carrier has been paid. A single copy of Mill’s 
 ‘Principles of Political Economy,’ or Bastiat’s ‘ Harmonies 
 Heonomiques,’ is all the American publisher need buy. No 
 wonder if American economists should be content to take their 
 political economy for the most part ready made from Mill and 
 Bastiat. 
 
 It would, nevertheless, be an erroneous conclusion that 
 American political economy has no peculiar features, or that 
 little is to be learned from its study. Besides the perspicuity 
 with which its doctrines are set forth, and the novel illustrations 
 and instances which it affords, it has striking and distinctive 
 characteristics, an examination of the nature and causes of 
 which cannot fail to instruct the English economist. The reader 
 will find in their consideration fresh evidence of the influence, 
 among other conditions, of the physical geography of a country 
 on its philosophy, 
 
 American economists have, in the first place, been nearly 
 unanimous in rejecting, or, at least, setting aside as practically 
 unimportant, the Malthusian doctrine of a tendency of population 
 to outstrip the means of subsistence. It is controverted or 
 ignored in all American treatises on the general principles of 
 economics. It is repudiated alike by protectionists and free- 
 traders—by Carey, Thompson, Peshine Smith, and Bowen,* the 
 authors of the chief systematic works on the science which 
 advocate protection, and by Amasa Walker and Perry, the 
 writers of the chief text-books in which the freedom of inter- 
 national trade is supported. Mr. Henry George, the propounder 
 
 
 
 
 
 
 
 * Mr. Bowen is in error in asserting, in a recent article in the North American 
 Review on ‘ Malthusianism, Darwinism, and Pessimism,’ that for the last thirty 
 years English economists have abandoned the Malthusian theory. 
 
134 Political Economy in the United States. 
 
 of a new theory of the distribution of wealth, and of the causes 
 of poverty, is as zealous in antagonism to it as the writers of 
 American schools, from whom he differs on other fundamental 
 points. The immense resources of the North American con- 
 tinent ; the extent of uncultivated land of the highest fertility ; 
 the constant movement of agriculture to richer instead of to 
 poorer soils, while the cost of production is further diminished 
 by invention; the actual need of a faster increase of population 
 than the country itself yields; the rapid improvement in the 
 condition of a perpetual influx of emigrants, are enough to 
 account for general scepticism or indifference with respect to the 
 doctrine of Malthus. A comparison of his chapter on the checks 
 to population in France, with its actual movement since his 
 time, shows, indeed, that he much underestimated the force of 
 the preventive check there under institutions conducive to pro- 
 vidence ; and among the American-born citizens of the United 
 States this check is even stronger than in France. It must be 
 allowed to detract not a little from the practical worth and 
 lasting fame of his doctrines, that Malthus should have shown 
 so little insight into the power of institutions to foster either 
 improvidence or prudence, as to speak of them as in reality light 
 and superficial in comparison with those deeper-seated causes of 
 evil which result from the laws of nature and the passions of 
 mankind. Nevertheless, his fundamental position remains 
 unshaken, that, given the fecundity or power of increase of 
 mankind, or the ‘ potential rate,’ as it has been called, of popu- 
 lation, which he assumed, the numbers of any nation must, 
 unless restricted by either preventive or positive checks, soon 
 exceed the means of subsistence. If the ‘potential rate’ of 
 human increase everywhere and always accords with his assump- 
 tion that it tends to double in every twenty-five years, the 
 necessity for either positive or preventive restraints to keep 
 population within the limits of subsistence is incontrovertible. 
 Both in America and in England the antagonists to Malthus 
 misapprehend the doctrine they combat, when they point to an 
 actual increase of wealth as well as of population even in old 
 countries. 3 
 
Political Economy in the United States. 155 
 
 In neither England nor France has population advanced at 
 the assumed ‘ potential rate ;’ it has everywhere been restrained 
 by preventive or positive checks, or by both. But the question 
 follows—Is the potential rate always and everywhere what 
 Malthus supposed P Does it really remain constant, as he 
 assumed ? ; 
 
 Mr. Amasa Walker has adduced the following statistics of 
 the proportion of births among American-born and immigrant 
 inhabitants of the State of Massachusetts, merely with the view 
 of proving the strength of the preventive check in a highly 
 civilized and prosperous community, but they suggest something 
 more :— 
 
 Native population, ‘ ‘ : ; . 970,952 
 Foreign, : ‘ : : ' . 260,114 
 Number of births in native population, . 16,672 
 
 5 “fi foreign o é - 16,1388 
 
 The number of births in the native population, as he 
 observes, to be in proportion to the foreign, should have been 
 60,289, or nearly four times the actual number. ‘The grand 
 cause for this remarkable difference,’ according to Mr. Walker, 
 ‘is to be found in the fact that the foreign population are far 
 less influenced by prudential considerations and social restraint.’ 
 They therefore enter the marriage state with less regard to 
 their ability to support a family respectably. ‘On the other 
 hand, the resistance to marriage from a more costly style of 
 » living is constantly increasing with the native population, 
 among whom the standard of family expenditure rises rapidly 
 with the finer culture, the more elegant arts, and the greater 
 social vivacity of each new year.* In support of this view the 
 author adds statistics showing that the number of marriages in 
 proportion to population is twice as great among the immigrant 
 as among the American-born inhabitants of Massachusetts. 
 _ But the proportion of births has been seen to be not twice only 
 but four times as great. Such a decline of births seems to 
 indicate something more than an increased force of the pruden- 
 
 
 
 * The Science of Wealth, By Amasa Walker. 7th ed., p. 463. 
 
136 Political Economy in the United States. 
 
 tial check since Franklin said, ‘ Marriages in America are more 
 general and more generally early than in Europe; and if in 
 Europe they have but four births to a marriage, we may here 
 reckon eight.” Mr. Walker himself suggests that one cause 
 of the difference is, that ‘the foreign population is engaged 
 somewhat less than the native at indoor and sedentary employ- 
 ments, and in so far are likely to be more vigorous.’* He 
 furnishes statistics, too, which prove that the mortality 1s con- 
 siderably greater, and the longevity less, among the American- 
 born than among the foreign inhabitants. When to this we 
 add the vastly greater proportion of diseases of the digestive 
 organs in the United States than in Great Britain,t the 
 premature fading of American women, and what dentists report 
 of the frailty of American teeth, the conclusion seems inevitable 
 that a decline in vigour and fecundity is one of the causes of the 
 small families of American-born citizens, and that the ‘ potential 
 rate’ of population is not constant, as Malthus supposed. ‘That 
 climate is not the cause appears from Franklin’s statement 
 quoted above. The climate of Lower Canada is healthier than 
 that of Massachusetts, but not sufficiently so to account for the dif- 
 ference in the number of children to a marriage. ‘ Nous sommes 
 terribles pour les enfants,’ said a French Canadian to Mr. John- 
 ston, adding that from eight to sixteen are the usual number 
 of the farmers’ families, and naming women who had five-and- 
 twenty children, and threatened /e vingt-sixiéme pour le prétre.t 
 
 The slow growth of the native population of the Hastern 
 States of America seems to lend probability to Mr. Herbert 
 Spencer’s doctrine, that the increased cost in nervous structure 
 and function attending the keener struggle for life, as human 
 society advances, entails’ a diminution in fecundity. And 
 whoever studies Mr. Spencer’s arguments, along with facts 
 which may be learned from English physicians, surgeons, and 
 dentists, will find ground for surmising that new elements and 
 
 
 
 * The Science of Wealth. By Amasa Walker. 7th ed., p. 463. 
 
 t Notes on North-American Agriculture, Economical and Social. By James F. W. 
 Johnston, ii. 396. 
 
 t Lbid., i. 346. 
 
Political Economy in the United States. 137 
 
 conditions, which Malthus could not foresee, have begun to 
 affect the population of Hurope itself. A question, indeed, 
 arises whether Mr. Spencer’s view of the matter is not of too 
 optimist a colour; and whether the hurry and anxiety of 
 modern life do not cause more than a mere change in the 
 direction and use of nervous power, and bring with them a 
 ‘decline in physical vigour that takes many painful and distress- 
 ing forms, and is, in truth, a degeneracy of the race. However 
 this may be, there is much to justify a doubt that Lord 
 Macaulay’s prediction will ever be fulfilled, or that American 
 economists will ever be driven to give the theory of Malthus a 
 prominent place in their treatises. 
 
 A second marked feature of American political economy is 
 the conspicuousness of a theological element. Mr. Buckle 
 affirmed that in England political philosophy was finally 
 separated from theology before the end of the eighteenth 
 century ; and Dr. Roscher speaks of German political economy 
 as haying disengaged itself from religion and become an 
 independent science a century earlier. Neither proposition is 
 strictly accurate; but neither German nor English writers on 
 the science have incorporated theology with it, as American 
 economists have habitually done. ‘The assumption of an in- 
 visible hand, directing to the general good the efforts of 
 individuals seeking their own gain, appears only in a single 
 passage of the ‘ Wealth of Nations,’ and Adam Smith’s 
 economic philosophy could stand without it. He never used 
 his conception of the character and designs of the Deity as a 
 premiss from which to deduce conclusions or laws. Archbishop 
 Whately is the only modern English writer of eminence who 
 has imported theological conceptions into economic discussions : 
 he was a digressive writer, and his introduction of theology is 
 clearly a digression. Of Continental economists, Bastiat is the 
 one in whom the religious element is most prominent; but with 
 him, too, it comes in as an inference, not as a major premiss. 
 The harmony of the economic interests of mankind is not 
 deduced from the beneficence of the Ruler of the Universe, but 
 inferred from economic facts, and applied to confirm the belief 
 
138 Political Economy in the United States. 
 
 in such a ruler. In American treatises, on the other hand, 
 theology becomes the backbone of economic science. Assump- 
 tions respecting the Divine will and designs are employed by 
 both protectionists and free-traders in support of their theories. 
 The Malthusian theory is controverted as atheistic in tendency, 
 and contrary to the commandment to replenish the earth. Mr. 
 Perry announces at the beginning of his ‘ Elements of Political 
 Economy,’ which has reached a fourteenth edition, that one of 
 his main purposes is ‘an examination of the providential 
 arrangements, physical and social, by which it appears that 
 exchanges were designed by God for the welfare of men.’ He 
 bases his theory of value and rent on the proposition that ‘ God 
 is a giver, and not a seller,’ and that ‘ value has its origin, not 
 in what God has done, but in what man has done.’ Children 
 used to have a way of classing books as ‘Sunday’ or ‘ week- 
 day books’ by looking over the leaves for sacred names. 
 According to this criterion several American treatises on political 
 economy would be set apart as Sunday books. See, for instance, 
 Mr. Perry’s ‘ Elements of Political Economy, pp. 2, 63-5, 181,. 
 238-41 ; and his ‘ Introduction to Political Economy,’ pp. 29, 
 73-5, 152, 208. 
 
 One cause of this characteristic is the religious origin of the 
 chief American colonies, and the traditional influence of theolo- 
 gical tenets over American thought on which M. de Tocqueville 
 lays stress.* The chief American colleges in the Eastern States 
 Were, moreover, founded for sectarian purposes, and their 
 original design still exercises a considerable though a declining 
 influence over their systems of instruction and philosophy. At 
 Yale College an attempt was made last year to stop the Professor 
 of Social Science, Mr. W. G. Sumner, whose name is honourably 
 known in this country as well as in his own, from making use 
 of Herbert Spencer’s works, and the matter is not yet settled.. 
 Down to recent time, also, the lecturers on political economy in 
 American Colleges were for the most part, as many of them still 
 are, ministers of religion. ‘This circumstance is itself connected. 
 
 
 
 * De la Démocratie en Amérique, iii. 10, 11. 
 
Political Economy in the United States. 159 
 
 with a more general cause; for political philosophy has been 
 left to a theological class, who have worked their professional 
 ideas into it, because the laity were engaged in more lucrative 
 pursuits. Again, the prosperity of the American people, and 
 the bountiful aid which human effort receives from nature, are 
 more in harmony than the general condition of Kuropean society 
 with assumptions of beneficent design in the arrangements of 
 the economic world. Sentiment has undergone a great change 
 in modern times in relation to this point. In the Middle Ages 
 pain, privation, and poverty were regarded as pleasing to God, 
 and the idea lingered long afterwards. Lord Bacon speaks of 
 times of peace and prosperity as inclining to atheism, ‘For 
 troubles and adversities do more bow men’s minds to religion.’ 
 The feelings of our own day are becoming more and more 
 adverse to such a conception. Mr. Mill’s essays on religion 
 leave little room for doubt that had all mankind been as happily 
 circumstanced as the people of the United States, he would have 
 been a confirmed theist. An example of the mixture of national 
 pride in the prosperity of the United States with thankfulness 
 to heaven on the part of its citizens that they are not as other 
 men are, appearsin the Secretary of State’s letter accompanying 
 the reports of the United States consuls, in 1879, on the ‘ State 
 of Labour in Europe’: ‘No American labourer or capitalist,’ 
 says Mr. Evarts, ‘ can read their reports without a feeling of the 
 utmost commiseration for the toiling millions of Europe, and 
 heartfelt pride in and appreciation of the blessings which heaven 
 has vouchsafed to the people of the United States.’ 
 
 A third characteristic of American political economy is the 
 absence of long chains of deduction, such as English economists 
 have affected, from the assumption that competition equalizes 
 the wages of labourers and the profits of capitalists in different 
 occupations and localities throughout a country. A priori one 
 might naturally have anticipated, from the mobility of labour 
 and capital in the United States, that the doctrine of the 
 dependence of prices on cost of production, by reason of the 
 equality of the gains of equal efforts and sacrifices, would have 
 been pushed to its farthest point there. It has been, on the 
 
140 Political Economy in the United States. 
 
 ‘contrary, rejected by some American economists, ignored by 
 others, or greatly qualified, and by none made the foundation of 
 a great superstructure of theory ; and two causes seem to have 
 contributed to this:—First, the rapid invention and change in 
 the processes of American industry ; for only in a stationary 
 condition of the industrial arts could the value of commodities 
 really depend on their original cost. Secondly, the fluctuation 
 in prices, and the palpable deviation from first cost, resulting 
 from speculation, the manipulation of dealers, and the local 
 variations of demand and supply within the vast area over 
 which American business is carried on. ‘The extraordinary 
 fluctuations of the grain and flour market in this country,’ says 
 Mr. Bowen, ‘American Political Economy,’ p. 212, ‘are so 
 great as to put all calculations at defiance, and to make the 
 gains of dealers nearly as uncertain as a lottery.” And Messrs. 
 Jtead and Pell observe in their recent report, ‘ When we quitted 
 America wheat was 13d. per bushel cheaper at Liverpool than 
 New York; and wheat of the same quality was worth almost 
 as much at Chicago, 900 miles from the seaboard.’ 
 
 A fourth distinguishing feature of the development of 
 Political Economy in the United States is the systematic 
 - teaching of protectionism in colleges and text-books as a 
 ‘scientific doctrine. In the United Kingdom only a single 
 professor of the science—the late Isaac Butt, who for a time 
 held the chair of Political Kconomy in the University of 
 Dublin—has shown any leaning towards protection. In 
 Germany Dr. Schmoller, Professor in the University of Stras- 
 barg, supports the present protective tariff, and has some 
 followers. But no regular text-book of the principles of 
 political economy, advocating protection, so far as the present 
 writer is aware, has been published in any country in Hurope. 
 In the United States, on the other hand, protection is set forth 
 in formal economic text-books—for example, the treatises of 
 Carey, Thompson, Peshine Smith, Bowen, and Wilson—and 
 taught by the professors of several colleges. Mr. Perry, though 
 himself a zealous advocate of the freedom of trade, in his 
 * Elements of Political Economy,’ describes American economists 
 
Political Economy in the United States. 141 
 
 as falling for the most part into two groups:—‘ First, those 
 modelled mainly after the ideas of Adam Smith ; and, secondly, 
 those modelled mainly after the ideas of Henry C. Carey;’ 
 thus recognising the system of Carey and his followers as that 
 of a school of economists. No supporter of free trade, indeed, 
 could be appointed to a chair, or get a class of students, in 
 Pennsylvania. In the other colleges the lecturers in political 
 economy are generally on the side of free trade, yet notable 
 exceptions may be found. In Harvard College Mr. Bowen’s 
 chair included economics when his ‘American Political Economy’ 
 was published, in 1870. The chair has since been -divided, it 
 has been said, in consequence of Mr. Bowen’s strong protectionist 
 bias ; but his successor in respect of economic functions, Mr. C. 
 Dunbar, is reported to be a mild protectionist, though no 
 indication of this appears in the essay above referred to, but 
 only an objection to sudden and violent alterations in tariffs. 
 At Cornell University, Dr. Wilson, who lectures on economic 
 science, has published a manual which shows him to be a 
 protectionist. Physical and political conditions have combined 
 in America to evoke a development of protectionist doctrine. 
 The chief obstacle the manufacturer there has had to combat, in 
 competing with England, has been the superiority of his own 
 country in some of the natural elements of wealth—land and 
 its products, cereals, cotton, tobacco, and the precious metals— 
 creating a scale of wages much above the English rate, and 
 raising the cost of production in industries in which the natural 
 advantages are not so great. The best economy, of course, 
 would have been for American ‘capital to confine itself to the 
 fields in which it had superior productiveness, awaiting a rise of 
 wages and in the cost of coal-mining in England for competition 
 in others. But in some States, Pennsylvania especially, there 
 were rich coal-beds and iron ores; and the owners of these and 
 the capitalists at their side were naturally impatient for an 
 earlier harvest, in reaping which, moreover, they could not, like 
 the English protectionists, be charged with taxing the food of 
 the labourer. The antagonistic feeling towards England of a 
 large section of the Republican party concurred to favour 
 
142 Political Economy in the United States. 
 
 protection. But instead of taking sulk at political economy 
 and turning his back on it, as the English protectionist did, the 
 shrewder American sought a political economy on his own side, 
 advocating a development of all the national resources ; and 
 authors and lecturers were soon forthcoming to supply the 
 demand for economic science of this sort. 
 
 The professors of political economy in the United States, 
 elsewhere than in Pennsylvania, are, however, for the most part, 
 on the side of free trade. And when it is borne in mind that 
 each of the thirty-six States in the Union has from one to five 
 or six universities or colleges—‘ university ’ in the United States 
 means no more than ‘college,’ and is only regarded as a somewhat 
 finer name—and that there are 287 such universities or colleges, 
 the importance of a decisive predominance of free trade doctrine 
 in academic lectures and instruction is undeniable. Its signifi- 
 cance ought not, however, to be overrated. Hven in England 
 it was not philosophers and professors, but manufacturers and 
 politicians, who carried free trade : in America the manufacturers 
 and most energetic politicians are against it, and can point toa 
 so-called national system of political economy on their side, 
 while the opposite system labours under the suspicions attaching 
 to a foreign origin. 
 
 Economie theories and systems may be regarded in several 
 different lights: (1) in reference to their causes, as the products 
 of particular social, political, and physical conditions of thought ; 
 (2) in reference to their truth or error; (8) as factors in the 
 formation of public opinion and policy. It is chiefly from the 
 first of these points of view that American political economy 
 has been considered in this essay ; but the other aspects of the 
 subject ought not to be altogether overlooked. The chief 
 different schools of economic doctrine in the United States 
 accordingly call for some notice. On the side of free trade 
 are two schools, of whose leading principles respectively the 
 late Amasa Walker’s ‘ Science of Wealth,’ now in its seventh 
 edition, and Mr. Perry’s ‘ Elements of Political Economy’ and 
 ‘Introduction to Political Economy,’ may be said to contain 
 the best expositions. Mr. Walker’s treatise fully deserves its 
 
Political Economy in the United States. 143 
 
 popularity and circulation, but is so nearly in accordance with 
 the views of the majority of English economists, unless with 
 respect to population, as to need no special description. Mr. 
 Perry, on the other hand (Professor of History and Political 
 Economy in Williams’ College, Massachusetts), claims to belong 
 to a newer school, of which Bastiat is the chief light. The 
 lines of his system seem, by Mr. Perry’s own account, to have 
 been somewhat hastily traced in his mind. The study of 
 Bastiat’s ‘ Harmonies Economiques’ had, he says, been recom- 
 mended to him: ‘I had scarcely read a dozen pages in that 
 remarkable book,’ he adds, ‘ when, closing it, and giving myself 
 to an hour’s reflection, the field of political economy in all its 
 
 outlines and landmarks lay before my mind, just as it does 
 
 to-day. From that hour political economy has been to me a 
 new science.’ ‘That the clearness with which a conception is 
 entertained gives evidence of its truth is a proposition for 
 which the maxim of an illustrious philosopher might be cited: 
 ‘ Credidi me,’ said Descartes, ‘pro regula generali sumere posse 
 omne id quod valde dilucide et distincte concipiebam verum esse.” 
 Modern logic, nevertheless, rejects the presumption, and, as 
 Mr. Mill has observed, no one can have examined the sources of 
 fallacious thought without becoming deeply conscious that a 
 nice coherence and concatenation of our ideas are apt to pass off 
 with us for. evidence of their truth. Political economy, in 
 Mr. Perry’s view, is simply a science of value, and value is 
 never the result of natural agencies apart from human effort and 
 
 _ service, because God’s gifts are gratuitous. Rent, accordingly, 
 
 is a payment, not for the use of a natural agent, but for a 
 service rendered by the owner to the cultivator. ‘'o the obvious 
 objection that land varies in value from natural causes Mr. Perry 
 replies, that ‘A high degree of natural fertility has been scattered 
 with so bountiful a hand, and lands naturally less fertile have 
 such comparative advantages of another sort, that under a broad 
 view the degree of original fertility becomes a common factor. . 
 cancelled in price.’ - In other words, land has everywhere some 
 natural advantage or other of fertility, situation, aspect, climate, 
 water-power, mineral wealth, &c., so that there is a general 
 
144 Political Economy in the United States. 
 
 equality in respect of natural gifts, and land rent is never the 
 price of their monopoly. Mr. Perry has visited the British 
 Islands, and might have learned that even within their narrow 
 compass the gifts of nature are most unequally distributed, and 
 that the barren mountains of Donegal or the Shetland rocks. 
 have ‘no compensating advantage of another sort’ to redress. 
 the balance. 
 
 A chain of filiation connects Mr. Perry’s system with one- 
 which, on the question of free trade, is fundamentally opposed 
 to it; for Mr. Perry’s doctrines are derived directly from 
 Bastiat; and Carey, not without reason, claimed that Bastiat 
 owed to him his leading ideas respecting the harmony of 
 economic interests, the value of land, and the economic results 
 of the growth of population and civilization. Carey himself 
 owed not a little to Herbert Spencer, though he strangely 
 metamorphosed some of the conceptions he drew from that 
 great thinker’s philosophy. A personal element, however, 
 combined to mould Carey’s economic ideas. ‘Throughout the 
 history of political economy, indeed, the personal history, 
 education, and character, of particular writers has borne no small 
 part in its developments and forms.* Dr. William Elder, one of 
 Carey’s most zealous supporters, remarks that, besides being a. 
 philosopher, he was an American and a patriot, and that his 
 passionate hostility to the British system of foreign trade, and 
 to the subsidiary British system of political economy, takes 
 something of the temper and tone of national prejudice.t Dr. 
 Elder adds: ‘His father was an Irish patriot and a political 
 exile from the land of his birth. Something hereditary may be. 
 detected running with much of the pristine force of blood 
 through the life and character of his son.’ + 
 
 
 
 * For instances in the cases of Adam Smith, Quesnay, ‘Gournay, and J. 8. Mill,. 
 see the Essay in the present volume entitled, The Political Economy of Adam Smith, 
 pp. 30-34, and also pp. 65-56. 
 
 t+ Memoir of Henry C. Carey. By William Elder, Philadelphia, 1880, pp. 30-1. 
 
 { Ibid. Of the fervour of Carey’s utterances Dr. Elder says :—‘ He sometimes 
 clinched his deliverances with expletives and epithets something out of fashion in 
 society.” An English writer who visited him, after favourably describing him on 
 the whole to the writer of this essay, added: ‘He is a man of plain speech, and 
 swears like a bargeman whenever Mill’s name is mentioned,’ 
 
Political Economy in the United States. 145 
 
 The main doctrine of Carey is, that under a proper national 
 economy all the productive powers of a country and its people 
 are harmoniously developed, and continual progress is achieved 
 both in every branch of production and in the equity of 
 distribution. An industrial nation contains three great funda- 
 mental classes: the agricultural, the manufacturing, and the 
 commercial. All three should be developed and exist in equi- 
 librium. In a rude state of the social organism there is no 
 differentiation of functions ; every man is warrior, hunter, fisher, 
 builder, and carpenter. In an advanced and harmoniously- 
 developed society all the leading industries are carried on by 
 distinct classes, dependent on each other. Up to this point the 
 advocate of free trade, looking on civilized society as embracing 
 all civilized nations, might concur in the doctrine. The point 
 of separation is, that Carey regarded each nation as a distinct 
 social organism, containing the appointed natural means of 
 independent development. ‘No one,’ says the chief living 
 expositor of Carey’s ideas (Mr. Robert Ellis Thompson, Pro- 
 fessor of Social Science in the University of Philadelphia, and 
 editor of the ‘Penn Monthly’), ‘who believes in the continual 
 government of the world by Divine Will can doubt that nations 
 exist in consequence of that will. ‘ He fixeth the bounds of 
 the nation.”’ Hach State, like each man, has a vocation. Hvery 
 nation is a chosen people. It has a peculiar part to play in the 
 moral order of the world.’ Unless in the sense that whatever is 
 is right, and exists by divine ordinance—in which case Carey’s 
 followers must concede that free trade itself may be a divine 
 institution—it can hardly be maintained that the boundaries of 
 nations have been providentially ordained. A witty countryman 
 of Professor Thompson has ‘ guessed’ that ‘if ever the lion les 
 down with the lamb, it will be with the lamb inside;’ and such 
 is in reality the manner in which the bounds of the nations have 
 for the most part been settled. They have swallowed up their 
 weaker neighbours. History, too, is one long contradiction 
 of the fixity of national boundaries. The limits of no great 
 civilized empire, the United States not excepted, are what they 
 were the year before the ‘ Wealth of Nations’ was published 
 
 L | 
 
146 Political Economy in the United States. 
 
 and American Independence declared. How, then, can every 
 State contain within confines which are frequently changed the 
 ‘providential’ conditions of independent economic existence ? 
 Carey argues further that great waste in carriage is saved by 
 bringing the farm and the factory into close proximity to each 
 other, and that a return is thereby made to the soil, which is 
 thus not robbed of its constituents as it is by the exportation of 
 its produce. But in the United States the chief iron and coal 
 mines and factories are at one side of the continent; the richest 
 soils and the most productive farms are many hundred miles off 
 at the other side; considerable cost of carriage is incurred, and 
 no return of constituents is made to the land in the west from 
 produce sold in the east. 
 
 Carey’s system is, in fact, Pennsylvanian rather than national 
 economy ; it is a product of Pennsylvania, likeits iron and coal, 
 and has gained little acceptance in its entirety beyond the limits 
 of that State, asmay be gathered from the names of its principal 
 supporters. In other States the most popular exposition of 
 economic principles on the protectionist side is Mr. Bowen’s 
 ‘American Political Economy,’ a title assumed on the ground 
 that the system expounded by English writers is really the 
 political economy of England alone, while America needs an 
 American political economy adapted to what is special in its 
 physical conditions and institutions. Yet Mr. Bowen’s own 
 system is after all, in the main, English political economy, with 
 an incongruous admixture of Pennsylvanian doctrine in relation 
 to foreign trade. His treatise contains a clear exposition of 
 principles long generally accepted in England, and its protec- 
 tionism, like an artificial limb, can be detached without hurting 
 or altering the rest of the structure. Mr. Bowen, it ought to be 
 added, pronounces emphatically in favour of a metallic standard, 
 and advocates a resumption of specie payments; while Carey 
 regarded issues of inconvertible paper-money as streams of 
 productive wealth. Carey’s followers, in general, have been 
 charged with adhesion to this doctrine, but it is repudiated by 
 Professor Thompson, who advocates convertibility and deprecates 
 an inflation of the currency. Soft money seems to have little 
 
Political Economy in the United States. 147 
 
 support. now from any school of economists. Protection, however, 
 has much deeper roots ; a majority of the Republican party still 
 leans to it, and the intelligence of the country is to be found 
 chiefly in the ranks of that party. The line between protection- 
 ists and free-traders, it should be observed, does not coincide 
 with that between Republicans and Democrats. In Pennsylvania 
 both Republicans and Democrats are protectionists, while in the 
 city of New York many of both parties are free-traders. The 
 most able and energetic supporters of both free trade and 
 protection are Republicans. 
 
 Differing on some fundamental points from the systems that 
 have been described is the theory set forth in a work published 
 last year at San Francisco, entitled ‘ Progress and Poverty,’ the 
 author of which, according to the statement of American news- 
 papers, has lately been appointed Professor of Political Economy 
 in the University of California. From a passage in his book it 
 appears that he was formerly a working-man in a trade,* and 
 if this is to be understood in the ordinary sense, his learning 
 and literary power are truly astonishing and admirable. Among 
 other gifts he possesses a fertile imagination, supplying him 
 readily with pertinent illustration. Want of imagination is one 
 of the causes of the inability of many economists to emancipate 
 themselves from old abstractions, generalizations, and formulas. 
 Their minds do not enable them to realize actual phenomena, 
 and to test theories on all sides by a multitude of instances. 
 Mr. George’s work, however, calls for notice not only on account 
 of its ability, and because it contains internal evidence of being 
 a product of the economic history of California, but because also 
 of the magnitude of the problem it propounds, and the nature of 
 the solution it proposes. It seeks to discover the cause that 
 makes poverty the constant companion of wealth, and to find at 
 the same time the explanation of recurring seasons of industrial 
 and commercial paralysis and distress. Its author is opposed to 
 protection, and to various notions which, he says, are rapidly 
 gaining ground in the United States, ‘ that there is a necessary 
 
 
 
 * Progress and Poverty, p. 283. 
 L 2 
 
148 Political Economy in the United States. 
 
 conflict between capital and labour; that machinery is an evil, 
 that competition must be restrained and interest abolished ; that 
 wealth may be created by the issue of money; that it is the duty 
 of Government to furnish capital or to furnish work.’ He often 
 reasons deductively in the old-fashioned ‘ orthodox’ way, as 
 confidently as Ricardo or Mr. Senior, from the assumption that 
 every man follows his pecuniary interest by the shortest and 
 easiest road. It is surprising to an English reader, accordingly, 
 to find that his main theory is, that the cause of the accompani- 
 ment of great wealth by great poverty, and of the succession of 
 commercial depression to commercial prosperity, is the existence 
 of private property in land. 
 
 Poverty, Mr. George argues first of all, is never the 
 consequence of either a deficiency of capital or an excess of 
 labourers. The labourer produces his own wages, and is not 
 paid out of pre-existing capital, although the fact is concealed 
 by the separation of employments and the complexity of the 
 process of exchange. When a division of labour first takes place 
 in early society, and, instead of every man as before supplying 
 his own wants, one hunts, another fishes, a third gathers fruit, a 
 fourth makes weapons or tools, a fifth clothing; each really 
 produces his own maintenance, though he exchanges the produce 
 of his own labour for other things. So, in a more advanced 
 stage, an exchange is really going on between the producers in 
 different occupations, and the labourer gets his subsistence in 
 exchange for his own productive work, and does not derive it 
 from capital, though the capitalist conducts the exchange. And 
 an increase in the number of labourers causes a more than 
 proportionate increase instead of a diminution in the rate of 
 production. ‘Twenty men working together where nature is 
 niggardly will produce more than twenty times the wealth one 
 can produce where nature is most bountiful. The denser the 
 population, the more minute becomes the subdivision of labour, 
 the better the economy of work. It is true the growth of 
 numbers necessitates recourse to inferior soils and other natural 
 agents, but the increase of the power of the human factor more 
 than compensates for the decline in power of the natural factor, — 
 
Political Economy in the United States. 149 
 
 The richest countries are not those where nature is most prolific, 
 but where labour is most efficient, not Mexico but Massachusetts, 
 not Brazil but Great Britain. The cause, then, of the depression 
 of both the wages of labour and the interest on capital, and of 
 the growth of poverty, as society advances, is not the increase 
 of population, and does not lie in the conditions of production. 
 It must, therefore, lie in distribution. The rise of rent is the 
 real cause of the fall of both wages and interest, while the pro- 
 ductive powers of society, so far from declining, are improving. 
 Where the value of land is low, there may be a small production 
 of wealth, and yet a high rate of both wages and interest, as we 
 see in new countries. In California, where wages were higher 
 than anywhere else in the world, so also was interest higher ; 
 but rent was non-existent ; wages and interest have since gone 
 down together, while rent has risen with startling rapidity. 
 Where land is free, wages will consist of the whole produce, less 
 the part necessary to induce the storing up of labour as capital. 
 Where land, on the contrary, is all monopolized, wages may be 
 forced downto aminimum. Three parties divide the produce, 
 the labourer, the capitalist, and the landowner. If, with an 
 increase of production, the labourer gets no more, the capitalist 
 no more, but even less, the inference is that the landowner gets 
 the whole increment. It is not the total produce, but the net 
 produce after rent has been deducted, that determines what can 
 be divided as wages and interest. Free trade has enormously 
 increased the total wealth of Great Britain without lessening 
 pauperism, because it has simply raised rent. To extirpate 
 poverty, to make wages what justice commands they should be, 
 the full earnings of the labourer, we must substitute for the 
 individual ownership of land a common ownership: we must 
 make land common property. For this purpose it is only 
 necessary for the State to appropriate rent, not to dispossess the 
 holders of land of its occupation. — 
 
 Such, in brief, is the substance of Mr. George’s argument. 
 And so far as the proposition is concerned, that the labourer 
 produces his own wages, it is true, as an American economist 
 
150 Political Economy in the United States. 
 
 has shown in a work of great ability,* that in new countries 
 labourers are often paid after the harvest, or by the year, and 
 therefore out of the produce of their labour. Even in that case, 
 however, the fund out of which the labourer is maintained 
 while his wages are being earned, though his own, is the 
 produce of past labour, not of the labour he is actually per- 
 forming. In old countries the majority of the labourers 
 engaged in long operations have not wherewithal to maintain 
 themselves until the product is sold; but if they had, this fund 
 would be a product of previous labour ; it would be pre-existing 
 wealth productively employed; that is to say, capital in the 
 sense intended by Mr. Mill in his proposition that industry is 
 limited by capital—a proposition which Mr. George confounds 
 with the doctrine of the wages fund, now rejected by almost all 
 English economists. Piers the Plowman, in Langland’s poem, 
 had barely enough food saved from the previous produce of his 
 little farm to keep soul and body together until harvest time, 
 while hired labourers beside him had strong ale and fresh meat 
 and fish, hot and hot, twice a-day, because they were paid out 
 of the savings of their employers. Piers himself could have 
 fared equally well if, instead of waiting on his own crops to 
 dight his dinner as he liked best, he had gone into the labour 
 market for a share of the last year’s corn, and of beef and mutton 
 which had taken years to grow. In the England of our own 
 day labourers not only get wages from capitalists long before 
 their own work is finished and sold, but are many of them dead 
 and gone before then. Sometimes the product is destroyed by 
 an accident after the workmen have been paid wages in full, 
 but before the employer has made anything by it. In the 
 agricultural districts of California there was, as Mr. George 
 says, a total failure of crops in 1877; and of millions of sheep,. 
 nothing remained but their bones. The farmers, nevertheless, 
 hired labourers for the next crop, and he argues that they could 
 not have done so out of past produce which was lost. The case 
 
 * The Wages Question, by Francis A. Walker. See an Article by the same 
 writer, North American Review, January 1875. 
 
Political Economy in the United States. 151 
 
 really tells at both ends against Mr. George’s conclusion; for it 
 is clear that the labourers who helped to produce the crops that 
 perished were not paid for that year’s work, or maintained 
 during it out of its produce; and the funds which the farmers 
 borrowed to resume their operations must have been the produce 
 of previous work, not of work the fruits of which were not yet 
 forthcoming. 
 
 The accumulation of capital is, then, necessary for the 
 maintenance of labourers, though it may be accumulated by 
 themselves; and in a country like France, where land is to a 
 large extent held by the productive classes, including labourers, 
 capital is in good part accumulated out of rent. In France, 
 too, rent in the case of a majority of families is an addition to, 
 not a deduction from, wages and interest or profit ; and were 
 any government to seek to abolish private property in land, 
 there are several million Frenchmen would ‘ know the reason 
 why.’ Nor is it true that wages and interest uniformly decline 
 as rent advances. All three have been higher during the last 
 thirty years in England than they were a hundred and thirty 
 years ago—a fact which overthrows Mr. George’s whole theory. 
 In Holland all three have considerably risen in our own time ; 
 and although it is cited by one economist after another as the 
 country where interest is lowest, the rate of interest 1s now 
 considerably higher than in England, or than it was in Holland 
 itself fifty years ago. A simple illustration will show how this 
 may take place. Suppose a district contains ten million acres, 
 yielding at a low stage of husbandry ten bushels an acre, and 
 ten million acres of better land yielding fifteen bushels an acre, 
 and therefore five bushels per acre as rent. Let agricultural 
 art advance along with population, so as to double the produc- 
 tiveness of the whole district, and the poorer land will now 
 yield twenty, the best land thirty bushels an acre. Ten bushels 
 per acre instead of five will now be payable in rent for the best 
 land; yet the whole labouring population may be better clothed, 
 housed, and fed, in consequence of the improvements attending 
 the division of labour; and the farmer may get a higher return 
 on his capital. The entire amount of rent may also be received 
 
152 Political Economy in the United States. 
 
 by farming and labouring families, whom its very existence 
 may have stimulated to the industry and thrift that led to the 
 increased production. It is overlooked, one may add, by writers 
 who treat the fall of interest as society advances as an established 
 historical fact, that in old times most people could get no interest 
 at all on their savings, and hoarded them for lack of productive 
 investments. 
 
 On behalf of abolishing the private ownership of land, and 
 giving an equal share in the bounty of nature to all, Mr. George 
 urges that it is ‘ but carrying out in letter and spirit the self- 
 evident truth enunciated in the Declaration of Independence, 
 that all men are created equal; that they are endowed by their 
 Creator with certain inalienable rights; that among them are 
 life, liberty, and the pursuit of happiness.’ The age of the 
 Declaration of Independence was indeed one in which philoso- 
 phers believed in inalienable natural rights; and, if we are to 
 be guided by the ideas of its framers, nothing is more certain 
 than that they included among ‘natural rights’ the right of 
 every man to acquire property in both land and movables. 
 Only by a theory of dynamical inspiration, such as has been 
 applied to the Bible, can we get any other meaning out of the 
 Declaration than its authors intended. Coming down to more 
 recent times, Mr. George cites the actual procedure of the first 
 miners in California, who, he says, falling back upon ‘ first 
 principles, primitive ideas, and natural perceptions of justice,’ 
 declared that the gold-bearing land should remain common 
 property, of which no one might take more than he could use, 
 or hold for a longer time than he actually used it. It may be 
 that the land system of every country calls for reform, but it 
 may be hoped that civilized men will not seek precedents for it 
 in the infancy of the race, or in ‘ primitive ideas.’ Mr. George 
 can but have hastily studied the works of Sir Henry Maine, 
 whom he cites, if he supposes that early communities recognised 
 any common right in mankind, permanent or temporary, to the 
 use of the soil. Hach little tribe jealously excluded every other 
 to the best of its power, and recognised no right in a human 
 being, as such, to property of any kind, or even to liberty or 
 
Political Lconomy in the United States. 153 
 
 life. If, however, the natural perceptions of justice really lead 
 to common ownership, the citizens of California are bound to 
 admit Chinamen without number to a share in the land of the 
 State. Had Mr. George confined himself to contending that 
 the governments of new countries have committed a grievous 
 blunder in allowing their territory to be appropriated in 
 perpetuity by the first comers for a nominal payment, he would 
 have found allies among the advocates of private property in 
 land. ven in old countries like England, whose territory has 
 been appropriated by a small number of owners with the full 
 sanction of the State, and contracts, and dealings, and invest- 
 ments of capital, have gone on for centuries on this foundation, 
 all the requirements of justice and expediency would be met 
 were it enacted that at a remote date—say four generations 
 hence, or in the year 2001—all landed property, both in country 
 and town, shall revert to the State. At that period legislators 
 could decide, with better lights than we now possess, how to 
 dispose of the vast accession to its resources. It would in any 
 ease come into a fund which would enable it to extinguish all 
 taxes, and the restrictions to production and commerce they 
 cause. Unhappily, existing generations care little for a distant 
 posterity, and would be too apt, were the project under 
 discussion, to convert it into one for immediate and uncom- 
 pensated confiscation, such as Mr. George urges with a harshness 
 that might justify a harsher name. His theory bears decisive 
 marks of its growth out of the anomalous history of the 
 marvellous region in which it was published, from the first 
 occupation of the Gold Fields by strangers from every quarter 
 of the globe, down to the sudden impoverishment of San 
 Francisco in recent years by the fall in mining stocks and land 
 values, consequent on rash speculation and imprudent invest- 
 ments. As Carey’s system was a product of the mines of 
 Pennsylvania, so is Mr. George’s of those of California. 
 
 The prospects of political economy in the United States 
 should be augured rather from the capacity shown than from 
 what has been actually done, and in that sense the works of 
 oth the writers just referred to afford favourable indications, 
 
154 Political Economy in the United States. 
 
 Speaking generally, however, the men best qualified to stand in 
 the front rank of American economists are not the authors of 
 systems or general theories, or text-books of principles, but 
 writers on special subjects—David Wells, William M. Grosvenor, 
 Albert 8. Bolles, Francis A. Walker, Edward Atkinson, William 
 G. Sumner, C. F. Dunbar, and Simon Newcomb. Only since 
 the Civil War has America begun seriously to apply its mind to 
 economic questions, and the number of powerful intellects it has 
 brought to bear on them is a remarkable phenomenon in the 
 history of philosophy. Many of the best economic essays the 
 last decade has produced will be found in the pages of American 
 periodicals—the ‘ North American Review,’ the ‘ International 
 Review,’ the ‘Atlantic Monthly,’ the ‘Penn Monthly,’ the 
 ‘Princeton Review,’ ‘Scribner’s Magazine.’ Journals like the 
 ‘Nation’ and the ‘Public’ discuss economic questions with 
 consummate skill. In the translation of Roscher and Blanqui 
 work has been done by America which England ought not to 
 have left it to do. ‘Two considerable contributions to economic 
 history were made last year in the ‘Industrial History of the 
 United States,’ and the ‘Financial History of the United 
 States, 1774-1789,’ by Mr. Bolles. In the perfection of its 
 economic statistics America leaves England behind. 
 
 Were we surveying the entire field of political economy, so 
 far as it has been cultivated in both the old and the new world, 
 the question would arise :—How much, beneath what can claim 
 only a local or a temporary importance, possesses universal and 
 permanent value? What problems have been solved for all 
 time? What universal truths have been discovered? How 
 much of the work of Adam Smith, Malthus, John Stuart Mill, 
 Roscher, Knies, Bastiat, Chevalier, Wayland, Walker, Perry,. 
 Carey, will remain standing and solid a hundred years hence ? 
 The subject of this Essay raises a still more important question : 
 What new economic problems remain ? Among them are some, 
 it may confidently be affirmed, which the chief economists of 
 both worlds have never yet raised, and of which they have not 
 dreamt. There is reason to believe that America will take an 
 active part both in bringing them to light and in their solution. 
 
XIV. 
 
 ECONOMIC SCIENCE AND STATISTICS.* 
 
 Economic. SctencE was not formally included within the 
 Statistical Section of the British Association until 1856; and, 
 even since then, addresses of distinguished Presidents of the 
 Section have turned mainly on its statistical functions, and 
 have been devoted principally to an inquiry into the nature and 
 province of statistics. That the inquiry is neither so superfluous 
 nor so easy as might at first appear is sufficiently shown by the 
 fact that there are, according to the great German statist, Dr. 
 Engel, no less than 180 definitions of the term to be met with 
 in the works of different authors. These various definitions 
 may, however, be said to group themselves round one or other 
 of three conceptions, of which one follows the popular view of 
 statistics ; the etymological and original meaning almost 
 disappearing in the notion merely of tables of figures, or 
 numbers of facts, of which the chief significance lis in their 
 numerical statement. According to another conception, statis- 
 tics, following etymology and the signification given to Statistik 
 by the famous Gottingen school, should be regarded as equivalent 
 to the science of States, or political science, but, nevertheless, 
 as confining itself to the ascertainment and collection of facts 
 indicative of the condition and prospects of society, without 
 inquiring into causes or reasoning on probable effects, and 
 carefully discarding hypothesis, theory, and speculation in its 
 investigations. A third conception is, that statistical science 
 aims at the discovery, not only of the phenomena of society, 
 but also of their laws, and by no means discards either inquiry 
 into causes and effects or theoretical reasoning. : 
 
 
 
 * Atheneum, September 27, 1873.—Written on the meeting of Section F of 
 the British Association for the Advancement of Science, September, 1873. 
 
156 Keonomie Science and Statistics. 
 
 It is curious that some who give to statistics the first of 
 these three meanings, and who regard the numerical statement 
 of facts, and the marshalling of tables of figures, as the proper 
 business of the statistician, nevertheless speak of statistics as a 
 science. But, as the eminent economist Roscher has observed, 
 numbering or numerical statement is only an instrument of 
 which any branch of science may avail itself, and can never, 
 in itself, constitute a science. No one, as he says, would dream 
 of making a science of microscopics, or observations made 
 through the microscope. The distinguished English statistician 
 and economist, Mr. Jevons, has likewise condemned the miscon- 
 ception of statistics and the misuse of the term we refer to in 
 language worth recalling :—‘ Many persons now use the word 
 statistical as if it were synonymous with numerical; but it is a 
 mere accident of the information with which we deal that it is 
 often expressed in a numerical or tabular form. As other 
 sciences progress, they become more and more a matter of 
 quantity and number, and so does statistical science; but we 
 must not suppose that the occurrence of numerical statement is 
 the mark of statistical information.’ 
 
 The doctrine that the consideration of causes and probable 
 reasoning are excluded from the province of statistics, and that 
 statisticians should confine themselves to the ascertainment of 
 facts, is hardly more satisfactory. No branch of science, no 
 scientific body, confines itself to the observation of phenomena 
 without seeking to interpret them or to ascertain their laws. 
 It is not, indeed, possible, at present, to explain all the 
 phenomena which come within the observation of the statist, 
 or to connect them with any law of causation ; and even naked 
 collections of statistical facts may be useful as aids to further 
 inquiry, or as supplying links in the chain of observed effects. 
 But serious error, and even practical mischief, have followed 
 from attention merely to the recurrence of statistical facts 
 without inquiry into their causes. A theory of a decennial 
 recurrence of commercial crises, for example, was based on the 
 occurrence of crises in 1837, 1847, and 1857. Had the causes 
 of commercial crises been examined, it would have been 
 
Economic Science and Statistics. 157 
 
 discovered that they are extremely various and uncertain in their 
 occurrence; that a war, a bad harvest, a drain of the precious 
 metals, anything, in short, which produces a panic, may cause 
 a crisis; and as there is no decennial periodicity in the causes, 
 there can be none in the effects. - 
 
 These considerations lead us to adopt the third conception 
 noticed above, namely, that statistical science investigates the 
 laws of social phenomena as well as the phenomena themselves; 
 and, if not co-extensive with sociology, or the science of 
 society—because not going so far back in its researches, and 
 confining itself to the phenomena of modern society—yet 
 employs all available methods, inquiry into causes, theory, and 
 probable reasoning for the interpretation of the facts it discovers. 
 But it is not easy to give to a word a signification other than 
 the one which long usage has put upon it; and, unfortunately, 
 to the majority of persons the term statistics denotes simply 
 dry figures and tabulated facts. The Statistical Section of the 
 British Association has found a means to escape from the 
 difficulty, in a great measure, by allying itself formally to 
 Economic Science. It thus embraces definitely and expressly 
 the whole economic side of the science of society, including the 
 investigation of laws of causation, as well as the observation of 
 facts, and employing all the methods of scientific investigation 
 and reasoning. But if it deals in this manner with economic 
 facts, it can hardly fail to do so likewise with the other classes 
 of social phenomena which it approaches. And thus, however 
 narrow may be the sense in which the term statistics may be 
 elsewhere employed, the Statistical Section of the British 
 Association is free from all trammel, and unfettered by any 
 exclusion of theory, or even speculation, in its investigation of 
 political and social problems. 
 
 The formal incorporation of economic science with statistics 
 has another great advantage: it tends to correct the error to 
 which economists as well as that to which statisticians are 
 specially prone. If the latter have been apt to think only of 
 facts, it has been the besetting sin of the former to neglect facts 
 altogether ; if statisticians have often been content to collect 
 
158 Economic Science and Statistics. 
 
 phenomena without heed to their laws, economists more often 
 still have jumped to the laws without heed to the phenomena ; 
 if statistics have lain chiefly in the region of dry figures and 
 numerical tables, economics have dwelt chiefly in that region of 
 assumption, conjecture, and provisional generalization, which 
 other sciences, indeed—geology to witness—have not escaped, 
 but from which they are triumphantly emerging by combining 
 the closest observation of phenomena with the boldest use of 
 speculation and scientific hypothesis. 
 
 We may thus look for considerable benefit to both political 
 economy and statistics from the combination of the methods to 
 which the followers of each have been specially addicted. 
 The subjects which occupied the principal place in Mr. Forster’s 
 address, and in the attention of the Section, conspicuously 
 illustrate the importance of combining statistical with economic 
 inquiry, and the characteristic defects of the economic and 
 statistical methods hitherto commonly followed. ‘Take, for 
 example, the question of wages. The relations of capital and 
 labour, and the causes determining the rates of wages, are not 
 to be summed up or disposed of in any brief formula or so-called 
 ‘economic law.’ But much might have been done, by the 
 collection of statistics and careful inquiry into facts, towards 
 obtaining much closer approximations to truth than the 
 generalizations which take the name of ‘the wages fund,’ ‘the 
 equality of profits,’ ‘ the average rate of wages ’—generalizations 
 of which the world generally has grown a little doubtful and 
 not a little weary. 
 
 Economists have been accustomed to assume that wages on 
 the one hand and profits on the other are, allowing for differences 
 in skill and soforth, equalized by competition, and that neither 
 wages nor profits can anywhere rise above ‘the average rate,’ 
 without a consequent influx of labour or of capital bringing 
 things to a level. Had economists, however, in place of 
 reasoning from an assumption, examined the facts connected 
 with the rate of wages, they would have found, from authentic 
 statistics, the actual differences so great, even in the same 
 occupation, that they are double in one place what they are in 
 
Economie Science and Statistics. 159 
 
 another. Statistics of profits are not, indeed, obtainable like 
 statistics of wages; and the fact that they are not so, that the actual 
 profits are kept a profound secret in some of the most prominent 
 trades, is itself enough to deprive the theory of equal profits of 
 its base. Enough, however, is known or discovered from time 
 to time, by the working men in particular trades, to justify them 
 in the conclusion, on the one hand, that profits will bear a reduc- 
 tion, and that wages may consequently receive an augmentation ; 
 and, on the other hand, that competition has not produced, and 
 will not produce, those results. When, therefore, Mr. Forster 
 assumes that the majority of working men are now disposed 
 to admit, as fundamental truths of economic science, that the 
 remuneration of labour can be raised only in three ways—by 
 the increase of capital, the diminution of the whole labouring 
 population, or the participation of labourers in capital—we are 
 reminded that not a few working men in certain trades believe 
 there is another mode by which their remuneration might be 
 raised, namely, by a participation in profits, which are 
 enormously high ; and that they believe, too, that this partici- 
 pation can be secured only by combination, not by competition. 
 Not quite consistently with his own statement, that one of the 
 methods by which wages may be raised is a diminution of 
 population, Mr. Forster pointed to the increase in the population 
 of England and Wales from 163 millions in 1831 to 213 millions 
 in 1871, simultaneously with an increase of general prosperity, 
 as militating against the theory of population advocated by 
 Malthus and Mr. Mill, and the necessity those great writers 
 contended for, of a prudential check to the potential rate of 
 births. An unrestrained potential increase would have doubled 
 the 16$ millions about 1856; at the present time there would, 
 at the same rate, be about 50 millions of people in England and 
 Wales; and, before the end of the century, the population of 
 that part of the United Kingdom would exceed 100 millions. 
 Hither, therefore, the prudential check has been firmly opposed 
 by some classes of the population to the potential increase, and 
 has permitted that increase of prosperity which Mr. Forster 
 assumes; or other checks, in the shape of death and infirmity, 
 
160 Economie Science and Statisties. 
 
 have acted instead of the prudential check, and demonstrated 
 the urgent necessity for it. Another point, in connexion with 
 wages, on which Mr. Forster’s reasoning seems to need some 
 explanation, relates to the agricultural labourers. He seems to 
 throw out an opinion that there is yet another source, besides. 
 those which have been named, from which the wages of labour 
 may be raised, namely, rent; but his language on the subject 
 leaves much to be desired, to use a Gallicism, on the head of 
 clearness. He says itis well there is here ‘a third class, namely, 
 the landlords, who are able to enter into the question, and to act 
 as mediators.’ But then he adds that a Paper might well be- 
 devoted in the Section to the question, how far the rent paid 
 for land affects the question of wages. The innuendo would 
 appear to be that an increase of rural wages may be brought 
 about by an abatement of rent; and we fail to see how that 
 prospect places the landlords in a position to qualify them for 
 the position of impartial mediators between farmers and men. 
 Another important subject discussed in the Section, the treat- 
 ment of which was not exhaustive in respect of either the 
 economic or the statistical methods employed, was that of prices, 
 and the rise in the cost of living. Mr. Levi took the prices of 
 the Metropolitan Meat Market for his measure with respect to 
 that article, adding, indeed, the expression of an opinion, that 
 the rise has been greater in the chief towns than in other parts 
 of the kingdom. The fact is, that the diffusion of steam com- 
 munication in the last twenty-five years has raised the price of 
 meat in country places and remote parts of the kingdom much 
 more than in the chief towns, because it has raised it from a much 
 lower point in the former to something like the same price as 
 in the latter localities. In many parts of Ireland and Scotland, 
 where, thirty years ago, the price of butcher’s meat averaged 
 3d. a pound, it is now not much below the London price; and 
 this equalization of prices, where the means of communication 
 have been equalized, is connected with the distribution of 
 money over the world, in a manner very necessary to be borne 
 in mind in estimate both of past and probable future changes 
 in the cost of living. The prices of the Metropolitan Meat 
 
Economie Science and Statistics. 161 
 
 Market afford, for another reason, insufficient indications of 
 what has actually taken place in respect of the purchasing 
 power of money. ‘The price of mutton per pound in that 
 market has risen from 6°37, in 1863-7, to 7°62, in 1873. But 
 in the same period the price of a mutton chop in a London 
 railway refreshment-room has risen from 6d. to 1s.; and, in 
 fact, the rise in retail prices, on which the cost of living really 
 depends, is more accurately indicated by the latter figures than 
 by those which Mr. Levi has cited. It is obvious, too, that the 
 rise in wages is to a very large class, who have to pay servants’ 
 wages—an addition, and not a counterpoise, to the increased cost 
 of living arising from the rise of commodities. Mr. Levi, we 
 might add, seems to have caused some confusion of ideas, if he 
 did not fall into it himself, with respect to the effect on the price 
 of necessaries and ordinary comforts of an increased expenditure 
 on luxuries. T’he consumption of better qualities of food and 
 clothing would naturally tend to raise the cost of the particular 
 articles on which the increased outlay took place. But an 
 increased expenditure on luxuries, such as seal-skin jackets, 
 carriages, wine, tobacco, would, ceteris paribus, diminish the 
 outlay on other things, and would tend to a corresponding fall 
 in the prices of the latter. Had we, however, much fuller 
 statistics than are forthcoming respecting the changes in prices 
 throughout the United Kingdom, we should still be unable to 
 form a sound judgment respecting the most important part of 
 the question, namely, the probable future range of prices, 
 - without a mass of additional information respecting the causes 
 which have acted on the supply of each article, and on the 
 distribution of money as well as on its amount. And we have 
 in this matter an illustration of the defective character of that 
 kind of statistical inquiry which confines itself to the collection 
 of a multitude of instances of facts, without reference to causes. 
 It must be allowed that the principles laid down by the 
 illustrious Quetelet rather tend to foster the error to which we 
 advert. He assumed that by enlarging the number of instances 
 we eliminate chance, and arrive at general and stable laws or 
 conditions. But a great number of instances does not give us 
 M 
 
162 Economie Science and Statistics. 
 
 their law, or justify us in any positive conclusion respecting the 
 future. New conditions, for example, have been acting on 
 prices during the last two years, and mere tables of prices for 
 the last twenty or ten years confound years in which those 
 causes were in operation with years in which they were not. 
 
 We cannot close these few remarks and suggestions without 
 thanking Mr. Forster, the eminent President of Section F, for 
 the just, but not the less generous, tribute which he paid to the 
 great leader of economic science, whom the world has lately lost 
 in Mr. John Stuart Mill. 
 
XV. 
 
 ON THE PHILOSOPHICAL METHOD OF POLITICAL 
 ECONOMY .* 
 
 Apam SmiruH called his famous treatise an inquiry into the 
 nature and causes of the wealth of nations. Mr. Senior defines 
 political economy as the science which treats of the nature, the 
 production, and the distribution of wealth. The definition 
 in Mr. Mill’s“ Principles of Political Economy’ is similar, 
 though broader: ‘ Writers on political economy profess to 
 teach or to investigate the nature of wealth and the laws of 
 its production and distribution, including, directly or remotely, 
 the operation of all the causes by which the condition of 
 mankind, or of any society of human beings in respect to this 
 universal object of desire, is made prosperous, or the reverse.’ 
 These definitions sufficiently indicate the character of the 
 problem of political economy, namely, to investigate the 
 nature, the amount, and the distribution of wealth in human 
 society, and the laws of co-existence and sequence discoverable 
 in this class of social phenomena. ‘The solution offered by the 
 method hitherto chiefly followed by English economists—known 
 as the abstract, a priori, and deductive method—may be briefly 
 stated as follows:—The nature of wealth is explained by 
 defining it as comprising all things which are objects of 
 human desire, limited in supply, and valuable in exchange. Of 
 the causes governing its amount and distribution, the chief 
 exposition is, that the desire of wealth naturally leads, where 
 security and liberty exist, to labour, accumulation of capital, 
 appropriation of land, separation of employments, commerce, 
 
 
 
 
 
 * Hermathena, vol. ii., 1876. 
 
 M 2 
 
| 
 
 — 
 
 164 On the Philosophical Method of Political Economy. 
 
 and the use of money; whence a continual increase in the total 
 stock of wealth, and its distribution in wages, profit, rent, and 
 the prices of products, in proportion to the labour, sacrifice, 
 amount of capital, and quantity and quality of land, contri- 
 buted by each individual to production. It is added that, 
 inasmuch as human fecundity tends to augment population in a 
 geometrical ratio, while the productiveness of the soil is limited, 
 the proportion of rent to wages and profit tends to increase in 
 the progress of society. 
 
 This theory, it is here submitted, is illusory, as a solution of 
 the problem. It throws, in the first place, hardly any light on 
 the nature of wealth. There is a multitude of different kinds 
 of wealth, differing widely in their economic effects. Land, 
 houses, furniture, clothing, implements, arms, ornaments, ani- 
 mals, corn, wine, money, pictures, statues, books, are but a few 
 of the different kinds of wealth; and of each kind there are: 
 various species. No inconsiderable part of the present wealth 
 of the United Kingdom consists of intoxicating drink. Wealth, 
 moreover, undergoes great changes in kind in different states of 
 society, and one of the most important features of economical 
 history is the evolution of new kinds, profoundly affecting the 
 material as well as the moral condition of nations. The wealth 
 of Rome under the Cesars differed from its wealth in the first 
 age of the Republic, in quality as well as quantity ; and there 
 are essential differences, as well as resemblances and historical 
 relations, between the constituents of medisval and modern 
 wealth. Some of the fundamental distinctions between Oriental 
 and Kuropean wealth have been vividly brought before us in 
 the last few months. One of these is, that the movable wealth. 
 of rich men in the Kast consists chiefly of precious stones, gold: 
 and silver ornaments, and splendid apparel. An English writer 
 long ago described a religious ceremony in Turkey, at which a 
 prince of eleven years old ‘ was so overloaded with jewels, both 
 on himself and his horse, that one might say that he carried the 
 value of an empire about him.’ That is to say, the wealth 
 that might have made a territory prosperous, and been dis- 
 tributed in wages through many hundreds of families, was. 
 
On the Philosophical Method of Political Economy. 165 
 
 concentrated on the bodies of a child and a horse. The 
 correspondent of the ‘ Times’ recently remarked on the appear- 
 ance of the officers of an Indian municipality: ‘It would have 
 rather astonished the members of an English town council to 
 have seen these Punjabees in turbans of the finest tissue, gold- 
 brocaded gowns and robes, with coils of emeralds, rubies, and 
 pearls round their necks finer than any Lord Mayor’s chain.’ 
 This allusion to the surviving finery of English official dress 
 illustrates a change which has taken place since the French 
 Revolution in the ordinary dress of men in Western Europe. 
 Another description of a reception of native chiefs at Calcutta a 
 few months ago seems to give indication of the beginning of a 
 similar change in India. While one Maharajah, ‘ dressed in 
 black satin and silver lace, wore a cap which was literally 
 covered with diamonds, said to be worth £100,000,’ and another 
 was ‘resplendent in a dress of mauve, embroidered with gold,’ 
 Holkar and Sir Salar Jung ‘ presented a striking contrast from 
 the extreme simplicity of their attire.’ It is no unimportant 
 example of the mutation in the nature of wealth, in the progress 
 of society, that diversities exist in Western Europe, in respect 
 of splendour and costliness of apparel, between masculine and 
 feminine wealth, which did not manifest themselves conspicu- 
 ously before the present century. ‘The accounts of the dresses 
 of the princes and nobles of India, during the Prince’s visit, 
 read like one of the dresses of a number of great ladies at a 
 London ball; but even in England the fashion of wearing silks, 
 satins, velvets, diamonds, and jewels, was formerly not confined 
 to one sex. ‘There was a time when men ‘wore a manor on 
 their backs.’ The remark of Addison in the ‘Spectator’ that 
 ‘one may observe that women in all ages have taken more pains 
 than men to adorn the outside of their heads’ is inaccurate. 
 An Eastern prince still sometimes wears precious stones on his 
 turban to the value of half a million; and probably no lady 
 ever wore such a weight of diamonds as the Shah of Persia 
 displayed in London. It is at least conceivable that the attire of 
 an English lady may one day rival in simplicity and inexpen- 
 siveness that of a gentleman. The wealth of all but the 
 
166. On the Philosophical Method of Political Keonomy. 
 
 stationary part of mankind of both sexes undergoes various 
 changes in the nature as well as in the number of its con- 
 stituents; and the differences and changes in the character 
 of Eastern and Western, medizyval and modern, masculine and 
 feminine wealth, of which some indications have been given, 
 ought surely to meet with investigation, as regards both cause 
 and effect, in a true Science of Wealth. The definition alpeay) 
 referred to, that wealth comprehends all things which possess 
 exchangeable value, is a mere abstraction throwing no light on 
 these differences and mutations, or on the laws of society and 
 social evolution by which they are governed. It originated in 
 opposition to the Mercantile theory, and amounts in fact to 
 little more than a negation of the doctrine, erroneously imputed 
 to the Mercantile School, that money only is wealth. What 
 that school really taught was that money is the most durable 
 and generally useful kind of movable wealth, and their chief 
 error lay in the measures by which they sought artificially 
 to increase its amount. Money really had acquired great ad- 
 ditional usefulness by its substitution for barter and payments 
 in kind, and by the extension of international trade; and 
 money is one of the kinds of wealth the invention and variations 
 of which form a most instructive chapter in economical history. 
 Adam Smith, it should be observed, did not fall into the error 
 of later antagonists to the Mercantile theory. His doctrine was 
 that wealth consists chiefly, not in money, but in consumable 
 commodities; in the necessaries, conveniences, and luxuries of 
 life. Although he did not systematically investigate the subject, 
 he has in several passages indicated important differences in the 
 economic effects of different sorts of wealth, and pointed out 
 some essential changes which have taken place in its component 
 elements, in the progress of society. 
 
 Closely connected with the illusory exposition of the nature 
 of wealth to which attention has been drawn is the doctrine of 
 abstract political economy, that the mental principle which 
 leads to its production and accumulation ‘is the desire of 
 wealth.’ No other branch of philosophy is still so deeply 
 tinctured with the realism of the schools as economic science. 
 
On the Philosophical Method of Political Economy. 167 
 
 A host of different things resemble each other in a single aspect, 
 and a common name is given to them in reference to the single 
 feature which they have in common. It is, properly speaking, 
 only an indication of this common feature, but it puts their 
 essential differences out of mind, and they come to be thought 
 of in the lump as one sort of thing. The desire of wealth is a 
 general name for a great variety of wants, desires, and senti- 
 ments, widely differing in their economical character and effect, 
 undergoing fundamental changes in some respects, while 
 preserving an historical continuity in others. Moralists have 
 fallen into a similar error, though from an opposite point of 
 view, and, in their horror of an abstraction, have denounced, 
 under the common name of love of wealth, the love of life, 
 health, cleanliness, decency, knowledge, and art, along with 
 sensuality, avarice, and vanity. So all the needs, appetites, 
 passions, tastes, aims, and ideas which the various things 
 comprehended in the word ‘ wealth’ satisfy, are lumped together 
 in political economy as a principle of human nature, which is the 
 source of industry and the moving principle of the economic 
 / world.* ‘That every man desires to obtain additional wealth, 
 with as little sacrifice as possible, is in political economy,’ says 
 Mr. Senior, ‘ what gravitation is in Physics, or the dictwim de 
 omni et nullo in Logic, the ultimate fact beyond which reason- 
 ing cannot go, and of which almost every other proposition is 
 merely an illustration.’ The division of labour, the process of 
 exchange, and the intervention of money, have made abstract 
 wealth or money appear to be the motive to production, and 
 veiled the truth that the real motives are the wants and desires 
 of consumers; the demands of consumers determining the 
 commodities supplied by producers. After all the reproach cast 
 on the Mercantile School, modern economists have themselves 
 lapsed into the error they have imputed to it. If every man 
 produced for himself what he desires to use or possess, it would 
 be patent and palpable how diverse are the motives summed up 
 
 
 
 * Many years ago I endeavoured to draw attention to the error of both 
 economists and moralists on this subject, in an Essay on the Love of Money, 
 reprinted at the beginning of the present volume. 
 
168 On the Philosophical Method of Political Economy. 
 
 in the phrase ‘ desire for wealth ’—motives which vary in 
 different individuals, different classes, different nations, different 
 sexes, and different states of society. Hunger and thirst were 
 the first forms of the desire of wealth. A desire for cattle is its 
 principal form at the next social stage. A desire for land 
 comes into existence with agriculture ; but the desire for land is 
 itself a name for different feelings, aims, and associations, in 
 different ages, countries, classes, and individuals, producing at 
 this day widely different effects in two countries so close to each 
 other as England and France. Adam Smith’s historical and 
 inductive mind here again preserved him from the realistic 
 error. He has even attempted to indicate the actual order in 
 which the desires of wealth succeed one another in the progress 
 of history ; and although his generalizations on this point are 
 scanty and inaccurate, they ought to have suggested a fruitful 
 line of investigation to his followers, and doubtless would have 
 done so but for the dominion over their minds which the abstract 
 method acquired. His illustrious successor, John Stuart Mill, 
 has indeed made some instructive observations on the point in 
 the Preliminary Remarks of his ‘ Principles of Political Eco- 
 nomy, but he had been brought up in the straitest sect of the 
 abstract economists, and his method was formed before his mind 
 was matured; so that there is no systematic application of 
 historical and inductive investigation in his treatise, although it 
 abounds in luminous suggestions, and corrections of the crude 
 generalizations of the school in which he was taught. An 
 investigation of the diverse and varying desires confounded in 
 the phrase ‘ desire of wealth’ would be requisite, were we even, 
 with some of that school, to regard Political Economy as a mere 
 theory of exchanges and value. For the value of commodities 
 rises and falls with changes in the degree and direction of these 
 desires. Both in England and France, the love of land, for ex- 
 ample, raises its price out of proportion to the income it yields ; 
 but this may not always be, as it has not always been, the case ; 
 or, on the contrary, it may display itself hereafter in increased 
 price. At this day it is a national passion in France, but felt 
 only by a limited number in England. Works of art, again, 
 
On the Philosophical Method of Political Economy. 169 
 
 nndergo extraordinary variations in value with the currents of 
 fashion and taste; and diamonds would lose almost all their 
 value were the indifference towards them, already felt by one 
 ‘sex in this country, to extend to the other, and to become 
 -general throughout the world. 
 
 It is true that a love of accumulation or an: property, an 
 acquisitive propensity, a desire for wealth apart from its 
 immediate or particular uses, is a principle of social growth of 
 which the economist must take account. But this principle 
 opens up another neglected chapter in the science of wealth, for 
 the love of property, or of accumulation, takes very different 
 concrete forms in different states of society. Were there no 
 ‘division of labour, it would take forms—land, cattle, houses, 
 furniture, clothing, jewels, &c.—determined by the existing or 
 anticipated wants of the accumulator himself, or his family. 
 In the actual commercial world in which we live its forms are 
 ‘determined, either by the wants and demands of other con- 
 sumers, or the accumulator’s own desires, anticipations, and 
 associations. ‘The holder of a share in a mine may never see 
 his investment, and may have no desire for the coal, iron, or 
 silver it contains, yet the form of his accumulation is determined 
 by the demand for these particular kinds of wealth on the part 
 of surrounding society. 
 
 The questions we have been discussing are immediately 
 connected with the conditions which govern the amount of 
 wealth. The abstract theory on this subject is of the most 
 fragmentary character. It exists only in the form of a few 
 propositions and doctrines, such as that, under the influence of 
 the desire of wealth, human energy and effort are constantly 
 -devoted to its acquisition ; that its amount is largely augmented © 
 by the division of labour; that of the three great instruments 
 of production, the supply of two—labour and capital—tends to 
 increase, but that of the third—land—remains stationary, while 
 its productiveness tends to decrease with the growth of popula- 
 tion; that wealth is increased by productive and diminished by 
 unproductive expenditure and consumption. The first of these 
 propositions really throws as little light on the amount as on 
 
170 On the Philosophical Method of Political Economy. 
 
 the nature of wealth. The desire for it is by no means neces- 
 | __ sarily an incentive to industry, and still less to abstinence. 
 War, conquest, plunder, piracy, theft, fraud, are all modes of 
 acquisition to which it leads. The robber baron in the reign of 
 Stephen, and the merchant and the Jew whom he tortured, 
 may have been influenced by the same motives. The prodigal 
 son who wastes his substance in riotous living is influenced by 
 the same motives—the love of sport, sensual pleasure, luxury, 
 and ostentatious display—which impel many other men to 
 strenuous exertion in business. Good cheer, meat, beer, and 
 tobacco, are the chief inducements to labour with the majority 
 of working men, and to beggary and crime with another part 
 of the population. Unproductive expenditure and consumption, 
 on the other hand, do not necessarily tend to diminish wealth. 
 They are the ultimate incentives to all production, and without 
 habits of considerable superfluous expenditure, as Mr. Senior 
 himself has observed, a nation would be reduced to destitution. 
 Moreover, the effect of expenditure on the amount of wealth 
 depends on the direction which it takes, for example, whether 
 of services and perishable commodities, or, on the contrary, of 
 | durable articles. Here, once more, Adam Smith opened the 
 way to a line of investigation which abstract political economy 
 afterwards closed. He observed that a man of fortune may 
 spend his revenue, either in a profuse and sumptuous table, or 
 in maintaining a great number of menial servants and a multi- 
 tude of dogs and horses, or in fine clothes, or in jewels and 
 baubles ; or, again, in useful and ornamental buildings, furni- 
 ture, books, statues, pictures. ‘ Weretwo men of equal fortune 
 to spend their revenue, the one chiefly in the one way, the 
 other in the other, the former would, at the end of the period, 
 be the richer man of the two: he would have a stock of goods 
 of some kind or other. As the one mode of expense is more 
 favourable than the other to the opulence of an individual, so 
 is it likewise to that of a nation. ‘The houses, the furniture, 
 the clothing of the rich become useful to the inferior and 
 middling ranks of the people.” Consumption and expenditure 
 in abstract political economy have become misleading terms. 
 
On the Philosophical Method of Political Economy. 171 
 
 Both have come to denote the using up and destruction of 
 things, whereas expenditure properly denotes simply the pur- 
 chase, and consumption simply the use, of the article in question. 
 If the things purchased be of a durable kind, unproductive 
 consumption so called may amount in reality to a form of 
 accumulation. It was, in fact, one of the chief forms down 
 to recent times. In the fifteenth century, and long afterwards, 
 one of the chief modes of laying by for a man’s wife and family 
 was the purchase of plate, furniture, household stuff, and even 
 clothing. Some modes of expenditure, although intended 
 simply as such, may be actually productive, as in the case of 
 articles which, like rare works of art, or lands for purposes of 
 enjoyment and amusement, acquire increased value with time 
 and the growth of surrounding wealth. Even a stock of wine 
 in a private cellar may, on the death of the owner, prove to 
 have beena good investment for his family. The main questions. 
 respecting the influence alike of the ‘desire of wealth’ and of 
 expenditure and consumption are: To what kinds of wealth, 
 what modes of acquisition, and what actual uses do they lead in 
 different states of society, and under different institutions, and 
 other surrounding conditions ? To what laws of social evolution 
 are they subject in the foregoing respects? On these points. 
 we learn nothing from abstract political economy. A distin- 
 guished English economist and man of science has lately 
 admitted, in the following passage, the absolute necessity for a 
 true theory of consumption: ‘ We, first of all, need a theory 
 of the consumption of wealth. J.S. Mill, indeed, has given an 
 opinion inconsistent with this. ‘“‘ Political economy,” he says, 
 “has nothing to do with the consumption of wealth, further 
 than as the consideration of it is inseparable from that of pro- 
 duction, as from that of distribution. We know not of any 
 laws of the consumption of wealth, as the subject of a distinct. 
 science ; they can be no other than the laws of human enjoy- 
 ment.” Butit is surely obvious that economics does rest upon 
 the laws of human enjoyment, and that if those laws are 
 developed by no other science, they must be developed by 
 economists. We labour to produce with the sole object of 
 
172 On the Philosophical Method of Political Economy. 
 
 consuming, and the kinds and amounts of goods produced must 
 be determined with regard to what we want to consume. Every 
 manufacturer knows and feels how closely he must anticipate 
 the tastes and needs of his customers : his whole success depends 
 upon it, and in like manner the theory of economics must begin 
 with a correct theory of consumption.’* No such theory, 
 however, respecting the effect of consumption on either the 
 nature or the amount of wealth, can be forthcoming without a 
 study of the history and the entire structure of society, and the 
 [laws which they disclose. 
 
 But further, in order to form any approach to an adequate 
 estimate of the influence of human desires on the amount of 
 wealth, it must surely be evident that we need an investigation, 
 not only of the motives and impulses which prompt to the 
 acquisition of wealth, but also of those which withdraw men 
 from its pursuit, or give other directions to their energies. © 
 What abstract political eeonomy has to teach on this subject is 
 stated by Mr. Mill in his Essay on the Definition and Method 
 of Political Kconomy, and also in his Logie, as follows:— 
 
 ‘ Political economy is concerned with man solely'as a being 
 who desires to possess wealth. It makes entire abstraction of 
 every other human passion or motive, except those which may 
 be regarded as perpetually antagonizing principles to the desire 
 of wealth, namely, aversion to labour, and desire of the present 
 enjoyment of earthly indulgences. These it takes to a certain 
 extent into its calculation, because these do not merely, lke 
 other desires, occasionally conflict with the pursuit of wealth, 
 but accompany it always as a drag or impediment, and are 
 therefore inseparably mixed up in the consideration of it.’ 
 Abstraction has here clouded the reasoning of the most celebrated 
 logician of the century. Had Mr. Mill looked to actual life, he 
 must have at once perceived that among the strongest desires 
 confounded in the abstract ‘desire of wealth ’ are desires for the 
 present enjoyment of luxuries; and that the aversion to labour 
 itself has been one of the principal causes of inventions and 
 
 
 
 
 
 * The Theory of Political Eeonomy. By William Stanley Jevons. 2nd ed., 
 pp. 42, 43. 
 
On the Philosophical Method of Political Economy. 173 
 
 improvements which abridge it. Frugality, as Adam Smith 
 has observed, has never been a characteristic virtue of the 
 inhabitants of England ; commodities for immediate consump- 
 tion and luxuries have always been the chief motives to exertion 
 on the part of the bulk of the English population. The love of 
 ease is the motive which has led to the production of a great 
 part of household furniture, and is one of the chief sources of 
 architecture. 
 
 ‘A great part of the machines,’ says Adam Smith, ‘made 
 use of in those manufactures in which labour is most subdivided, 
 were originally the inventions of common workmen, who 
 naturally turned their thoughts towards finding out easier and 
 readier methods of performing it. ... One of the greatest 
 improvements (in the steam engine) was the discovery of a boy 
 who wanted to save his own labour.’ By what logical principle, 
 moreover, can economists justify the admission of ‘two antago- 
 nizing principles’ into their theory while excluding or ignoring 
 others? In fact, no economist has ever been able to limit his 
 exposition in this manner. Mr. Mill, in his own ‘ Principles of 
 Political Economy,’ follows Adam Smith in including in his 
 doctrine of the causes which govern the choice of occupations 
 and the rates of wages and profits, many other motives, such as 
 the love of distinction, of power, of rural life, of certain pursuits 
 for their own sake, of our own country, the consequent indis- 
 position to emigrate, &e. al 
 
 The real defect of the treatment by economists of these | 
 other principles is, that it is superficial and unphilosophical ; 
 that no attempt has been made even to enumerate them 
 adequately, much less to measure their relative force in different 
 states of society; and that they are employed simply to prop up 
 rude generalizations for which the authority of ‘laws’ is claimed. 
 They serve, along with other conditions, to give some sort of 
 support to saving clauses—such as ‘allowing for differences in 
 the nature of different employments,’ ‘ ceteris paribus, ‘in the 
 absence of disturbing causes,’ ‘making allowance for friction’— 
 by which the ‘law’ that wages and profits tend to equality 
 eludes scrutiny. Had the actual operation of the motives in 
 
174 On the Philosophical Method of Political Economy. 
 
 question been investigated, it would have been seen to vary 
 widely in different states of society, and under different con- 
 ditions. The love of distinction or social position, for example, 
 may either counteract the desires of wealth, or greatly add to 
 their force as a motive to industry and accumulation. It may 
 lead one man to make a fortune, another to spend it. At the 
 head of the inquiry into the causes on which the amount of the 
 wealth of nations depends is the problem, What are the con- 
 ditions which direct the energies and determine the actual 
 occupations and pursuits of mankind in different ages and 
 countries? A theory surely cannot be said to interpret the laws ~ 
 regulating the amount of wealth which takes no account, for 
 instance, either of the causes that make arms the occupation of 
 the best part of the male population of Europe at this day, or, 
 on the other hand, of those which determine the employments of 
 women. 
 
 Enough has been said: in proof that the abstract a priori 
 and deductive method yields no explanation of the causes 
 which regulate either the nature or the amount of wealth. 
 With respect to distribution, it furnishes only a theory of 
 exchange (or of wages, profits, prices, and rent), which will be 
 hereafter examined. The point calling for immediate atten- 
 tion is, that such a theory, even if true, must be altogether 
 inadequate to explain the distribution of wealth. One has 
 but to think of the different partition of land in England and 
 France, of the different partition of real and personal property 
 in England, of the different partition of both between the two 
 sexes, of the influence of the State, the Church, the Family, of 
 marriage and succession, to see its utter inadequacy. Take 
 land, for example. Sir Henry Maine has justly observed that 
 exchange lies historically at the source of its present distribution 
 in England to a greater extent than most modern writers. on 
 the subject seem aware. ‘The purchase and sale of land was 
 active, both in the Middle Ages and in the age of the Refor- 
 mation; and the original root of the title of the existing holder, 
 in a vast number of cases, is a purchase either in those ages or 
 since. But it is only by historical investigation that we can 
 
On the Philosophical Method of Political Economy. \75 
 
 mount up in this manner to purchase; and the present distri- 
 bution of land, descending from such a source, is none the less 
 the result of another set of causes, among which that great 
 historical institution, the Family, which has never ceased to be 
 one of the chief factors in the economy of human society, holds 
 a principal place. 
 
 The truth is, that the whole economy of every nation, as 
 regards the occupations and pursuits of both sexes, the nature, 
 amount, distribution, and consumption of wealth, is the result of 
 a long evolution, in which there has been both continuity and 
 
 change, and of which the economical side is only a particular 
 aspect or phase. And the laws of which it is the result must 
 be sought in history and the general laws of society and social 
 evolution. 
 
 The succession of the huntihg, pastoral, agricultural, and 
 commercial states is commonly referred to as an economic 
 development ; but it is, in fact, a social evolution, the economical 
 side of which is indissolubly connected with its moral, intel- 
 lectual, and political sides. ‘T’o each of these successive states 
 there is a corresponding moral and intellectual condition with 
 a corresponding polity. With the changes from savage hunting 
 life to that of the nomad tribe, thence to fixed habitations and 
 the cultivation of the soil, and thence to the rise of trade and 
 towns, there are changes in feelings, desires, morals, thought and 
 knowledge, in domestic and civil relations, and in institutions 
 and customs, which show themselves in the economic structure 
 of the community, and the nature, amount, and distribution of 
 its wealth. | 
 
 The celebrated German economist, Wilhelm Roscher, has 
 remarked that every economical system has a corresponding 
 legal system as its background ; but the more general proposition 
 may be advanced that every successive phase of social progress 
 presents inseparably connected phenomena to the observation of 
 the economist, the jurist, the mental, the moral, and the 
 political philosopher. ‘The same institutions—marriage, the 
 Family, landed property, for example—may be regarded from 
 a moral, a legal, a political, or an economical point of view. 
 
176 On the Philosophical Method of Political Economy. 
 
 Both an intellectual and a moral evolution is visible in the suc- 
 cessive modes of satisfying human wants—by hunting and can- 
 nibalism ; by the domestication of animals, with slavery instead. 
 of the slaughter of captured enemies; by agriculture, with 
 serfdom gradually superseding slavery ; and by free industry 
 and commerce, instead of conquest and piracy. And it may be: 
 affirmed that the means by which wealth is acquired in suc- 
 cessive states of society are subject to regular laws of social 
 evolution, as a whole, although only in the earlier stages is 
 their operation easily traced. Slavery would exist in England 
 at this day but for the co-operation of moral and political, 
 with what are specially termed economical, causes. ‘The suc- 
 cessive evolution of the hunting, pastoral, agricultural and 
 commercial states is intimately connected ‘with ‘the movement 
 from status to contract,’ to employ Sir Henry Maine’s appro- 
 priate formula; one which affords striking evidence of the- 
 indissoluble nature of the connexion between the moral, intel- 
 lectual, legal, political and economical phases of social progress. 
 Sir H. Maine has considered it chiefly in its legal aspects, but it 
 is easily shown to involve the other aspects referred to. To 
 that primitive state in which there are no individual rights, in 
 which the legal position of every one—law then appearing in 
 the embryo form of usage—is determined by blood, birth, and 
 sex, there 1s a corresponding polity, that is to say, a rude tribal 
 organization, not without analogy to that of a herd of wild 
 animals; and there is a correlative economic structure, limiting 
 individual possession to certain articles of personal use, recog- 
 nising no property in land, making sex and age the sole basis 
 of division of labour, and leading to no exchanges between 
 individuals. The moral condition is of a corresponding type. 
 Communism in women is one of its original features; another 
 is an entire absence of the feeling of individual responsibility. 
 Tribes and groups of kinsfolk collectively are responsible for 
 offences. 
 
 The intellectual state is strictly analogous. There is no 
 mental individuality, no originality, or invention; all think as 
 well as act and live alike. Tho savage is a savage in his intel- 
 
On the Philosophical Method of Political Economy. 177 
 
 lectual development and ideas, as in his morals, his institutions, 
 and his economy. The movement from status to contract, on 
 the other hand, evolves not only individual property from 
 communal ownership, and rights based on individual agreement 
 from the transactions of whole communities of families, but also 
 individual responsibility and individuality of thought and 
 invention. It is likewise inseparably connected with a political 
 development, with the gradual growth of a central government, 
 and the substitution of the control of the State for that of the 
 family or kindred. very institution relating to property, 
 occupation and trade, evolved by this movement, is an economic 
 as much as a legal phenomenon. Changes in the law of 
 succession, the growth of the testamentary power, the alien- 
 ability of land, its liability for debt, are economical, as well as 
 juridical facts; they involve changes in the economical structure 
 of society, and in the amount and distribution of wealth. And 
 every successive intellectual discovery, every new employment 
 of the mental energy, has its part in determining the economical 
 condition of the nation. A priori political economy has sought 
 to deduce the laws which govern the directions of human 
 energies, the division of employments, the modes of production, 
 and the nature, amount, and distribution of wealth, from an 
 assumption respecting the course of conduct prompted by 
 individual interest; but the conclusion which the study of 
 society makes every day more irresistible is, that the germ 
 from which the existing economy of every nation has been 
 evolved is not the individual, still less the mere personification 
 of an abstraction, but the primitive community—a community 
 one in blood, property, thought, moral responsibility, and 
 manner of life; and that individual interest itself, and the 
 desires, aims, and pursuits of every man and woman in the 
 nation have been moulded by, and received their direction and 
 form from, the history of that community. — 
 Both the desires of which wealth of different kinds is the 
 object, and those which compete with them, are in every nation 
 the results of its historical career and state of civilization. 
 N 
 
178 On the Philosophical Method of Political Heonomy. 
 
 What are called economical forces are not only connected, but 
 identical, with forces which are also moral and intellectual. 
 The desires which govern the production, accumulation, distri- 
 bution, and consumption of wealth are passions, appetites, 
 affections, moral and religious sentiments, family feelings, 
 sesthetical tastes, and intellectual wants. The changes which 
 Roman wealth underwent after the conquest of Asia Minor 
 represent moral changes; the new desires of wealth which 
 became dominant were gluttony, sensuality, cruelty, and 
 ostentation. These moral changes, again, were inseparably 
 connected with the political history of Rome, and they had 
 intellectual aspects which the author of the ‘ Dialogus de 
 Oratoribus’ has vividly portrayed. Allusion was made ‘in an 
 earlier page to the passion for jewels which distinguishes the 
 men of the East from the men of the West, and this form of 
 the desire of wealth has sprung mainly from the absence for 
 many ages of the conditions essential to general prosperity, 
 economic progress, and the accumulation of wealth in really 
 useful forms. Where insecurity has long prevailed, not only 
 are those aims and distinctions which take the place, with the 
 growth of civilization, of personal display, prevented from 
 emerging, but a desire is generated for the kinds of wealth 
 which contain great value in a durable and portable form, and 
 are easily hidden, easily removed in flight, and nothing the 
 worse for being buried for months or years. The wealth of 
 England at this day, it should be observed, although dissimilar 
 in some essential respects to that of Asia, ancient Rome, and 
 medieval Kurope, displays also features of resemblance, alike to 
 oriental, to classical, and to medieval wealth—for example, in 
 architecture, both ecclesiastical and civil, in the structure of 
 landed property and the associations surrounding it, and in the 
 surviving passion in women for jewellery—which are, in fact 
 historical features. Our wealth is historical wealth, has been 
 made what it is by historical causes, and preserves visible traces 
 of its history. How long a history lies {behind the feelings 
 with which land is regarded, and its price in the market, as well | 
 
On the Philosophical Method of Political Economy. 179 
 
 as behind its existing distribution! Our whole national economy 
 is a historical structure, and in no other manner to be explained 
 or accounted for. 
 
 Recent apologists for the a priori and abstract method of 
 economic reasoning feel themselves constrained to confine its 
 application to the most advanced stage of commercial society ; 
 they seem even prepared to concede its inapplicability to every 
 country save England, and to confine it to the latest development 
 of English economy. The position which they take up seems 
 to be, that the social evolution, already referred to as a move- 
 ment from status to contract, issues in an economy to which the 
 assumptions and deductions of abstract theory respecting the 
 tendencies of individual interest fit. In modern England, they 
 say, there is such a commercial pursuit of gain, and such a 
 consequent choice of occupations, as to effect a distribution of 
 _the produce of industry to which the doctrines of Ricardo 
 respecting wages, profits, prices, and rents may be fairly applied. 
 They thus abandon at once the claim formerly made on behalf of 
 political economy to the character of a universal science founded 
 on invariable laws of nature. ‘ Political Economy,’ said Mr. Lowe 
 only six years ago, ‘belongs to no nation; it is of no country: 
 it is founded on the attributes of the human mind, and no 
 power can change it.’ It is now restricted by Mr. Bagehot to 
 ‘a single kind of society—a society of grown-up competitive 
 commerce, such as we have in England.* The economic 
 society which we behold in England, and which is the result of 
 the social evolution referred to, is, however, one which displays 
 on every side the influence of tradition, custom, law, political 
 institutions, religion and moral sentiment ; it is one in which the 
 State, the Family, and even the Church, are powerful elements 
 directly and indirectly, and in which the pursuits of individuals, 
 the nature and value of different kinds of wealth, the structure 
 of trades and professions, are incapable of explanation apart 
 from history. It is one in which, as Mr. Bagehot himself has 
 remarked, ‘there are city families, and university and legal 
 
 * Economic Studies, p. 17 | 
 N 2 
 
180 On the Philosophical Method of Political Economy. 
 
 families—families where a special kind of taste and knowledge 
 are passed on in each generation by tradition’; and in which 
 the system even of banking and the money market is the product: 
 of a peculiar history. Not even looking exclusively to the 
 purely commercial side of the English economical structure; not 
 even as a mere analysis of ‘business’ or ‘commerce,’ in the 
 narrowest sense, is the abstract theory which used to claim rank 
 as a Science of Wealth able to hold its ground. It is, in fact, 
 as inapplicable to the most advanced stage of commerce as to that 
 primitive state of nature from which Ricardo deduced it by a 
 process which deserves a high place in the history of fallacies, 
 and which was not present to Mr. Mill’s mind when arguing 
 that ‘no political economists pretend that the laws of wages, 
 profits, values, prices, and the like, set down in their treatises. 
 would be strictly true, or many of them true at all, in the 
 savage state.* The principal foundation of Ricardo’s theory 
 of value, prices, wages, and profits, is the assumption that 
 ‘in the early stage of society the exchangeable value of 
 commodities depends almost exclusively on the comparative: 
 quantity of labour expended on each. Among a nation of 
 hunters, for example, it is natural that what is usually the 
 produce of two days’, or two hours’, labour should be worth 
 double of what is usually the produce of one day’s or one hour’s. 
 labour.’+ ‘The minor premiss in his syllogism is the assumption 
 that it is ‘natural’ that in a tribe of savages things should 
 exchange in proportion to the labour required to produce them ;. 
 the major premiss is, that what is natural in the earliest must 
 be natural in the most advanced state of society. The minor 
 involves a petitio principii, and one entirely at variance with 
 fact, for savages work only by fits, and have no measures of - 
 labour and sacrifice. The produce of the chase is determined 
 largely by chance. Such exchanges as take place are of the 
 
 * Auguste Comte and Positivism. By J. 8. Mill, p. 81. 
 
 t ‘That this is really the foundation of the exchangeable value of all things, 
 he continues, ‘excepting those which cannot be increased by human industry, is. 
 a doctrine of the utmost importance in Political Economy.’—Ricardo’s Works, 
 Ed. M‘Culloch, p. 10. 
 
On the Philosophical Method of Political Economy. 181 
 
 special products of different localities, and between groups or 
 communities, not individuals. If any exchanges took place 
 between individuals within the community, they would obviously 
 be governed, not by cost of production, but like the exchange 
 between Esau and Jacob, by the urgency of the respective needs 
 of the parties. The major premiss, on the other hand, involves 
 the fallacy of undistributed middle, the two states of society 
 being entirely dissimilar. Thrown into a form less unfavourable 
 to Ricardo’s conclusion than the one he has himself given to it, 
 his argument is, that in a small and stationary community—in 
 which employments are few and simple, and every man knows 
 all his neighbours’ affairs, how much they make, how they 
 make it, and can transfer himself to any more gainful employ- 
 ment than his own—the values of commodities and the earnings 
 of individuals depend on labour and sacrifice ; and therefore, in 
 a great commercial nation in which there is an infinite sub- 
 division of labour, an immense and ever-increasing variety of 
 occupations, incessant change in the modes of production and 
 in the channels of trade, constant fluctuations in speculation, 
 credit and values, and in which each man has enough to do to 
 mind his own business—wages, profits, and prices, and the 
 distribution of the gains of production, are determined by the 
 same principle, namely, the labour and sacrifice undergone by 
 producers. It is the conclusion thus arrived at by Ricardo 
 which Mr. Bagehot sets forth as the first fundamental as- 
 sumption of abstract political economy, applied to advanced 
 commercial society, though with an exception with respect to one 
 sex which illustrates its essential weakness. ‘The assumption,’ 
 he says, ‘which I shall take is that which is perhaps oftener 
 made in our economical reasonings than any other, namely, that 
 labour (masculine labour, I mean) and capital circulate within 
 the limits of a nation from employment to employment, leaving 
 that in which the remuneration is smaller, and going to that 
 in which it is greater. No assumption can be better founded, as 
 respects such a country as England, in such an economical state 
 as our present one.’ It is an assumption equally ill-founded 
 with respect to both the extremes of economical progress, the 
 
182 On the Philosophical Method of Political Economy. 
 
 earliest and the most advanced ;—to the former, because there 
 is no regular labour, no calculation of gain, and no exchange 
 between individuals; to the second, because each of a vast 
 multiplicity of occupations needs unremitting attention, and 
 exchanges are infinitely numerous, and subject to perpetual 
 variations in the conditions affecting them. Ricardo ignored 
 both the homogeneousness of primitive, and the heterogeneous- 
 ness of advanced, society; Mr. Bagehot ignores the infinite 
 heterogeneousness of the latter. The assumption really made 
 its only approach to truth in the intermediate economical stage 
 to which Adam Smith expressly limited it, when he restricted 
 it to well-known and long-established employments, in the 
 same neighbourhood, undisturbed by speculation or other 
 causes of fluctuation, and between which there is perfect 
 facility of migration*—in other words, to a small and stationary 
 world of trade. Consider the complexity of the causes which, 
 in the modern commercial world, affect the price of a single 
 commodity, and judge of the possibility of estimating the 
 relative profit to be made by the manufacture and sale of every 
 article. ‘The following passage, written by one of the most 
 eminent living philosophers, with no reference to political 
 economy, will enable the reader to form some conception of the 
 demand which the abstract economic assumption makes on his 
 faith :—‘ The extreme complexity of social actions, and the 
 transcendent difficulty which hence arises, of counting on special 
 results, will be still better seen if we enumerate the factors. 
 which determine one single phenomenon, the price of a 
 commodity—say cotton. A manufacturer of calicoes has to 
 decide whether he will increase his stock of raw material, at its. 
 current price. Before doing this, he must ascertain, as well as 
 he can, the following data:—Whether the stocks of calicoes in 
 
 * In order that this equality may take place in the whole of the advantages and 
 disadvantages of the different employments of labour and stock, three things 
 are requisite, even where there is the most perfect freedom. First, the employ- 
 ments must be well known and long established in the neighbourhood; secondly, 
 they must be in their ordinary or natural state; and thirdly, they must be the 
 sole or principal employments of those who occupy them.—/Wealth of Nations, 
 Book i., c. 10. 
 
On the Philosophical Method of Political Economy. 183 
 
 the hands of manufacturers and wholesalers at home are large 
 or small; whether by recent prices retailers have been led to 
 lay in stocks or not; whether the colonial and foreign markets 
 are glutted or otherwise ; and what is now, and is likely to be, 
 the production of calico by foreign manufacturers. Having 
 formed some idea of the probable demand for calico, he has to 
 ask what other manufacturers have done and are doing as 
 buyers of cotton—whether they have been waiting for the price 
 to fall, or have been buying in anticipation of arise. From 
 cotton-brokers’ circulars he has to judge what is the state of 
 speculation at Liverpool—whether the stocks there are large or 
 small, and whether many or few cargoes are on their way. The 
 stocks and prices at New Orleans and other cotton ports have 
 also to be taken note of; and then there come questions respect- 
 ing forthcoming crops in the States, in India, in Egypt, and 
 elsewhere. Here are sufficiently numerous factors ; but these are 
 by no means all. The consumption of calico, and therefore the 
 consumption of cotton, and the price, depend in part on the sup- 
 plies and prices of other textile products. . . . Surely the factors 
 are now all enumerated? By no means. There is the estimate 
 of mercantile opinion. The views of buyers and sellers respect- 
 ing future prices, never more than approximations to the truth, 
 often diverge from it widely. . . . Nor has he got to the end 
 of the matter when he has considered all these things. He has 
 still to ask, what are the general mercantile conditions of the 
 country, and what the immediate future of the money market 
 will be, since the course of speculation in every commodity 
 must be affected by the rate of discount. See, then, the 
 enormous complication of causes which determine so simple a 
 thing as the rise or fall of a farthing per pound in cotton some 
 months hence.* To admit the assumption on which the 
 abstract doctrine of the equality of profits rests—and on which, 
 again, the doctrine of indirect taxation is based—one must be 
 prepared to admit that men in business are able to make, and 
 do make, similar calculations respecting every other commodity, 
 
 * The Study of Sociology. By Herbert Spencer, pp. 18-19. 
 
184 On the Philosophical Method of Political Economy. 
 
 and thus are enabled to estimate the relative profits of different 
 businesses. 
 
 The only verification adduced in support of the assumption 
 is, that capital and labour desert employments known to be 
 comparatively unremunerative for those which are known to 
 yield better returns. Even this proposition is far from being 
 universally true, and, if it proved the conclusion, would prove 
 that the migration of labour from Europe to America must long 
 ago have equalized Kuropean and American wages. Mr. Mill, 
 in stating the doctrine, has granted that individual profits 
 depend, among other things, ‘on the accidents of personal 
 connexion, and even on chance,’ adding, ‘that equal capitals 
 give equal profits, as a general maxim of trade, would be as 
 false as that equal age or size gives equal bodily strength, or 
 that equal reading or experience gives equal knowledge.’ He 
 supposed, however, that bankers and other dealers in money, by 
 lending it to the more profitable trades, put the various employ- 
 ments of capital ‘on such a footing as to hold out, not equal 
 profits, but equal expectations of profit.’ In like manner, Mr. 
 Bagehot argues that ‘the capital of the country is by the 
 lending capitalists transmitted where it is most wanted.’ If 
 individual profits vary to the extent which Mr. Mill admitted, 
 since there are no means of knowing what individual profits 
 really are, it is hard to imagine how bankers and bill brokers 
 can gauge the existing profits of different trades, and still 
 harder to imagine how they can foreknow them. How much 
 they really know of the matter has been recently exemplified by 
 the transactions of banks and bill brokers in the cases of Messrs. 
 Overend and Gurney, and Messrs. Collie and Co.* Mr. Bagehot 
 himself, writing on the money market and joint-stock banks, 
 has observed: ‘The old private banks in former times used to 
 lend much to private individuals ; the banker formed his judg- 
 
 
 
 
 
 * On the failure of these firms a commercial writer observes: ‘The nation 
 entrusted most of its floating capital to the bill-brokers, and the public found that 
 they had no check on their indiscretion. . . . Bankers took the bills as security 
 because bill-brokers did, and hardly stopped to test the bills or to study their 
 nature.’— The Rationale of Market Fluctuations, pp. 52-3. 
 
On the Philosophical Method of Political Leonomy. 185 
 
 ment of the discretion, the sense, and the solvency of those to 
 whom he lent. And when London was by comparison a small 
 city, and when by comparison everyone stuck to his proper 
 business, this practice might have been safe. But now that 
 London is enormous, and that no one can watch anyone, such 
 a trade would be disastrous ; it would hardly be safe in a coun- 
 try town.’* 
 
 If there is one lesson which the history of trade and the 
 money market in the last ten years ought to have brought home 
 to us more clearly than another, it is that both the lending and 
 the borrowing capitalists, both bankers and traders, are singularly 
 ill-informed and short-sighted with respect even to the con- 
 dition and prospects of their own business. The Deputy 
 Governor of the Bank of England told a meeting of Turkish 
 bondholders, a few months ago, that he had gone into these 
 bonds largely himself, and had advised others to do so. A man 
 of business, of considerable experience, had asked my own opinion, 
 as an economist, of that very security, and afterwards complained 
 that I had dissuaded him from a good investment. 
 
 Such is the stability of the main proposition of abstract 
 political economy. The nature of the superstructure built on 
 it may be judged from the doctrine that all special taxes on 
 production fall, not on the producer, but on consumers, the 
 former receiving the tax with ‘average’ profit on its advance ; 
 although, in fact, the producer may make no profit, may never 
 sell the articles taxed, may even be driven from the trade and 
 ruined by the impost, as the last load which breaks the back of 
 the camel, for taxation has notoriously contributed to drive 
 the smaller capitalists from several branches of business—for 
 example, distilling and brewing. I must leave it to physicists, 
 geologists, and naturalists, to judge of the analogy for which Mr. 
 Bagehot contends, of reasoning of this kind to the processes by 
 which their sciences have been built up; nor may I attempt to 
 pass judgment on the sufficiency of the method which Mr. 
 Darwin, in particular, has followed. But when it is urged that 
 
 * Lombard-street. By Walter Bagehot. 6th ed., p. 261. 
 
186 On the Philosophical Method of Political Economy. 
 
 the abstract economist, like Mr. Darwin, reasons deductively 
 from ‘ one vera causa,’* the rejoinder is obvious that the ‘ desire 
 of wealth,’ which in abstract political economy occupies the place 
 of gravitation in astronomy, and of natural selection in Mr. 
 Darwin’s theory, so far from being a vera causa, is an abstraction, 
 confounding a great variety of different and heterogeneous 
 motives, which have been mistaken for a single homogeneous. 
 force; and that Mr. Darwin’s hypothesis was based on many 
 previous inductions, and followed by minute and elaborate 
 verification, for which the sole substitute in political economy 
 has been an ignoratio elenchi. Mr. Cairnes, indeed, emphasizes 
 in italics the proposition that ‘the economist starts with a 
 knowledge of ultimate causes; + adding: ‘ He is already, at the 
 outset of his enterprise, in the position which the physicist only 
 attains after ages of laborious research. Ji anybody doubts 
 this, he has only to consider what the ultimate principles 
 governing economic phenomena are. First among these 
 ‘ultimate principles’ he places ‘the general desire for physical 
 well-being, and for wealth as the means of obtaining it.’ Yet 
 the desire for physical well-being is so far from being identical 
 with the desire of wealth, that they are often in direct antago- 
 nism to each other. And the title of such an abstraction as. 
 the desire for wealth to rank as an ultimate principle has been, 
 it is hoped, sufficiently refuted. 
 
 The abstract a priori method, it ought not to be overlooked, 
 has almost entirely lost credit in Germany, and has never had 
 undisputed possession of the field in either England or France. 
 It is repudiated by M. de Laveleye, and by some of the most 
 eminent economists in Italy. Malthus and Say, the two most 
 eminent contemporaries of Ricardo, emphatically protested 
 against it. Mr. J. 8S. Mill’s treatise on the ‘ Principles of 
 Political Economy’ often departs from it, and in his later 
 writings he showed an increasing tendency to question its 
 generalizations. Nor did the founders of political economy, 
 either in England or France, intend to separate the laws of the 
 
 * Bagehot, Economic Studies, p. 18. t Logical Method, §e., p. 75. 
 
On the Philosophical Method of Political Economy. 187 
 
 economical world from the general laws of society. Their error 
 lay in the assumption of a simple harmonious and beneficent 
 order of nature, in accordance with which human wants and 
 propensities tend to the utmost amount of wealth, happiness, 
 and good. Mercier de la Riviére, whom Adam Smith calls the 
 best expositor of the doctrines of the Economistes, entitled his. 
 work ‘L’Ordre Naturel et Essentiel des Sociétés Politiques’ ; 
 and with Adam Smith himself political economy was part of a. 
 complete system of social philosophy, comprising also natural 
 theology, moral philosophy, and jurisprudence. He regarded 
 the economical structure of the world as the result of a social 
 evolution, but the dominant idea of a natural order of things 
 disposed him to dwell chiefly on ‘the natural progress of 
 opulence’; and led him to regard its actual progress as ‘ un- 
 natural and retrograde’ wherever it diverged from the imaginary 
 natural order, in place of being the result of the real laws of 
 nature at work. He followed, nevertheless, the historical, as 
 well as the a priori, method, the latter being simply an offshoot 
 of the eighteenth century theory of Natural Law ; and the same 
 language may be used in reference to political economy, which 
 Sir H. Maine has employed in describing the influence of that 
 theory on jurisprudence: ‘It gave birth or intense stimulus to 
 vices of mental habit all but universal, disdain of positive law, 
 impatience of experience, and the preference of a priori to all 
 other reasoning. . . . There is not much presumption in 
 asserting that what has hitherto stood in the place of a science 
 has, for the most part, been a set of guesses, the very guesses 
 of the Roman lawyers.”* 
 
 Ricardo’s fundamental assumption is a ‘ guess’ respecting 
 the natural principle regulating value and the distribution of 
 wealth in the early stages of society, or in a state of nature; 
 and he proceeds to determine by the same process the ‘ natural’ 
 course of wages, profits, and prices in advanced society. In 
 proof that every improvement in the processes of manufacture 
 which abridges labour is attended with a corresponding fall in 
 
 
 
 * Ancient Law, pp. 91-115. 
 
188 On the Philosophical Method of Political Economy. 
 
 the price of the product, his argument is: ‘Suppose that, in 
 the early stages of society, the bow and arrows of the hunter 
 were of equal value and of equal durability with the canoe and 
 implements of. the fisherman, both being the produce of the 
 same quantity of labour. Under such circumstances, the value 
 of the deer, the produce of the hunter’s day’s labour, would be 
 exactly equal to the value of the fish, the produce of the fisher- 
 man’s day’s labour. ‘The comparative value of the fish and 
 the game would be entirely regulated by the quantity of labour 
 realized in each, whatever might be the quantity of production, 
 or however high or low general wages or profits might be.’ 
 To prove that profits are equalized in the modern world by the 
 flow of capital into the more profitable trades, he resorts, in 
 like manner, to a ‘ guess’ :—‘ It is perhaps very difficult to trace 
 the steps by which this change is effected: it is probably by 
 a manufacturer not actually changing his employment, but 
 ‘only lessening the quantity of capital he has in that employ- 
 ment.’ How far this conjecture was well founded appears in 
 his own words in the same chapter. ‘ The present time appears 
 to be one of the exceptions to the justice of this remark. The 
 termination of the war has so deranged the division which 
 before existed of employments in Hurope, that every capitalist 
 has not found his place in the new division which has now 
 become necessary.’ 
 
 Mr. Cairnes defines political economy as ‘the science which 
 traces the phenomena of the production and distribution of 
 wealth up to their causes in the principles of human nature and 
 the laws and events, physical, political, and social, of the 
 external world.’* ‘This process has been exactly reversed by 
 the @ priort and deductive method. The economist ‘ starts,’ 
 according to it, with the assumption of a ‘knowledge of ultimate 
 causes,’ and deduces the phenomena from the causes so assumed. 
 What has still to be done is to investigate the actual pheno- 
 mena, and discover their ultimate causes in the laws of social 
 evolution and national history. The bane of political economy 
 
 
 
 * Logical Method of Political Economy, 2nd ed., p. 57. 
 
On the Philosophical Method of Political Economy. 189 
 
 has been the haste of its students to possess themselves of a 
 complete and symmetrical system, solving all the problems 
 before it with mathematical certainty and exactness. The very 
 attempt shows an entire misconception of the nature of those 
 problems, and of the means available for their solution. The 
 phenomena of wealth may be made the subject of a special 
 inquiry by a special set of inquirers, but the laws of coexistence 
 and sequence by which they are governed must be sought in 
 the great Science of Society, and by the methods which it holds 
 out. And that science itself is still in its infancy. Auguste 
 Comte’s ‘System of Positive Philosophy ’ (not his ‘System of 
 Positive Polity’) is a work of prodigious genius, yet it did but 
 suggest and illustrate, it did not create, the science—that could 
 not be done by a single mind, nor in his time; still less did it 
 work out the connexion between the economic and the other 
 phases of the social evolution. If Political Economy, under 
 that name, be not now bent to the task, it will speedily be © 
 taken out of the hands of its teachers by Sociology. 
 Inadequate as is the exposition contained in this Essay, 
 it is submitted as establishing, on the one hand, that the 
 abstract and a priori method yields no explanation of the laws 
 determining either the nature, the amount, or the distribution 
 of wealth; and, on the other hand, that the philosophical 
 method must be historical, and must trace the connexion between 
 the economical and the other phases of national history. As 
 regards the nature of wealth, it has been shown that essential 
 differences in its kinds and constituents, profoundly affecting 
 the economical condition of mankind, manifest themselves at 
 different stages of progress, and that their causes must be sought 
 in the entire state of society—physical, moral, intellectual, and 
 civil, The amount of wealth has been proved to depend on all 
 the conditions determining the direction and employments of 
 human energies, as well as on the state of the arts of production, 
 and the means of supply. And the distribution of wealth has 
 been shown to be the result, not of exchange alone, but also 
 of moral, religious, and family ideas and sentiments, and the 
 whole history of the nation. The distribution effected by 
 
190 On the Philosophical Method of Pohtical Economy. 
 
 exchange itself demonstrably varies at different stages of social 
 progress, and is by no means in accordance with the doctrines 
 of a priori political economy. Every successive stage—the. 
 hunting, the pastoral, the agricultural, the commercial stages, 
 for example—has an economy which is indissolubly connected 
 with the physical, intellectual, moral, and civil development ; 
 and the economical condition of English society at this day is 
 the outcome of the entire movement which has evolved the 
 political constitution, the structure of the family, the forms of 
 religion, the learned professions, the arts and sciences, the state 
 of agriculture, manufactures, and commerce. The philosophical 
 method of political economy must be one which expounds this 
 evolution. 
 
AVL 
 POLITICAL ECONOMY AND SOCIOLOGY.* 
 
 Putitosoputcat, like religious and political history, is the history 
 of change and reform, of the decline of old and the rise of new 
 systems, and the reformers encounter the same opposition in 
 the world of philosophy as in that of religion and politics, being 
 accused of attempts to destroy what they seek to regenerate and 
 preserve. ‘Those whose interest or pride is on the side of the 
 old system resist the new one as an attack on themselves, but 
 they call it an attack on religion, on the constitution, on 
 science, or on some venerable name. ‘The upholders of an 
 ancient worship did not cry publicly that their craft was in 
 danger to be set at nought, but ‘Great is Diana of the 
 Ephesians.” So a cry is now heard in reply to Mr. Ingram 
 from an old sect of economists of the greatness of Adam Smith. 
 And it is well that the ery is now for him instead of Ricardo. 
 Not long ago Adam Smith’s name was seldom heard; his 
 reputation was eclipsed by Ricardo’s; the ‘ Wealth of Nations’ 
 was treated as almost obsolete. A sort of mythical glory 
 surrounded Ricardo, and we may realize in his instance the 
 process by which the ballads of a number of singers came to be 
 ascribed to one bard, and the exploits of a line of chiefs and 
 warriors to a single hero. A theory to which a contemporary 
 of Adam Smith was led by his own experience and observation 
 of farming in Scotland, and which was afterwards reproduced 
 
 
 
 * Fortnightly Review, January 1, 1879.—In connexion with this Essay, and 
 the controversy referred to in it, see The Present Position and Prospects of Political 
 Economy, by John K. Ingram, F.T.C.D., and an article in the Nineteenth Century, 
 _ November, 1878, entitled ‘ Recent Attacks on Political Economy,’ by the Right Hon. 
 Robert Lowe, M.P. (Lord Sherbrooke). 
 
192 Political Economy and Sociology. 
 
 by two contemporaries of Ricardo, came to be called ‘ Ricardo’s 
 Theory of Rent,’ in spite of his own acknowledgment in his 
 preface and elsewhere that he took it from Malthus and West, 
 and of the fact that only the exaggerations and inaccuracies 
 were his own.* Mr. Mill’s theory of international values has 
 in like manner been traced to Ricardo, contrary to its author’s 
 own statement in his Autobiography of its independent origin. 
 Mr. Mill himself, indeed, though he so qualified and amended 
 the doctrines of his predecessor that the latter could scarcely 
 have recognized them, and brought new elements and conditions 
 within the field of political economy, sometimes spoke with the 
 piety of a disciple, and has been represented by some of his own 
 followers as little more; the giant thus standing on the shoulders 
 of the dwarf to see over his head. It is a sign, then, that 
 Ricardo has lost ground when his adherents fall back on Adam 
 Smith, just as a victory was gained when theologians could no- 
 longer oppose a new doctrine as contrary to the Fathers, and 
 were driven to contend that it was against the Bible, which 
 they had before kept in the background. A bold attempt may 
 be made now and then hereafter to rehabilitate Ricardo, but. 
 practically he is given up. It is to be noted that the phrase 
 ‘desire of wealth,’ which with some of his successors is made to 
 bear the whole weight of political economy, was not used by 
 Ricardo. But that is only because he dispensed altogether 
 with psychology, and with all inquiry into the mental forces 
 at work; setting out with naked assumptions, such as that it is 
 ‘natural’ that the value of things should be proportionate to. 
 the labour of producing them, and that the ‘natural’ rate of 
 wages is the price of the labourer’s subsistence. These nebulous 
 assumptions are not only both false, but also contradictory; for 
 if the cost of the labourer’s subsistence determined the rate of 
 wages, it could not vary in different occupations with the nature 
 
 * Tn all that I have said concerning the origin and progress of rent, I have 
 briefly repeated and endeavoured to elucidate the principles which Mr. Malthus has 
 so ably laid down, on the same subject, in his Inquiry into the Nature and Progress 
 of Rent, a work abounding in original ideas.’—Ricardo’s Works, M‘Culloch’s ed., 
 p- 374. Compare the preface to Ricardo’s Principles of Political Economy and 
 Taxation. 
 
Political Economy and Sociology. 193 
 
 of the work. A deduction from the assumed relation between 
 wages and food, on which much of his system was built, was 
 that a tax on corn could not fall on the labouring class, and 
 this doctrine, as both Cobden and Sir Robert Peel have borne 
 witness, was the main cause of the Corn Law. Hais theory, that 
 no improvement or economy in production can augment profit 
 unless it lowers wages, has in like manner done incalculable 
 harm. ‘It has been,’ he says in his treatise, ‘my endeavour 
 throughout this work to show that the rate of profits can never 
 be increased but by a fall of wages.’ Had he been an English 
 Lassalle or Karl Marx, and his main object to sow enmity 
 between capital and labour, he could not have devised a doctrine 
 better adapted to the purpose. The notion, too, which his 
 language did much to establish, that all wealth, including 
 capital itself, is the produce of labour, in the sense of manual 
 labour, exclusive of the capitalist’s enterprise, invention, trouble, 
 and abstinence, is actually the corner-stone of the creed of the 
 German ‘social democrat.’ Political economy is, then, emerging 
 from a cloud of petitio principit, bad generalization, and mis- 
 chievous fallacy, when the controversy turns on the system of 
 Adam Smith. It reminds one of the contest between the spirits 
 of darkness and light for the body of Moses, to find the 
 followers of Ricardo claiming Adam Smith for their prophet, 
 and seeking to make his shrine the prop of a falling super- 
 stition. 
 
 The real issue, of course, is not what Adam Smith’s system | 
 was, but what is the true one; the two questions, however, are 
 not unrelated. ‘ Whom ye ignorantly worship, him declare I 
 unto you,’ the true disciple of Adam Smith may say to those 
 who raise altars to his name, but to whom he is virtually an 
 unknown being. Not only is the phrase ‘desire of wealth’ 
 not to be found in the ‘ Wealth of Nations,’ and Adam Smith 
 guiltless of a vicious abstraction that has done much to darken 
 economic inquiry; he introduced into his theory of the motives 
 to exertion and sacrifice various desires and sentiments besides 
 those which have wealth for their object. A writer from whom 
 something more may be learned than was known in the days 
 
 O 
 
194 Political Economy and Sociology. 
 
 of Plato respecting the philosophy of society, history, and law, 
 has observed, with respect to the deductive economists’ practice 
 of setting aside a number of forces as ‘friction,’ that the best 
 corrective would be a demonstration that this so-called friction 
 is capable of scientific analysis and measurement.* Friction is 
 not, one may remark, a very appropriate or an adequate term, 
 indicating neither the strength nor the mode of operation of 
 the forces included under it. It would hardly seem correct to 
 say that the earth is prevented by friction from falling into 
 the sun. ‘The motives, too, ‘ eliminated’ in this fashion act in 
 opposite ways, sometimes counteracting and sometimes stimu- 
 lating by an additional object the love of gain. But Adam 
 Smith was so far from ‘eliminating’ ,them, that he has set the 
 example of an attempt to carry out Sir Henry Maine’s idea 
 of subjecting them not only to analysis, but to measurement. 
 The assertion of a recent advocate of the a priori and deductive 
 method, that the whole science of political economy is based on 
 the desire of wealth and aversion from labour, is contrary not 
 only to the spirit but to the letter of Adam Smith’s ‘ Wealth 
 of Nations.’ It is characteristic, indeed, of the laxity of the 
 deductive method, in spite of its pretence of rigorous logic, 
 that immediately after laying down the foregoing proposition 
 Mr. Lowe drops one of the two abstractions contained in it, 
 and affirms that Adam Smith’s method was successful because 
 the subject admitted of the elimination of all motives save the. 
 single one of pecuniary interest. And at the centenary of the 
 ‘Wealth of Nations’ he pronounced that ‘the result of Adam 
 Smith’s investigation amounts to this, that the causes of wealth 
 are two, work and thrift, and the causes of poverty two, 
 idleness aud waste’; adding that, in his own opinion, no more 
 need be known, or perhaps could be known, on the subject. 
 Nearly three thousand years before Adam Smith, Solomon had 
 said as much; summing up in his proverbs on the subject the 
 results of sagacious observation and induction, while men in 
 general sought to grow rich by shorter methods, such as prayer 
 
 * Village Communities in the Eust and West. Third Edition, p. 232. 
 
Political Economy and Sociology. 195 
 
 to their gods, as in later times by the aid of human pro- 
 tectors. 
 
 But to set aside all other motives to exertion besides riches 
 is quite opposed to Adam Simith’s rationale of the choice of 
 employments, and the different rates of wages and _ profit. 
 Observing that these were everywhere in Hurope extremely 
 different in different occupations, he traced the diversities to 
 various circumstances ‘which, either really or in imagination, 
 make up for a small pecuniary gain in some, and counterbalance 
 a great gain in others ’—the desire, for instance, of credit, dis- 
 tinction, or health, the love of independence, power, or country 
 life, the interest in certain pursuits for their own sake, the 
 dislike of others on various accounts. The cases in which such 
 influences come into play in his system are by no means 
 abnormal or uncommon. He examined their operation in many 
 of the ordinary employments of life—the farmer’s, the weaver’s, 
 the smith’s, the collier’s, the carpenter’s, the painter’s, the 
 butcher’s, the jeweller’s, the soldier’s, the sailor’s, the barrister’s, 
 the author’s; and sought to measure them by a pecuniary 
 standard. Honour, he said, formed a great part of the reward 
 of all honourable professions. ‘The farmer’s profit was lower 
 than the merchant’s or the manufacturer’s in proportion to the 
 other attractions of his business. So far from building a science 
 of the production and distribution of wealth on Mr. Lowe’s two 
 abstractions, the famous tenth chapter of his first book involves 
 a complete refutation of such a system; as it does also of the 
 assertion that its leading principles were not obtained by 
 induction. The notion of evolving from his own consciousness 
 the circumstances and motives that diversify the employments 
 of a nation, and the remuneration obtained in them, would be 
 preposterous, even if Adam Smith himself had not expressly 
 stated at the beginning of the chapter that he had gathered 
 them from observation. His exposition of the causes that lead 
 men to accept a comparatively low rate of profit in farming 
 shows both the closeness of that observation, and the delicate 
 analysis to which he subjected influences which have been either 
 disregarded altogether, or lumped together as ‘friction’ or 
 
 02 
 
196 Political Economy and Sociology. 
 
 ‘disturbing causes’ by the deductive school of his successors. 
 ‘The beauty of the country,’ he said, ‘ besides the pleasures of 
 country life, the tranquillity of mind which it promises, and, 
 wherever the influence of human laws does not disturb it, the 
 independence which it really affords, are charms that more or 
 less attract everybody, and in every stage of his existence man 
 seems to retain a predilection for this primitive employment.” 
 Mr. ©. 8S. Read, speaking the other day from practical know- 
 ledge, and without thinking of Adam Smith, of the reasons why 
 men continue to hold farms at rents that leave little or no profit,. 
 fell into nearly similar language. The fact that Mr. Lowe, 
 with Adam Smith on his tongue, can think of no incentive to 
 exertion save pecuniary gain, is enough to prove the inadequacy 
 of the method he follows, of deducing the laws of political 
 economy from his own mind, instead of from careful induction. 
 Even Mr. Senior, though ambitious to construct the science 
 from the fewest possible principles, laid down several besides 
 the two jumbled into one in his treatise, as a desire to obtain 
 wealth at the least possible sacrifice. Among these additional 
 principles is that of population, and Mr. Lowe’s mention of 
 Malthus among the successors of Adam Smith might have- 
 suggested to him the insufficiency of the foundation on which 
 he builds a science of the production, accumulation, consumption,. 
 and distribution of wealth, as he defines political economy. 
 Among the chief motives to production, the most powerful of 
 all to accumulation, and deeply affecting consumption and 
 distribution, are conjugal and parental affection. The family 
 finds no place in a system which takes cognizance only of indi- 
 viduals, and of no motive save personal gain. Yet without the 
 family, and the altruistic as well as self-regarding motives that 
 maintain it, the work of the world would come almost to a 
 standstill; saving for a remote future would cease; there would 
 be no durable wealth ; men would not seek to leave anything: 
 behind them; the houses of the wealthiest, if there were any 
 houses at all, would be built to last only for their own time. 
 In order to solve the problem of political economy, Mr. Lowe 
 assures us that ‘all that is wanted is the knowledge that the 
 
Political Economy and Sociology. 197 
 
 ruling passions of mankind are wealth and ease.’ It does not 
 appear whether, like Mr. Bagehot, Mr. Lowe excludes women 
 from the sphere of the science; but the exertions of that 
 hardest-worked of all labourers, the poor man’s wife, can hardly 
 be explained by the love of wealth and ease. Had not more 
 than one of Mr. Ingram’s opponents contended that the scientific 
 character and the complete success of the method of eliminating 
 all other motives, is demonstrated by its enabling the economist 
 to predict, it would seem too plain to need statement that just 
 the opposite is the truth. If you know all a man’s inclinations 
 and motives, and their relative force, you may foretell how he 
 will act under given conditions. But if you set aside all save the 
 desire of pecuniary gain and aversion from labour, you will to 
 a certainty go wrong about human conduct in general; you 
 will not be right about even the miser, for he has sometimes 
 some human affections, and, on the other hand, thinks nothing 
 of trouble. Mr. Jevons, though favourably disposed by philo- 
 sophical culture and tastes towards historical investigation in 
 economics, has urged, on behalf of deduction from the acquisitive 
 principle, that even the lower animals act from a similar motive, 
 ‘as you will discover if you interfere between a dog and his 
 bone.’ A bone fairly enough represents the sort of wealth 
 coveted by a dog, who has a comparatively simple cerebral 
 system, and few other objects. Yet you cannot predict the 
 conduct even of a dog from his love of bones, or not one would 
 be left in the butchers’ shops. The dog has a regard for his 
 master and a fear of the police, and he has other pursuits. 
 
 All men, it may be said, desire health, ‘and in the absence 
 of disturbing causes’ will seek it. But can a science of health 
 be based on this assumption, or the conduct of mankind be 
 predicted from it? Everybody, it might be affirmed, loves 
 vritue ‘in the abstract,’ and ‘in the absence of disturbing causes’ 
 would be virtuous; yet, policemen, prisons, and the Divorce 
 Court show that no theory of morals, much less absolute pre- 
 dictions, can be drawn from this abstract principle. That the 
 a priori method in political economy renders positive prediction 
 possible is indeed contrary to the doctrine of its most eminent 
 
198 Political Economy and Sociology. 
 
 expositors. Mr. Mill, though he subsequently much enlarged 
 the scope and system of economic investigation, was in his earlier 
 years an advocate of thea priori method; yet in the well-known 
 essay In support of it he emphatically insisted that the con- 
 clusions deduced from it are ‘true only in the abstract,’ and 
 ‘would be true without qualification only in purely imaginary 
 cases.’ Mr. Cairnes, in like manner, says, ‘it is evident that an 
 economist arguing from the desire of wealth and the aversion to 
 labour with strict logical accuracy may be landed in conclusions 
 that have no resemblance to existing realities’; adding that ‘ the 
 economist can never be certain that he does not omit some 
 essential circumstance, and it is indeed scarcely possible to 
 include all; therefore his conclusions correspond with facts only 
 in the absence of disturbing causes, and represent not positive 
 but hypothetic truths.’* 
 
 The more sagacious adherents to the mere deductive method 
 will therefore probably decline to accept Mr. Lowe as their 
 representative, but his exposition is a reductio ad absurdum of 
 their own system. He is only more thoroughgoing—one cannot 
 say more consistent or logical, for he sometimes includes and 
 sometimes discards the dislike of labour—in his elimination 
 of all principles save the desire of wealth, which is the real 
 backbone of their theory as well as his. ‘The other motives 
 and forces to which they nominally concede a place are only 
 admitted at the outset for form’s sake, to be afterwards set 
 aside as ‘ disturbing causes’ in a manner without precedent or 
 analogy in physical science. The last thing an astronomer 
 would dream of is, that having admitted in general terms the 
 existence of other forces besides those that were taken account 
 of by the earliest observers, he need not concern himself with 
 them further, and may calculate the movements of the hea- 
 venly bodies without reference to them. Nor is this the only 
 fundamental objection. No such principle as ‘the desire of 
 wealth,’ in the sense of a single, universal motive, whose 
 consequences are uniform and can be foreseen, really exists. 
 
 * Logical Method cf Political Economy, p. 49. 
 
! 
 
 Political Economy and Sociology. 199 
 
 Adam Smith does not use the phrase, and his doctrine respect- 
 ing the nature of wealth shows the impossibility of using it 
 as a key to the movements of the economic world. Wealth, he 
 says, ‘ consists not in the inconsumable riches of money, but in 
 the consumable goods annually reproduced by the labour of the 
 society.’ It includes therefore food, drink, clothing, houses, furni- 
 ture, plate, ornaments, books, works of art; in short, necessaries, 
 comforts, luxuries, in all their varieties, and all the productions 
 of nature or of human exertion and skill to be had in the 
 market. It includes things which vary in different countries 
 and different ages, and have very different economic effects ; 
 and which are objects not only of different but of antagonistic 
 desires. Tho love of gin is the love of one kind of wealth 
 which too often competes in the mind of a poor man with the 
 love of a decent dwelling. There is a saying about a four- 
 footed animal not without firmness of character but of limited 
 ideas, between two bundles of hay both soliciting his choice. 
 The decalogue shows that this animal was one of divers things 
 which the Israelites were prone to covet. The ox, to which 
 allusion is also made, in the commandment, was, as Sir Henry 
 Maine has explained, the kind of wealth most valued by early 
 agricultural communities; yet even they desired some other 
 kinds, and sometimes the reason why a man was without an ox 
 for his plough, was that he was too fond of strong drink. In 
 modern society there are countless varieties of wealth. Adam 
 Smith has made some excellent remarks on the difference, in 
 respect both of its amount and its distribution, of expenditure 
 on different sorts. But expenditure is simply the method of 
 acquisition by which, under a division of labour, the desires of 
 men for different things are satisfied. Were there no such 
 division, some would build houses and make clothes for them- 
 selves, while others in nakedness or rags distilled spirits or 
 brewed ale in mud hovels or caves. 
 
 One of the most important economic inquiries relates to the 
 changes which take place in the direction of the chief wants of 
 mankind, and the species of wealth which they call into exist- 
 ence. ‘The main object of industry and accumulation on the 
 
200 Political Economy and Sociology. 
 
 part of the French nation is landed property ; the chief impulse 
 determining the national economy.is the desire of it : in England 
 this desire is absent among the nation at large, and the one 
 which takes its place with no small number of Englishmen is the 
 love of beer. Happily in England there is a still more general 
 object of desire in the house, and the house owes its structure, 
 perhaps its very existence, to the institution of the family. 
 Even in the matter of dress, the changes in the nature of the 
 things constituting wealth deeply affect its economic condition. 
 Richard II. wore a coat which cost more than £20,000 in modern 
 money; the Prince of Wales would not take £20,000 to wear 
 it. The stronger passion of women than men in our time for 
 personal decoration is the result not of an original difference 
 in the mental constitution of the two sexes, but of a dif- 
 ferent social and political history. The formula of demand and 
 supply is still supposed by some economists to explain every- 
 thing fully, but both demand and supply have in every case 
 a long history. The demand for duelling swords and pistols . 
 in France is such that the supply makes no inconsiderable 
 figure in the inventory of French wealth. Were they used 
 only in duels, there would probably not be two swords or 
 a brace of pistols in England. It is a misrepresentation of 
 the Mercantile System that its adherents considered nothing 
 but money as wealth, still they did attach undue importance to 
 it; and the consequence of the excessive estimation in which 
 they held it demonstrates the absurdity of basing either the 
 economic prosperity of nations or economic science on the 
 abstraction which is the corner-stone of both in the deductive 
 system. ‘The other principle which Mr. Lowe associates with it, 
 the dislike of labour, involves an equal confusion. One might 
 ask, when it is maintained that we can predict the conduct of 
 mankind from these two principles, in what proportion are we 
 to mix them for the purpose? ‘The Jews were always a wealth- 
 loving nation, and many of them industrious, yet there seem 
 to have been not a few sluggards in Solomon’s time who would 
 go to no trouble to get it. Can employers tell whether higher 
 weekly earnings or fewer hours of work will be the principal 
 
Political Eeonomy and Sociology. 201 
 
 object of their workmen a year hence? ‘The savage has a 
 dislike for regular labour which only some form of slavery can 
 ‘overcome, but with the progress of civilization a love of exertion 
 for its own sake grows up, and employment becomes necessary 
 to the happiness of a great number of men. We are told 
 somewhat abruptly in the Psalms that a man was famous 
 according as he had lifted up axes on the thick trees, yet the 
 most celebrated woodcutter of that period perhaps felled no 
 more trees in a week than Mr. Gladstone will do for mere 
 recreation. ‘The German emperor replied to a deputation that 
 he had felt the pain of his wounds less than the abstinence from 
 his ordinary activity which they compelled. The love of several 
 occupations for their own sake is one of the causes by which 
 Adam Smith explains the small profit to be made in them. 
 Had Mr. Lowe ever watched a French peasant at work in his 
 vineyard, he could hardly have made a universal dislike of toil 
 -one of the two pillars of political economy. 
 
 Other motives, which eminent advocates of the deductive 
 system propose to take into account, vary in like manner in 
 force, direction, and consequence. Mr. Cairnes refers to the 
 love of men for their own country as the main cause of the 
 diversity of the rates of wages and profit in different countries, 
 and it is a highly complex feeling, varying greatly in strength 
 in different nations and ages. ‘The Fleming was the great 
 emigrant of the middle ages; now he can hardly be got to 
 migrate to an adjoining province for double wages. Patriotism 
 -did not exist in England some centuries ago. Different races, 
 nations, and clans had been too recently blended under one 
 government for a strong feeling of nationality ; a man belonged 
 to his township, his borough, his guild, not to his country. 
 Had Englishmen been as patriotic as they were brave, William 
 of Normandy might never have got the title of Conqueror. 
 The Germans when they invaded the Roman Empire knew no 
 common fatherland. In 1870 they left lucrative employments 
 in all parts of the world for a soldier’s perils and pay, in a manner 
 that shows how much there is on earth that is not dreamt of in 
 Mr. Lowe’s philosophy. And this is far from exhausting the 
 
202 Political Economy and Sociology. 
 
 principles entitled, even on ‘the admission of distinguished 
 adherents of the deductive method, to a place in the science of 
 wealth. Mr. Cairnes asks, for example, ‘ How far should religious 
 and moral considerations be admitted as coming within the 
 province of political economy?’ His answer is that ‘ They are 
 to be taken account of precisely in so far as they are found, in 
 fact, to affect the conduct of men in the pursuit of wealth’ ; 
 and one need only allude to the influence of medieval religion 
 on both the forms and the distribution of the wealth of the 
 community, the changes in both with the change in religion 
 after the Reformation, in proof of the impotence of the a priory 
 method to guide the economist in relation to this class of 
 agencies. Yet a few pages after recognising their title to 
 investigation, Mr. Cairnes argues that induction, though in- 
 dispensable in physical, is needless in economic science, on the 
 ground that ‘ the economist starts with a knowledge of ultimate 
 causes,’ and ‘is already, at the outset of his enterprise, in the 
 position which the physicist only attains after ages of laborious 
 research’.* The followers of the deductive method are, in fact, on 
 the horns of a dilemma. They must either follow Mr. Lowe’s 
 narrow path, and reason strictly from the assumption that men 
 are actuated by no motive save the desire of pecuniary gain,. 
 or they must contend that they have an intuitive knowledge of 
 all the moral, religious, political, and other motives influencing 
 human conduct, and of all the changes they undergo in different 
 countries and periods. 
 
 Shut out by their own method from the investigation of 
 the true problems of political economy, the deductive school 
 have devoted themselves to a fictitious solution of others 
 which the ablest among them have nevertheless admitted to 
 be insoluble. ‘If you place a man’s ear within the ring of 
 pounds, shillings, and pence, his conduct can be counted on 
 to the greatest nicety,’ according to Mr. Lowe. Mr. Cairnes. 
 on the other hand, as we have seen, concurs with Mr. Mill 
 that positive, unconditional conclusions are beyond the reach 
 
 
 
 * Logical Method of Political Economy, p. 75. 
 
Political Economy and Sociology. 203: 
 
 of the economist, since he does not take into account, or even 
 know, all the forces at work, much less can measure them with 
 precision. An entire lecture in Mr. Cairnes’ ‘ Logical Method 
 of Political Economy’ is devoted to proof that quantitative. 
 exactness is unattainable in the science, and that its conclusions 
 being only hypothetically true, and representing only several 
 tendencies ‘in the absence of disturbing causes,’ ought not 
 to affect the semblance of numerical exactness. Mr. Lowe’s 
 proposition is nevertheless true in the sense that the deductive 
 system does affect the power not only of absolute prediction 
 but of prediction with mathematical accuracy. ‘Take any 
 treatise following the deductive method, and it will be found 
 to consist mainly of propositions respecting wages, profit, 
 prices, rent, and taxation, which profess to determine with 
 arithmetical exactness on whom a given tax, say on a box of 
 lucifer matches, will fall, how much it will add to the price of 
 the box, and what profit both the manufacturer and the retailer 
 will net on its advance. In a previous article* the present 
 writer has exposed the fallacies involved in the whole chain 
 of reasoning, and shown that it cannot be foreseen whether a 
 trader will ever recover a so-called indirect tax at all; that 
 it may be a direct tax on himself, may drive him and all 
 other small capitalists from the business, and ultimately give: 
 a lucrative monopoly instead of ‘ average profit’ to a few great 
 capitalists—half-a-dozen distillers and brewers, for example. 
 The deductive theory of wages, profits, prices, rent, and 
 taxation, is substantially a set of predictions respecting the 
 distribution of wealth, which affect to foretell exactly the 
 gain in every business, and the rates at which goods of every 
 kind may be sold. It has been well said that before predicting 
 the future, we must learn to predict the past; and before 
 predicting the past, it might be added, we should learn to 
 predict the present, by studying the forces at work in the 
 world around us, the conditions under which they operate, 
 and their actual results. A striking instance of the failure of 
 
 
 
 
 
 * <The Incidence of Imperial and Local Taxation on the Working Classes.” 
 Fortnightly Review, February 1st, 1874. (Reprinted in the present volume.) 
 
204 Political Economy and Socvology. 
 
 the deductive economist to predict even the present, is Mr. 
 M‘Culloch’s assertion in several editions of the ‘ Wealth of 
 Nations’ that the local inequalities of wages, of which Adam 
 Smith spoke, had almost disappeared with the improvement 
 in the means of communication. In point of fact, they had 
 greatly increased ; agricultural wages varying from 6s. to 16s. 
 -a-week when his first edition was published, and from 9s. to 
 22s. at the date of the last, varying, too, from causes which 
 inductive investigation had enabled Adam Smith to discover, 
 namely, the unequal local development of manufactures, 
 commerce, the greater demand and competition for labour in 
 some places than in others, and the obstacles to its migration. 
 
 The history of the last few years gives disastrous proof 
 of the falsity of the predictions of both present and future 
 involved in the theory of the equality of profits, which assumes 
 that the gains in different employments can be foreseen with 
 a close approximation to accuracy, and that competition 
 accordingly keeps them nearly at a level. If there was a 
 man in the country who might have been supposed capable of 
 foresight in such matters, by reason of the widest information 
 and great financial skill, it was Mr. Gladstone, when a few 
 years ago he described the trade of the country as advancing by 
 leaps and bounds. Did he see that they were leaps in the dark ? 
 Did the capitalists who rushed into the businesses in which 
 prices and profits were trebling see that they were bounds 
 that would end in a fall on the other side? Have the capitalists 
 in other businesses, who were heavily mulcted by the rise of 
 coal and iron, recovered their losses ‘with average profit’? 
 Adam Smith, reasoning from observation, rigorously and 
 emphatically confined the tendency of profits to equality to 
 long-established well-known trades in the same neighbourhood, 
 unaffected by new discoveries, by speculation, fluctuations 
 of credit, accident, or political events, carried on, not by 
 directors and shareholders with other business to mind, but 
 by persons whose sole occupations they were. In other words, 
 from an induction he predicted inequality where the deductive 
 economist predicts equality. Mr. Cairnes, indeed, though 
 
Political Economy and Sociology. 205 
 
 adhering to the general truth of the doctrine of equality, was of 
 opinion that the new gold would, by its unequal distribution 
 over different trades, disturb the level of profits for many years. 
 The actual course of the distribution was, however, very different 
 from that which @ priori reasoning led him to predict, the: 
 chief rise of prices being in foreign countries, where railways, in- 
 dustrial progress, and the opening of the English market raised 
 them suddenly from a low scale towards the English range.* 
 The new gold was only one of many new conditions of modern 
 trade. In an age of companies there is a very imperfect divi- 
 sion of labour: credit and speculation have made trade a lottery, 
 in which ‘the absurd presumption of every man in his own 
 abilities, and the still more absurd presumption in his own good 
 fortune,’ of which Adam Smith speaks, have full play. 
 
 The recurrence of commercial crises alone defeats all 
 attempts to predict the course of prices and profits, and would 
 do so even if the doctrine of decennial cycles had a solid 
 foundation ; for if the periods of inflation and depression could 
 be foretold, and the occurrence of each crisis timed with 
 precision, the particular movements of credit, speculation, and 
 prices, and the gains and losses in each business, could not. 
 The theory of a decennial cycle, like that of the equality of 
 profits, and the whole @ priori system, with its seeming 
 simplicity, symmetry, and roundness, owes its attractions to 
 that idol of the tribe which, as Bacon says, leads the spirit 
 of man to suppose and feign in nature a greater equality and 
 uniformity than is in truth, and to mark the hits of his system, 
 but not the misses. An ingenious attempt has lately been 
 made to account for the imaginary decennial cycle by the 
 supposition that about every ten years there is a change in 
 the management of business through a younger generation 
 taking the place of the older, as though the commercial world 
 
 * An example of this was cited lately by the eminent French economist, 
 M. Leroy-Beaulieu, in the Economiste Frangais, from statistics compiled by 
 Mr. Newmarch, showing that between 1830 and 1870 the price of corn fell 14 
 per cent. in England, while it rose 17 per cent. in France, 88 per cent. in Belgium, 
 133 per cent. in Hungary, 142 per cent. in Austria. 
 
206 Political Economy and Sociology. 
 
 were composed of successive ranks of men born together at the 
 beginning of successive decades, and all in each rank reaching 
 sixty, and retiring together. But the commercial class, like the 
 army, the bar, and the whole nation, is recruited with fresh 
 blood every year, not only every tenth year. Lord Bacon 
 himself showed a strong tendency to believe in both a political 
 and an economical cycle, and supposed his own age of the 
 world on the descent of the wheel, though he judiciously 
 thought it ‘not good to look too long on these turning wheels 
 of vicissitude, lest we become giddy.’ Adam Smith, too, leaned 
 to the notion of a code of nature regulating the movement of 
 the economic world with perfect equality and uniformity. 
 Perhaps, therefore, one need not wonder that Mr. Jevons, whose 
 philosophical powers have enabled him to make real discoveries, 
 ‘should be fascinated by the idea of commercial cycles recurring 
 with the regularity of astronomical phenomena, and traceable 
 to astronomical causes. But one is driven to suspect that Mr. 
 Lowe can never have made a discovery, when he argues that 
 Adam Smith’s method was wholly deductive, because in the 
 ‘Wealth of Nations’ he puts his conclusions first ; supporting 
 them afterwards by the instances which he deems most con- 
 vincing, instead of setting before his readers a vast number of 
 historical and statistical facts, and working out the principle 
 which they establish under their eyes. A library would not 
 contain the books he would have written, had he attempted to 
 convey to other minds by such a method the knowledge he 
 had himself reached by long and laborious investigation. A 
 discoverer would be avoided like a pestilence or the ancient 
 mariner, were he to relate all the steps by which he got to his 
 journey’s end, after many misfortunes and failures, it may be, 
 and often burning his fingers in the crucible. Results, it is 
 well said, not processes, are for the public eye. How little 
 Adam Smith was disposed to publish all his processes appears 
 from his direction to Hume, in 1773, to burn all the papers, 
 with one exception, found in his house at his death, and from 
 his own destruction of them a few days before his end. The 
 advantage of the division of labour—to which Mr. Lowe refers 
 
Political Economy and Sociology. 207 
 
 as a proof that he proceeded by assumption, because the number 
 of examples he gives is small—was not a new doctrine; but 
 his chapter on its limitation by the extent of the market bears 
 all the marks of wide research and induction. The work of 
 induction in relation to the division of labour is, moreover, by 
 no means complete. There are plain symptoms in modern eco- 
 nomy of tendencies to an amalgamation, instead of a division, 
 of occupations. And the most arduous problem respecting the 
 separation of occupations has never even occurred to the deduc- 
 tive school—namely, What are the causes governing its actual 
 course, determining the directions of the national energies, the 
 employments of different classes and of both sexes, in different 
 countries and ages ? 
 
 The human being or ‘individual’ from whose assumed 
 tendencies the conclusions of the deductive system are drawn, 
 and its predictions made, is a fiction, not a reality—a_ personi- 
 fication of two abstractions, the desire of wealth and aversion 
 for labour—feelings differing, as has been shown, in different 
 countries, ages, and persons—differing much, for example, in 
 men and women. Mr. Bagehot felt so strongly the inapplica- 
 bility of the assumptions of the system to the greater part of 
 _ the world, that he actually limited political economy to England 
 at its present state of commercial development, and to the 
 male sex in England. Such a limitation involves a complete 
 surrender of the position that the system is based on universal 
 laws or principles of human nature ; it involves also an ad- 
 mission that it is only by inductive investigation that we can 
 determine what the actual economy of society is, and what the 
 causes that govern its structure and movement. Enough has 
 been said, too, to show that the fundamental assumptions of 
 the deductive economist are really as fallacious in reference to 
 modern Englishmen as to Frenchmen, Germans, Asiatics, or 
 Africans. The economy of English society can, no more than 
 that of any other nation, be explained by assuming that English- 
 men are personifications of the love of wealth and ease. But 
 this is only one of the fundamental shortcomings of the system. 
 Looking only to the assumed motives of individuals, it ignores 
 
208 Political Economy and Sociology. 
 
 altogether the collective agency of the community, through its 
 positive institutions as an organized political body or state, its 
 history and traditions, and the social environment with which 
 it encompasses every man and woman within it, from the cradle 
 to the grave. | 
 
 Adam Smith’s philosophy was not, like the little system that 
 pleases some of his successors, if I may use a Horatian phrase, 
 ‘complete in itself, smooth, and round.’* ‘There was, it is true, 
 in his mind an ideal order of things which he called ‘ natural,’ 
 as being that which would take place if certain tendencies of 
 human nature were allowed to operate without interference. 
 Even in this ideal world, however, he saw that there must be 
 laws relating to property, succession, tenure, and other sub- 
 jects, although, in accordance with both the political and the 
 theological philosophy of his time, there was a ‘natural’ type 
 to which these institutions ought to conform. Mr. Macleod has 
 urged, on behalf of confining the scope of political economy 
 to commercial exchange, that the ‘ distribution’ of wealth con- 
 templated by, the French Physiocrates was that effected by 
 exchange, or by the process of distribution as distinguished 
 from that of production. The Physiocrates, it may be observed, 
 were not the first to use the term in this sense; it was so 
 employed by English writers on commerce a hundred years: 
 earlier. But one might as reasonably exclude all agencies 
 save water from geology on the ground that Werner did not 
 take them into account, as limit the investigations of the 
 economist to the mode of distribution taken cognizance of in 
 either the seventeenth or the eighteenth century, in either 
 England or France. The very word ‘distribution,’ moreover, 
 which Adam Smith applies in his first book to the partition 
 effected by exchange, is in his third book applied to that 
 effected by succession; though in both cases we may perceive 
 the influence of the ideal code of nature on his opinions and 
 language. Long before his time, indeed, the term was applied 
 to the distribution of wealth by law, as the Statute of Distribu- 
 
 * ‘Tn se ipso totus, teres atque rotundus.’—Hor. 
 
Political Economy and Sociology. 209 
 
 tions shows. He sets before us both the ‘natural,’ as he 
 called the ideally best, order of things, and the actual order 
 resulting from positive institutions, historical events, and the 
 constitution of human nature with its various and conflicting 
 propensities; among which, as he points out, the love of 
 dominion is apt to prevail over the desire of gain. The third 
 book of the ‘ Wealth of Nations’ is mainly an investigation 
 into the action and reaction of political and economic history, 
 the progress of agriculture, manufactures, and commerce, and 
 of the different classes of society in both country and town, 
 until out of medizval Catholic and feudal Europe had issued 
 the Europe of his own time with an economy moulded and 
 fashioned by centuries. The word ‘evolution’ had not come 
 into use in Adam Smith’s day, and social philosophers did not 
 eall the historical order of events the natural order, or the 
 actual sequences resulting from the whole constitution of 
 human society and the surrounding world the results of 
 natural law: the word ‘ Nature,’ in their terminology, having a 
 purely ideal meaning. Yet in substance Adam Smith shows 
 that the economic condition of the nations of modern Europe 
 was the outcome of a long historical evolution, and could not 
 otherwise be accounted for or understood, although a better 
 state of things, which in the language of his time he called 
 the natural state, would have resulted from better human 
 government and institutions. Whoever compares the last three 
 books of the ‘ Wealth of Nations’ with the announcement, at 
 the end of the ‘Theory of Moral Sentiments,’ of the author’s 
 intention ‘in another discourse to give an account of the general 
 principles of law and government, and of the different revo- 
 lutions they have undergone in different ages and periods 
 of society, not only in what concerns justice, but in what 
 concerns police, revenue, arms, and whatever else is the subject | 
 of law,’ will find evidence that political economy was not the 
 only branch of political science in which Adam Smith had 
 advanced beyond Plato, in whose days Mr. Lowe affirms that 
 knowledge in all other branches of moral and political philosophy 
 came to a standstill. Adam Smith saw that ‘the revolutions 
 P 
 
210 Political Economy and Sociology. 
 
 of law and government’ had followed a determinable order ; 
 that the whole movement of society, including even that of 
 positive law, was subject to law in the scientific sense of regular 
 and intelligible sequence; and that the economic state of a 
 nation at every period of its history was only a particular aspect 
 of the whole social development. This is the fundamental 
 conception on which the Science of Society rests, although the 
 modern social philosopher calls the actual succession of social 
 phenomena the natural one, while Adam Smith used the word 
 ‘natural’ in a different sense. 
 
 ‘In love, or war, or politics, or religion, or morals,’ Mr. Lowe 
 argues, ‘it is impossible to foretell how men will act, and 
 therefore it is impossible to reason deductively ;’ whereas, ‘in 
 matters connected with wealth, deviations arising from other 
 causes than the desire of it may be neglected without perceptible 
 error.’ The truth is that all these causes—war, love, religion, 
 morals, and politics—do profoundly influence the conduct and 
 condition of mankind in relation to wealth, and the economic 
 structure of society. It is one of Mr. Buckle’s incorrect 
 generalizations that in the middle ages there were but two 
 engrossing pursuits—war and religion—and only two professions 
 —the church and the army. It is, on the other hand, a no less 
 
 superficial philosophy that overlooks the influence of war and_ 
 
 religion on the economy of modern Hurope, the occupations of 
 its inhabitants, and the nature, amount, distribution, and 
 consumption of their productions. At no period of the middle 
 ages was so large a proportion of the population of the 
 Continent trained to war as at the present day. An immense 
 part of the wealth of modern Europe, England included, 
 consists of weapons, warlike structures and stores, and the 
 appliances of armies and fleets. What would be the worth of 
 a treatise deducing the economy of Germany from the assump- 
 tion that every man is occupied solely in the acquisition of 
 wealth, ‘ the actual deviations being so slight that they may be 
 treated as practically non-existent?’ Were astronomers able 
 to discover certain indications of human life in another planet, 
 on Mr. Lowe’s principle we should know all that need interest 
 
Political Economy and Sociology. 211 
 
 or could instruct us respecting the economy of the planetary 
 world from ‘the two ruling passions of mankind—wealth and 
 ease.’ Would not the questions arise :—‘ Does war exist, and 
 if so, is every man a soldier, or is there a distinct military 
 profession?’ ‘Have the inhabitants of the planet any religion, 
 and if so, is there a wealthy priesthood?’ ‘Are the institutions 
 of marriage and the family established?’ ‘What are the 
 checks to the increase of population?’ ‘Is land held in 
 common, or does private property in it exist?’ ‘ What are the 
 laws and customs with respect to succession?’ ‘ Have the 
 people of this planet the same kinds of wealth as those of the 
 earth, and have different countries in it different kinds, as in 
 our own world?’ It has been shown that the mundane 
 economist possesses no such powers of prediction as Mr. Lowe 
 ascribes to him, just because politics, war, religion, morals, 
 and love, do all powerfully affect human conduct in matters 
 connected with wealth. Nevertheless, the philosophy of society 
 is not so undeveloped that no regular sequence or natural law 
 is discoverable in these very influences, or prediction altogether 
 impossible in relation to them. It can be foretold, with a close 
 approximation to accuracy, how many marriages there will be 
 between the Ist of January, 1879, and the next census. A 
 well-known economist is said to maintain that marriage 1s 
 nothing but a commercial contract; but Edmund Burke’s 
 complaint that the age of chivalry was gone, and that of 
 economists and calculators had succeeded, was not quite so 
 well grounded. love, chivalrous sentiment, morals, religion, 
 do still deeply affect marriage, even among a nation of shop- 
 keepers ; and it is because they do that we can nearly foretell 
 the number of such unions, and the number of children born 
 and reared. We should be altogether without data for cal- 
 culating the advance of population, the supply of labour, the 
 movement of rent, the accumulation of capital, and its distri- 
 bution by marriage and succession as well as exchange, if men 
 and women, or even men alone, were influenced by no other 
 than mercantile motives. 
 
 The economic structure of any given community, the direc- 
 
 P 2 
 
212 Political Economy and Sociology. 
 
 tion taken by national energies, the occupations of the different 
 classes and of both sexes, the constituents and the partition of 
 movable and immovable property, the progressive, stationary, 
 or retrogressive condition in respect of productive power and 
 the quantity and quality of the necessaries, comforts, and 
 luxuries of life, are the results not of special economic forces, 
 but of all the social forces, political, moral, and intellectual, as 
 well as industrial. The very wants and aims summed up in 
 ‘the desire of wealth’ arise not from innate, original, and 
 universal propensities of the individual man, but from the 
 community and its history. Hunger and thirst, desire of 
 shelter from cold and heat, are probably the only forms of the 
 economic impulse that a human being isolated altogether from 
 social influences would feel. The very kinds of food sought in 
 civilized society are determined by a long national history, and 
 are not the same in England and France. The predominant 
 form which the love of wealth takes in the last country is, as 
 already said, the love of landed property, a form non-existent 
 in primitive humanity, and which in civilized countries is so: 
 much the result of national history, that it is extinct in our own 
 as a motive to labour and thrift on the part of the nation at 
 large, though once widely diffused through all classes in both 
 country and town. 
 
 Political economy is thus a department of the science of 
 society which selects a special class of social phenomena for 
 special investigation, but for this purpose must investigate all 
 the forces and laws by which they are governed. The deductive 
 economist misconceives altogether the method of isolation 
 permissible in philosophy. In consequence of the limitation of 
 human faculties, not that the narrowing of the field is in itself 
 desirable or scientific, it is legitimate to make economic pheno- 
 mena, the division of labour, the nature, amount, and distribution 
 of national riches, the subject of particular examination, pro- 
 vided that all the causes affecting them be taken into account. 
 To isolate a single force, even if a real force and not a mere 
 abstraction, and to call deductions from it alone the laws of 
 wealth, can lead only to error, and is radically unscientific. The 
 
Political Economy and Sociology. 213 
 
 development of the positive law of a nation, for example, is in 
 all its bearings on industry, commerce, accumulation, and the 
 distribution of property, a subject demanding the economist’s 
 investigation. ‘The primitive ownership of things in common, 
 the evolution of the separate possession of both chattels and 
 land; of slavery, serfdom, and free labour; the changes in the 
 law of intestate succession; the growth of the testamentary 
 power, and of the law of contract in its different forms, are at 
 once jural and economic facts, which the jurist regards from 
 one point of view and the economist from another. The field 
 of human society is so large and complex, man’s capacity so 
 limited, that it is by a number of investigations in relation 
 to different aspects of the subject, that the science of society, 
 as a whole, is most likely to be advanced, and its ultimate 
 generalizations and laws at last reached. ‘The history of politi- 
 cal economy is a warning against all attempts to reach them 
 per saltum, and to construct at once a complete and symmetri- 
 cal system. A radical error with respect to the history of both 
 science in general, and political economy in particular, lies at 
 the root of Mr. Lowe’s notion, that ‘science means knowledge 
 in its clearest and most absolute form, the test of which is 
 prediction’; and that the fabric of economic science, under the 
 hand of Adam Smith, ‘ rose up, like Jonah’s gourd, in a single 
 night.’ If science meant only knowledge in its clearest and 
 most absolute form, no science couid have a beginning or a 
 youth: it must spring into life fully grown and armed, like 
 Minerva from the head of Jove; and only a science founded, 
 like deductive political economy, on fiction, could do so. Had 
 political economy grown up, like Jonah’s gourd, in a night, it 
 would like it have perished in a day, and could not have borne 
 the ight. A long line of inquirers had preceded Adam Smith, 
 to some of whom he has acknowledged his debt. Nearly a cen- 
 tury before the publication of the ‘ Wealth of Nations,’ Dudley 
 North, himself a merchant, had expounded the policy of com- 
 mercial liberty, going on some points even beyond his illustrious 
 successor. Adam Smith’s own language respecting the French 
 economists answers a question raised by Auguste Comte’s 
 
214 Political Economy and Sociology. 
 
 remark, that he made no pretence of founding a new and special 
 science of wealth. He did not pretend to be its founder, but he 
 did regard such a science as not only founded, but far advanced, 
 by Quesnay and his followers, whose system of political economy 
 he describes as, ‘ with all its imperfections, the nearest approach 
 to perfection that had yet been made in that important science.’ 
 At the same time, like his French contemporaries, he regarded 
 it as a branch of a wider science, which they called Physiocratie, 
 or the science of the government and laws of nature, and which 
 he called Moral Philosophy. 
 
 Science is patient and progressive, never, therefore, reaching 
 perfection; its essence consists in a right method of investi- 
 gation more than in the extent of its progress. The same mis- 
 conception that leads Mr. Lowe to admire the a priori political 
 economy, with its fictitious completeness, symmetry, and exact- 
 ness, and to deny a science of society, because it is yet in an 
 inchoate state, shows itself in his assertion that no more is known 
 now in psychology, morals, or politics, than was known in the 
 days of Plato. No such realistic abstraction as the ‘Ideas of 
 Plato’ now deludes the psychologist, though something akin to 
 it lingers in the deductive economist’s notion of ‘the desire of 
 wealth.’ The association of ideas is a psychological law which 
 alone places mental philosophy far beyond the point it had 
 reached with the Greeks; and the change in the course of 
 social progress, on the one hand, and the inheritance, on the 
 other, of cerebral qualities can hardly be known to Mr. Lowe, 
 or he could not refuse to admit a great recent advance in our 
 knowledge of the laws of the human mind. In the science of 
 law and politics the superiority of Adam Smith himself over 
 Plato is evident. His remarks on the Athenian tribunals show 
 that he could have saved Pericles from a blunder which not 
 only deprived Athens of a system of jurisprudence, but did 
 much to corrupt and undermine the State; yet Plato failed to 
 discover it, though its consequences were under his eyes, and the 
 constitution of courts was one of the subjects that engaged his 
 attention. And the perception of revolutions in law and 
 government following a regular sequence, and evolving successive 
 
Political Economy and Soctology. 215 
 
 economic as well as political states, to which Adam Smith 
 attained, not only never dawned on Plato’s mind, but may be 
 said in itself to be a long step towards the foundation of a true 
 science of society. ‘The attempt to raise a prejudice against 
 such a science, on account of the difficulty of naming it other- 
 wise than sociology, a compound of Latin and Greek, is not only 
 captious and frivolous, but displays an extraordinary forget- 
 fulness of scientific nomenclature. To say nothing of the 
 admission of such combinations in Germany, the fatherland of 
 philology, in words such as Socialpolitik, English philosophical 
 terminology itself abounds in them. Natural philosophy, moral 
 philosophy, are names compounded of Latin and Greek, which, 
 according to German usage, would be written in one word, like 
 Socialpolitik ; and the term ‘natural law’ is a mixture of Latin 
 and English. One wonders, indeed, that Mr. Lowe, who is so’ 
 shocked at sociology, does not shudder at the name of Adam 
 Smith, as a combination, not from cognate tongues like Latin 
 and Greek, but from Hebrew and English. 
 
 Yet, although neither the objection that sociology has not 
 attained to the perfection of astronomy, nor that it is a hybrid 
 word, is entitled to a serious consideration, it would be a grave 
 error to regard it as otherwise than a science still in its infancy. 
 Its students should take warning from the history of political 
 economy against hasty induction, and attempts to rise at once 
 to the deductive stage. ‘Two men of extraordinary genius, 
 Auguste Comte and Herbert Spencer, though differing consi- 
 derably on some points, have struck out some luminous gene- 
 ralizations and apercus; but great circumspection and caution 
 are needed in their application: they cannot safely be made to 
 support trains of deduction, still less can they be treated as 
 constituting the supreme inductions and fundamental laws of 
 a science of society. Mr. Spencer’s theorem, for example, 
 that ‘a movement from the homogeneous to the heterogeneous 
 characterizes all evolution,’ in both the physical and the social 
 world, is true in a number of instances; and he has connected 
 it with vere cause, with ascertained natural forces and con- 
 ditions, indubitably creating diversity where there had been 
 
216 Political Economy and Sociology. 
 
 similarity, and evolving new kinds and species of phenomena. 
 Yet it is not a universal law, or an invariable truth from which 
 inferences respecting the course of social development can with 
 certainty be drawn.* The movement of language, law, and 
 political and civil union, is for the most part in an opposite 
 direction. In a savage country like Africa, speech is in a per- 
 petual flux, and new dialects spring up with every swarm from 
 the parent hive. In the civilized world the unification of lan- 
 guage is rapidly proceeding; probably no Celtic tongue will be 
 spoken in any part of Europe, Brittany or Wales not excepted, 
 in a few generations. The diversities of English speech were so 
 great four hundred years ago, that Caxton found them a great 
 obstacle to printing ; four hundred years hence the same English 
 will be spoken over half the globe, and will have few competitors, 
 there is reason to believe, over the other half. The movement 
 of political organization is similar; already Europe has nearly 
 consolidated itself into a Heptarchy, the number of States into 
 which England itself was once divided; and the result of the 
 American war exemplifies the prevalence of the forces tending 
 to homogeneity over those tending to heterogeneity. ‘T'wo 
 systems of civil law, again—the French and the English—now 
 extend over a great part of the civilized world; and Sir Henry 
 Maine has established many grounds for the proposition that 
 ‘all laws, however dissimilar in their infancy, tend to resemble 
 each other in their maturity.’ In customs and fashion civilized 
 society is likewise advancing towards uniformity. Once every 
 rank, profession, and district had a distinctive garb; now all such 
 distinctions, save with the priest and the soldier, have almost 
 disappeared among men; and among women the degree of 
 outlay and waste is becoming almost the only distinction in 
 dress throughout the West. In the industrial world a generation 
 
 
 
 * [In an article published in the Academy of October 23rd, 1880, Mr. Leslie 
 wrote as follows :— 
 
 ‘The movement of society, designated by Mr. Herbert Spencer as from “ the 
 homogeneous to the heterogeneous,’’ is highly important in its economic aspects ; 
 and the present writer acknowledges that Mr. Spencer’s recent reply’’—(Appendix to 
 First Principles, dealing with criticisms)—‘‘to some comments of his own on the 
 doctrine so formulated is in the main substantially just and sufficient.’ ] 
 
Political Economy and Sociology. 217 
 
 ago a constant movement towards a differentiation of employ- 
 ments and functions appeared; now some marked tendencies to 
 their amalgamation have begun to disclose themselves. Joint- 
 stock companies have almost effaced all real division of labour 
 in the wide region of trade within their operation. Improve- 
 ments in communication are fast eliminating intermediate trades 
 between producers and consumers in international commerce ; 
 and the accumulation and combination of capital, and new 
 methods of business, are working the same result in wholesale 
 and retail dealing at home. Many of the things for sale in a 
 village huckster’s shop were formerly the subjects of distinct 
 branches of business in a large town; now the wares in which 
 scores of different retailers dealt are all to be had in great 
 establishments in New York, Paris, and London, which some- 
 times buy direct from the producers, thus also eliminating the 
 wholesale dealer. These changes are among the causes that 
 baffle the supposed prevision on which the doctrine of the 
 equality of profits rests. 
 
 In the early stages of social progress, again, a differentiation 
 takes place, as Mr. Spencer has observed, between political and 
 industrial functions, which fall to distinct classes: now a man 
 is a merchant in the morning and a legislator at night; in 
 mercantile business one year, and the next perhaps head of the 
 navy, like Mr. Goschen or Mr. W. H. Smith. There is even a 
 strong tendency to sink the representative into the delegate, and 
 to give every male householder a direct and immediate part in 
 the government of the country. Improvements in both manu- 
 factures and the art of war seemed to Adam Smith, with good 
 reason, to necessitate a separation between the military and 
 industrial occupations: now every able-bodied man is a soldier 
 on the Continent. And here one of Auguste Comte’s great 
 generalizations also comes into question. Were a tendency to 
 division of labour and differentiation of functions still to display 
 itself on all sides, it would not give us a fundamental law 
 determining the directions of human energies and their actual 
 occupations. ‘To take the case of another planet inhabited by 
 human beings, astronomers might conceivably discover marks 
 
218 Political Economy and Sociology. 
 
 of a diversity of employments, and yet get no clue to the nature 
 or course of the division of labour. We should need to know, 
 for example, whether war and religion had any influence on 
 their occupations. One of Comte’s inductions affords an 
 example of the kind of fundamental law needed to give us. 
 an insight into the causes and directions of the movement. 
 Theology and war, according to Comte, are the ruling powers. 
 governing, in the early stages of society, human energies and 
 employments; science and industry the chief powers in the 
 more advanced stages. Undoubtedly the grounds on which this 
 induction rests go to the root of the matter, and bring some great 
 changes in the political, moral, and economic state of society 
 under scientific law. Theology has long been a declining force, 
 and, though its indirect influence is still great, has now little 
 direct control over the economic structure of Western society. 
 But the military element is more powerful now in Europe, and 
 its power rests on less accidental causes than in Auguste Comte’s 
 own day. ‘The very improvements in manufacture and the 
 military art which tended, in Adam Smith’s view, to wean the 
 mass of mankind from war, the very agencies represented by 
 steam and gunpowder, to which Buckle triumphantly traced its. 
 extinction in the civilized world, have brought nations so close: 
 together, and armed them with such deadly weapons, that. 
 every man may almost be said now to sleep with arms at his. 
 side, ready to do battle in the morning. Science and industry 
 themselves, along with pacific tendencies, have others of the 
 opposite character, both in the effects already referred to and 
 in the higher pride, rivalry, ambition, and patriotism of nations, 
 developed by intellectual and industrial progress. When 
 Buckle pointed to the Russians as the only warlike people in 
 Europe, except the Turks, because the least civilized, they were 
 really a most unwarlike people under a warlike government. 
 Now a military spirit is fast rising among them. Who shall 
 say, too, that when the people of the United States have fully 
 assimilated their present territory, and are at the same time 
 brought into close proximity to the old world, their energies 
 may not take a military direction for a time? ‘The Americans,” 
 
Political Economy and Sociology. 219 
 
 said Tocqueville, ‘have no neighbours, consequently no great 
 wars to fear; they have almost nothing to dread from military 
 glory.’ When they are within four days of Europe they may 
 find they have neighbours beyond sea; but, without crossing it, 
 the whole continent north and south of the isthmus may tempt 
 their ambition. Although a fundamental truth underlies the 
 generalization referred to, it is not, then, a law from which 
 deductions can be made. ‘There are, moreover, diversities in the 
 course of social evolution in different countries, which must be 
 closely investigated before the sociologist can be in a condition to 
 lay down universal canons; and after these are reached, much 
 will remain for inquiry respecting the special development of 
 particular races and nations. 
 
 A science of society thus does not exist in the sense of 
 ‘knowledge in its clearest and most absolute form, of which the 
 test is prediction.’ That, however, is not a scientific definition 
 of science, and the sociologist may answer it with Bacon’s words, 
 prudens interrogatio dimidium scientie. Nor is it the science 
 of society in its entirety only that is yet in its youth, and has a 
 long and arduous future before it; it is so also with the 
 department of it relating to the economic condition of mankind 
 in different countries and ages. ‘The labourer in this field, too, 
 must go to work in a modester frame of mind than that of 
 ‘the Political Economist,’ as he called himself in capitals, of 
 twenty years ago. Mr. Lowe arrogates ‘triumphs’ for his own 
 economic method: those he refers to were achieved by the 
 opposite method of reasoning from observation and experience. 
 But the scientific spirit is not a triumphant and boastful one, 
 fired with a sort of intellectual Chauvinism, seeking polemical 
 distinction and a path to promotion in the field of party war. 
 A cavalry officer of the period before the Crimean War, when 
 that branch of the army was distinguished by the glory of a 
 moustache, used to say that no man could conceive the pitch 
 to which human conceit could soar unless he had served in a 
 light dragoon regiment. He was, however, mistaken. There 
 was a being yet more elate with a sense of superiority over his 
 fellow-creatures in the economist who had Bastiat at his fingers’ 
 
220 Political Economy and Sociology. 
 
 ends, and who looked on political economy as a weapon by 
 which he could discomfit political adversaries, and on free 
 trade as a personal triumph; though he had as much claim to 
 renown for it as a passenger in a Cunard steamer to the fame 
 of Columbus. 
 
 Some of the earlier economists—Adam Smith, Malthus, 
 Tooke, and John Mill—had a true claim to honour and repu- 
 tation as discoverers. But the generalizations and conceptions 
 that do credit to one period may discredit the next, just as it 
 would disgrace the navigators of our time to follow the same 
 course, and sail in the same kind of ship, as Columbus. The 
 deductive economists of the present generation have contented 
 themselves with the repetition of doctrines and formulas which 
 once caused the light of science to dawn where all had been 
 confusion and darkness. Clouds of abstraction and a priori 
 reasoning nearly extinguished the promise of day; but fresh 
 light is beginning to break. A few years ago Mr. Ingram’s 
 Address could hardly have been delivered, and the ‘ orthodox’ 
 economist, who now receives it with sullen respect, would have 
 scoffed at it. It is suggested, indeed, by way of diminishing 
 its effect, that its author is a follower of Auguste Comte; but it 
 expresses the views of many who, like the present writer, are 
 not, however highly some of them, like him, may think of 
 Comte’s genius. 
 
 
 
XVII. 
 
 THE KNOWN AND THE UNKNOWN IN THE 
 ECONOMIC WORLD.* 
 
 Tue most characteristic feature of the commercial situation for 
 more than a year past has been not so much the depth of the 
 depression—for there have been worse times in that respect ; or 
 its extent—for the stagnation was as general throughout Europe, 
 and much more widely felt throughout France thirty years ago— 
 as the sense of being in the dark, and surrounded, as it were, 
 by the unknown. Yet it is the consciousness only of not seeing 
 their way on the part of people that is new. Trade has long 
 been carried on blindly, and people as little knew what was 
 before them when it was said to be advancing by leaps and 
 bounds as they do now that these are found to have been leaps 
 in the dark. ‘Temporary circumstances have added to the 
 gloom and uncertainty, and it is ascribable in part to a false 
 economic theory ; but to get a ray of light we must first recognize 
 that the obscurity of the present crisis has arisen in a great 
 measure from causes inherent in the constitution of the modern 
 economic world. It is not the writer’s purpose to inquire 
 whether, in the most vital sense, the present depression is 
 temporary or permanent. Our manufactures and commerce 
 may or may not recover their vigour and supremacy; our 
 agriculture may or may not be overborne finally by American 
 competition. The chief point to which attention is sought here 
 is that, even in the most favourable event, elements of disorder, 
 difficulty, and recurring disaster, which have been growing 
 
 
 
 
 
 * Fortnightly Review, June lst, 1879. 
 
ee The Known and the Unknown 
 
 with the growth of our trade, will remain, unless new sources of 
 light can be discovered. Another point that should not be left 
 unnoticed is, that the economic world is not bounded by its 
 trade, and has other regions in which to add to the known and 
 diminish the unknown ought to be the economist’s aim. 
 
 The full knowledge and foreknowledge lately claimed for 
 political economy in modern commercial society can exist only 
 at an opposite stage of development, at which human business 
 and conduct are determined, not by individual choice, or 
 the pursuit of wealth, or commercial principles, but by 
 immemorial ancestral custom. All that relates to the occu- 
 pations and movements of a nomad tribe in Central Asia 
 is known and foreknown by all its members, who possess 
 the power of prediction, which Mr. Lowe calls the test of science. 
 ‘Every tribe and every awl,’ says a recent traveller among the 
 Kairghis, ‘follows year after year the same itinerary, pursuing 
 the same paths, stopping at the same wells as their ancestors 
 did a thousand years ago. No awl ever mistakes its way. The 
 regularity and exactitude of the movement is such that you can 
 predict to a day where, in a circuit of several hundred miles, 
 any awl will be at any season of the year.’ At the more 
 advanced stages of early agricultural society the power of 
 prediction continues, and is not destroyed by disturbing causes 
 of a more abnormal and violent character than the follower of 
 the a priori method of political economy has in view in the 
 phrase. Dynasties rise and fall, conquerors come and go, 
 empires are shattered above the head of the village community ; 
 yet it survives unchanged. ‘The village itself may be burned, 
 its lands laid waste, the inhabitants driven away for a genera- 
 tion; but another generation returns and resumes the old life, 
 each man following the occupation of his fathers, pursuing the 
 same methods, and seldom being either richer or poorer than 
 they. It is in what Mr. Bagehot called a pre-economic state, 
 though it is more properly regarded as an early state of the 
 economic world among stationary communities—‘ where the 
 thing that hath been it is that which shall be, and that which 
 is done is that which shall be done, and there is no new thing 
 
In the Econonie World. 220 
 
 under the sun ’—that ‘ knowledge in its most perfect form, as 
 tested by prediction,’ exists. And just in proportion as the 
 stationary passes into the progressive condition, as industry and 
 commerce are developed, does the social economy become com- 
 plex, diversified, changeful, uncertain, unpredictable, and hard 
 to know, even in its existing phase, at any given time. In the 
 primitive village community the prices of commodities and the 
 gains of producers are not only known, but foreknown, because 
 they are customary prices. But when a market grows upon the 
 border, when dealings with strangers are unrestricted by the tie 
 of kinship or community, or by usage, the prices at which things 
 are bought and sold can no longer be known beforehand, and 
 are not even necessarily known to everyone afterwards. Another 
 element of uncertainty, introducing itself so soon as traffic with 
 the outer world begins, is that production can no longer be 
 exactly adjusted to consumption, supply to demand, both the 
 number and the means of customers from without being un- 
 known. And as industrial development proceeds; as labour is 
 subdivided, and occupations multiply, and the methods of 
 production improve; as commerce enlarges its borders and 
 changes its paths, the unknown more and more takes the place 
 of the known. ‘The desire of wealth, or of its representative— 
 money—instead of enabling the economist to foretell values and 
 prices, destroys the power of prediction that formerly existed, 
 because it is the mainspring of industrial and commercial 
 activity and progress, of infinite variety and incessant alteration 
 in the structure and operations of the economic world. For 
 more than a hundred years before Adam Smith’s birth the rate 
 of wages might have been nearly foretold throughout most of 
 Scotland, and in parts of the Highlands down to the time when 
 the ‘ Wealth of Nations’ was written. But so soon as com- 
 mercial activity began to stir in the Lowlands, the price of 
 labour became variable and uncertain. The Philosopher relates: 
 ‘In the last century the most usual day-wages of common 
 labour through the greater part of Scotland were sixpence in 
 summer and fivepence in winter. Three shillings a-week, the 
 same price very nearly, still continues to be paid?in some parts 
 
224 The Known and the Unknown 
 of the Highlands and Western Islands. Through the greater 
 
 part of the low country the most usual wages of common labour: 
 are now elghtpence a-day ; tenpence, sometimes a shilling, in 
 the counties which border on England, and in a few other places. 
 where there has lately been a rise in the demand for labour— 
 about Glasgow, Carron, &c.’ Had Arthur Young foretold the 
 rates of agricultural wages in England in 1868 from those 
 which he found prevalent in 1768, the prediction would have 
 proved nearly correct in the stationary southern counties, though 
 utterly false in the mining and manufacturing counties north 
 of the Trent. 
 
 It is thus a fundamental error of the a priori or deductive. 
 political economy that it takes no cognizance of the cardinal 
 fact that the movement of the economic world has been one 
 from simplicity to complexity, from uniformity to diversity, 
 from unbroken custom to change, and, therefore, from the 
 known to the unknown. The origin of the error is in part 
 traceable to the extreme slowness and almost imperceptible 
 character of the movement down to the age of steam. Adam 
 Smith’s own theory of wages, profits, and prices, rested on the 
 assumption that employments in general were long established, 
 well known, and undergoing no change, and was expressly 
 restricted to such. The immobility of the world he lived in 
 shows itself in an observation of his great contemporary, 
 Hume :—‘ In five hundred years the posterity of those in the 
 coaches and those on the boxes will probably have changed 
 places.” Hume seems to have taken for granted that five: 
 centuries after his time the same sort of coaches would travel on 
 the same sort of road, the only change being in the places of the 
 passengers inside and out. An age of iron, however, succeeded 
 to his age of wood; the age of iron is already giving place to 
 an age of steel; and who now attempts to forecast the modes of 
 conveyance five centuries, or even five generations hence? ‘De 
 minimis non curat lex,’ said Mr. Mill in the House of 
 Commons, citing the legal maxim adroitly in reference to the 
 small importation of meat little more than a decade ago. Now, 
 nearly one-fourth of the animal food consumed in the kingdom 
 
In the Economie World. PRAT 
 
 comes from abroad, and even live beasts are largely imported. 
 The extension, again, of the area of trade has brought with it 
 liability to countless unforeseen and sudden changes, rendering 
 it impossible to adjust supply to demand. Not only a great 
 war, like the Franco-German, disturbs the calculations of 
 merchants and manufacturers ; the outbreak of the present Zulu 
 war led to the sudden countermanding of large orders for sheep- 
 shears, wire-fencing, and edge-tools for the Cape. Credit adds 
 another unknown quantity. It springs from the growth of 
 confidence between man and man, and of foresight in one sense ; 
 yet it greatly augments the uncertainty of trade, the difficulty 
 of anticipating the future, and the chance of expectations being 
 frustrated by fraud. So long as goods are sold only for cash, 
 prices are fixed by the pecuniary means of purchasers, and are 
 subject to comparatively little variation of demand ; as soon, 
 too, as the sale is effected, the amount of the seller’s profit is 
 certain. But when once promises to pay acquire a purchasing: 
 power, the fluctuations of prices have no assignable limit, and a 
 promised payment may never be made; so that after parting 
 with his goods the producer’s profit still remains doubtful. 
 Not only the future, but even the present, becomes inscrutable 
 in a highly advanced community. The number of employments 
 is so great, each of them is so intricate a business, and affected 
 by such a variety of conditions, the fortunes of the individuals 
 engaged in them are so diverse, that no one dreams of surveying 
 the entire field; he often cannot tell even how the people he 
 deals with himself, and to whom he is perhaps making large 
 advances, are doing. The banker of fifty years ago, in 
 Mr. Bagehot’s words, ‘formed his judgment of the solvency 
 of those to whom he lent. And when London was by 
 comparison a small city this practice might have been safe ; 
 but now that London is enormous, and that no one can watch 
 anyone, such a trade would be disastrous: at present it would 
 hardly be safe in a country town.’ In the same work, ‘ Lombard 
 Street,’ Mr. Bagehot lays stress on the extent, beyond the 
 conception of our ancestors, to which English trade is carried on 
 by borrowed capital. It is a surprising instance of the force of 
 Q 
 
226 The Known and the Unknown 
 
 a foregone conclusion that this acute thinker did not see how 
 inconsistent this fact was, by his own showing, with the doctrine 
 of an equality of profits, to which he adhered :—‘ A new man, 
 with a small capital of his own, and a large borrowed capital, 
 can undersell a rich man, who depends on his own capital only. 
 The rich man wants the full mercantile rate of profit; but the 
 poor man wants only interest on much of what he uses.’ The 
 man who trades with his own capital thus can no longer count 
 on what Mr. Bagehot calls ‘the full mercantile rate of profit.’ 
 But the new system introduces much else that disturbs the old 
 order of things. Did ‘the new man’ take as much care of the 
 capital he borrows as if it were his own, he would not treat the 
 whole surplus of his gross profit above interest, as at his disposal, 
 either to lower prices or to spend. He may be unexpectedly 
 called on to refund what he has borrowed; his credit may be 
 shaken; a hundred unlooked-for events may subject him to 
 pressure ; his position is far more precarious than that of the 
 man with funds of his own; and he ought to provide an 
 insurance fund in proportion. But he risks other people’s 
 money—not his own; if he loses it all, he is, at the worst, no 
 poorer than when he began, after, perhaps, living like a lord in 
 the meanwhile ; and it will go hard with him if he does not save 
 something out of the fire for himself. At a much earlier stage 
 of the economic world a man ran some risk of being robbed of 
 all his money; but he seldom ran any of losing it in a trade 
 speculation. We talk of modern security of property in com- 
 parison with the middle ages; yet it would be much to say that 
 the wealth of a modern capitalist is as secure as that of a stout 
 franklin in the worst days of the Plantagenets. 
 
 Professor Nasse of Bonn, replying, in a recent essay, to the 
 socialistic doctrine that, under State regulation, production 
 might be so adjusted to consumption, and supply to demand, as 
 to render industrial crises impossible, observes that such an 
 adjustment, without individual freedom in respect either of 
 production or consumption, is not inconceivable, though on terms 
 involving the destruction of civilization and all that makes life 
 worth having. ‘But to reconcile it with individual freedom is 
 
In the Economie World. 227 
 
 a problem comparable only with the quadrature of the circle. 
 All the operations of fixed capital—ships, railways, factories, 
 mines—involve production for the future ; but how is the future 
 to be foreseen ?’* One may add that the ‘ orthodox’ theory of 
 prices and profits is as inconsistent as the socialistic programme 
 with individual liberty. It is a curious characteristic of the 
 ‘deductive political economy that, in spite of its show of logic, 
 ' its followers have never firmly grasped either their own premises 
 or their conclusions. With Mr. Senior and Mr. Lowe they . 
 suppose, for the most part, that the assumption on which their 
 theory of value rests is a universal desire of wealth. Indeed, 
 some who no longer contend that the whole economic world can 
 be isolated, for the investigation of its laws, from the moral and 
 political world, are still disposed to hold that there is a depart- 
 ment of economic phenomena, namely, that of commercial 
 exchanges, values, and prices, the laws of which may be deduced 
 from the single motive of pecuniary gain. No theory whatever, 
 nevertheless, is deducible from that motive alone. You may 
 know that everybody you meet between Belgrave-square and 
 the Bank loves wealth of some sort, and money, as the means of 
 purchasing all sorts; but what can you infer from that with 
 respect to anyone’s part or conduct in either production or 
 distribution ? Can you infer, either, that the Duke of West- 
 minster will, or that he will not, sweep a crossing for sixpence ? 
 ‘The late Lord Derby is said to have replied to an engineer who 
 urged that a particular line of railway would add ten thousand 
 a-year to his rental—‘ How do you know that I care to have 
 ten thousand a-year added to my rental?’ The economist, 
 however, need not ascend to too lofty a region, or perplex 
 himself with so transcendental a question. He may take it for 
 granted, like the engineer, that people do care for ten thousand 
 a-year. Mr. Lowe’s doctrine is not wholly unfounded, that the 
 general love of money enables the economist to foretell human 
 conduct. Just as from the strength of the impulses to marriage, 
 
 * Ueber die Verhiitung der Productionskrisen durch staatliche Fursorge. Von 
 Dr. Erwin Nasse. Holtzendorff-Brentano. Jahrbuch III. i. 
 
 Q2 
 
228 The Known and the Unknown 
 
 together with observations of their consequences, you may 
 predict that, other circumstances remaining the same, nearly 
 the same number of young men in business will marry this. 
 year as last; so from the strength in this country of pecuniary 
 interest, and the course of conduct it has been found for centuries 
 to lead to, you may predict that, if business does not greatly fall 
 off, about the same number of young men will go into it this 
 year as last. For fresh youth recruits the commercial world 
 every year—not every tenth year, as a cyclical theorist naively 
 persists. But you can no more predict from their love of money 
 what prices and profits the young men will get in their business. 
 than from their love of fair women what fortune they will get 
 with their wives. And you might as well assume that, allowing 
 for difference of age, looks, family, and other attractions, the 
 fortunes the wives bring will be equal, as that, allowing, 
 according to the orthodox formula, for differences in the nature- 
 of their employment, they will make equal rates of profit on 
 their capital. Here the real main postulate of the deductive- 
 economist comes in. They cannot, he says, make a higher rate 
 of profit in one business than in another, because other people. 
 will not allow that if they know it, but will cut in at once. 
 And he assumes that they do know it. He assumes that the 
 choice of occupations and investments, and the movements of 
 labour and capital, are determined by knowledge so accurate 
 that the result is the same percentage of profit on capital all 
 round, and a scale of comparative prices in proportion to the 
 quantity and quality of the labour and sacrifices required to. 
 produce commodities, or their comparative cost of production. 
 He predicts, in short, that the price of any given article will be 
 such as to give average profit to its producers, after paying the. 
 labourers average wages. If you object that prices fluctuate 
 in the most unforeseen manner—that producers, so far from all 
 getting ‘ average’ profits, meet with the most different fortunes, 
 some being ruined, and some becoming millionaires—his excuse 
 is ready. Political economy, he tells you, with an air of 
 offended dignity, is a science of tendencies in the long run, and 
 in the absence of disturbing causes; it does not predict in 
 
In the Economic World. 229 
 
 individual cases. A great general used to say that a man who 
 was good at excuses was never good for anything else; and 
 nearly as much may be said of a theory. But the deductive 
 economist has really no title to the excuse, such as it is. 
 His theory of profits and prices, when examined, will be found 
 to claim to be true, under all circumstances, in the case of every 
 individual in trade and of every particular article, and to 
 foretell the exact rates at which goods will be sold. His theory 
 of taxation is an application of his theory of profits and prices ; 
 and it proceeds on the assumption that prices will actually 
 conform to the cost of production, so nicely in every particular 
 case, that every special tax on any commodity will be recovered 
 by the producer from the consumer, with a profit on the 
 advance. No one was less disposed than Mr. Mill to strain the 
 orthodox system till it cracked; and in his chapter on the 
 relation of cost of production to value it is somewhat vaguely 
 laid down that, as a general rule, things tend to exchange at 
 such value, that is, to sell at such prices as will enable each 
 producer to be repaid the cost of production with ordinary 
 profit. But when he comes to taxes on commodities he affirms, 
 in accordance with the orthodox theory, that ‘there are but two 
 cases in which duties on commodities can, in any degree or 
 any manner, fall on the producer.’ The excepted cases do not 
 concern the question; and in the case of customs and excise 
 duties, trade licenses, and various stamp duties, taxes, and rates, 
 the strict theory is, that a producer recovers all special taxation 
 with a profit in every particular instance. No disturbing causes 
 can be pleaded, nor can the trader obtain a postponement of 
 taxation until it becomes certain that he will be recouped by 
 his customers. 
 
 The orthodox, a priori, or deductive system thus postulates 
 much more than a general desire of wealth. It postulates, also, 
 such full knowledge of the gains in different employments, 
 and such facilities of choice and change of employment, that 
 any special tax can be evaded or shifted. A case where the 
 conditions seem sufficiently realized will illustrate the matter. 
 Indoor and outdoor servants meet in the same establishments, 
 
230 The Known and the Unknown 
 
 and are in the closest relations; they know each other’s wages, 
 perquisites, and circumstances exactly ; and the classes recruiting 
 them both are the same, and equally well-informed. ‘The son 
 of the gamekeeper, gardener, coachman, or groom, knows as. 
 well as the butler and footman how the indoor servants are off ; 
 and he knows that, if the duties were abolished, the condition of 
 outdoor servants and labourers, who buy their own tea and beer, 
 would be improved. It is therefore a reasonable inference that 
 masters who supply these articles to their *indoor servants give, 
 or may give if they like, lower wages in consequence of the 
 duties, and that indoor wages would rise if the duties were taken 
 off, so that their real incidence may be said to be on the servants. 
 To confound this case with that of indirect taxes in general, as 
 a recent writer has done,* is to fall into the fundamental error 
 of the a priori system of confounding the unknown with the 
 known in the economic world. The farmer, the merchant,. 
 the manufacturer, the innkeeper, the grocer, the tobacconist, the 
 publican, do not know the profits of other businesses, and are, to 
 a very small extent, recruited from the same classes. Farmers, 
 for instance, as Mr. Bear says, ‘as a rule do not go out of 
 farming until they are ruined.’ Most of them know no other 
 means of getting a living, without sinking into the position of 
 stewards and bailiffs—a class far too numerous already. Again, 
 the master can stop the amount of the duties at the time 
 he pays his servants their wages, whereas a trader’s premises 
 may be burnt down, or he may become bankrupt a week after 
 his rates and taxes are paid, and before the sale of any part of 
 his stock: the payment, indeed, may be the last straw that 
 breaks an overburdened back. Many men in trade, during the 
 last four years, have failed to recover their taxes in prices, 
 because they have failed altogether. 
 
 Adam Smith’s economic theory was mainly a theory of 
 production and abundance, or, in his own words, of ‘ the great 
 multiplication of the productions of the different arts in con- 
 sequence of the division of labour, which occasions that universal 
 
 * Mr. H. Sidgwick, Fortnightly Review, February, 1879, p. 304. 
 
In the Economie World. a | 
 
 opulence which extends itself to the lowest ranks of the people.’ 
 With distribution by means of exchange he was concerned 
 chiefly as promoting the division of labour, and thereby the 
 plenty and variety of commodities. With Ricardo distribution, 
 as he states in his preface, became the chief problem, and he 
 elaborated a theory of exchange values, wages, profits, and 
 prices, irreconcilable with the fundamental principles of Adam 
 Smith’s theory of production. Industrial liberty and the di- 
 vision of labour, the two pillars of Adam Smith’s system, 
 produce an economic world, the vastness, complexity, and in- 
 cessant changes of which are absolutely incompatible with the 
 main postulates of the Ricardian theory, that the advantages 
 and disadvantages of all the different occupations are known, 
 that competition equalizes the rewards of both labour and 
 abstinence, and that the prices of commodities therefore are 
 determined by the respective cost of production. The whole 
 deductive theory of distribution rests on that postulate. It is, 
 indeed, because so much has been built on it that scrutiny of 
 the ground it stands on is resisted and resented. The system 
 rests on the wrong end, the superstructure supporting the foun- 
 dation. For though it is true in logic, as in mechanics, that 
 nothing is stronger than its weakest part, it is not so in matters 
 of opinion, whether in politics, religion, or philosophy. A 
 seemingly symmetrical system has in itself charms for many 
 minds, and the interests bound up with orthodox economics are 
 various and strong. ‘The opponent of direct taxation, for in- 
 stance, is well pleased with a system which teaches that taxes 
 on trade and commodities fall with perfect equality ; and had 
 not their inequality been thus put out of sight, Mr. Gladstone 
 could hardly have dreamt of the enterprise of abolishing the 
 income tax. 
 
 In Adam Smith’s time a revolt against the blundering in- 
 terference of the State led by reaction, in both England and 
 Trance, to an overweening trust in the enlightenment and 
 sagacity of individual interest, with which the notion of keen 
 insight into the condition of every employment was in har- 
 mony. But there was also in a comparatively small, simple, 
 
Pape The Known and the Unknown 
 
 and stationary economic world better reason to assume the 
 existence of such insight. It might, for example, be not irra- 
 tionally conjectured that in a little village at the present day 
 every man knows all his neighbours’ affairs. To jump from 
 that to the conclusion that everybody in England knows the 
 affairs of everybody else is the leap that Ricardo and his fol- 
 lowers have made. The present writer, after personal inquiry 
 some years ago in villages and small towns within the United 
 Kingdom and on the Continent, was led to doubt that even in 
 a modern village is there such a knowledge of profits as the 
 deductive economist assumes. ‘The village innkeeper, publican, 
 or shopkeeper, who is making a small fortune, does not invite 
 competition by telling his neighbours of his profits; and the 
 man who is not doing well does not alarm his creditors by ex- 
 posing the state of his affairs. If you take a whole country 
 like England, it becomes a matter of accident, situation, and 
 personal history and connexion, what a man knows about the 
 state of any particular business, There are people in London 
 and elsewhere who know more about the state of trade and the 
 openings for capital and enterprise in California, China, and 
 Japan, or some South American State, than in their own 
 country, and who could more easily make their own way, or 
 push on their sons or their nephews, in a place some thousand 
 miles off, than in their own town. The distinction which Mr. 
 Mill has drawn between international trade and home trade, in 
 respect of the transferability of labour and capital and the 
 equalization of wages and profit, if it had once some founda- 
 tion when trade at home was simpler and better known, and 
 when foreign countries were almost wholly unknown, cannot 
 now be sustained. Not that the doctrine of the equality of 
 profits and of the determination of comparative prices by com- 
 parative cost of production is now applicable to both, but that 
 it is applicable to neither. It was a step in the right direc- 
 tion to recognise its inapplicability to the exchanges between 
 different countries, but the further step is now required of 
 abandoning it altogether. 
 
 In both home trade and international trade the migration of 
 
In the Economie World. 2393 
 
 labour and capital has some effect on wages and profits, and the 
 comparative cost of producing different commodities some effect 
 on their comparative value and price; but in both cases the 
 -effect is uncertain, irregular, and incalculable. In neither case 
 is there an equalization of either wages or profits; in neither 
 ‘ease do prices conform to the Ricardian law of cost. If a 
 particular business is known or believed to be flourishing, 
 capital flows into it; but it also flows into businesses that are, 
 in reality, very unprosperous. One has only to keep one’s eyes 
 open in the streets of London to see, year after year, shops fail, 
 disappear, and reappear with another name over the window, 
 though the locality evidently does not support them. Save in 
 so far as the prosperity of their own business depends on that 
 of others, the people in one trade know little or nothing of the 
 ‘condition of other trades, or no more than the newspapers tell 
 them. So far, too, is the producer of one article from knowing 
 the cost of every other, that often he does not know what the 
 cost of his own commodity is to other producers in the same 
 business. That varies with the method they follow, their 
 situation, connexion, and the rapidity of their returns; the 
 solvency of the people they give credit to, and the number of 
 bad debts; their own credit; the economy, the skill, care, and 
 invention exerted by both themselves and those under them ; 
 luck, and many other conditions. Ricardo and his followers 
 have assumed labour to be the only element in the cost of 
 production, and the only productive power : and the notion has 
 had pernicious consequences. Capitalists have been led by it to 
 look to reduction of wages as the only means of keeping up 
 profit, and labourers to suppose that every increase of profit 
 must have arisen from their own work, and be at their own 
 cost. All the sophistry in the literature of Socialism has not 
 given birth to a more mischievous fallacy than that contained 
 in the Ricardian dogma: “ The rate of profit is never increased 
 by a better distribution of labour, by the invention of machinery, 
 or by any means of abridging labour, either in the manufacture 
 -or the conveyance of goods. These are causes which operate on 
 
234 The Known and the Unknown 
 
 price, and are beneficial to consumers; but they have no effect 
 whatever on profit. On the other hand, every diminution in 
 the wages of labour raises profit.’ * A capitalist, no less than a 
 statesman, may, by taking thought, add a cubit to his stature. 
 He may diminish his outgoings and augment his returns without 
 lowering wages. ‘The soil, the seed, the animals, the coal, the 
 machinery, the chemical agents that capitalists employ, have 
 productive powers; their own brains have productive powers ; 
 and all these forces may be made, by skill and economy, to 
 produce more at less cost. Mr. Mill made, doubtless, an 
 important correction of Ricardo’s language in saying that the 
 rate of profit depends, not on wages, but on the cost of labour 3. 
 but the cost of labour is only one of several conditions affecting 
 the result. 
 
 What is or may be known generally, with respect to com- 
 ‘modities, is not the cost—still less the profit—of producing 
 them, but their actual market price. People in a particular 
 trade may further know what profit a particular price yields to — 
 themselves, though the same price may give very different 
 profits to different producers. People outside the trade, again, 
 may know whether the present prices of the things produced in 
 it are above or below the usual level. But not even the people 
 in the trade can know what the price will be six months hence. 
 When the price of an article—say coal or iron—is above the 
 usual level, capital is attracted to its production, and bills 
 increase in the business; but no examination of the entire field 
 of employment is known or attempted. In truth, the choice 
 of employment runs in a very narrow groove. ‘There is, no: 
 doubt, a tendency of trades to localize themselves, like cotton 
 manufacture in Lancashire, in the places with the best natural 
 aptitudes for them. But in the degree and manner in which 
 this localization takes place it is largely the result of want of 
 information, and want of originality and enterprise, and is far 
 from effecting the best distribution of industry. Men follow 
 each other, like sheep, in flocks, though the sheep are not wise in 
 
 * Ricardo’s Works, ed. M‘Culloch, p. 49. :: 
 
 
 
 4p 
 “i 
 
In the Economie World. 235. 
 
 inferring that wherever there is enough good grass for a few, 
 there must be plenty for the whole flock that goes after them. 
 Belfast is well situated for the manufacture of linen, and has a 
 trained population, with hereditary aptitudes; but that is far 
 from affording adequate reason for the fact that almost everyone 
 there with capital has, for the last two generations, gone into. 
 linen ; for the place and people have capacities for other manu- 
 factures. ‘The Belfast people have put almost all their eggs in 
 one basket. There has been a great over-production of linen ; 
 and the case is only one of many, showing that Chancellor 
 Oxenstiern’s saying, ‘ Quantula sapientia regitur mundus,’ is as 
 true of the commercial as it is of the political world. 
 
 Instead of the world of light, order, equality, and perfect 
 organization, which orthodox political economy postulates, the 
 commercial world is thus one of obscurity, confusion, haphazard, 
 in which, amid much destruction and waste, there is by no. 
 means always a survival of the fittest, even though cunning be 
 counted among the conditions of fitness. ‘The race is not to 
 the swift, nor the battle to the strong, nor yet riches to men of 
 understanding; but time and chance happeneth to them all.’ 
 The part of chance in the matter is really so great, the venture 
 so often chiefly at other people’s risk, and the ramifications of 
 commercial relations and credit, the sudden changes in the 
 activity of business and in demand, the fluctuations of prices, 
 make the trader’s future dependent on so many other conditions 
 than his own skill and care, that not a few hardly try to exercise 
 judgment or foresight. The Duke of Wellington is said to 
 have replied to a lady who besought him to tell her how the 
 Battle of Waterloo was won: ‘ Well, madam, we pounded and 
 they pounded, and we pounded the hardest.’ If the story is 
 correct, the Duke probably thought no better account of a battle 
 intelligible to a woman; but many men nowadays seem of 
 opinion that the only way to succeed in the battle of life is to 
 pound the hardest as long as they can, especially if they can do 
 so with metal from other people’s magazines. The very word 
 ‘speculation ’ has undergone a perceptible change of meaning, 
 denoting something much nearer gambling than it once did. 
 
236 The Known and the Unknown 
 
 Adam Smith spoke of certain employments in his day as 
 lotteries—‘ the lottery of the law,’ ‘the lottery of the sea,’ for 
 example—and of the absurd presumption of mankind in their 
 own good fortune in respect of such lotteries. Now almost 
 every trade has become a lottery, and human presumption has 
 in no respect diminished. 
 
 The ignorance and blindness with which modern trade is 
 carried on are, as the foregoing pages have shown, partly 
 inevitable and irremediable, resulting as they do, to a great 
 extent, from the consequences of industrial and commercial pro- 
 gress on the one hand, and the limitations of human faculties 
 on the other. So much could never be known, in a free and 
 progressive world, of the condition and prospects of every 
 employment, nor could the transfer of labour and capital 
 become so easy, as to produce an approximation to the equality 
 in the rate of profit imagined by the orthodox economist. His 
 system has, indeed, done much to defeat itself and to aggravate 
 the obscurity, disorder, and inequality. By assuming that the 
 laws determining profits, prices, and the division of employment, 
 are fully understood, and pursuing the method of deduction 
 from arbitrary assumptions to the neglect of the investigation 
 of facts, he has left us in darkness with respect to many matters 
 as to which the economic world might be less unknown than it 
 is. Arthur Young’s ‘Tours,’ Tooke’s ‘ History of Prices,’ 
 Porter’s ‘ Progress of the Nation,’ Thorold Rogers’ ‘ History of 
 Agriculture and Prices,’ Caird’s ‘ English Agriculture in 1850,’ 
 the so-called ‘ Domesday Books ’—inaccurate as they are—the 
 ‘Agricultural Statistics,’ and those relating to trade and to 
 income, together with the Reports of many Parliamentary 
 Committees, afford an example of the facts that might-be 
 gathered, marshalled, and sifted. We might by this time have 
 an almost complete industrial and commercial map of the king- 
 dom, showing, for the last forty years, the distribution of trades, 
 the changes in the methods of both manufacture and farming, 
 the migration of their sites, the new employments invented, the 
 number of persons in every employment in each successive year, 
 the fluctuations in the prices of both commodities and labour, 
 
In the Economic World. 237 
 
 not in the chief markets only, but in every town and parish, and 
 the main changes that have taken place in the nature, amount, 
 and distribution of national wealth, and other causes. Mr. 
 Bagehot, criticising the plea of a German economist and statist, 
 Dr. Gustav Cohn, fora close investigation of all facts relating 
 to banking and other departments of industrial and commercial 
 economy, called it, by way of disparagement, ‘the all-case 
 method,’ affirming that no discovery was ever so made. It 
 would be nearer the truth to say that no discovery was ever 
 made by the no-case method. To imagine that a clever man, 
 with his eyes shut, can think out the laws of the economic 
 world is as reasonable as to suppose that he could, in the same 
 manner, discover the laws of the physical world. In chemistry, 
 in natural history, in physiology, in physical astronomy, 
 discoveries are made every year by the all-case method—by 
 neglecting no phenomenon as unworthy of observation, and 
 investigating every case that presents itself, with a view to 
 ascertaining its causes and laws. The economist might acquire 
 by this method something of the faculty of prediction which 
 Mr. Lowe claims for him. The relation, for example, between 
 the economy and the law of a country, and between the move- 
 ments of both, is one of the cases in which a power of prevision 
 may be acquired by the inductive method. When Mr. Lowe 
 affirms that political economy is the only department of political 
 and moral science in which prediction is possible, he forgets that 
 all the laws of civilized society are based on the assumption that 
 the conduct of the great majority of its members can be foretold, 
 that they will obey the laws, and that certain consequences, 
 moral, political, and economic, will ensue. Were it otherwise, 
 the desires of which the various kinds of wealth are the objects 
 would lead, not to industry and commerce, but only to plunder 
 and theft. In relation to the present depression of trade, an 
 instance may be given of the power of prediction the lawyer 
 possesses. As Auguste Comte well said, ‘to predict the future 
 you must be able to predict the past, where your predictions can 
 be verified and your method put to the test.’ The following 
 prediction of the past, proving a power of predicting the future, 
 
238 The Known and the Unknown 
 
 is in point. Not long ago, an eminent economic authority, 
 Mr. Jevons, referred, in a letter in the ‘ Times,’ to the number 
 of bankruptcies in the United States in 1878, in support of his 
 theory of a decennial solar cycle, resulting in regular periods of 
 depression and commercial crises. An eminent legal authority, 
 on the other hand, Mr. Francis Reilly, observed at once to the 
 present writer, that Mr. Jevons should have inquired whether 
 anything besides the number of sun-spots had changed, adding, 
 that the American bankruptcy law varied, and as in this 
 country the number of bankruptcies varied with the law, he 
 believed it would be found to be so in the United States. Soon 
 afterwards facts were published, proving that this prediction of 
 the past was well-founded, that the great number of American 
 bankruptcies last year arose from the desire of debtors to take 
 advantage of an expiring Act—too liberal to defaulting traders— 
 and that Mr. Reilly might draw an Act that would much 
 diminish the number of fraudulent bankruptcies in England, 
 and possibly baffle Mr. Jevons’ solar cycle in 1888. 
 
 Again, although the modern commercial world is, by its 
 nature and constitution, by the ever-increasing extent of its 
 area, not only one of perpetual change, but liable to sudden 
 and unforeseen disturbances, yet the very perception of this 
 fact and of its causes gives a power of prevision. A curious 
 and instructive example of the error of the a priori economist 
 on this point will be found in Ricardo’s chapter on natural and 
 market price. He could not shut his eyes altogether to the fact 
 that there were fluctuations in prices and profits, disturbing the 
 order and equality his theory assumed, and was compelled to 
 admit that the termination of the great war with France, for 
 example, had deranged the previous distribution of employments 
 in Europe, and destroyed some of the occupations of capital. * 
 But he proceeded at once to set aside such changes in his 
 exposition of the laws of wages, profits, and prices, on the 
 assumption that they were equally operative in all states of 
 society—an assumption absolutely false in itself, and assuredly 
 
 
 
 * Ricardo’s Works, ed. M‘Culloch, p. 48. 
 
In the Economie World. 239 
 
 not a reason for leaving the phenomena in question out of 
 consideration, had it been true. ‘ Having,’ he says, ‘fully 
 acknowledged the temporary effects which, in particular em- 
 ployments, may be produced on the prices of commodities, as 
 well as on the wages of labour and the profits of stock, by 
 accidental causes, since these effects are equally operative in all 
 states of society, we will leave them entirely out of our con- 
 sideration, whilst we are treating of the laws which regulate 
 natural prices, natural wages, and natural profits.* That is to 
 say, in discussing the natural as distinguished from the posi- 
 tive laws governing the distribution of wealth, he ignored the 
 essential difference between stationary and progressive society — 
 between the ancient economic world, with its simple and cus- 
 tomary methods and prices, and the modern, with its vastness, 
 complexity, incessant movement, and sudden vicissitudes and 
 fluctuations. The changes which he set aside as the results of 
 ‘accidental causes’ were mainly the natural and inevitable 
 consequences of the constitution and course of the economic 
 world in which he lived. But even disturbances which arise 
 from political and other causes of a different nature ought to 
 be taken into account by both the theoretical economist and the 
 practical man of business, as inseparable from the world and ~ 
 the age in which we live. The present depression of trade 
 has been attributed to various temporary causes—the Franco- 
 German War and its consequences, the war in Turkey, the im- 
 mense military expenditure through Hurope, the demonetizing | 
 of silver, a succession of bad harvests at home, and famines in 
 India and China. These are not, in truth, the only causes of 
 the depression which has arisen in a great measure, as already 
 explained, from conditions inherent in modern economy; but 
 even the temporary occurrences referred to have nothing really 
 abnormal in their character: they are natural incidents of the 
 world and the age, and as such should have been included in 
 the speculations of both economists and men of business. It is 
 written, indeed, that ‘he that observeth the winds shall not 
 
 * Ricardos Works, ed. M‘Culloch, p. 49. 
 
240 The Known and the Unknown 
 
 sow, and he that observeth the clouds shall not reap ;’ but he is: 
 a poor husbandman who reckons on nothing but fine weather. 
 The present article has kept the industrial and commercial 
 side of the world chiefly in view; but it would be a fundamental 
 error to regard the economical world as bounded by commerce. 
 and industry, or as containing no other phenomena whose laws 
 it is the object of political economy to investigate. The desires. 
 for various kinds of wealth are not the only motives on which 
 the production and distribution of wealth depend ; the economist 
 must penetrate even into the most romantic passions and senti- 
 ments of the human heart. There, too, all is not unknown, or 
 beyond scientific, or even commercial, prevision. No writer of 
 his time had a keener insight into the secret springs of the 
 movements of society, when he was not in economic leading- 
 strings, than Mr. Bagehot, who has finely observed that ‘ the 
 range and force of some of the finest impulses and affections of 
 young hearts enter largely into the calculations and anticipated 
 profits of the speculative builder.’ Stop for a twelvemonth 
 marriages of the most sentimental order—those of pure love— 
 and many builders and house-owners will be ruined; many 
 clergymen, lawyers, and doctors impoverished ; and a generation 
 hence it will be felt in the labour market, and in every trade: 
 and profession. But marriages for love will not stop for a 
 twelvemonth; the calculation of the Registrar-General will not 
 be defeated ; clerical, legal, and medical functionaries will be 
 employed, and five-and-twenty years hence sons of this year’s 
 lovers will be found in every vocation. A critic has severely 
 rebuked the writer for having, in a previous article, controverted 
 Mr. Lowe’s proposition that the desire of wealth is the single 
 motive in human affairs on which predictions can be founded, and 
 that ‘in love, war, and politics, prediction is impossible.’ ‘ He ac- 
 tually,’ the critic says, ‘adduces the fact that we can predict, within 
 a certain small limit of probable error, the number of marriages, 
 for any year, as a proof that economic phenomena do not depend 
 on the operation of a single motive. He could not have chosen 
 a more unlucky example; for the merest tyro in statistical 
 inquiry is aware how closely the number of marriages is con- 
 
In the Economic World. 241 
 
 nected with the price of grain, and this in all countries. No 
 one can possibly look at the curves representing these two facts 
 without seeing that the price of grain determines the movement 
 of the marriages.* The critic would appear to hold that the 
 single motive to marriage is to go share in a big loaf. But it 
 is true that, although only the poorest class is restrained by the 
 price of corn, when bread is dear many poor persons are unable 
 to marry for love. The curious thing is that in England, 
 among a nation of shopkeepers, marriages are more commonly 
 for love than in France, where the tender passion is supposed 
 to be more easily excited; and that if the love of money be 
 anywhere the single motive from which transactions in the 
 matrimonial market can be foretold, it is at the other side of 
 the Channel. In all countries, however, the forces by which 
 the economic world is moved are many and complex; and it is 
 only by a searching investigation of its actual movements that 
 the laws by which these movements are governed can be known. 
 
 It is not meant that deduction has no place in economic 
 science; every inference from, or application of, a general 
 principle is a deduction. What is meant is, that political 
 economy has not reached the stage of a deductive science ; that 
 the fundamental laws of the economic world are still imperfectly 
 known; and that they can be fully known only by patient 
 induction. ‘The aphorism of Bacon, moreover, respecting the 
 application of human laws, should be constantly present to the 
 mind of the student of economic laws :—‘ Consequentiae non 
 est consequentia; sed sisti debet extensio intra casus proximos: 
 alioqui labetur ad dissimilia, et magis valebunt acumina 
 ingeniorum quam auctoritas legum.’ ‘The theory of profits, 
 prices, and taxation, referred to in a previous page, affords an 
 instructive instance. That everyone desires money is a conse- 
 quence of the fact that money is the common medium of 
 exchange, and purchases everything. But every subsequent 
 link in the chain of circumstances deduced in the orthodox 
 theory is defective—that there is a consequent equality of both 
 
 
 
 
 
 * The Statist, January 4th, 1879. 
 R 
 
242 The Known and Unknown in the Economie World. 
 
 wages and profits; that prices are, therefore, in proportion to 
 cost of production; and that a tax on any special trade or 
 commodity falls necessarily on the consumer, and cannot fall 
 on the producer. Small capitalists have been driven out of 
 several trades by taxation, and it is thus possible that in parti- 
 cular cases so-called indirect taxation, by ruining producers, 
 may cause the stock-in-trade to be sold at a sacrifice to 
 consumers, 
 
 Two conclusions at least, it is hoped, many readers will 
 concur in—that the economic world is still, in a great measure, 
 an unknown one; and that to know it economists must ex- 
 plore it, as geographers have explored the world of physical 
 
 geography. 
 
XVIII. 
 
 THE HISTORY AND FUTURE OF INTEREST AND 
 PROFIT.* 
 
 Tue history of interest, which involves that of profit, is con- 
 nected with fundamental changes in human society, and in the 
 ideas and feelings on which it rests. It raises, too, economic 
 and social problems of no little importance for the future of the 
 civilized world. Once it was a question wholly of moral and 
 religious sentiment, at length embodied in positive law, whether 
 interest were permissible, and, if so, what rate should subsist. 
 A generation ago in this country all restraint of its rate, 
 together with all other interference on the part of society at 
 large, or the State, with pecuniary dealings between adult men, 
 seemed definitely abandoned. But on the Continent of Europe 
 the legitimacy of interest is vehemently disputed by the adherents 
 of Socialism ; a feeling against it is growing up in the United 
 States; and even in England, although no special question about 
 interest has been raised, there are indications of a tendency to 
 revert to ancient ideas on kindred subjects. 
 
 The medieval reprobation of interest under the name of 
 usury has often been ascribed to the Christian Church, but 
 its origin may be traced to a much earlier stage of society. 
 Churchmen and canonists, doubtless, appealed to Christian 
 doctrine, as well as to Aristotle’s doctrine, that interest is 
 unnatural, because money, unlike corn and cattle, is barren and 
 cannot beget money; and since nothing is lost by the loan of 
 an unproductive commodity, they argued that the lender was 
 
 * Fortnightly Review, November Ist, 1881. 
 R2 
 
244 The History and Future of Interest and Profit. 
 
 in equity entitled to no recompense. But Aristotle himself 
 unconsciously sought to justify a notion inherited from pre- 
 historic times, when the members of each community still 
 recognized each other as kinsmen ; when communism in property 
 existed, at least in practice, and no one who had more than he 
 needed could refuse to share his superfluous wealth with a 
 fellow-tribesman in want. Tacitus, who remarks that usury 
 was unknown to the ancient Germans, tells also that anyone 
 might enter the house of a German, and ask for what he 
 pleased: receiving it as a matter of course, and placed under no- 
 obligation by the gift. Describing, in like manner, the ancient 
 customs of the Eskimo, Dr. Rink says that if anyone had 
 anything to spare, it was ranked among goods that were 
 possessed in common; and if a man borrowed the boats or 
 weapons of another, he was not bound to give the owner any 
 compensation for damage or loss. The usages and sentiments 
 of archaic communism survived in various forms long after 
 private property, even in land, had grown up. Far down in 
 the middle ages, the rich man who closed his hall-door, and 
 dined in a private room with his family, was a byword for 
 extraordinary selfishness and meanness. Many other medieval 
 customs and opinions had their original source in pre-historic 
 tribal and family ideas, and in the practices of a stage of social 
 evolution when each little community deemed itself one in blood 
 and ancestral gods, and individual proprietary rights were most 
 imperfectly developed. The maxim ‘ Natura non facit saltum’ 
 is true of the social as of the physical world. The structure of 
 English medizeval society, especially on its economic side, had 
 throughout a foundation of which the original type must be 
 looked for in archaic kinship. The guild was a brotherhood 
 bearing all the marks of deriving its organization and funda- 
 mental ideas from the ancient joint family. The township or 
 village community had been constituted either by actual kinsmen 
 or by a body of men organized as such. The typical town was an 
 expansion of the township. The nation was an amalgamation of 
 tribes whose tribal ideas survived in various forms. On all sides 
 social structures, practices, and notions existed, descending from 
 
The History and Future of Interest and Profit. 245 
 
 a time when neighbourhood was scarcely possible without blood 
 relationship or formal adoption, unless in the case of the 
 conquered serf. The feeling of actual kinship might have 
 disappeared in that of membership of a local community bound 
 together by ancient customs, rights, and obligations, but neither 
 townsmen nor countrymen could have conceived individuals 
 dwelling in the same place, without bond, connexion or reciprocal 
 duties, each pursuing what life and occupation he thought fit, 
 controlled neither by his neighbours, nor by ancient local usage. 
 The theory of medieval prices had grown out of the archaic 
 idea that the vendor of a commodity or the labourer for hire in 
 a neighbourhood was either a member by descent or adoption of 
 the local community, or its servant, and in either case bound to 
 conform to its usages, to render to it honest and loyal service, 
 and to accept customary or equitable remuneration. And the 
 connexion is close between the prohibition of interest and the 
 penalties in the early statutes against forestalling, engrossing, 
 and regrating. The forestaller was regarded as seeking an 
 exorbitant profit, not by honest work, but simply out of the 
 necessities of a neighbour, who stood in the shoes of the ancient 
 kinsman, and had inherited, as it were, the moral rights of one. 
 A man was held entitled to a fair price, determined commonly 
 by custom or authority, for work or produce, but not to a profit 
 on buying or storing up things of which his fellow-townsmen 
 stood in need. Dr. W. von Ochenkowski, in a recent work of 
 merit, ‘ Englands wirthschaftliche Entwickelung im Ausgange 
 des Mittelalters,’ lays too exclusive a stress on the duty which 
 the medizval citizen owed to the State. That duty plays an 
 important part in medizval economy ; but Dr. von Ochenkowsk1 
 overlooks the nearer duty which the burgher owed to the civic 
 body, and the inhabitant of a township or manor to the little 
 village community and its lord. 
 
 The fundamental idea of modern English economy—that 
 every man should be free to follow his own pecuniary interest 
 as he thinks fit without fraud—does not distinctly emerge until 
 the sixteenth century, in which Shakespeare deplored the decline 
 of the loyalty of the antique world, ‘when service sweat for 
 
246 The History and Future of Interest and Profit. 
 
 duty, not for mead.’ Yet we may detect in commercial towns 
 an earlier break with antiquity in respect of dealings between 
 lenders and borrowers. ‘T'wo opposite practices in relation to 
 the payment of interest co-existed in the fourteenth century, 
 one descending from social infancy, the other developed in the 
 progress of intercourse between mercantile people—among 
 whom, moreover, the clergy were in no great esteem—by 
 experience of the needs of trade. There were ordinances of the 
 Mayor of London against usury, but they were rarely enforced, 
 and seem to have been chiefly aimed against foreigners and 
 the high rate of interest they exacted. The civic authorities 
 formally sanctioned in the case of citizens what would now be 
 regarded as an enormous rate of interest, and passed accounts 
 in which it was ‘charged, as in accordance with ‘the custom 
 of the city.’ The city records show that the fortune of a ward 
 was customarily intrusted to his guardian to employ in his own 
 business, paying interest at ten per cent. Thus, in 1874, the 
 account of a mercer was duly presented respecting ‘ £300 
 belonging to a minor, son of a late citizen, and delivered to the 
 mercer to trade with.’ The mercer ‘charges himself with £300 
 so received, and with the increase by way of profit, four shillings 
 being paid yearly for the use of every pound according to the 
 custom of the city, of which he asks that he may be allowed two 
 shillings in the pound for his trouble, according to the custom 
 of the city.* The customary rate of profit is here computed at 
 twenty per cent., the customary interest at ten per cent., or half — 
 profit; the rate of profit being ‘double interest,’ as Adam 
 Smith says it was in his time, four hundred years afterwards. 
 The Act 37 Edward III., c. xi., which puts merchants, citizens, 
 and burgesses with a capital of £1000 on the same footing in 
 point of expendible income as landowners with £200 a-year, 
 proves that twenty per cent. was then considered the customary 
 rate of profit in the commercial towns of the kingdom. It is 
 observable, too, that ten per cent., the customary rate of interest 
 among the tradespeople of London in Edward III.’s reign, is 
 
 * Riley’s Memorials of London, p. 378. Compare a fishmongeyr’s account, idid., 
 pp. 446, 447. 
 
The History and Future of Interest and Profit. 247 
 
 the rate permitted by the Act of Henry VIII. in a.p. 1546, 
 which first legalized interest, so that it seems to have been still 
 regarded at the latter period not only as the traditional rate, but 
 also as moderate and reasonable. 
 
 We must not, indeed, take the profit and interest customary 
 in commercial towns in the reign of Edward III. as repre- 
 senting rates current throughout the country. The profits of 
 agriculture after the pestilence in the middle of the fourteenth 
 century, lowered as they were by the rise of wages consequent 
 on depopulation, could not have borne a rate of interest ap- 
 proaching to ten per cent. on the capital engaged in ordinary 
 farming. Outside of the region of town trade no regular or cus- 
 tomary rate prevailed. Unless among townspeople, money in 
 the Middle Ages was usually borrowed not to make profit, but 
 because the borrower was in need, and the interest was often 
 extortionate. In many cases the penalties on usury prevented 
 loans altogether. The amount of accumulation, moreover, in 
 the Middle Ages was small, and but little of it took the form 
 of coin, the only loanable form of capital, even townspeople 
 commonly investing their savings in land, cattle, sheep, plate, 
 household stuff, and clothing. The amount of capital that 
 could be put into trade was limited in various ways, and, save 
 in trade, loans for interest were surrounded with danger, dis- 
 credit, and trouble. Money, too, that is to say coin, was scarce. 
 The English silver mines had become exhausted in the four- 
 teenth century :* the Papal See caused a constant drain of 
 treasure; foreign war was another source of pecuniary loss ; 
 and base money from abroad supplanted the sterling coin of 
 the realm. Monasteries and great landowners not unfrequently 
 raised loans, but there was so little lending throughout the 
 country, that we may confine our attention to the towns. 
 
 Several questions arise with respect to interest and profit 
 in the towns. How did so high a rate of interest as ten per 
 cent. come to subsist in medieval trade? Why did it continue 
 
 
 
 * See Dr. Georg Schanz’s excellent work, Englische Handelspolitik, gegen Ende 
 des Mittelalters, i. pp. 492-494. 
 
_ 
 
 248 The History and Future of Interest and Profit. 
 
 at the same rate, neither fluctuating from time to time, nor 
 declining on the whole, as it has done in modern times? How 
 was a customary profit of twenty per cent. established? The 
 high rate of interest in the Middle Ages has often been ascribed 
 to the insecurity of capital. But unless in foreign commerce— 
 which as yet was chiefly in foreign hands, and in which there 
 was danger of both piracy and shipwreck, and great gains and 
 great losses were made—trade risks were less in the Middle 
 Ages than they are now. ‘Trade, in general, was carried on in 
 a small, customary, circumspect way, regulated by guilds and 
 civic authority ; demand and prices could generally be estimated 
 beforehand; and there was little or no speculation. The rate 
 of commercial interest was not determined by the demand for, 
 and supply of, money; had it been so, it would have varied 
 from time to time, instead of remaining steady at ten per cent. 
 Its explanation must be sought, first of all, in the rate of profit. 
 Modern economists have for the most part assumed that com- 
 petition proportions prices to cost of production and equalizes 
 profits. Medieval economy was based on very different prin- 
 ciples, yet it brought about a much closer approximation of 
 profits to equality, and a much closer correspondence of prices 
 with outlay, labour, and sacrifice. The medizval theory was, 
 that the trader owed to the community to which he belonged 
 good articles for reasonable and moderate remuneration, and 
 
 should not seek his own ‘singular profit;’ while he was, on 
 
 the other hand, entitled to such profit and prices as yielded 
 a sufficient livelihood to himself and his family—the family 
 forming an important unit in the social economy. In Elifric’s 
 ‘ Colloquy of the Eleventh Century,’ the Merchant says, ‘I say 
 that I am useful to the King and to ealdormen and to the rich 
 and to all people. I ascend my ship with my merchandise and 
 sail over the sealike places, and sell my things, and buy things 
 which are not produced in this land.’ To the question, *‘ Will 
 you sell your things here as you bought them there?’ he 
 answers, ‘I will not, because what would my labour benefit 
 me? JI will sell them dearer here than I bought them there, 
 that I may get some profit to feed me, my wife and children.’ 
 
The History and Future of Interest and Profit. 249 
 
 Anything above a fair profit was regarded, like extortionate 
 interest, as usurious, because out of proportion to labour and 
 cost. ‘Thus the ‘Ordinances of the Plumbers,’ approved by 
 the Mayor and Aldermen of London in the thirtieth year of 
 Edward III., ordain ‘that everyone of the trade shall do his 
 work well and lawfully, and that for working a clove of lead 
 for gutters or for roofs of houses, he shall take only one half- 
 penny, and for working a clove for furnaces, belfrys and con- 
 ‘duit pipes, one penny. Also that no one for any singular 
 profit shall engross lead coming to the said city for sale, to the 
 damage of the commonalty, but that all persons of the said 
 trade, as well poor as rich, shall be partners therein at their 
 desire.’ There were many ordinances, both royal and municipal, 
 in the fourteenth century for the sale of various commodities 
 ‘at reasonable prices.’ The general standard of ‘reasonable’ 
 or fair price and profit was custom. Where the seasons, as in 
 the case of food, or other circumstances made a customary price 
 impossible, the local authorities or the central government itself 
 intervened to prevent sellers from taking advantage of the ne- 
 cessities of buyers. There was abundance of self-seeking and 
 greed of lucre, as well as of hypocrisy, in the medizval world, 
 but they worked not through competition, but through combi- 
 nation ; towns, guilds, companies, classes, grasping at exclusive 
 privileges, monopolies, and gains. Men pursued their prey, as 
 it were, in troops and packs. What was sought was not the 
 gain of individuals as such, but of communities, corporations, 
 fraternities, and orders. 
 
 The causes determining mediaeval profit may then be easily 
 understood. Its high rate was not the result, as in new coun- 
 tries in modern times, of a great productiveness of labour and 
 capital, aided by prolific natural agents. In a small, and, 
 compared with our own, a nearly stationary commercial world— 
 where the number of persons engaged in each trade was limited 
 by guild ordinances, or by the governing body of the town ; 
 where every business was carried on in accordance with usage 
 or rule, even the amount of capital or work being often re- 
 stricted; where prices were controlled by custom, public opinion, 
 
250 The History and Future of Interest and Profit. 
 
 authority, or positive law—the ordinary rate of profit might be 
 without difficulty measured, indirectly regulated, and kept at a 
 high level. Twenty per cent. came accordingly to be the cus- 
 tomary rate of profit in the fourteenth century, and seems to 
 have continued so long afterwards. Again, the customary rate 
 of interest in medizeval trade was half profit, or ten per cent., 
 not because the competition of lenders and borrowers resulted 
 in such a rate—for competition would have produced a fluc- 
 tuating, not a stable or customary rate—but, it may be rea- 
 sonably conjectured, on the same principle that prevailed in 
 the common European tenure of metayage, that the person 
 furnishing the capital should get half of the produce, and the 
 person performing the labour the other half. Throughout the 
 greater part of Kurope down to the sixteenth century the pre- 
 vailing rate of interest was ten per cent., and twenty per cent., 
 or double interest, appears to have been the customary profit, 
 at least in common opinion. 
 
 The statute of Henry VIII.’s reign (87 Henry VIII, 
 A.D. 1546), which legalized interest at ten per cent., though 
 prohibiting higher rates as usurious, opens a new epoch in the 
 history of the subject. Interest was now distinguished from 
 usury. ‘The same cause that had led the civie authorities of 
 London two centuries earlier to sanction trade loans at that 
 rate, now acted on the Legislature with respect to all loans. 
 Economic considerations prevailed over early moral ideas and 
 later theological dogmas. The extension of manufactures and 
 commerce called for an extension of credit, and interest was the 
 foundation or saison d’étre of credit. The change was connected, 
 too, with the Reformation and the decline of ecclesiastical 
 authority, while the position and influence of merchants and 
 citizens had risen. There was, at the same time, a general 
 tendency of legislation towards a relaxation of restraints on the 
 disposition and use of property, of which the Statutes of Fines. 
 and of Wills are instances; commercial policy and the dictates 
 of experience superseding the notions of both archaic and feudal 
 society respecting the inalienability of family property. Theo- 
 logy recovered ground for the moment in Edward VI.’s reign, 
 
The History and Future of Interest and Profit. 251 
 
 when ‘a Bill against Usury,’ in 1552, enacted that the late 
 statute sanctioning interest should be ‘ utterly abrogate, void, 
 and repealed.’ But in 1571, an Act of Elizabeth, following 
 that of Henry VIII., again legalized interest at ten per cent. 
 Thenceforward the Legislature intervened only to lower the 
 legal rate, which early in the seventeenth century was reduced 
 to eight, afterwards to six, and in the middle of the eighteenth 
 century to five per cent. These reductions might appear at first 
 sight like attempts to tighten restrictions on dealings between 
 lender and borrower; but they simply followed at a distance a 
 fall in the market rate, which always averaged below the legal 
 maximum. During Hlizabeth’s reign, though the Queen herself, 
 at her accession, had borrowed at twelve per cent. on account of 
 the supposed insecurity of her throne, the market rate sank far 
 below the lawful ten per cent. ‘Throughout the seventeenth 
 century the usual rate was five per cent. In the eighteenth 
 century the interest on the National Debt stood at one time so 
 low as three per cent. ‘The immense loans contracted by the 
 Government during the long war with France afterwards caused 
 a considerable rise; but the permanent tendency of the rate in 
 modern times, amid frequent fluctuations, has been to decline. 
 In the later Middle Ages it stood, as we have seen, at ten per 
 cent. ; while in the present year, according to the price of the 
 Funds, it has kept close to three per cent. What have been 
 the causes of this fall? What conditions now govern the rate 
 of interest? How are its incessant fluctuations on the one 
 hand, and its decline in the long run, on the other hand, in 
 contrast with its stationary rate in former years, to be explained ? 
 _Is a continuous fall to be looked for in the future ? 
 
 Many eminent writers before Adam Smith supposed that 
 the fall in the rate of interest after the middle of the sixteenth 
 century had been caused by the change in the purchasing power 
 of money, consequent on the influx of silver from America. 
 Money, they said, was worth less, and therefore less was given 
 for the use of it. But, as Adam Smith has replied, the change 
 in the purchasing power of money affected both interest and 
 principal alike, and could not alter the proportion. Yet the 
 
252 The History and Future of Interest and Profit. 
 
 writers referred to were not wrong in ascribing the reduction of 
 interest mainly to the increase of money, though mistaken in 
 their view of its mode of operation. It was by augmenting, 
 not the sums of money in the market for commodities, but the 
 stocks of money entering the loan market, that the new silver 
 lowered interest. The sudden descent in the market rate in 
 Ilizabeth’s reign, already alluded to, may be traced mainly to 
 two causes—the increase of silver in Europe after 1545, when 
 the mines of Potosi were discovered, and the new coinage under 
 the great queen. In 1523, it had been computed in Parliament 
 that the total amount of money in the kingdom did not exceed 
 a million. Elizabeth’s mint coined more than five millions. 
 Old men, says Harrison, in his description of England in her 
 reign, could remember when it was rare for a farmer to have so 
 much as six shillings in hand; whereas, when he wrote, it was 
 common for one to have as much as six or seven years’ rent by 
 him, though rents had enormously risen. Little of the coin 
 thus accumulated in the country was put out at interest; but in 
 London and other commercial towns stores of money did not 
 lie idle. ) 
 
 The steadiness of the mediwval rate of commercial interest 
 has already been accounted for by the steadiness of the rate of 
 profit on the one hand, and the fact that half profit was accounted 
 fair interest on the other, in conformity with the principle com- 
 monly followed in farm tenures throughout Hurope—that the 
 person advancing the capital was entitled to half the produce. 
 According to Adam Smith, interest in his time bore the same 
 proportion to profit. ‘Double interest,’ he says, ‘is in Great 
 Britain what the merchants call a good, moderate, reasonable 
 profit—terms which, I apprehend, mean no more than a common 
 and usual profit.? Whether this estimate was strictly accurate 
 may be questioned. ‘The rate of profit was no longer as certain 
 as it had been under the medizeval system. Nevertheless, the 
 philosopher lived in an age in which custom was still ‘the 
 principal magistrate of man’s life.’ Trade was carried on in 
 the main by customary methods. In old and well-known 
 employments, to which he limited the doctrine of the equality 
 
The History and Future of Interest and Profit. 253 
 
 of profits, the rate may have been tolerably well ascertained and 
 uniform; and the steadiness of profit tended to make interest 
 steady. Some of Adam Smith’s fundamental ideas—such as 
 the correspondence of price with cost of production, the equality 
 of profits, and that ordinary profit was double interest—had 
 come down from an earlier economic world, many of whose 
 usages and traditions survived. He referred phenomena, which 
 were really vestiges of an old stationary economy, to a new and 
 progressive one slowly emerging, under which free competition 
 was about to supersede custom, law, and official control, and to: 
 transform a standstill and uniform world into one of infinite 
 diversity, and change, and incessant movement. His own 
 observations show that industrial and commercial progress was 
 already creating wide divergence of prices, profits, and interest 
 from old standards. The period was one of transition, which 
 at length brought the old economic régime to a close, and 
 established one of which production on a large scale, specula- 
 tion, unlimited competition, and ceaseless fluctuations of prices, 
 profits, and interest are essential features. We are thus brought 
 back to the questions, What are the modern conditions deter- 
 mining the rate of interest, and whether its continuous decline 
 is an inevitable consequence of social progress? These inquiries 
 involve topics transcending the province of economics; but even 
 those that are strictly within it deeply concern the future of the 
 civilized world. 
 
 Why, then, is the rate of interest on the best security only 
 three per cent. in Great Britain, while it is higher in the United 
 States, and even in Holland, formerly the stock example of low 
 interest ? The answer which a chapter of Mr. Mill’s ‘ Political 
 Economy’ suggests, and which is true so far as it goes, though 
 inadequate, is that the desire and the means of accumulation 
 have led in this country to the existence of a quantity of capital 
 which its owners are led by the preference of other pursuits, or 
 of ease and leisure, above commercial business, to lend instead 
 of personally employing; while there is, on the other hand, a 
 demand on the part of people engaged in trade for loans. ‘The 
 consequent equation of demand and supply results in a rate of 
 
254 The History and Future of Interest and Profit. 
 
 commercial interest which indirectly governs the price of the 
 funds and the income from such investments, trade being the 
 chief competitor with Government stock and similar securities 
 for loanable capital. In connexion with this explanation, it 
 should be borne in mind that the increasing accumulation is not 
 the only cause that has vastly augmented the supply of loanable 
 capital. The greater part of the movable and immovable pro- 
 perty accumulated in a country, in goods, machines, materials, 
 cattle, buildings, and soforth, never directly enters the loan 
 market; and in former times such accumulations would not 
 have affected the rate of interest even indirectly. But banking 
 and credit have rendered the intervention of money no longer 
 necessary to effect loans, unless in a panic. A vast quantity of 
 wealth, not itself directly loanable, is practically converted by 
 credit into productive capital, of which borrowers get the com- 
 mand. The manufacturer and the merchant obtain, through 
 the intervention of banks, advances of the fixed or circulating 
 stock they stand in need of. In former times they must first 
 have obtained a loan of money in sterling coin. Credit, though 
 unfortunately called money in city phraseology, is neither money 
 nor capital, but it acts as the representative of both in the loan 
 market, and has virtually multiplied beyond calculation the 
 supply of loans. Yet, vastly as it has augmented the supply, it 
 has not tended only to lower interest, for it has also vastly 
 augmented the demand. The holder of goods can get advances 
 on his stock, and is often a borrower. The operation and 
 activity of modern credit are, moreover, connected with a system 
 of industrial and commercial enterprise which creates a pro- 
 digious need of the loan of capital to carry it on. It is 
 impossible, accordingly, to lay down any general proposition 
 respecting the effect of credit on the rate of interest. At one 
 time it augments chiefly the demand for loanable capital, and 
 at another time the supply. The difficulty is thickened by the 
 close connexion between the action of credit on capital on the 
 one hand, and on the circulation and prices on the other. When 
 credit expands in the loan market, it is active also in the market 
 for commodities, and prices rise, giving promise of profit; when 
 
The History and Future of Interest and Profit. 255 
 
 it collapses in the former, it contracts in the latter, and prices 
 fall, to the discouragement of enterprise. The chief fluctuations 
 of both interest and prices thus find their explanation in credit, 
 which is not, like coin, a given quantity, but subject to sudden 
 expansion and contraction. 
 
 When all this has been said, we are still far from an 
 adequate view of the movements of interest. The supply of 
 capital and the demand for it determine the shares of lenders 
 and borrowers in the revenue derived from its employment in 
 business, but do not determine the revenue to be shared. The 
 price of stock and the rate of interest on such securities are 
 governed by the competition of investments, of which trade is 
 the chief; and the terms which trade can offer must depend on 
 the expected profit. If the rate of profit anticipated in business 
 be twenty per cent. at the least, a much higher rate of interest 
 will evidently follow a given state of supply and demand in the 
 loan market, than if no higher profit than ten per cent. could be 
 looked for. Interest fluctuates from causes independent of the 
 rate of profit, and bears no fixed proportion to it —sometimes 
 varying in an opposite direction when the immediate need of 
 loans isurgent. But only high profit can permanently support 
 high interest, and low profit can afford only a low recompense 
 to the lender of capital. The rate of profit determines in 
 general both the maximum and the minimum of interest ; the 
 maximum must be below it, or the borrower would make 
 nothing, and the minimum must not be so low as to drive the 
 owners of capital to employ it themselves, instead of lending it, 
 or to spend it. ‘Thus before we can adequately explain the 
 causes governing interest, we must ascertain those determining 
 profit. For the like reason we can make no answer to the 
 inquiry whether interest tends to rise or to fall in the progress 
 of society, until we have learned the tendency of profit in that 
 respect. In speaking of profit, however, it is not meant here 
 that there is in modern trade any customary, equal, or average 
 rate, such as is talked of in text-books. ‘The medieval rate of 
 profit was a customary one, and the commercial rate of interest 
 was then a customary one likewise. Now profit is uncertain, 
 
256 The History and Future of Interest and Profit. 
 
 variable, and speculative ; nevertheless, interest still bears an 
 essential relation, though not a fixed proportion to it, being 
 higher when and where high profits are frequent and probable, 
 than where the returns are commonly small. The rate of profit 
 can no longer be described as ‘ double interest,’ but unless the 
 returns to capital ordinarily exceeded bare interest, and afforded 
 remuneration for its active employment, borrowing in business. 
 would cease. 
 
 The inquiry whether the rate of profit necessarily declines. 
 as the world grows older has a double claim to attention, 
 possessing an intrinsic importance apart from its relation to the 
 future of interest. Historical and surrounding facts seem at 
 the first view to support the doctrines of those economists who 
 regard a tendency of profit to a minimum as an inevitable 
 consequence of social progress and an established economic law. 
 The actual fall of interest from ten to three per cent. seems 
 presumptive evidence of a fall of profit on the whole hitherto, 
 since interest bears always a relation to profit. And though 
 individual traders now sometimes make more than the ordinary 
 medieval profit of four shillings in the pound, no one supposes 
 that, gains and losses together, profit approaches an average of 
 twenty per cent. on all the capital in trade. In Adam Smith’s 
 time the market rate of interest was generally below five per 
 cent., yet merchants thought double interest good profit. The 
 economic world of his day, it is true, resembled the medisval 
 more than the modern world in the narrow dimensions of trade, 
 the lack of movement and change, and the influence of custom. 
 Yet there were essential differences. Prices and profits were 
 not artificially kept to a certain standard by guilds, civic 
 authorities, and laws. A natural tendency of profit to decline 
 from age to age could hardly, therefore, be inferred from its 
 lower level in the eighteenth century than in the fourteenth. 
 A fortiori no such inference can be drawn from a comparison of 
 medieval profit with its rate under the industrial and commer- 
 cial system of our own time. In the middle ages each trade 
 was in the hands of a limited and organized body; capital, 
 competition, and production were subject to various restrictions ; 
 
The History and Future of Interest and Profit. 257 
 
 prices were customary, or regulated ; the total amount of profit 
 was accordingly small, but the rate was high. Under unlimited 
 competition, unrestricted production, and uncontrolled prices, 
 had the state of society permitted of such a system, profit would 
 have varied much in individual cases and in different employ- 
 ments; its aggregate amount might have been much greater, 
 because the amount of capital would have been so, but the 
 mean rate would in all probability have been considerably 
 lower. 
 
 If from historical we turn to surrounding facts, the state of 
 trade and agriculture in this country during recent years is 
 regarded by many as indicating more than a temporary fall 
 in the profit of British capital. The novel feature of reduced 
 assessments to the income-tax, especially under Schedule D, 
 and diminished proceeds of the legacy and succession duties, 
 exhibit a retrogression only partially accounted for by diminished 
 incomes, expenditure, and savings of landlords and farmers. 
 But the most prosperous countries, the United States and 
 France for example, have their unprosperous periods. The 
 tendency towards more stringent protection abroad is not to be 
 regarded without anxiety; yet our trade statistics prove that 
 an immense market is still open to our productions, and that 
 British energy hitherto has surmounted opposition. A falling- 
 off in the foreign demand for British produce, such as is 
 sometimes argued from the small proportion of exports, would 
 have the opposite effect of diminishing the proportion of im- 
 ports, by altering the equation of international demand to the 
 disadvantage of Great Britain. A diminution of exports might 
 result from hostile tariffs, but imports would fall off more. A 
 good market abroad for our exports raises their value measured 
 in foreign commodities, and swells the amount of goods given 
 for them ; while a declining demand in foreign countries would 
 compel us to give more for our imports; the ratio of exports 
 would increase, exporters would sell at ever-increasing dis- 
 advantage and diminishing profits. Yet even in such an event 
 it could not be inferred that the advance of society lowers 
 the returns to capital, but only that national ignorance and 
 
 S 
 
258 The History and Future of Interest and Profit. 
 
 international jealousy may do so in commerce as well as in war. 
 The chief unsoundness in the actual state of matters, and the 
 most threatening indication for the immediate future, lie in 
 two circumstances independent of foreign countries, namely, 
 that our trade is carried on in uncircumspect, over-speculative, 
 and haphazard manner, and that the immense fabric of our 
 system of credit rests on so narrow and precarious a basis that 
 it might suddenly be overthrown altogether. The gradual and 
 spontaneous growth, however, with better communication and 
 commercial information, of a better organization of our indus- 
 trial economy, is not to be despaired of. With respect to 
 agriculture, on the other hand, it is not enough to say with 
 Mr. Bright that adverse seasons have caused the depression of 
 the profits of British farming and the ruin of many farmers. 
 Farming that pays only in fine seasons must be a losing 
 business in such a climate as ours. It is no mere question of 
 sunshine; nor will five thousand or more miles, at which 
 engineers will smile in spite even of Lord Derby, protect the 
 British corn-grower from loss in competition with American 
 produce under present conditions. Cereals, however, play a 
 minor and diminishing part in British rural economy, and even 
 as regards them, the exhaustion of virgin soil and the increase 
 of population may alter the terms at which the Transatlantic 
 grower can hereafter sell. On the whole, the present situation 
 forebodes no lasting depression of the profits of British capital. 
 
 But the question as to the tendency of profit to fall is not 
 to be answered by reference to the particular case of Great 
 Britain, still less its state at this moment. It involves a con- 
 sideration of the general causes on which profit depends, and 
 the conditions under which they will operate as ages advance 
 and capital accumulates. Adam Smith thought that the mere 
 growth of capital necessarily entailed a fall of profit. ‘When,’ 
 in his words, ‘the stocks of many rich merchants are turned 
 into the same trade, their mutual competition tends to lower 
 profit; and when there is a like increase of stock in all the 
 different trades carried on in the same society, the same com- 
 petition must produce the same effect in them all.’ Were this 
 
The History and Future of Interest and Profit. 259 
 
 reasoning correct, profit must inevitably decline in every pros- 
 perous country. But there is a flaw in the argument. When 
 in a single trade alone the goods for sale increase, the com- 
 petition of the sellers may force them to accept reduced prices 
 and lower profits, because the general produce and revenue of 
 the country may not have increased in proportion. But when 
 capital and production take larger dimensions in all businesses 
 alike, all producers have more to exchange, the general revenue 
 is greater, and no class need get less for its goods in the market. 
 It might even be that no increase of capital or production in 
 any pre-existing employment would follow an augmentation of 
 the total amount. A new trade was a rare thing in Adam 
 Smith’s days; now scores grow up every year, and new trades 
 may both absorb much new capital and create new markets for 
 the produce of old trades. Ifthe growth of capital lower profit, 
 it must be either by raising wages or by forcing resort to inferior 
 or more costly instruments of production. 
 
 A later theory of a tendency of profits to a minimum is that 
 an increased cost of subsistence follows the advance of popula- 
 tion ; so that, to obtain a sufficient supply of labour when capital 
 is increasing, employers must raise wages and submit to a de- 
 crease of profit until a stationary state is reached, at which the 
 further increase of capital is arrested. ‘This theory is defective 
 in two opposite ways. On the one hand, it omits all but one 
 of the causes tending to a depression of profit; on the other, it 
 overlooks both counteracting agencies, and the possibility of a 
 change in the fundamental conditions determining the move- 
 ment of population. The soil, in the first place, is not the only 
 natural agent whose productiveness diminishes. Mines of all 
 kinds would be exhausted even by a stationary population, 
 whereas the productiveness of agriculture would increase with 
 agricultural skill, were the number of consumers to remain 
 constant. ‘The cost of land, too, rises for all purposes of pro- 
 duction, and not in agriculture alone. Many employments 
 again besides agriculture yield diminishing returns to successive 
 applications of capital, because the best places are taken by the 
 first-comers, and those who come later must work in worse 
 
 ez 
 
260 The History and Future of Interest and Profit. 
 
 situations. The first roads, canals, and railways in a country 
 are usually those, as M. Leroy-Beaulieu has observed, between 
 the chief centres of population, wealth, and business, and 
 traverse the districts where traffic and movement are greatest, 
 later lines of communication running through poorer and less 
 populous localities. The best sites for docks, wharves, ware- 
 houses, shops, and other places of business are, for the most 
 part, the first occupied. When any new and lucrative enter- 
 prise is started, or any invention or novel production is intro- 
 duced, a crowd of competitors follow, and profits fall off. Nor 
 is an increased cost of food the only cause tending to raise 
 wages; it is not the cause that has raised them in England 
 during the last twenty years. Facilities for migration, emi- 
 gration, and combination, together with greater intelligence, 
 knowledge, and self-respect on the part of the working classes, 
 have produced the rise. 
 
 Yet there is another side to the subject. The rate of profit 
 depends on the ratio of the gross returns to the total outgoings— 
 on the cost and efficiency of all the instruments of production,. 
 not of labour alone. Given the entire produce of the capital, 
 labour, and natural resources of a country, in order to ascertain 
 how much is profit, we should know not only how much falls to 
 the share of human labourers, but also how much must be 
 applied to the maintenance of fixed and circulating capital, 
 including animals, seed, materials, fuel, machinery, buildings; 
 how much, too, must be paid as rent for the use of natural 
 agents; and how much is to be deducted in taxation and legal 
 expenses, or what is the cost of protection and of the other 
 advantages of government. In a country whose natural re- 
 sources are abundant and prolific, efficiently co-operating with 
 eapital and labour at small cost, and whose government and 
 legal. system are inexpensive, both wages and profit may be 
 high. If the soil and climate be favourable, mines of all kinds 
 rich and easily worked, the structure of the country lending 
 itself to cheap and rapid locomotion, taxes and law costs small, 
 it is plain that the return to capital, alike in agriculture, manu- 
 factures, and commerce, may give a large surplus in profit, 
 
The History and Future of Interest and Profit. 261 
 
 although at the same time the reward of labour is abundant. 
 And what the bounty of nature may effect may be effected by 
 the art of man. Better machinery may be applied at once to 
 the factory, the farm, and the locomotive: while chemistry 
 cheapens and improves the cultivation of the ground, it may do 
 like service in every branch of manufacture. Less costly and 
 more efficient means of heating and lighting every place of 
 production and business may be discovered. The general rate 
 of profit might thus be sustained by the progress of science, 
 though population were advancing. No speculation respecting 
 the economic future of the civilized world which does not take 
 account of the inexhaustible resources of science, and of the 
 progressive development of the human faculties for discovery 
 and invention, has now much claim to attention. Labour, in 
 the narrow sense, is-not, as political economists as well as ‘social 
 democrats’ have assumed, the sole cause of profit. There might 
 be production and profit without the employment of a single 
 human labourer, and profit in that case would be greater or less, 
 according to the qualities of the other agents, and the manner 
 in which they were used. A company in a new colony, where 
 hired labour was not to be had, might carry on a great business 
 by the aid of animals, machines, and natural agents; the profit 
 depending partly on the cost, partly on the powers of these 
 animate and inanimate coadjutors. And the progress of indus- 
 trial art constantly augments the number and efficiency, and 
 diminishes the expense, of some of these auxiliaries. The fact 
 that the best steam-engines still waste the greater part of the 
 fuel is enough to show that the field for economic invention in 
 mechanics is immense. Again, if it be true that the first 
 railways are the best situated, and bring in the largest returns, 
 it is true also that commerce and industrial movement have a 
 constant tendency to spread, and to create markets and traftic 
 where there had been stagnation. ‘The tendency of many great 
 enterprises, like the Suez Canal, is to become more remunerative. 
 Fifty years ago the farthest-seeing mind could not have formed 
 a conception of the profitable occupations that steam would 
 provide for fresh accumulations of capital, and steam is perhaps 
 
262 The History and Future of Interest and Profit. 
 
 a feeble agent compared with some future sources of power. 
 The facilities for the migration and emigration of labour may 
 tend to raise wages at the expense of profit; but they are 
 connected with causes which constantly enlarge the sphere for 
 capital in the application of neglected or imperfectly developed 
 resources, both in old and new regions. The overflow of British 
 capital to foreign countries has two aspects. Mr. Mill has con- 
 templated it as a sign of the fall of profit in old countries; but 
 it may be regarded also as an example of the tendency of social 
 progress to find fresh fields of employment for their accumu- 
 lations. Students of Mr. Herbert Spencer’s works know, 
 moreover, that there is reason to question the undiminished 
 fecundity of the population of the civilized world, which the 
 theory of a decline of profit assumes. Civilization makes con- 
 stantly greater demands on the nervous system, enlarges the 
 brain, and multiplies its expenditure of physical power, thereby 
 diminishing the quantity expendible on the increase of the race, 
 while at the same time raising the standard of wants, and 
 augmenting prudence. One and the same cause—the increase 
 of cerebral force and activity, and therewith of science, fore- 
 sight, and adaptation of means to ends—tends to add to the 
 industrial productiveness of the people of the West, and to 
 slacken the growth of their numbers, although a different future 
 may be before the pecple of the Hast. The time must indeed 
 come, after countless ages, when the decline of solar and terres- 
 trial heat shall arrest the mental advancement of the human 
 race, and make the returns to capital and industry dwindle. 
 But within economic as distinguished from astronomical and 
 geological periods, there seems no ground for concluding that 
 in the more civilized parts of the globe man must press con- 
 stantly closer and closer on the means of subsistence, and thrift 
 and enterprise consequently obtain a decreasing reward. Were 
 population stationary, it may perhaps be argued, the price of 
 labour would rise to such a pitch from the accumulation of 
 capital as to leave little or no profit. The answer is, that the 
 accumulation would not take the form of wages, but of new 
 mechanical and other agencies for aiding production, which 
 
The History and Future of Interest and Profit. 263 
 
 would benefit the labourer as a consumer without raising the 
 cost of his services. One remote difficulty, indeed, raises a 
 formidable, and at present insoluble problem, namely, What is 
 to be done for coal and iron when the mines become exhausted ? 
 Yet the men of a former age might have regarded the disap- 
 pearance of forests, and the consequent rise in the cost of wood, 
 with equal embarrassment. It is at least certain that the earth 
 contains resources now undreamt of, which science is sure to 
 reveal ; or, rather, which the mind of man, the real cause of all 
 wealth and profit, is sure to discover. Some of the chief sources 
 of modern profit must ultimately fall short; but food is not 
 likely to be among the number, because the number of human 
 beings can be kept within bounds—as it is already in France 
 and among the old American families in the States of New 
 England—and substitutes for those which must fail may be in 
 the womb of time. No certain conclusion respecting the future 
 of profit can be reached, but the theory of its tendency to a 
 minimum has no claim to the character of a law of social 
 ‘progress, ignoring, as it does, some of the chief results of that 
 progress, and its chief cause—the constant improvement of 
 human faculties. Profit may uniformly fall from its first high 
 level in new countries like the Western States of America, yet 
 may not continuously decline in old countries. The rate will 
 probably vary from time to time in the future as it has done in 
 the past. 
 
 If profit, then, be subject to no law of inevitable decline, can 
 interest be so? It is almost needless to say that no inference 
 can be drawn from its lower level in modern times than in the 
 Middle Ages, since the medieval rate of profit was fixed, and 
 interest bore a fixed proportion to it. Now, profit is indeter- 
 minate and fluctuating ; interest, too, fluctuates from causes 
 independent of profit, affecting the loan market, such as the 
 state of credit, the foreign exchanges, the movements of bullion 
 actual or anticipated, the harvests, Government and foreign 
 loans, and political events and prospects. The movement of 
 interest in trade may consequently be different from, and even 
 opposite for the moment to, its movement in respect of other 
 
264 The History and Future of Interest and Profit. 
 
 investments. The price of Government stock might be high, 
 and interest on such securities falling, while the rate of discount 
 showed that men of business were eager for loans, either because 
 credit had been shaken, or because a shock to it or a scarcity of 
 money was apprehended, or, on the other hand, because a specu- 
 lative mania had arisen. Or again, people in trade might be 
 slow to accept short loans on very favourable terms, because 
 waiting for a turn in commercial affairs, while stable and 
 permanent investments like the funds or land mortgages 
 returned a high interest. Yet the main cause determining, 
 throughout the whole field open to capital, the general tenor of 
 the movement of interest, is the rate of commercial profit. Let 
 new channels of trade offer bountiful returns for a series of 
 years, and the savings of the country would flow into them, the 
 price of Consols would fall, and mortgagors would pay dearly 
 for loans. ‘The main reason why the rate of interest has been 
 constantly higher in the United States than in England is that 
 the prolific natural resources of America have afforded a richer 
 field for the employment of capital than was found in this island. ’ 
 The chief cause of the rise of interest in Holland is that Dutch 
 capital has found in colonial undertakings, American invest- 
 ments, foreign commerce, and husbandry at home, more profitable 
 employment than lay open to it a century ago. And the sta- 
 tionary state ultimately reached by the whole civilized world 
 may possibly be that of a stationary population, whose savings 
 are more productively employed than those of the present gene- 
 ration, and yield a higher interest. 
 
 We have yet to consider how profit is distributed between 
 lenders and borrowers of capital, and what proportion falls to 
 the share of the former. Gross profit, according to Mr, Mill, is 
 made up of three elements :—interest, or the reward of simple 
 abstinence ; insurance, or the compensation for risk; and the re- 
 muneration for superintendence or management. ‘This analysis 
 however, errs in treating insurance as a constituent of profit. 
 The sum spent in insuring the goods of a manufacturer or 
 merchant against fire or shipwreck forms part of his outgoings, 
 not of his profit upon them. He may spend what he receives 
 
The History and Future of Interest and Profit. 265 
 
 both as interest and as recompense for management, but what 
 comes to him as insurance should be laid by to provide against 
 accident or loss, and is not expendible income. It is true, since 
 losses and accidents may be escaped, that men in a trade exposed 
 to them who do not insure may get a higher profit from the 
 higher prices caused by the risk. They have played double or 
 quits, and have won. JBut if all risk in trade, and therefore 
 insurance, could be extinguished, the total amount of profit 
 would not be diminished, as it would be by the extinction of 
 interest, or of the earnings of management. On the contrary, 
 were the same amount of insurance required in all trades alike, 
 its elimination would be a saving, and a source of additional 
 profit allround. The mistaken classification of insurance with 
 the elements of profit, instead of with those of cost of production, 
 is connected with the common inaccuracy of treating interest as 
 higher in proportion to risk. Interest proper is net income, and 
 safely expendible as such; the provision against loss of the 
 principal is not so. As in the case of profit, however, particular 
 lenders may be gainers by the risk of losses which do not actually 
 befall them, though nothing may be gained from it by lenders 
 all round. How far risk attracts or repels capital depends 
 indeed partly on national character and the temper of the age. 
 But the presumptuous trust in their own good fortune, which 
 Adam Smith imputes to the greater part of mankind, tends to 
 make the losses resulting from risk exceed, on the whole, the 
 indemnity. 
 
 Profit, then, includes two elements only—interest for the 
 mere loan of capital, or an equivalent where the capital is the 
 employer’s own, and the additional return resulting from its 
 active employment in production. This second element is not 
 happily called wages of superintendence or earnings of manage- 
 ment. Regarding it in that light, Mr. Alfred Marshall and 
 some eminent foreign economists consider it simply as a species 
 of wages, determined by the same causes that govern the 
 recompense of skilled labour in general, such as the rarity of 
 the faculties and acquisitions required, and the amount of toil 
 undergone. Were there no other constituent than this, in 
 
266 The History and Future of Interest and Profit. 
 
 addition to interest, in gross profit, interest would absorb a 
 greater share of profit than it does, and therefore be higher 
 than it actually is. The surplus above interest arising from 
 the active employment of capital is in proportion, not to the 
 difficulty and trouble of management, but to the amount of 
 the capital. If two companies, one employing twice as much 
 capital as the other, can make a good profit by selling at a 
 particular time or place, the gain of each will be in proportion 
 to the business done and the amount of the sales; and one 
 will make twice as much as-the other, although the skill and 
 exertion required to conduct the operations in the two cases 
 may be the same. There may be a manager of each company 
 who gets a fixed salary, and this, doubtless, is wages; but the 
 profit on the transaction will be so much per cent. on each 
 company’s capital, and may far exceed the manager’s pay. 
 The shares of interest on the one hand, and of the return for 
 the employment of the capital on the other hand, are deter- 
 mined by the supply of and demand for it in the loan market. 
 The proportions will vary in different countries and ages, 
 according, in a great measure, to the attraction or repulsion 
 that active trade has for the owners of capital. The rate of 
 interest, in short, is determined by no invariable rule; but, like 
 that of profit, seems subject to no law of inevitable decline—at 
 least until great astronomical and geological changes supervene, 
 and the whole solar system begins to approach the end of its 
 career. 
 
 So far the future of interest and profit has been considered 
 with reference to economic conditions alone. ‘But is it certain 
 that economic conditions exclusively will henceforth control 
 them? The policy of society in reference to both has been 
 determined by various conceptions. Archaic notions and feel- 
 ings founded on kinship, Greek philosophy, Roman law, Chris- 
 tianity, Catholic theology, commercial ideas, the modern regard 
 for individual liberty, political economy, have all played a part 
 in their history. Other sources and modes of thought have yet 
 to be reckoned with—democracy, the views of the working 
 classes, German and French Socialism, the subtler shapes of 
 
The History and Future of Interest and Profit. 267 
 
 Socialism which ostensibly seek only to enlarge the intervention 
 of the State in the economical sphere, and new conceptions of 
 moral and social duty. The authority of the economic theory 
 hitherto dominant with respect to individualism, competition, 
 and non-interference, is visibly shaken even in England. The 
 notion that all capital should belong to the State for the benefit 
 of the working classes has many strenuous adherents in Ger- 
 many and France, notwithstanding the wide distribution of 
 property in those countries, but for which it would have already 
 overcome all opposition. The favour with which Mr. Henry 
 George’s ‘Progress and Poverty’ has been received in the 
 United States makes a curious revelation of the tendencies of 
 educated thought in a country where individual energy has. 
 worked under the most propitious conditions. Mr. George, 
 indeed, proposes to confiscate land-rent only without compensa- 
 tion ; but rent in a vast number of cases is virtually a form of 
 interest, being the return to an investment by purchase or 
 outlay. Protection, again, is a revival of the medisval regu- 
 lation by law or authority of trade, prices, and profit; and the 
 policy of most civilized countries is protective. In England, a 
 generation ago, when at length Bentham’s ‘ Defence of Usury’ 
 had led to the abolition of a legal limit to interest, much more 
 seemed to be swept away. The change apparently formed part 
 of a wider and deeper change in social opinion and legislative 
 policy, and belonged to a general movement of thought, 
 emancipating human conduct from a multitude of ancient 
 restraints in the name of morality or religion. Yet, little as 
 people are dreaming of it at present, there are indications of a 
 tendency on the part of English society to slide back to the 
 medieval system of regulating contracts, bargains, pecuniary 
 dealings, and prices by authority. Fair wages, fair profits, and . 
 fair rents are now objects more or less distinctly conceived by 
 many who, ten years ago, regarded buying in the cheapest 
 and selling in the dearest market as the sole rule in all 
 questions of contract. No one, perhaps, in England at this 
 moment thinks of controlling interest; yet propositions are now 
 often put forward respecting wages and profit involving the 
 
268 The History and Future of Interest and Profit. 
 
 regulation of both, and indirectly, therefore, of interest, which 
 follows the movement of profit. Ten years ago no English 
 statesman would have listened to a proposal to regulate rent in 
 any part of the United Kingdom by statute or judicial decision. 
 Yet the principle of the Act by which judicial rents are now 
 introduced into Ireland is no other than that of the medieval 
 law against usury, that the owner of property should not be 
 permitted to take advantage of his neighbour’s necessity to 
 extort a high price for the loan of it. The establishment of 
 rings and corners, and of bulling and bearing in English trade, 
 might considerably alter public opinion with regard to the 
 medieval laws against forestalling and engrossing. Demo- 
 cratic legislation will assuredly intervene in directions not in 
 accordance with the doctrines that have commended themselves 
 hitherto to the minds of great capitalists or landowners. Ideas 
 of moral and social obligations, too, seem likely to play a 
 greater part in the commercial sphere than they have ever done 
 since Adam Smith based a complete economic code on the 
 desire of every man to better his own condition, and some of 
 these ideas may make light of that code. 
 
 The misfortune is that great general principles, like that of 
 the freedom of contract, are now abandoned in a moment to 
 promote a particular measure, perhaps expedient or necessary 
 in itself and defensible on special grounds, like the Irish Land 
 Act. Medieval economy has been ignorantly decried; there 
 was much in it that was good in design and suited to the time ; 
 yet let us not ignorantly go back to it from a notion that we 
 are following new and advanced guides. Let us look steadily 
 before us; and if we are to revert to an ancient system which 
 tolerated no individual liberty in production or exchange, let 
 us, at least, do so advisedly and deliberately, not sliding back 
 into it unconsciously. 
 
XIX. 
 
 THE DISTRIBUTION AND VALUE OF THE PRECIOUS. 
 METALS IN THE SIXTEENTH AND NINETEENTH 
 CENTURIES.* 
 
 Ir seems to be still a matter of doubt with many whether 
 the new mines have actually diminished the purchasing power 
 of gold, or have only contributed the additional currency 
 required by the increase of the world’s commodities and trade. 
 Fortunately for those who care to pursue the inquiry, the very 
 causes which, by their complexity and fluctuating character, 
 make it vain to seek an exact measure of the effect of the new 
 gold on prices, are in themselves subjects of great interest ; for 
 the history of prices is interwoven with the history of the pro- 
 gress and fortunes of mankind. Several writers on the gold 
 question have drawn conclusions from the fall in the value of 
 both the precious metals after the discovery of America; but, 
 without a careful comparison of the economical conditions of 
 that epoch and the present, no sort of inference can be rationally 
 made; and the comparison—one might say the contrast— 
 abounds in instruction apart from the light it throws on the 
 monetary, problem. The proper region of money is the region 
 of industry, roads, navigation, and trade; and prices tend to 
 approach to equality as these are improved, as men become 
 equally civilized, and as political disorders cease to interrupt 
 human intercourse and prosperity. At this day, in the most 
 civilized countries, the precious metals serve two masters—war 
 and commerce ; but in those least civilized they serve none. 
 The currents from the mines may vibrate through a third of the 
 
 * Macmillan’s Magazine, August, 1864. 
 
270 The Distribution and Value of the Precious Metals 
 
 habitable globe, but they have no conductors through more 
 than half of Asia and South America, or through almost the 
 whole of Africa. In the sixteenth century, the bulk of the 
 people of Europe itself could seldom, if ever, have touched a 
 coin from the mines of Mexieo or Peru. There was no even 
 distribution through Christendom of the treasure which the 
 Spaniards tore from the New World ; and on this and other 
 accounts prices rose unequally in different places, and not at 
 all in some. In the chief towns of Spain they seem to have 
 risen even before the fifteenth century had closed; and in the 
 Netherlands their ascent was much earlier than in England, 
 where the state of the currency before 1560, and the drain con- 
 sequent on its debasement, together with the foreign expenditure 
 of the Government, both retarded and concealed the first symp- 
 toms of the falling value of the precious metals. During the first 
 sixteen years after the mine of Potosi was opened,” although 
 prices measured in base coin rose rapidly in England, they 
 rose in no proportion to the increase of silver and gold in the 
 world. There was, as it were, a hole in the English purse; and 
 the ancient fine coin of the realm ran out into the foreigner’s 
 hands as fast as the new base coin was poured in (just as eagles 
 and dollars have been driven from the American States by the 
 issues of paper). Moreover, war with France and Scotland 
 drew much money out of England, and most of the treasure 
 netted upon trade was hoarded, or made into plate. But with 
 Elizabeth came peace with France and a reformation of the 
 currency: silver flowed fast into the Royal Mint; old fine coin 
 returned into the market ; and prices, instead of falling in pro- 
 portion to the improvement of the currency, continued to rise, 
 because the new issues exceeded the old, and the increase of 
 commodities, great as it was, did not keep pace with the 
 increase of money and men in the most prosperous parts of the 
 country. Prices depend on the quantity of money in proportion 
 to commodities—not on its quality—whether it be made of 
 
 * In 1545. The increase of the precious metals before that year was. not 
 considerable. 
 
In the Sizteenth and Nineteenth Centuries. 271 
 
 metal or paper. Prices accordingly in England, before 1560, 
 rose in proportion to the increase of base money, and not in 
 proportion to its baseness. One Englishman alone, however, 
 down to 1581, seems to have connected the phenomenon of 
 extraordinary dearness in the midst of extraordinary plenty, 
 which was the common complaint, with the mines of the New 
 World.* With others it was a cry of class against class, for 
 covetousness, extortion, extravagance, and luxury; and of all 
 classes against the landlords for exorbitant rents and enclosures. 
 The complaint against enclosures, that they fed sheep instead ° 
 of men, was no new one; it had been a popular grievance for 
 more than a century, and a subject of legislation before the 
 discovery of America. <A recent writer, nevertheless, supposes 
 that at the period of Stafford’s ‘ Dialogues,’ ‘ the foreign demand 
 springing from the increased supply of the precious metals fell 
 principally upon wool. The price of wool, accordingly, rose 
 more rapidly than that of other industrial products in England ; 
 the profits of sheep-farming outran the profits of other occupa- 
 tions, and the result was, that extensive conversion of arable 
 land into pasture which the interlocutors in the Dialogues 
 describe, and which was undoubtedly the proximate cause of 
 the prevailing distress.’t But the truth is, that corn was 
 not, as this theory assumes, at once comparatively scarce 
 and comparatively cheap: the real paradox is, that it was, 
 like other articles of food, extraordinarily plentiful in the 
 country, and extraordinarily dear in and near the capital 
 
 
 
 
 
 * William Stafford, the supposed author of the famous ‘ Dialogues,’ published 
 in 1581. He says:—‘ Another cause I conceive to be the great plenty of treasure 
 which is walking in these parts of the world, far more than our forefathers have 
 seen. ,Who doth not understand of the infinite sums of gold and silver which are 
 gathered from the Indies and other countries, and so yearly transferred into these 
 coasts?’ &c. &e.—See Harl. Misc. vol. ix. 
 
 t Political Economy as a Branch of General Education. By J. KE. Cairnes, Esq. 
 It is immaterial to the point in question above, but not to the monetary history of 
 the period, to observe that unmanufactured wool was then far from being the chief 
 export from England, and that the loom was then, as now, England’s chief mine. 
 But had the price of wool been disproportionately high, and led to the growth of 
 sheep in place of corn, the price of mutton should have been comparatively low, 
 whereas its price, like that of beef, was extravagantly high in comparison with all 
 former rates. 
 
272 The Distribution and Value of the Precious Metals 
 
 and chief towns.* England had become rich, both in money 
 and in commodities, but not in roads and means of carriage ; 
 and wool had risen only with all other produce of the realm 
 within reach of the chief markets. The gains of the wool- 
 grower were not greater than those of the clothier, the hatter, 
 the shoemaker, the blacksmith, the butcher, the baker, or the 
 tillage farmer, in most places near the chief centres of increasing 
 population and trade.t Before the New World was discovered, 
 and down to the eve of Elizabeth’s reign, the extension of 
 pasture had caused much real distress. But, for a generation 
 before the ‘ Dialogues,’ tillage had increased and prospered ; 
 and the popular charge against the landlords had become an 
 anachronism. Poverty and suffering, it is true, still existed 
 side by side with rapidly-increasing wealth, but not through the 
 scarcity of corn. Food of all sorts, though abundant in the 
 country, was dear beyond precedent in and around the places 
 where the population had multiplied fastest. The old feudal 
 and ecclesiastical economy of society had broken up; monasteries 
 and noble houses no longer maintained swarms of serfs, and 
 paupers, and waiting and fighting men; the nobility and gentry 
 were deserting the country for the town; a long peace, while it 
 had swelled the general numbers of the people, had extinguished 
 
 
 
 * ¢ Albeit,’ says a historian of that age, ‘there be much more ground eared now 
 almost in every place than hath been of late years, yet such a price continueth in 
 each town and market that the artificer and poor labouring man is not able to reach 
 unto it, but is driven to content himself with horse-corn : I mean beans, peas, oats, 
 tares, and lentils.’.—Harrison’s Description of Great Britain. And again, ‘There 
 are few towns in England that have not their weekly markets, whereby no occupier 
 shall have occasion to travel far off with his commodities, except it be to seek 
 for the highest prices, which commonly are near unto great cities.’ And the 
 knight in the Dialogues says:—‘I say it is long of you, husbandmen, that we are 
 forced to raise our rents, by reason we must buy so dear all things we have of 
 you, as corn, cattle, goose, pig, chicken, butter, and eggs. Cannot you, 
 neighbour, remember that I could, in this town, buy the best pig for fourpence, 
 which now costeth twelvepence? It is likewise in greater ware, as beef or 
 mutton.’ 
 
 + One cause of corn being cheap in some places was that the gains of the farmer 
 had stimulated agriculture and produced unusual abundance. Harrison accordingly 
 says:—‘ Certainly the soil isnow grown to be much more fruitful than in times past. 
 The cause is that our countrymen are grown to be much more painsful and skilful 
 through recompense of gain than hitherto they have been.’ 
 
In the Sixteenth and Nineteenth Centuries. 278 
 
 the calling of the soldiers; and labourers seeking bread were 
 gathering to the chief centres of employment and wealth. The 
 dearness of provisions in and within reach of the markets 
 where the competition of mouths was thus greatest was caused, 
 not by a decrease of tillage, nor yet by the increase of money 
 alone, but in part by the fact that the increasing supplies which 
 were wanted were drawn at an extravagant cost of carriage from 
 limited districts, pack-horses being the principal means of 
 land transport from the country to the town. For a similar 
 reason food is now extravagantly dear at the mines of British 
 Columbia, and not merely on account of the plenty of gold, for 
 it is cheaper at San Francisco than in London. The price of 
 meat was even more unequal than that of bread in town and 
 country generally, because there were few roads by which cattle 
 could be driven to market. Corn was, as it still is, more portable 
 than fresh meat; but the means of carrying even corn were so 
 scanty and costly that it was often at a famine price in one 
 place and cheap in another not far off. Wool, again, was more 
 portable than corn, and might be sent to market with profit 
 from districts too remote to supply corn or fresh meat. ‘These 
 circumstances explain the inconsistency of statements in the 
 ‘ Dialogues,’ and other writings of that period, respecting the 
 prices of corn and meat, and the numbers of the population. 
 _ Cheapness and dearness, plenty and scarcity, of corn and other 
 food, depopulation and rapidly increasing numbers, really co- 
 existed in the kingdom. There were places from which the 
 husbandman and labourer disappeared, and the beasts of the 
 field grazed where their cottages had stood; and there were 
 places where men were multiplying to the dismay of statesmen. 
 There were places where corn was above the labourer’s reach, 
 and places where it had come little or not at all within the waves 
 of the monetary revolution about all the chief centres of traffic. 
 In every locality, and with respect to every commodity, the 
 range of prices was determined by the quantity of money cir- 
 culating there on the one hand, and the quantity of commodities, 
 or their cost of production, on the other; and these proportions 
 varied in different places, in different years, and with respect to 
 se 
 
274 The Distribution and Value of the Precious Metals 
 
 different commodities. In the very year after Stafford’s tract 
 was published, ‘all the commodities of Greece, Syria, Egypt, 
 and India, were obtained by England much cheaper than for- 
 merly,’™* by a direct trade with Turkey, which saved the charges 
 of the Venetian carrier. Nor was the rise of corn or meal 
 general throughout the country, for the cost of carriage cut off 
 the remoter places altogether from the markets in which the 
 new gold and silver abounded. Most writers, from Adam Smith 
 downwards, have taken the price of corn in or near the principal 
 markets of the most opulent and commercial countries as the 
 measure of the effect of the mines in the sixteenth century, 
 and have treated the fall in the value of money as general and 
 uniform over Europe. Mr. Jacob, for example, came to the 
 conclusion that ‘in England and the other kingdoms of Europe, 
 within the first century after the discovery of America, the 
 quantity of the precious metals had increased nearly fivefold, 
 and the prices of commodities had advanced nearly in the same 
 proportion.” Most subsequent writers have followed in Mr. 
 Jacob’s steps. It generally happens that, when a man gains 
 the position of an authority on a question, all that he says is 
 accepted in a lump, and his errors and oversights take rank with 
 his best-established conclusions. One recent inquirer, however, 
 has pertinently asked whether prices were really trebled or 
 quadrupled (some economists have said more than decupled), 
 even in all the chief cities of Europe. ‘And what was the 
 extent in Muscovy and Poland, or in the Highlands of Scotland 
 and the West of Ireland ?’+ 
 
 The inquiry is important apart from the bare question of 
 depreciation to which it refers, for the answer goes far to give a 
 measure of the progress and civilization of the different districts 
 of Europe. T'wo centuries and a quarter after the mine of 
 Potosi had begun to affect the value of money, Arthur Young 
 compiled a Table of the comparative prices of provisions at 
 different distances north of London. Within fifty miles of the 
 
 * Macpherson’s Annals of Commerce, A.D. 1582. 
 t Letter in the Zimes, by W. M. J., September 3, 1863. 
 
In the Sixteenth and Nineteenth Centuries. Bho 
 
 capital he found the price of a pound of meat in several places 
 fourpence—at greater distances, in several, only twopence. ‘The 
 variations in the prices of butcher’s meat,’ he observed, ‘ are so 
 regular, the fall so unbroken, that one cannot but attribute it to 
 the distance, nor can any other satisfactory account be given 
 of it. It was not, however, the mere difference of distance 
 from London which made prices so unequal ; for in the southern 
 counties Arthur Young himself found them more uniform. 
 Distance, both north and south, operated on prices through the 
 cost of carriage; and, when the distance was short, the result 
 was the same as if it were great, where access to good markets 
 was hindered by the badness of the roads. There were, both 
 north and south of London, lower prices than any tabled by 
 Arthur Young. About the time of his tours the price of mut- 
 ton at Horsham, in Sussex, was only five farthings a pound,* or, 
 allowing for the difference in the standards, little higher than 
 what seems to have been a common price in England before the 
 conquest of Peru.t In Scotland, again, down to the Union, 
 there were, as Adam Smith relates, places where meat, if sold 
 at all, was cheaper than bread made of oatmeal; and he speaks 
 of a village in his own time in which money was so scarce that 
 nails were carried to the alehouse. At a later period, indeed, 
 in many parts of the Highlands, men were their own butchers 
 and brewers, and no money passed from the right hand to the 
 left. In Ireland, in like manner, until the famine of 1846, 
 there were districts in which not a coin from the American mines 
 was in circulation; the labourer was hired with land or potatoes, 
 and paid his rent in turn, and bought his clothes, with labour. 
 Neither in the British Isles, nor in any continental country, 
 
 
 
 * See Porter’s Progress of the Nation. Ed. 1851, p. 296. ‘The only means,’ 
 says Mr. Porter, ‘ of reaching the metropolis from Horsham was either by going on 
 foot, or by riding on horseback. The roads were not at any time in such a state as 
 to admit of sheep or cattle being driven to the London market, and for this reason 
 the farmers were prevented from sending thither the produce of their land, the 
 immediate neighbourhood being, in fact, their only market.’ 
 
 + In 1527 the pound weight of silver was coined into £2; and about that time 
 the price of mutton seems to have been generally three-farthings a pound. At the 
 period referred to above the pound weight of silver was coined into £3. 
 
 T 2 
 
276 The Distribution and Value of the Precious Metals 
 
 was the money from the mines of the West spread over all 
 localities and commodities alike. Much that was grown and 
 manufactured in every State was both produced and consumed 
 at home, gave money no occupation, and absorbed nothing of its 
 power. Had every Englishman in the reign of Elizabeth 
 bought and sold as he does now, the money which the Queen 
 coined could not have raised prices through the kingdom, as it 
 actually did in the chief towns. Nor did the new streams of 
 silver penetrate into the remoter and more backward districts of 
 the Continent. The trade of the Low Countries, then the 
 distributors of the precious metals, with Denmark, Sweden, 
 Norway, Russia, and Poland, was almost entirely a barter of 
 Oriental luxuries and Western manufactures for the raw produce 
 of those countries. ‘The price of the bulky merchandize of the 
 north and east of EKurope in Western markets was principally 
 freight, which the Western merchant got; what balance there 
 was for the remote producer was usually paid in kind. In 
 Guicciardini’s Tables of the exports of the Netherlands to the 
 countries named above the precious metals are not named; and 
 Raleigh, in the 17th century, lamented the small English trade 
 with Russia, because ‘it was a cheap country, and the trade very 
 gainful.’ Less than a hundred years ago, an English traveller 
 found the price of a pound of meat at Novgorod three-halfpence; 
 but it was much cheaper, or without a price, in the forest and the 
 steppe, and is so in some such places still. Adam Smith, it is 
 true, has asserted that, although Poland was, in his time, ‘as 
 beggarly a country as before the discovery of America, yet the 
 money price of corn had risen, and the value of money had 
 fallen, there as in other parts of Europe.’ But this opinion 
 must have been founded on the price of a small part of the 
 produce of Poland, in foreign markets, for the chief part of the 
 produce of the country was not sold for money at all. Down 
 to our own time, the bulk of the people of Eastern Europe have 
 lived for the most part on their own productions, or on a 
 common stock; their few exchanges have commonly been 
 performed in kind; what little money they have gotten from 
 time to time has been hoarded and not circulated; and prices 
 
In the Sixteenth and Nineteenth Centuries. Ort 
 
 have not risen where there have been no prices at all. Nor did 
 prices rise in all the secluded inland towns and villages of 
 France, as they did in Paris, and near the ports of commerce 
 with the Netherlands, England, and Spain. From the prices of 
 corn in Paris, a French economist concludes that prices generally 
 in France were twelve times higher in 1590 than in 1515, 
 owing to the American mines. But the true history of the 
 Paris market itself cannot be learned from naked figures of the 
 prices of a single commodity. The movements of the city and 
 surrounding population, the harvests in the neighbourhood, and 
 the means of carriage from a distance, political and military 
 events, and many other circumstances, besides the bare fact of 
 the increase of silver in Europe, must be taken into account. 
 Prices are the abstract and brief chronicles of the times, but 
 they are often too concise for clear interpretation, and many 
 leaves are missing. And the Paris prices of corn are so far 
 from giving the average of prices generally throughout France, 
 that, as we shall presently see, a great inequality of prices in 
 different parts of the country continued down to the era of 
 railways, and the contemporary influx of gold from the new 
 mines; and the market of the capital exercised, until recent 
 years, little or no influence upon the produce of the remoter 
 rural districts. 
 
 Although, then, there is evidence of a great fall in the pur- 
 chasing power of money in Europe in the 16th century, it was 
 unequal in point of time and place ; it was a partial and irregular 
 depreciation, and one which cannot be measured with any ap- 
 proach to arithmetical precision. There were still, when it had 
 reached its lowest point, millions of men, and the cattle on a 
 thousand hills, fetching no more money than before; and the 
 change would have been much less than it actually was at the 
 centres of commerce, had the sums collected there been spread 
 over all the people and produce of this quarter of the globe. 
 The most of the money was expended in a few particular 
 places—those most commercial and advanced—in which other 
 causes besides the fertility of the new mines contributed to 
 raise the price of the very commodity, corn, which has been 
 
278 The Value and Distribution of the Precious Metals 
 
 commonly referred to as an accurate measure of the force of the 
 metallic cause alone. Such rise of prices as really took place 
 was almost confined to the neighbourhood of the chief seats of 
 wealth and traffic; but there, certainly within a few years from 
 the first arrival of silver from Potosi, it was rapid, evident, and 
 in respect of nearly all commodities, raw and manufactured, 
 domestic and foreign. Is any such phenomenon discernible 
 now in Europe, and in the chief towns of Europe in particular, 
 after the lapse of a similar interval from the first discovery of 
 mines of extraordinary fertility ? The same economic laws still 
 govern prices. Different countries, now as then, share unequally 
 in the new treasure, according to their produce, situation, and 
 the balance of their trade; and its expenditure must have 
 different effects in different markets and on different articles, 
 aceording to the local supply of goods as well as money. Now, 
 as then, it is a question, not as to the total increase of the stock 
 of gold and silver in the world at large, but as to the addition 
 to, and the local distribution of, the currency of each country, 
 compared with the quantity forthcoming of each sort of com- 
 modity on which more money is spent than formerly. According 
 as the supply of each sort of thing has increased as fast as, or 
 not so fast as, or, on the contrary, faster than, the increase of 
 money expenditure upon it in each place, its price should 
 evidently have remained stationary, risen, or, on the contrary, 
 fallen there. In the 16th century the things on which the 
 new money was poured out were not only comparatively few, 
 but comparatively cheap, even in the dearest markets; so that 
 a small sum made a large addition to their price. Sixpence 
 more doubled the price of a pair of shoes in an English town at 
 the beginning of Elizabeth’s reign; another penny doubled the 
 price of a chicken, and a shilling trebled that of a goose or a 
 pig. In the four and forty years of her reign, Elizabeth coined 
 little more than five millions of money, but that was nearly five 
 times as much as was current before; and the things on which 
 the additional money was laid out were, after all, but a scanty 
 assortment. ‘The modes of manufacture were little improved, 
 and the greater supplies of raw produce required in the principal 
 
In the Sixteenth and Nineteenth Centuries. 279 
 
 towns were carried to market at increasing expense. The new 
 money of thisage, on the contrary, while very much greater in 
 amount, has been spread over a far wider area, and a much 
 larger stock of goods; and it found on its arrival a much higher 
 level of prices in the principal markets than that which the 
 silver from Potosi disturbed. The period of the new gold mines, 
 moreover, is one in which several other new agencies have been 
 at work, tending on the one hand to counteract to a great extent 
 the effect of the circulation of more money in the markets pre- 
 viously dearest, and tending on the other (by contrast to what 
 happened at the earlier epoch) to raise most considerably the 
 price of the produce of some of the more remote and recently 
 backward countries and districts. The bare question of the rise 
 of prices is in itself, and so far as merely relates to the change 
 in the value of money, of comparatively little importance. Its 
 chief interest lies in the test the inquiry may elicit of the pace 
 and direction of industrial and commercial advancement. For, 
 in proportion to improvement in the processes of production and 
 the means of importation, the monetary power of the mines is 
 counteracted at the chief seats of industry and commerce by the 
 contemporary increase of commodities; while again, in pro- 
 portion to the improvement of the methods of locomotion and 
 the extension of trade, prices are brought nearer to equality 
 over the world, and the more distant and undeveloped regions 
 gain access, at diminished expense, to the markets where prices 
 have been hitherto highest. Hence, by a seeming contradiction, 
 it is a sign of great progress in commerce and the arts, in the 
 places farthest advanced in civilization, if the prices of com- 
 modities are found slowly advancing in the face of an uncommon 
 abundance of money; while itis, on the contrary, usually a sign 
 of the growing importance and economic elevation of the poorer 
 and cheaper, and hitherto backward localities, if prices are rising 
 in them. By reason of their previous poverty and remoteness 
 from good markets, and consequent cheapness, the pecuniary 
 value of the produce of the latter sort of places suddenly rises 
 when they are brought into easy communication with the 
 
280 The Distribution and Value of the Precious Metals 
 
 former ; and the rise is a mark of improvement in their com- 
 mercial position and command over distant markets and foreign 
 commodities. The sort’of produce in which undeveloped regions 
 are naturally richest—the produce of nature—is the sort for 
 which the population, capital, and skill of the wealthiest and 
 most industrious communities have created the most urgent — 
 demand; and it is the sort which, in many cases, derives the 
 greatest additional value from cheap and rapid modes of con- 
 veyance. ‘The cheapest land-carriage, less than ninety years 
 ago, of two hundred tons of goods from Hdinburgh to London, 
 would, we are told by Adam Smith, have required 100 men, 
 50 waggons, and 400 horses, for three weeks. A single engine, 
 twenty trucks, and three men, would doit nowinaday. All 
 the ships of England, again, would not have sufficed, in Adam 
 Smith’s time, he tells us, to carry grain, to the value of 
 £5,000,000, from Portugal to England. In 1862, we imported 
 grain to the value of nearly £38,000,000—most of it from a 
 much greater distance. And the extension in the last fifteen 
 years (the very period of the new gold) of the best means of 
 land and water carriage to many distant and formerly neglected 
 and valueless districts has brought about, both in international 
 trade, to a great extent, and in the home trade of many countries, 
 the sort of change which Adam Smith perceived in the last 
 century, to some extent, in the home trade of the United 
 Kingdom—a change, however, which, even in the United 
 Kingdom, has only very lately become anything like general 
 and complete. ‘Good roads, canals, and navigable rivers,’ said 
 the philosopher, ‘by diminishing the expense of carriage, put 
 the more remote parts of the country more nearly on a level 
 with the neighbourhood of the towns.’ Railways and steam 
 navigation have done more to equalize the conditions of sale 
 through the world, since the new mines were discovered, than 
 all preceding improvements in the means of communication 
 since the fall of the Roman Empire and the ruin of its roads. 
 Immediately after the Californian discoveries, a Russian 
 economist predicted that, if a fall in the value of gold should 
 
In the Sixteenth and Nineteenth Centuries. 281 
 
 ensue, England must be the first country to feel it ;* and an 
 English economist more recently argued that a greater rise of 
 prices had, in fact, taken place in England than anywhere else, 
 ‘save in the gold countries themselves and the States of America.t 
 Looking back, however, at the situation of England since the 
 opening of the new mines, it is easy to see several agencies 
 tending to counteract the effect upon prices here, some of which 
 ‘tended, on the contrary, to turn their chief effects upon prices 
 abroad. Our vast importations of food and materials, through 
 recent legislation, aided by steam, have, thanks to the gold 
 mines, been easily paid for, but they have made foreigners the 
 recipients of the bulk of the new treasure ;{ and, while tending 
 to lower the price of the produce of our own soil, they have 
 added to the price of the foreigners’ produce sent to our market 
 at diminished expense, owing both to the reduction of duties, 
 and to cheaper and faster means of transportation. Corn was, 
 
 * M. De Tegoborski: Commentaries on the Productive Forces of Russia (Eng. 
 trans.), vol. i., p. 208. 
 
 Tt J. E. Cairnes, Esq.: Dublin Statistical Journal, 1859; Fraser’s Magazine, 
 1859 and 1860; and letters to the Economist and Times, 18638. 
 
 t Mr. Cairnes reasons that England, in consequence of the greater amount of 
 its trade with the gold countries, must receive much more gold than other countries, 
 and that the gold it receives must act more powerfully upon prices because of the 
 activity of credit in the English system of circulation. But the comparative in- 
 crease of the precious metals in England, or any other country, depends, as Mr. 
 Mill has pointed out, not on the comparative amount of its trade with the mining 
 regions alone, but on the comparative balance of its whole foreign trade and ex- 
 penditure. The general course of international demand and transactions may be 
 such that a couutry may even part with all, or more than all, the bullion it imports. 
 Such, in fact, has been the situation of England in several years past. In the four 
 years, 1859-1862, the exports of specie exceeded the imports according to the 
 returns, and there is reason to think the balance was more against England than 
 appears by the official accounts. What bullion we got in those years went from us 
 at once into foreigners’ hands; and much of the money we get for our manufac- 
 tures abroad is always in reality partly the price of the foreign materials of which 
 they are made, and the articles of foreign production which the makers consume. 
 Again, although speculative credit often raises prices for the moment above their 
 natural level, representative credit, which merely saves the expense of coin, is 
 only a substitute for it, and not an augmentation of the currency, and the prices 
 it fixes are not higher than would prevail under a metallic system. Moreover, a 
 given addition to prices here would make less change than in previously cheaper 
 countries. And there have been, lastly, peculiar circumstances, pointed out in the 
 text, tending to cheapen prices in the English market. 
 
282 The Distribution and Value of the Precious Metals 
 
 therefore, less likely to rise in Great Britain than in many 
 other regions; and the improvement in our manufactures 
 generally surpassed the production of gold until the failure of 
 cotton from America. About six-sevenths of the exports of 
 Great Britain are manufactured commodities, and accordingly 
 the productions of this country, which first felt the influence of 
 the new money, generally fell instead of rising in price. Nine- 
 tenths of our imports, on the contrary, are unmanufactured 
 commodities, and the things which have really risen most in 
 our markets are, consequently, to a large extent, foreign com- 
 modities ; as to which it is important to notice that comparative 
 Tables of past and present prices in England do not measure the 
 change in prices abroad. Even a low price of wheat, for example, 
 to the buyer in London may be a high price to the grower in 
 Poland or Spain; and the French peasant may be trebling the 
 price of his eggs and his butter, when the Londoner pays little 
 more for those articles than he did before French railways and 
 free trade. In fact, the chief monetary phenomenon of this 
 epoch is the rise of prices in remote places, put suddenly more 
 nearly on a level with the neighbourhood of the great centres 
 of commerce as regards the market for their produce. And the 
 Tables by which Mr. Jevons has attempted to measure the change 
 in the value of money fail on this very account to exhibit the 
 real extent of the change even in the United Kingdom itself, to 
 which his researches have been confined. They give compara- 
 tive prices in England of several sorts of country produce for 
 some years before and since the opening of the gold mines; but 
 ‘they are the prices of the capital and chief towns, not of the 
 remote places of the kingdom. Beef, mutton, veal, butter, eggs, 
 and poultry, for example, have risen about twenty-five per cent. 
 in the London market ; but they have risen a hundred per cent. 
 above their rates a few years ago in the inland parts of Ireland 
 and Scotland on the new lines of railway. The common price 
 of meat in the towns in the interior of Ireland before they were 
 connected with the ports and the English market by railways, 
 was from 33d. to 4d. a pound, and now is from 7d. to 8d. The 
 rise of wages, again, in the agricultural districts of England 
 
In the Sixteenth and Nineteenth Centuries. 283 
 
 falls far short of the rise from a much lower level in the rural 
 districts of Ireland, suddenly brought into easy and cheap com- 
 munication with both England and America. The complete 
 revolution which has thus taken place in the scale of local prices 
 in the United Kingdom itself renders all arithmetical measures 
 of the change in the value of money, founded on the rates in 
 a few particular markets, altogether fallacious. ‘The truth 
 is, that the change has been unequal in different years and 
 different places, and in respect to different commodities. 
 Measured in corn, the value of money in these islands is much 
 greater now than it was during the Crimean War; measured in 
 cotton, the value of money is much less than before the war in 
 America. Speaking generally, however, the monetary movement 
 of the sixteenth century has been reversed, and the rise of prices 
 has been much greater in Ireland and the north of Scotland than 
 in England, and greater in the remote parts of the country than 
 in the capital. This contrast illustrates the general distinction 
 already pointed out between the commercial and monetary 
 phenomena of the former and the present metallic epochs. At 
 the former period the change in the worth of money was greatest 
 in the country receiving its supplies directly from the mines, 
 and next at or around the chief centres of commerce, such as 
 Antwerp and London, and moreover, in what had been the dear- 
 est markets before, or the towns as compared with the country. 
 Now, it will be found most conspicuous in many of the ruder 
 and remoter localities, where prices were previously lowest. 
 Not one-tenth of the general produce of the mines of the 
 world, since the new gold was discovered, has been finally 
 allotted by the balance of trade to Great Britain, and some signs 
 of the presence of the remainder might naturally be looked for 
 in places having little or no direct dealings with the mining 
 countries themselves. The new gold regions have, for example, 
 added a much larger amount to the treasure of France than: of 
 England. From the returns of the French Custom-house, it 
 would appear that bullion to the value of nearly £100,000,000 
 had been added, by the end of 1862, to the metallic stock of 
 France ; but the issues of gold coin from the French Mint since 
 
284 The Distribution and Value of the Precious Metals 
 
 1848 greatly exceed the declared imports of that metal. And 
 we are not without evidence of perceptible effects of so vast an 
 addition to the French currency upon the market of the country. 
 In 1848, the French Government revised the official scale of 
 prices, based upon a scale of 1827, and found that prices gene- 
 rally (inclusive of raw produce) had fallen in the interval. Since 
 then the current and the ancient money values of all commodi- 
 ties, imported and exported, have been set down year by year ; 
 and it appears from their comparison that, in 1852, a change 
 took place. Prices, instead of falling, began to rise, and, down 
 to the end of 1861, ranged generally much above the old 
 valuation, in spite of an enormous increase of importation and 
 production. But these statistics, like those of Mr. Jevons for 
 Great Britain, afford no real measure of the actual changes 
 which the purchasing power of money has undergone through- 
 out France; for, wherever railways have intersected the country, 
 they have carried up prices towards the metropolitan level; and 
 the advance upon former rates has been much greater in France 
 than in England, because of the previous inferiority of the 
 former in the means of locomotion, and the more backward con- 
 dition of the places farthest from the capital.* In France, as in 
 England, there has been some controversy respecting the influ- 
 ence of the gold mines on prices; but there too writers on both 
 sides have overlooked the effect of railways upon the distribution 
 of the national currency and the prices of country productions. 
 The writer on the Precious Metals, for example, in the ‘ Diction- 
 naire Universel du Commerce,’ simply pronounces that provisions 
 and raw materials are rapidly rising in price, but manufactures 
 tending rather to fall. But in the article on Railways, in the 
 same work, it is remarked that prices have risen enormously in 
 the districts they traverse, and that ‘one hears every day, in some 
 place where people lived lately almost for nothing, that the 
 passage of a railway has made everything dear.’ The rise of 
 prices in the provincial towns and rural districts forms the most 
 prominent subject in most of the reports of the Britsh Consuls 
 
 * See on this subject, Les Chemins de Fer en 1862 et 1863, par Eugéne Flachat. 
 
In the Sixteenth and Nineteenth Centuries. 285 
 
 in France for several years past.* In each locality, special 
 causes are commonly assigned by persons on the spot, for ‘ the 
 dearness of living;’ but how is it that the same phenomenon 
 presents itself in so many different localities—in the capital, the 
 provincial town, and the agricultural district ? How is it, if 
 railways have raised wages, prices, and rents, that the rise has 
 taken place at both ends of and along their lines? How is it, if 
 labour and produce are rising in the country, because they are 
 carried off to the town, that they are rising alsoin the town? And 
 how could the prices of things, for the most part increased greatly 
 in quantity, have risen prodigiously throughout France, if there 
 were no more money than formerly circulating through it ? 
 Many persons seem to imagine they have accounted for a rise of 
 prices, without reference to the influx of money from the mines, 
 when they have pointed out how the additional money has been 
 actually laid out, and through whose hands it has most recently 
 passed. Unless they see the miner himself, they will not 
 believe that he is the prime agent in the matter, although it is 
 commonly only being brought by other hands than his own, 
 that his gold can raise prices at a distance. An interesting 
 German writer has reproduced one of the popular theories of 
 
 * Thus the Consul at Nantes, in his Report for 1862, observes: ‘The market 
 prices of goods have -been greatly increased by the railway communication 
 between Nantes and Paris, while house rent has risen to a price almost equal to 
 Paris.’ The Consul at Bordeaux, in his Report for 1859, says: ‘For a while 
 the hope was entertained that the establishment of railways would realize the 
 problem of cheap living ; but this has proved a fallavy, for the facility of trans- 
 port and increased demands of the capital have created a drain in that direction. 
 House-rent has within the last few years doubled, if not trebled.? In his Report 
 for 1862, the same Consul says: ‘ With the exception of bread, the price of every 
 commodity remains excessively high; and, though wages have risen in propor- 
 tion, there does not appear to be any marked improvement in the state of the 
 lower classes. It cannot be denied, however, that the progress of civilization has 
 gradually created among them a tendency towards more expensive habits, and that 
 what formerly were esteemed luxuries have now become indispensable wants.’ 
 There are similar reports from the Consuls at Havre and Marseilles. Nor is it 
 only in the provincial towns that this monetary revolution has taken place. The 
 cultivators of the soil, although they sell their produce at much elevated rates, 
 complain bitterly of the increased cost of rural labour. The rise of house-rent in 
 the towns is, no doubt, due in part to the concentration of the population ; but this 
 would not, if there were not more money in general circulation, raise wages and 
 commodities both in town and country. 
 
286 The Distribution and Value of the Precious Metals. 
 
 Elizabeth’s reign—that luxury, ostentation, and expensive 
 habits among all classes are the causes of the modern dearness 
 of living, and not the abundance of money.* ‘There cannot, 
 however, be more money spent, if people have no more to spend 
 than before. A mere change in the ideas and desires of society 
 would add nothing to the number of pieces of money, and 
 could not affect the sum-total of prices. If more money were 
 spent upon houses, furniture, and show, less would remain, if 
 pecuniary means were not increased, to be spent upon labour 
 and food, and the substantial necessaries of life; and, if the 
 former became dearer, the latter would at the same time become 
 cheaper. But, when people have really more money than for- 
 merly to spend, they naturally spend more than they formerly 
 did, and their unaccustomed expenditure is considered excessive 
 andextravagant. And, when an increase in the pecuniary incomes 
 of large classes arises from, or accompanies, greater commercial 
 activity and general progress, there commonly is a general taste 
 for a better or more costly style of living than there was at a 
 lower stage of society. There is always, it is true, much folly 
 and vanity in human expenditure; and masses of men do not 
 become philosophers of a sudden because they are making more 
 money, and their state is improving upon the whole. But their 
 state is improving on the whole when their trade is increasing, 
 and the value of their produce rising to a level with that of 
 the most forward communities, and when the lowest classes are 
 breaking the chains of barbarous custom, and furnishing life 
 with better accommodation than servile and ignorant boors 
 could appreciate. It is better to see German peasants building 
 chimneys and embellishing their houses than burying their 
 money, even if we find them copying their superiors in non- 
 essentials and in finery, as well as in the plain requisites of 
 civilization. The greater expense of ordinary life in North than 
 South Germany has been cited as positive proof that the growing 
 dearness of living on the Continent comes not from the plenty 
 of money, but from the costlier habits of the people; and there 
 
 * See the chapter headed ‘ Der Geld-preis und die Sitte,’ in Riehl’s Culturstudien. 
 
In the Sixteenth and Nineteenth Centuries. 287 
 
 may be much that is wasteful and silly in modern German 
 fashion, as well as much that is uncleanly and unwholesome in 
 what is called ancient German simplicity. But the chief reason 
 why South Germany is comparatively cheap is, that there is 
 really less money in circulation; partly because it has more 
 recently been opened up by railways, and still remains farther 
 from the best markets of Europe; and partly because a greater 
 proportion of the money actually gotten is hoarded*—which 
 is a sign of comparative backwardness, and illustrates the con- 
 nexion between progress and ascending prices noticed already. 
 Wherever backwardness is changing into progress, and stag- 
 nation into commercial activity, it will be found that cheapness 
 is changing into dearness, and that something like English 
 prices follow hard upon something like English prosperity. 
 Thus the British consul at Bilbao reported lately : ‘The increased 
 trade and prosperous condition of the country have drawn 
 numbers of families to Bilbao. As a result of this the cost of 
 living has risen enormously, and Bilbao, long one of the cheapest 
 towns in Europe, has become a comparatively dear place.’t ‘To 
 Spain, which in the sixteenth century robbed the treasures of 
 the New World directly from their source, gold now comes by 
 honest trade, and the miner is hidden behind the merchant. 
 
 * The following passage is taken from the Revue Germanique for October, 1863, 
 in which it forms part of a translation from an article which appeared in 1857 in 
 a German Quarterly :—‘ La population de scampagnes a été dans les huit derniéres 
 années comme une éponge qui s’est gorgée d’argent. Des statisticiens ont calculé 
 que dans un seul canton a blé del’ Allemagne du sud, lequel ne compte que quelque 
 milles carrés, on a thésaurisé dans le cours des dix derniéres années au moins un 
 million de florins d’argent comptant, qui n’est pas rentré dans le commerce.’ 
 
 t The Consul gives the following comparative Table of Prices in 1854 and 
 
 1860 :— 
 
 1854. 1860. 
 
 £ foes, |) a. £ ech a Meme 
 Houses and apartments, . qetb.to 0s OL 0 50 to 80 0 0 
 Beef (per pound), 0 0 23 0 0 4 
 Mutton, ,, 0 0 22 0 0 42 
 Vealsia. is; Wares On Oues 
 Bread, ,, er Gual 002 
 Potatoes (per stone), eres) 0 3 74 
 Eggs (per dozen), 0 0 3 0 0 7% 
 Wine (two quarts), On) aft 0, Lise 
 
288 The Distribution and Value of the Precious Metals 
 
 Unaccustomed streams of money are flowing, not only into the 
 towns of Northern Spain, but through all the more fertile 
 districts of the Peninsula near the new lines of railway. And 
 the sums by which prices have been raised in Portugal and 
 Spain could evidently not have been drawn from England and 
 France without a corresponding fall of prices in those countries, 
 had their coffers not been replenished from a new source. It is, 
 too, in regions like the great corn-district of Medina del Campo, 
 poor lately in money, but rich in the wealth of nature, that 
 prices must rise fastest when they are brought into easy com- 
 munication with the markets where money abounds, since the 
 money is both attracted by their cheapness, and produces the 
 more sensible change on account ofit. It is in such places also. 
 that the unwonted abundance of such treasure, and the rise in 
 the pecuniary value of the labour and produce of the people, are 
 to be regarded as signs of rise in the international and economical 
 scale, and of the obstacles being at length overcome which 
 for centuries prevented them from contributing their natural 
 resources and energies to advance the general prosperity and 
 happiness of mankind. Thus the trade of the Swiss, shut out 
 by their own mountains from the principal markets of Europe 
 in the last century, now reaches to the farthest regions of gold ; 
 the merchant and the traveller pour the precious metals into 
 their lap; and a country, not long ago scantily furnished with 
 a base native currency, is now flowing with money from the 
 mints of the wealthiest States. In the north and east of Europe 
 we likewise find the range of prices indicating the course of 
 local fortunes, and the share of remote places in the increased 
 currency of the world depending on the improvement of their 
 means of intercourse and trade with the more forward regions 
 and their general progress. In Norway—which, with a 
 population about half of that of London, is, in respect of 
 its commercial marine, the fourth among maritime powers— 
 the wages of seamen rose at a bound to the British level 
 on the repeal of the navigation laws; and no sooner did 
 Australian gold appear in Europe than the Norwegian currency 
 swelled to an unprecedented balance, and prices rose to a 
 
In the Sixteenth and Nineteenth Centuries. 289 
 
 pitch unknown before.* In Russia, a commodity which, a 
 few years ago, was worth to the producer in the interior only 
 a fourth of the sum it would sell for in the capital, may now 
 be carried thither at comparatively trifling cost in fewer days 
 than it might formerly have taken months to perform the 
 journey ; and the producer gains the difference. Such a burst 
 of traffic ensued upon the new means of locomotion that the 
 receipts of the St. Petersburg and Moscow Railway for the 
 carriage of goods in 1859 are said to have equalled those of the 
 best railways in England; and in the summer of the previous 
 year 300 steamers plied the waters of the Volga, where only ten 
 could be counted in 1853. This rapid growth of trade was 
 accompanied, as the British Secretary of Legation reported, by 
 a great improvement in the condition of the people, increased 
 demand for labour, and higher wages, better food, and the ex- 
 change of the sheepskin for cloth. The exports of Riga, again, 
 are of the very class which benefited most by the alterations in 
 the English tariff, and which rose the most in the English 
 market immediately after the influx of new gold began; and at 
 Riga the same monetary revolution has ensued which Bilbao and 
 other Western towns have experienced. In his report for 1859 
 the British Consul says :—‘ A fact which seems rather to weigh 
 against Riga is the rapid increase of late years in the cost of 
 living in this port. The necessaries of life have doubled in ten 
 years; labour has risen in proportion.’+ It would, however, be 
 an inference wide of the truth, that the whole Russian Empire 
 exhibits similar indications of a rise towards the Western level. 
 Great part of it is hardly better furnished with the paths of 
 traffic than before the discovery of America; the carrier in 
 
 * British Consul’s Report for 1852-3. The Consul at Gottenberg, in Sweden, 
 reports for 1855 :—‘ The year 1855 has been most prosperous. Notwithstanding 
 that most articles are now admitted free of duty, provisions of every kind are 
 excessively dear, many articles having, within the last few years, advanced to 
 treble, and in no instance to less than double in price. This may be attributed to 
 the general prosperity, and consequent increased consumption of better food, among 
 the working classes.’ 
 
 + A part of this rise is attributable to the depreciation of the paper rouble, but 
 this was not considerable at the period referred to. 
 
 U 
 
290 The Distribution and Value of the Precious Metals 
 
 many places leaves the cultivator little or no surplus; and 
 the resources of a teeming soil and the industry of an ingenious 
 people are imprisoned and valueless. There is, in fact, still 
 great inequality of prices, as of opportunities of progress, in 
 different parts of Europe; but there is evidence, nevertheless, 
 of the presence of a new money power in parts of every 
 European country since the new gold first glittered in the 
 market, and the Englishman has had, in his own quarter of the 
 globe, many successful competitors for a share in the treasure, 
 some of whom have been realizing prices much more above the 
 ancient level than those which have ruled in the wealthiest 
 towns of this island. Different countries—different localities — 
 by reason not only of the inequality of comparative pro- 
 gress, but also of the vicissitudes of the seasons and political 
 affairs—have participated unequally from time to time in 
 the general enlargement of the circulating medium of Europe. 
 One prevailing tendency is, however, discernible in the com- 
 mercial movement of this age—to reverse the monetary order 
 of the 16th century, and to raise most, in relation to money, 
 the produce of places where money was scarcest before. Is it 
 so in Europe only? On the contrary, the most remarkable 
 contrast between the former and the present epoch in the history 
 of the precious metals lies in the share allotted to Hastern 
 countries, and the rise of Hastern industry and productions in 
 international value, as measured by the universal standard of 
 money. From 1500 to 1595 the Portuguese monopolized the 
 maritime trade with the East Indies; and the cargoes of 
 Asiatic merchandize which arrived in Europe, few and small 
 in the first half of the century, declined in the latter half; nor 
 does Mr. Jacob estimate at more than fourteen millions the 
 entire amount of treasure which moved to Asia from the West 
 in the first 108 years after America was discovered. In the 
 last fourteen years, India has netted a balance of about a 
 hundred and fifty millions. For upwards of two years the 
 scale has been loaded in favour of India with money lost to 
 the American States by the war—a fact which illustrates the 
 connexion with the fortunes of nations of the movement of the 
 
In the Sixteenth and Nineteenth Centuries. 291 
 
 precious metals. This influx into India began, however, with 
 the increase of their quantity in the world,* following the 
 general law of the period of the attraction of money to cheap 
 and fertile places with which communication has been improved, 
 and in favour of which international trade must be redressed. 
 The money has flowed into India, it is true, not only in the 
 immediate purchase of its commodities, but also in loans, public 
 works, and investments of English capital—a fact, however, 
 springing from the same general cause, and tending in the same 
 direction. It is a fact of the same order with the gradual rise 
 of the country to an economic level with the earlier elevated 
 towns which struck the sagacious mind of Adam Smith. ‘Every- 
 where,’ he said, ‘the greatest improvements of the country have 
 been owing to the overflowing of the stock originally accu- 
 mulated in the towns.’ ‘The ruder and remoter regions are at 
 length, if commerce be allowed its natural course, brought into 
 neighbourhood and fellowship with the regions more advanced 
 and endowed with the same advantages, especially with that 
 advantage to which the latter mainly owed their earlier progress, 
 the advantage of a good commercial situation, which steam 
 navigation, railways, and roads, are giving to many districts in 
 India, rich in the food of mankind and the materials of industry, 
 but until lately unable to dispose of their wealth, unless upon 
 beggarly terms. There are some who view the accession of 
 metallic treasure to such countries as a burden and a loss to 
 them—who maintain that the money exported to India, for 
 example, abstracts a proportionate sum of commodities from 
 the consumption of the natives, and then disappears in useless 
 hoards or frivolous ornaments, adding little or nothing to its 
 industrial spirit and power, or to the pecuniary value and com- 
 mand over foreign markets of its produce. As to the actual 
 use of the new treasure in India, the truth is, that there, as in 
 Egypt, and every continental country in Europe, it has been 
 both hoarded and circulated. Even in England there is always 
 
 
 
 * The bullion imports of India in 1852-3 exceeded five millions sterling; in 
 1855-6 they rose nearly to eleven millions and a-half; in the year 1856-7, the 
 year before the mutiny, they reached £14, 413,690. 
 
 U2 
 
292 The Distribution and Value of the Precious Metals 
 
 a considerable quantity of money lying temporarily idle in the 
 purse of the people too poor to keep bankers ; and we shall see- 
 reason to believe that the amount of hoarding in India is by no 
 means so great as some English writers assume. Almost all 
 the gold, however, or rather more than a third of the whole. 
 treasure lately imported into India, has certainly been either 
 hoarded or made into ornaments. By reason of gold not being 
 legal tender in India, the gold mines have added only indirectly 
 to its currency—adding not gold but silver money. In the 
 West the new gold has taken the place of silver; the greater 
 part of the silver set free has been finally carried to India, 
 where it has a purchasing power—which gold—a far more: 
 portable, convenient, and economic medium—has unfortunately 
 been denied. Even the hoards and ornaments in India, how- 
 ever, are not to be regarded merely as waste. ‘They are not 
 only as legitimate pleasures and uses of wealth as many of the 
 modes of expenditure common in the West, but they are also. 
 the private banks and insurance offices of the Indian natives.* 
 The total coinage at the three Indian Mints, including an 
 insignificant quantity of copper and gold, since the discovery of 
 the gold mines, amounts to about a hundred millions of English 
 money; and, in considering the effects of so great an addition 
 to the coinage, it is material to observe that prices had gene- 
 rally been falling in India for more than five-and-twenty years 
 previously. During that period the balance of treasure netted 
 by India had not been large, owing to the slow development of 
 its export trade, and the considerable remittances of specie to 
 
 
 
 * It may not be considered out of place here to notice a misconception which: 
 seems to exist with respect to the effect on prices of the large portion of the annual 
 supplies of silver and gold made in all countries, not into money, but into articles. 
 of use or ornament. Some writers treat this portion as having no effect at all on 
 prices; others make calculations in which the whole additional stock of the 
 precious metals from the new mines is counted as money. But, when the precious 
 metals are converted into articles other than money, and sold and circulated as. 
 commodities, they tend not to raise, but to lower, the general level of prices, by 
 absorbing a portion of the currency in their own circulation ; for money cannot be- 
 in two places or doing two things at the same time, and the quantity engaged in 
 buying plate, watches, ornaments, &c., is withdrawn from the market of other 
 commodities. Hence the whole addition to the stock of the precious metals in 
 
In the Sixteenth and Nineteenth Centuries. 293 
 
 England. On the other hand, the production of commodities 
 increased from internal quiet, and the work to be done by the 
 circulating medium of the country was multiplied not only by 
 the increase of ordinary traffic, but also by the adoption under 
 British rule of payments in money for taxes and other pur- 
 poses, where payments in kind and barter had been customary 
 before. The amount of the currency had in consequence be- 
 come insuflicient ; the natives were often inconvenienced, and 
 sometimes even ruined by its scarcity; and the labour and 
 commodities of India were bought cheaper and cheaper by 
 other countries. In fact, the price of labour and of many com- 
 modities was lower in India in 1845 than in England when the 
 mine of Potosi was discovered three hundred years before, and 
 we have seen how the previous cheapness of the English market 
 contributed to the monetary revolution which followed the first 
 considerable influx of silver from the New World. 
 
 But it would be an error to look for a rise of price in all 
 commodities and localities alike in India on the augmentation 
 of its currency. The apparent effect of an expanded currency 
 is sure in any country to be magnified in the case of some com- 
 modities, and diminished in the case of others, by extrinsic 
 causes. ‘The additional money is, in the first place, not laid out 
 on all things or in all places equally—on some there may be no 
 additional expenditure at all; and it raises more, or less, or not 
 at all, the prices of the things on which it is expended, according 
 to the supply forthcoming in each case to meet the increased 
 pecuniary demand. ‘Thus, for example, the paper price of dif- 
 ferent commodities at New York had arisen above their level a 
 
 
 
 England since the discovery of the new mines has not only not tended to raise the 
 prices, but a portion, and probably a very considerable portion, has really acted in 
 the contrary direction, having been made into articles which added to the stock of 
 commodities to be circulated. The consumption of gold and silver in the useful 
 and ornamental arts in England, for watches, plate, jewellery, and decoration, 
 must be very great. In Adam Smith’s time the value consumed in the town of 
 Birmingham in plating and gilding alone was estimated at more than £50,000 
 ( Wealth of Nations, Book I. ch. xi.); and last year it was stated, in the Campden 
 House case, that ‘a single artist had received from the proprietor of a single house 
 no less a sum than £1000, not for the work of gilding generally, but for the actual 
 gold to be used in the process.’—Times, Sept. 5, 1863. 
 
294 The Distribution and Value of the Precious Metals 
 
 year before in different degrees from 10 to 220 per cent.* In 
 India prices have varied much in different places, and in diffe- 
 rent seasons, partly through the unequal distribution of the new 
 money through the different localities, and partly on account of 
 local inequalities in the supply, not of money, but of commodi- 
 ties. The defect of means of internal communication, more than 
 any other circumstance, has contributed to cause great local in- 
 equalities in Indian prices in the last ten years.f It throws some 
 light upon the English prices in the 16th century to read that, 
 in the North-west Provinces during the famine which followed 
 the Mutiny, ‘while in one bazaar prices of 4 rupees per maund 
 might be ruling, in another not far off the price would be 
 R. 1:8; yet no flow could take place from the full to the ex- 
 
 
 
 
 
 * See a table of prices of fifty-five commodities in the New York Market.— 
 Economist, March 28, 1863. 
 
 t The effect of the increase of money in India cannot be measured by the rates 
 at which Indian products sell in the English market. Prices are very unequal in 
 different parts of the East, and our imports may come from the cheapest places. 
 Moreover, prices may be actually rising at the place of exportation, while falling at 
 the place of importation, and the very cause of a fall at the latter may produce a 
 rise at the former. Thus, the price of rice has been low of late years in the English 
 market, because of large importations from the cheap Burmese provinces, where, 
 however, the price has risen in consequence. For the same reason, together with 
 the abundance of the crops on the spot, the price of rice has latterly been low in 
 some districts of Bengal in which prices generally have been high. Thus, at 
 Dacca, the price of rice was not higher in 1862 than in 1854; it was, however, 
 30 per cent. higher at Berhampore, and 100 per cent. higher at Cuttack. The 
 exports of India—coffee, cotton, grains, hemp, hides, indigo, jute, oils, opium, 
 saltpetre, seeds, shawls, silk, sugar, tea, wood, wool—have almost all risen greatly 
 even in foreign markets. Nevertheless, the prices in Mr. Jevons tables of ‘ tea, 
 sugar, rice, foreign spirits, spices, seeds,’ have been referred to by an able writer 
 as confirming his conclusion that prices have risen less abroad, and especially in 
 India, and Eastern and tropical countries generally, than in England. But English 
 prices are not foreign prices. Of the commodities just named, rice has greatly 
 risen in most parts of India; tea has risen considerably even in the English market, 
 but much more in India; and sugar has risen in India (more than 100 per cent. in 
 some places), but it has fallen in Europe for several years, owing to the enormous 
 increase of the produce of Cuba and Porto Rico, and of beetroot sugar on the 
 Continent. Foreign spirits (except brandy, which has much risen) have falien in 
 England, in common with British spirits, by reason partly of the immense produc- 
 tion of rum in the West Indies, and partly of diminished consumption in England 
 and Ireland. Spices have been falling in the British market ever since the cessa- 
 tion of the Dutch monopoly, owing partly to the immense increase in the sources. 
 and amount of supply, partly to the extent of adulteration, and partly to the 
 
In the Sixteenth and Nineteenth Centuries 295 
 
 hausted market, because roads were not in existence.’* Before 
 the Mutiny the prosperity of these provinces had steadily in- 
 creased, and labour bore a price in them from 1854 to 1857 that 
 it had never borne before. ‘Then came destruction and famine; 
 and while the price of labour fell, that of food increased—just 
 as, in the winter of 1586, food bore an enormous price at Ant- 
 werp and Brussels, not because the new mines were prolific—for 
 the plenty of money had disappeared—but because the Spaniards 
 had stopped cultivation.t In the adjoining provinces of Hol- 
 land, on the contrary, prices at the same period were high, 
 though every commodity abounded in the market, because 
 American silver abounded there too; so likewise in India, while 
 famine prices reigned in the North West, there were other 
 provinces in which things were at once abundant and dear, 
 because the harvest of money as well as of food had been rich ; 
 and the same may be said of the North West itself for two 
 years past. During the famine years in the North West, the 
 enormous rise in prices, generally in the Lower provinces of 
 Bengal, was not attributable exclusively to the operations of the 
 Indian Mints ; but in 1862 and 1863 plenty reigned all around, 
 and yet prices ranged far above their level in 1854, with striking 
 inequalities in the rise in different districts in different commodi- 
 ties, varying from above 300 per cent. to less than 20. Sugar, 
 for example, was only 25 per cent. higher at Dacca in 18638, but at 
 Patna and Dinapore it was 130 per cent. higher than in 1854. 
 Rice is almost the only native product in any part of the Lower 
 provinces of Bengal which did not sell much higher in 1863 
 than before the drain of silver to the East, which the gold mines 
 made possible ; and the rare exception is accounted for not only 
 
 alteration in our tastes and customs of cookery, through which the demand has not 
 increased with the supply. Oil seeds have risen enormously in India. Opium (to 
 which the writer quoted has not referred) is the only Indian export of importance 
 which has fallen in India itself; the causes of the fall being, first, a great increase 
 of production since the Government raised the price to the cultivator, in order 
 to drive rivals from the Chinese market ; and, secondly, the late monetary crisis at 
 Calcutta. 
 
 * Colonel Baird Smith’s Report. 
 
 t Motley’s United Netherlands. 
 
‘4 
 
 296 The Distribution and Value of the Precious Metals 
 
 by splendid crops upon the spot, but by the diversion of a part 
 of the demand to the Burmese rice-grounds. Corn, in like 
 manner, is as cheap in the London market now as it was a 
 hundred years ago, because the supply of last year has outgrown 
 the money demand. But rice sold in 1863 for double its ancient 
 price in many parts of Madras, although cultivation had extended, 
 and the two last harvests had been good, while the importations 
 of food had increased, and its exportation diminished. In the 
 interior of Bombay such unprecedented prices have been latterly 
 witnessed that the natives (who seem to be equally blamed 
 whether they save or spend) have been accused, in an official 
 Report of ‘ playing with their money like the Californian gold- 
 finders in the first days of the diggings.’ In this novel 
 profusion of expenditure, in the new comforts and luxuries 
 with which the natives of India are filling their houses, in the 
 new and more numerous exchanges which money performs in the 
 interior of the country, and the larger sums necessary to perform 
 them at rates enormously higher than formerly, we have the real 
 account of much of the money supposed to have been hoarded 
 because it has not found its way back to the bankers in the 
 chief towns. The peasantry of the poorest districts in Ireland, 
 in the late famine of 1847, were, in like manner, supposed to be 
 hoarding the silver introduced by the Board of Works, because 
 it did not return to the banks: the true explanation being that 
 barter had ceased, and the coins which had disappeared were 
 busy performing common exchanges, which had never been per- 
 formed by money before. It is no slight advantage to the 
 Indian natives to have their industry excited, and their traffic 
 facilitated by the unwonted abundance of the currency, and it 
 liberates the ryot from the cruel exactions of the money-lender. 
 It raises the value of Indian commodities in the market of the 
 world, and the Hindoo is no longer forced to sell cheap and buy 
 dear, in international trade.* It isin the rate of wages, perhaps, 
 that the most remarkable proof is afforded of the elevated rank 
 
 * The disadvantage to which a country is exposed in international trade from a 
 lower range of prices than obtains in the countries with which it trades, is wel 
 
In the Sixteenth and Nineteenth Centuries. 297 
 
 of the Indian people in the scale of nations ; for the comparative 
 powers of production and purchase of different nations are 
 measured by the average pecuniary earnings of labour in each. 
 The rise of money-wages in England is seldom computed at so 
 much as 20 per cent.; but the localities are now few in India 
 where the labourer cannot earn more than twice the sum he 
 -could have done twelve years ago, and there are many in which 
 he can earn more than three times as much. The railways, 
 and new public works, and the emigration of Coolies to Ceylon, 
 Mauritius, and the West Indies, have, along with the European 
 purchases of cotton, contributed largely to this result; but a 
 fact is not explained away by showing how it has come to pass. 
 The better market for the industry of the Hindoo, the expendi- 
 ture of unprecedented sums upon it, and its extraordinary rise 
 in price, are the very things spoken of. All the silver sent to 
 the Hast could not add a rupee to the price of its produce and 
 industry unless it were expended; the railways, public works, 
 and the payments for cotton, are among the channels of expen- 
 diture; but the true sources of the money, though it be nearly 
 all silver, are the new gold mines, for the silver could not have 
 been spared from the West, had its place not been supplied by 
 new gold. 
 
 There is, then, upon the whole, incontrovertible evidence of 
 a great change in the value of the precious metals in the world, 
 far more extensive than occurred in the 16th century, and upon 
 a different ground-plan; but, like that earlier monetary revo- 
 lution, it has been neither universal nor equal where it has 
 occurred. It has not been universal, for the Egyptian is almost 
 
 
 
 explained in the following answer of the Doctor to the Knight in the old Dialogues 
 referred to in the early part of this article :— 
 
 ‘ Knight.—Yea, but, sir, if the increase of treasure be partly the occasion of this 
 continued dearth, then by likelihood in other our neighbours’ nations, unto whom 
 yearly is consigned great store of gold and silver, the prices of victuals and other 
 wares in like sort be raised, according to the increase of their treasure.’ 
 
 ‘ Doctor.—It is even so; and, therefore, as I account it a matter hard to revoke 
 all our English wares unto their old prices, so do I not take it to be either profitable 
 convenient to the realm, except one should wish that our commodities should be 
 uttered cheap to strangers, and on the other side be dear unto us, which could nos 
 de without great impoverishment of the commonwealth.’ 
 
298 The Distribution and Value of the Precious Metals 
 
 the only African enriched; China has netted nothing on the 
 balance of its trade for many years, and the cattle wandering 
 in the pampas of La Plata soon leave the golden circle. Nor 
 has it been equal, for the change has been greater in cheap 
 markets than in dear. But the immense rise of prices in many 
 of the former has been balanced by no corresponding fall in any 
 of the latter markets, and a great diminution in the value of 
 money, on the whole, is therefore clear, though to attempt to- 
 measure it with precision is vain, and to talk of it in terms of 
 arithmetic is an abuse of figures. The only reasonable conclu- 
 sion on the subject is, that money has for the present lost much 
 of its purchasing power in the general world of trade—a con- 
 clusion by itself little to be desired. To load the exchanges. 
 of men—to alter the terms of agreement, and disappoint just 
 expectations—to make landlords unwilling to grant leases, and 
 all classes doubtful about contracts for time and thrifty invest- 
 ments—were a calamitous result of the enterprise and toils of 
 the miners. And some evil of this kind has undoubtedly been 
 done. The first consequence, too, of the discovery of the new 
 mines was a diminution in the production of commodities. In 
 1851, half the male population of Victoria deserted their 
 occupations for the diggings. In 1850, when the population of 
 the colony was only 76,000, more than 52,000 acres were under 
 cultivation. In 1854, when the population amounted to nearly 
 237,000, only 34,657 acres were cultivated. In 1860, this very 
 colony imported from the rest of the world consumable commo- 
 dities to the value of more than fifteen millions, and gave 
 commodities in exchange to the value of only four millions and 
 a quarter. British Columbia to this day has produced little but 
 gold, and has levied a continual tribute upon the food, clothing, 
 and implements of the rest of the world. Nevertheless, the good 
 and the gain which have accompanied the evil and the loss are 
 infinitely greater. The new gold has not only founded com- 
 mercial nations of great promise round its sources, and enabled 
 our own nation to work out (not only without a paralysing 
 monetary drain, but with triumphant success) the problem of 
 free trade, and to purchase in most critical times the material 
 
In the Sixteenth and Nineteenth Centuries. 299: 
 
 of our manufactures; but it has assisted many backward 
 communities to rise rapidly in the scale of civilization, and 
 ‘wandered heaven-directed to the poor.’ The rapid rise in the 
 pecuniary value of the labour and produce of several such 
 communities, of which evidence has been given, is not merely a 
 sign and effect of their growing prosperity and elevated com- 
 mercial position; it has also helped to conduce to their progress. 
 The new money has obtained the immediate execution of great 
 works such asa long line of ancient Egyptian tyrants could 
 not have compelled ;* it has been a stimulus to the cultivator’s 
 industry and to the merchant’s activity; and it has substituted 
 to a considerable extent a civilized medium of exchange for the 
 barbarous and obstructive contrivance of barter. 
 
 So much the increase of the precious metals may be said to: 
 have accomplished. What more in their future increase they 
 may accomplish it is not in the province of political economy to 
 forecast. ‘They may become a curse instead of a blessing; they 
 may turn the reaping-hook into a sword, and become the sinews 
 of war in Kurope, when the sinews of war are exhausted in 
 America. In Asia they may be buried out of the reach of the 
 merchant by rebellion and anarchy, and prices may rise although 
 
 
 
 
 
 * ¢ An extraordinary revolution is rapidly proceeding in this country 
 (Egypt). Europe has finally understood the immense future of Egypt, and is 
 eager to develop her yet budding resources. Every steamer is pouring a new 
 population and a golden stream on our shores; energy and capital are taking 
 possession of the land, and urging it forward in the path of civilization and 
 wealth. Not only are the cities of Alexandria and Cairo receiving so great an 
 influx of inhabitants that, although whole quarters are rising on every side, 
 house-room is still insufficient, and rents are always increasing; but the inland 
 towns and villages are overrun, and factories with high chimneys and long lines 
 of black smoke cut the sky of our flat landscape through the length and breadth 
 of Lower Egypt. Gradually, but surely, the tide is creeping upwards, and will 
 soon people the shores of the Thebaid. Englishmen, I am glad to say, are not 
 behind in the race, and their numbers must always increase in a corresponding 
 ratio to the amount of machinery employed. The effect of all this is telling on 
 the natives. I lately heard that Halim Pacha, in conversing with his farm 
 labourers, had found the intellect of the lads who have grown up since the intro- 
 duction of the new mechanical appliances was greatly in advance of that of the 
 men who had reached manhood under the former primitive system of cultivation, 
 when the ox was the all-in-all to the fellah, and when his mind had no stimulus 
 and no cause for thought or inquiry.,—Times, March 28, 1864. 
 
300 Distribution and Value of the Precious Metals, &e. 
 
 money is scarce, because food is scarcer still. But, should both 
 hemispheres be blessed with peace, their hoards as well as their 
 mines may pour their contents into the lap of trade, and a new 
 use may be found for all. The emancipation of the Russian 
 serfs affords, in the payment of wages it involves, an example of 
 the useful employment which the progress of civilization may 
 provide for an increase of silver and gold in the world. The 
 history of the last fifteen years bids us believe that, if the sword 
 can be kept in its sheath, the precious metals will become less 
 precious, chiefly in places where they are too precious at present; 
 that prices will rise fastest where they are now lower than they 
 should be, or could be,if commerce had convenient pathways; and 
 that commodities will finally be multiplied as much as pieces of 
 money on the market. Given the fertility of the mines and the 
 total quantity of money in circulation, prices in the aggregate 
 must be lower through the world as a whole, in proportion to 
 the general industry and skill of mankind, and the extent and 
 facility of their trade; but in the same proportion they must 
 also be nearer equality in different markets; and the rise of 
 prices in cheap places to the level of the dearest is a sign of 
 advancing civilization and prosperity. If prices were at a per- 
 fect equality in all places, it would prove that even distance as 
 well as war had ceased to separate mankind. Although the 
 literal attainment of a perfect monetary level is, therefore, 
 manifestly impossible, the history of prices proves that, while 
 many obstacles to human fellowship remain, more has been done 
 since the new gold mines were discovered to make the world one 
 neighbourhood than was done in 300 years before. 
 
XX. 
 
 THE NEW GOLD MINES AND PRICES IN EUROPE 
 IN 1865.* 
 
 On the discovery of the new gold mines, under the name of the 
 Gold Question, an economic inquiry, unconnected with party 
 politics, for the first time gained the ear of the public at large. 
 Yet public interest has been languid, in comparison with the 
 real importance of the monetary problems involved. The chief 
 reason for this is perhaps the diffusion of an opinion, that the 
 effect of the increase of money upon prices practically concerns 
 persons alone whose pecuniary incomes are fixed: an opinion 
 which would be sufficiently true if prices were everywhere uni- 
 formly affected, and with respect to all things alike. But the 
 fact is, that the scale of relative incomes, and of relative prices, 
 in different places, and with respect to different commodities, 
 has been so altered, that the old level of profits in different 
 employments, and the old rates of expenditure in different situa- 
 tions, have been permanently disturbed, and new elements must 
 be imported into all calculations respecting the best markets to 
 buy and sell in, the cost of living in different localities, the out- 
 goings and returns in different trades, and the rates of interest 
 which different investments will yield. Those who omit to take 
 these new elements into account may find that their expenses, 
 both as producers and consumers, are largely increased, while 
 the prices of their own productions are not higher than formerly ; 
 or they may find themselves buyers in markets in which prices 
 have unexpectedly and enormously risen, and sellers where they 
 
 
 
 
 
 * North British Review, June, 1865. 
 
302 The New Gold Mines, and Prices in Europe in 1865. 
 
 have risen in no such proportion; or again, they may miss 
 investments which would yield extraordinary gain. The 
 British farmer complains that while labour and many of the 
 requisites of production are dearer, he gets no more money than 
 formerly for his wheat, and the migration of population from 
 the country to the towns, and the production of animal food 
 instead of corn, are among the results of changes in relative 
 prices at home. Most writers on the effects of the Mines have 
 confined their observations to changes in prices at home. The 
 truth, however, is, that changes in prices abroad are of equal 
 importance even to Englishmen, not for the purpose of theoretical 
 instruction alone, but even with a view to pecuniary saving and 
 gain. very day people are making speculations and entering 
 into transactions—in emigration, in foreign trade, and in foreign 
 loans and undertakings—the prudence of which depends upon 
 the movements of prices abroad. Great undertakings by Eng- 
 lishmen abroad, in fact, have been based upon estimates which 
 have proved fallacious, because they made no sufficient allowance 
 for the effects of an extraordinary increase of money in remote 
 places. Chairmen of Indian Railway and Irrigation Companies, 
 for example, have reported in London that the rise of prices 
 in India had falsified all their calculations, and entailed the 
 heaviest losses on contractors. Nor is it in production alone 
 that the unequal alteration of prices has made itself felt, for 
 consumers have been very differently affected according to the 
 place of their residence and the things they are accustomed to 
 use. The class of British holders of fixed incomes, who have 
 really been the chief sufferers from the increase of money in 
 other hands than their own, are not fundholders and Govern- 
 ment servants in Great Britain, who are generally placed first 
 in dissertations on the subject, but military and civil servants of 
 the Crown in India, who are confronted by a rise of prices to 
 which there has been nothing similar in England since the reign 
 of Elizabeth. Even in England itself, consumers are differently 
 affected, according to their class of life and habits, and the 
 localities they live in. ‘To the agricultural labourer the price 
 of grain is the chief matter, and grain is cheap; he suffers 
 
The New Gold Mines, and Prices in Europe in 1865. 308 
 
 comparatively little from the dearness of butter and meat, and 
 nothing from the dearness of service, now pressing so hard on 
 the poorer gentry and tradesmen, especially in the parts of the 
 country where such things used to be cheapest. It depends 
 entirely on the localities men buy and sell in, and the things 
 they buy and sell in them, how they are affected by the greater 
 amount of money in the world; and statistical averages of 
 prices in general are not only fallacious in principle, but mis- 
 leading in practice. The additional money has been unequally 
 distributed by the balance of trade to different countries, and 
 very unequally shared by different classes in the countries re- 
 celying it; again it has been spent by the classes receiving it, 
 not upon all commodities alike, but unequally, and the supply 
 of some things upon which there has been an additional ex- 
 penditure has increased very much more than that of others. 
 Moreover, a low range of prices is raised more by a given 
 addition to money than a high one, which is one reason why 
 the change has been greatest in places once remarkable for their 
 cheapness.* And from what has been said, it is plain that a 
 change in comparative incomes and prices would have been 
 caused by the new gold alone, since it would increase the 
 incomes and expenditure only of the classes, beginning with 
 the miners, to whose hands it successively came. But the new 
 gold has by no means been the only new agency at work; an 
 altered distribution of money through the world has been 
 brought about by more general and permanent causes. And 
 at a time like the present—a time of doubtful markets and 
 hesitating trade—it is peculiarly desirable to lay hold of the 
 
 
 
 * The greater effect on low prices of an additional sum of money is a matter of 
 considerable practical importance, which may be illustrated in this way. Let us 
 suppose that the price of common labour was formerly 1s. 6d. a-day in England, 
 and 1d. a-day in India, and that the increased demand for labour has added a six- 
 pence to the rate of daily wages in both countries, raising the rate from 1s. 6d. to 
 2s. in England, and from 1d. to 7d. in parts of India. Wages would then have 
 risen 33 per cent. in England, and 600 per cent. in India; and whereas a con- 
 tractor could only hire three men in England for the sum with which he could 
 formerly have hired four, in India he could only hire one man for the sum with 
 which he could formerly have hired six. 
 
304 The New Gold Mines, and Prices in Europe in 1865.. 
 
 fundamental causes at work, because, although the fortunes of 
 individuals here and there may depend on the momentary 
 condition of things, to the bulk of society the permanent 
 agencies which prevail in the end, and the permanent rates. 
 they tend to establish, are the objects of greatest importance. 
 Commerce and enterprise may pause and falter for a few weeks 
 or months; a transitory disturbance originating in America. 
 may possibly agitate all markets; but such possibilities only 
 make it of greater importance to know what to look forward to 
 afterwards, and to distinguish between permanent and temporary 
 changes of prices and of the profits of production in each place: 
 and with respect to each sort of thing. 
 
 The general principle determining the distribution of the 
 precious metals is, that money is spent by those who receive it 
 on the things they want most for production or consumption, 
 and in the places where those things can be procured at the 
 smallest expense. To buy in the cheapest and sell in the dearest. 
 market is the policy of trade; and a combination of causes has. 
 latterly given, and is continually giving buyers, on the one hand, 
 access to cheaper places of production for many commodities, 
 and the sellers of the produce of such places, on the other hand, 
 easier access to the markets where their value is greatest. But 
 this necessarily leads to a change in the seats of production and 
 in relative prices, the tendency being always towards the pro- 
 duction of everything in the places within reach where its cost 
 of production is least, and towards an equality in the prices of 
 portable goods over the area of cheaper and closer commercial 
 intercommunication. Producers in particular occupations and 
 particular places, accordingly, have not only obtained no share 
 in the new treasure, getting no additional custom either from 
 the mining countries or from the countries these deal with, but 
 have even found the demand for their produce decreasing, and 
 transferred to other localities; and capital and industry are ina 
 course of migration, not only because extraordinary profits are 
 offered in new regions and new employments, but also because 
 ordinary profits are no longer to be made in old places and old 
 employments. 
 
The New Gold Mines, and Prices in Europe in 1865. 305 
 
 The great gold movement itself—that is to say, the pro 
 duction and distribution of the new gold—is only a part of a 
 much larger movement, resulting from the new facilities of 
 producing many things, gold among the number, in cheaper 
 places than formerly, and disposing of them more readily in the 
 places where their value is the highest, and the enterprise with 
 which such facilities are being turned to account. The mines of 
 California and Australia, for which older mines were forsaken,* 
 are only a particular class of new sources of production from 
 which the markets of the world are being supplied, and their 
 rapid development is only a particular instance of the energy 
 with which cheaper and better sources of supply are sought 
 and developed. ‘The bent of the industrial and commercial 
 movement of our times is, above all things, to discover and put 
 to profitable use the special resources, metallic and non-metallic, 
 in which each region excels, to seat every industry in the places 
 best adapted for it, and to apply the skill and capital of old 
 countries more productively in remote places with great natural 
 resources. ‘The first phenomenon,’ Mr. Patterson observes, 
 ‘attendant upon the gold discoveries, has been the great 
 emigration—the transfer of large masses of population from 
 the old seats to new ones, the vast and sudden spread of civilized 
 mankind over the earth. The countries where these gold-beds 
 have been found are in the utmost ends of the earth, regions the 
 most isolated from the seats of civilization. Of all spots on the 
 globe, California was the farthest removed from the highways of 
 enterprise. Not a road to it was to be found on the map of the 
 traveller ; not a route to it was laid down in the charts of the 
 mariner. Australia was, if possible, a still more isolated quarter 
 of the globe.’ This migration to the remote regions of the new 
 gold is not, however, a singular and isolated movement of 
 industry. We shall find, on the contrary, that the key to the 
 principal permanent changes in prices which have followed the 
 
 * ‘The product of gold in the Atlantic States has fallen off since the discoveries 
 of gold in California.’—Preliminary Report on the Eighth Census of the United 
 States, p. 63. 
 
 X 
 
306 The New Gold Mines, and Prices in Europe an 1865. 
 
 path of the new gold through the world, is to be found in the 
 fact that remoteness is no longer the obstacle it was to the best 
 territorial division of labour, and that buried natural riches and 
 neglected local capabilities are obtaining, in a thousand direc- 
 tions at once, a value proportionate rather to their actual quality 
 than to their nearness to market, and attracting capital and 
 skill by high profits to their development. For the same reason, 
 and by the same aids to industrial enterprise which have 
 brought miners and merchants to cheaper places for gold, 
 cheaper places for the production and purchase of many other 
 things have been contemporaneously found, and the distribution 
 of the new gold and its effects upon prices have been very 
 different from what they would have been, had the fertility of 
 the new mines been the only altered condition of international 
 trade. The general principle which regulates the distribution 
 of money through the world is, as we have said, that those who 
 receive it naturally spend it on the things they want most, and 
 in the places where such things can be had cheapest; but they 
 have of late years obtained access to markets not formerly within 
 reach, and much of the new money has been absorbed in new 
 regions, and in the circulation of produce not before in the 
 market. The world may at present be divided into three classes 
 of regions: first, those in which prices were formerly highest ; 
 in the second place, those in which the new movements of trade 
 have already raised prices towards the level prevailing in the 
 former regions; and, thirdly, the places not yet within the 
 influence of the new means of commercial intercommunication. 
 The first and second class of regions may be said to be fast 
 merging into one, with pecuniary rates approaching to equality, 
 while the third class is also, in numerous directions, on the 
 point of assimilation. A permanent change is thus taking 
 place in the conditions which govern comparative prices in 
 different markets, and one the more worthy of notice, since, in - 
 the earlier years after the discovery of the new mines, there was, 
 both in the gold countries themselves, and in the chief markets 
 of Europe, an abnormal, and in a great measure, temporary 
 elevation of prices, which, although not in reality principally 
 
The New Gold Mines, and Prices in Europe in 1865. 307 
 
 due to the increase of gold, led to mistaken conclusions respect- 
 ing its real effects. 
 
 The first rise of prices in California and Australia, from 
 which M. Chevalier and other eminent writers were led to 
 apprehend a proportionate fall in the value of money through- 
 out Hurope, was, in fact, as Mr. Newmarch has shown,* both 
 temporary in degree and partial in extent; those things alone 
 rising in price which were in demand with the. classes whose 
 pecuniary incomes were increased. While, for instance, the 
 coarser sorts of clothing adapted to life at the diggings were 
 fetching extraordinary prices, the best quality of cloth for a time 
 was almost unsaleable. Moreover, the early rise in prices in the 
 gold countries was not only partial, but only partially caused 
 by the new gold. In the face of a rapidly increasing popula- 
 tion, there was an actual decrease in the supply of labour and 
 many of the necessaries of ife. Farms and pastoral settlements 
 were forsaken; the crops in many places were lost for want of 
 hands; all building ceased in Melbourne at the very time that 
 crowds were arriving; and the vessels coming from Europe were 
 too full of emigrants to have room for considerable cargoes. 
 So far, too, as the rise of prices was really caused by the increase 
 of gold, and not by the scarcity of commodities, it should be 
 taken into account that a great part of the gold current at first 
 came not from the new, but from the old mines of the world, 
 brought by immigrants who did not come empty-handed, and 
 who were driven to spend a good deal of old money before they 
 could make any new, or even get to the mines. Hence the first 
 fall in the value of money in the gold countries was in a great 
 measure due to a temporary and abnormal condition of things, 
 and not to the fertility ofthe mines. In 1854, prices in Victoria 
 were already much lower than during the two years before, 
 and the following Table of prices, published by the Registrar- 
 General of the colony, shows their continuous descent in subse- 
 quent years :— 
 
 
 
 
 
 * History of Prices, vol. vi., Appendices xxx. and xxxil. 
 xX 2 
 
3808 The New Gold Mines, and Prices in Europe mm 1866. 
 
 ESTIMATED WEEKLY EXPENDITURE OF AN ARTISAN, HIS WIFE, 
 AND THREE CHILDREN. 
 
 
 
 
 
 
 
 
 
 1854. 1857 1861. 
 
 PY PL Ee Pe & Fae a 
 Bread, 28lbs., . 012 6 0 6 83 006 2 
 Beef, or mutton, 21 lbs., O2T5I9 012 3 0 610 
 Potatoes, 21 lbs., 0 6 103 0 2 104 as Gol 
 Flour, 5 lbs., Ue gi 0 1 22 Oval) 
 Tea, 11b., . 0 2 0 0 2 6 029 
 Sugar, 6 lbs., 0 3 0 Oy 2 an 02 8 
 Soap, 3 lbs., 01 0 0. Lame 0 029 
 Candles, 2 lbs., . On tas G Orel, 4 0 b.% 
 Milk, 7 pints, O7e0 0 3 6 0 2 4 
 Butter, 2 lbs., 07.9.0 0 5 6 0 3 0 
 Firewood, + ton, 012 6 0 p0.0 0/4, £0 
 Water, 1 load, . 010 0 0 65 0 0. et 
 Rent of cottage, per week, . 27 0 0 010 0 0 6 0 
 Clothing, . 015 0 010 0 0 6 0 
 School fees, Opts er 0 3 0 0 3 0 
 
 £7 0 34 | $3 18 400) eaguee 
 
 The reader will perceive in these figures a proof of the error. 
 of a method by which some writers have attempted to measure 
 the permanent effect of the new mines on the value of money— 
 that, namely, of taking an average of prices one year with 
 another since their discovery. An average of prices for a 
 succession of years hides the material point whether prices have. 
 continuously risen, or, on the contrary, have latterly fallen—a 
 point of great practical importance, since, as already observed, 
 the general movement of prices has been very different in 
 
The New Gold Mines, and Prices in Europe in 1865. 309 
 
 different places. As an illustration of this we beg attention to 
 the following Table of prices at Bilbao, in contrast with the 
 previous Table of prices at Victoria :— 
 
 
 
 1854.* 1860. 1864. 
 
 Ser a. Br 8s ote Barges. O. 
 Mutton, per lb., 0 0 24 0 0 43 0 0 8%} 
 Beef, do... | 0 0 23 Via Ueda 5d. to 8d. 
 Veal, do., % : *| 0 0 3} o=05°3 8d. to 10d. 
 Butter, do., . Une Onan by 0 0 93 01 3 
 Eggs, per doz., . 0 0 382 0:0 7% 0 010 
 Bread, per lb., . OF ONT Omri. 2 CeO aes 
 Common wine, two quarts, 0 0 7% 0 1 3} 0 010 
 Rent, : ‘4 : ; £15 to £20. £50 to £80. £30 to £80. 
 
 
 
 
 
 
 
 
 
 It is evident, from a comparison of the two Tables, that per- 
 sons intending to trade with, or settle at, either Melbourne or 
 Bilbao, would make a serious mistake in averaging prices one 
 year with another. The average would give a range more than 
 three times too high at one of the places, and nearly three 
 times too low at the other. Prices in Australia in the first 
 years after the derangement of industry by the mines, and prices 
 in Spain before the new gold had found entrance, are so far 
 from affording a basis for calculations respecting the future 
 probable value of money, that they ought rather to be excluded 
 from the estimate. The contrast, however, between the de- 
 scending movement of prices at one place, and their ascending 
 movement at the other, indicates an important practical dis- 
 tinction. The causes which raised prices so high in Australia 
 from 1852 to 1854 were in a great measure transitory and local ; 
 
 * Prices in 1854 were the average prices of a long period anterior. The very 
 nigh price of wine in 1860 was in part occasioned by scarcity; not so with the 
 other articles. The harvests have been good, and although bread was at the same 
 price at Bilbao in 1864 as in 1860, in consequence of railway communication with 
 the interior, its price rose in the interior between those years. 
 
310 The New Gold Mines, and Prices in Europe in 1865. 
 
 but those which have raised them in Spain are fundamental and 
 permanent in their character, and extend in their operations. 
 over the whole area of commercial intercommunication. Mr. 
 Windham has left the following note of Dr. Johnson’s conver- 
 sation on the effect of turnpike-roads in England :—‘ Hvery 
 place communicating with every other. Before, there were 
 cheap places and dear places; now, all refuges are destroyed 
 for elegant and genteel poverty. Disunion of families by 
 furnishing a market for each man’s ability, and destroying the 
 dependence of one man upon another.’ The train of consequences 
 described in these sentences has, with extraordinary rapidity, 
 followed the recent increase in the communication between 
 distant parts of the world, created by the knowledge and enter- 
 prise of our times, as well as by its better means of locomotion. 
 Wherever these causes have acted may be seen the equalization. 
 of prices, the disappearance of comparative cheapness, the 
 opening-up of new markets for the special capabilities of each 
 place and its inhabitants, and the rupture of ancient bonds of 
 local dependence, of which Dr. Johnson saw, eighty years ago, 
 almost the beginning in England. It is curious to observe how 
 writers, at places the most remote from each other, fall naturally 
 into the use of the very same words in describing the changes 
 taking place under their eyes. Of Bilbao, the British Consul, 
 four years ago, when prices had not reached their subsequent 
 pitch, reported :—‘ The cost of living has risen enormously; and 
 Bilbao, from being one of the cheapest towns in Europe, has. 
 become a compatatively dear place.’ From Yokohama, in 
 Japan, the Consul writes :—‘ From being one of the cheapest 
 places in the Hast, it has become second only to Shanghai in 
 expensiveness.” And from Alexandria we hear :—‘ Egypt, 
 which a few years ago was one of the cheapest countries, is fast 
 rising to the Indian scale of prices.’ 
 
 The rising prices in such places indicate, it should be 
 particularly observed, not a mere fall in the local value of 
 money, but a rise in the general as well as in the pecuniary 
 value of their produce. If all the cattle in the pastures of 
 South America could be carried rapidly and cheaply to Europe, 
 
The New Gold Mines, and Prices in Europe in 1865, 311 
 
 their value in money might be more than decupled; but the 
 change would not be a depreciation of money ; for, on the 
 contrary, money would have found an additional demand. 
 Less than a generation ago, the Landes of the Gironde were a 
 pestilential waste, covering 300,000 hectares, and valued at 
 900,000 frances on the whole, or three francs a hectare on the 
 average. Partly by being brought nearer to markets by rail- 
 ways, partly by the mere fact of their capabilities becoming 
 known, partly by drainage and cultivation, and partly, no 
 doubt, through the general increase of money in France, the 
 price of the Zandes has risen in the extraordinary manner 
 described in the British Consul’s report, and more in detail by 
 M. About, who relates that the tobacco crop of a single hectare 
 was lately sold for more than a thousand francs, and that the 
 wood alone, on a plot of 500 hectares, only partly in plantation, 
 will, in less than twenty years, be worth a million franes, being 
 more than the worth of the whole territory of the Landes about 
 the time that the mines of California were discovered. M. About 
 adds :—‘ his enormous territory, which did not figure for a 
 million franes when I was at College, will be worth six hundred 
 millions in 1894.’ In the same work from which these figures 
 are taken,* M. About graphically describes some of the causes 
 of the enormous.advance in prices in Paris. It denotes, he 
 observes, that Paris has become the metropolis of the business as 
 well as of the fashion of the Continent ; and rents are trebled, 
 because shops and hotels are crowded, and Paris is a city 
 frequented by the rich. So far as it goes, this description is 
 true, though it fails to allow both for the immense influx of 
 gold shown in the official accounts of the foreign commerce of 
 France, and for the expenditure in the metropolis of vast sums 
 lent to the Government from the old hoards of the people. 
 But we must differ entirely from M. About where he says that, 
 while Paris has become a place only for the rich, there remains, 
 and will always remain, a refuge for poverty in the country. 
 ‘If the rise of prices in Paris terrifies you, there is the railway ; 
 
 
 
 * Le Progrés, 1864. 
 
312 The New Gold Mines, and Prices in Europe m 1865. 
 
 it not only brings people to Paris, but takes them away. Live 
 in the country.’ We affirm, on the contrary, that, just because 
 the railway brings people and things from the metropolis as well 
 as to it, it brings metropolitan prices into the country, and far 
 more effectively than the old turnpike-road realizes Dr. Johnson’s 
 opinion of the results of easy communication between place and 
 place: ‘ Before, there were cheap places and dear places; now, 
 all refuges are destroyed for elegant and genteel poverty.’ 
 The price of eggs a few years ago at Bayonne was six or seven 
 sous a dozen ; now, you will not get as good a dozen for fourteen ; 
 and the price of boarding in a pension at the same place has 
 exactly doubled in the same period. In formerly less accessible 
 places than Bayonne, the change in the cost of subsistence has 
 been greater ; and one cause of the concentration of the popula- 
 tion of Europe in large towns—which is a fact of immense 
 political significance in our times—is not only that access to them 
 is easier, and employment in them is greater, but that railways are 
 making the country as dear as the town. M. About recommends 
 the country to the poor for its healthfulness and beauty as well as 
 for economy ; but modern means of locomotion, and the move- 
 ment of which they are both cause and effect, tend to give all 
 the advantages of each place a pecuniary value in proportion 
 to their real utility and rarity, and to turn them to the utmost 
 commercial account, thus finding new markets for the produce 
 of the mines in the Pyrenees and the Alps. The same general 
 tendency towards the commercial development of the natural 
 wealth of such regions, which led to the production of the new 
 gold, governs its distribution and effect upon prices. Buyers 
 on the one hand, and sellers on the other, have gained, and are 
 constantly gaining, access to new markets. ‘The necessary 
 consequence is to bring money in unusual abundance to places 
 where prices were formerly low, and on the other hand, to bring 
 the cheap produce of such places to the markets previously 
 dearest, and to counteract more or less in the latter the fall in 
 the value of gold which the increase in its quantity would 
 otherwise have produced. And thus it is that stationary prices 
 of commodities in general are the best marks of prosperity in 
 
The New Gold Mines, and Prices in Europe in 1865. 318 
 
 ‘one class of localities, namely, those in which money has 
 always abounded, and where cheapness indicates improvement 
 in production at home, and access to cheaper places of production 
 abroad; while, in another class of localities, rising prices 
 indicate improved means of exportation, better markets, and 
 inducements for the ingress of capital and skill as well as 
 money. For the rate of profit on capital and skill employed in 
 the development of their resources, and bringing their produce 
 cheaply to market, is in proportion to the increase of the 
 quantity and price of the produce. If people can sell for £100 
 what cost them but £50, their profit in money is 100 per cent. ; 
 and the high profits and interest latterly yielded on capital 
 employed in foreign trade and investments has arisen mainly 
 from obtaining a share in the rising pecuniary value of the 
 productions of regions whose commercial situation has been 
 improved. This movement certainly tends to destroy the 
 refuges of poverty, but it tends, on the other hand, to destroy 
 poverty itself by ‘ furnishing a market for each man’s ability.’ 
 It brings with it hardship to those whose condition is stationary, 
 but it makes the condition of many progressive. A few years 
 before Dr. Johnson’s remarks on the effect of roads, Goldsmith 
 made those excursions through the country which resulted in 
 the poem of the ‘ Deserted Village,’ in which the features of the 
 landscape, and something of personal incident, were drawn from 
 his native village in Ireland; but the picture of the intrusion 
 of the wealth of towns and ‘trade’s unfeeling train’ into remote 
 parts of the country, was taken from England. The poet saw 
 only the privation to the parson, who ‘ remote from towns’ had 
 been ‘passing rich at forty pounds a-year,’ and the sorrowful 
 side of the migration of the peasantry ; Dr. Johnson saw also the 
 market opened for each man’s capacity by the union of localities, 
 and the liberation of individuals from hereditary restraints and 
 family dependence. ‘This is exactly the movement which a 
 philosophical jurist has pronounced to be the chief characteristic 
 of progressive societies. Their movement is uniform, says Mr. 
 Maine, in the substitution of the commercial principle of contract 
 for the ancient family bond as the principle which associates 
 
314 The New Gold Mines, and Prices in Europe in 1865. 
 
 men, and the amalgamation of isolated original groups into 
 larger communities connected by local proximity.* This theory 
 is equally true of the economic and of the legal and political 
 framework of civilized society; the migration of labour to 
 new fields of employment, and of capital and wealth into the 
 inmost recesses of the country or remoter regions, and of both 
 money and commodities to new markets, are incidents of the 
 better division of labour in which it results, by which the 
 majority of men must be gainers; and the working of the new 
 gold mines is only a particular instance of the rapid develop- 
 ment of the natural resources of each place, which must result 
 in a vast increase of the aggregate of human wealth, although 
 involving loss to particular classes. Considerable misappre- 
 hension has arisen with respect to the effects of the new gold, 
 by attributing to it changes in prices due mainly to different 
 causes. M. Levasseur, for example, concluded in 1857 that 
 the mines had caused a monetary revolution in Western 
 Hurope very unfavourable to the well-being of the labouring 
 classes. In the mining countries themselves, he observes. 
 that labouring men were the first to receive the gold, and 
 the price of labour rose before that of commodities: the latter 
 rising only in consequence of the increased expenditure of the 
 labouring class. But in countries ike England and France, the 
 new treasure was first received in exchange for commodities 3. 
 the price of which consequently, according to this able writer, 
 rose before labour; high profits preceded increased wages; the 
 manufacturer, the merchant, and the farmer were gainers, but 
 the labouring classes were losers. ‘This, he says, is a repetition 
 of what happened in the sixteenth century after the influx of 
 money from the mines of America, when the labourers inces- 
 santly complained of the insufficiency of their wages. Happily,. 
 however, the historical parallel fails, for wages in the sixteenth 
 century were kept down by law; and the modern changes in 
 production and trade, of which the new gold is only an instance,, 
 tend rather to lower than to raise the price of corn in England 
 
 * Maine’s Ancient Law, pp. 132, 168-170. 
 
The New Gold Mines, and Prices in Europe in 1865. 315 
 
 and the districts of France in which it was formerly dearest. 
 ‘As commerce extends,’ says Mr. Mill, ‘ and ignorant attempts 
 to restrain it by tariffs become obsolete, commodities tend more 
 and more to be produced in the places in which their production 
 can be carried on at least expense of labour and capital to man- 
 kind.’ We get corn from America and Russia for the same 
 reason that we get gold from California and Australia, instead 
 of from our own rivers and mountains—although there is gold 
 in every stream that flows and on the side of nearly every hill 
 —namely, that we seek the cheapest places for everything, and 
 have access to cheaper places than formerly for many things, 
 corn and gold included. Bad harvests, the Russian war, and 
 speculation, and not the cheapness of gold, were the chief causes 
 of the dearness of corn, and of several other important com- 
 modities, in England and France from 1853 to 1857. We have 
 here another example of the error of measuring permanent prices 
 by averages of foregoing years, without regard to their ultimate 
 range and the permanent or temporary character of the causes 
 of arise. It is on the reasons for prices, and not on mere prices 
 themselves, that producers should found calculations for the 
 future; and a farmer would be greatly in error in taking the 
 price of corn from 1853 to 1857 as a safe basis for calculating 
 the future profit and loss of its growth. ‘The harvest of 1853. 
 was almost the worst for a century throughout Western Europe ; 
 that of 1855 was very deficient; that of 1856 was under an 
 average, while the war with Russia still farther shortened 
 supply, and added to the cost of importation ; and the scarcity 
 of corn, and not the abundance of money, was the cause of the 
 sufferings of the labouring classes during the period. The 
 relative price of labour and bread in both countries has really 
 undergone an alteration in favour of those who purchase the 
 latter by the sale of the former. Thus in France, while corn 
 has considerably fallen, money wages have greatly advanced 
 both in country and town, and the advance has been constant. 
 In 1860, the average of wages in Paris was 4f. 55c., and is 
 now computed at 5 f.; andthe pay of agricultural labour in the 
 country around Bordeaux has risen in the same time from 
 
316 The New Gold Mines, and Prices in Europe nm 1865. 
 
 40 to 50 sous a-day. In the United Kingdom, money wages 
 have also considerably risen; and the rise in the price of animal 
 food, though greater in remote rural districts than in the large 
 towns, and considerably greater on the average than is shown 
 in any statistics on the subject, but little affects the bulk of the 
 rural population, since agricultural labourers have never been 
 accustomed to consume much of it. In towns, on the other 
 hand, money wages have risen fully as much as the price of 
 meat, the rise of which is, in fact, mainly due to an increased 
 expenditure of the working population; and, accordingly, it is 
 pork, and the inferior qualities of mutton and beef, which have 
 risen most. ‘lhe very causes which tend to raise wages and to 
 cheapen corn, tea, sugar, and clothing, evidently tend to raise 
 the price of animal food, by leaving the bulk of the people more 
 to expend on it; it being a thing of which there are not the 
 same means of increasing the supply as of clothing and corn. 
 We cannot, indeed, exempt the owners of land from blame in 
 respect to the dearness of meat and dairy produce, since the 
 uncertain duration of tenure has been, along with some un- 
 favourable seasons, an obstacle to the increase of the domestic 
 supply, on which its price must chiefly depend. But the change 
 in the relative prices of corn and fresh animal food, and the 
 change in husbandry it is leading to, are mainly to be traced 
 to the general movement of commerce, which it is the endeavour 
 of this article to explain, and which is one certainly far from 
 injurious to the labouring classes in its general results. The 
 movement tends, as we have seen, to the production of every- 
 thing, money included, in the cheapest accessible places, and 
 its sale in the dearest accessible markets, and hence to equalize 
 prices approximately in cheap and dear markets brought closer 
 together, thereby raising considerably the price of each class of 
 commodities in the places connected, in which it was previously 
 lowest, and, on the contrary, counteracting the effect of the 
 increase of money in those in which it was previously highest. 
 The price of corn has accordingly risen in many distant places 
 nearly to its level in England ; but in England its level has not 
 been raised. But just as the improvement in communication 
 
The New Gold Mines, and Prices in Europe in 1865. 317 
 
 is not the same between all parts of the world alike, and the 
 equalization of prices is not universal for any commodities, so 
 the improvement is not equal for all classes of commodities 
 alike; and the price of commodities, such as fresh butter and 
 meat, which are portable only for a limited distance, has been 
 equalized over a much smaller area than that of corn. The 
 cheaper places to which London has access for fresh animal 
 food, are only the remoter parts of the kingdom itself and the 
 nearest parts of the Continent. Improvements in communica- 
 tion produce an approximation to equality in the prices of 
 portable goods only in proportion to their portability, and 
 hence a double change in relative prices ensues. In the first 
 place, the prices of easily portable articles approach to a level 
 in cheap and dear markets; but, secondly, as all things are not. 
 equally portable, a change is produced not only in comparative 
 prices in different places, but in the comparative prices of dif- 
 ferent commodities; and both changes result in a disturbance 
 of the profits of different occupations, and a change in the 
 places of different industries. The same general cause tends. 
 to raise the price of meat at Athlone almost to the price it 
 fetches in London, and to lower the price of corn in London 
 almost to its price at Odessa. And the consequence is, that 
 since labour and capital desert the occupations in which money 
 returns are declining and stationary, for those in which they 
 are increasing, the production of animal food is taking the 
 place of the production of corn in this kingdom, and shep- 
 herds are increasing, and agricultural labourers decreasing, in 
 number. 
 
 But this internal change in our industrial economy is a 
 small part of the change in the territorial division of labour 
 which the changes in relative prices in the world of commerce 
 are producing. For the very same reasons that the price of 
 meat has risen in England, but not that of corn, and that the 
 former has risen more in the remoter parts of the country than 
 in the capital, and again, that the change in prices is producing 
 the changes in the occupations of the people just stated, prices 
 in general have rapidly risen in many foreign countries, and 
 
318 The New Gold Mines, and Prices in Europe in 1865, 
 
 British industry and capital have been attracted from domestic 
 to foreign employment. The pecuniary value of the produce 
 of cheap places rises in proportion as they are brought within 
 reach of the best markets; and capital employed in the improve- 
 ment of their commercial situation, the development of their 
 resources, and the transport of their produce, obtains an extra- 
 ordinary profit from sharing in the increase of its money value. 
 If, for example, a cwt. of goods is worth £1 at one place, and 
 only 5s. at a distance for want of communication, a railway 
 company making the line of connexion may charge more for 
 the carriage of goods, and buy the land and unskilled labour 
 they require for its construction very much cheaper than if 
 prices were near an equality at the two places already. 
 
 The great rise of prices in India and the enormous growth 
 of its trade are regarded by many as passing results of the 
 American war. And it is desirable, with reference to the 
 future not only of India but of many other places under the 
 same economic conditions, or which will soon be brought under 
 them, and also with reference to the future outlets both for 
 Engiish capital and enterprise, and the produce of the new 
 mines, to ascertain whether we ought really to regard the 
 increase of money in India, and of English capital engaged in 
 its foreign commerce or internal improvement, as a fortuitous 
 and transitory event, or, on the contrary, as the result of per- 
 manent causes, which, upon the one hand, are continually in- 
 vesting with additional value the capabilities and productions 
 of places circumstanced like India, and, on the other hand, are 
 finding food and materials from the cheapest accessible quarters 
 for countries like England, and new and remunerative employ- 
 ment for their accumulated capital and skill. 
 
 That the stream of the precious metals to India, and the rise 
 of prices ensuing, are not solely attributable to the payments 
 for cotton caused by the American war, is clear from the facts 
 that the bulk of the treasure was imported before 1861, and that 
 the balance of imports of specie above exports, reached fifteen 
 and a-half millions sterling in the year 1859-60, and has not 
 reached twenty millions a-year as the average since the war. 
 
The New Gold Mines, and Prices in Europe in 1865, 319 
 
 It is an error to suppose we have paid the new cotton countries 
 sums of money proportioned to the price of cotton in our markets, 
 part of which has gone to our own merchants and carriers, 
 and part has been paid in our own manufactures. The balance 
 of trade is always considerably more in our favour than appears 
 in the official reports of the value of our imports and exports, 
 respectively. We are ourselves the chief carriers both of our 
 exports and imports, and foreign countries really pay more for 
 our exports, and we pay them less for our imports than appears 
 by our Custom-House valuation, since we receive ourselves a 
 great part of the freight of cargoes both outwards and inwards, 
 and of the mercantile profit on the exchange. The balance of 
 trade, however, has been largely in favour of India for many 
 years past, and the rise of prices was anterior to the war. Ina 
 speech at Calcutta, in February, 1860, Mr. Wilson, after re- 
 ferring to the rapid growth of Indian commerce, observed: 
 “It is notorious how much the price of all country produce has 
 increased of late years, in consequence of the demand for expor- 
 tation. I am thankful to know that the benefits thus conferred 
 by our commerce upon the land have extended in no slight 
 degree to the labourer. It is no exaggeration to say that the 
 rate of wages has risen in many districts twofold, and in some 
 threefold, during the last few years. In the face of evidence 
 of this kind, can anyone doubt that all classes in India are in 
 a state of prosperity, unparalleled in any former time?* A 
 very different view of the matter has latterly been taken by 
 
 
 
 * Economist, March 31, 1860. The following Table of prices of the chief 
 articles of daily consumption in the ‘ Statement showing the Material and Moral 
 Progress of India for 1860-61, pursuant to Act 21 and 22 Vict., c. 10, sec. 53,” 
 shows the great rise of prices in Bengal before the cotton drain began :— 
 
 
 
 
 
 1859 March, 1861. 
 R. A. R.A BAS Bs As Boras R. A 
 TORUS Ss Le “See toueb  e PPL DA} toh Ber y ZG OU TED OG. 
 Urrur Dhol, | 1 7 ,, 110 Da en We PEE a ent 
 Paddy, . Le type fl a ee oe eee en 
 Ghee, his Sis, BLILS Wnt Si ty) :2%x8 Wee On prim OSes 
 Oil, . ig Eako MG Sylhet! it NR eae Re ON RS wa iene yf 
 Tobacco, 210 OA GUNG SAPOEHY, O18 4 6 8 
 
3820 The New Gold Mines, and Prices in Europe in 1865. 
 
 several writers, who regard the rise in the price of all Indian 
 produce as a calamity to India resulting from the growth of 
 cotton for Europe instead of food for the natives. The real 
 increase in the cultivation of cotton in India has, however, 
 been immensely exaggerated on the one hand, and the increase 
 in the cultivation of crops for native consumption in numerous 
 districts, has on the other hand been left out of sight. Our 
 import of cotton from Bombay, Madras, and Bengal, amounted 
 in 1860 to 570,000 bales, and in 1864 to 1,398,000; but the 
 bales in 1864 were considerably lighter than in 1860, and a great. 
 part of their contents was not an additional growth, but cotton 
 withdrawn from native manufacture and the markets of China. 
 And there is copious evidence, that except in particular and 
 exceptional localities, the dearness of food has not arisen from 
 scarcity. In one of the principal new cotton districts—the 
 Nagpore country, in the lake region of which 300,000 acres: 
 were under cotton—Mr. Temple’s report on the trade and 
 resources of the central provinces of India for 1863-4, states. 
 that ‘agricultural produce abounds of all descriptions common 
 to India.’ General Mansfield, in his Minute on the Currency 
 of India, March 8, 1864, observes: ‘One great reason of the 
 rise of prices in all descriptions of food, is the greater disposition 
 to consume. The people, being richer, actually eat more than 
 they did in the days of their poverty. Great tracts of land 
 which for ages had lain waste, are being daily brought into 
 cultivation.” In the ‘ Papers relating to a Gold Currency for 
 India,’ lately published by order of the House of Commons, 
 there is a Memorandum by the Board of Revenue at Madras 
 which states: ‘Agriculture is extending everywhere. There is 
 a great demand for cotton, and indeed for every product of the 
 field. Prices are at the same time exceedingly high.’ And 
 the Madras Athenzeum, not many weeks ago (March 4, 1865), 
 contained the following explanation of the rise of prices in that. 
 Presidency : ‘ The rise in the price of provisions has succeeded a. 
 general rise in the price of labour, skilled and unskilled. Men 
 engaged in mercantile pursuits, from the lowest ryots and 
 coolies, have been making money, and this has caused every- 
 
The New Gold Mines, and Prices in Europe in 1865. 321 
 
 thing to be dear to those whose salaries were fixed in the good 
 old times. Mutton is not dear solely because pasturage and 
 grain are more costly, but because it has been eaten very much 
 more largely. People took to it as soon as they could afford it. 
 It has often been thought that religious prejudices among the 
 natives would always preserve animal food for the Englishman 
 at a cheap rate. But religious prejudices succumb under the 
 influence of rupees, as they are dispelled by the light which 
 rupees throw on the question.’ 
 
 It is true that in particular places the dearness of the 
 necessaries of life is partly the result of a failure of the 
 crops, and is so far a misfortune; and in Bombay the late ex- 
 orbitant prices of cotton have really led to a diminished produc- 
 tion of food, and to a rise of general prices which cannot 
 be regarded as entirely of a durable or beneficial character. 
 But taking the upward movement of prices over India as a 
 whole, we cannot consider it as otherwise than both bene- 
 ficial and durable, and as being, like the rise of prices in 
 the Landes of the Gironde and at St. Nazaire,* the result 
 of a permanent improvement in commercial position, and in 
 the means of turning to profitable account the great natural 
 resources of the country and industrial powers of the people. 
 In a speech at the opening of a railway two years ago, Sir 
 Bartle Frere, the remarkably able Governor of Bombay, said: 
 —‘We all know what vast sums, chiefly of English capital, 
 have of late years been spent in this country. Let us consider 
 for one moment what has been the effect of giving a fair day’s 
 wages for a fair day’s labour. As arule, this was unknown before 
 the railway period. Not only were wages in most parts of the 
 country fixed by usage and authority, rather than by the natural 
 laws of demand and supply, but the privilege of labour was in 
 
 
 
 
 
 * ¢St. Nazaire, a small fishing-town seven years since, has attained a prodi- 
 gious development, equal to any American city. France, a short time since, did 
 not possess a commercial port over an extent of 500 miles of coast washed by the 
 Atlantic. The manufacturers of that part of France were consequently placed in 
 a disadvantageous position in consequence of having no seaport whence to ship 
 their produce. The population has kept pace with the traffic. The value of 
 ground has risen with the population. Ground sold formerly for sixpence the 
 square yard is now worth almost £8.’—Times, April 29, 1865. 
 
 he 
 
322 The New Gold Mines, and Prices in Europe in 1865. 
 
 general restricted to particular spots, and nothing like the power 
 of taking labour to the best market practically existed. The 
 result was that the condition of the labourer was wretched in the 
 extreme, and Government could do little to raise him above the 
 status of a serf of the soil. All this has now changed, and for 
 the first time in history the Indian coolie finds that he has in 
 his power of labour a valuable possession, which, if he uses it 
 right, will give him something better than a mere subsistence. 
 As a general rule, the labourer works far harder and better, 
 and acquires new and more civilized wants in proportion to the 
 wages he receives.’ 
 
 The whole population of India by no means indeed imme- 
 diately shares in the gains arising from access to better markets 
 and the ingress of Kuropean inventions, which on the contrary 
 tend to deprive some classes of their former means of subsist- 
 ence. ‘The native handloom is collapsing in every part of 
 India. The best wares of English manufacture are getting 
 possession of the market, and in the form of utensils for cooking, 
 eating, and drinking, are passing from luxuries into necessaries. 
 Even Cheshire salt is supplied at prices which are obtaining for 
 it a wide field of consumption in Northern India.’* This is part 
 of the general change in the relative profits of different occupa- 
 tions and the seats of different industries attending the altered 
 distribution of money, produced by closer international com- 
 merce and the tendency of all things to be bought and produced 
 in the cheapest and sold in the dearest places. Europe can now 
 manufacture cheaper than Asia, which was once the manufacturer 
 for Europe; the steel of Sheffield has supplanted that of Da- 
 mascus ; and the looms of Asia Minor and India are constantly 
 decreasing in number. The same cause, however, which di- 
 minishes the earnings of Hindoo weavers increases the money 
 incomes of the Hindoo population as a whole; for in proportion 
 as they are enabled to buy and sell in the best markets, they 
 get better prices for the numerous productions in which they 
 excel. Mr. Senior pointed out that the comparative number of 
 ounces of silver or gold the Indian and the Englishman can earn 
 
 * Papers relating to a Gold Currency for India, p. 74. 
 
The New Gold Mines, and Prices in Europe in 1865. 328 
 
 in a year depends on the comparative productiveness of their 
 industry in exportable commodities. But an Indian labourer 
 earned, when Mr. Senior wrote, only a ninth of the money 
 earned by an English one, not because his labour was really less 
 productive in that proportion, but because his means of export- 
 ing the produce were greatly inferior. The price of Indian 
 cotton may decline; Bombay may cease to be England’s 
 principal cotton field; yet may it be safely predicted that the 
 capabilities of India and its people for numerous other produc- 
 tions are such that, with the means of exportation henceforward 
 at their command, prices in the three Presidencies will never 
 subside to their former beggarly level. Future candidates for 
 appointments and undertakers of industrial enterprises in India, 
 would do well to include this result of the improved commercial 
 situation of India in their calculations. 
 
 The monetary future of India has a more general practical 
 importance for Englishmen. Mr. Fawcett remarked two years 
 ago, that the question of a future depreciation of money in 
 England, supposing the increase in the supplies from the mines 
 to continue, is substantially a question as to the continuance of 
 the drain of the precious metals to the East. We would expand 
 Mr. Faweett’s proposition into the wider one, that it is a question 
 as to the continued absorption of money in places in all quarters 
 of the world, including Europe itself, in which the amount 
 hitherto current has not been in proportion to their powers of 
 production. India is only a representative of a large class of 
 localities, whose industrial resources are providing new markets 
 for the produce of the mines. In India itself, the Governor of 
 Bombay observes in a Minutere commending a gold currency: 
 ‘Great quantities of silver absorbed in remote parts of the 
 country go to furnish a currency where no general medium of 
 exchange before existed. There can be no doubt rupees are now 
 found in hundreds of small bazaars where all trade used to be 
 conducted by barter.’* 
 
 
 
 * Papers relating to a Gold Currency for India, p. 9. In page 89 of these 
 Papers the following passage occurs:—‘ Partly owing to the change from a 
 native to a European form of government, partly to the substitution of money 
 
 Y 2 
 
324 The New Gold Mines, and Prices in Europe m 1865. 
 
 Adam Smith has observed that the difficulties of land traffic 
 are such that commerce settles first on the borders of seas and 
 rivers, and is long before it penetrates into the inland parts. 
 even of the most opulent and mercantile countries. And not- 
 withstanding the immense improvement in the means of land 
 carriage, it is still true, not only of Asia, but even of the 
 most civilized countries in Kurope, that there are inland dis- 
 tricts in which prices are far below the surrounding level, 
 because they cannot or do not sell in the best markets, or on 
 the same terms as their neighbours. While some French 
 writers expatiate on the rise of prices in the parts of France 
 intersected by railways, others complain that in a country whose 
 institutions are intended to favour equality, the railways pro- 
 moted by Government have created a shocking inequality in 
 local incomes and prices, by giving some places the power of 
 transporting their produce cheaply to the capital, while others 
 are not nearer to good markets than before railways were 
 invented. A railway map of the world enables anyone to 
 predict that prices must rise greatly and soon in a vast number 
 of places. However obvious the remark, it is one of great 
 practical importance in trade, speculation, emigration, the 
 purchase of land, and industrial enterprises of a hundred 
 different kinds, that the price of labour and produce will 
 eventually rise wherever the soil is productive, and the means 
 of locomotion are defective; and will rapidly rise wherever 
 those means are suddenly and greatly improved. But physical 
 obstacles to traffic are by no means the only causes of low prices; 
 ignorance is often the mountain to be removed, and it is one 
 which still divides England itself into regions with different. - 
 monetary rates. Mainly from the want of agricultural sta- 
 tistics, the differences in the wages of farm-labourers, the 
 profits of small shopkeepers, and the prices of produce in 
 different counties are surprising. An excellent authority on 
 this subject drew attention last winter to the fact that, while in 
 
 for barter in remote districts, but chiefly to the general increase of prices and 
 wages, and the vastly augmented amount and numbers of transactions, the require- 
 ments of India for coin are only beginning to be felt.’ 
 
The New Gold Mines, and Prices in Europe in 1865. 325 
 
 some counties the farmers were paying ruinous prices for fodder, 
 in others, hay, straw, turnips, mangolds, and carrots were 
 selling at much the usual rates.* But these are inequalities 
 which cannot continue; and the fact of their present existence 
 enables us to foresee in a great measure the future movements 
 of money and prices, and the most profitable places for the 
 investment of capital. Knowing the places where prices will 
 rise as soon as their resources are turned to account, and their 
 markets frequented, the capitalist knows places in which he 
 can get a large return for the expense of assisting to develop 
 these resources, or carry the produce to the best buyers. For 
 example, a considerable part of the enormous prices paid in 
 Europe for cotton imported from the East has really been 
 received by our own merchants; and the fact serves to explain 
 the discrepancy between our own official accounts of the value 
 of our imports from India, and those of India itself as to the 
 value of its exports to us. And the enormous profits which 
 have been made of late years in our foreign trade, and upon 
 various investments of capital in regions the pecuniary value of 
 whose produce has rapidly risen, is one principal cause of the 
 high rates of interest latterly prevailing. A high rate of 
 interest, like a high scale of prices, may arise from several 
 causes. It may arise from a scarcity of capital, a great demand 
 on the part of unproductive borrowers, or high profits which 
 enable producers to borrow on liberal terms to the lender. 
 Governments may pay a high interest out of taxes, but mer- 
 cantile men can only pay it out of profits, and the maximum of 
 profit fixes the maximum permanent rate of interest in trade. 
 Mr. Mill is of opinion that the new mines have tended to lower 
 the rate of interest. ‘The masses of the precious metals which 
 are constantly arriving from the gold countries are, it may be 
 said, wholly added to the funds that supply the loan market. 
 So great an additional capital tends to depress interest.’+ And 
 there can be no doubt that a great portion of the new gold 
 
 
 
 * Daily News, November 19, 1864. 
 t Principles of Political Economy (sixth ed.), Book iii., chap. 23. 
 
326 The New Gold Mines, and Prices in Europe m 1865. 
 
 received in this country did at first enter the loan market, and 
 tended to make interest low. The subsequent distribution of 
 the precious metals, however, seems to us to have tended in 
 the opposite direction. Money spent, for example, in improving 
 the Landes, in building at Bilbao or St. Nazaire, in cultivating 
 cotton in Kgypt, and cotton, tea, oil-seed, and other productions 
 in India, and in carrying such productions to the markets of 
 Europe, has reproduced itself with extraordinary profit, and 
 could be borrowed with profit at higher than ordinary interest. 
 In the future distribution of the precious metals, in like manner, 
 over markets in which prices will rise—thereby investing with 
 considerable pecuniary value resources which now have scarce 
 any pecuniary value at all—we may reasonably foresee a source 
 of high profit and interest for a long time to come. The very 
 spirit of mingled economy and enterprise, which adds to the 
 quantity of the capital in the loan market, by attracting 
 hitherto unemployed funds from the hoard, the till, and the: 
 private account at the bank, tends to provide more profitable: 
 employment for the capital seeking investment. ‘It is,’ in Mr. 
 Patterson’s words, ‘the utilization of hitherto useless things. 
 which peculiarly characterizes our times. It is the utilization 
 of neglected resources, the accumulation and concentrated ap- 
 pliance of a thousand forces or savings, which is the basis of 
 our extending power. We are economizing our money like 
 everything else; and this economy of capital, almost as much 
 as the new gold mines, is the agency which is giving to com- 
 merce its enormous expansion.”* In the production of gold in 
 mines utterly valueless less than a generation ago, and now 
 worth twenty millions a year—in the reclamation of waste lands 
 and waste substances at home and abroad—in trade with new 
 markets and industrial enterprise in new regions—in the col- 
 lection and subsequent diffusion of formerly unemployed money, 
 the same principle is operative throughout: a principle on which 
 we may rely to find profitable use for the fresh produce of the 
 mines, and for the savings of our incomes for an indefinite period. 
 
 * The Economy of Capital. By R. H. Patterson. 
 
The New Gold Mines, and Prices in Europe in 1865. 327 
 
 The same economical movement has brought petroleum*— 
 to take one of the latest examples of the redemption of wealth 
 from the regions of waste—and the new gold into the market, 
 and the former is a new demand for the latter. In every 
 neglected or undervalued resource in the natural world or in 
 human capacity there is a profitable investment for money, and 
 commercial enterprise is constantly finding fresh employment 
 for money, both in the purchase of new articles of value, and in 
 higher prices for things of which the value is enhanced by 
 improvement. Speaking of the non-valeurs (a term for which 
 we have no exact English equivalent) which still abound even 
 in the most civilized countries, M. About remarks that among 
 them should be classed, not only things absolutely wasted and 
 worthless from neglect, but also things whose value is only 
 partially realized, like land under corn, which would fetch more 
 under grass. Such things M. About designates as non-valeurs 
 relatives, including among them all the insufficiently exercised 
 powers of humanity. An entire half of the French nation, he 
 adds—the whole female sex—belongs to the category of non- 
 valeurs relatives. But if women were enabled, by both custom 
 and law, to realize the full worth of their powers, the higher 
 prices their industry would obtain would denote, not a fall in 
 the value of money, but a rise in the value of women. So the 
 increase in the money earnings of coolies and ryots in India, 
 and fellahs in Egypt, denotes not a mere doubling or trebling 
 of counters of payment, but an elevation of the commercial 
 status of two nations. ‘There is thus an important distinction 
 between the significance of a rise of prices in Calcutta and in 
 London; in the latter it signifies generally either a scarcity of 
 commodities or a depreciation of money, but in the former it 
 signifies trade on better terms with the world, as well as a 
 change in the local value of money. 
 
 * ‘Though petroleum has been but four years an article of commerce, it has 
 already assumed the second place among the exports of the United States, and now 
 ranks next to breadstufts. In 1860 scarcely any was exported ; last year the exports 
 amounted to 32,000,000 gallons, while the domestic consumption was even greater.’ 
 —Times, April 27, 1865. 
 
328 The New Gold Mines, and Prices in Europe in 1865. 
 
 The question whether the new -mines have lowered the 
 value of money in England is one the more difficult to answer 
 with precision, since, in addition to the absence of perfect 
 statistics, causes, such as bad seasons and the Russian and 
 American wars, have temporarily affected the prices of great 
 classes of goods. Setting aside these disturbances, the truth 
 seems to be, that while, on the one hand, such important 
 commodities as corn, sugar, and coal* are cheaper than for- 
 merly, and the wholesale prices of textile manufactures, 
 although higher than during the depression of trade, for some 
 years before 1851, remained nearly stationary from that year 
 until the American war,—on the other hand, the prices of 
 animal food, of land, and of metal manufactures, have con- 
 siderably risen ; and the result would appear to be, that in 
 wholesale trade the general value of money was not sensibly 
 altered in England before the American war. But, speaking 
 of retail prices, into which higher rents, wages, and prices of 
 animal food more or less enter, we should say that the cost of 
 subsistence is decidedly greater to all classes, except agricul- 
 tural labourers, whose chief expenditure is on bread, sugar, and 
 tea; and that fixed incomes by no means buy as much as they 
 used, especially in remote parts of the country. We believe, 
 too, with an eminent economist, that the real rise of prices to 
 consumers is partially disguised in a deteriorated quality of 
 many things. The disguises which the fact that people are 
 really given less for their money may assume are numberless. 
 For example, the prices were the same at the bathing estab- 
 lishments of Biarritz last autumn as in former years, but the 
 visitor could often get nothing but a wet and dirty bathing 
 dress for his sous. French gloves, again, are not only dearer 
 than formerly, but seem made in order to tear; and both in 
 England and France washerwomen are apt to spoil linen now 
 for the prices at which they used formerly to dress it. 
 
 But the effects of the new mines upon prices are far less 
 obscurely and far more satisfactorily discernible in countries 
 
 
 
 * ¢ Average shipping price of Newcastle coal :—1841, 10s. 6d. per ton; 1850, 
 9s. 6d. ; 1860, 9s..—The Coal Question, p. 61, by W. 8. Jevons. 
 
The New Gold Mines, and Prices in Europe in 1865. 329 
 
 like India, where they have directly or indirectly furnished the 
 means of raising the remuneration of industry, and circulating 
 produce which had formerly little or no circulation. The 
 result of this influx of money into India is by no means merely 
 the trouble of carrying and counting more coins to do the same 
 business as formerly; and so far as there has been such a 
 result, it might have been in a great measure avoided had the 
 Government allowed gold to pass current as money. By the 
 exclusion of gold, India has been obliged to fetch a much 
 bulkier material for its currency from a far greater distance, 
 and to incur an unnecessary loss, first, on the freight from 
 abroad; next, on the coinage at the mint; thirdly, on the 
 carriage through the country; and fourthly, on the wear and 
 tear of so many more new coins. The great mines of Australia 
 seem to have been specially designed to provide, at a compara- 
 tively small cost, the additional money required by the 
 increased trade of India, and its Government, too, have resolved 
 to defeat the economy of nature. In contending, however, for 
 all possible economy in the monetary system of India and 
 every other country, we cannot adopt the opinion Mr. Patterson 
 appears to entertain, that the economy might be carried so 
 far as to dispense with the cost of metallic currencies alto- 
 gether. Coin is better fitted for rough work and for the 
 labourer’s pocket than bank-notes. It cannot, like paper, be 
 eaten by ants in the East, and is safer from water and fire. 
 Nor can we conceive that a currency would be safe from 
 depreciation by excess, unless based upon things possessing 
 intrinsic value like silver and gold. Mr. Patterson argues that 
 the value of money depends simply on its conventional use and 
 acceptance. But limitation of supply is in all cases an 
 indispensable condition of value; and the history of assignats 
 in France, and greenbacks in America, shows that negotiability 
 does not constitute the determining element of the value of a 
 currency. And taking this view of the monetary use and 
 
 * Mr. Bonamy Price says in a recent article :—‘ The peculiarity of this com- 
 modity (gold) consists only in this, that every man agrees to take it in exchange 
 for his goods. The general consent to make gold the medium of exchange consti- 
 
330 The New Gold Mines, and Prices in Europe m 1865. 
 
 importance of the precious metals, it seems to be a question 
 worth considering, whether the future supplies are likely to be: 
 sufficient to supply money enough for the rapid progress of the. 
 backward parts of the world, and the immense development. 
 their resources seem sure to obtain. Mr. Maine has remarked 
 that investigators of the differences between stationary and 
 progressive societies must, at the outset, realize clearly the fact. 
 that the stationary condition of the human race is the rule, the: 
 progressive the exception ; and, when this reflection was made, 
 the condition of the greater part of Asia and of Northern Africa. 
 might even have justified the proposition that a retrograde. 
 condition of the human race was the rule. In the wildest 
 regions frequented by the nomad hordes of Central Asia, the 
 traveller discovers the vestiges of former cultivation and wealth. 
 But he can now perceive in such regions that while he stands 
 on the grave of an old civilization he stands also on the borders. 
 of anew one. It seems certain, at least as regards Asia, which 
 contains the bulk of the human race, that: not only the 
 stationary, but the retrograde communities will become pro- 
 gressive—will be reached by roads, railways, river navigation, 
 and Western commerce, and obtain the aid of Western capital 
 and skill. And it seems equally certain that the pecuniary value 
 of their produce will immensely increase; that they will need 
 vast quantities of coin for its circulation; and that the question 
 
 tutes the precise demand for gold, just as the general consent to make shoes of 
 leather constitutes the demand for leather.’ But the social compact to wear shoes. 
 does not determine what they are worth; that depends on the supply of leather 
 and competent shoemakers. The public consents to take shillings as well as. 
 sovereigns; but it is not their consent that makes a sovereign worth twenty 
 shillings, which it would not be if gold were as easy to get as silver. So the 
 public may consent to take pieces of paper for coins, but how many must be given 
 for a horse or a cow or a loaf depends on the comparative scarcity of each. We 
 make this comment merely to illustrate the principle that the value of money 
 depends on its rarity, and not on convention and custom ; for we confess we do not 
 see the drift of Mr. Price’s arguments. He refutes some fallacies of the old. 
 mercantile school which hardly required fresh refutation, and which are not 
 supported by any of the writers on currency he refers to. But he by no means. 
 makes it clear whether he objects only to the particular provisions of the Bank 
 Charter Act, or to a metallic standard altogether, and to Sir Robert Peel’s definition. 
 of a pound. 
 
The New Gold Mines, ana Prices in Europe in 1865, 331 
 
 is one of importance, whether coin enough for the purpose will 
 be easily obtained. The steady decline of the produce of some 
 of the new gold mines might seem to justify a doubt on the 
 subject. ‘But from Mexico and South America additional 
 supplies may be expected. Of Peru the British Consul says: 
 ‘ Peru is one vast mine which the hand of man has only hitherto 
 scratched.’ 'T'o the produce of the mines must be added the 
 vast sums that the progress of commerce will restore to circula- 
 tion from the hoards of Asia and Kurope, which, even in such 
 places as Lapland, are great. Large sums of Norwegian money 
 are said by Mr. Laing, in his ‘Journal of a Residence in Nor- 
 way, to have disappeared in Lapland; the wealthiest Lap- 
 landers having always been accustomed to live, like the poorest, 
 on the produce of the reindeer, and to bury the money coming 
 to them from Norway in places where their heirs often fail 
 to discover it. 
 
 The movement we have discussed is one which tends to 
 bring all buried and neglected riches to light; and we anticipate 
 from it both an ample provision of money and an increasing 
 demand for it; although temporary-fluctuations in both may 
 cause changes 1n prices. 
 
XXI. 
 PRICES IN GERMANY IN 1872.* 
 
 Tue theoretical principles involved in what is called the gold 
 ‘question are matters, for the most part, about which little con- 
 troversy exists, although there may be much respecting their 
 application to facts, from the difficulty of ascertaining the real 
 facts. The effect on prices of a great increase in the quantity 
 of the precious metals in the world depends on their distribu- 
 tion; on the proportions converted into money on one hand, 
 and articles of use or ornament on the other, the latter consti- 
 tuting, in the hands of dealers, an addition to the demand for 
 money, not to the supply of it; on the activity of the part 
 converted into money, and the degree to which the volume of 
 metallic circulation is swollen by instruments of credit; and, 
 lastly, on the course which the additional expenditure takes in 
 each country, and the conditions affecting the supply of the 
 things on which it is laid out. The mere statement of these 
 conditions shows such a multiplicity of agencies at work that 
 the necessity of proceeding by observation to determine the 
 actual movements of prices is evident; indeed, extensive and 
 careful observation on the part of many inquirers is likely, 
 after all, to leave us in ignorance or doubt on some points, but 
 it cannot fail to afford much information, especially as foreign 
 countries must be the principal field of inquiry. On the distri- 
 bution of the precious metals, first of all, and the opening up 
 of new channels for the new streams of treasure, hang the 
 gravest issues affecting the classes with stationary incomes in 
 this country. ‘The rise of prices has for some months attracted 
 
 
 
 
 
 * Fortnightly Review, November 1, 1872. 
 
Prices in Germany in 1872. 333: 
 
 considerable attention in England, and with good reason; but 
 in many parts of the Continent it has been for more than a 
 decade the subject of remark and complaint, and in the earlier 
 attention to it abroad one may perceive the main reason why it 
 has received comparatively little at home until now. A much 
 more rapid fall must have taken place in the value of money in 
 England had there been no considerable fall in other parts of 
 the world, had the chief part of the additional gold which has 
 come into circulation in the last twenty-two years been poured 
 into English markets: a matter in itself sufficient to show how 
 deeply we are concerned in its distribution, and in the move- 
 ment of prices in other regions. The movement in Germany 
 in particular deserves investigation, as a country which has. 
 undergone great economic as well as political changes in the 
 period of the new gold, and one in which several of the con- 
 ditions determining its action on prices can be most advanta-. 
 geously studied. German statistics afford fuller information 
 respecting local prices than are obtainable with respect to 
 England or any other great country. But in every country 
 the real movement of prices has been a number of different 
 local movements, and in Germany we can trace the causes 
 governing the modern changes not in German prices only, but 
 in prices throughout the world. Wide miscalculations respecting 
 the effects of the American silver mines on the value of money 
 in the sixteenth and seventeenth centuries arose from attending 
 only to some statistics of prices in a few principal markets. 
 Even two centuries after the discovery of the American silver 
 mines prices had not risen all over Hurope in the manner com- 
 monly supposed. It was a partial, local, and irregular rise 
 over a limited area, whence the prodigious effect of the streams 
 of additional money in the localities which actually received 
 them ; prices rising enormously in London, for example, while 
 wholly unaffected in part of the Highlands of Scotland and of 
 the west of Ireland, and but little affected even in some parts 
 of England itself not far from the metropolis. ‘The monetary 
 phenomenon which now first strikes the eye on an inspection 
 of German statistics is the extraordinary inequality of local 
 
304 Prices in Germany in 1872. 
 
 prices, and it is one which throws a flood of light on both the 
 past and the probable future distribution of the produce of the 
 new mines of our own time. 
 
 In the month of December, 1870, to take official statistics 
 published by Dr. Engel, Director of the Royal Prussian 
 Statistical Office,* the price of beef, putting silbergroschen and 
 ‘ pfennigen into English money, was 3d. a pound at Neidenburg, 
 in the province of Prussia, at the east of the kingdom, while it 
 was 81d. at Aix-la-Chapelle, in the Rhine province. In the 
 same month butter was 93d. at Neidenburg, 124d. at Berlin, 
 143d. at Magdeburg, in the province of Saxony, 15d. at Dort- 
 mund, in Westphalia, and 16d. at Aix-la-Chapelle. Straw was 
 10s. the schock at Braunsberg, in the province of Prussia, and 
 £2 12s. at Saarbriicken, west of the Rhine. Take again the 
 following statistics of a number of the most important articles 
 at various towns. (See Table on next page.) ‘The prices are 
 given in silbergroschen and pfennigen in Dr. Engel’s tables, 
 but the proportions will be sufficiently indicated by the 
 figures. 
 
 Dr. Engel’s tables give prices at other towns in each of the 
 different provinces, the naked statistics being presented in all 
 cases without theory or comment. The war in France may 
 probably have disturbed the markets in the towns nearest 
 the military operations during the latest period for which the 
 official statistics are published, and the military element is one 
 which we shall have to notice again as one of the conditions 
 besides the new gold affecting the movement of prices in 
 Europe. But it by no means accounts for the inequalities, 
 as is evident from the statistics of a number of years before 
 the war. Going back, for instance, to 1865, we find butter 7d. 
 a pound at Neidenburg, 10d. at Thorn, in the same eastern 
 province, and 132d. at Aix-la-Chapelle, at the extreme west of 
 the kingdom. The value of money, in short, is a local affair, 
 even in Prussia, though one of the most advanced countries in 
 
 * Zeitschrift des Kéniglich Preussischen Statistichen Bureaus. Elfter Jahrgang, 
 1871. See also the statistics of prices in the volume published in 1867. 
 
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336 Prices in Germany in 1872. 
 
 Europe, and one of the best provided with internal communica- 
 tions. Some of the differences are partially accounted for by 
 differences in the fertility or in the harvests of different regions. 
 Great fortifications, as at Cologne, Coblentz, Mayence, Konigs- 
 berg, Dantzig, and Stettin, obstructing the growth and business. 
 of towns, and raising the rents of houses, occasion other di- 
 versities. Other local causes affecting supply or demand were: 
 recently assigned on the spot at other places in reply to my own 
 inquiry. But if special local causes alone were at work, the rise 
 in some localities would be attended by a fall in others, because 
 the same sum of money cannot be in two places at once, and if 
 part of the money previously current had been drawn off to new 
 localities, there would be less left in the old ones; whereas. 
 we find a higher range of prices than formerly everywhere 
 throughout Germany, though the differences are surprising. 
 In Germany, as in England, combinations and strikes are now 
 often referred to as the chief cause of rise in the present year in 
 the prices of many things, and of the greater cost of living at 
 particular towns. But this explanation fails to account for a 
 continuous rise of prices for twenty years before strikes or 
 combinations (which are of very recent appearance in Germany) 
 were heard of; nor could a rise of the mass of commodities take 
 place without either an increase in the money demand, or a 
 diminution, which is not pretended, of the supply. A rise in 
 money wages at the expense of employers may cause a change 
 in relative prices, and a rise of things produced mainly by labour, 
 but in that case things produced mainly by fixed capital, and 
 whose price consists largely of profit, would sustain a corres- 
 ponding fall. An altered distribution of money to the advantage 
 of the working classes, again, would lead to an increased expendi- 
 ture on their part; their comforts and luxuries might accordingly 
 rise. But this in turn would be met by a corresponding diminu- 
 tion of expenditure on the part of other classes, and a correspond- 
 ing fall in some articles. A fall in the house-rents of the middle 
 classes, for example, would ensue, whereas what is particularly 
 complained of is a rise. The payments of France, on account of 
 the war, are in some places spoken of as one cause of advanced 
 
Prices in Germany in 1872. O37 
 
 prices in the present year. The chief part of the money coming 
 from that source seems, however, as yet either to have been 
 withheld from circulation by the Government, or to have been 
 expended west of the Rhine, in Alsace and Lorraine; and in any 
 case those payments afford no explanation of the continuous 
 advance of prices before July, 1871, the last month to which 
 Dr. Engel’s statistics come down. There are, I must allow, 
 anomalies in German prices which remain inexplicable to me 
 after much recent local inquiry; but some general results of 
 importance seem to emerge beyond doubt from their examination 
 in a number of different places. 
 
 The lesson, it is true, which investigation of facts impresses 
 more and more on one’s mind is distrust of economic generaliza- 
 tions; still they are of use if we are careful both, as far as possible, 
 to cover under them only the proper particulars, and also to use 
 them as guides to, instead of as concluding, inquiry. A general- 
 ization which may be advanced with reference to the present 
 subject is that, in the first place, a much lower scale of the prices 
 of land, labour, animal food, and other main elements of the cost 
 of living to large classes, will usually be found to prevail in 
 places without steam communication than in places similarly 
 situated in other respects, but possessing railways or steam 
 transport by water; in the next place, among places possessing 
 steam communication, a considerably higher scale of prices of 
 the staples referred to will for the most part be found in those 
 which are centres of industrial or commercial activity or of 
 foreign resort than in such as are of a stationary or colourless 
 character; and, thirdly, as a general rule, there is a marked 
 tendency to a higher elevation of prices in Germany as we travel 
 from east to west. Hence Germany may be roughly divided 
 into four monetary regions:—(1) places in arrear of the world’s 
 progress in respect of their means of locomotion as in other 
 respects; (2) places communicating by steam with good markets, 
 but not themselves the sites of much enterprise, or possessing 
 any special attractions; (3) places which unite the best means 
 of communication with local activity, or considerable resort from 
 without; (4) among places falling within the last category, a 
 
 Z 
 
338 Prices in Germany in 1872. 
 
 higher scale of rents, wages, the price of animal food and other 
 essentials will be found, ceteris paribus, in those which lie 
 nearest the traffic and movement of Western Europe. Of the 
 effect of the want of steam communication the reader may 
 observe an example in the comparative prices given above, of 
 Neidenburg on the one hand, without either railway or steam 
 transport by water, and Thorn on the other hand, in the same 
 province, seated both on the Vistula and on a railway. Again, 
 for an example of the lower range of prices in comparatively 
 stationary places, though well provided with means of locomotion, 
 than in centres of industrial activity, compare prices, stated 
 above, at Minster, in Westphalia, with those of Dortmund and 
 Bochum, in the same province, but among the busiest spots in 
 the Ruhr Basin. For an illustration, lastly, of the ascent of 
 prices as we move westward in Germany, compare prices in the 
 chief towns of the province of Prussia with those of Saxony and 
 Westphalia, and these again with the prices of Aix-la-Chapelle, 
 on the borders at once of Belgium, Holland, and Prussia, and 
 on the high road to France and to the English Channel. This 
 upward movement of prices as we move westward seems to be 
 connected both with proximity to the best international markets, 
 the increase of the manufacturing element and of industrial and 
 commercial activity, and also with a third condition, itself not 
 remotely allied to the two others—namely, the influence of 
 education. In the two most eastern provinces of the kingdom, 
 Prussia and Posen, it appears that above twelve per cent. of the 
 recruits annually enlisted are unlettered; in Brandenburg, 
 Saxony, and the Rhine Provinces, the percentage of unlettered 
 recruits is considerably below one per cent. One discovers 
 some correspondence between this scale of education, and the 
 following scale of the average prices, in the decade 1861-70, of 
 towns in the different provinces, from Dr.:Engel’s statistics :— 
 
 PROVINCE, Wheat.|} Rye. |Barley.| Oats. | Peas, ek \Butter.| Beef. | Pork. Hay. | Straw. 
 Prussia\ 6, 6) |(OleCl) S3eL 00 42.70 90-4. 50.210 20.4 7 SA A 8 | 24.8 | 188.8 
 Posen Pier EEO FMS Sean Fa AeLOMS That SO.500 | 2503 8.7 3-10)|)) 4.10)] 25.7 moans 
 Brandenburg . | 83.7 | 59.11 | 47-4 | 34-1 | 73.2 | 18.10] 9.8 4-7 5.2. |127. 7 a eae 
 Saxony . . « | 83.3 | 64.7 | 52-3 | 33-8 | 79.3 | 21-4 9.7, 4.9 5-4 | 360.2 | 234.2 
 Westphalia . . | 91.8 | 69.1 | 57.7 | 38.7 | 88.4 | 29.3 8.9 4.8 5.8 | sxx feeere 
 Rhine Province 93.6 | 67.11] 56.9 | 35.6 | 90.10] 27.10] 9.5 543 5.ILi 39d 0 eee 
 
Prices in Germany in 1872. 339 
 
 The higher range of prices in Western Germany, in short, 
 springs from the greater abundance of money where business 
 and trafic are best situated and most active, the manufacturing 
 element furthest developed, and general intelligence highest. 
 Knowledge, industrial energy, the value of land, labour, and 
 time increase, and the commercial and money-making spirit 
 becomes keener, for better for worse, as communication with 
 the wealthiest and busiest countries of Western EHurope becomes 
 closer, and the German approaches the principal lines of western 
 traffic, travel, civilization, and money expenditure. 
 
 _ Those who are conversant with the theory of the interna- 
 tional distribution of the precious metals, expounded by Mr. 
 Senior and Mr. Mill, may find evidence in the local prices of 
 Germany that the principles which govern the partition of the 
 world’s currency among different countries, and the scale of 
 international prices, apply also to the distribution of a national 
 currency and the comparative prices of different places in the 
 same country. ‘The more efficient, productive, and valuable the 
 industry of any country, or of any locality, and the cheaper 
 and faster its produce can be carried to the best markets, the 
 higher will be the scale of pecuniary earnings and incomes, and 
 the higher consequently the prices for the most part of things 
 in great demand, such as labour, land, and fresh animal food, of 
 which the supply is limited, and which make a great figure in 
 the cost of living. The producers for the foreign market get 
 higher profits and wages; money flows in from abroad, and 
 producers for home consumption, though no such nice equality 
 of wages and profits as book theorems assume really exists, earn 
 more than can be earned in less active and less advantageously 
 situated places. If Yorkshire cloths and Lancashire cottons, 
 carried by steam, could be made to suit the convenience and 
 taste, and awaken a demand on the part of the whole population 
 of European Russia and Asia, what would follow with respect to 
 prices in England? Yorkshire and Lancashire would have a 
 larger claim on the money of the world ; there would be a rise 
 in Yorkshire and Lancashire wages and profits in general, 
 though by no means in the exactly equal ratio which economic 
 
 Z2 
 
340 Prices in Germany in 1872. 
 
 fictions assume for wages and profits throughout the whole king- 
 dom; both the working classes and their employers would have 
 more to spend, and the comforts and luxuries of both, of which 
 there was not a proportionately increased supply forthcoming, 
 or not without additional cost, would advance in price. So in 
 Germany, although one cause of prices being higher in places 
 of great industrial activity or resort than in more purely agri- 
 cultural or less frequented localities, may be that the supply 
 needed, or part of it, must be brought from a greater distance, 
 yet the principal cause is the difference of money demand and 
 expenditure. The great rise in the cost of living at Berlin in 
 the last year and a-half springs in the main from the fact that 
 Berlin has become the capital not merely of Prussia, but 
 of Germany, its political, intellectual, and financial centre. 
 Hence a great influx of capital, people, and money, a great 
 activity of business, an extraordinary demand for houses, build- 
 ing materials, and labour, an exorbitant rise in the prices of 
 things into which they enter as principal elements, and a con- 
 dition of the labour market which enables workmen in some 
 trades to exact what are thought by employers exorbitant 
 terms. ‘The same monetary phenomenon presents itself like- 
 wise in small towns, which situation and local advantage have 
 made places of much resort. At Heidelberg, for instance, I 
 was lately told by a resident, who is a high authority with 
 respect to German prices, that the cost of living to persons of 
 moderate income, though rising many years before 1866, had 
 advanced fifty per cent. since that date, and is still advancing, 
 the main proximate cause in the last twelve months being the 
 exactions by the working classes, in one trade after another, of 
 a great advance in wages. But Heidelberg lies on the high road 
 of travel, and almost at the intersection of the principal lines of 
 European railway communication; it is one of a ring of towns 
 of much resort, and itself possesses special attractions; the de- 
 mands for higher wages have been grounded on the rise of 
 commodities, and the increased pecuniary expenditure, of which 
 the higher wages and prices afford proof, could not be forth- 
 coming without a more plentiful circulating medium. 
 
Prices in Germany tn 1872. 341 
 
 The comparison of local prices in Germany reconciles in 
 principle two seemingly opposite theories respecting the in- 
 ternational movement of prices consequent on the new gold 
 mines, though neither theory is quite in accordance with facts. 
 According to one theory, prices should have risen earliest and 
 most in the countries whose industrial efficiency and whose 
 “means of communication were furthest advanced, and therefore 
 more in England than in Germany or France. Another theory 
 is that steam communication equalizes prices, raising them, 
 therefore, most where they were formerly lowest, and therefore 
 most in what formerly were backward and cheap countries and 
 localities. Each theory contains a measure of truth, but the 
 first overlooks the rapid diffusion of industrial inventions, 
 activity, and improvements in transit, the consequent changes 
 in the distribution of money and in the relative prices of dif- 
 ferent countries and different localities in the period of the new 
 gold; while the second exaggerates the equalizing influences of 
 steam locomotion. The real movement of comparative national 
 and comparative local prices has not been a general equalization, 
 nor as yet even a tendency towards it. What we find is, not a 
 uniform elevation of the whole level, but the rise, as it were, of 
 a great number of monetary peaks of different altitudes—a rise, 
 that is to say, at a great number of points in continental countries 
 to or near to the highest ranges in England, and again ata still 
 greater number of other points, to altitudes considerably below 
 the pitch reached at the points of highest development, but 
 much above the level of places without improved communication. 
 Railways and steamers are said to equalize prices; and so they 
 do, creating equalities and tendencies to equality of two kinds, 
 They tend to raise prices at many of the most advanced places 
 on the Continent to, or nearly to, a par with those of the principal 
 English markets, and again, to bring prices in previously remote 
 and cheap places up towards the range generally prevailing 
 along the lines of steam transport. But they also create new 
 inequalities, and these, too, of two kinds. They raise prices at 
 places obtaining the new means of communication above the 
 range prevailing at places obtaining no similar advantage ; and 
 
342 Prices in Germany in 1872. 
 
 again, they concentrate capital, business, and money expendi- 
 ture plethorically, as it were, at particular spots with peculiar 
 natural resources or advantages of situation, and thus elevate 
 prices enormously there at a time when an unwonted abundance 
 of money isin the world. Improvements in locomotion develop 
 the resources of the world, but the resources of different countries. 
 and of different localities are unequal, on the one hand, and the 
 new means of locomotion develop their actual resources unequally, 
 on the other hand, because not equally distributed. It is not, 
 we must remember, the mere acquisition of means of rapid 
 communication that raises money-earnings to the highest point, 
 or that makes the greatest change in habits of expenditure and 
 the pecuniary cost of living; what does so is the ingress of 
 wealth, enterprise, and outlay, the generation not only of 
 opportunities for pecuniary gain, but also of the habit of taking 
 advantage of them, the influx not only of money, but also of 
 the money-making spirit, the creation of a custom of looking, 
 not for customary prices, but for the highest prices to be got for 
 everything, every inch of ground, every trifling exertion, every 
 minute of time; while, at the same time, the habits of consumers 
 naturally become costlier as their incomes as producers become 
 larger. So far are railways and steamers from diffusing these 
 causes of extraordinary pecuniary gains and extraordinary prices 
 equally throughout all the regions they traverse, or even all the 
 places they actually touch, that they often draw capital, business, 
 and money, not to but from places on the very lines of steam 
 communication to others with greater advantages. Hven at 
 spots whose position and opportunities are such that the money- 
 making spirit, the habit of seeking the utmost price, and the 
 organization often necessary to obtain it, might be expected to 
 develop themselves at once, they sometimes do not do so for 
 years. In a district, for example, where the bulk of the 
 inhabitants are owners of land, growing chiefly for their own 
 consumption, they may not be tempted immediately by the offer 
 which a new railway makes of high prices at a distance to send 
 their produce to market. People are often reluctant to change 
 their ways of life, even where they would be great pecuniary 
 
Prices in Germany in 1872. 343 
 
 gainers. A few weeks ago, at a place in the Ruhr Basin, 
 which must soon be absorbed in the whirl of industrial 
 activity round it, but where life is still comparatively cheap, 
 tranquil, and old-fashioned, an hotel-keeper answered the 
 question, whether there were any great factories or industrial 
 establishments yet,—‘ No, thank God!’ It must be confessed 
 that the new movement does not always add to the comfort or 
 happiness of the district it invades. Take those little hamlets 
 which one sees from time to time nestling in a ravine on the 
 side of one of the low mountains of Siegerland, where every 
 householder has his twenty acres of land, his share in a wood, 
 his three or four cows, his pig, and perhaps a few sheep, whose 
 own land produces his food, and the sale of whose wood supplies 
 all his other wants. ‘The mountain has ribs and bowels of iron ; 
 tall chimneys and high prices will soon rise at its base; the 
 peasant may find that his wood buys less than before; he may 
 descend from the rank of a landowner to that of a labourer, and 
 perhaps be tempted to begin a new, anxious, and uncertain 
 career in a town. But there is another side of the picture. 
 The progress of industrial and commercial activity is inseparably 
 bound up with that of science and art, as both cause and effect ; 
 and it is the chief of the agencies which, by a number of 
 influences, direct and indirect, are elevating at last the condition 
 of the toiling masses of Kurope in one place after another. 
 
 The movement in place of prices in Germany, or of com- 
 parative local prices, is obviously connected with the movement 
 in time, or the comparative prices of different periods, and 
 therefore with the question concerning the changes in the 
 value of money since the new mines were discovered, or the 
 gold question. With a view to the solution of a different 
 though closely related question, to which we shall have to recur, 
 and which the title of his Essay explains,* an eminent German 
 statistician has recently published an elaborate analysis of the 
 
 
 
 
 
 * Welche Waaren werden in Verlaufe der Zeiten immer theurer ? [What com- 
 modities become constantly dearer in the lapse of periods of time?] Statistische 
 Studien zur Geschichte der Preise. Yon Dr. E. Laspeyres. Tubingen, 1872. 
 
344 
 
 Prices in Germany in 1872. 
 
 prices of 8312 commodities from 1846 to 1865 in the market of 
 Hamburg. Among the results is a classification of the 312 
 commodities in eleven groups, with the comparative prices of 
 successive quinquennial periods indicated in the following Table, 
 in which the prices of the first period, 1846-50, are represented. 
 by 100 :— 
 
 GROUP. 
 
 iT; 
 
 III. 
 
 ive 
 
 ve 
 
 vas 
 
 VII. 
 
 Pang 
 
 
 
 Class of Commodities, 
 
 
 
 
 
 Products of South 
 European plants— 
 wines, fruits, &c. . 
 
 Agricultural products 
 of Central Europe— 
 corn, peas, beans, 
 &e., » 
 
 Hunting and pert 
 products, . 
 
 Products of vi icul- 
 ture, 
 
 Produce of European 
 cattle-rearing, 
 
 Edible Colonial a 
 (octsy 3108 
 
 Non-edible Colonial 
 products, ; 
 
 Fibrous manufactures 
 —linen, woollens, 
 spun silk, &e., . 
 
 Chemical manufac- 
 tures, . 
 
 Mineral and metal 
 manufactures, 
 
 Products of mining 
 and smelting—coal, 
 iron, &e., 
 
 
 
 Number of 
 Commodities. 
 
 23 
 
 41 
 
 19 
 
 17 
 
 29 
 
 44 
 
 44 
 
 12 
 
 40 
 
 
 
 22 
 
 24 
 
 15 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 100 
 
 
 
 
 
 
 
 Five 
 years, 
 
 121 
 
 122 
 
 116 
 
 109 
 
 113 
 
 110 
 
 105 
 
 102 
 
 111 
 
 107 
 
 107 
 
 111°2 
 
 
 
 Five 
 years, 
 1856 
 
 143 
 
 133 
 
 135 — 
 
 113 
 
 137 
 
 125 
 
 115 
 
 107 
 
 117 
 
 111 
 
 108 
 
 122°1 
 
 
 
 
 
 136 
 
 128 
 
 131 
 
 160 
 
 125 
 
 129 
 
 123 
 
 127 
 
 102 
 
 101 
 
 97 
 
 123°3 
 
 
 
 
 
 Fifteen 
 
 133°7 
 
 127°8 
 127°8 
 127°2 
 124-1 
 121°8 
 
 114°0 
 
 112-2 
 109°9 
 
 106-4 
 
 104°1 
 
 118-98 
 
Prices in Germany in 1872. 345 
 
 If, however, the reader examines the prices of the particular 
 articles comprised in the eleven groups, he will find that the 
 average prices of the groups do not show the real rise, the 
 greater number of the more important commodities having 
 risen much more in the period subsequent to 1846-50 than the 
 averages indicate. Unfortunately, too, the table stops at the end 
 of 1865, while a great rise in some commodities has taken place in 
 subsequent years. Group x1. in the table shows, in fact, a fall 
 in coal and iron in 1861-65 compared with 1846-50, whereas 
 those great staples are now at extravagant prices in Germany 
 asin England. The statistics presented by Dr. Laspeyres* do 
 not enable us to make any close comparison between the 
 movement of prices at Hamburg and at London, but so far as 
 they go they indicate a considerably greater rise at Hamburg 
 since the discovery of the new mines. On this point, it seems 
 to me that the reason assigned by Dr. Laspeyres for a greater 
 rise of cereals, &c. (group u1.), at Hamburg than at London, 
 namely, that England has derived greater benefit than Germany 
 from improvements in transport and free trade in corn, hides 
 the real distribution of benefits. Improvements in transport 
 and trade tend to raise the pecuniary value of raw produce 
 exported to the benefit of producers in the exporting countries, 
 and to lower the price in the importing countries to the 
 benefit of consumers. But Germany is an exporting, England 
 a great importing country in the matter of corn, Germany 
 being, in fact, one of the sources of the English supply. Dr. 
 Carl Knies, the eminent professor of political economy at 
 Heidelberg, pointed out in an essay on the ‘ Depreciation of 
 Money’ in 1859 that there were causes tending to a greater 
 rise of prices in Germany than in England. ‘First and fore- 
 most,’ he observed, ‘among the agencies creating important 
 changes in prices come railways, diminishing the differences in 
 the local values of money, by causing its influx into places 
 where prices were low from places where they were high. 
 Germany may be classed among the former, England among 
 
 
 
 * See p. 58 of his Essay. 
 
Prices in Germany in 1872. 
 
 346 
 
 
 
 
 
 
 
 
 
 
 
 GLE | &-LE | ITS] &g 8-9 ¢-6 | OT-LG |OT-06 | 9-G€ | 6-99 |II-L9 01-86 ieee t 
 : ‘sQOUIAOIG OUITY 
 F106 | 1:86 | Gh} GE 6-7 1-9 6:06 | §-GL | L-86 | 3-9F | 0-19 | 1-68 | OGS—TPF8T 
 C406 | G98 | FO] 6-7 6-9 1-6 PIG | €-LL | 8-8 | &-19 | £9 | €-€8 | OL—T98T 
 sah * _* KAOXRS 
 6-91T | 1:26] 6&8] HE 9-9 01-9 6-91 | 0-69 | 9-93 |IT-98 | 3-6% | -99 | OG—TFSI 
 b-GLG | I-18 | 9-9 | 8-F 8-¢ 6-8 €-66 | ¥-88 | 1-88 | 4-29 | 1-69 | 8-16 | OL—T98T 
 > “erpetdqso AA 
 €-09T | 9:06 | 6-€] IT-@ 0-7 AE, 6:06 | G-89 | 6-86 |O1-F | 9-99 | F-92 | OG—TFST 
 0-676 | L246 | G9] 2L-F 6-9 8-6 | OT-8T | 3-82 | T-F& |OT-G€ |TT-6¢ | 1-8 | OL—I98T 
 ‘S.Inquapuvig 
 6-F8T | 1:66 | 98 | 0-8 9-7 6-9 9-FL | 6-99 | 9-93 | HLH | €-9F | 6-69 | OG—TPFST 
 €-S8I | €-0€ | II-F | IT-€ 6-% G-8 €-8I | 6:99 | 8-08 | FF | I-89 | 6-62 ee et : 
 “eo $m SBTeOTTS 
 S-IFL | 9-36 | 98] 6% v-P Lg I-LT | ¥-69 | ¥-F6 |IT-GE | G-9F | 6-99 | O&—TP8I 
 1-386 | €-36 | FG] IT-€ PP &-6 v-6L | L-49 | L-€8 | 6-9F |TT-69 |OT-¢8 | OL—T98T 
 ; *  “eTuv1ewog 
 €CLT | 261 | £E |} 66] OLS L-9 T-9L | ¥-8h | L-FG | FEE | L-Gh | 8-89 | O¢—IF8I 
 G-F6T | 1:93 | OT-F | OT-€ €-¢ 1-8 €-GT | 9-89 | 8-1E |OT-Pr | 8-G¢ | 1-6 ee fs : 
 a" wesog 
 F991 | 8:36 | FE] 6-6 6- OI-¢ O-FL | 8-LY | F-F3 | GFE | 0-FF | 0-99 | OG—TF8I 
 8-881 | 86} 8H] L& GG IT-2 4-06 | 6-69 | ¥-08 | L-IF |1T-€¢ |II-18 ae ge 
 ‘ *  “eIssnig 
 IT-€7T | T-6E | 0-8 | FG 9-% o4 6-CLl | L-9F | 0-66 |IT-T€ | T-6F | ¥-29 | OG—IP8I 
 ‘mMeIIG | ‘Ae | ‘yIOg | ‘joog | ‘Morey | *1033nq |*soozejog | ‘svog | *s}¥Q |'Ao[Ieg| ‘oAQ |*seOT AY ‘opro0q, *HONIAOUT 
 
 
 
 | 
 
 
 
Prices in Germany in 1872. B47 
 
 the latter. Ata time when a general fall in the value of money 
 is taking place in consequence of the abundance of gold, the 
 change is diminished in England and augumented in Germany 
 by the change in the movement of money.’ But the same 
 movement which has given Germany railways and steamers 
 has given it steam for manufacture and mining as well as for 
 locomotion, and all the mechanical and chemical inventions of 
 England and France in addition to its own. If we add great 
 legal and administrative reforms removing obstacles to production 
 and trade, and the spread of education, we may see reason for 
 greater relative progress and a greater relative increase of pecu- 
 niary incomes in many parts of Germany than in England, 
 though the actual scale of incomes and prices may still be higher 
 in England. ‘The prices of Hamburg, it should be added, must 
 not be taken as representing the movement of prices throughout 
 Germany, where the real movement is made up of a number of 
 different local movements. Hamburg, long one of the chief 
 seats of German trade, has advanced much less in respect of 
 industrial activity, means of communication, wealth, and the 
 increase of money, than many other towns which have come to 
 the front in the last twenty years. Dr. Engel’s tables supply 
 some additional information, showing, for example, the average 
 prices of some important commodities in the chief towns of each 
 province of Prussia in the two decades 1841-50 and 1861-70 
 respectively. (See Table on preceding page.) 
 
 If, however, we compare the average prices of 1861-70 
 with those of the immediately preceding decade 1851-60, we 
 find that while the rise in butter, tallow, beef, pork, hay, and 
 straw, has been a continuous one, wheat, barley, oats, peas, and 
 potatoes were, on the contrary, on the average of years, higher 
 in the decade 1851-60 than in 1861-70. ‘The articles, how- 
 ever, which have risen continuously are much better measures of 
 the purchasing power of money in Prussia than those which 
 ranged higher in the first decade of the new gold period than 
 in the second, above the prices of 1841-50. The prices of 
 butter, tallow, beef, and pork, are taken on a more uniform 
 system throughout the different markets of the kingdom than 
 
348 Prices in Germany in 1872. 
 
 those of the other articles. The seasons produce much more 
 violent fluctuations in grain and potatoes than in animal food ; 
 and animal food is both a much more important item than 
 bread and potatoes in the economy of the middle and wealthier 
 classes, and one better adapted to test an increased expenditure 
 on the part of the working classes—butter especially, on which 
 the working classes in the mining and manufacturing districts 
 at least of Prussia spend much more than on meat. Not to 
 encumber our pages with too many figures on one hand, and 
 because, on the other hand, butter, of all the articles in Dr. 
 Engel’s statistics, affords the best criterion of the movement of 
 prices and the cost of living, let us take the price of that article 
 during a succession of years at various towns; the year 1841 
 affording, as Dr. Engel’s tables show, a fair standard of pre- 
 Californian prices for comparison :— 
 
 Prick oF THE Pounp oF BurrerR InN PFENNIGEN. 
 
 
 
 YEAR. 
 
 Konigsberg. 
 Stettin. 
 Magdeburg. 
 Aix-la-Chapelle. 
 
 1841 73 71 70 96 84 64 81 64 75 75 
 1851 71 72 70 88 84 78 89 60 68 67 
 1852 | 80 | 80 84 95 86 90 89 64 77 93 
 1854 | 90 91 101 100 91 93 97 78 85 96 
 1855 | 95 | 103 106 110 91 98 104 82 93 100 
 1856 | 101 110 104 | 113 112 97 108 85 102 112 
 1857 | 104 | 104 | 102 | 117 120 102 118 88 113 | 129 
 1859 | 103 101 98 107 119 90 109 80 109 | 130 
 1860 | 92 95 88 104 108 82 95 75 91 111 
 1862 | 106 | 106 107 | 125 111 94 | 111 89 110 | 124 
 1863 | 105 107 109 120 114 102 108 73 | 104 | 122 
 1864 | 104 | 105 110 | 120 E17) 10 114 87 118 | 128 
 1865 | 110 | 112 116 125 118 | 113 120 92 125 | 137 
 1870 | 111 | 118 128 132 124 | 115 140 | 105 134 161 
 
 
 
 
 
 
 
 
 
 
 
Prices in Germany in 1872. 349 
 
 These statistics exhibit, amid some curious irregularities, a 
 continuous rise at all the towns in the list, but a much greater 
 rise at Aix-la-Chapelle, where the price has more than doubled, 
 than at Konigsberg, where the rise is a little more than 50 per 
 cent. We have, however, no statistics of places where the rise 
 has been greater: places, that is to say, which before 1850 had 
 neither railway communication nor industrial activity, and 
 which now are in the front rank with respect to both. Aix-la- 
 Chapelle was a considerable town, and had the advantage of 
 a railway before the discovery of the new gold mines; but 
 there are now mining and manufacturing centres which twenty 
 years ago were not to be found on the map, and it is in such 
 places that the scale of wealth, wages, rents, and the prices of 
 animal food, has changed most. 
 
 Dr. Engel’s statistics do not come down to the present year ; 
 but Mr. Scott’s report on ‘the condition of the industrial 
 classes, and the purchase power of money’ in Wirtemberg, 
 supplies figures showing a continuous rise in that part of 
 Germany since 1850 :— 
 
 CoMMODITIES. | April, 1870. | April, 1872. | 
 Beef, , ; 6d. 64d. 
 Pork, : ; 6d. 7d. 
 
 Veal, F : 54d. 6id. 
 Butter, — , , 174. 103d. 
 Milk, ; : 23d. 3rd. 
 
 
 
 The recent advance in these articles has, I am assured, been 
 greater in some parts of Germany, though I am not enabled to 
 authenticate the results of personal inquiry by official statistics. 
 It is more important to note that no statistics exhibit the real 
 increase in the cost of living in many German towns, since 
 they do not exhibit the increase of town wages and house-rents, 
 and of the retail prices of many things into which wages and 
 house-rent enter as principal elements. ‘The practical change 
 in the value of money varies, of course, for different classes and 
 
390 Prices in Germany mm 1872. 
 
 different individuals, according to the course of their habitual 
 expenditure, since some things have risen more than others, 
 and some, both imported and manufactured in the country, not 
 at all. The classes who seem to be least affected by it as 
 consumers, are those who have no wages to pay, while their 
 own wages have risen considerably, and who have often a 
 cottage, a garden, and cow of their own. The classes with 
 stationary incomes, in whose expenditure house-rent, animal 
 food, and the wages of servants, form the chief items, are, of 
 course, the chief sufferers. 
 
 On the whole, it is evident that there has been a great 
 change in the value of money in Germany in the last twenty 
 years, though it has been different in different localities, and 
 we have no such array of statistics as would be necessary to 
 determine the exact amount of the fall in any locality. Still 
 less can we determine exactly the share of the new gold mines 
 in the fall. ‘There were causes tending to raise prices in 
 Germany, though no new mines of extraordinary fertility had 
 been discovered. One cause, altogether distinct from the mines 
 in its nature, though indistinguishably associated with them in 
 its operation, is the improvement in the industrial and com- 
 mercial position of the Germans. In a country which has gold 
 mines of its own, the production of gold depends partly on the 
 powers and skill of the miners, and partly on the fertility of the 
 mines. Let both the efficiency of the miners and the produc- 
 tiveness of the mines largely increase, and there will be a vast 
 increase in the production of gold; but it will be impossible 
 to say how much is due to the miners, and how much to the 
 mines. foreign trade, as economists put it, is the gold mine 
 from which nations without actual mines of their own get their 
 gold, and the fertility of the foreign mine and the efficiency 
 of the Germans who work at it have increased together. 
 
 Both causes together, nevertheless, fall short of explaining 
 the changes in German prices. ‘Two other sets of causes have 
 been at work at the same time: one augmenting the amount 
 of the circulating medium and the rapidity of its circulation, 
 the other affecting the supply of some of the chief articles on 
 
Prices in Germany in 1872. dol 
 which the cost of living mainly depends. The improvements 
 - in locomotion and in commercial activity which have so largely 
 augmented the money-making power of the Germans, have 
 also quickened prodigiously the circulation of money; and the 
 ‘development of credit, likewise following industrial progress, 
 has added to the volume of the circulating medium a mass of 
 substitutes for money which move with greater velocity. You 
 can send money by steamer and railway, but you can send credit 
 by telegram, and a new million at New York may raise prices 
 in a few hours at Frankfort and Berlin. A much smaller 
 amount of money than formerly now suffices to do a given 
 amount of business, or to raise prices to a given range; and to 
 the increased amount of actual money now current in Germany 
 we must add a brisk circulation of instruments of credit. Itis | 
 true that some of the principal means of substituting credit for 
 coin, and economizing the use of the latter, have little or no 
 operation in Germany. Cheques, strange to say, are hardly in 
 use, and there is no Clearing-house. But there is a mass of 
 bank-notes; and bills of exchange, for very small as well as 
 for large amounts, pass from hand to hand among people in 
 business almost as freely as bank-notes; the same bill making 
 often a great number of purchases before it reaches maturity. 
 The transactions are, of course, liable to be reopened if the bills 
 be not met in the end, but otherwise they answer as payment 
 in cash. A small proportion of coin thus supports an immense 
 volume of circulating credit. “Were the circulating medium 
 composed of coin alone, whatever the amount of the precious 
 metals issuing from the mines or circulating in other countries, 
 whatever the price of German commodities in the gold market 
 abroad, no rise of prices of German commodities at home could 
 take place without additional coin enough to sustain. it. It 
 might be the conviction of people in business in Germany, 
 that, looking to international prices, and the relative cost of 
 production of German exports and other German commodities, 
 prices generally ought to be double their former amount; yet, 
 in the absence of instruments of credit, only a doubled quantity 
 of coin, or a doubled rapidity of its circulation, could actually 
 
852 Prices in Germany im 1872. 
 
 double prices, and give German labour and productions their 
 due value in relation to money. But, when credit comes in 
 as a substitute for coin, it may, with a small proportion of 
 money as a support, raise prices at home to the pitch which 
 equal amounts of labour and abstinence fetch in the foreign 
 market. 
 
 There has, then, been a plurality of causes, besides the 
 increased quantity of gold in the world, augmenting what for 
 shortness we may call the money demand for German commo- 
 dities—the increased industrial and commercial powers of the 
 Germans, the more rapid circtilation of money, and the rapid 
 augmentation of the circulating medium by a volume of credit. 
 But the question of prices is a question concerning the supply 
 of commodities no less than the money demand. An increased 
 money demand does not of necessity raise the prices of commo- 
 dities. That depends on the conditions affecting the supply of 
 each class of thing, for which there is a greater money demand. 
 A nation like the United States, possessing a vast territory of 
 prodigious fertility, might, with peace and free trade, see the 
 prices of almost all things falling in the markets of California 
 itself. An important class of considerations, connected with 
 the rise of prices in both Germany and England, is contained 
 in the question Dr. Laspeyres has raised: ‘ What commodities 
 become constantly dearer in the lapse of periods of time?” 
 Adam Smith has given an answer which at least points in the 
 right direction, if it involves an erroneous distinction between 
 corn and other sorts of rude produce in the case of old countries 
 which do not import the former: ‘If you except corn and such 
 other vegetables as are raised altogether by human industry, 
 all other sorts of rude produce—cattle, poultry, game of all 
 kinds, the useful fossils and minerals of the earth, &¢.— 
 naturally grow dearer as the society advances in wealth and 
 improvement.’ Among the sorts of rude produce particularly 
 referred to by Adam Smith in his elaborate exposition of the 
 subject as naturally growing dearer in the lapse of periods of 
 time is wood, and German statistics afford an illustration. In 
 Professor Rau’s ‘ Grundsiatze der Volkswirthschaftslehre,’ the 
 
Prices in Germany in 1872. 303 
 
 following prices of a given measure of the same wood at 
 Wirtemberg, in successive periods, are given :— 
 
 Fl, Kr, 
 1640—1680 F < ; 3 : Cards 
 1690—1730 > ; : , 2 0 57 
 1740—1780 . : , ; 2 14 
 1790—1830 8 22 
 
 Dr. Engel, again, gives statistics which show the conti- 
 nuous rise of carpenter’s wood in another part of Germany 
 
 since 1830 :— 
 
 1830. 1840. 1851. 1860. 1865. 
 Carpenter’s wood per klafter, ¢ \ 
 in silbergroschen, } Be 16 Lee bt 18) 
 
 Of course, the rise in price of things which grow naturally 
 dearer in the progress of society is enhanced by any sudden 
 increase of money and fall in its general value, and it then 
 becomes impossible to apportion the influence of the different 
 agencies—increased consumption with growing scarcity or 
 greater cost of production on the one hand, and greater abund- 
 ance of money on the other. Every artificial obstruction to 
 the supply of important commodities inflicts an aggravated loss 
 on those whose money incomes remain stationary while money 
 is falling in value. The rise in the price of animal food in 
 Germany, where there is a wide distribution of landed property 
 and a simple system of land transfer, may be ascribed mainly 
 to natural causes; and a large part of the German population 
 are either gainers by it as sellers, or unaffected by it as pro- 
 ducers for their own consumption. It is otherwise in a country 
 like England, in which laws in the supposed interest of an 
 insignificant number limit the supply of land in the market, 
 diminish its produce, and make food unnaturally dear. The 
 gold question has added enormously to the importance of the 
 land question in England, and the classes with fixed incomes 
 are especially concerned in both. 
 
 Persons with stationary incomes in this country are, as it 
 were, between several fires. They suffer from high prices, 
 
 2A 
 
304 Prices in Germany im 1872. 
 
 whether they spring from abundance of gold, from natural 
 dearth of commodities, or from the increase of population and 
 wealth. They suffer along with other classes, and the pros- 
 perity of other classes is a calamity to them. The main re- 
 sources they had to look to on the discovery of the new gold 
 mines were reforms in the laws relating to land in their own 
 country on the one hand, augmenting and cheapening the 
 produce of land, and industrial and economical progress in 
 other countries on the other, assigning to these the principal 
 share of the new treasure. Of all parts of Hurope, England 
 is that in which the fall in the value of money, measured in 
 commodities—I do not say measured in labour—ought to have 
 been least sensible, on account of the nature of its imports, 
 the natural cheapening of manufactures, the improvements in 
 husbandry which legislation might have indirectly effected, 
 the example which all the rest of the civilized world had 
 set with respect to land laws, and the immense demand for 
 the treasure from the new mines which peace, liberty, industry, 
 and trade might have opened up in other countries to cir- 
 culate a vast increase of produce at much higher pecuniary 
 value than remoteness and poverty have hitherto allowed them 
 to bear. The new area in Europe, not to speak of Asia, 
 which civilization would open for the employment of new 
 money is enormous. ‘The inequalities in the local prices of 
 Germany, the rise in its most progressive localities, the com- 
 paratively low prices in its backward localities, point to one 
 of the chief outlets to which people here, with fixed incomes, 
 might have reasonably looked for the absorption of the new 
 gold. Low as prices still are in many places in Germany, 
 they are lower over great districts of Austria, and yet lower 
 over the greater part of Russia, two countries, moreover, 
 where inconvertible paper currencies resist the circulation of 
 the precious metals. 
 
 As matters stand, the increase of money in England has 
 far outstripped the increase of some of the most important 
 commodities. And when one reflects that the money comes 
 
Prices in Germany im 1872. 30D 
 
 from a new world of peace and liberty, in which production 
 never flags, while the demand for it in Kurope is limited by 
 the policy of an old military world, and the supply of commo- 
 dities by the law of an old feudal world, the prospect before 
 those with whom money does not increase with house rent and 
 the price of food seems the reverse of encouraging. 
 
 2A 2 
 
XXII. 
 
 PRICES IN ENGLAND IN 1873.* 
 
 THE movement of prices in England is a less simple matter 
 than the reasoning of some eminent economists indicates. The 
 advance in the cost of living is considerably greater than 
 appears from their calculations, and the new gold is but one 
 of the causes acting on prices. An attempt has been made to 
 - measure the effect of the gold by comparing the average prices 
 of a number of important commodities during the period since 
 the new mines were discovered, with the average prices of a 
 previous period. Mr. Jevons, who adds rare mathematical 
 powers to high economic attainments, has adopted this method ; 
 but, in inquiries of this kind, the truth is seldom reached until 
 several methods have been tried, and probable truth only, not 
 mathematical precision, is attainable. The method of averages 
 fails in several ways. It does not show the real movement of 
 prices or the real depreciation of money; the tables omit some 
 of the chief elements of the cost of living; the prices compared 
 are wholesale prices, while the purchasing power of an income 
 depends on retail prices; and, by ascribing the whole rise of 
 prices to the new gold, this method conceals the material fact 
 that the gold is only one of a plurality of causes lately tending 
 to raise them. 
 
 A comparison of the average prices of successive periods of 
 years may be useful to indicate the total profit and loss on 
 transactions in the periods compared, but is delusive as a 
 criterion of the change in the value of money. Suppose that 
 in the first decade after the discovery of the new mines prices 
 
 
 
 * Fortnightly Review, June 1, 1873. 
 
Prices in England in 1873. B07 
 
 had risen twenty per cent., and in the second decade had fallen 
 back to their old level, money at the end of the twenty years 
 would be of the same value as at the beginning, yet the average 
 prices of the whole twenty years would show a depreciation of 
 twenty-five per cent. Suppose, on the other hand, that prices 
 had risen steadily during both decades so as to range fifty per 
 cent. higher at their close, the real fall in the purchasing 
 power of money would be fifty per cent., yet an average would 
 show a fall only of twenty-five: that is to say, only half the 
 real fall. Take, as exemplifying the second supposition, the 
 movement of prices in the sixteenth century, after the discovery 
 of the American mines. Prices rose continuously in some parts 
 of Europe until money had sunk to a third of its former value ; 
 here an average, including the lower prices of the earlier years 
 of the movement, would far under-estimate the real depreciation. 
 So in England now, if the cost of living to large classes be 
 much greater than during most of the years since the new gold 
 mines were opened, the average prices of the whole period 
 afford no measure of the real diminution in the purchasing 
 power of fixed incomes. If house rent, the wages of servants, 
 indoor and outdoor, animal food of all kinds, coal, washing, 
 many articles of clothing, horses and horse-keep, cost now in 
 the aggregate, by a succession of rises, one-half more than they 
 did a generation ago, a householder would be a good deal out 
 in his reckoning were he to measure the present and future 
 purchasing power, say of a thousand a-year, by the average 
 prices of the past twenty-five years. The averages referred to, 
 moreover, omit some of the chief items in the cost of living. 
 No account, for example, is taken of the great rise in house 
 rent and wages in recent years, nor of the additional charges 
 which retailers make to consumers, partly to cover higher 
 wages, shop-rents, and other items in the cost of their own 
 business. The recent prices of many important articles, e. g. 
 butchers’ meat, have risen far more than prices in the wholesale 
 market. The actual increase in the cost of living to large 
 classes, therefore, far exceeds the advance shown in tables 
 which Mr. Jevons and the ‘ Kconomist’ have published. The 
 
308 Prices in England in 18738. 
 
 living of the poorest class (of women especially), who pay no 
 wages, rarely eat animal food, and whose chief expenditure is 
 on bread, sugar, and tea, may, notwithstanding the rise of coal, 
 cost no more than formerly ; but, where the scale of expenditure 
 ascends to servants, meat and butter every day, and a tolerable 
 house, the change for the worse in the purchasing power of 
 fixed incomes makes itself more heavily felt than any statistics 
 show. 
 
 Free trade created in this country a demand for a larger 
 currency; but the chief cause which has prevented a ruinous 
 rise of prices in England is that other parts of the world have 
 absorbed the bulk of the gold and silver sent into circulation. 
 Take a single fact. In the twenty-two years, 1850-1871, 
 inclusive, the imports of gold and silver into British India 
 amounted to £2385,000,000; the amount exported was only 
 £27,000,000, and the mints of the three Presidencies coined 
 upwards of £145,000,000. In that period, therefore, India 
 alone absorbed £208,000,000’s worth of gold and silver for 
 currency and other purposes: that is to say, an equivalent to 
 two-fifths of the addition made to the stock of the precious 
 metals by the new gold mines in the twenty-two years. What 
 probability is there that the development of Indian trade will 
 be such in the next twenty-two years as to absorb £208,000,000 
 more ?* The question forms part of a larger one. What chance 
 is there that, for the future, the progress of the rest of the 
 world in means of locomotion, production, and trade, will be 
 such as to divert from England all but a small fraction of the 
 new treasure the mines may yield ? 
 
 The international and local distribution of the precious 
 metals in the last twenty years has followed, in the main, the 
 path of the industrial and commercial development abroad. 
 Steamers, railways, the rise of manufactures, the growth of 
 trade—internal and external—have caused a prodigious increase 
 in the demand of foreign countries for money to carry on their 
 
 * Sir Richard Temple’s able financial statement for 1873-4 shows that in 
 1872-3 the influx of treasure had almost ceased. The Mints of Calcutta and 
 Bombay were in a state of inaction. 
 
Prices in England in 18738. 309 
 
 increased business, and represent the rise in both the quantity 
 and the market value of their productions. The same change 
 in the distribution of money has taken place over a great part 
 of the world which took place earlier in England itself. Places 
 formerly remote, undeveloped, and backward, ill-furnished 
 with both means of locomotion and money, have gained access 
 by steam to the best markets, have advanced in both industry 
 and skill, have ceased to be poor and cheap, and have made 
 vast additions to their currencies. But many of the foreign 
 channels which railways and commerce have created for the 
 streams of new money are now full—some full to overflowing. 
 Many parts of the Continent, which not long ago were noted 
 for cheapness, are now as notorious for dearness ;* and although 
 a great part of Europe has yet to be opened up by railways, 
 it were rash to assume that the progress made in the next twenty 
 years will be equal to that of the last twenty. The west of 
 Europe is already reticulated with railways; the east will 
 hardly in two decades overtake the west, and during their 
 construction new railways raise the prices of Hnglish iron and 
 coal, though when finished they find new outlets for money. 
 An eminent authority points, indeed, to possible absorbents for 
 much of the future gold in the resumption of payments in 
 specie by France and the United States on the one hand, and 
 the gold coinage of Germany on the other. The fact, however, 
 which actually confronts us is, that France, the Huropean 
 country which had hitherto absorbed most of the new gold, is 
 now driving it from its currency; and that Germany is exchang- 
 ing silver for gold—the silver will be liberated for circulation 
 elsewhere—but what we have to look to is, not the amount of 
 gold only in the world, but the amount of gold, silver, and 
 credit together, remembering that a great rise of prices in 
 England can be brought about with a small importation of 
 
 
 
 * See, as regards Germany, the Essay, entitled ‘Prices in Germany,’ in the 
 present volume (supra, pp. 382-355). It is greatly to be desired that the eminent 
 French economists who have discussed the effects of the new gold mines, M. Che- 
 valier, M. Levasseur, and more recently M. Victor Bonnet, would resume the 
 investigation in connexion with later changes of prices in France. 
 
360 Prices in England in 1878. 
 
 specie. Suppose that English iron and coal, for example, sell 
 fifty per cent. dearer in the foreign market by reason of the 
 abundance of the precious metals abroad, they may sell as 
 much dearer in the home market, mainly by an expansion of 
 the credit circulation ; and other English productions will then 
 rise In price. 
 
 Other causes, besides the abundance of the precious metals, 
 have raised the cost of living in England. The method of 
 averages assumes the new gold to be the sole cause of the rise in 
 prices arrived at, on the ground that ‘the average must, in all 
 reasonable probability, represent some single influence acting 
 on all the commodities.’ But why not a plurality of influences? 
 Mr. Jevons’ own work on coal proves the existence of one 
 other cause besides the new gold. Mr. Tooke’s ‘ History of 
 Prices’ supplies a still more decisive example. The high range 
 of prices from 1793 to 1815 was ascribed by many persons 
 exclusively to the over-issue of notes, and the consequent de- 
 preciation of the currency. Mr. Tooke demonstrated that the 
 main causes of the rise lay in conditions affecting commodities, 
 not money, and that the depreciation of the currency never 
 exceeded 30 per cent., while corn, to take one commodity, 
 stood at one time at 177s. the quarter. Mr. Newmarch has. 
 done good service accordingly, by insisting from the first on 
 an investigation of the conditions of demand and supply affect- 
 ing commodities, before coming to any conclusion respecting 
 the influence on prices of the increase of gold. By means. 
 of such an investigation only can we ascertain whether the ° 
 causes of the rise of prices are permanent or temporary, and 
 what is more important, whether they are, as in the case of 
 coal and animal food, to some extent within our control, or, 
 like the fertility of the gold mines, altogether beyond it. It 
 should, however, always be borne in mind, in speaking of 
 demand and supply, that it is only in the shape of money- 
 demand that the new gold can ever come into circulation, 
 and that if there be independent conditions of supply and 
 demand sufficient ‘to cause a rise of prices, a great addition to 
 the quantity of money in circulation must magnify the rise in 
 
Prices in England in 1873. 361 
 
 proportion. But some reasoners go beyond this. They urge 
 that since the demand which raises prices can be no other than a 
 money-demand, to trace a rise of prices to an increase of demand 
 is simply to trace it to the new gold. A rise of some commodities, 
 it has been added, would, but for the new gold mines, have 
 been compensated by a fall of others, since the total amount of 
 money expended would otherwise not have increased. It is 
 not so, however. The total expenditure of money will naturally 
 advance with the increase of population, though no new sources 
 of money be discovered, and prices may rise without any dis- 
 covery of more fertile mines. Suppose the population of 
 England to grow from twenty to thirty millions, English 
 exports and money returns increasing nearly in the same 
 ratio, and the average money-income of the population con- 
 tinuing at, say, £10 per head. Though individual incomes 
 will not rise on this supposition, yet the total money-income of 
 the nation will increase with the population from £200,000,000 
 to £300,000,000. Suppose, then, that half the income of each 
 individual, on the average, is spent on house-rent, animal food, 
 leather, coal, and some of its products, not an acre of land will 
 have been added to the island, and house-rents may rise; meat, 
 butter, milk, and some other products of land may grow 
 considerably dearer; coal may have to be fetched from greater 
 depths or poorer mines at high cost. There may thus be a 
 considerable rise in the cost of living, and a corresponding 
 fall in the purchasing-power of fixed incomes, as the conse- 
 quence merely of the growth of population. Let new gold 
 mines of extraordinary fertility come at the same time into 
 play—let money-incomes rise on the average from £10 to £15 
 per head, and the rise of prices may beggar the classes whose 
 incomes are stationary. 
 
 The actual situation of matters in England is, then, that 
 a number of causes, of which the new gold is only one, 
 have raised the cost of living, and that the cause which has 
 hitherto diverted from England the chief effects of the new 
 gold mines can hardly be counted on. One result with which 
 we may be threatened may be exemplified by the fact that the 
 
362 Prices in England in 1873. 
 
 race of scholars in Germany is said to be in danger of dying 
 out before the rise of prices and the diminished power of fixed 
 incomes. We cannot, however, control the production of gold, 
 we cannot hasten the development of foreign countries, and 
 thus provide for its absorption. ‘The more need, therefore, to 
 do what lies in our power at home to check the increasing 
 cost of chief staples of expenditure, such as coal and the pro- 
 duce of land. Even Lord Derby tells us that the produce of 
 land is only half what it should be; and the bearing of our 
 land system on the matter is sufficiently illustrated by the 
 statement in the last Agricultural Returns of Great Britain, 
 that a decrease of 3,592,600 sheep, or 12 per cent. in the 
 whole stock of sheep in Great Britain, took place between 
 1868 and 1871, chiefly, if not entirely, through the want of 
 irigation and grass. 
 
 It is not in political economy to tell how the cost of ex- 
 tracting coal can be diminished, or how the enormous waste’ 
 of fuel may be lessened. But it might at least be expected of 
 economists not to foster extravagant prices by fictions and 
 fallacies. The equality of profits is a fiction under which 
 producers and dealers are enabled to hide inordinate gains: 
 at one time by keeping down wages, at another by charging 
 exorbitant prices. The assumption that an omniscient compe- 
 tition equalizes profits has done infinite mischief, both theoretical 
 and practical, by checking inquiry into the actual phenomena 
 of trade, and the real distribution of wealth. The new gold 
 itself is a novel condition from which an eminent economist 
 anticipates a disturbance of relative prices and profits for thirty 
 or forty years. What sort of equality is that which is liable 
 to disturbance for more than a generation by even one of the 
 numberless changes which industrial progress and discovery 
 (to say nothing of political events) are perpetually importing 
 into the conditions of trade? In London alone seventy-four 
 new trades appear in this year’s Directory, and it may be 
 affirmed that before they were added not a capitalist in London 
 knew so much as the names of the trades already existing. 
 How, then, can it be maintained that capitalists are so well 
 
Prices in England in 1878. 363 
 
 acquainted with the situation and prospects of every occupation 
 that their competition equalizes profits? The truth is, we are 
 almost in total darkness respecting the profits of many long- 
 established businesses, and this darkness (which is often the 
 cover of exorbitant prices) is due in great measure to an in- 
 fluential school of economists who have taken away the key 
 of knowledge—the investigation of facts—which Adam Smith 
 and Mr. Mill had put into our hands. 
 
XXIII. 
 
 THE MOVEMENTS OF AGRICULTURAL WAGES IN 
 KUROPE.* 
 
 THE question presenting itself in the Hastern Counties is really 
 no mere local question or struggle, no mere trial of the right 
 or power of English agricultural labourers to raise wages by 
 combination, important and significant as is its assertion. It 
 is a particular phase of a movement, or series of movements, 
 general over Europe, arising everywhere mainly from similar 
 causes, and exhibiting everywhere some similar phenomena, 
 along with phenomena due to special causes in particular 
 countries and localities. Farmers in the Eastern Counties no 
 doubt imagine themselves in presence of an extraordinary 
 difficulty. But there have been no combinations or strikes of 
 agricultural labourers on the Continent, yet complaints of the 
 rise of agricultural wages have been heard for years; it was. 
 one of the chief causes of the late French Enguéte Agricole ; 
 a serious alarm on account of it is now felt in most parts of 
 Germany (notwithstanding a recent general fall in the price 
 of labour), and in some parts of Belgium. A survey of the 
 principal facts in several representative countries may aid us to 
 estimate the nature and strength of the forces with which the 
 farmers in the Hastern Counties have to contend, and to judge 
 how far general and permanent, how far local and temporary, 
 causes are at work. ‘The chief reason, however, for the present 
 investigation is, that it is not an agricultural labour question 
 only which is finding its issue at home and abroad, but one 
 connected with all the most important economic phenomena 
 
 
 
 * Fortnightly Review, June 1, 1874. 
 
The Movements of Agricultural Wages in Europe. 365 
 
 and problems of the age, with the course of industrial and 
 commercial development in Europe, the amount and distribution 
 of money and its representatives, the changes in prices, the 
 movements of population, the new ideas and powers of the 
 working classes, and the operation of land laws and systems of 
 rural economy ; though some of these great subjects can only 
 be glanced at in the following pages. 
 
 Two not unrelated phenomena in all the chief countries of 
 Europe, are a remarkable rise in the money wages of agricultural 
 labour in recent years, and prodigious diversities in the rates 
 paid in different parts of each country. 
 
 In Belgium, where farm wages had been rising for twenty 
 years, they have lately sprung in some districts from 2fr. 50c. 
 to 3fr. 50c. and upwards. In France, M.de Lavergne estimated 
 the general rise in the decade 1855-1865 at 20 per cent., but 
 it was much greater in many places, and continued down to the 
 war. Dr. Baur and Baron Von der Goltz put it at 60 per 
 cent. in the north of France in the last twenty-six years; and 
 one cannot doubt that the rise throughout the country would 
 have been greater, and would be still going on, but for the late 
 war, the drain of money which has followed it, and the uncertain 
 state of political affairs. In Germany there are four different 
 classes of agricultural labourers (Dienstleute, G'esinde, Hinlieger, 
 and Haiisler), and a calculation of the rise in wages 1s much 
 embarrassed by differences in the modes of payment, and 
 payments in kind. Jor the present purpose we need concern 
 ourselves only with the earnings measured in money of the two 
 classes (called Hinlieger and Haiisler, the latter having cottages 
 of their own, and the former being lodgers) who share the 
 designations of Tagelohner and freie Arbeiter, day-labourers 
 and free labourers. Baron Von der Goltz, Professor of Rural 
 Economy in the University of Konigsberg, a writer of great 
 practical experience, in the new edition of his work on the 
 German agricultural labourer’s question, measures in money the 
 rise of the wages of the classes of labourers referred to at 100 
 ‘per cent. in the Rhine Province, and from 50 to 60 per cent. in 
 the eastern province of Prussia, in the last ten to twenty 
 
366 The Movements of Agricultural Wages in Europe. 
 
 years.* <A table of agricultural wages in the last number of 
 the Journal of the Agricultural Society for Rhenish Prussia 
 puts the rise in one district at from 75 to 100 per cent. in the 
 last four years, in another district at 200 per cent. in the last 
 twenty years, and in a third at 200 per cent. in the last ten 
 years.t At Tibingen in Wirtemberg, Dr. Gustav Cohn tells 
 me the rate was ls. 2d. a-day in 1850-1855; 1s. 4d. in 1860- 
 1865; 1s. 83d. in 1866-1870; and is 2s. Odd. in 1874. At 
 _ Wissen, in the Rhine Province, on the border of Westphalia, 
 Mr. Wynne, a resident English engineer, states: ‘Ten years ago 
 agricultural wages were ls. 23d. a-day, measured in money ; 
 about that time railway works commenced, and they rose very 
 quickly. At present they are about 2s. a-day—a fall after the 
 exaggerated rates of last year.’ Mr. White, British Consul at 
 Dantzig, one of the best informed and most intelligent English- 
 men in Germany, although remarking (April 27) that ‘ the 
 price of labour in Germany has quite lately entered into a 
 retrogressive stage,’ measures the general rise in the price of 
 agricultural labour at from 50 to 100 per cent. in the last 
 twenty years, and speaks of great alarm on the part of farmers 
 with respect to the future. The foregoing estimates are in 
 accordance both with facts ascertained by myself in several 
 visits to Germany, and with recent information from authorities 
 so high as Professor Nasse of Bonn, member of the Prussian 
 Parliament, Mr. W. T. Mulvany of Diisseldorf,? and Herr 
 Bueck, formerly secretary to an Hast Prussian Agricultural 
 Society, and now to an important society in Rhenish Prussia. 
 It may be concluded from these authentic data that the rise of 
 farm wages in some parts of Germany much exceeds the rise, 
 according to Mr. Caird’s estimate, in England. 
 
 A second European phenomenon is prodigious inequality 
 in the prices of agricultural labour in different parts of each 
 
 
 
 
 
 * Die landliche Arbeiterfrage. Zweite Auflage, 1874, p. 125. 
 
 t+ Zeitschrift des landwirthschaftlichen Vereins fiir Rheinpreussen. Mai, 1874, 
 p- 158. 
 
 t Formerly Poor Law Commissioner in Ireland, but for many years past the 
 chief of great mining and other industrial enterprises in the Ruhr Basin and the 
 Rhine Province. 
 
The Movements of Agricultural Wages in Europe. 367 
 
 country. In England they varied at the end of 1873, according 
 to Mr. Caird, from an average of 12s. a-week in the southern 
 to 18s. a-week in the northern counties: these averages, how- 
 ever, covering much greater local diversities. In 1870 they 
 varied from 7s. a-week in Dorsetshire to 22s. in Yorkshire 
 and Northumberland, and they still vary from 11s. to 25s. In 
 Belgium the actual diversities are thus described in a letter 
 from M. Emile de Laveleye: ‘In the Campine the rate of agri- 
 cultural wages is lfr. 25c. a-day in summer, and Il fr. in 
 winter, without food or other addition. This rate extends to the 
 environs of Hasselt and St. Trond, four leagues from Liége. 
 In Flanders the rate is 1 fr. 50 c. ; in the Ardenne it is 2 fr. 50 c. 
 In the coal and metallurgic basins of Liége, Charleroi, Mons, 
 it is from 3 fr. to 3 fr. 50 ¢.; and ina commune near Liége it is. 
 actually at this moment (May 1, 1874), 3fr. a-day, and the 
 labourer’s food into the bargain.’ With respect to Holland, I 
 possess no more recent statistics than those given in the docu- 
 ments relating to foreign countries in the Report of the late 
 French Enquéte Agricole, where it is stated that the rate of 
 wages varies from lfr. in some provinces to 2 fr. in others. 
 With regard to France, statistics exist in abundance. Dividing 
 the country into six regions, M. de Lavergne, in 1865, estimated 
 the earnings of the French agricultural labourer at 600 fr. 
 a-year in the north-west and south-east, at 360 fr. in the north- 
 east, and only at 300 fr. in the west, south-west, and centre. 
 These figures, being averages struck over many departments, 
 included much wider variations. According to the Hnquéte 
 Décennale, published in 1868, wages were 3 fr. 14c. a-day, with 
 4 fr. 35 c. in harvest, in the Department of the Seine; 1 fr. 14 c¢., 
 with 1 fr. 68 ¢. in harvest, in the Cotes du Nord. In 1869 Mr. 
 J.S. Mill informed me that the rate about Avignon, where he 
 resided, was 3 fr. a-day throughout the year. In the same 
 year I found it as low as 1 fr. a-day in more than one place in 
 Brittany ; and Lord Brabazon’s Report to the Foreign Office in 
 1872* gives an average rate of 2 fr. 50 c. in the Seine, 1 fr. 13 ¢. 
 
 
 
 * Further Reports, §c., respecting the Condition of the Industrial Classes and the 
 Purchase-power of Money in Foreign Countries. 1872, pp. 43, 44. 
 
368 The Movements of Agricultural Wages in Europe. 
 
 in the Cotes du Nord, and 1fr. 15c. in the Morbihan. At 
 present the tendency to a rise throughout France, which other- 
 wise might show itself, is arrested by political uncertainty; but 
 at four or five leagues from Paris, as the eminent economist, M. 
 Victor Bonnet, informs me, the rate is 3 fr. 60 c.a-day; at from 
 twenty to fifty leagues from Paris it varies from 2fr. 50c. to 
 2fr.; andin some remote parts of the country without a railway 
 it may perhaps be as low still as from 1 fr. 25 c. to 1 fr. 
 
 In Germany the lowest rates of agricultural wages are 
 found in the eastern provinces of Silesia and Posen. In one 
 district of Silesia they averaged, in 1873, only 81d. a-day in 
 summer, and 7d. a-day in winter; while in a district of the 
 Rhine Province they were from 2s. 6d. to 4s. 6d. a-day in 
 summer, and from 2s. 21d. to 3s. in winter, and by task-work 
 the labourer in this district earned from 2s. 6d. to 6s. a-day, 
 according to the work and the season. In the Rhine Province 
 itself prodigious diversities are found, for examples of which 
 see the table of wages already referred to in the ‘ Zeitschrift 
 des landwirthschaftlichen Vereins fiir Rheinpreussen’ for May, 
 1874. Even these instances fail to show the full extent of the 
 inequality of the money earnings of an agricultural labourer’s 
 family in different parts of Germany. German women take 
 an active part in farm work, and their wages vary from place 
 to place, like the wages of their husbands and fathers. The 
 number of working and earning days, again, is considerably 
 greater in most parts of west Germany than in the north-east 
 of the empire, although the length and severity of the winter 
 in the latter region demands a larger expenditure in fuel and 
 clothing. It is, too, much easier for the farm labourer in south- 
 western than in north-eastern Germany to acquire a plot of land 
 of his own, and the milder climate and better markets of the 
 former enable him to make a larger addition to his wages by its 
 produce than he could in the latter. 
 
 The inquiry follows, What are the causes of the two pheno- 
 mena described—which might be easily shown to present them- 
 selves also in several other countries—the immense rise in the 
 price of agricultural labour, and its prodigious local diversities ? 
 
The Movements of Agricultural Wages in Europe. 869 
 
 The rise is supposed by many persons to be sufficiently 
 accounted for by emigration and migration to towns—two 
 agencies of great importance, but by no means adequate to 
 account for the phenomenon. Emigration, in the first place, 
 cannot have caused the rise in France or in Belgium, from 
 neither of which has there been any emigration to speak of. 
 From Germany the total emigration has been considerable, but 
 the natural increase of population has more than replaced it ; 
 it has taken place chiefly in the parts of the empire where 
 wages have risen least, and there has been but little emigration, 
 if any, in recent years from the localities where wages are 
 highest, and where they have risen most; in these localities 
 immigration, in fact, not emigration, is the conspicuous move- 
 ment. It is worthy of notice, moreover, that the chief emigra- 
 tion has been from provinces and districts where the population 
 is thinnest, where large estates prevail, where little farms are 
 fewest, and where the labourer despairs of getting a plot of 
 land of his own.* In England, again, emigration has not 
 hitherto much diminished the number of agricultural labourers, 
 probably not at all in the districts where agricultural wages are 
 highest ; and though indirectly emigration from Ireland has had 
 an appreciable effect on English wages by diminishing Irish im- 
 migration, the great recent rise in money wages in the southern 
 counties certainly cannot be referred chiefly to that cause. 
 
 The migration of agricultural labourers to towns and mining 
 and manufacturing districts is a more potent agent, the economic 
 and social significance of which in several aspects can hardly 
 be exaggerated. But it is demonstrable that it affords only a 
 partial explanation of the rise in the price of agricultural 
 labour. There has been no considerable migration from 
 Flanders, yet agricultural wages have risen. In Germany, 
 the migration of the rural population to Berlin and the chief 
 industrial towns and districts in the west has been very great. 
 But were that the sole cause of the rise in agricultural wages, 
 how are we to account for the still greater rise of wages in 
 
 
 
 * Von der Goltz, Die ldndliche Arbeiterfrage, pp. 114-121. 
 2B 
 
370 The Movements of Agricultural Wages in Europe. 
 
 those very towns and manufacturing districts? In France, 
 likewise, a great rise of town wages preceded, and, indeed, 
 caused the migration of the rural population which continued 
 down to the war. And in England, town, mining, and manu- 
 facturing wages have, although the movement is very unequal, 
 on the whole risen greatly along with the price of agricultural 
 labour, instead of sustaining a fall, as the migration theory, 
 taken alone, would import. How is it, moreover, that farmers 
 have been enabled to pay so much higher prices for labour in 
 all the countries referred to? Whence has come the additional 
 money to pay them, and to raise at the same time the prices of 
 commodities all over Europe? ‘The general rise in the money 
 wages of agricultural labour must be connected with this general 
 rise in the prices of commodities, and with the chief cause of the 
 latter phenomenon, the immense augmentation and the more 
 rapid circulation of money and its representatives since the 
 new gold mines were discovered, and since railways and other 
 inventions began to spread over EKurope. ‘To exemplify the 
 rise in the prices of articles coming more or less within the 
 consumption of the German labourer, Mr. W. Wynne has 
 furnished me with the following table of prices, in Silbergro- 
 schen, at Wissen in the Rhine Province (5 Silbergroschen = 
 6d.) :— 
 
 ComMoDITIES. | 1853. | 1863. | 1873-4. 
 Butter, per lb., ; ; 34 ser. 4} ser. 13—14 sgr. 
 Eggs, per dozen, . : 27us Suita) 9—10 ,, 
 Beef, per lb., . ; 4 Sua 45 5, 7 “ 
 Vial yaes : ; ' 1g—2_,, Not stated. 4— 5 ,, 
 Potatoes, per cwt. . “ 10 ae — 25 + 
 Linen, per ell, . , 4 76 Es — 43 <i 
 Clothe) alse : - | 380—35 _ ,, — 60—70 ,, 
 Coffee, per lb., ° ‘ 5—6 ,, -— 10—12 ,, 
 
 As an instance of the rise of prices in north-east Germany, 
 Herr Bueck states with respect to the district of Gumbinnen, 
 
The Movements of Agricultural Wages in Europe. 371 
 
 in the province of Prussia,—‘the Regierungsbezirk Gumbinnen 
 obtained its first railway in 1860, and the price of one pound 
 of butter was then 4 to 5 Silbergroschen, whereas at present 
 it is 10 to 13 Silbergroschen ; the price of beef, which was then 
 21 to 3 Silbergroschen, is now 6 Silbergroschen.’ But al- 
 though the rise in the prices of commodities, as well as in 
 money wages, at home and abroad, and in both country and 
 town, proves that one general agency is the increase and the 
 greater activity of money and its representatives, the explanation 
 thus afforded is by no means adequate to account for the move- 
 ments of agricultural wages. ‘The highest German authorities, 
 scientific and practical, Professors Nasse and Von der Goltz, 
 Mr. Mulvany, and Mr. Consul White, are agreed that the rise 
 in money wages in Germany exceeds the rise in the price of 
 the articles of the labourer’s consumption.* ‘T’he changes in 
 wages, again, from year to year, and from decade to decade, do 
 not correspond with the changes in prices. Not only has the 
 price of rye, for example, which is the chief food of the German 
 farm labourer, not risen in proportion to wages, but in the 
 decade 1861-71 rye and all other cereals were cheaper than in 
 1851-61 ; yet money wages continually rose. Nor do the local 
 variations of wages in Germany, or any other country, follow 
 or correspond with the variations in the prices of commodities. 
 ‘ Food and clothing are not dearer in the coal basin of the Meuse 
 than in Flanders, yet agricultural labour is twice as well paid ; 
 and food is rather cheaper in the Ardenne than in Flanders, 
 yet the farm labourer is paid about 75 per cent. more for 
 inferior work. It is, in fact, impossible to get to the root of 
 the rise in wages, without entering into the causes of the other 
 striking phenomenon—their great local diversities. 
 
 
 
 * Professor Nasse says: ‘ That the economic condition of the agricultural 
 labourer has improved here, and that the rise of wages has surpassed the rise 
 of prices of the necessaries of life, admit of no doubt. The condition of the 
 labourers who, as here is often the case, have a little property in land, has 
 especially improved.’ From another part of the Rhine Province Mr. W. 
 Wynne writes: ‘The rise is to a considerable extent a real one, as the labourer 
 now lives better, and clothes himself better, takes more holidays, gets oftener 
 drunk, &c.’ 
 
 2B 2 
 
372 The Movements of Agricultural Wages in Hurope. 
 
 The causes of this second phenomenon are both general and 
 local; some common to all countries in Europe, some peculiar 
 to particular countries, some to particular regions or districts. 
 The most general causes are, first, the unequal natural advan- 
 tages of different regions and localities for manufacture or trade; 
 secondly, their unequal development, especially by means of 
 locomotion, and, above all, railways. Capital, money and its 
 representatives, and the demand for labour, have increased most 
 where the means of production and the means of communication 
 with the best markets have improved most, where coal, iron, and 
 mechanical power have multiplied the produce of the human 
 hand, and where railways and other modes of communication 
 have made most rapid progress. Broad exemplifications of the 
 influence of these two sets of conditions (which are closely 
 related, for superior natural advantages attract the means of 
 development) are to be seen on every side at home and abroad. 
 Many years ago, Mr. Caird pointed out that a line ‘following 
 the line of coal’ divided England into two regions of high and 
 low agricultural wages, and his recent statistics show that the 
 same line of division still exists :— 
 
 ‘ Average weekly wages in England: 1850. 1873. 
 Northern counties : ; : lls. 6d. 18s. Od. 
 Southern counties : 4 : : 8s. 5d. 12s. 0d.’* 
 
 In Belgium a similar line divides a region without mineral 
 wealth, including Flanders and the Campine, from one rich in 
 coal, iron, and manufactures, where wages range from 100 to 
 300 per cent. above the rates in the former region. In Germany, 
 the country above all others in which the study of the subject 
 abounds in interest and instruction, the line between high and 
 low agricultural wages drawn by Von der Goltz is one between 
 northern and southern Germany ;+ the former being the region 
 
 * Letter of Mr. Caird, Times, Jan. 3, 1874. 
 
 tIn North Germany Von der Goltz includes the provinces of Prussia, Pome- 
 rania, Posen, Silesia, Brandenburg, Mecklenburg, Sleswig-Holstein, Brunswick, 
 Oldenburg, Hanover, together with the northernmost parts of the Rhine Province: 
 and of Westphalia; the remainder of the present German empire forming South 
 Germany, according to this division. 
 
The Movements of Agricultural Wages in Europe. 373 
 
 of low, and the latter of high agricultural wages. ‘The rates of 
 wages certainly justify this division, but they vary greatly from 
 east to west in the north—from 1s. 8d. a-day in Mecklenburg 
 to 8d. a-day in parts of Silesia and Posen—and a much more 
 marked and characteristic division lies between north-eastern 
 and south-western Germany. From Dresden westward wages 
 range higher than eastward, but the main region of high farm- 
 wages is from the neighbourhood of Frankfort-on-the-Maine to 
 the Ruhr Basin, thence to Disseldorf and Aachen, and south- 
 ward through Rhineland to Baden.* In this region of high 
 wages itself there are immense inequalities, but some of them 
 form no exception to the principle of the division, others fall 
 under another principle, likewise connected with natural advan- 
 tages, which will be presently indicated. Speaking generally, 
 the south-western region, whose boundary has just been roughly 
 marked out, is the main region of German industrial and com- 
 mercial enterprise, communication by steam, general activity, 
 intelligence, and wealth. Vicinity to the chief countries and 
 markets of western Europe, numerous lines of railway, a river 
 crowded with steamers, coal, iron, and their products, cause a 
 greater abundance and more rapid circulation of currency, a 
 greater demand and competition for labour of all kinds, and 
 a generally higher price for agricultural as well as town or 
 mechanical labour, than is to be found in the north-east of the 
 empire, which lies remote from the traffic, civilization, and pro- 
 gress of the western world, is much less completely provided 
 with railways, and is in a more primitive condition as regards 
 customs, ideas, and industrial life.t Take as an example of the 
 
 
 
 
 
 *Mr. Consul White, who has an extraordinary knowledge of the industrial 
 economy of Germany, remarks on this view, as to which I lately consulted him: 
 “What you say of the south-west is, I think, on reflection the correct represen- 
 tation, and I quite agree in your delimitation. An English employer of labour, 
 who has travelled over those parts quite lately, told me that at Niirnberg he found 
 wages a trifle higher than at Dantzig, but from thence he found them highest at 
 Frankfort-on-the-Maine, the Ruhr Basin, and Cologne. This tallies also with 
 your views in the essay on ‘‘ Prices in Germany”’ in the Fortnightly Review, 
 November, 1872.’ 
 
 t+ Low railway freights for raw material have been one cause of the industrial 
 
374 The Movements of Agricultural Wages in Europe. 
 
 influence of this diversity in the economic conditions of the two 
 regions, the rates of agricultural wages in the districts of Diussel- 
 dorf on the Rhine, on the one hand, and Gumbinnen, in the: 
 province of Prussia, on the other hand, where the soil is good, 
 but no manufactures or trade on a large scale exist :-— 
 
 
 
 
 
 
 
 DwUssELpoRF. | GUMBINNEN. 
 
 $, ae & a. ee Vie Ste 
 Summer wages, per diem, Men, . 2 6 to 4 0 1 0 tol 9% 
 + ay 7 Women, 1 61,7250 0 6,,0 9% 
 Winter * ys Men, . 1:63), nome Rae ee mek tI 
 5 - 5 Women, 1; Oa 0 42,,0 6 
 
 
 
 
 
 The same principle shows itself in local inequalities within each 
 of the two great regions. The price of farm labour is much 
 higher close to Berlin than throughout the greater part of 
 Brandenburg, and considerably higher about Dantzig than in 
 most rural districts of the province of Prussia. It is, in lke 
 manner, 75 per cent. higher in the Ruhr Basin, and near towns. 
 like Cologne, than in purely agricultural districts of Westphalia 
 and the Rhine Province. One remarkable exception to the 
 general principle (which, however, seems less real than apparent) 
 is, that Silesia, the eastern province in which there is most 
 manufacture and trade, and which possesses considerable 
 mines, is also the province in which the price of farm labour 
 is lowest. Mr. Consul White, remarking that ‘it has always. 
 astonished him that Silesia, an industrial centre, has the lowest 
 agricultural wages of all Germany,’ adds, that he is told the cause: 
 hes in the cheap and thrifty modes of living of the peasantry, 
 and suggests that the proximity of Poland and of Austria may 
 also partly account for it in Upper Silesia. Von der Goltz 
 also refers the low scale of Silesian wages partly to the low 
 standard of expenditure of the inhabitants, partly to the rela- 
 tively dense population. If, in addition to these conditions, we 
 
 
 
 progress, wealth, and high wages of western Germany. Should the attempt to- 
 raise them which is now being made be carried out, it is the opinion of high 
 authorities that a serious decline in the rate of industrial progress will ensue. 
 
The Movements of Agricultural Wages in Europe. 3875 
 
 reflect that this immense province is for the most part untraversed 
 by railways, is contiguous to a vast region backward in that as 
 in other respects, lies remote both from maritime ports and 
 from western markets, we may fairly consider the exception 
 only a partial one; though it proves that there are economic 
 conditions which no single generalization will cover, and the 
 roots of which may reach far down in past history. ‘ Every 
 province,’ says the illustrious rural economist, M. de Lavergne, 
 of his own country, ‘has its history, which has powerfully 
 acted on its economic development ;’* and the observation is yet 
 truer of Germany than of France. 
 
 But another potent cause of inequalities in agricultural wages 
 alike in Germany and in many other countries, lies in local 
 diversities of climate and soil—a cause which the more merits 
 attention that its operation is diametrically contrary to an old 
 economic doctrine. It is where the work of cultivation has least 
 variety and interest, where life has few charms, where winter is 
 longest and coldest, where the wage-earning days are fewest, 
 where the labourer finds it hardest to supplement his earnings 
 by the produce of a little farm of his own, that the price of 
 agricultural labour per diem is lowest in Germany, and Von der 
 Goltz is certainly right in treating the climate as one cause of 
 the low rate of wages in the north-east ; though the chief cause 
 seems, as certainly, the one previously pointed out, on which he 
 does not dwell. In the south-western region itself we find this 
 second class of natural causes in active operation, wages being 
 usually much lower in barren mountainous districts than in those 
 warm, fruitful valleys and plains which enable both the farmer 
 and the labourer with a plot of ground of his own to rear close 
 to excellent markets a variety of rich plants, tobacco, chicory, 
 garden vegetables, hemp, which will not grow in less generous 
 zones. After citing a number of local rates of agricultural 
 wages in Wirtemberg, Von der Goltz adds :—‘ From these data 
 it follows that the rates in Wurtemberg vary materially. In 
 the least favourably situated districts they average from 47 to 
 
 i. —— 
 
 
 
 * Economie Rurale de la France, 4™* ed., p. 60. 
 
376 The Movements of Agricultural Wages in Europe. 
 
 49 kreuzers a-day ; in those most favourably situated they rise to 
 78-80 kreuzers. This fact meets one in all parts of middle and 
 south Germany, in which climate and cultivation exhibit such 
 diversities.” It is a fact to which an analogy may be found in 
 these islands, in which wages and profit, as well as rent, ceteris 
 paribus, usually are higher on exceptionally good land, all 
 three, and not rent only, falling on barren and mountainous 
 soils, whatever economic theories may suppose.* ‘The great 
 inequalities of wages hence arising in Germany are, no doubt, 
 partially compensated by the descent of the mountain labourer 
 into the plains and valleys at harvest and other seasons, when 
 there is an unusual supply of work ; but throughout the rest of 
 the year his earnings are smaller, while his wants are greater, on 
 account of the cold, than those of the inhabitants of the lower 
 districts. Baron Von der Goltz—almost the only economic 
 defect of whose book is its tendency to sweep averages, the 
 besetting sin of both statisticians and economists—seems much 
 to overrate the compensatory influence of this periodical mi- 
 gration. ‘The Irish labourer used, in like manner, to migrate 
 to England for the harvest, but that did not raise his earnings 
 to the English level; it only enabled him to exist for the rest 
 of the year on Irish wages. Assuredly in Germany money 
 wages have by no means followed the equitable principles of 
 which economists, in their thirst after generalization rather than 
 truth, and under the influence of eighteenth century notions of 
 natural laws of equality and uniformity, have dreamt. It is 
 where the skies are brightest, the air most genial, the work of 
 husbandry pleasantest, life in every way most agreeable, that 
 the price of farm labour is highest. It is here, too, that the 
 labourer finds it easiest to get a property of his own, and that 
 its produce is richest. ‘The farther,’ says Von der Goltz, ‘ we 
 proceed from north and east to south and west, the more 
 numerous is the class of landowning agricultural labourers, and 
 the better is the condition of those who are so.’ The fluctuations 
 in the price of labour are no doubt greater in the industrial 
 
 
 
 
 
 * In the United Kingdom itself wages, profit, and rent are all three commonly 
 highest, ceteris paribus, where the land is best. 
 
The Movements of Agricultural Wages in Europe. 377 
 
 districts of the south-west than in north-east Germany, partly 
 for a reason not referred to by Von der Goltz, but mentioned to 
 me by Professor Nasse, that where small farming predominates, 
 there is a less regular supply of labour in the market; and 
 partly, I am disposed to think, because both demand and supply 
 are here affected by the fluctuations in manufacture and trade. 
 * But it is beyond all question that the permanent influence of 
 the causes which produce these variations has been favourable 
 to the agricultural labourer, and that, notwithstanding them, his 
 condition has been a continuously improving one. The remark 
 which Consul White makes with respect to the farm labourer 
 throughout Germany, is especially applicable to him in Rhine- 
 land and the Ruhr Basin: ‘ Improved civilization has produced 
 greater demands and requirements in this class; all authorities 
 agree that they live, on the whole, better than they used to, and 
 insist on getting better paid.’ 
 
 In France, as in Germany, the chief causes of high agricul- 
 tural wages are proximity to great industrial centres or easy 
 communication with great markets, but we find also local causes 
 of diversity, such as differences of climate or soil. The high 
 wages about Avignon, for example, are attributable partly to 
 the high prices produced by markets, such as Lyons and 
 Marseilles, partly to the rich returns which the climate affords 
 to cultivation, and partly to the skill of the cultivators. Writing 
 in 1869 respecting the rise of wages there, above the rate ten 
 years before, Mr. Mill said :—‘ All prices have risen at Avignon 
 (which was already ten years ago a remarkably dear place), 
 owing to the causes which made it then dear. There is a rapid 
 ‘sale for all agricultural produce in Paris, Lyons, and Marseilles; 
 consequently all the prices in the market are high. . . . The 
 cultivation round Avignon is carried to a high degree of 
 perfection, and seems to have been so for centuries. The 
 system of irrigation is elaborate, ploughing deep, the clearing 
 of the land from weeds very perfect, fallows unknown except 
 in the poor mountain soil, and the whole country is covered 
 with trees of some sort, under which there is cultivation. I have 
 been told that, owing to the peculiar advantages of irrigation, 
 
378 The Movements of Agricultural Wages in Europe. 
 
 climate, and position between large towns, with easy railway 
 and river communication, there is a constantly increasing ten- 
 dency towards the cultivation of early fruit and vegetables. 
 Already the exportation of these is very considerable, and it seems 
 as though this cultivation must be favourable to small properties.” 
 
 In Normandy the rate of wages is as two to one compared 
 with the rate throughout a great part of Brittany; and there 
 are several reasons for the difference. Normandy is much 
 nearer to the market of Paris; it has great manufacturing 
 towns, and Brittany none ; its soil is much more fertile, and the 
 Norman population does not multiply like the Breton. Agri- 
 cultural wages have greatly risen throughout France in the last 
 twenty years, through the increase of French production and 
 trade, -the increased quantity and activity of money, railways, 
 the demand for labour in the chief towns, the consequent 
 migration of the rural population to the towns, their disincli- 
 nation for large families, and the absorption of the peasantry 
 (several millions of whom own small properties) in the cultivation 
 of land of their own. But the local force of each of these 
 causes varies, and the prices of agricultural labour are con- 
 sequently very unequal. 
 
 In Belgium, again, although the principal cause (as in 
 every progressive country in Kurope) of diversity in the local 
 rates of agricultural wages is the presence or absence of mines, 
 manufactures, or commerce on a great scale, other causes are 
 at work. ‘T'hus the low rate in Flanders and the Campine is 
 due partly to the natural poverty of the soil; and the chief 
 cause of the relatively high rate in the Ardenne, where the 
 farm labourer earns twice as much as in Flanders (although his. 
 work is inferior, and the region has no manufactures or foreign 
 commerce), is that there are 270 Flemings and only 100 
 Ardennois to the same number of hectares. 
 
 Thus there are various causes in each country for great 
 local diversities of agricultural wages, but the most powerful 
 and the most general cause is the unequal distribution of 
 advantages for manufactures and commerce, and of good 
 markets; and we can easily trace a close connexion between 
 
The Movements of Agricultural Wages in Europe. 379 
 
 the great general rise in the price of agricultural labour in 
 Europe in recent years, especially in part of west Germany and 
 Belgium, and the great local inequalities in its price in each 
 country. The currency of all Europe has been vastly augmented 
 by new mines and instruments of credit; the rapidity also of 
 the circulation of money has multiplied, and the prices of all 
 things, labour included, which have not increased in proportion, 
 have by consequence risen. Secondly, money has increased 
 most, and the price of labour has risen most, in the districts 
 whose money-getting powers have increased most through in- 
 dustrial development and rapid communication with the best 
 markets. Thirdly, our continental neighbours have acquired in 
 recent years those new arms of industry and commerce—iron, 
 coal, the steam-engine, steam locomotion—which England 
 possessed a generation earlier; prices consequently have risen 
 in many parts of the Continent to the English scale from a 
 much lower level; the demand and competition for labour, and 
 the sums offered for its assistance, have increased abroad in 
 proportion, and the French, German, and Belgian agricultural 
 labourer has shared with the town workman in the new streams 
 of money. An economist of merited parliamentary fame, lately 
 spoke of machinery as one cause which has prevented a rise of 
 wages in recent years in some trades in Hngland;* and 
 doubtless it sometimes has that effect, by superseding labour. 
 Nevertheless the main cause of the comparatively high rate of 
 wages throughout western Hurope, and the main cause of high 
 local rates of agricultural wages in each of its countries, is, In one 
 word, machinery, or the steam-engine, creating new industries 
 and immense accumulations of capital, finding swift sale for their 
 produce in markets where gold and its representatives abound, 
 and augmenting the price of all kinds of labour in the vicinity. 
 
 The real movements of agricultural wages throughout Hurope 
 will be seen to be in striking contradiction to generalizations, 
 such as the tendency of wages to equality, which have passed 
 with a certain school of English economists for economic laws: 
 
 
 
 
 
 * Mr. Fawcett, M.P., in an article in the Fortnightly Review; also in his 
 Manual of Political Economy (5% ed.), pp. 137-9. 
 
380 The Movements of Agricultural Wages in Europe. 
 
 generalizations not without a measure of truth as indicating one 
 of several forces, but mistaken by that school for the actual 
 resultant of all the forces: generalizations, one may add, which 
 were once useful and meritorious as first attempts to discover 
 causes and sequence among economic phenomena, but which 
 have long ceased to afford either light or fruit, and become part 
 of the solemn humbug of ‘economic orthodoxy.’ During the 
 last two generations, while some distinguished economists were 
 asserting, not merely a tendency towards it, but an actual 
 equalization of wages, the real tendency in all countries making 
 progress was towards inequality—a tendency which, in fact, 
 already showed itself in a marked manner a century ago, 
 with the advance of commerce and manufactures, in both Great 
 Britain and France, as statistics collected by Adam Smith and 
 Arthur Young prove. The ‘law’ which economists ought to 
 have laid down for the age from those two great writers’ days 
 to our own, was the law of great inequality in the local demand 
 for labour, by reason of great inequalities in the advantages, 
 development, and money-making powers of different localities. 
 But the consequent inequalities in the prices of agricultural 
 labour in England, it is important to notice, were formerly 
 compensated for in a good measure by corresponding inequalities 
 in the prices of commodities: food was cheap where wages were 
 low, food dear where wages were high. Prices rose around the 
 great centres of mining, manufacture, and trade to a scale 
 greatly above that prevailing in purely agricultural districts, 
 just as they have risen in the industrial districts of West 
 Germany above the scale in Pomerania, Silesia, and Posen. A 
 new inequality in agricultural wages in England took place with 
 the equalization of the prices of food by railways and roads. 
 In not a few parishes in the southern counties money wages 
 remained almost stationary, at 7s. to 8s., from 1770 to 1870, 
 while meat rose in the interval from 2d., and in some places 
 actually only a 14d. a pound, to nearly the same price, say 10d., 
 as in Yorkshire and Northumberland, and milk and butter in 
 proportion. When Mr. M‘Oulloch was laying down in succes- 
 sive editions of Adam Smith’s treatise, that canals, roads, rail- 
 
The Movements of Agricultural Wages in Europe. 381 
 
 ways, &e., had ‘brought the prices of all sorts of produce and 
 the wages of labour in different districts much nearer to a 
 common level than at the period of the publication of the 
 “Wealth of Nations,”’’ he was right enough about the prices of 
 produce, but so wrong about wages that they varied in England, 
 at the time of his last edition, from 9s. to 22s., not unfrequently 
 with a cottage and garden in the latter case, and without either 
 in the former. Moreover, on the rise in the prices of food in the 
 southern counties, brought about by their equalization through 
 the kingdom, supervened a succession of further rises caused by 
 the general increase of population, the increased wages and 
 consumption in the manufacturing districts, and the increase of 
 both the metallic and the credit circulation of the country. The 
 recent rise of money wages in the southern counties had in fact 
 been preceded by a fourfold fall in real wages measured in the 
 price of animal food, and a great fall measured in cottage rents. 
 The rise, therefore, during the last three or four years in the 
 wages of the southern farm labourer—though in some cases 
 from 7s. and 8s. to 12s. and 138s.—is, compared with his real 
 wages a century ago, almost a nominal one only. 
 
 Another inequality which the application of steam to manu- 
 factures and locomotion brought about was a difference between 
 the wages of mechanical and agricultural labour (unless in the 
 manufacturing districts) out of all proportion to any differences 
 in the severity of the employment and the skill and knowledge 
 required. Adam Smith thought the ploughman in his time 
 beyond comparison superior in skill, judgment, and discretion 
 to the town workman or mechanic, and he certainly is not now 
 inferior in the proportion of his pay. In so faras he is ignorant 
 and inefficient, it is the effect, not the cause, of his low wages; 
 and the groundlessness of a recent suggestion that the lower 
 wages of the southern counties are attributable to an inferiority 
 of race, is proved by the fact, which might have been learned 
 from Mr. Caird, that a hundred years ago wages were higher in 
 the southern than in the northern counties, in the proportion of 
 7s. 6d. to 6s. 9d. a-week. The truth is, that the sources of wages 
 are unequally distributed by nature, but a more equal local 
 
382 The Movements of Agricultural Wages in Europe. 
 
 development and a more equal distribution of labour might long 
 azo have been brought about, had economists, in place of 
 assuming equality, examined the facts, and ascertained the 
 actual inequalities and their causes. 
 
 It remains briefly to indicate some of the conclusions to 
 which the foregoing review of facts, and the present conditions 
 of the situation, seem to point. A rise in the money wages of 
 agricultural labour isa general Kuropean phenomenon, showing 
 the operation of general causes. It is everywhere in part 
 merely a nominal rise, but especially so in the southern counties 
 of England, where a great fall in real wages, by reason of a 
 continuous rise in prices, preceded it. In all countries in 
 _ Europe there are great inequalities in money wages, but in most 
 of them, Germany in particular, those inequalities are partially 
 compensated by local differences in the prices of food, so that no 
 such real inequalities in real wages exist there as in England; 
 nor is it possible that such inequalities can continue here, now 
 that the economic fictions which concealed them and their 
 causes have been exposed. The future rate of money wages is 
 indeed everywhere partly a question relating to the fertility of 
 the gold mines and the abundance of money ; but whatever may 
 be the amount of money in circulation, it may be predicted that 
 ‘its distribution will be such as to secure a larger share than 
 heretofore to the agricultural labourer in the southern counties 
 of England. ‘Temporary and local causes have lately checked 
 the rise of agricultural wages in some countries, but all the 
 permanent and general conditions tend to maintain it, especially 
 in the lower levels. ‘The recent decline in Germany is, in fact, 
 a mark of the increasing influence of manufactures and trade on — 
 the price of agricultural labour, and of the disappearance of 
 customary and stationary rates of agricultural wages, and of 
 the excessive disproportion between them and the rates in other 
 employments.* Hiverywhere in Hurope farm labourers are 
 
 
 
 * Since this Essay was written, nearly five years ago, the diminished activity 
 of manufactures and trade in Germany has been attended with a further decline in 
 agricultural wages, which are not much higher in many places now than in 1867. 
 Formerly the movements of trade did not affect German agricultural wages. 
 [January, 1879. ] 
 
The Movements of Agricultural Wages in Europe. 383 
 
 breaking the bonds of tradition and habit, everywhere acquiring 
 new powers; in England they have, moreover, gained those 
 potent forces of union which have long been the monopoly of 
 town workmen, and farmers in the depth of the country are 
 beginning to feel at once the effects of the competition of distant 
 employers in towns and in the New World, and of the combina- 
 tion of their own labourers on the spot. When one considers 
 the number and strength of the causes tending to the elevation 
 of the agricultural labourer, and the breadth of the area over: 
 which they are operating, one can hardly err in affirming the 
 ultimate futility of a local effort to put a stop to a movement 
 which, on the one hand, has what may be called universal and 
 permanent forces on its side, and, on the other hand, is fortified 
 by special local conditions. The dark part of the prospect 1s, 
 that England, in the outcome, may lose the chief part of its 
 ‘ rural population, for it seems too plain that nothing will awaken 
 its legislature or its landowners in time to the importance of 
 making it the well-grounded hope of the industrious and thrifty 
 farm labourer to acquire a little farm of his own. 
 
XXIV. 
 
 THE INCIDENCE OF IMPERIAL AND LOCAL TAXATION 
 ON THE WORKING CLASSES.* 
 
 Tue working classes comprehend in this article all grades of 
 working people, skilled and unskilled, in both town and country,, 
 domestic servants, and also that numerous body of small dealers 
 whose earnings are derived more from their labour than from 
 their little stock-in-trade. It is not very important whether 
 foremen are included or not, but they are so here as receiving 
 wages. ‘T'o measure the burden imposed on this vast section of 
 society by both imperial and local taxation is a problem of much 
 complexity and difficulty, admitting of no exact solution, but 
 the grounds for a rational judgment may be found. Two ques- 
 tions are involved : How much do the working classes contribute 
 to the revenue of the State ? and, How much do they actually 
 lose by the system of taxation? The first may possibly be 
 answered with some approximation to accuracy ; but the second 
 is really the principal inquiry, and it is one as impossible to 
 answer in arithmetical terms, as it would have been to estimate 
 in precise figures the pecuniary loss inflicted on the working 
 classes by the corn duties. ‘The theoretical canons commonly 
 applied to determine the incidence of taxes afford but moderate 
 assistance, and are often misleading. They furnish us amply 
 with inferences from ideal ‘ average’ or ‘ natural’ rates of wages 
 and profit, respecting the ‘ tendencies’ of taxes in ‘ the long run’ 
 and ‘in the absence of disturbing causes.’ But taxes are paid 
 immediately under the real conditions of life, and out of the 
 actual wages and profits or other funds of individuals, not out 
 of hypotheses or abstractions in the minds of economists. The 
 
 * Fortnightly Review, February Ist, 1874. 
 
The Incidence of Imperial and Local Taxation, §c. 885 
 
 working classes have had especial reason to complain of the 
 acceptance of such abstractions as realities, and of inferences 
 from them as rules of practical finance. The doctrine of the 
 equality of wages has done much to perpetuate the low wages of 
 agricultural labour in the southern counties, that of the equality 
 of profits has injured the labouring classes generally, alike as 
 recipients of wages, as consumers, and as taxpayers; and the 
 doctrine of a ‘natural’ rate of wages was the chief cause of the 
 passing of the Corn Laws, the least mischief of which to the classes 
 who live by labour was the rise in the price of bread. It was 
 inferred that the labourer’s pay must rise with the price of his 
 food, and that taxes on wages are really taxes on profits,* and 
 accordingly members of Parliament, on both sides of the House, 
 discussed the duty on corn under the conviction that it could 
 not fall on the labourer.t Mr. Ricardo himself opposed the 
 duty in Parliament, simply on the ground that it would lower 
 the profits of capitalists. In place of raising wages, it really 
 lowered them, in a manner highly important to remember in an 
 inquiry into the effects of existing taxation. ‘Take the great 
 change in the Corn Laws,’ said Mr. Gladstone, in a celebrated 
 Budget speech. ‘ You have created a trade in corn; by that 
 trade you have created a corresponding demand for the com- 
 modities of which they (the working classes) are the producers, 
 their labour being an essential element in their production, and 
 it is the enhanced price their labour brings, even more than the 
 cheaper price of commodities, that forms the main benefit they 
 receive.’ One of the chief causes of the impossibility of ascer- 
 taining with exactness the amount of the burden of existing 
 taxation on the classes in question, is that the effect on wages 
 must be taken into account. But, although I cannot pretend 
 to furnish an accurate estimate, I think the following investi- 
 gation, brief as it necessarily is, will be found to establish at 
 least: (1.) That the real burden imposed on the working classes 
 by the present system of taxation, imperial and local, is incal- 
 
 * Ricardo’s Principles of Political Economy and Taxation, chap. xvi. 
 t See, on this point, the Speeches of Mr. Cobden (popular edition), p. 9. 
 
 2 C 
 
386 The Incidence of Imperial and Local Taxation 
 
 culably greater than is generally supposed. (2.) That taxes 
 which admittedly fall on them seriously affect them in various 
 ways besides those ordinarily taken account of. (38.) That they 
 are contributors to a number of taxes generally believed not to 
 touch them at all. 
 
 Take, first, imperial taxation. Of the grievous inequality of 
 the contribution levied from the working classes by the customs 
 and excise duties, which produced nearly forty-seven millions of 
 the sixty-five and a-half millions raised by imperial taxation in 
 the last financial year (exclusive of the revenue from the post- 
 office, telegraphs, crown lands, and miscellaneous receipts), there 
 can be no question. The duty, for instance, on all qualities of 
 tea is the same ; the duty on a pound of the finest cigars is little 
 heavier than on a pound of common unmanufactured tobacco ; 
 the duties on beer, spirits, and wine, make no distinction be- 
 tween rich and poor. It is, indeed, sometimes asserted that the 
 wealthier classes pay, in addition to their own, their servants’ 
 taxes on tea, sugar,* and beer; but the very language in which 
 one well-known writer defends this assumption, affords proof 
 of its error: ‘A gamekeeper,’ says Mr. Dudley Baxter, ‘ is 
 employed by a country gentleman at weekly wages, but lives in 
 his own cottage, and pays his own taxes on beer and sugar. If 
 the taxes are taken off, he reaps the benefit, and is therefore the 
 true taxpayer. But a house-servant, if his provisions are paid 
 for him, would not receive any benefit, so that his master is the 
 taxpayer.’t Were the taxes referred to removed, the result 
 would be that outdoor servants would have more money to spend, 
 while indoor servants in the very same establishments would 
 have no more than before, unless their wages were raised, as 
 they could be, in proportion to the reduced cost of their board, 
 without any loss to their masters. It is, indeed, a mere fiction 
 that competition equalizes wages in all occupations and all over 
 the kingdom ; but such an inequality as the foregoing obviously 
 could not continue. It is not, however, by the cost to them as 
 
 * The duty on sugar has been abolished since the first publication of this Essay. 
 t The Taxation of the United Kingdom, p. 48. 
 
On the Working Classes. 387 
 
 consumers, even adding the charges for the advance of the duties 
 by the producers and dealers, that the sums of which customs 
 and excise duties deprive the working classes can be measured. 
 Not to mention that the forty to fifty millions advanced would 
 otherwise be productively employed, yielding wages as well 
 as profit on each turn of the capital, the system by which 
 they are raised is a network of obstructions and restrictions to 
 trade, production, and the employment of labour. For evidence 
 in detail of the mass of impediments which customs and excise 
 - regulations oppose to the growth of commerce, manufactures, 
 agriculture, capital, and wages, | must refer to a former Hssay.* 
 But I may instance one fact not particularized there. Conser- 
 vatives and Liberals are now agreed that protective and dis- 
 criminative duties impede the development of our resources, and 
 diminish the demand for labour. Yet we still maintain four 
 protective and discriminative duties—on sugar, spirits, wines, and 
 tobacco. The sugar duties are framed for the protection of 
 the British refiners, and the protection afforded appears to be 
 disastrous, even to many of them.t The duty on foreign spirits 
 protects the British against the German distiller, in ordinary 
 years. The wine duties place all wine-producing countries 
 other than France, and our trade with them, under a heavy 
 disadvantage. The licensed British cigar-maker pays little more 
 than the importer of raw tobacco, and the duty becomes virtually 
 protective. These four duties, accordingly, by obstructing the 
 natural course of commerce and industry, diminish the earnings 
 of the working classes, besides taxing them on their expenditure. 
 Just as the duty on foreign corn was a tax not only on the 
 
 
 
 
 
 * Financial Reform. Cobden Club Essays, 2nd Series, 1871-2. 
 
 t+ ‘Since 1840 they had had no less than twenty-seven changes in the sugar 
 duties, and since 1863 they had had four or five conventions with Foreign Powers 
 for the purpose of protecting the refining trade, and also the revenue. The re- 
 sult had been this, that while there were twenty-three sugar refiners existing 
 in London in 1862, only three or four were left in existence now. He had the 
 curiosity to ascertain what proportion of foreign sugar and English sugar was 
 sold in this town (Bradford). He went to one of the leading grocers and asked 
 him the question, and was astonished to hear that he did not sell a single ounce 
 of English made sugar, and that he found it more profitable to buy it from 
 France.’—Speech of Mr. Jacob Behrens at Bradford, November 26. 
 
 2C2 
 
388 The Incidence of Imperial and Local Taxation 
 
 bread, but also on the wages of working classes, so the sugar 
 duties mulct them, not only as buyers of sugar, but also as sellers 
 of labour; and the duties on wine, spirits, and tobacco are taxes 
 on the wages of men and women who never drink a glass of 
 strong liquor, or smoke a pipe in the year. It may, on account 
 of the difficulty of levying the imperial revenue by direct taxa- 
 tion, be absolutely necessary ; it may, for moral and sanitary 
 reasons, be desirable to tax the consumption of stimulants; but 
 in estimating the actual incidence and pressure of our system 
 of taxation, we are bound to take account of the fact that the 
 duties levied on commodities are not only taxes, and most 
 unequal ones, on the working classes as consumers, but also 
 taxes on their earnings as producers. 
 
 Another incidence of a number of taxes on the working 
 classes as producers has been concealed by the doctrine that 
 taxes on particular commodities and particular employments. 
 fall on consumers only, not on producers. The theory of 
 taxation abounds in examples of the danger of the abstract and 
 hypothetical method of reasoning in economics. The economist 
 sets out with an assumption surrounded with conditions and 
 qualifications, and perhaps itself open to question, such as that 
 in the long run, and on the average, the profits of different 
 occupations tend to equality, and presently forgetting all his 
 qualifications and conditions, concludes that the profits of indi- 
 viduals must be equal; and therefore all special taxes advanced 
 by producers must come back to them with equal or average 
 profit. Individual profits really, in almost every business, vary 
 from enormous gain to absolute loss. Profit depends, as Mr. 
 Mill says, not only on the skill of the capitalist himself, and 
 the conduct and honesty of those he deals with, but also ‘on 
 the accidents of personal connexion, and even on chance. That 
 equal capitals give equal profits, as a general maxim of trade, 
 would be as false as that equal age and size give equal bodily 
 strength.”* Nevertheless, it is taken for granted that every 
 special tax on a business is recovered ‘with average profit,’ 
 
 
 
 * Principles of Political Economy, Book ii., chap. xv. 
 
On the Working Classes. 389 
 
 though the net result of all a trader’s advances is not unfre- 
 quently ruin, though all such taxes give an advantage to the 
 larger capitalists, and though our customs and excise duties 
 have been steadily driving small producers and dealers from 
 one business after another. There is a numerous working class 
 (as, from the small proportion of their capital to their work, 
 they are properly considered) who are frequently losers by the 
 taxes they advance. A petty retailer, to give real examples, 
 takes out licences to sell spirits, beer, and tobacco ; he advances 
 the customs and excise duties on tea, sugar, and the rest of his 
 stock ; he pays perhaps sixpence in the pound on his shop; and 
 after all these duties have been advanced, his shop is burned to 
 the ground, or he falls sick and loses his business, or he is 
 defrauded and becomes bankrupt; or a large dealer, to whom 
 the taxes are ‘a fleabite,’ takes away his customers; or from 
 one of twenty other causes the return to all his outgoings is 
 ruin. ‘Take another actual case. A cab driver saves a little 
 money, and sets up a cab for himself; soon afterwards his cab is 
 smashed in a street collision, and his horse is so seriously 
 injured that it has to be shot. A large cab proprietor would 
 feel the loss of one horse almost as little as the cost of his licence, 
 but to the poor cabman I speak of his licence itself was a con- 
 siderable outlay, and he will never recover it. There are 
 thousands of poor men who every year embark their little 
 savings or borrowed money in losing ventures of this sort on 
 which they pay taxes; and not unfrequently one cause of their 
 failure is the advantage which wealthier rivals find in those 
 very taxes. ‘Thus, excise and customs duties on commodities, 
 trade licences, licences to keep horses and public carriages, &c. 
 —though treated not only by theorists but even by chancellors 
 of the exchequer as taxes on consumers alone—are often heavy 
 - direct taxes on a working class of producers, over and above the 
 general diminution of wages which the whole system of so-called 
 indirect taxation occasions. 
 
 Again, it is commonly assumed in estimates of the incidence 
 of taxation, that the working classes are entirely unaffected by 
 a number of imperial taxes which really fall on them. ‘Thus 
 
390 The Incidence of Imperial Taxation 
 
 probate and legacy duties, and stamp duties in general, the 
 income-tax, the house-tax, the wine duties, the railway duty, 
 and the duty on dogs, are usually supposed never to fall on 
 working men or women, directly or indirectly. Now, in fact, 
 the succession duty, in the first place, really falls upon many of 
 them. Numbers of working men and women in towns and 
 manufacturing districts have become owners of houses—ori- 
 ginally in most cases through building societies—and succession 
 duty is often paid on them. At Bradford, for instance, a 
 high local authority answers as follows the questions given :— 
 ‘Do any of the working classes own the houses they occupy ?’ 
 ‘A large number.’ ‘Do cases occur in which they pay probate 
 and legacy, or succession duties?’ ‘ Yes,. frequently, as large 
 numbers own house property.’ Another good authority states. 
 with respect to the same town: ‘ Very many workmen own the 
 cottages they live in. A smaller but still fair number own two,. 
 and some even four cottages. The cottages are worth from £100 
 to £150 each.’ A London workman’s house is sometimes worth 
 from £400 to £500, and, if a leasehold, pays the higher suc- 
 cession duty on personalty. It does not so often happen that 
 working men leave to their families other property of sufficient 
 value to become liable to probate and legacy duty; yet it does. 
 sometimes happen, in the case alike of workmen, servants, and 
 small dealers belonging to the working class. Servants, too, 
 sometimes receive legacies, subject to duty from their masters, 
 and working people of all classes sometimes succeed to per- 
 sonalty, or receive legacies from relatives who have made money 
 as emigrants or otherwise. The house-tax, again, sometimes. 
 falls on the highest class of skilled workmen, and sometimes on 
 workmen of a poorer class, either as lodgers or letters of lodg- 
 ings. ‘The income-tax, though directly incident on but a small 
 number of the highest paid workmen or foremen, has an 
 incidence on the working classes which one of the current 
 canons of taxation conceals. It is laid down that taxes on the 
 profits of all employments fall on capitalists only, and cannot 
 be shifted on any other class. But there is in reality a per- 
 petual migration along the borders between capital and labour, 
 
On the Working Classes. 391 
 
 as there is also an intermediate class who individually may be 
 regarded either as capitalists or workmen, according as capital 
 or labour forms the main element in their earnings. To 
 instance actual examples of the migration referred to: I have 
 known the same man successively a butler, a grocer, and a 
 court-crier; the same man an upper servant, a small trader, 
 and a railway-platform inspector; the same man a groom, a 
 cab proprietor, and the conductor of an omnibus; the same 
 man a waiter, a tavern-keeper, and a waiter again; the same 
 man a private servant, a servant in a hotel, and the proprietor 
 of the hotel ; the same woman a housekeeper, a shopkeeper, and 
 the matron of a workhouse. It is quite a common thing for 
 servants to set up shops with their savings; and the induce- 
 ments to do so, as also their success in doing so, depend a good 
 deal on the taxes on profits. Few, indeed, of the working 
 classes are sufficiently versed in the real incidence of taxation to 
 estimate the pressure of indirect imposts; but they are quite 
 alive to the pressure of such a tax as the income-tax, and to the 
 vexatious and often oppressive manner in which it has latterly, 
 with grievous impolicy, been levied. So long as the exemptions 
 of small incomes are not carried considerably further, Schedule 
 D must fall indirectly on servants and other working classes, 
 by diminishing the migration from their ranks to those of 
 employers, and so lowering wages. Other commonly over- 
 looked taxes on working people, as above said, are stamps on 
 receipts, bills, &c.; the railway duty, the duty on dogs, and 
 the wine duties. Small retailers and other dealers, carpenters, 
 smiths, and other workmen, have often occasion to use stamps, 
 besides which, stamp duties reach the labouring classes gene- 
 rally as consumers. The railway duty falls on them both as 
 regular passengers and as excursionists; and the duty on dogs, 
 though sometimes regarded by country gentlemen, in relation 
 to the working classes, as a duty on poaching, is really often a 
 duty on the sentinel who guards the poor man’s or poor 
 woman’s cottage from tramps and peculating neighbours. 
 Even the wine duties fall sometimes on working people in sick- 
 ness, ‘for the poor are sometimes sick,’ as Mr. Gladstone once 
 
392 The Incidence of Imperial and Local Taxation 
 
 said on the subject; and the heaviest duties are imposed on the 
 kinds of wine they use. The wine duties in such cases have, 
 too, like several other taxes, another incidence on the poor, in 
 the shape of privation. Law taxes have been said to fall 
 heaviest on a class who, at first sight, seem not to be subject to 
 them at all, namely, those who are too poor to go to law on 
 account of its cost, and thereby forfeit their rights. Stamp 
 duties on deeds are of this character; they constitute also part 
 of the system which makes land—the common and favourite in- 
 vestment for the savings of working men on the Continent—an 
 impossible investment for them in England. 
 
 Thus the pressure of imperial taxation in the mass on the 
 working classes is enormous, though it cannot be accurately 
 measured, and is not distributed equally over the entire body. 
 In the financial year ending March 31, 1873, its different 
 branches* yielded :— 
 
 
 
 Stamps (in- 
 Excise, cluding Probate, Land Tax Property 
 Customs. Li and and 
 icences, &c. | Legacy, and Suc- TT ouaek Tut Tnesma tie 
 cession Duties). y: ’ 
 £ £ & £ £ 
 21,033,000 25,785,000 9,947,000 2,337,000 7,500,000 
 
 To the two first of these branches, which yielded more than 
 two-thirds of the whole, the working classes contributed out of 
 all proportion to their incomes; and the other branches, in. 
 place of compensating for that inequality, added heavily to the 
 burden sustained by many working people. But this statement 
 affords no adequate measure of the relative pressure of taxation, 
 since it omits the incalculable losses in wages which the system 
 of raising it occasions. 
 
 Bearing these considerations in mind, let us glance at an 
 arithmetical estimate by one of our most distinguished econo- 
 
 * Exclusive of the Post Office, Telegraph Service, Crown Lands, and Miscel- 
 laneous Receipts. See Statistical Abstract, 1873. 
 
On the Working Classes. 393 
 
 mists, of the relative contributions of different classes to both 
 imperial and local taxation: one which seems to estimate as 
 accurately as is possible the chief taxes on expenditure, save 
 that it adds to the burden on the wealthier class the duties on 
 the consumption of their servants, the objection to which has 
 been stated already. Summing up the results of an investigation 
 into the taxes falling on three typical families—the first, a 
 common labourer’s, with an income of £40 a-year; the second, 
 an artisan’s, with £85 a-year; and the third, a middle class 
 family, with £500 a-year—Mr. Jevons arrives at the following 
 Table :*— 
 
 Percentage of Income paid in Taxes, by 
 Families expending in the Year, re- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 DEscRIPTION oF Tax. pectively :— 
 
 £40 £85 £500 
 
 On Necessaries, . 4 : : 2a | 1:7 8 
 On Stimulants, . . : : 5°5 4°] 1°8 
 Direct Taxes, ‘ : : : — — 2°7 
 Legacy and Probate Duties, . : = —_ 8 
 Rates and Tolls, . - : : 2°5 2°4 1:9 
 Total Taxation, . : 10°1 8:2 8:0 
 
 
 
 
 
 It will be seen that, according to this estimate, the weight 
 of taxation decreases as the income increases, being 10:1 per 
 cent. on the common labourer’s income, and only 8:0 per cent. 
 on an income of £500 a-year; and it seems clear that if the 
 estimate had been carried up to the higher incomes, the burden 
 would be seen to bear an inverse proportion to the ability to 
 bear it. Yet the estimate omits a number of items which, as 
 we have seen, must be included in the real pressure, direct and 
 indirect, of taxation on the working classes. To Mr. Jevons’ 
 
 * The Match Tax. By W. Stanley Jevons, p. 64. As the estimate occurs 
 only incidentally in the able essay referred to, it could not well be exhaustive, 
 ‘but it furnishes a good basis for calculation. 
 
394 The Incidence of Imperial and Local Taxation 
 
 estimate ought to be added the incidence, direct or indirect, or 
 both, of the income-tax, the house-tax, the probate, legacy, 
 succession, and other stamp duties, trade licences, taxes on 
 shops, and on public carriages, railways, horses, and dogs, and 
 sundry taxes paid by a number of small dealers. Above all, I 
 submit, with unfeigned respect to Mr. Jevons, that a large 
 addition ought to be made for the losses in wages arising from 
 the system of indirect taxation. 
 
 Another estimate, by Mr. Leone Levi, reckons the taxes 
 paid by the working classes out of their total taxable income, 
 at twelve-and-a-half per cent., and the taxation of the upper 
 and middle classes at twelve per cent. This estimate includes 
 some of the taxes on labour omitted by Mr. Jevons, but omits 
 a number of others which it has been shown ought to be 
 included. And so far is Mr. Levi’s estimate from taking any 
 account of the loss of wages, or even allowing for the additional 
 cost of taxation occasioned by the advance of duties by dealers. 
 (which Mr. Jevons puts at twenty per cent.) that he strangely 
 assumes that the advance causes an addition to wages.* Never- 
 theless he concludes that the whole burden of taxation on the 
 upper and middle classes is ‘rather less than that which falls 
 on the income of the working classes.’ 
 
 Both the estimates just referred to include the important 
 element of local taxation. The question now follows, whether 
 local taxation redresses or aggravates the very unequal burden 
 which, it has been shown, imperial taxation casts on the working 
 classes P 
 
 Some recent writers on local taxation set out with the as- 
 sumption that local rates in England are always levied on the 
 occupier, but the proposition does not hold good in the case of 
 the occupiers of premises of small rateable value ; ¢ the greatest 
 diversity of practice exists in different towns and parishes with 
 respect to the levy of rates on owners and small occupiers. 
 
 * Estimate, §c. By Leone Levi, p. 10. 
 
 ¢ See with respect to the levy of poor-rates, in the case of small occupiers, the 
 Poor Rate Assessment and Collection Act, 1869. The levy of other rates is affected 
 by a number of Acts, and the powers given to authorities. 
 
On the Working Classes. 395 
 
 But the real incidence of rates does not depend on their levy 
 from owner or occupier, and the subject is one of great com- 
 plexity, though some economists find a simple key to its solu- 
 tion in the doctrine of an equality of the profits of different 
 occupations and investments. Neither farmers, house builders, 
 nor people in trade, they argue, will take less or can get more 
 than ‘ average,’ ‘ ordinary,’ or ‘natural’ profits; none of them, 
 therefore, will bear special taxation, and the rates in the case of 
 farmers will fall on land-rent ; in the case of houses (unless in 
 special situations, where the ground owner is affected), on the 
 occupiers ; in the case of the premises of traders, on consumers. 
 Respecting the profits of farmers, I will only say, so far are 
 they from being determined by a knowledge of the profits of 
 other occupations, that a farmer seldom knows the profits of 
 any other business in the nearest market town, and never knows 
 the profits of farming itself in the different parts of the kingdom. 
 Farming is a speculative business, depending very much on 
 the seasons and other local conditions, and its profit varies 
 in different localities, under different landlords, with different 
 farmers, at different periods. We can only make sure that 
 farmers in general will shift the burden of rates from their own 
 to other shoulders if they can. And the question follows, Are 
 there no shoulders but the landlord’s to which they may shift 
 it? Are there not two other possible sources besides rent, from 
 which they may recoup themselves for special local taxation, 
 namely, wages and prices? As regards prices, foreign com- 
 petition has hitherto presented no insurmountable obstacle to 
 a rise in the price of a great part of farming produce, such as 
 fresh meat, milk, butter, eggs, and sundry vegetables; the price 
 of corn itself depends a good deal on the domestic supply. Then 
 as to wages, the truth is, that while economists have been 
 assuming, contrary to Adam Smith, a free competition and an 
 equal rate of wages throughout the kingdom, farmers have had 
 all along the price of labour very much under their own control 
 in a number of places. ‘The wages of labour on Salisbury 
 Plain,’ Mr. Caird wrote, in his famous ‘ Letters on English 
 Agriculture in 1851,’ in which he showed that agricultural 
 
396 The Incidence of Imperial and Local Taxation 
 
 wages varied from six to sixteen shillings a-week, ‘are lower 
 than in Dorsetshire. An explanation of this may partly be 
 found in the fact that the command of wages is altogether 
 under the control of the large farmers, some of whom employ 
 the whole labour of a parish. Six shillings a-week was the 
 amount given for ordinary labourers by the most extensive 
 farmer in South Wilts, who holds nearly five thousand acres of 
 land, great part of which is his own property. Seven shillings, 
 however, is the more common rate; out ofthat the labourer has 
 to pay one shilling a-week for the rent of his cottage.’ Twenty 
 years later, wages in Dorsetshire were generally from seven to 
 eight shillings a~week ;* and if we look to the low wages of 
 labour in many parts of the country on the one hand, and the 
 high price of farm produce.on the other, it is impossible not 
 to see that farmers in many places have been able to put the 
 burden of rates on labourers as well as consumers, and have 
 exercised the power; so that, in fact, labourers have been 
 mulcted in both wages and prices. We find here the explanation 
 of a difficulty which seems to have puzzled both members of the 
 committee of the House of Commons on Local Taxation (1870) 
 and witnesses. It was argued, on the one hand, that the great 
 increase of rates must have come out of the pocket of the farmer, 
 since rents had not fallen; and, on the other hand, that it must 
 have come out of the landlord’s pocket, since agricultural profits 
 had not fallen. It seems not to have occurred to either land- 
 lord or farmer that a rise in the price of farm produce, without 
 a corresponding rise in farm wages, reconciles the two state- 
 ments respecting profits and rent, and proves at the same time 
 the incidence of the rates on consumers and labourers :— 
 
 ‘2373. Are you an owner of land in Somersetshire ?>—I am. 
 
 ‘2374. Do you farm your own land ?—I do. 
 
 ‘2375. Have you given attention to the subject of rating ? 
 
 —lI have. 
 * * * * * 
 
 * On the different rates of wages of agricultural labour in England and their 
 causes, see the present writer’s Land Systems of Ireland, England, and the Continent, 
 pp. 853-4, 357-79. 
 
On the Working Classes. 397 
 
 ‘2432. Is this a fair way to state your opinion, that the 
 owner does not reduce the rent in consequence of the rise in the 
 rates P—Certainly he does not; I believe that during the last 
 thirty years, when the rate has nearly doubled, nearly the whole 
 of the increase has been paid by the occupier. 
 
 ‘2433. Because there has been no readjustment of the rent ? 
 —LExactly; rents are not readjusted very often. Farming is 
 one of those fluctuating businesses that an owner does not read- 
 just his rent very often, perhaps not even for one or more lives. 
 
 2435. ‘Then you have this curious result, that though a 
 farmer’s profits must be enormously affected by a rise in the 
 rates, which you have described as 100 per cent., nevertheless 
 it has had no influence on the rent >—Very little indeed. 
 
 ‘2445. Have the farmers’ profits diminished generally in 
 your neighbourhood ?—No; I think not.’ 
 
 But more general incidences of the rates, both in country 
 and town, have to be considered. In the first place, on whom 
 do the rates on the houses occupied by working people, both in 
 country and town, fallP Secondly, what is the effect of the 
 poor-rate on wages? It would save a world of trouble to follow, 
 in respect to the first question, the formula that the builders of 
 houses and investors in house property must get the average 
 rate of profit, and therefore the rates must fall on the occupiers, 
 whether working people or not. It gives, too, an air of com- 
 plete command over the subject, and of rigorous logic, to argue 
 strictly from assumptions such as the equality of profits. But 
 there are really no such short cuts to the end of economic 
 inquiries. In one of the excellent articles on finance which M. 
 Leroy-Beaulieu, an economist of very high reputation, and editor 
 of the Economiste Francais has recently contributed to that 
 useful journal, it is shown that there are no external character- 
 istics by which the State can measure, for the purpose of an 
 income-tax, the profits of business. ‘The system is in its very 
 nature defective. One of its principal faults is, that it can 
 throw no light on the individual profits of each trader : it has, in 
 fact, for its base the supposed average profit which each class 
 of traders may reasonably obtain. In this system, therefore, 
 
398 The Incidence of Imperial and Local Taxation 
 
 individual injustices must alway sbe numerous.’»—(Hconomiste 
 Francais, December 20, 1873.) Nevertheless, the State has a 
 thousand times better means of ascertaining the actual profits 
 of every business than any private person in business can have, 
 inasmuch as it can make it the business of a large staff to collect 
 information on the subject in every locality, while each man in 
 business must mind his own business, instead of the business of 
 other people all over the country. What would be thought of 
 a project to assess the taxpayers under Schedule D to the income- 
 tax, on an assumption that every man actually makes the same 
 percentage of profit on his capital? Such, verily, is the assump- 
 tion on which the common theory of the incidence, alike of local 
 rates, of customs, and excise duties, is based: a theory which 
 suits large and successful capitalists, no doubt ; it justifies both 
 low wages and high prices; and it serves as a screen for enor- 
 mous profits from the competition of ‘low men’—to borrow the 
 language of a high authority in such matters—who would ‘ cut 
 in’ if they knew the real state of affairs. A flagrant ignoratio 
 elenchi in economics has arisen from this readiness to ‘cut in’; 
 it is put forward as proving that profits are, by consequence, 
 equalized. ‘The fact that capital deserts losing businesses for 
 others in which extraordinary profits are made, proves only that 
 profits are actually very unequal. The new capital, moreover, 
 often comes in only for a loss at the turn of the tide, after the 
 earlier men in the trade have doubled their capitals, and a fresh 
 inequality is the real consequence. Take the common case of 
 building-ground to be let for ninety-nine years, and consider for 
 one moment the nature of the assumption that the profit on houses 
 is determined by the knowledge which capitalists have of the 
 profits of all investments, and the consequent equalization of 
 building with other profits. The profits of each occupation vary, 
 as we have seen, with different individuals, from immense gain to 
 utter ruin, and vary at different times in the case of the same 
 individual. We are told by Mr. Brassey’s biographer that there 
 were times when he would have died a poor man; and he might 
 have died a poor man had the economic assumption been well 
 founded, and had other people known the real state of his 
 
On the Working Classes. 399 
 
 business. The same capitalist, in several cases known to 
 myself, is making profits on different investments under his 
 own management, varying from upwards of 100 per cent. 
 to a balance on the wrong side. Adam Smith, writing at a 
 time when the number of employments for capital was com- 
 paratively insignificant, when the modes of carrying on business 
 were almost stationary, when speculation was a much less active 
 element than now, and when all the conditions of an estimate 
 of the profits of different businesses were comparatively simple, 
 said :—‘ It is not easy to ascertain what are the average wages 
 of labour even in a particular place, and at a particular time. 
 We can, even in this case, seldom determine more than what 
 are the most usual wages; but even this can seldom be done 
 with regard to the profits of stock. Profit is so fluctuating that 
 the person who carries on a particular trade cannot always tell 
 you himself what is the average of his annual profit. It is 
 affected not only by every variation of price in the commodities 
 he deals in, but by the good or bad fortune both of his rivals 
 and of his customers, and by a thousand other accidents to which 
 goods, when carried either by sea or land, or even when stored 
 in a warehouse, are liable. It varies, therefore, not only from 
 year to year, but from day to day, and even from hour to hour. 
 To ascertain what is the average profit of all the different trades 
 carried on in a great kingdom must be much more difficult ; and 
 to judge of what it may have been formerly, or in remote periods 
 of time, must be altogether impossible.’ 
 
 The doctrine by which eminent economists of our own day 
 affect to determine the incidence of rates assumes much more 
 than the knowledge of which Adam Smith demonstrated the 
 impossibility. It assumes that capitalists not only know the 
 past and present profits of all occupations and investments, but 
 foreknow them at remote periods—to the end of a long building- 
 lease, for example. Yet it is clearly impossible for persons 
 contemplating the building or buying of new houses to foretell, 
 even for twenty years, the profits that single investment will 
 yield. The movements of business and population, the demand 
 for houses and other buildings, the increase of wealth and 
 
400 The Incidence of Imperial and Local Taxation 
 
 money, and the general range of incomes and prices, the supply 
 of new houses on the spot, the means of locomotion bringing 
 other districts within reach, all defy calculation. The under- 
 ground railway defeated the expectations of many house-owners. 
 in London. There are indeed house-agents who will affect to 
 tell you the rate of profit on houses, just as there are actuaries 
 who profess to be able to capitalize and assess to the income-tax 
 the profits of every man in every business, though of two men 
 assessed at the same rate, one will be bankrupt within the year, 
 and the other will make money for half a century, and die 
 richer than Mr. Brassey. The truth is that the profits of house 
 property, the rents that can be exacted from occupiers, and 
 the incidence of rates, depend on no such fiction as ‘the average 
 rate of profit,’ but on the demand for and the supply of houses, 
 and these conditions vary from time to time, and from place to 
 place. The house-builder, having cast in his lot with house 
 and ground, and covenanted to pay a ground-rent, determined, 
 not by any knowledge of the profits of all occupations, but 
 simply by the local demand for and supply of building-ground, 
 afterwards makes such terms as he can with his tenants. And 
 the constant increase of population, the narrow limits of distance 
 from their business within which it is convenient to most people 
 to live, and the cost and trouble to existing occupiers of removal, 
 give the owner, in most cases, the stronger position, and enable 
 him to throw any increase in the rates on the occupier. But, on 
 the other hand, if rates were abolished, house-owners in most 
 places might exact some addition to their rent, and to that 
 extent they may be said to pay a part of the present rates in 
 reduced rents; their power of raising the rent on the abolition 
 of rates being limited, not by any ‘ average rate of profit,’ but 
 by the supply and demand for houses, and the encouragement 
 to building which the prospect of higher rents might occasion. 
 No universal or strict rule, therefore, can be laid down on the 
 subject; but, generally speaking, the occupier is the weaker 
 party, and the chief burden of the rates can be laid upon him. 
 In the case of occupiers of the working class, the inquiries 
 I have been able to make lead to the conclusion that, generally 
 
On the Working Classes. 401 
 
 speaking, the bulk of the rates falls either directly, or indirectly 
 in rent, upon them; but as rent usually could and would be 
 somewhat raised, were rates to be done away with, a part may 
 be said to fall on the houseowner. It would be unfair, at the 
 same time, to take no account of the fact that on some large 
 estates, owing to the liberality of the landlords, the payment of 
 the rates on the cottages of labourers falls altogether on the 
 former. So differently, indeed, are labourers circumstanced in 
 respect of both house-rents and rates, as well as of wages, in 
 different places, that in one parish I know of, belonging to a 
 large proprietor, the labourer pays only £2 12s. for a decent 
 cottage and garden, and nothing for rates; while in neighbouring 
 parishes, in which the rate of wages is the same, he pays £6 for 
 a worse house without garden, and the rates in addition. The 
 estate of the great landlord is, to speak fairly, in most cases, 
 the best estate for the labourer to live on. Where great 
 landlords and great estates injure the working classes, are as 
 buttresses of a system which keeps land out of the market, 
 obstructs agriculture, manufactures, and trade, and causes the 
 very notion of little farms to appear a chimera to the untravelled 
 Englishman. 
 
 The only conclusion we can come to with respect to the 
 incidence of rates, as between owner and occupier, is that 
 generally the working man, as occupier of a house in country or 
 town, pays (sometimes to a man as poor as himself) all the 
 rent that can be screwed out of him. A little more could be 
 screwed out of him were there no rates, and to that extent the 
 rates may be said to fall on the owner, the remainder being 
 borne by the workman. Even where the local authorities 
 exempt the occupier from the payment of rates on the score of 
 poverty, the rent is often raised in proportion. But it must 
 not be forgotten that, whatever may be the incidence of the 
 rates, as between owner and occupier, working men are now, 
 in a considerable number of cases, the owners of the houses they 
 occupy, and bear the whole burden of the rates, even where 
 _ their houses are mortgaged. In not a few cases, moreover, the 
 owners of the cottages occupied by workmen are themselves 
 
 2D 
 
402 The Incidence of Imperial and Local Taxation 
 
 working men; and here, too, whatever the incidence of the 
 rates, as between owner and occupier, working men pay the 
 entire amount. It is estimated that there are 2000 building 
 societies in England, and although the English building societies 
 do not build, they advance money to working people both to 
 build and to buy houses, and the number of houses consequently 
 owned by men and women of those classes in some places is truly 
 prodigious.* ‘We have,’ says a witness connected with some 
 of the chief building societies in Birmingham, in evidence be- 
 fore the Friendly and Building Societies’ Commission, ‘ 13,000 
 houses in Birmingham belonging to our working men. We 
 have streets more than a mile long, in which absolutely every 
 house belongs to the working classes.” The value of a working- 
 man’s house, and the amount of the rates on it, are sometimes 
 considerable. ‘'T'o-morrow,’ says another witness before the 
 Commission, ‘I have to settle an advance to a workman on the 
 Metropolitan Railway ; we are to lend him £360 ; he has bought 
 a house for £420.’ The amount of local taxation on a town 
 workman’s house is, in short, sometimes actually not far below 
 the amount paid by a millionaire, who keeps only an office in 
 town, and livesin a parish where rates are low. But it is not 
 town workmen only who pay rates as owners of houses. The 
 famous Mr. Joseph Arch, for example, has long been a village 
 ratepayer, as owner of a house left to him by his mother. 
 
 Two other classes of working people ought not to be left 
 unnoticed, who are neither owners nor occupiers of whole 
 houses, but letters of lodgings and lodgers. The vestry clerk 
 of St. Leonard’s, Shoreditch, gave the following evidence before 
 the Poor-rates Assessment Committee of 1868, with respect to 
 inhabitants of houses of £10 a-year rateable value in eats 
 parish :— 
 
 ‘2543. Do you know in what way those people are employed 
 
 
 
 * A useful Essay on English Building Societies has been published by Mr, 
 Ernst von Plener (lately First Secretary to the Austrian Embassy in London, 
 now a Member of the Austrian Parliament), the author of a History of English 
 Factory Legislation, of which an English translation was procured by Mr. 
 Mundella. 
 
On the Working Classes. 403 
 
 who live in those houses? —A great many of them have stalls 
 in the street, and they go out with hearthstones, and there are 
 a great many birdcatchers and brickmakers. 
 
 ‘2544. Are there many bricklayers and masons’ labourers 
 in your parish P—Yes, there are a good many bricklayers, and 
 a good many cabinet-makers. 
 
 ‘2546. Do those people chiefly take in lodgers in their 
 houses P—A. great many of them take a house—for instance, 
 widows, and those sort of people—and let it out to lodgers.’ 
 
 The vestry clerk of Bethnal Green also gave evidence :— 
 
 ‘2707. Are the people who occupy a £10 house, even 
 though they pay a weekly rent, unable to pay their rates P— 
 In many instances they take in lodgers, and with that they are 
 scarcely able to get along.’ 
 
 It may be assumed, for the reasons given above respecting 
 occupiers, that in such cases the letter of the lodging in the 
 first instance generally pays at least the greater part of the 
 rates in rent, but the question follows—Is it finally paid by the 
 lodging-letter or by the lodgers? The stoutest advocate of 
 ‘the average rate of profit,’ as the key to the incidence of 
 taxation, will hardly contend that costermongers, sellers of 
 hearthstones, birdeatchers, bricklayers, and poor widows in 
 Shoreditch are accurately informed respecting the rates of 
 profit to be made in every trade and investment. ‘The case, 
 indeed, falls within one of the exceptions which Adam Smith 
 emphatically made to the doctrine of a tendency of the gains of 
 different occupations in the same neighbourhood to equality— 
 exceptions which deprive the doctrine of all application to the 
 profits of English trade at the present day. There is no general 
 principle to determine the incidence of rates in the case of the 
 lodgings of poor workpeople. We can only assume that the 
 letters of such lodgings get as much rent as they can, but its 
 payment is precarious; and even if they succeed in shifting 
 both their own rent and the rates on their lodgers, they pay 
 themselves for the exemption in discomfort and injury to health. 
 And whether they or the lodgers are the real ratepayers, the 
 rate falls on a working class. Nor does the incidence of local 
 
 2D 2 
 
404 The Incidence of Imperial and Local Taxation 
 
 taxation on the working classes end there. Both as consumers 
 and as producers, they are likewise contributors to local rates 
 levied on shops and other trade premises, and to tolls and dues 
 for roads, bridges, canals, ferries, fairs, markets, and harbours. 
 They contribute as consumers, like other classes, when the price 
 of the commodities they use is enhanced by such local taxation. 
 And they pay much more heavily as small producers and 
 dealers, when their business is unremunerative, and they fail 
 to recover their outgoings. It has been demonstrated already 
 that so-called indirect imperial taxes are often crushing direct 
 taxes on poor working men and women with a small stock in 
 trade; and local taxation, too, is sometimes the last straw that 
 breaks the back of the petty trader. It is, therefore, certain 
 that, on the whole, the working classes bear out of their scanty 
 incomes an amount of local taxation in rates which forms a 
 heavy addition to their imperial taxation. What, then, if 
 nearly one-half of the whole amount levied in rates is applied 
 in a manner which makes it, in fact, to a great extent a deduc- 
 tion from wages? What if, in addition, a great part of the 
 remainder of the local revenue is applied to purposes from 
 which the owners of property derive the chief, and, in some 
 cases, the whole advantage, as in the case of various permanent 
 local improvements, and other objects of local expenditure which 
 raise the value of land and buildings? | 
 Out of nearly twenty-two millions of local taxation in Eng- 
 land and Wales, between seventeen and eighteen millions are 
 raised directly by rates, and of this amount about eight millions 
 are applied, directly or indirectly, to the relief of the poor. 
 But that the relief of the poor cheapens labour, and is to a 
 considerable extent taken out of wages, as Mr. Purdy and Mr. 
 Thorold Rogers have argued, appears incontrovertible. I by 
 no means go the length of saying that its operation in that 
 respect can be nicely calculated, or that the whole of the fund 
 raised for the relief of the poor—who must not in that sense be 
 confounded with the working classes, many of whom never get 
 any relief, and who are not the only classes relieved—is prac- 
 tically a deduction from wages. But it is certain that, were 
 
On the Working Classes. 405 
 
 it not for the poor-rate, there would be a smaller supply of 
 labour, and a higher rate of wages Both the preventive and 
 the positive checks to population would act in inereased force. 
 There would be fewer improvident marriages and more emi- 
 gration, on the one hand; and more deaths from sickness and 
 want, more vagrancy and mendicancy, on the other hand. If 
 the poor-rate were abolished, the difference would not all go 
 into the pockets either of landlords or farmers in the country, 
 or of owners or occupiers in towns; for wages would certainly 
 rise in both country and town. And it follows that many 
 members of the working classes contribute in poor-rates to a 
 fund from which they not only derive no advantage, but which 
 is so applied that it diminishes their own earnings. They are 
 taxed, therefore, twice to the poor-rate; and they are taxed 
 further for local improvements, from which a wealthier class 
 derives the chief benefit. It is not, indeed, possible to measure 
 exactly the amount of benefit derived by different classes from 
 the objects of either imperial or local taxation. And few falser 
 maxims of finance have ever been propounded than that of the 
 great French economist, M. Say, which Sir William Harcourt 
 appears to follow, that ‘the best system of finance is to spend 
 little, and the best taxation is that which is least in amount.’ 
 On the contrary, as Mr. Wells observes in a Report on the 
 local taxation of New York, ‘ probably there is no act which 
 can be performed by a community, which brings in so large a 
 return to the credit of civilization and general happiness, as the 
 judicious expenditure, for public purposes, of a percentage of 
 the general wealth raised by an equitable system of taxation. 
 It will be found to be a general rule that no high degree of 
 civilization can be maintained in a community, and indeed no 
 highly civilized community can exist, without comparatively 
 large taxation.’ Mr. Wells cites, in the same Report, the wise 
 remark of Mr. Jevons:—‘There is sure to be a continuous 
 increase of local taxation. We may hope for a reduction of 
 the general expenditure, and we shall expect rather to reduce 
 than raise the weight of duties; but all the more immediate 
 needs of society—boards of health, medical officers, public 
 
406 The Incidence of Imperial and Local Taxation 
 
 schools, reformatories, free libraries, highway boards, main- 
 drainage schemes, water supplies, purgation of rivers, improved 
 police, better poor-laws—these and a score of other costly 
 reforms must be supported mainly out of local rates.’ The 
 working classes undoubtedly share the benefits of such in- 
 stitutions, but a much larger share often accrues to a wealthier 
 class, whose contribution, in proportion to their ability, is 
 immeasurably smaller. Local improvements in towns, for ex- 
 ample, whether made by municipal authority or by great com- 
 panies, often raise prodigiously the value of the property of the: 
 rich, while causing only loss and distress to working people, 
 whom they disturb from their dwellings, whose rents they raise, 
 and who do not remain long enough to participate in the ulti- 
 mate advantages. 
 
 As in the case of imperial, so in the case of local taxation, 
 I make no pretence to offer an exact estimate of the relative 
 burdens imposed on the working and other classes. But the 
 candid reader who has followed the investigation which my 
 limits have narrowly circumscribed must, I think, be convinced 
 that, on the one hand, imperial taxation falls with enormously 
 disproportionate weight on the working classes; and, on the 
 other hand, local taxation, in place of redressing, greatly ag- 
 gravates the inequality. I will venture only to add that, under 
 these circumstances, to abolish the income-tax on Schedule D 
 (which includes many of the wealthiest and least taxed men in 
 the world), instead of repealing the duties on sugar and tea, 
 would be a monstrous injustice. In a debate in the House of 
 Commons on local taxation, in 1872, Mr. Rathbone, M.P. for 
 Liverpool, said: ‘ Local taxation, as at present levied, pressed 
 heavily on labour as compared with capital, and the wealthiest 
 classes were allowed to escape from paying anything like their 
 fair share of the rates. In the case of London, or any other sea- 
 port where merchants were the wealthy class, and their visible 
 personal estate consisted mainly of ships and stock-in-trade 
 of great value, the anomaly became apparent. It was this class 
 who directly or indirectly derived benefit from the labouring 
 classes, so long as they were earning wages, and escaped almost 
 
On the Working Classes. 407 
 
 entirely when they became chargeable. From inquiry into a 
 number of cases he had ascertained that many large merchants 
 and brokers were only paying one-half to two per cent. (in 
 rates), while the labouring men in their employ were paying 
 twice to seven times as much in proportion to their income. 
 In a word, a merchant, or shipowner, deriving an income of 
 £15,000 a-year from a capital of £150,000, paid £62 in rates 
 on his counting-house and warehouses, and £65 on his suburban 
 residence assessed at £450 a-year. The young doctor or solicitor 
 paid £14 out of his income of £600 a-year on his £60 house; 
 and the labourer £2 8s. 9d. out of his £1 4s. a-week on his 4s. 
 cottage. Thus an income of £15,000 a-year paid less than 
 1 per cent. ; an income of £600 a-year paid 24 per cent. ; and 
 an income of £1 4s. a-week paid 4 per cent.’ 
 
 Lake also the evidence of a witness before the Select Com- 
 mittee on Local Taxation :— | 
 
 2792. You are a Justice of the Peace at Liverpool P—I am. 
 
 ‘2793. Have you been a member of the Town Council at 
 Liverpool P—Yes, for many years. 
 
 £2938. ... <A gentleman comes and hires an office in 
 Liverpool, and he makes his £50,000 a-year in it; but he goes 
 and lives in Cheshire, and pays nothing to the rates of Liver- 
 pool beyond the rates that are levied on his office.’ 
 
 The Chairman of the Middlesex Quarter Sessions, again, 
 stated with respect to the metropolitan county in which so 
 many millionaires live :— 
 
 ‘Unfortunately the rates do not keep pace with a man’s 
 wealth ; there is many an individual that has £10,000 a-year, 
 whose rates are perhaps no more than upon a house of £500 
 a-year, and there is the injustice, I think, of the poor-rate.’ 
 
 The levy of a large portion of the revenue by indirect taxa- 
 tion gives, however, the smaller incomes included in Schedule D 
 a claim to exemption, and the argument for it is fortified by 
 the fact that otherwise the income-tax must, for reasons given 
 above, fall indirectly on the working classes. Those classes are, 
 moreover, virtually subjected to a heavy income-tax (though 
 one which brings nothing into the treasury of the State) in the 
 
408 The Incidence of Imperial and Local Taxation, &e. 
 
 diminution of wages resulting from customs and excise duties 
 and regulations. A remodelled succession duty, equalizing the 
 duties on real and personal property, and raising both in the 
 case of remote successions, but reducing both in case of suc- 
 cessions to property of small value, seems the best remedy for 
 the inequalities of the income-tax as regards permanent and 
 temporary incomes—inequalities which are not peculiar to the 
 income-tax, being incident also to all duties on articles of com- 
 mon consumption. To substitute a naked property-tax for the 
 income-tax is to tax the houses and savings of poor working 
 people in order to exempt the income of the Rothschilds from 
 taxation. 
 
XXY. 
 BRITISH COLUMBIA IN 1862.* 
 
 Ovur most distant North American colonies, British Columbia 
 and Vancouver Island, move in a course the very reverse of 
 what Adam Smith has called the natural progress of opulence. 
 He argues that as subsistence is necessarily prior to comfort and 
 luxury, the cultivation and improvement of the country must, in 
 the nature of things, precede the growth of towns, and the greater 
 part of the capital of a rising community must be first directed 
 to agriculture, next to manufacture, and last of all to foreign 
 commerce. This necessary order of things is also, he observes, 
 in conformity with the natural inclinations of mankind ; agricul- 
 ture being the pleasantest of all occupations, and being unattended 
 with the risks of trade. From these premises the philosopher 
 concludes that if human institutions had not thwarted nature, 
 the towns would nowhere have increased beyond what the im- 
 provement and cultivation of the territory in which they were 
 situated could support, until the whole of that territory was 
 completely cultivated. But he points out that this natural 
 order of progress was inverted in the growth of all the States 
 of Europe after the dissolution of the Roman Empire. The 
 foreign commerce of these cities introduced all their fine manu- 
 factures, and manufactures and commerce together gave birth to 
 the principal improvements of agriculture. The causes which 
 forced the different countries of Europe into ‘ the unnatural and 
 retrograde order’ are investigated in the Third Book of the 
 Wealth of Nations; and the explanation amounts in brief to 
 this, that the mediwval laws and customs affecting the owner- 
 ship and tenure of land discouraged agriculture, while the 
 
 * Saturday Review, October 25, 1862. 
 
410 British Columbia in 1862. 
 
 inhabitants of towns arrived at independence and liberty much 
 earlier than the occupiers of the soil. 
 
 But how are we to account for the phenomenon that the 
 youngest colonies of Great Britain in North America are 
 following the same paths of progress as the feudal States of the 
 Middle Ages? ‘The very first consequence of the rush to the 
 mines of British Columbia in 1858 was to create the flourishing 
 town of Victoria in Vancouver Island, which before was merely 
 a factory of the Hudson Bay Company. On the mainland, the 
 less populous and less prosperous town of New Westminster, the 
 capital of British Columbia, grew up, between which and the 
 mining districts are now several smaller towns. All these towns 
 are purely commercial. In Vancouver Island agriculture is 
 still in its infancy. In British Columbia it can hardly be said 
 to exist as yet. In the latter the colonial population, as distinct 
 from the native Indian tribes, consists almost exclusively of 
 miners, shopkeepers, carriers, or packers, town and road 
 labourers, and military and civil officials—the mining element 
 largely preponderating during the mining season. Some time 
 ago the Victoria ‘ Daily British Colonist,’ a sensibly written, 
 but villainously printed paper, observed:—‘ The town and 
 country begin to swarm with men, most of them inured to 
 labour. The majority are, perhaps, better acquainted with 
 agriculture than with any other art. Yet all profess to be 
 bound for Cariboo. Agriculture seems never to be taken into 
 account.’ ‘This is a state of things not only irreconcilable, in 
 appearance at least, with Adam Smith’s doctrine, but diametri- 
 cally opposed to the precepts of a yet more famous philosopher 
 respecting a colonial community. ‘The people wherewith you 
 plant,’ according to Lord Bacon, ‘ought to be gardeners, 
 labourers, smiths, carpenters, joiners, fishermen, fowlers, with 
 some few apothecaries, engineers, cooks, and bakers. But,’ he 
 adds, ‘ moil not too much underground, for the hope of mines is 
 uncertain, and useth to make the planters lazy in other things.’ 
 
 Were there no land fit for either pasture or tillage in British 
 Columbia, it would be needless to say anything more about 
 the cause of the backwardness of agriculture. No one now 
 
British Columbia in 1862. 41] 
 
 disputes that Vancouver Island possesses, in addition to a 
 climate closely resembling that of England, several rich tracts 
 of arable and pasture land, which are however only beginning 
 to be settled. But as to the agricultural capabilities of British 
 Columbia, there has been some controversy, which appears to 
 have arisen from a confusion between the coast and inland dis- 
 tricts. In the former, mountains and forests predominate, 
 but the mines are all in the interior, and beyond the range of 
 the Cascade Mountains. There is abundant room for a large 
 farming population. In the country of the Thompson, the 
 Bonaparte, and the Pavilion Rivers, for example, as well as in 
 that of the Similkameen and of the O’Kanagan Lake, there are 
 great tracts of excellent land. The soil and climate are not the 
 obstacles to the growth of agriculture in British Columbia. The 
 traveller there may indeed be reminded of the gloomy horrors 
 of ‘those matted woods where birds forget to sing,’ to which 
 the exiles from the Deserted Village were driven; but we have 
 unquestionable evidence that between the Thompson and the 
 Quesnelle Rivers there are vast undulating table-lands where 
 there is not more than sufficient wood for the settlers’ require- 
 ments. ‘he traveller, for instance, from Kamloops may canter 
 his horse for days without a check from the nature of the 
 ground, turning him out to grass at night. Such being the 
 capabilities of this country, the ‘ British Colonist’ impresses upon 
 its readers that there is a way in which a fortune can be made 
 in British Columbia without breasting the snow on the hills or 
 packing beans and bacon on their backs from creek to creek in 
 Cariboo :—‘ That way is simply by taking farms on the road 
 to Cariboo. That way is by raising hay, oats, wheat, potatoes, 
 beans, pork, beef,and mutton. These are the commodities that 
 can be most easily exchanged for gold. There is not a country 
 under the face of heaven that now offers such brilliant induce- 
 ments to the farmer as British Columbia.’ 
 
 How is it then that such brilliant inducements have been 
 held out in vain if they exist ? Is it simply an instance of the 
 truth of Bacon’s observation, that the hope of mines useth to 
 make the planters lazy in other things? Or is there anything 
 
412 British Columbia in 1862. 
 
 peculiar to the economic condition of a gold country tending 
 to the discouragement of agriculture, and to the removal of 
 the order of industrial development that Adam Smith describes 
 as the natural one? Upon Adam Smith’s own principles it 
 follows that the industries which supply the prime necessaries 
 of the miner’s life and occupation must be the first to settle 
 themselves near the gold diggings, and this alone would ac- 
 count for commerce taking precedence of agriculture, since the 
 miner cannot wait for food until it is grown in his new country, 
 and he wants many things besides the food that the most fertile 
 soil can supply him with. He wants, for instance, first of all 
 things, whisky. ‘If you ask,’ says a Cariboo correspondent 
 of the ‘British Colonist,’ ‘why provisions are so high, look at the 
 nature of the first invoices which invariably follow civilization, 
 and the predominant article will invariably be whisky.’ ‘The 
 miner wants also tools, boots, and other articles, which will not 
 grow out of the ground, and which he must get from the mer- 
 ' chant, and not from the farmer. For this reason alone we might 
 look for the appearance of ships before farms in a mining colony, 
 and the growth of towns before the cultivation of the country. 
 But this is not the whole of the matter. Another principle, 
 known to the student of modern political economy, is on the 
 side of commerce against agriculture. That is, when a country 
 has a pre-eminent advantage over other countries in the produc- 
 tion of one or two commodities, it may be more profitable to 
 import than to produce at home commodities for the production 
 of which it has not so decided a superiority. It may be that 
 British Columbia has pastures richer than any in the British 
 Isles; yet it may be cheaper to bring English cheeses and Irish 
 cattle round Cape Horn than to find them in the colony. The 
 ‘ British Colonist’ speaks of Cariboo prices as offering a bounty 
 on farming near Cariboo, but forgets that those prices also 
 impose an enormous tax on the farmer, who has to pay for 
 labour and every other requisite at an extravagant rate. Gold 
 is cheap at Cariboo, and dear abroad; it flies from the cheap to 
 the dear market, and the first people to surround the miner are 
 those who act as his agents and carriers to and from foreign 
 
British Columbia in 1862. 413 
 
 countries. Packers, storekeepers, merchants, are the people he 
 deals with, because they fetch what he wants from places where 
 gold is comparatively scarce, and labour comparatively cheap. 
 The metallic riches of British Columbia make agriculture pro- 
 portionately costly in the colony, since every labourer looks for 
 a miner’s earnings, and farm labourers are not to be had unless 
 for enormous wages. It is not, then, absence of fertile land, nor 
 the presence of Red Indians and mosquitoes that forms the main 
 impediment to farming in British Columbia; it is the presence 
 of mines of still greater fertility for the time than its richest 
 soils. The distance of the mines from the coast, the distance, 
 again, of the colonial harbours from Oregon and San Francisco, 
 may afford protection to the colonial producer of fresh meat and 
 vegetables for the gold diggings; but the growth of cereals 
 to any extent, or anything in the nature of elaborate agricul- 
 ture, is not likely to be seen in British Columbia for years. Its 
 exports of gold for some time will probably be great, and its 
 imports of provisions in exchange will as probably not be small. - 
 
XXVI. 
 AUVERGNE.* 
 
 In the magnificent picture of the physical geography of France, 
 with which the genius of Michelet has illustrated its history, 
 only a few harsh touches are given to the province of Auvergne, 
 depicted briefly as a land of inconsistencies and contradictions, 
 cold beneath a southern sky, and inhabited by a southern race 
 shivering on the ashes of volcanoes ; a land of vineyards, whose 
 wine does not please, of orchards, of which distant strangers 
 eat even the commonest fruits, and one to whose mountains 
 thousands of emigrants yearly return without a new idea. 
 It is, in fact, a land of contrasts, physical and moral; containing 
 regions whose features, social and economic, as well as geological, 
 are widely dissimilar. Yet the.contrasts involve no real contra- 
 dictions. The chief physical contrast is between mountain and 
 plain, and remarkable economic and social diversities spring 
 from it. But mountain and plain are correlatives and comple- 
 ments, not contradictions, to one another; and differences of 
 life, occupation, usage, thought, and feeling in their inhabitants 
 are but consequences of the same laws of human nature, 
 operating under diverse conditions, and afford excellent illus- 
 trations of the mode in which differences of structure and 
 character in human societies, often superficially attributed to 
 diversity of ancestral origin or race, are really produced. 
 
 
 
 * Fortnightly Review, December, 1874.—Some controversy exists on the point 
 whether, in translating the name |’Auvergne, the English article should be used, 
 as in the case of the Bourbonnais, the Lyonnais, the Vivarais, the Ardennes, the 
 Seine, the Creuse, &c., or whether we should say simply Auvergne, as in the case 
 of Normandy, Brittany, Picardy, Flanders, &. A German philologer whom I 
 consulted on the point, and in whose opinion a French philologer also consulted, 
 concurs, draws the following distinction between the cases in which the article 
 should be used in English, and those in which it is more idiomatic to discard it :— 
 
Auvergne. 415 
 
 It is not the scenery of Auvergne that this essay seeks to 
 describe, but some of its chief economic and social phenomena ; 
 they are, however, so related to some of its physical features, 
 that the latter cannot be left altogether unnoticed. Of the 
 two departments into which the ancient province once called 
 Arvernes, from the Arverni, is now divided, that of the Cantal, 
 formerly La Haute Auvergne, is wholly a mountainous region ; 
 while the richer, more populous, and far more important de- 
 partment of the Puy-de-Déme—so named from the huge moun- 
 tain overhanging Clermont-Ferrand, its capital—contains both 
 mountainous districts, and also the famous plain or valley 
 named the Limagne, traversed by the railway from Gannat to 
 Issoire ; of which, thirteen hundred years ago, King Childebert 
 said, ‘there was but one thing he desired before he died, that 
 was to see the beautiful Limagne of the Auvergne, which was 
 said to be the masterpiece of nature, and a land of enchantment.’ 
 A century earlier Sidonius Apollinaris wrote from a country- 
 seat in this rich valley, ‘The Auvergne is so beautiful that 
 strangers who have once entered it cannot make up their minds 
 to leave it, and forget in it their native land.’ The strangers 
 who enter Auvergne at the present day are for the most part 
 either geologists about to inspect its extinct volcanoes and other 
 similar phenomena, or invalids on their way to the mineral 
 waters of Royat, La Bourboule, or Mont Dore, or ordinary 
 tourists coming to see both its exhausted craters and its baths. 
 The geologists and the tourists usually make up their minds to 
 leave the province after a few days; and a few weeks at the 
 baths generally suffice to give the invalids strength and reso- 
 lution to return home. Least of all, perhaps, is the visitor who 
 comes (as has happened more than once to the present writer) 
 
 ‘The Bourbonnais, the Lyonnais, the Vivarais, are adjectival formations, and 
 therefore naturally take the article in English. The French departments, again, 
 being the names of rivers and mountain chains, take the article in English, just as 
 we say the Seine, the Loire, the Alps, the Pyrenees, of the rivers and mountains 
 themselves. But the only French province which could properly take the article in 
 English would be such as La Marche, where English idiom, too, would require us 
 to say the March, or the Border. There is nothing to distinguish the case of 
 Auvergne from that of Normandy and Brittany, where the article is omitted in 
 English, though used in French.’ 
 
416 Auvergne. 
 
 fresh from Switzerland to the Limagne, likely to be moved to 
 the enthusiasm of Sidonius Apollinaris by its scenery ; especially 
 just after the harvest, when its corn-fields, like shorn sheep, 
 are bare and unpicturesque. But the ancient could as little 
 have sympathized with the modern traveller’s admiration for 
 Switzerland. What he loved was a land of corn and wine and 
 fruit, and that the Limagne is. His associations with gigantic 
 mountains, frowning rocks, tremendous precipices, deserts of ice 
 and snow, were horror, hunger, danger, and death. Auvergne 
 itself has mountains and rocks, which, picturesque as they are, 
 have few charms for those to whom they are associated only with 
 privation and hardship. A woman, of whom I asked my way 
 a few weeks ago in the highlands of Mont Dore, said, ‘ This is 
 not a nice country, with all these mountains and rocks,’ adding, 
 with a horizontal movement of her hand, ‘I like a flat country.’ 
 Her associations with mountain scenery were black bread with 
 a few chestnuts and potatoes, water unreddened with the wine 
 at: which Michelet sneers, hard times in winter, and hot and 
 weary work in summer, with only one preservative from thirst— 
 not to have a habit of drinking. ‘Je n’ai pas Vhabitude de 
 boire, ainsi je n’ai pas soif,’ she replied to a question suggested 
 by my own feelings under a burning sun. In the plain of the 
 Limagne she knew that the labourer often owned the ground 
 on which he worked, might, if he pleased, drink the juice of his 
 own grapes, and might, if he sold, as Michelet says, the common 
 apples from his orchard in a distant market, instead of eating 
 them himself, get 450 francs to the hectare for them, with as 
 much more for the grass amidst which they grew. Having heard 
 an old woman in a cottage in the Limagne say to a visitor, to 
 whom she offered a slice off a huge melon, that she was very 
 fond of melons, which are cheap in that region, I asked my 
 friend on the Mont Dore mountain if she liked them. ‘Je 
 les aimerais mieux,’ she replied, ‘s'ils venaient dans les 
 montagnes.’ 
 
 A contrast full of instruction and interest, when viewed in 
 relation to its causes, betweén the mountain and the plain in 
 Auvergne, is the different distribution of landed property. In 
 
Auvergne. AIT 
 
 the mountainous districts of the Puy-de-Déme, the term large 
 property—/a grande propriété—is applied, as a general rule, 
 only to properties of a hundred and fifty acres and upwards; 
 properties under forty acres being there classed as Ja petite 
 propriété, and those between forty and a hundred and fifty 
 acres as la moyenne propriété. In the Limagne, on the other 
 hand, from twenty to five-and-twenty acres make a large 
 property in popular thought and speech, and a multitude of the 
 small properties do not exceed a quarter of an acre. The soil 
 in this fertile plain has in the last two generations, especially 
 the last twenty years, passed almost wholly out of the possession 
 of wealthier and larger owners into that of petits propriétaires, 
 who cultivate it with their own hands. The Report on 
 the Puy-de-Déme, contained in one of the twenty quarto 
 volumes of the ‘ Enquéte Agricole,’ after referring to the want 
 of capital in the mountainous parts of that department, says, 
 “Tn the plain, the want of capital does not make itself felt, in 
 consequence of the sale of land in small lots, which has per- 
 mitted of the liquidation of property by paying off mortgages ; 
 but the species of proprietors has changed, and the man of 
 means, the former proprietor, has become a capitalist, who has 
 invested the proceeds of his land in securities.’ This diversity 
 in the distribution of landed property results partly from 
 economic causes, partly from profound differences in the feelings 
 and ideas generated by opposite conditions of life in mountain 
 and plain. ‘The economic causes are by no means the most 
 interesting, but they must not be overlooked. In the moun- 
 tains, on the one hand, both the comparative infertility of the 
 land and the nature of pastoral husbandry tend to maintain 
 comparatively large farms, and to prevent their being broken 
 up by sale in small parcels. In the Limagne, on the other 
 hand, the aptitude of the soil and climate for the production of 
 rich plants—the vine, for example—requiring minute cultivation, 
 and peculiarly suited to spade-husbandry ; the rise in the price; 
 of such productions in recent years; the rise, moreover, of 
 wages—adding nothing to the expenses of the cultivator who 
 employs no hired labour, but heavily to those of the large 
 2E 
 
418 Auvergne. 
 
 farmer ;—the increased gains and savings of both small culti- 
 vators and labourers, and their consequently increased purchases 
 of land, make a combination of causes tending to minute 
 subdivision. Adam Smith, remarking that it was a matter of 
 dispute among the ancient Italian husbandmen whether it was 
 advantageous to plant new vineyards, adds, that the anxiety of 
 the owners of old vineyards in France in his own time to 
 prevent the planting of new ones indicated an opinion that the 
 high profits of vine-growing could last no longer than the 
 restrictive laws which they had procured for that purpose. The 
 increased growth of the vine around Clermont-lerrand in the 
 last five-and-twenty years shows what the small proprietors in 
 the Limagne now think on the subject. In the arrondissement 
 of Clermont alone, between thirty and forty thousand acres of 
 both hill-side and plain are now covered by vineyards, which 
 formerly were to be seen only on certain slopes with the best 
 aspects. 
 
 Yet, after allowing all due weight to the causes referred to, 
 it remains certain that causes of a totally different order have 
 powerfully contributed to the maintenance of larger properties 
 in the mountainous districts than in the plain, namely, the 
 greater strength in the former of ancient usage, old family 
 feeling, and religious sentiment in both sexes. In the plain 
 both the sale of land in small plots and the partition of 
 inheritances by the law of succession tend to break up family 
 properties; in the mountain neither has hitherto operated 
 considerably. The Report of the ‘ Enquéte Agricole’* on the 
 Puy-de-Déme makes no attempt to trace to their sources the 
 curious diversities of usage and sentiment which it describes ; 
 but the description itself is worth citing. ‘The transmission of 
 property takes place in a manner essentially different in the 
 plain and the mountain. In the plain an inheritance is almost 
 always partitioned or sold when a succession (of more than one 
 child) takes place ; if partitioned, each of the heirs takes a part 
 of each parcel ; if it is sold, itis so in detail, and by the smallest 
 fractions, in order the more readily to find buyers. Hverything 
 thus contributes to indefinite subdivision in the plain. In the 
 
Auvergne. 419 
 
 mountains they cling to the conservation of the inheritance 
 unbroken, and do all that is possible in order not to destroy the 
 work of the family, and not to divide the paternal dwelling. 
 The daughters willingly consent to take religious vows, and 
 renounce the patrimony of their parents ; those who contract 
 marriage agree to leave to the head of the family their share of 
 the inheritance. It is the same with the sons, of whom some 
 become priests, others emigrate, consenting not to claim their 
 share of the property ; and it is one of the sons who remains at 
 home, working with the father and mother, who becomes in 
 turn proprietor of the paternal dwelling. Thus the principle of 
 the law of equal partition is eluded, and it comparatively 
 seldom happens that the other children assert their claims, so 
 accepted is the usage in the manners of the mountain.’ 
 
 In Auvergne, as in the department of the Creuse, one 
 reason for the great annual migration of the peasants to the 
 towns, which, in France, where there is no exodus to foreign 
 countries, goes by the name of emigration, is doubtless the 
 comparative unproductiveness of mountain land. It cannot 
 give bread to all the young men born on it. But a more 
 potent reason, in Auvergne, though ‘one less in accordance with 
 old economic hypotheses, is that the younger sons, as the 
 ‘Enguéte Agricole’ states, seek a subsistence elsewhere, in 
 order to leave the property undivided to the elder brother; or 
 occasionally it is the elder brother who emigrates, relinquishing 
 his share to a younger one remaining at home. Thousands of 
 Auvergnats are consequently to be found labouring in remote 
 cities, as masons, sawyers, porters, water-carriers, blacksmiths, 
 chimney-sweeps; and it is a saying in the surrounding pro- 
 vinces, when some hard work has to be done, ‘ Il faut attendre 
 le passage des Auvergnats.’ 
 
 They have a character in French towns, and French novels, 
 for clownishness and stupidity, derived doubtless from the 
 nature of their occupations, as hewers of wood and drawers 
 of water. But they show no lack of native shrewdness, 
 according to my observation, when questioned on any subject. 
 And M. de Lavergne remarked to me lately, that the Auvergnat 
 
 2E2 
 
420 Auvergne. 
 
 displays more sagacity in timing his migration than the peasant 
 of his own department, the Creuse—M. de Lavergne is deputy 
 for the Creuse—does. The Auvergnat leaves his home at the 
 beginning of winter, when the country is buried in snow, 
 returning in summer, when work of different kinds is going on. 
 The Creuse peasant, on the other hand, goes to Paris, Lyons, or 
 some other town, when summer is coming on, and comes back 
 in winter, when there is nothing to do. Michelet taunts the 
 Auvergne emigrants with bringing back some money, but 
 no new ideas. The sum they bring to the poor department of 
 the Cantal is put at five million frances (£200,000) a-year, in 
 the Report of the ‘ Enquéte Agricole’ on that department—a sum 
 hardly to be despised. But the renunciation by the emigrants 
 of their share in the family property certainly shows, if not an 
 extraordinary imperviousness to new ideas, an extraordinary 
 tenacity of old ones, and in particular of two ideas which are 
 among the oldest in human society—subordination to the male 
 head of the family, and conservation of the family property, 
 unalienated and unpartitioned. The number of younger sons 
 from these mountains who become priests is a still more 
 remarkable phenomenon, though traceable in the main to the 
 same causes. M. Bonnet, of Clermont-Ferrand, being asked in 
 the course of his evidence before the ‘ Enquéte Agricole,’ what 
 was the proportion of young men in the plain and the moun- 
 tains, respectively, of the Puy-de Dome, who devoted themselves 
 to the clerical profession, replied, ‘In the Limagne very few 
 young men devote themselves to the religious profession. It is 
 from the mountains they come. Half the clergy of the diocese 
 come from the arrondissement of Ambert.’ 
 
 A few weeks ago, I happened myself to sit beside a party of 
 priests at dinner, and learned that four out of the six were born 
 in the Auvergne mountains, which likewise contribute largely 
 to recruit the convents with nuns. M. Bonnet, being asked 
 whether the mountain families do not induce the daughters to 
 take religious vows, in order to prevent the partition of the 
 family estate, replied, ‘To that I answer in the affirmative. 
 The parents, in consequence of the piety which reigns in the 
 
Auvergne. 421 
 
 mountains, are not sorry to see their daughters embrace the 
 religious profession, and at the same time to see the family 
 property thereby less divided. In general, the eldest son 
 remains at home, and the father frequently leaves to him the 
 part disposable by will. And when a daughter enters a convent, 
 if the portion she brings to it does not absorb her share in the 
 inheritance, she on her side usually makes her will in favour of 
 the already favoured brother.’ 
 
 Thus in the Auvergne mountains at this day, ‘the younger 
 brother sinks into the priest,’ just as Sir Henry Maine describes 
 him as doing under the influence of primogeniture in feudal 
 society. The daughter, too, enters the convent just as she did 
 in the middle ages, and from the same causes which actuated 
 her then—family sentiment and male primogeniture on the one 
 hand, and ‘ the piety which reigns in the mountains’ on the other 
 hand, which is, in fact, a survival of medieval piety, preserved 
 by certain conditions of life and environment. A reason, it is 
 true, sometimes assigned for the number of young women who 
 become nuns in the department of the Puy-de-Déme is that 
 there are no girls’ schools in the mountains; the daughters of 
 parents who can afford it are, therefore, sent to convents to be 
 educated, and the education they receive both unfits them and 
 gives them a distaste for the rude life of a mountain farmhouse. 
 They learn to make lace and embroidery, but not to mend 
 stockings or to make butter or cheese. It is, neverthless, 
 undisputed that religious feeling and family ideas fill the chief 
 place among the motives which lead both the daughters to take 
 vows, and the younger sons to become priests. 
 
 I have nowhere met with any attempt to trace to their 
 ultimate causes the curious social phenomena just described ; 
 but one may, I think, point with certainty to the difference of 
 environment and conditions of life in the mountain and in the 
 plain, as the source of the superior force of religion, family 
 feeling, and ancient usage in the former. On its moral and 
 social side, the contrast between mountain and plain is the 
 contrast between the old world and the new; between the 
 customs, thoughts, and feelings of ancient and modern times. 
 
422 Auvergne. 
 
 The principal sources of change and innovation in the plain— 
 towns, manufactures, trade, easy communication with distant 
 places, variety of occupation and manner of life—are inoperative 
 in the mountains. Even in summer, the mountain lies aloof 
 from the town and its life, communication between them is 
 tedious for people on foot; the country carts are of the most 
 primitive make, and drawn by slow oxen or cows. Where a 
 heavy load has to be brought up hill on the best roads in the 
 department, for instance, from Clermont towards Mont Dore, I 
 have seen six horses yoked in a curious order to draw it—first 
 one wheeler, then two abreast, with three leaders in tandem. 
 In winter the whole mountain region is under snow, the roads 
 are often impassable, and the members of the mountain family 
 are shut up together with their dumb companions, the cattle. 
 Then the life of the mountain pastoral farmer is the same from. 
 father to son, and from age to age; the whole neighbourhood, 
 too, follows the same occupation, and leads the same life, so that 
 there is a surrounding mass of uniform and primitive usage and 
 thought. But the family is the earliest of social bonds, and it 
 is by studying it as it survives in places such as the Auvergne 
 mountains, that we can best realize something of the force of 
 that ancient bond, and something of the nature of the sentiments 
 which led to the patriarchal authority of the elder brother on 
 the one hand, and the conservation of the family property under 
 his guardianship and control on the other. Sir Henry Maine 
 calls the origin of primogeniture, as affecting the devolution of © 
 land in the middle ages, one of the most difficult problems of 
 historical jurisprudence; and it has a peculiar difficulty in 
 England to which he has not referred. How was it that during 
 a period when society was decidedly becoming more orderly, and 
 patriarchal rule was giving place to regular government, the 
 division of socage lands among all the sons was superseded by 
 primogeniture, the principle already established in the case of 
 land held in military tenure? A tendency to uniformity in the 
 law, produced by the institution of itinerant royal courts, and 
 the bias of the judges, contributed probably to the change; but 
 something more is required to explain it. The courts proceeded 
 
Auvergne. 423 
 
 to make custom, instead of the old law of gavelkind, determine 
 the succession to socage lands; but the question follows, how did 
 a custom come into existence contrary to the old law, and to the 
 apparent interest of the majority of the family? And the 
 existence at this day, in the Auvergne mountains, of a custom 
 directly opposed to the positive law of the land helps us to 
 understand how the English courts were supported by family 
 feeling in assuming a custom of primogeniture contrary to the 
 old law of division. 
 
 The force of religious feeling, ‘the piety which reigns in 
 the mountains,’ as M. Bonnet calls it in a passage cited above, 
 has its root, doubtless, partly in the same conservation of 
 ancient sentiment, thought, and belief, which gives the family 
 property to one son, partly in other ideas and feelings gene- 
 rated by the conditions of mountain life. As the difference 
 between the mountain and plain is a phase of the difference 
 between the old world and the new, so is it a phase of the 
 difference between country and town. ‘The mountain is, as it 
 were, the country in its rudest primitive form, while the plain 
 is, as it were, a great suburb of the towns it contains and has 
 continual intercourse with. The petit propriétaire in the 
 Limagne has the money-making spirit as strongly developed 
 as the town tradesman; sometimes he himself lives in the 
 town, and in any case he has frequent transactions of buying, 
 selling, and other relations with it. But the money-making 
 and commercial spirit evidently tends to individualism, and to 
 the disintegration of the family; and it has ever been found 
 also to foster a secular spirit and repugnance to sacerdotal 
 dominion. In towns, moreover, and also (though in a smaller 
 degree) in the surrounding plain, men see chiefly the power 
 of man, and unconsciously gather confidence from their own 
 numbers against both the powers of nature, which are supreme 
 in the mountain, and those supernatural powers which the 
 powers of nature suggest to rude minds. The difference be- 
 tween the force of religious sentiment and reverence for the 
 clergy in town and country in Catholic countries is striking. 
 One has but to look at the way in which a Flanders priest is 
 
424 Auvergne. 
 
 saluted in the streets of Ghent, for instance, and at some miles” 
 distance in the country, for evidence of the opposite influence in 
 this respect of town and country life. At Clermont-Ferrand, the 
 respectable working-man commonly holds aloof from the clergy, 
 declines their aid, even when in need, and is averse from join- 
 ing societies for the mutual benefit of the members, because the 
 clergy take a part in their management. Indications of the 
 prevailing disposition in that town towards ecclesiastical au- 
 thority have repeatedly come under my notice. One day, 
 last September, I was reading a newspaper in a café, when an 
 old woman going by observed in the most sarcastic manner 
 and tone in reference to a person beside me, ‘Ce monsieur 
 appartient a Monseigneur VEvéque, puisqwil a acheté la 
 Gazette d’Auvergne.’ Pointing to another person, she con- 
 tinued, ‘Ce monsieur-la appartient a Monsieur le Préfet, 
 puisqu’il a acheté le Journal du Puy-de-Déme.’ Then seeing 
 both journals in my hand, ‘ Voila un monsieur qui a acheté 
 tous les deux. I] ne sait pas encore 4 qui appartenir. C’est 
 une question difficile.’ No old woman in the mountains of a 
 diocese which draws half its clergy from their youth could 
 have spoken with such levity of an episcopal dignitary. The 
 persistence in the Auvergne mountains of ancient ideas and 
 feelings on such subjects as both the clergy and family 
 property, notwithstanding that thousands of their peasants. 
 spend half the year in large towns, affords an instructive 
 example, on the one hand, of the profound influence of physi- 
 cal geography on the mental constitution of man, and the 
 history of the different branches of the race, and, on the other 
 hand, of the operation of laws of human nature and motives 
 to human conduct, powerfully affecting the economic struc- 
 ture of society, the division of occupations, the amount and 
 the distribution of wealth, which are absolutely ignored in 
 what still passes with some professed economists for a science 
 of wealth. 
 
 Among the most active agencies in the town which rarely 
 reach the mountains in Auvergne is the newspaper, the in- 
 fluence of which at Clermont-Ferrand I have heard ecclesi- 
 
Auvergne. 425. 
 
 astics deplore, although they themselves employ it to the 
 utmost of their power. Arthur Young tells that he could not 
 find a single newspaper in a café in that town in the autumn 
 of 1789, though the air was alive with revolutionary rumours. 
 In tle autumn of 1874 he might have found half-a-dozen in 
 any one of several cafés, besides having them pressed upon him 
 by newsvendors incessantly passing by. The local journals. 
 are not sparing of rhetoric, or lacking in party spirit. The 
 number of the journal which the old woman called the organ 
 of Monseigneur |’Evéque, contained a furious article against 
 radicalism, of which the following passage is a specimen :—‘ The 
 radical lives on hatred. Irritated against authority, irritated 
 against society, irritated against God, he hates everything, he 
 hates even himself.. Hatred devours him, and hatred supports 
 him. To glut his hatred he would give his life, and he wishes. 
 to live only to glut it. He breeds, imbibes, and feeds on hatred; 
 and, like the garment of Nessus, it burns him, being in that 
 respect an anticipation of eternity.’ If the Auvergne radical is. 
 a good hater, it seems that the Auvergne ecclesiastic is so too. 
 M. de Lavergne, speaking of the immense subdivision of landed 
 property in the Limagne since 1789, and the vast increase in 
 the number of spade-cultivators, remarks in his ‘ Rural Heconomy 
 of France’ that the prevalence of such severe manual labour 
 has a tendency to produce rough and violent manners. Such 
 manners certainly are sometimes exhibited in the Limagne, but 
 not by spade-cultivators only. 
 
 The minute subdivision of land during the last twenty-five 
 years in the Limagne, whatever may be its tendencies for good 
 or for evil in manners and other respects, assuredly cannot be 
 ascribed to over-population, once regarded in England as the 
 inevitable consequence of the French law of succession. It is 
 true that between 1789 and the middle of this century the 
 population of the Puy-de-Déme increased, as M. de Lavergne 
 says, from 400,000 to 600,000.* But later statistics supplied to 
 me by M. Adolphe F.. de Fontpertuis, an economist well known 
 
 * Economie Rurale de la France, 4me ed., p. 364. 
 
426 Auvergne. 
 
 to English readers of the ‘ Economiste Francais’ and the 
 ‘Journal des Kconomistes,’ exhibit an opposite movement— 
 
 1851. 1866. 1872. 
 Population of the Puy-de-Ddme, . 601,594 571,690 566,463 
 
 And the Report of the ‘ Enquéte Agricole’ on the department 
 states, ‘ All the witnesses have declared that one of the principal 
 causes of the diminution of the population is the diminution of 
 children in families. Hach family usually wishes for only one 
 child; and when there are two, it is the result of a mistake 
 (une erreur), or that, having had a daughter first, they desire to 
 have a son.’ A poor woman near Royat, to whom I put some 
 questions respecting wages and prices, asked whether my wife 
 and children were there, or at one of the other watering- 
 places, and seemed greatly surprised that I had neither. She 
 thought an English tourist must be rich enough to have several 
 children; but when asked how many she had herself, she an- 
 swered with a significant smile, ‘One lad ; that’s quite enough.’ 
 
 Our conversation on the point was as follows :— 
 
 ‘Votre dame et vos enfants, sont ils 4 Royat?’ 
 
 ‘Non.’ 
 
 ‘Ou done? a Mont Dore?’ 
 
 ‘Moi, je n’ai ni enfants ni femme.’ 
 
 ‘Quoi! Pas encore!!’ 
 
 ‘Et vous, combien d’enfants avez-vous ?’ . 
 
 ‘Un gars; c’est bien assez. Nous sommes pauvres, mais 
 vous étes riche. Oecla fait une petite différence.’ 
 
 If over-population gives rise to tremendous problems in 
 India, the decline in the number of children in France seems 
 almost equally serious. If two children only are born to each 
 married couple, a population must decline, because a consider- 
 able number will not reach maturity. If only one child be born 
 to each pair, a nation must rapidly become extinct. The French 
 law of succession is producing exactly the opposite effect to what 
 was predicted in this country. Had parents in France complete 
 testamentary power, there would not be the same reason for 
 limiting the number of children. M. Léon Iscot, accordingly, 
 
Auvergne. 427 
 
 in his evidence on this subject before the ‘ Hnquéte Agricole ’ 
 on the Puy-de-Déme, said, ‘The number of births in families 
 has diminished one-half. We must come to liberty of testation. 
 In countries like England, where testamentary liberty exists, 
 families have more children.’ 
 
 Whatever may be thought of the change which is taking 
 place in France in respect of the numbers of the population, there 
 is one change of which no other country has equal reason to be 
 proud. Its agricultural population before the Revolution was 
 in the last extremity of poverty and misery, their normal condi- 
 tion was half-starvation ; they could scarcely be said to be clothed, 
 their appearance in many places was hardly human. No 
 other country in Europe, taken as a whole, can now show upon 
 the whole so comfortable, happy, prosperous, and respectable a 
 peasantry. The persons examined before the ‘ Enquéte Agricole’ 
 on the Puy-de-Déme, a department with many disadvantages 
 of situation and climate, grumbled about many things, as 
 landowners and farmers universally do; but they were unani- 
 mous on the point that the peasantry and labouring class 
 were ‘better fed, better clothed, and better lodged’ than a 
 generation ago; and in all these respects a visible improvement 
 has taken place, even within the last ten years. You still, it is 
 true, often see boys and girls in the Puy-de-Déme without 
 shoes and stockings, but rarely ever otherwise than comfortably 
 clad in all other respects. The absence of shoes and stockings 
 is a sign, not of poverty, but of the retention of ancient 
 custom. In the north of Ireland it is still not uncommon to 
 see girls on the road in a smart dress and bonnet, and holding 
 a parasol over their heads, with their shoes not on their feet, 
 but in their hands. And in a good many parts of the south of 
 France a century has made no great change since Adam Smith 
 wrote, ‘Custom has rendered leather shoes a necessary of life 
 in England. The poorest person of either sex would be 
 ashamed to appear in public without them. In Scotland, 
 custom has rendered them a necessary of life to the lowest 
 order of men, but not to the same order of women, who may, 
 without any discredit, walk about barefooted. In France, they 
 
428 Auvergne. 
 
 are necessaries neither to men nor to women; the lowest ranks 
 of both sexes appearing there publicly, without any discredit, 
 sometimes in wooden shoes, and sometimes barefooted.’ That 
 it is no discredit either to boys and girls in the Puy-de-Déme to 
 go barefooted, and, on the other hand, that modern fashion is 
 beginning to creep even into the mountain villages, I saw 
 evidence the other day in the village of La Tour d’ Auvergne, 
 where children smartly chaussés in the latest style were playing 
 with others without shoes or stockings. The Auvergne 
 children, one may observe, do play; they are not, like the 
 children in Swiss villages, serious little old men and women, 
 too busy and grave for laughter or play. Children and adults 
 alike in Auvergne seem for the most part in rude health, though 
 in the mountains they may sometimes owe more to the air 
 than to the food, and in some villages crétins are still to be 
 seen—a consequence, doubtless, of the filthy condition of the 
 cottages within and without. The horrid malady of crétinisme 
 has lately been driven from some Swiss valleys by an improve- 
 ment of the houses. In the Puy-de-Déme this autumn I saw 
 many instances of a change which is the sure precursor of an 
 elevation of the standard of habitation, namely, the substitution 
 of tiled for thatched roofs. One hears people say there, indeed, 
 that this change is no improvement; that the thatch is not 
 only cheaper, but warmer in winter, and cooler in summer. It 
 is, however, a source of constant danger from fire to the whole 
 village; and in every country in western Europe the change 
 from the straw roof to tiles or slates is found to be accompanied 
 by material progress. M. L. Nadaud puts into the mouth of 
 an interlocutor in his ‘ Voyage en Auvergne,’ ‘ You will never 
 make of an Auvergne village a Flemish village. Climates form 
 the habits and tastes.’ Climate certainly plays a great part 
 in determining the economic condition of mankind; and its 
 agency, along with other physical influences, has been too 
 generally overlooked by economists in their eagerness to 
 explain the whole economy of society by reference to the 
 single assumption of a desire of every one to obtain additional 
 wealth. But climate did not make the Flemish village. It 
 
Auvergne. | 429 
 
 grew up by degrees in the middle ages out of liberty, manu- 
 factures, and markets for village productions. And the fact 
 that the Auvergne villager is beginning to roof his dwelling 
 with tiles from another province shows that liberty and 
 facilities for trade may yet make a Flemish village of the 
 Auvergne one. Even of the remote and mountainous Cantal, 
 M. de Lavergne said several years ago, ‘The discoveries of 
 modern civilization have been long unknown in Upper 
 Auvergne; its towns are but rude villages, and its rustic 
 dwellings have but too often the repulsive aspect of extreme 
 poverty, yet competence and comfort are making their way into 
 them by degrees.’ 
 
 A general rise of wages has taken place in Auvergne in the 
 last fifteen years, but the rise has been very unequal. The 
 demand for labour has increased much more in some communes 
 than in others, and, on the other hand, the supply is much 
 scantier in some than elsewhere. ‘In one commune,’ says the 
 Report of the ‘ Enquéte Agricole,’ ‘there are but four labourers ; 
 everyone therefore fights for them, and when they work for one 
 employer, it is impossible for the others to get their work done.’ 
 At Saint-Maude, near Issoire, M. de Saint-Maude stated to the 
 commission that it was out of the power of large proprietors there 
 to farm their own land, on account of the scarcity of labour and 
 its extravagant price. ‘The price of a day’s labour is from 
 4 to 5 francs, and a meal besides, with wine. Wages have more 
 than doubled since 1852. Women, above all, have seen their 
 wages trebled.’* In another place, however, the rate was shown 
 to be only 1 fr. 25 cents. in winter, and 2 fr., with food, in 
 summer; and in a third, 1 fr. 50 cents., without food, during the 
 greatest part of the year, with 1 fr. 25 cents., and food, in harvest. 
 In the autumn of the present year, after the harvest, I found 
 3 francs a-day the rate in several parts of the Limagne, and 
 a person from Normandy, who was present when I made some 
 inquiries on the subject, remarked that this was more than is 
 paid in that wealthy province—a statement quite in conformity 
 
 * Enquéte Agricole, Puy-de-Dome, p. 296. 
 
430 Auvergne. 
 
 with M. Victor Bonnet’s statistics.** The assertion of M. de 
 Saint-Maude respecting the rise of women’s wages is likewise in 
 accordance with a statement of a high authority on French 
 economics, M. Paul Leroy-Beaulieu, that the pay of women 
 for agricultural labour has risen more than that of men in recent 
 years—a fact, he adds, only to be rejoiced at, women having 
 formerly been much underpaid in comparison with men. With 
 respect to the relative movement in recent years of agricultural 
 and town wages in Auvergne, the following figures are taken 
 from some unpublished statistics, which Mr. Somerset Beaumont, 
 late M. P. for Wakefield, collected at the close of last year, 
 showing the comparative rates in agriculture and several other 
 employments in 1868 and 1878, at Clermont-Ferrand and in its 
 neighbourhood :— 
 
 
 
 
 
 | 1868. | 1873. 
 
 bana Wiens 
 
 Agricultural Wages, per ( During the harvest, 3 17 4 0 
 diem, without food, 7 ordinary seasons, . 2 24 2 50 
 Masons, 3 ad) 3 50 
 Carpenters, ee!) 4 650 
 Joiners, 3 600 3 50 
 Locksmiths, : : 3 25 3 50 
 Servants, per annum—Men, 3 ; . ; 300 0 400 0 
 + Le Women, . ; . : 150 0 200: «0 
 
 
 
 The reader will observe that these variations are by no means 
 in harmony with the old assumption of abstract political 
 economy, that the diversity of wages in different employments 
 corresponds to diversities in the nature of the work; as though 
 all the poor workmen throughout every country could know 
 exactly all the differences of wages and work in all occupations, 
 and choose their own trade accordingly. The wages of carpen- 
 ters at Clermont were lower in 1868 than those of locksmiths ; 
 
 * See Essay, ‘ Agricultural Wages in Europe,’ supra, p. 368. 
 
Auvergne. 45] 
 
 in 1873 they were much higher, and were so, not because the 
 nature of either employment had changed, but simply for the 
 same reason that agricultural wages had risen in some communes 
 much more than in others, namely, that the local conditions of 
 demand and supply had changed. 
 
 Among causes both of a rise and of local inequalities in 
 wages, prices, and the cost of lving in Auvergne are its 
 watering-places, Royat, Mont Dore, and La Bourboule, which 
 may be classed together as constituting a third social and 
 economic region. Auvergne, as already said, is a land of 
 contrasts, and the contrast which this third region presents to 
 the two others already described is worth notice, not only 
 as contributing to a description of the province, but also as 
 illustrating the influence of local physical conditions on social 
 phenomena, and exemplifying the causes which produce distinct 
 types of human life, character, and pursuit. 
 
 One difference which strikes the eye at once between the 
 watering-place and the two other regions is, that while the 
 latter display dissimilar social and economic features, yet those 
 features are in both cases indigenous ; it is the Auvergnat you 
 see, unlike as he appears in mountain and plain. But the 
 watering-place, though in Auvergne, is not of it, socially 
 speaking. You find yourself, on entering it, among Frenchmen 
 from every part of France, except the province in which it is 
 situated ; its chief social phenomena are exotic, not native. 
 The only pervading type of character here is also altogether 
 unlike the types which the two other regions develop. The 
 representative man of the Limagne is the spade-husbandman, 
 wringing the uttermost farthing from his little property ; the 
 patriarchal head of the pastoral household, the priest, the nun, 
 the emigrant labourer, are the representatives of the mountain. 
 But in the watering-place, the only representative character is 
 the invalid; the people round you differ in every respect but 
 one, that they are almost all seeking the cure of some malady. 
 In the mountain, family sentiment, religion, ancient usage, are 
 the dominant principles; in the rich agricultural plain, the 
 
432 . Auvergne. 
 
 paramount object is to make money wherewith to buy land; 
 at Royat, Mont Dore, and Bourboule the dominant motive 
 which determines the occupations of producers and the demand 
 of consumers is the desire, not of wealth, but of health. But 
 this desire brings wealth to the watering-place, which thereby 
 becomes a monetary region in which the cost of living is higher 
 than in other parts of the province, and is so in conformity 
 with the main principle governing the diffusion of money 
 and the movements of prices. The general principle traceable 
 throughout the immense monetary changes of our time—one 
 which the assumption that wages and profits are equalized by 
 competition has led not a few economists to miss—is that the 
 distribution of the increased currency of the world has followed 
 the path of local progress, and of the development of local 
 resources or advantages, of whatever kind. Superior local 
 advantages for manufactures and trade in one place, for 
 scenery or amusement in another, for the cure of disease in a 
 third, cause a relatively large influx of money, and send up the 
 prices of labour and important commodities above the rates 
 prevailing in places making inferior progress, or offering no 
 special attraction to money. Only one classification, as already 
 said, fits the majority of the visitors to the watering-places of 
 Auvergne, namely, that they are for the most part invalids; but 
 whatever they are, and however they spend their lives, they spend 
 here in the mass a great sum of money at hotels, and on baths, 
 carriages, saddle-horses, sedan-chairs, shops, the casino, &e. ; 
 and as their numbers yearly increase, local prices rise. Not 
 many years ago, Royat, Mont Dore, and Bourboule were three 
 villages of no reputation, with village prices. Bourboule, in 
 particular, was then a mere hamlet of the meanest order ; 
 now the visitor forgets the old hamlet in a cluster of new 
 hotels, and villas, with rows of smart little shops, which 
 disappear at the close of the season. Bourboule was mentioned 
 in guide-books not long ago as having from seventy to eighty 
 visitors in the season; this autumn it had several thousands, 
 most of whom remained for several weeks. There were members 
 
Auvergne. | 433 
 
 of the National Assembly, authors, country gentlemen, Parisians, 
 provincial townspeople, military men, ecclesiastics, besides a 
 multitude of nondescript young gentlemen and ladies. Eminent 
 above all was a writer of European fame, M. Léonce de 
 Lavergne, especially entitled to mention here, not only as 
 having described the rural economy of both the Limagne and 
 the mountains of Auvergne, but also as having foretold the 
 growth of its watering-places in one of the celebrated works by 
 which he is best known to most English readers, ‘ L’ Economie 
 Rurale de la France.’ In his own country he has long held a 
 high place, both in the world of letters and in the political 
 world, having formerly occupied a considerable post in M. 
 Guizot’s government, and being now one of the most influential 
 and respected members of the National Assembly, although the 
 infirmity of his health has prevented his taking a conspicuous 
 part in its public proceedings. His presence at Bourboule this 
 autumn may be instanced as an example of the operation of the 
 physical causes which are giving both wealth and celebrity to 
 places formerly as poor as unknown, and changing the scale of 
 prices in proportion. The charge for pension this autumn at 
 Bourboule was from twelve to fifteen francs a-day, according 
 to the length of the stay—a rate, perhaps, not immoderate, 
 considering that it included wine, but one which would have 
 seemed incredible a few years ago. At Clermont-Ferrand, 
 the passing and uncovenanted stranger still pays only four 
 francs for an excellent dinner in the principal hotels, with 
 wine and fruit unlimited. Clermont, indeed, with the other 
 chief towns of the Puy-de-Déme, might fairly be classed 
 together as constituting a fourth region with distinct social 
 and economic phenomena: one indication of this being that, 
 close as are the commercial and other relations between the 
 towns of the Limagne and the surrounding plain, the villagers 
 in the latter generally regard the townspeople with a feeling 
 approaching to hostility. It was, however, the aim of this 
 essay to sketch only some of the most striking and distinctive 
 social and economic features of a province as yet little known 
 in those respects in England; and its towns, though not with- 
 2F 
 
434 Auvergne. 
 
 out peculiar characteristics, seem hardly to call for a special 
 description. The sketch which has been given of the phenomena 
 of the rest of the province may suffice to illustrate the import- 
 ance of taking account, in economic investigations, of physical 
 geography and environment, and the necessary fallaciousness 
 of a theory which professes to account for the division of labour 
 in every country, the amount and distribution of its wealth, and 
 the movements of money and prices, by deductions from the 
 principle of pecuniary interest. 
 
 What do we learn respecting the real division of employ- 
 ments in Auvergne, the motives which determine it, the 
 distribution of landed property and other wealth, the scale of 
 wages and prices, from the assumption that every individual 
 pursues his pecuniary interest to the uttermost? Is it simply 
 the desire of pecuniary gain which makes one Auvergnat a 
 porter at Lyons, another a priest at Clermont, and the sisters 
 of both perhaps nuns, while an elder brother of each has the 
 whole family property? In one only of the three regions 
 described is pecuniary interest the dominant principle; and 
 even in that region there are inequalities of wages and profits, 
 with other economic phenomena utterly at variance with doc- 
 trines which, by a curious combination of blunders, have 
 been called by some writers ‘economic laws.’ The faith of a 
 school of English economists removes mountains. In France, 
 where labour moves from place to place, and from agriculture 
 to other employments, much more freely than in England, 
 mountains certainly do not prevent the migration of labour. 
 Yet even in France the migration by no means takes place on 
 such a scale, or with such facility, as nearly to equalize wages; 
 and in the places from which it is greatest, the department of 
 the Creuse and the province of Auvergne, the main cause is 
 not pecuniary interest. The younger brother in Auvergne 
 goes from his home to a distant city in obedience to traditional 
 family sentiments; and the peasant goes from the Creuse to 
 Paris as a mason, not because he has calculated the difference 
 of earnings in the two places, and in different employments (for 
 he could make more in many cases by remaining at home), 
 
Auvergne. 435 
 
 but because his father went to Paris before him, and his 
 comrades do so around him. The relation of the economic 
 phenomena of society to its moral, intellectual, and political 
 condition is undreamt of by the old school of economists. 
 Even in the case of men, it is manifestly vain to look for an 
 explanation of the causes which determine the economic 
 condition either of individuals or of classes, without reference 
 to laws, customs, moral and religious sentiment; how much 
 more is it so in the case of women? Let me adduce one 
 instance, showing how, even in the smallest details, the 
 economic structure of society, as regards the occupations and 
 earnings of women, is influenced by moral and other causes, 
 quite apart from individual pecuniary interest. At a hotel 
 in Clermont-Ferrand, in which, as is commonly the case in 
 large French hotels, a man does the work of housemaid, a 
 Swiss visitor remarked to me lately, that you will rarely find 
 perfect cleanliness and neatness where such is the case; yet in 
 France, he added, ‘it is a necessary evil. A young or good- 
 looking housemaid has no chance of keeping her character 
 in a French hotel; in Switzerland she is as safe as in a 
 church.’ I answered that possibly she might be as safe in 
 the mountains of Auvergne as of Switzerland; for climate 
 is certainly one of the causes which produce a difference in 
 this respect between French and Swiss morals. Other causes, 
 too, might be assigned, but I refer here to the moral difference 
 in question only as exhibiting the influence of moral causes on 
 the economic structure of society down to the minutest details. 
 There is another subject on which the social and economic 
 phenomena of Auvergne may be seen to throw considerable 
 light, namely, the mode in which diversities of human character 
 and life are produced, and the real origin of differences of 
 national character, customs, and condition, which are vulgarly 
 attributed to difference of race—that is to say, to ancestral 
 and inherited differences of physical and mental constitution. 
 Greater differences of human life, motive, and pursuit are to 
 be found in parts of the province of Auvergne, a few miles 
 from each other—in adjacent districts of mountain and plain, 
 
436 Auvergne. 
 
 for example—than some which are often pointed to between 
 Frenchman and Englishman as the consequences of an original 
 difference of race. The people of every country like to be told 
 that they possess an inherent superiority to every other, and 
 the doctrine of race flatters every race and every nation. The 
 Englishman, the Frenchman, the German, the Spaniard, the 
 Jew, above all the Chinaman, each thinks himself of a superior 
 race. When we descend from nations to smaller divisions 
 of mankind, to provinces for example, the same claim is com- 
 monly set up by each to superiority over the other divisions. 
 An Auvergnat lately asked me if I did not observe that the 
 Auvergnats were a finer and more vigorous race than the rest 
 of Frenchmen, and the question reminded me that a Comtois 
 once asked me the very same question in favour of the men 
 of his own province, la Franche Comté. Divide provinces 
 into departments or counties, and one finds that county pride 
 can soar quite as high as provincial or national pride. Descend 
 further from counties to yet smaller divisions, to villages 
 for instance, and you will find neighbouring villages in Ger- 
 many with a profound contempt for each other, and an exalted 
 consciousness of their own hereditary superiority. Take still 
 minuter groups, and you may discover in every country many 
 thousands of families, in all ranks of life, the members of 
 each of which believe that they come of a better stock, and 
 possess finer natural qualities than their neighbours. From the 
 family come down to the individual, and the real root of the 
 popular doctrine of race in all its forms is reached, being no 
 other than individual conceit. The doctrine of race not only 
 does not solve the problems which really arise respecting 
 national diversities of character, career, and condition, but 
 prevents those problems from being even raised. And it is 
 impossible to acquit a dogmatic school of economists of all 
 blame in respect of the ignorance of ascertainable causes of 
 social diversities which the vulgar theory of race. exhibits. 
 The method of abstract reasoning from crude assumption, in 
 place of careful investigation of economic phenomena and their 
 causes, has prevented the discovery of a mass of evidence 
 
Auvergne. 437 
 
 respecting the real origin of differences in the aims, qualities, 
 and circumstances of mankind in different countries and 
 situations, such as the mountain and the plain of Auvergne, 
 for example, upon which a true theory of the causes of the 
 
 diversities commonly attributed to race, might have been 
 built. } 
 
 THE END. 
 
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 The Aineid of Virgil, freely translated into English blank verse. By 
 
 WituiAM J. THORNHILL, B.A., Late Scholar, Trinity College, Dublin, Canon of 
 St. Patrick’s Catheds -al, and Rector of Rathcoole, Dublin. 7s. 6d. 
 
 In the Press. 
 
 The History of the University of Dublin. By JoHN W. Srusss, 
 D.D., Senior Fellow, Trinity College, Dublin. 
 
 DUBLIN: HODGES, FIGGIS, AND CoO. 
 LONDON: LONGMANS, GREEN, AND CO. 
 

 

 
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